The third presentation in the Arini blockchain series. It focuses on summarising the block chain applications.

1. theapplicationsof
blockchain
andcryptocurrencies
Grzegorz Gawron
Arini Labs
marketics at arini.biz

2. Agenda
- RIP bitcoin, long live the blockchain?
- crypto protocols
- escrow, offline payments-green addresses, micropayments
- timestamping, but no clairvoyance
- smart property - using OpenAssets
- cryptographic randomness beacon
- multi party lotteries
- prediction markets
- financial uses
- smart coins
- bonds
- Stellar

3. RIPbitcoin
long live the underlying
tech: blockchain?
“...It’s time to admit
that the current Bitcoin
needs to be scrapped and
to take advantage of the
innovations behind the
technology that underlies
Bitcoin, the
blockchain...”
* [6]

4. bitcoin‘experiment’
* [7], [5]
● (Mike Hearn) would you use a payment system which:
○ Couldn’t move your existing money
○ Had wildly unpredictable fees that were high and rising fast
○ Allowed buyers to take back payments they’d made after walking out of
shops, by simply pressing a button (...) RBF/scorched earth
○ Is suffering large backlogs and flaky payments
○ … which is controlled by China
○ … and in which the companies and people building it were in open
civil war?
● main cause = community failure?
○ miner concentration
○ limited throughput

5. blockchain
and
“cryptoprotocols”

6. bitcoinscripts’applications
● escrow
● green addresses
● efficient micro-payments
* [3]

7. TRANSACTION
10 BTC
from Alice
to MULTISIG
(2 out of 3)
Escrow
Arbitrator
Alice
2x sign
Bob
sign
2x sign
1 2a
2c 2b

8. Bob
TRANSACTION
10 BTC
from Bank
to Bob
GreenAddresses
Alice
‘Bank’
1
sign
2
3
4

9. Bob
TRANSACTION B
<lock time>
1 BTC
from TRANS A
to Alice
Micropayments
Alice
2a
sign
TRANSACTION k
0.0001 BTC
from TRANS A
to Bob
TRANSACTION 2
0.0002 BTC
from TRANS A
to Bob
TRANSACTION 3
0.0003 BTC
from TRANS A
to Bob
TRANSACTION A
1 BTC
from Alice
to MULTISIG
(2 out of 2)
1
sign
sign
2b
3
sign
sign
sign
4 5
6

10. Timestamping
- proof of something without revealing it
- Alice and Bob both sign a hash of a patent
- not proof of clairvoyance
- corrupt FIFA case

11. Timestampbitcoinimplementation
- ‘burn’ coins by sending to the time-hash
- but you burn coins and the output needs to be tracked forever, not
good
- encode the time-hash in the private key
- send back money 2x with the same randomness key
- this allows reconstructing the private key
- but a bit complex
- ‘burn’ using OP_RETURN with the time-hash
- it costs (<1GBp), but you can batch the commitments in a merkle tree
for instance
side note: illicit content: eg illegal links embedded

12. Smartproperty
- ownership of any real-world property
- tickets, cars, stocks, domain names
- OpenAssets protocol
- based on OP_RETURN with instructions
- pass the coin through a special publicised P2SH address
splitting/combining the coins in a tx with a burned bitcoin
encoding the split config
- downsides
- burn
- need to validate the full history of a coin to make sure it’s
really ‘coloured’

13. Cryptographicbeacon
- the need: envelopes
- bent edges
- cold envelope
- video rigged
- bitcoin beacon
- treat the hash found as a random bit
- miner can withhold (<4000$)

14. Multipartylotteries

15. Secure,multi-partylotteries
● untrusting counterparties
● sensitive inputs
● and yet - auto transfer money according to rules

16. Thelotteryrounds
- round 1
- everyone picks a random value
- everyone shares hash of their random value
- round 2
- everyone shares the random value
- all the values are combined into one (eg sum mod n)

17. Howtomakeafairlottery
what if alice got all the real numbers in round 2 and knows
she lost? a collateral should help here
● alice creates tx in round 1:
○ to alice/bob OR to alice (with hash)
● alice/bob sign time-locked collateral transaction
● alice reclaims collateral by providing the data

18. PredictionMarkets

19. Predictionmarkets
● let people earn from their ‘dispersed’ knowledge
● get a prediction at the same time
● proposed operation
○ create/buy/sell
○ arbitration
○ data feeds

20. Predictionmarketsinbitcoin
● simple wager
○ with Reality Keys
○ tx to: < bob&YES OR alice&NO >
■ YES/NO - a private key for the yes/no-scenario
● market API
○ OpenMarket/Close_
○ BuyCompleteSet/Sell_
○ BuySingle/Sell_

21. Dealstructures
● go long:
○ enter: buySingle (buyComplete/sellSingle*)
○ exit: sellSingle (buySingle*/sellComplete)
● go short:
○ enter: buyCompleteSet/sellSingle
○ exit: buySingle/sellComplete
● arbitrage
○ if (sum sellSingle* < complete price)
○ buy all / sellComplete
○ ... and vice versa

22. Externalexchange-needabroker
* 20/1/2016 http://www.jbonneau.com/doc/CBEKMN14-WEIS-decentralizing_prediction_markets.pdf

23. Bitshares

24. Bitshares-abitmorefinance
● smart coins
○ long: spend BTx, get BTgold
○ short: put collateral margin, produce BTgold
● smart bonds
○ put BTx as collateral
○ produce a BTbond, get BTS
○ pay BTS interest
○ if not: your collateral gets paid to BTbond buyer

25. Stellar

26. Stellar-blockchainplatform
● comparison to bitcoin
○ no POW, Federated Byzantine Agreement instead
■ 2 seconds between ‘blocks’
○ ledger of accounts, not transactions
● life cycle
○ client: create tx, sign, submit
○ core: preliminary checks, propagate, scp

27. Multi-signatures
● security thresholds
○ low - allow trust
○ medium
○ high - modify signers, options
● eg - any 3 employees can sign anything
○ thresholds: low/medium/high: 3/3/3
○ master key weight: 0
○ Employee x key weight: 1

28. Stellarconsensusprotocol
* 20/1/2016 https://www.stellar.org/

29. Consensusbasedon‘federated’trust
* 20/1/2016 https://www.stellar.org/

30. References
[1] http://www.jbonneau.com/doc/CBEKMN14-WEIS-decentralizing_prediction_markets.pdf
[2] https://www.stellar.org/papers/stellar-consensus-protocol.pdf
[3] Princeton University: ‘Bitcoin and cryptocurrency technologies’ https://www.coursera.
org/course/bitcointech
[4] https://bitshares.org/
[5] https://medium.com/@octskyward/replace-by-fee-43edd9a1dd6d
[6] https://www.washingtonpost.com/news/innovations/wp/2016/01/19/r-i-p-bitcoin-its-time-to-move-on/
[7] https://medium.com/@octskyward/the-resolution-of-the-bitcoin-experiment-dabb30201f7

31. THANKYOU