1. Blockchains and Smart Contracts for the Internet of Things
Konstantinos Christidis and Michael Devetsikiotis
IEEE Special Selection on the Plethora of Research in IOT May 2016
Presented by: Chris Corsi

2. Blockchains

3. What is a blockchain?
Distributed data structure that is replicated and shared among the members of a network

4. 4 Core Components of a Blockchain Network
Public / Private Key Set
Distributed Open Ledger
Miners
Consensus Mining Algorithm (PoW & PoS)
Miners – Validate and put in ledger
Purpose is to establish consensus on the block chain – agree on state of BC

5. Consensus Mining Algorithm: Proof of Work
Computationally heavy
High electrical costs
Very hard to guess right answer, but very easy to verify right answer
Need specialized hardware or graphics cards (most hashing power wins!)
Turning electricity into coins

6. Consensus Algorithms: PoW(
Proof of block
?????
Hashes of
Transactions within block )
Known Answer
Hash
Difficulty increases by
adding 0s to
beginning of answer

7. Consensus Algorithms: PoS
You are taking “Stake” in the verification
Lock up stake until block is validated
If you have a lot of money in the network - don’t damage the network
If you are a malicious validator or forge a transaction you lose your stake coins
Less energy – not solving hashes
Turning coins into more coins
Casper

8. Consensus Algorithms: Proof of Stake
Validator 1
20 Coins
20%
Validator 3
45 Coins
45%
Validator 2
10 Coins
10%
Validator 4
25 coins
25%

9. Example Chain Mary Tom $5 Tom: $10 Mary: $5 Tom: $10 Mary: $5
$20
Mary -> Tom $5
Jane
Tom: $10
Mary: $5
Tom -> Jane $20
Mary -> Tom $5

10. Smart Contract
“A computerized transaction protocol that executes the terms of a contract” $3
10 kw
Mary
Tom $1
10 kw $3
Smart Contract:
$1 = 5kw
10 kw
Deposit
Withdraw
Trade

11. Sybil attack PT 1 Mary Tom Tom: $10 Mary: $5 Tom: $10 Mary: $5
Jane
Tom: $10
Mary: $5
Tom -> Jane $10
Tom -> Mary $5

12. …… …… 51% Sybil attack PT 2 Tom: $10 Mary: $5 Jane: $100
1) Jane -> Mary $10
2) Tom -> Mary $5
1) Tom -> Mary $5
2) Jane - > Mary $10
1) Jane - > Tom $5
2) Jane -> Mary $5 ……
Tom: $10
Mary: $5
Jane: $100
1) Jane -> Mary $10
2) Tom -> Mary $5
1) Jane -> Mary $5
2) Jane - > Mary $10
1) Tom - > Jane $5
2) Jane -> Mary $5
1) Mary - > Tom $5
2) Jane -> Tom $85 ……
Tom already received the
kw of energy at this point
Mary never gets her $5
51%
One way cryptographic hash we can easily tell if a nodes answer to the POW is correct.

13. Byzantine Fault Tolerance
 Practical Byzantine Fault Tolerance 1/3 or less
 Unique Node Lists 1/5 or less are faulty
13 mins
 PBFT: 3f  UNL: 5f + 1

14. Why Blockchain? eliminates intermediaries reduces fraud
increases efficiency and speed
increases revenue and savings
Transparency
Immutability
Highly available

15. Blockchain Taxtonomy Who has access to the network?
Who can transact or mine?
UTXO model or Smart Contracts?
Public
Private
Public
Private
UTXO SC
Sybil Attack
No Sybil Attacks
More restricted access
Multi-step processes
No Multi-step processes
Lower Throughput
Higher Throughput
Higher Throughput
Lower Throughput
More Energy Consumption
Lower Energy Consumption
18 mins

16. Potential Use Cases Finance Healthcare Utilities Real Estate
Government sector
Supply chain

17. IOT-a-size Blockchain

18. Example: Software Updates
Sensor
Update
Sensor
Factory
Request
Update
Smart Contract:
Request updates on
PK X
Update
Update

19. Solar Panel - > Mary: 40 kw
Example: Power Sales
Mary
Mary: 10kw
Tom: 0kw
Tom
Solar Panel - > Mary: 40 kw
$100
Smart Contract:
$2 = 1kw
50 kw

20. Example: Slock.it

21. Example: Supply Chain Transaction 1: Transaction 2:
UTXO in “I received the container” (b)
UTXO out “I received the container” token (a)
A signs returns to B
B signs – added to the chain
Transaction 1:
UTXO in “I have the container” (a)
UTXO out “I have the container” (b)
26 mins

22. Deployment Considerations
BC vs Central Database
Lower throughput
Higher latencies
No parallel task execution
No sharding
Security
Open ledger shows all PK
Could predict who owns network
Lack of transactional privacy
Other
Miner set (miner censorship)
Legal enforceability
Expected value of tokenized assets
Double-edged sword of smart contracts

23. Thank you! Q & A Image citations: