This document provides an overview of blockchain technology and its potential applications. It begins by explaining how blockchain first emerged through Bitcoin as a way to enable digital currency without a central authority. It then discusses key concepts like decentralized consensus, proof-of-work, and smart contracts. Several potential use cases for blockchain are outlined, including applications in banking, insurance, and healthcare by allowing decentralized verification of transactions, automatic execution of contracts, and more secure medical records. While some proposed uses may not be "sexy", the document argues that blockchain technology could fundamentally disrupt many industries by enabling new trustless systems.
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BLOCKCHAIN FROGU
IT IS NOT… IT IS …
OWNED BY ANYONE
REALLY A CHAIN
A GIFT FROM ALIENS
SOFTWARE
OPEN SOURCE
OF MYSTERIOUS ORIGINS
AN APP EXPERIENCE AN UNDERLYING TECHNOLOGY
AT ITS END ONLY JUST BEGINNING
3. BLOCKCHAIN CAME
INTO THE WORLD
THROUGH BITCOIN
BLOCKCHAIN IS THE UNDERLYING TECHNOLOGY BEHIND BITCOIN.
SPECIFICALLY IT IS DISTRIBUTED, CRYPTOGRAPHIC TECHNOLOGY. TO
BEST UNDERSTAND WHAT BLOCKCHAIN IS, HOW IT WORKS, AND WHAT
IT MAKES POSSIBLE, WE SHOULD FIRST START WITH BITCOIN AS A
VEHICLE FOR EXPLORING THE CONCEPTS OF CURRENCY AND TRUST.
BLOCKCHAIN FROGU
4. WHAT IS A
BITCOIN?
A BITCOIN IS A UNIT OF CURRENCY, LAUNCHED IN 2009, THAT ONLY
EXISTS ONLINE AND IS NOT CONTROLLED BY ANY KIND OF CENTRAL
AUTHORITY, LIKE THE US FEDERAL RESERVE.
YOU HOLD ON TO BITCOINS BY SETTING UP A VIRTUAL WALLET,
EITHER THROUGH A THIRD-PARTY WEBSITE, OR BY STORING IT ON
SOFTWARE RUN ON YOUR COMPUTER. AS SOON AS YOU HAVE YOUR
WALLET, YOU'RE PART OF THE BIG BITCOIN NETWORK. IF YOU WANT
TO BUY SOMETHING FROM YOUR NEIGHBOUR, YOU SIMPLY NEED TO
OBTAIN THEIR ANONYMOUS IDENTIFICATION NUMBER AND SEND
THEM SOME BITCOINS.
BLOCKCHAIN FROGU
5. WHERE DO BITCOINS
COME FROM?NEW BITCOINS ARE CREATED IN A PROCESS CALLED "MINING,"
WHICH INVOLVES BITCOIN USERS ATTEMPTING TO FIGURE OUT A
COMPLEX MATHEMATICAL SOLUTION RELATED TO THE CURRENT
NUMBER OF BITCOINS. YOU CAN COMPARE IT TO FINDING THE
MISSING PIECE OF A PUZZLE. WHOMEVER FINDS THE PUZZLE PIECE
WINS A CERTAIN NUMBER OF BITCOINS, AND THE PROCESS STARTS
ALL OVER AGAIN. FINDING THE BITCOIN SOLUTION INVOLVES AN
INCREDIBLE AMOUNT OF PROCESSING POWER, AND SO USERS OFTEN
BAND TOGETHER IN "POOLS" IN ORDER TO FIND THE SOLUTION AND
TO EARN BITCOINS MORE REGULARLY.
BLOCKCHAIN FROGU
6.
7. 8
FOUNDATION
CORE CONCEPTS
BLOCKCHAIN TECHNOLOGY IS A VERY
ABSTRACT AND FAR REACHING TOPIC SO
LET’S START WITH LAYING DOWN
FOUNDATIONAL KNOWLEDGE AS THE
FIRST STEP IN YOUR JOURNEY.
TO CONTINUE YOUR JOURNEY ON THE BLOCK
CHAIN WE WILL TALK ABOUT POSSIBLE DESIGN
OPPORTUNITIES, INTRODUCE CORE CONCEPTS
AT THE HEART OF THIS NEW TECHNOLOGY AND
POTENTIAL USE CASES.
