blockchain and bitcoin

Presenter: Nelson M. RosarioDate: February 7, 2017Location: IIT Chicago-Kent College of Law

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BlockchainBitcoinNew Technology

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Block 1 Block 2 Block 3

Definition: A blockchain is “an ordered, back-linked list of blocks of transactions.” –Mastering Bitcoin: Unlocking Digital Currencies

1. ConceptsA. TrustB. Consensus

2. TechnologyA. LedgersB. CryptographyC. Merkle Tree

3. Applications

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1. What is “trust?”2. Problem

a. How do you trust information on a trustless system?

3. Solutionsa. You could know the personb. You could trust the math

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1. What is “consensus?”2. Problem

a. How do you achieve consensus among parties that don’t trust each other?

3. Solutiona. You could use a trusted third party as an official record keeperb. You could trust a decentralized consensus mechanism

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1. Typically an accountant’s tool2. Keeps track of who has what3. Has been used for ages

a. Provenb. Conceptually well understood

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1. Art and science of keeping secrets2. Blockchains typically use public key cryptography

a. Public key is used as an address for storageb. Corresponding private key is used as the key to unlock whatever is stored by the public key

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1. Way to securely store information2. A data structure of cryptographic hashes3. Trivial to verify information in the tree

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1. Bitcoin2. Land Registry3. Real Estate Transactions4. Financial Trade Clearing and Settlement5. Logistics6. Supply Chain Management7. Identity Management8. Smart Contracts

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Definition: Bitcoin is “an electronic payment system based on cryptographic proofinstead of trust, allowing any two willing parties to transact directly with each otherwithout the need for a trusted third party.” - Bitcoin: A Peer-to-Peer Electronic CashSystem

1. Conceptsa. Double Spend Solutionb. Addressesc. Walletsd. Mining

2. Applicationsa. Undeterminedb. Currencyc. Something Else

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1. Problema. How do you stop someone from spending electronic money twice?

2. Solutiona. Use a blockchainb. Everyone knows all transactions conducted on the blockchainc. Trivially verify those transactions

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1. Abstraction based on public keys derived from private keys2. Used for receiving bitcoin3. Used to verify ownership of bitcoin

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1. Software programs that manage public key cryptographic pairs2. May hold multiple key pairs for a person3. Most people’s entry into the Bitcoin network

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1. System by which transactions are validated2. Miners guess a solution to a cryptographic puzzle3. Miners are rewarded for contributing their resources4. The network that makes transferring bitcoin possible

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1. Could be money?a. What is money?

i. Much more of a social invention than we realizeb. Is it just a medium of exchange?c. Is it also a unit of account, and a store of value?

2. Could be digital gold?a. There is a limited amount of bothb. People horde it assuming future value

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1. Used as a currency to purchase things1. Overstock2. Amazon3. PayPal4. Expedia5. Ebay

2. Not recognized as legal tender in any jurisdiction3. Price fluctuations make it risky

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1. Decentralized2. Trustless3. Limited4. Looks like a value transfer vehicle

1. Exclusionary2. Alienable3. Adaptable

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1. Anti-Money Laundering2. Know Your Customer3. Taxes4. Patents5. Securities

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1. New work at your job2. New clients3. Add on benefits

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1. Can count on you for work2. Can advertise your expertise to clients

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1. Internet of Things2. Augmented Reality3. 4D Printing4. Drones5. Smart Contracts6. Quantum Computing7. Personalized Medicine8. ???

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Resources

Books:Mastering BitcoinBlockchain Revolution

White Papers:BitcoinEthereum

Websites:Coin CenterBitcoin.org

[email protected]

nelsonmrosario.com

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