Meetup format1. Feature presentation: 30 min

Blockchain scalability, by Francis Pouliot

2. Latest blocks: 30 min

Short segments on various topics, 5-7 speakers

3. Expert panel Q&A; 30 min

Ask all your questions about blockchain technology

4. Community announcements 5-10 min

The Big News: Segregated Witness- Bitcoin blockchain maintains leadership- Solid scalability roadmap- Massive new upgrade

Presentation goals:

1. Understanding what is a blockchain?2. Overview of an emerging governance structure3. See the future of The Blockchain

UPGRADING LIVE BLOCKCHAINS

Introduction

1. Bitcoin, the first and largest blockchain2. Ethereum, a world of differences

The blockchain as a living ecosystem

Decentralized consensusWhat is consensus?

Goal: a “master” version of the ledger that everyone agrees upon.

Consensus is an emergent artifact of the asynchronous interaction of thousands of independent nodes, all following simple rules. All the properties of bitcoin, including currency, transactions, payments, and the security model that does not depend on central authority or trust, derive from this invention.

Consensus = rules + game theory

- Nobody is forced to agree on the last version

Result: a single source of truth

Decentralized consensus● Independent verification of each transaction, by every full node, based on a comprehensive list of criteria

Eg: correct syntax, correct signatures, correct amounts

● Independent aggregation of those transactions into new blocks by mining nodes, coupled with demonstrated

computation through a proof-of-work algorithm

● Independent verification of the new blocks by every node and assembly into a chain

● Independent selection, by every node, of the chain with the most cumulative computation demonstrated through

proof of work

HENCE: THE IMPORTANCE OF RULES

Problem1. Rules are written as code, implemented by participants running software.2. Participants coordinate without a central authority by implementing the

agreed-upon rules. 3. The blockchain is the result of its participants following the consensus rules.

But what happens if we need to change the rules? (e.g. to make Bitcoin more scalable or increase privacy)

We need to change the rules!

Main actorsCore developers (write code)- Maintain and protect the Bitcoin protocol- Implement new features in the reference implementation (Bitcoin Core)Miners- Implement protocol through mining - Required for soft-forkFull nodes- Implement protocol through validation- Required for hard-forkEconomic majority- Represent end-users- Provide value and legitimacy to a chain

Upgrading the BlockchainChanging the rules

1. Problem identified2. Solution (code) proposed3. Adopted by miners (soft fork + hard fork)4. Adopted by nodes (hard fork)

What happens if there is a hard fork?

1. Economic majority legitimizes a fork2. Losing fork disappears or develops into another blockchain

Upgrading the BlockchainProblems

A block following the new consensus rules is accepted by upgraded nodes but rejected by non-upgraded nodes. For

example, a new transaction feature is used within a block: upgraded nodes understand the feature and accept it, but

non-upgraded nodes reject it because it violates the old rules.

A block violating the new consensus rules is rejected by upgraded nodes but accepted by non-upgraded nodes. For

example, an abusive transaction feature is used within a block: upgraded nodes reject it because it violates the new rules,

but non-upgraded nodes accept it because it follows the old rules.

Defining consensus - Open community debate

- Academic papers, conferences, testing

- Industry groups / factions form

Trial by fire: Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited

Scenario to avoid: blockchain split

SCALING BITCOIN + BITCOIN CORE

Emerging institutions

- Bitcoin Core (vs. Bitcoin developers)

- Scaling Bitcoin

- Industry roundtable formats

Bitcoin development processResearch and development- Studying Bitcoin and blockchain as a scienceBitcoin improvement proposal- Process to propose changes to BitcoinPeer-review- Discussion and feedbackTest implementation- Proposing a strategy and roadmapIntegrate in main codebase (mainnet)- Semiformal, meritocratic process

Current prioritiesStriking a balance between:

● Scalability● Privacy● Decentralization● Accessibility

Scalibility: conceptual frameworksWhat does scaling mean?

● What are the goals?- Transaction volume- User adoption- Institutional adoption- Platform?

● What are the trade-offs?- Network fees- Decentralization- Attacks, risks

Gregory Maxwell, Blockstream CTO (aka “nullc”)With the available technology, there are fundamental trade-offs between scale and decentralization. If the system is too costly people will be forced to trust third parties rather than independently enforcing the system's rules. If the Bitcoin blockchain’s resource usage, relative to the available technology, is too great, Bitcoin loses its competitive advantages compared to legacy systems because validation will be too costly (pricing out many users), forcing trust back into the system. If capacity is too low and our methods of transacting too inefficient, access to the chain for dispute resolution will be too costly, again pushing trust back into the system.

Since Bitcoin is an electronic cash, it _isn't_ a generic database; the demand for cheap highly-replicated perpetual storage is unbounded, and Bitcoin cannot and will not satisfy that demand for non-ecash (non-Bitcoin) usage, and there is no shame in that. Fortunately, Bitcoin can interoperate with other systems that address other applications, and--with luck and hard work--the Bitcoin system can and will satisfy the world's demand for electronic cash.

Fortunately, a lot of great technology is in the works that make navigating the trade-offs easier.

Competing for block space

The importance of decentralization● Self-validation of transactions / trustless● Censorship resistance● Privacy ● Resistance to sybill attacks● Difficult to change / permanence● Removing systematic risk / too big to fail

Thus, the small block vs. big block debate emerge

Scalibility: conceptual frameworks

ON CHAIN vs. LAYER 2Some caveats:

- Not mutually exclusive - Not “binary”

SCALING BITCOIN We can scale Bitcoin to credit-card level of processing volumes while not compromising the decentralization of the blockchain.

1. Keep the blockchain as a settlement, validation layer2. Use decentralized payment networks for “every day purchases”3. Use sidechains for additional features

The base layer of the blockchain is “digital gold”. The upper layers are “payment processing” layers. We push all the complexity and risk to the outer layers, keeping the core layer safe and efficient.

Bitcoin Core capacity increase roadmapDeveloped and approved by over 70 Bitcoin Core developers

Philosophy

- Keep the Blockchain layer simple and efficient- Keep the Blockchain decentralized- Focus on technical improvements- Prepare for second layer solutions

- Versionbits- Segregated witness- Check sequence verify

- Lightning network- Sidechains

Smart contracts- Rootstock- Open transactions (Stash)

Lightening networks- Also smart contracts- Fast, private, scalable, cheap- Machine-to-machine payments- Decentralized marketplaces

Meta-protocol / timestamp- Open timestamps- Colored coins

SEGWIT ADOPTION TIMELINE1. Segregated witness proposed in December 2015 (Pieter Wuille)2. April - June 2015: tested as a Sidechain (P.W. + Blockstream)3. October 2015: Segwit softfork method discovered (Luke-Jr)4. December 2015: Segwit testnet (segnet)5. April 2016: Pull request 6. May 2016: Official testnet, in-person meeting of 30 core devs7. October 27 2016: Bitcoin Core 0.13.1 released8. November 15th 2016: Signaling starts9. Once miners signal at 95%+, Segwit is adopted