Ramanan Jagannathan
November 2016
Agenda
Online Transactions
Bitcoin and Blockchain
Agenda
Online Transactions
Bitcoin and Blockchain
Power is centralized
Incentive is largely lopsided
Security is still a big issue
Privacy is largely non-existent
IP rights are ambiguous
Inclusion is absent
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The Quest for crypto currency and distributed decentralized design methods continue with
projects in the areas of altcoins (namecoin, litecoin, etc), distributed ledgers (ethereum,
factom, hyperledger etc), meta-networks ( e.g. counterparty), currency platforms (Ripple,
cirlce etc.), micro channel platforms (Lightening network etc.) and many more...
Agenda
Online Transactions
Bitcoin and Blockchain
Bitcoin Overview
Bitcoin or bitcoin ? --- both valid, but not the same Bitcoin is an overloaded word
Protocol specifying how to construct and parse the blockchain, how transactions should be assembled, what is a valid
transaction
Network Peer-Peer network to which nodes connect and exchange messages containing new blocks and transactions
Currency unit of the native currency of the Bitcoin network. Each bitcoin is divisible to 100,000,000 pieces called satoshis
Open Source Project The original open source Bitcoin core ( written in C++)
What is a Blockchain ?
Bitcoin is the name of the best-known cryptocurrency, the one for which
blockchain technology was invented.
Blockchain Overview
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BlockChain, as a
framework for Value
Transfer disintermediates
the intermediaries
In other words, you dont need an
intermediary to do a(ny) transaction
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Power is de-centralized
Incentive is largely lopsided reputation
based
Smart Contract
Smart Contracts is defined as a piece code, able to self-verify their own conditions
using data & self-execute by releasing payment, while remaining tamper resistant.
Smart contracts aim to provide security superior to traditional contract law and to
reduce other transaction costs associated with contracting.
Smart contracts are not automatically legal contracts.
Characteristics
Turning legal obligations into automated processes
Guaranteeing a greater degree of security
Public blockchains are open-source and everyone can be part of them. Anyone in the world can
explore the blockchain, send transactions or contracts, consult them and participate in the
consensus process the process for determining what blocks get added to the chain and what the
current state is.
Examples: Bitcoin, Ethereum
Consortium blockchains
Consensus process is controlled by a pre-selected set of nodes; for example, one might imagine a
consortium of 15 financial institutions, each of which operates a node and of which 10 must sign
every block in order for the block to be valid. The right to read the blockchain may be public, or
restricted to the participants.
Example: R3
Private blockchains
Write permissions are kept centralized to one organization. Read permissions may be public or
restricted to an arbitrary extent. Likely applications include database management, auditing, and
more that are internal to a single company, and so public readability may not be necessary in
many cases at all, though in other cases public auditability is desired.
Examples: Eris Industries, Multichain
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Agenda
Online Transactions
Bitcoin and Blockchain
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Blockchain enables Two parties who neither know each other or trust each
other to transact and do business
Cost
On the blockchain, the network both clears and settles peer-to-peer value
transfers, and does it so continually so that the ledger is always up to date
Speed
Risk
Value
Innovation
The Blockchain Technology was designed to move bitcoins, and not other
financial assets. The technology is OpenSource and evolves due to
experimentation
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Mark Buitenhek
Global Head of Payments and Cash Management (PCM)
for ING
The Bank of England recognized the technology as 'significant innovation' that could have "far-reaching implications".
New York State has released Bitcoin World's first license - BitLicense!
Financial Conduct Authority (UK) is investigating ways in which the blockchain can be used in the formal financial
services industry
Source: WSJ, Banktech, American Banker, CoinDesk, BusinessInsider, Financial News, Twitter
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47%
17%
56%
84%
Want to use blockchain for reducing settlement risk and settlement time
62%
Believe that blockchain can be used in OTC derivatives, apart from payments
* Greenwich Associates 2015 study based on 58 respondents in America, Europe and Asia
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http://bravenewcoin.com/news/moodys-new-report-identifies-25-top-blockchain-use-cases-from-a-list-of-120/
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DLT has great potential to drive simplicity and efficiency though the establishment of
new financial services infrastructure and processes
DLT is not a panacea; instead it should be viewed as one of the many technologies
that will form the foundation of next generation financial services infrastructure
Applications of DLT will differ by use case, each leveraging the technology in different
ways for a diverse range of benefits
Digitial Identity is a critical enabler to broaden applications to new verticals: Digital Fiat
(legal tender), along with other emerging capabilities, has the ability to amplify benefits
The most important DLT applications will require deep collaboration between incumbents,
innovators and regulators, adding complexity and delaying implementation
New financial services infrastructure built on DLT will redraw processes and call into
question orthodoxies that are foundational to today's business models
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Agenda
Online Transactions
Bitcoin and Blockchain
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2. A Next Generation Smart Contract & Decentralized Application Platform (Vitalik Buterin, Ethereums
creator)
3. Enabling Blockchain Innovations with Pegged Sidechains (Blockstream team)
4. See Simple Explanation of Bitcoin Sidechains for a less technical interpretation to the above paper.
5. Ethereum: A Secure Decentralized Generalized Transaction Ledger (Gavin Wood, Ethereums cofounder) The Counterparty Platform (Counterparty)
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Questions?
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