BLOCKCHAIN FROGU
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BLOCKCHAIN FROGU
Around 3000 BC, bartering was the accepted form
of a direct trade of goods and services - I will give
you a stone axe if you help me kill a mammoth - but
such arrangements take time. You have to find
someone who thinks an axe is a fair trade for having
to face the 12-foot tusks on a beast that does not
take kindly to being hunted. If that did not work, you
would have to alter the deal until someone agreed to
the terms.
BARTERING
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BLOCKCHAIN FROGU
In 600 BC, Alyattes, King of Lydia, produced the
world’s first official coin. The coins were made from
electrum, a combination of silver and gold. Once
moulded, each coin was stamped with a picture and
these pictures acted as denominations. The
currency helped increase internal and external trade.
Years later, the last Lydian King, Croesus, minted the
world’s first gold coin.
COINS
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BLOCKCHAIN FROGU
Today money is easily accessible and used to
purchase goods and services. But instead of
carrying silver coins or bank notes from place to
place, we now use credit cards and debit cards to
secure the items we desire.
DEBIT ORDER
SYSTEMS
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BLOCKCHAIN FROGU
Trust is essential for virtually all economic activity.
I must trust that the takeaway coffee I buy is not
poisoned and the vendor must trust that the five
pound note I hand over is not fake. When we order
products online, we must trust that the item will
arrive, will be of the quality we expected and that our
credit card details will not be misused. It is a social
agreement we rely on.
TRUST (NOT MONEY)
MAKES THE WORLD
GO ‘ROUND
13. IF KEEPING TRUST
JUST WOULD BE
THAT EASY…
BLOCKCHAIN FROGU
OR, EVERYONE CAN HAVE GOOD INTENTIONS
BUT F*** UP
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BLOCKCHAIN FROGU
The Double Spending challenge is how to send and receive
money online without the need for a trusted third party, such
as PayPal, ensuring that the same digital credit standing in
for the amount being exchanged is not being spent twice. In
the real world, this problem gets avoided with cash.
ELIMINATING
THE NEED FOR
TRUSTED THIRD
PARTIES
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BLOCKCHAIN FROGU
In the mind of Satoshi Nakamoto governments debase a
currency, make too many regulations, interfere in financial
transactions for contraband, and tax to death. His approach
cannot be shut down or debased by the government
because it is decentralized and there are no tangible assets
that governments can seize.
STICKING IT TO
“THE MAN”
18. CENTRALIZED VERSUS
DECENTRALIZED
OUR DESIGNS HAVE TENDED TO STAY AWAY FROM
DECENTRALIZED SYSTEMS (PERHAPS OUT OF FEAR) WHILE IN
NATURE DECENTRALIZED SOLUTIONS HAVE EVOLVED AS THE
CLEAR WINNERS (ANT HILLS, FLOCKS OF BIRDS) OVER THE
MILLENNIA.
BLOCKCHAIN FROGU
19. 2020
CENTRALIZED VS
DECENTRALIZED
1990S
THE INTERNET ITSELF
2003
SKYPE
2001
BITTORRENT
The Internet – Compared to printed media,
books, encyclopaedias and traditional libraries,
the World Wide Web has enabled the
decentralization of information on a large
scale.
Skype – Skype used to be the first peer-to-
peer IP telephony network. In its origin the
network has consisted of "supernodes" made
up of regular users who had sufficient
bandwidth, processing power, and other
system requirements to qualify. These
supernodes then transferred data with other
supernodes in a peer-to-peer fashion.
BitTorrent – BitTorrent, took on the
concepts of its predecessors breaking files
into multiple chunks (Usenet, Topsites) as
well as the decentralized peer-to-peer
distribution mechanism (Napster, Gnutella,
eDonkey2000, Kazaa). In November 2004,
BitTorrent was responsible for 35% of all
Internet traffic.
The internet has brought us decentralized systems
that created disruption.
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BLOCKCHAIN FROGU
WHAT IF…
The door refused to open. It said, “Five cents, please.”
