Blockchain introduction
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The document provides an introduction to blockchain technology, explaining that it is a tamper-proof database where data is added in blocks that can’t be changed or deleted once frozen. It discusses various public and private blockchain databases, including Bitcoin and Ethereum, highlighting their unique features and use cases in finance, supply chain, and healthcare sectors. Additionally, it touches on concepts like mining, smart contracts, and the decentralized nature of cryptocurrencies.
Blockchain introduction
- 1. Introduction to Blockchain Swiss Re Contract Expert Circle 2017 [email protected] @sparkl
- 2. A blockchain is a simple database ✔ You can add data Data is regularly frozen into blocks. Once frozen: ❌ You can't change the data ❌ You can't delete the data Freezing a block is more commonly known as "mining" the block
- 3. The blockchain? No such thing! Anyone can knock up a blockchain database BitCoin is a famous public blockchain database, storing cash transactions Ethereum is a different public blockchain database, general purpose You can set up your own public blockchain any time you like
- 4. A famous public blockchain database is . . . BitCoin (known as BTC or XBT) The BitCoin database is duplicated by many computers in different places ○ 7000 mining bitcoin nodes globally in Mar 2017 ■ 2000 in USA ■ 1300 in DE ○ Around 250K transactions per day ○ About $16bn worth of BTC in circulation
- 5. A famous public blockchain database is . . . BitCoin (known as BTC or XBT) The BitCoin database is duplicated by many computers in different places ○ 7000 mining bitcoin nodes globally in Mar 2017 ■ 2000 in USA ■ 1300 in DE ○ Around 250K transactions per day ○ About $16bn worth of BTC in circulation Takes about 1 hour to "clear" transactions with confidence After 1 hour there will be 6 or more blocks frozen with consensus after your block
- 6. Other Blockchain Databases ● 100's of BitCoin alternatives (see altcoins.com) ○ Ethereum ETH ■ Interesting for its programming language (stored procedures, or "Smart Contracts") ■ This was exploited in 2016, leaving behind Ethereum "classic" currency ETC ○ Deutsche eMark DEM ■ Interesting because it is spuriously tied to a nation state ○ Zcash ZEC ■ Interesting because it provides true anonymity unlike BitCoin ■ It also hides transaction amounts and balances ○ Namecoin NMC ■ Interesting because transactions record/transfer domain names ■ e.g. sparkl.bit ○ Ripple XRP ■ Interesting because it's designed for inter-bank cross-border transfers ■ Promises to reduce the cost of clearing by 60%
- 7. Crypto-currency Mining BitCoins Proof of work Consensus ● Freezing a block of transactions is hard work ○ If you do it, you're called a "miner" ○ Lots of $$$ computer power is required ○ Each frozen block is assigned a fixed BitCoin value ● What is intrinsic value? Consensus is critical ○ Majority of duplicating computers must agree each block ○ Everyone must believe these duplicates are independent ○ Therefore must have 1000's of computers all over the globe ● All this work is paid for...how? ○ A % of the block BitCoin value goes to the miners ○ It's hard to know whether miners operate at a profit ○ You can pay to join miners e.g. genesis-mining.com
- 8. My Journey into the Light Start coinfloor.com Trading exchange blockchain.info Bitcoin wallet Trades BitCoin only. kraken.com Trading exchange Trades BitCoin, Ethereum, Monero, Zcash, Ripple and others. Holds your BitCoin in the cloud or in local wallet on your mobile. Easy to buy BitCoin through tame broker. namecoin.org DNS name wallet Provides local DNS server for .bit domains. I use this to keep a BitCoin balance I can spend on stuff using my mobile or browser. I use this to buy BTC using GBP with payments from my bank account. I use this to buy Ripple, Zcash or Eth using BTC or GBP. I use this to register sparkl.bit
- 9. Private Blockchain Databases ● Hyperledger ○ Open-source tech ■ Allows you to knock up any blockchain use case ○ Has stored procedures ("smart contracts") ○ Particularly aimed at trading groups or consortia ○ Makes sense where a group has some kind of collective trust ■ Group trust removes crypto-currency requirement ● No crypto-currency ○ Different consensus protocol ■ Uses centralised notaries, does not require "proof of work" ■ Instant validation of transactions ○ No need to wait for confidence, as you do with BitCoin
- 10. Private Blockchain Databases ● A private blockchain is a tamper-proof add-only database ○ New tool to use in corporate IT solutions ○ Useful focus of synchronisation between parties ■ With private databases, some trust exists between parties ● Helps deliver the usual benefits of a shared system ○ Reduced Cost ○ Increased Agility ● Convenient catalyst ○ Blockchain is a database with useful new features ○ Encourages shared systems that are perhaps decades overdue ○ New project ideas benefit from pent-up demand
- 11. Private Blockchain Use Cases ● Finance ○ Jan 17: Deutsche Börse Presents Blockchain Concept for Risk Free Cash Transfer ○ Dec 16: SWIFT launches Blockchain Proof of Concept In Hyperledger ● Supply Chain ○ Provenance of responsibly sourced fish ○ Tracking of aerospace components and lifecycle within completed products ● Healthcare ○ Health provider data and security ○ Patient identity and records transmission
- 12. "Smart Contracts" ● A blockchain is a database ○ You can add data ○ It's tamper proof ○ Achieves consensus through duplicate nodes ● Let that data include good old-fashioned programming code ○ Just like "Stored Procedures" in normal databases ○ Just as limited, too ○ Execution and consensus by duplicate nodes ○ Give an old dog a fancy new name and we have . . . ● "Smart Contracts" ○ Ta-da! ○ Highly risky in public blockchain ○ Useful tool in private blockchain
- 13. Oil rig Insurer Reinsurer IoT sensors and systems Closed loop distributed intelligence Realtime reporting and analytics Audit trails tamper-proofed using BitCoin public blockchain Smart Policy document expresses and processes policy events including claims and settlements Policy state held on private blockchain using "smart contracts" Settlements processed through Ripple public blockchain Internal systems and workflows are integrated Systems SPARKL Blockchain Databases Parties
- 15. Page down for extra slides Too detailed to present but interesting...
- 16. Interesting things about BitCoin #1 You get yourself a bitcoin "address" to receive a BitCoin amount A transaction is where an amount is signed over from one set of addresses to another set of addresses (N:M, but most often 1:1) You can have loads of addresses - often a new one per transaction Nobody knows all your addresses - that's your little secret The public, duplicated, tamper-proof database prevents double spending
- 17. Interesting things about BitCoin #2 Each frozen block, containing e.g. 2500 transactions, has a fixed coin value The coin value of later blocks is fixed to reduce logarithmically Total number of BitCoins is just the (inflating) sum of all those coin values So there's a limit of around 21m BitCoins (reached around 2140 AD) A transaction can be as small as 1/100,000,000 of a BTC! Today BTC 0.001 trades at roughly EUR 1.0
- 18. Interesting things about BitCoin #3 Freezing a new block is really expensive and difficult to do But amazingly easy for anyone to check! A block has a bunch of transactions in it, say 2000+ A "miner" gets paid for freezing a block, plus a fee for the transactions in it You can become a miner anytime you like (try genesis-mining.com) Payment for freezing a block is going down, down, down Txn volume means number of txns per block has to go up, up, up