1. Bitcoin & Blockchain
Bina Ramamurthy
2/22/2019

2. References https://bitcoin.org
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3. Overview What is bitcoin? What is its main contribution?
What is Blockchain?
Why is there so much excitement about this technology?
Which are the main businesses involved in Blockchain as a provider?
How can you get involved?
Where can you learn more?
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4. Bitcoin
Bitcoin : peer-peer cryptocurrency that does not require a middle entity such as a bank to complete a transaction between the sender and receiver.
Created by a secretive person known as Satoshi Nakamoto.
Runs on the Internet so all transactions are “virtual”
To keep track of the transactions, an ingenious ledger technology has been devised.
This ledger is distributed and is a collection of blocks of transactions.
How do you trust the ledger? The trust model out of this distributed ledger is an important contribution of Bitcoin.
The distributed ledger is called the “Blockchain”
Bitcoin “technology” is the genesis for this Blockchain revolution.
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5. Core Idea Reference: THE BLOCKCHAIN: A GENTLE
FOUR PAGE INTRODUCTION, J.H. White, Record and Currency Management, Dec, 2016.
“Blockchain is a distributed database that keeps a chronologically-growing list (chain) of records (blocks) secure from tampering and revision.
While computerisation has changed the nature of a ledger from clay tables in the old days to digital records in modern days,
blockchain technology is the first true innovation in record keeping that could potentially revolutionise the basic principles of information keeping.”
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6. Why Blockchain?
Almost every field that has multiple parties interacting a “trust model” and some of trusted record keeping (ledger) either by a centralized authority or by a trusted third party.
Of course, these approaches have potential issues such a single point failure, tampering and hacking the single ledger, deliberate manipulation by the central authority and the trusted third party.
Blockchain can address these issues using a distributed ledger, a trust model based on consensus and immutable chains/records.
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7. What is a Blockchain?
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8. Transaction
{Public-key private-key pair} plays an a critical role in sending “money” from party to another.
Each transaction has one or more inputs, one or more outputs and several header information such a transaction#, timestamp etc.
Lets say Alice wants to send money to Bob.
Alice gets Bob’s hashed public key
Encodes details of the transactions in Bob’s public key and outputs it as Unspent Tx Output (UTXO) to Bob.
Only Bob can decrypt it with his private key and it displays as unspent money in Bob’s wallet.
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9. Enabling Technology1: Cryptography
Transcription cryptography: only as good as the key chart
Symmetric key : Same key used for encryption and decryption: efficient but insecure, only as good as long as the key is secure
RSA (Rivest-Shamir-Adelman) public key – private key asymmetric encryption
Elliptical curve encryption (ECC) public key-private key asymmetric encryption
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10. Block
The bitcoin network involves a very important role that of “miner”.
A miner collect a bunch of transactions typically about 2016+/- (the typical number of transactions in 10 minutes) and hashes them together.
Merkel tree is used for this hash process.
Then a “nonce” in the header is adjusted to bring this hash to a number below a certain target value.
Many miners are competing to do this operation. The one who finishes first gets to create the block and gets rewarded in bitcoin.
He/she will also very the transactions in the block.
And include a hash form a previously completed block thus forming “immutable” (trusted) block chain.
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11. Block and Blockchain
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12. Blockchain Stack Applications Application Framework: Smart Contract
Hardware & Operating Systems
Blockchain Platform on a Network (Intranet/Internet)
Blockchain
Application Framework: Smart Contract
Applications

13. Blockchain Revolution
Instead of money, a transaction could embed an important document, a testimony, a congressional bill, a old textbook, contracts.
It provides a “trust model”
It is open and at the same time secure
Internet of assets (instead of Bitcoins)
Tracking provenance of precious gems, collectables
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14. Main Players
Bitcoin is the main thrust and innovation behind “Blockchain”
Ethereum is another major player
IBM and Linux open source are collaborating on another distributed ledger called “hyperledger”
There are several others start-ups: Root Stock Kit (RSK), ..zcash
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15. IBM’s Comparison of three Blockchain Products
Bitcoin
Ethereum
Hyperledger
Cryptocurrency required
bitcoin
ether, user-created cryptocurrencies
none
Network
public
public or permissioned
permissioned
Transactions
anonymous
anonymous or private
public or confidential
Consensus
proof of work
PBFT
Smart contracts (business logic)
yes (Solidity, Serpent, LLL)
yes (chaincode)
Language
C++
Golang, C++, Python
Golang, Java
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16. Summary How can you buy bitcoin?
Bitcoin can be bought like a stick on exchanges.
Today 1 bitcoin = 1,000,000,000 satoshi
1 bitcoin’s market value today is: $2500 (highly volatile)
Bitcoin has more clout for its technology than as a currency.
Many prominent players are taking the innovation of bitcoin and morphing it into platforms with better governance and application.
IBM’s direction seems to be best one in the market now, I plan to explore it for hands on experience.
Other blockchains: Monax, Ethereum have developer APIs.
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