He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried
the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I
don’t have to pay you.”
“I think otherwise,” the door said. “Look in the purchase contract you signed when you bought
this conapt.”
…
“I’ll sue you,” the door said as the first screw fell out.
Joe Chip said, “I’ve never been sued by a door. But I guess I can live through it.”
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BLOCKCHAIN FROGU
WHAT IF…
The door refused to open. It said, “Five cents, please.”
He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried
the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I
don’t have to pay you.”
“I think otherwise,” the door said. “Look in the purchase contract you signed when you bought
this conapt.”
…
“I’ll sue you,” the door said as the first screw fell out.
Joe Chip said, “I’ve never been sued by a door. But I guess I can live through it.”
– passage from Philip K Dick’s Ubik
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BLOCKCHAIN FROGU
BANKING
INDUSTRYWhat if… Blockchain is a way for one Internet user to transfer a unique piece of digital
property to another Internet user, such that the transfer is guaranteed to be safe and
secure. Think about digital signatures, digital contracts, digital keys (to physical locks, or
to online lockers), digital ownership of physical assets such as cars and houses, digital
stocks and bonds… and digital money.
All these are exchanged through a distributed network of trust that does not require or
rely upon a central intermediary like a bank or broker. And all in a way where only the
owner of an asset can send it, only the intended recipient can receive it, the asset can
inherently only exist in one place at a time, and everyone can validate transactions and
ownership of all assets anytime they want.
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BLOCKCHAIN FROGU
What if… there were no more disputes about the ‘last’ will and testament? When
someone dies and the coroner verifies death and cause of death to their Block Chain,
then their last will and testament is released publicly, their health records are donated to
medical research charities and their life insurance policy pays out automatically.
INSURANCE
INDUSTRY
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BLOCKCHAIN FROGU
HEALTHCARE
INDUSTRYWhat if… Block Chain technology can single handedly disrupt the way our healthcare
systems works, for good. Patients can hold the private key to their personal health data
and the public keys can be used to partially share certain parts of the data, when required.
• The health data can be securely stored and transmitted around the globe in seconds.
• The medical records can be decentralised.
• The data is stored in the nodes, a better structure compared to centralised storage of all
the healthcare data — as traditionally the companies use the data to sell it to
pharmaceuticals and insurance companies for better inventory management.
• Time-stamping of health status updates can notify doctors when fluctuation happens to
the person’s health.
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FOUNDATION
CORE CONCEPTS
BLOCK CHAIN TECHNOLOGY IS A VERY
ABSTRACT AND FAR REACHING TOPIC SO
LET’S START WITH LAYING DOWN
FOUNDATIONAL KNOWLEDGE AS THE
FIRST STEP OUR JOURNEY.
TO CONTINUE YOUR JOURNEY ON THE BLOCK
CHAIN WE WILL TALK ABOUT POSSIBLE DESIGN
OPPORTUNITIES, INTRODUCE CORE CONCEPTS
AT THE HEART OF THIS NEW TECHNOLOGY AND
POTENTIAL USE CASES.
BLOCKCHAIN FROGU
32. BLOCKCHAIN FROGU
DECENTRALIZED
CONSENSUS
Decentralized consensus breaks the
old paradigm of centralized
consensus — i.e., when one central
database used to rule transaction
validity. A decentralized scheme, on
which the bitcoin protocol is based,
transfers authority and trust to a
decentralized virtual network and enables
its nodes to continuously and sequentially
record transactions on a public “block,”
creating a unique “chain”: the Block Chain
What’s important here is that with
this degree of unbundling, the
consensus logic is separate from
the application itself; therefore,
applications can be written to be
organically decentralized, and that is the
spark for a variety of system-changing
innovations in the software architecture
of applications, whether they are money
or non-money related.
CONSENSUS LOGICPARADIGM SHIFT
33. FROGU
PROOF OF
WORK
It is an economic measure meant to
prevent abuse in a system or network. In
other words, if you have to pay to play, then
this will deter would be abusers of the
game.
