Blockchain technology Flavien Charlon flavien@trezeo.com

The origins Early 2009 Satoshi Nakamoto Distrust in banking The world is in the middle of a financial crisis Satoshi Nakamoto Introduces bitcoin to a cyberpunk mailing list

How a bank works Alice Charlie Alice $10 Bob $200 Charlie $50 Alice $60 Bob $150 Charlie $50 Bob Bank

How cryptocurrency works Alice Alice $10 Bob $200 Charlie $50 Alice $60 Bob $150 Charlie $50 Charlie Alice $10 Bob $200 Charlie $50 Alice $60 Bob $150 Charlie $50 Bob Alice $60 Bob $150 Charlie $50 Alice $10 Bob $200 Charlie $50

Double spend Bob creates two transactions Bob has $200 TX1: Pay $150 to Alice TX2: Pay $150 to Charlie Send TX1 to half the network, TX2 to the other half How to decide which is valid? Time is relative in a distributed network

Proof of work Mining: A vote to decide the “truth” Block reward Hashpower based “Arms race” Calculate hashes to find low values The block is valid if hash lower than a specific value (difficulty) Block reward Constant reward: 50 BTC (2009 – 2012), 25 BTC (2012 – 2016), 12.5 BTC (present) Transaction fees hash = SHA256(previous_hash, transaction_list, nonce)

Bitcoin accounts Accounts are addresses Private key Public key Can be generated though a mathematical operation Entirely offline Generate a public + private key pair Private key e.g. L4pm1SnqpZfYLoAXXTWLWKGLGAVNF6YWTrYUdUCRtokTHnwvd42T Used to sign a transaction Public key e.g. 178JCG232ju5DEZFacZSxWmvobKKssu9km Used to receive a payment

Benefits of Bitcoin Censorship resistance Pseudonimity Security No single entity can control the currency Pseudonimity Hard to say which address belongs to who Security Based on cryptography Authentication, integrity, non repudiation Transparency The ledger is public

Challenges Development process Scalability Slow and cautious Power struggle Scalability Ever-growing database More transactions means higher fees Ecological concerns with PoW

Beyond Bitcoin 2011 – 2014: Altcoins exprimentations Bitcoin forks: Namecoin, Litecoin, Dogecoin New chains: Ripple, NXT, Bitshares 2013 – 2015: Blockchain projects start to emerge Based on Bitcoin Colored coins, Mastercoin First crowdsales

Ethereum Proposed late 2013 Turing-complete scripting language By Vitalik Buterin, large team behind it Crowdsale July 2014 – 25,000 BTC (50 million ETH) Launched July 2015 Turing-complete scripting language Arbitrary code, with limitations Define smart contracts using scripts Code run deterministically upon transaction validation

Code is law? Replace legal contracts with smart contracts? Money in escrow, unlocked when shipping container is registered at destination Plenty of challenges What if the code has a bug, does not reflect intent Who resolves disputes What if contract is illegal The DAO controversy Who are you contracting with?

Applications Token issuance Create a transferable “coin” Used for fundraising through “ICOs” Presented as alternative to VC funding Some very successful projects (fundraising-wise) Filecoin ($257M) Tezos ($232M) EOS ($185M) Securities laws Banned in China, South Korea

Enterprise Blockchain Banks see potential for innovation And they have a PR problem Bitcoin has negative image “It’s not about Bitcoin, it’s about the technology” Private and consensus Blockchains Well known participants No proof of work: 1 vote per participant No underlying cryptocurrency Shared database with multiple writers and no central control If participants are known, why not have a trusted technical provider? E.g. SWIFT

Enterprise Blockchain Hyperledger Started by IBM, Linux foundation, a few startups R3 Banking consortium Chain Sillicon valley based Product + consulting Consensys Mosting consulting

Enterprise Blockchain Started around 2015 NASDAQ announcement with Chain 2016: Me too Most banks announcing pilot projects and POCs Big focus on enterprise applications 2017: More pilots? Where are the results? Focus has been shifting back to cryptocurrency with ICO madness in H2 2018: Make or break for enterprise blockchain Media attention diverted back completely to public chains and cryptocurrencies

Where is it going? Public chains Private chains ICO craze will continue though 2018 Then probably crash AAA cryptos (BTC, ETH) will dip but recover Other tokens will disappear SEC & other regulators will start enforcement Private chains More pilots and proof of concepts (2018, 2019) 10% of them will be deemed useful Hype will deflate

Q&A flavien@trezeo.com