introduction to blockchain and crypto currencies

Blockchain & Virtual CurrenciesTechnology, Opportunities and Threats

Rohas NagpalShinam Arora

7thMay,2016atMumbai

WhatisMoney?Fiatcurrency:DesignatedaslegaltenderbytheGovernment.Backedbycommodi8es?

Ipromisetopaythebearerthesumofonethousandrupees.

e-Money:Digitaltransfermechanismforfiatcurrency.Mobilewallets?Creditcards?VirtualCurrency:Notdesignatedaslegaltender.

þ  amediumofexchangeþ  aunitofaccountþ  astoreofvalue

Crypto-currenciesþ  Distributedþ  open-sourceþ  math-basedþ  peer-to-peerþ  de-centralizedþ  conver8ble

Morethan700tradedcrypto-currencies

Source:hFps://coinmarketcap.com/all/views/all/

The jargon

A look at some of the key concepts in blockchain & crypto-currencies.

Thejargonþ  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

SymmetricCryptography

Imagesource:AnIntroduc8ontoCryptography–PGPCorpora8on

Thejargonþ  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

AsymmetricCryptography

Imagesource:AnIntroduc8ontoCryptography–PGPCorpora8on

Thejargono  Cryptographyþ  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

One-wayHashFuncIons

Input Hash

sanya c75491c89395de9fa4ed29affda0e4d29cbad290

SANYA 33fef490220a0e6dee2f16c5a8f78ce491741adc

Sanya 4c391643f247937bee14c0bcca9Z985fc0d0ba

Thejargono  Cryptographyo  Hashfunc8onsþ  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

DigitalSignatures

Imagesource:AnIntroduc8ontoCryptography–PGPCorpora8on

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignaturesþ  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

Hashbeginswith5zeros

rn@asianlaws.org:info@lexcode.com:18032016:xxxx

input rn@asianlaws.org:info@lexcode.com:18032016:1

hash 288721860bec3a490811981c831702d4f41e54c3f8c183c5650ac73ff231659c

input rn@asianlaws.org:info@lexcode.com:18032016:2

hash 11caf434535c35cdc843e801382f0a8643a03500649a9bfa41c8e6a4be65a413

input rn@asianlaws.org:info@lexcode.com:18032016:1580661

hash 0000080602f705257e74a4e847e9ed23ab61be5b2ba4263\acc90bd7c7c7ab4

...increasenonceIll….

CompuInghashisnottrivial,verificaIonis.

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworkþ  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

Canyoudouble-spendphysicalcurrency?Incaseofphysicalcurrencynotes,youcannotdouble-spendanotebecauseonceyouhandthenoteovertosomeone,youdon’thavethenoteanymoretospendagain.Canyoudouble-spendvirtualcurrency?Sinceelectronicrecordsareeasilyduplicated,a“digitalcoin”canbespentmul8ple8mes.

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingþ  Blockchaino  Merkletreeo  Minerso  Addresso  Wallets

Imagesource:hFps://upload.wikimedia.org/wikipedia/commons/7/7a/Bitcoin_Block_Data.png

Blockchainisapublicledgercontaininganorderedand8me-stampedrecordoftransac8ons.Itpreventsdouble-spendingaswellasthemodifica8onofprevioustransac8onrecords.

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchainþ  Merkletreeo  Minerso  Addresso  Wallets

Imagesource:hFps://en.wikipedia.org/wiki/Merkle_tree#/media/File:Hash_Tree.svg

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeþ  Minerso  Addresso  Wallets

•  Whileagoldminerdigsintotheearthtodiscovergold,abitcoinminerusescomputa8onalpowertocalculatehashes.

•  Toaddanen8reblocktotheblockchain,aBitcoinminermustsuccessfullyhashablockheadertoavaluebelowthetargetthreshold.

•  MinersspendoncomputaIonalpowerandelectricityandarecompensatedbywayofarewardforeachblocktheymineandtransacIonfees.

•  Minersusuallyoperateaspartofalargepoolinsteadofasindividuals.

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeþ  Minerso  Addresso  Wallets

Imagesource:Wikipedia

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeþ  Minerso  Addresso  Wallets

Imagesource:Wikipedia

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeþ  Minerso  Addresso  Wallets

Imagesource:bitcoin.com

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minersþ  Addresso  Wallets

Therearecurrentlytwoaddressformatsincommonuse:CommonP2PKHwhichbeginwiththenumber11BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2NewerP2SHtypestar8ngwiththenumber33J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minersþ  Addresso  Wallets

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addressþ  Wallets

•  Collec8onofprivatekeys.

•  Thesecollec8onsarestoreddigitallyinafile,orcanevenbephysicallystoredonpiecesofpaper.

•  Althoughit’scalledawallet,aBitcoinwalletdoesnotstorebitcoins.Thewalletisacollec8onofpublic-privatekey-pairs.

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addressþ  Wallets

ThesimplestBitcoinwalletisaprogram,whichperformsthesefunc8ons:

•  itgeneratesprivatekeys,

•  derivesthecorrespondingpublickeys,

•  helpsdistributethosepublickeysasnecessary,

•  monitorsforoutputsspenttothosepublickeys,

•  createsandsignstransac8onsspendingthoseoutputs,

•  broadcaststhesignedtransac8ons.

Thejargono  Cryptographyo  Hashfunc8onso  DigitalSignatureso  Proofofworko  Double-spendingo  Blockchaino  Merkletreeo  Minerso  Addressþ  Wallets

Source:hFps://bitcoin.org/en/choose-your-wallet

Bitcoin in the real world

A look at how Bitcoin, the most popular crypto-currency is being used in the real world.

BitcoinATMTheworld’sfirstbitcoinATMwassetupinWavescoffeeshopinVancouver,CanadainOctober2013

Imagecourtesy:GeFy

UsingtheBitcoinATMAuserscansaQRcodeonhissmartphonetotransferbitcoins

Imagecourtesy:GeFy

BitcoinATMmap

Source:hFp://www.coindesk.com/bitcoin-atm-map/

BrazilianUniversityAcceptsBitcoin,InstallsCampusATM

Source:hFp://www.coindesk.com/

Imagecourtesy:www.bitcoinatm.com

BitcoinATMs

Imagecourtesy:www.bitcoinatm.com

Bitcoins&captchaBitcoinscanbeearnedbyfillingoutcaptcha.Thisisprobablyfundedbyspammerswhoneedhumanstofilloutcaptchaforms.

Bitcoins&loeery

Whatcanyoubuyusingbitcoin?

Source:hFp://bitcoin-realestate.com/

Whatcanyoubuyusingbitcoin?þ  Autos&Motorcyclesþ  Jewelry&Watchesþ  RealEstateþ  Travel&VIPEventsþ  FineArt&An8quesþ  Collec8blesþ  Handbags&Accessoriesþ  Yachts&Subsþ  PremiumDomains

Source:hFps://www.bitpremier.com/

BitcoinLaunderingQuickLaunder“Wescrambleyourbitcoinswiththecoinsofotherusers….(it)willonlyslowdown-notstop-amo8vatedinves8gatorfrombacktracingyourbitcoin”.SecureLaunder..“rendersyourbitcoinscompletelyuntraceable,eventothemostpersistentforensicinves8gator”…

Source:hFps://bitlaunder.com/launder-bitcoin

Blockchain & Virtual CurrenciesTechnology, Opportunities and Threats

Rohas Nagpal (rn@asianlaws.org)Shinam Arora (sa@asianlaws.org)