This idea has been proposed as part of
service design. If you are a requester of a
service, you would received computational
puzzle (i.e. proof of work) that requires
work be done before using the service. The
work is an impediment, but not
unreasonable.
The service provider in turn can easily
WHAT IS “PROOF OF WORK”?
DEFINITION
check to make sure the requester actually
carried out the requisite work.
Which brings us to two principles of proof
of work:
• The work must be moderately hard (but
feasible) on the requester side
• The work must be easy to check for the
service provider
This asymmetrical scheme has been
proposed as a layer on top of web browsing
and email to prevent detail of service
attacks and spam.
BLOCKCHAIN
34. BLOCKCHAIN FROGU
PROOF OF
WORK
Each time the public ledger of records that
is the block chain itself has to be updated
with new groups of transactions, all of the
bitcoin miners tackle a “proof of work
problem” which entails repeatedly trying to
solve a cryptographic problem or challenge
to get a unique result with a specific set of
leading zeros. How unique? It is like wining
the lottery.
Consider a coin toss where the probability
of getting heads or tails is 50/50 where
heads is 0 and tails is a 1. No
DETAILS
SO HOW DOES BLOCK CHAIN DO IT?
Let’s say you had to find a string with 40
zeros. That means you would have to try
2^40 attempts to find a valid proof; 1
trillion attempts on average. Not easy, but
not impossible.
Think of it this way, if I had 40 coins what
is the likelihood that I would end up with
40 heads in a row?
So, when the block chain needs to be
updated all the “miners” or nodes in the
bitcoin network tackle a challenge problem
to find a proof.
The elegance of this system is the
combination of cryptographic hash
functions with a distributed system to
ensure that the proof of work is hard
enough to thwart abusers – thus creating
trust – while making it easy enough to
complete and verify in a reasonable
amount of time.
While the concepts go back to the 90’s, this
type of software has not existed ever
before. That is fu**ing cool!
35. BLOCKCHAIN FROGU
SMART
CONTRACT
Smart contracts are the building blocks for
decentralized applications. A smart
contract is equivalent to a little program
that you can entrust with a unit of value (as
a token or money), and rules around that
value. The basic idea behind smart
contracts is that a transaction’s contractual
governance between two or more parties
can be verified programmatically via the
Block Chain, instead of via a central
arbitrator, rule maker, or gatekeeper.
WHAT IS A SMART
CONTRACT?
One example of a smart contract would be
an employment agreement: A wants to pay
$500 to B to build a website. The contract
would work as follows: A puts $500 into
the contract, and the funds are locked up.
When B finishes the website, B can send a
message to the contract asking to unlock
the funds. If A agrees, the funds are
released. If B decides not to finish the
website, B can quit by sending a message to
relinquish the funds. If B claims that
EXAMPLEDEFINITION
he finished the website, but A does not
agree, then after a 7-day waiting period it’s
up to judge J to provide a verdict in A or B’s
favor. …
36. BLOCKCHAIN FROGU
DECENTRALIZED
ORGANIZATIONS
The idea of a decentralized organization
takes the same concept of an organization,
and decentralizes it. Instead of a
hierarchical structure managed by a set of
humans interacting in person and
controlling property via the legal system, a
decentralized organization involves a set of
humans interacting with each other
according to a protocol specified in code,
and enforced on the Block Chain. A *DO*
may or may not make use of the legal
system for some protection of its physical
property, but even there such usage is
secondary. For example, one can take the
WHAT ARE DECENTRALIZED
ORGANISATIONS?
DEFINITION
shareholder-owned corporation above, and
transplant it entirely on the Block Chain; a
long-running Block Chain-based contract
maintains a record of each individual’s
holdings of their shares, and on-Block
Chain voting would allow the shareholders
to select the positions of the board of
directors and the employees. *Smart
property systems* can also be integrated
into the Block Chain directly, potentially
allowing DOs to control vehicles, safety
deposit boxes and buildings.
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BLOCKCHAIN FROGU
Blockchains provide us with one very
simple feature that was never before
present in the history of computer science:
the ability to declare a truth, globally and
without a center of authority regardless of
what anyone else does to change this
truth.
“
”
- CHRIS DEROSE, COUNTER PATH FOUNDATION