DEMYSTIFYING BLOCKCHAINS
PRESENTED BY
.
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RUBEN TAN
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Co-Founder & CTO of Neuroware
Technologist for life
Close to 15 years of software development
Co-founded Javascript Developers of Malaysia Facebook Group
Frequent speaker on various technologists Ruben Tan
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… Malaysian company from 500 Startups
… to provide public blockchain APIs and toolkits
… Non-financial, blockchain-agnostic solutions
… Bank-backed Blockchain Hackathon in Singapore
1st
NEUROWARE - FIRST IN MANY THINGS
BLOCKCHAINSBroad definitions
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Bitcoin Blockchain
DIFFERENTIATING BITCOIN AND BLOCKCHAINS
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Bitcoin Blockchain
DIFFERENTIATING BITCOIN AND BLOCKCHAINS
A peer-to-peer payment system
Open participation Complete transparency
Identity/Audit obfuscation
A collection of technologies
Distributed by nature Has a consensus algorithm
Enabling innovation
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GENERAL TRAITS OF BLOCKCHAINS
Blockchain stores dataLedgers, DNS records, etc
Immutable once recorded
Everybody has a copy
Blockchain is a networkFully distributed
Peer to peer connection
Has a consensus algorithm
Blockchain is infrastructureEnables trust-less interaction
Enables high automation
Creates new business models
BITCOINThe first blockchain
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Released in 2009 by Satoshi Nakamoto
Nobody knows who Satoshi Nakamoto is - this is a good thing!
USD 13 per coin in 2013, USD 1000+ per coin in 2017
Processing over 200k daily transactions… and growing
Market capitalisation at USD 17 trillion!
HISTORY OF BITCOIN
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Bitcoin stores a ledgerEach node stores a complete copy of all transactions
Miner nodes work to secure the ledger from attacks and also mint new coins
Bitcoin is a networkFully distributed, no centralauthority controls it
Open participation whereanybody can join, or evenstart mining coins
Bitcoin is p2p digital cashEnables almost instant payments to anybody anywhere in the world
Has escrow and multi-signaturefeatures, thus making it possible toautomate settlements
BITCOIN TRAITS
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A bitcoin node stores a ledger of all transactions that has ever happened
The ledger is made out of blocks
Each block contains a series of transactions at a specific point of time
Each block contains condensed information about the previous block
This forms a chain of blocks which cannot be broken
DIVING DEEPER INTO BITCOIN
Block 1
T T T
T T T
T
Block 2
T T T
T T T
T T
Block 3
T T T
T T T
T T T
Block 4
T T T
T T T
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DIVING DEEPER INTO BITCOIN
Each node is connected to one another, maintaining a list of peers
Nodes stay consistent with each other through a consensus algorithm called proof of work
New transactions can be created on any node, and once created is relayed to other nodes
Transactions are packed into new blocks on the blockchain through a process called mining
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PEER TO PEER GOSSIP
New transactions can be created on any node, and once created is relayed to other nodes
Any node can create a transaction
New transactions are relayed to other nodes using a gossip protocol
New transactions reside in a pool
Miner nodes eventually will receive a copy of the transaction
T my nodeminer
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DIVING DEEPER INTO BITCOIN
Miners are special nodes with the capability to add blocks to the chain
Miners ensure that everybody’s data is always consistent
Miners are also a source of new coins
Every time a new block is added to the chain, the miner that added it is rewarded with newly created bitcoins
Miners must perform a proof-of-work to gain the right to add a block to the chain
Miner Miner Miner Miner Miner Miner Miner
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Miner Miner Miner Miner Miner Miner Miner
Thousands of miners race to solve a math puzzle
MINING PROCESS
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Miner Miner Miner Miner Miner Miner Miner
First to solve gets the right to add a new block
MINING PROCESS
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Miner Miner Miner Miner Miner Miner Miner
Miner is rewarded with new coins and transaction fees
MINING PROCESS
Block 1T T T
T T T
T
Block 2T T T
T T T
T T
Block 3T T T
T T T
T T T
Block 4T T T
T T T
New BlockT T T
T T
New block with proof-of-work is broadcasted to all other nodes
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Auto-adjusting difficulty acts as traffic control
AUTO-ADJUSTING DIFFICULTY
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EARLY MINING RIGS
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MODERN MINING RIGS
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BITCOIN
Completely autonomous and fully open
participation with no central authority
Comes with high programmability to allow for
the creation of smart contracts easily
Neutral platform with strong consistency
guarantees to allow trustless transactions
BITCOIN VS CONVENTIONAL
CONVENTIONAL
Low autonomy using highly propriety
infrastructure and subject to strict regulations
Hard to automate and digitise due to existing
infrastructure and regulations
Requires users to trust institutions that may or
may not have their best interests in mind
THE IMPLICATIONSBack to blockchains please?
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EVOLUTION OF TOPOLOGIES/BUSINESS MODELS
CloudCentralised Distributed
Single point of failure
Expensive to scale
Basically outsourced
infrastructure
Mitigates failure
Requires trust
More secure as more
nodes exist/join
Highly resilient to data
loss and attacks
Evolution
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EVOLUTION OF BUSINESS MODELS
CloudCentralised Distributed
Telephone Service
Walmart
Taxi Services
Amazon
Uber
Firechat
Open Bazaar
Lazooz
Evolution
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PROBLEM WITH DISTRIBUTED TOPOLOGY
Distributed systems are subject to byzantine attacks where malicious nodes can issue faulty updates
Any distributed system (even centralised ones) need to have a consensus algorithm to ensure consistency
Consensus is always a tradeoff - there is no one single perfect algorithm for all situations
Blockchains is distributed by nature:
Needs a way to ensure consistency between nodes
Must have a consensus algorithm that works
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BENEFITS OF BLOCKCHAINS
Save cost - move from expensive client-server oriented structure (and cost of running/renting a complete data centre) to utilising commodity hardware
Enable innovation - blockchains can be used to create ecosystems with open participation, which in turn will create new business models/opportunities
Strong fundamentals - most blockchains have strong cryptography fundamentals, better base to work on than to rely on custom implementations
Trustless neutrality - blockchains are neutral, and can be used as a platform to conduct transactions without the need of an intervening third-party
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SAVING COST THROUGH DECENTRALISING
Save cost - move from expensive client-server oriented structure (and cost of running/renting a complete data centre) to utilising commodity hardware
Data centre rental/building cost
Hardware cost
Electricity cost
Maintenance personnel salary
Security hardware cost
Security personnel cost
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SAVING COST THROUGH DECENTRALISING
Save cost - move from expensive client-server oriented structure (and cost of running/renting a complete data centre) to utilising commodity hardware
Data centre rental/building cost
Hardware cost
Electricity cost
Maintenance personnel salary
Security hardware cost
Security personnel cost
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ENABLING INNOVATION THROUGH ECOSYSTEMS
Enable innovation - blockchains can be used to create ecosystems with open participation, which in turn will create new business models/opportunities
Internal Services Firewall Business
Contracts
Integration System
Startup
VendorPublic API
Research
Roadblocks are
everywhere!
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ENABLING INNOVATION THROUGH ECOSYSTEMS
Enable innovation - blockchains can be used to create ecosystems with open participation, which in turn will create new business models/opportunities
Internal Services
Blockchain Startup
Vendor
ResearchBlockchain
Blockchain
Blockchain
Lower barrier of
entry and better
ecosystem
Open participation
drives innovation
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RELY ON BLOCKCHAIN’S STRONG FUNDAMENTALS
Strong fundamentals - most blockchains have strong cryptography fundamentals, better base to work on than to rely on custom implementations
SWIFT network lost 81
million USD to a cyber heist
in 2016
LinkedIn was breached,
more than 117 million
accounts compromised
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RELY ON BLOCKCHAIN’S STRONG FUNDAMENTALS
Strong fundamentals - most blockchains have strong cryptography fundamentals, better base to work on than to rely on custom implementations
Immutable Data Strong Cryptography Strong Consistency
Blockchains
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STREAMLINE PROCESSES THROUGH NEUTRALITY
Trustless neutrality - blockchains are neutral, and can be used as a platform to conduct transactions without the need of an intervening third-party
Corporate A
Corporate BDatabase DatabaseWhose data can I trust?
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STREAMLINE PROCESSES THROUGH NEUTRALITY
Trustless neutrality - blockchains are neutral, and can be used as a platform to conduct transactions without the need of an intervening third-party
Corporate A
Corporate B
All nodes are equal and
consistent, no trust neededBlockchains Blockchains
LANDSCAPE ANALYSISThe monumental impact of blockchains
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Immutable, tamper-proof audit-trail
Data easily shared and verified, forced transaction through protocol
Vastly increased security, less vulnerable to attack or outage
Programmable contracts that can radically reduce human errors and costs
“While Fintech Disrupts Banks, the Blockchains Disrupt Fintech"
PwC, March 2016 Global FinTech Report
ENABLING AND DISRUPTIVE TECHNOLOGY
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As of January 2016, more than 60 banks and leading financial institutions have made statements confirming that they are actively working on blockchain projects.
TAKING THE FINANCE WORLD BY STORM
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multiple blockchains for cross-boarder payments and loyalty
Exploring KYC and AML via the blockchains
Patented a blockchain based wire transfer system
Blockchain based loyalty platform
Blockchain based remittance platform
Blockchain based trade finance platform
Custom blockchainfor settlements
BIG NAMES IN THE INDUSTRY
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BITCOIN TRADING VOLUME
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FINANCIAL GIANTS ENTERING THE FRAY
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CONSORTIUMS ARE FORMING WORLDWIDE
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BLOCKCHAIN EMBASSY ASIA
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BLOCKCHAIN ECOSYSTEM
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HONG KONG 2016 BUDGET PLAN
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‘Government will encourage the industry and relevant organisations to explore the application of “Blockchain”
technology in the financial services industry, with a view to developing its potential to reduce suspicious transactions and
bring down transaction costs.’
63rd paragraph, 2016 Hong Kong Budget Plan
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SINGAPORE
45
There are other technologies, like blockchains, which is used for bitcoin, but can also be used for many other applications
like real-time gross settlement, or trade finance verification. So our banks and our regulators must keep up to date and up to
scratch with these developments
UOB 80th anniversary dinner, Prime Minister Lee
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ZUG, SWITZERLAND
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The city of Zug, Switzerland, has announced it will pilot a bitcoin payments project that will allow local citizens to pay for
public services using digital currency.
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DELAWARE, UNITED STATES
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‘Amendments to Sections 219, 224 and 232 and related provisions are intended to provide specific statutory authority
for Delaware corporations to use networks of electronic databases (examples of which are described currently as 'distributed ledgers' or a 'blockchain') for the creation and
maintenance of corporate records, including the corporation’s stock ledger’
Delaware moving towards accepting corporate records on the blockchain
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SENEGAL AND TUNISIA
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Placed national currency on the blockchain, or converted national currency into digital form on the blockchain
BLOCKCHAINS - Q&A?A gateway into distributed technologies