Blockchain Technology - Application and Benefits [17 May 2016]
1. CLOUD ARCHITECTURE IN ATO
Distributed Ledger Technology
Tuesday, 17th May 2016
Presented By
Mick Motion-Wise
Technology Architect
04-3747-9236
mick@motion-wise.net
2. Agenda
What is Distributed Ledger Technology [blockchain]
How does blockchain work
Use Cases
◦ Smart Property
◦ Diamonds
◦ Health
Wrap Up
B l o c k c h a i n
3. Blockchain is a tamper-proof, immutable, transparent distributed
ledger with no single-point-of-failure.
B l o c k c h a i n
What is blockchain?
4. B l o c k c h a i n
The blockchain
overlay network
management
and
blockchain
data exchange
strategy.
6. B l o c k c h a i n
How does blockchain work?
The digital registers of the blockchain use an
encryption method known as cryptographic hashing.
Members of the blockchain use a private key to sign
transactions recorded into the register.
All transactions can be audited publically.
9. B l o c k c h a i n
Rewards
When we reach 420,000 blocks, we enter Rewards Era 3.
In Era 3 [which lasts until the 630,000th block], the rewards of bitcoins per block is halved from 25 BTC
per block to 12.5 BTC per block. After the 630,000th the rewards are halved again.
𝑖=0
32
210000[
5000000000
2 𝑖 ]
10000000
Using this equation we will reach 93.75% of the maximum number of available bitcoins in 8 years time.
Source: https://en.bitcoin.it/wiki/Controlled_supply
Access: 17/5/16
10. B l o c k c h a i n
An example of the
blockchain message
exchange network
11. To help explain Distributed Ledger Technology we will refer to
points on the next diagram.
Initially, each point will be referred to regards its relationship to
adjoining capability in the flowchart.
At a later section of the presentation, we will deep dive on each
point [as presentation time allows].
B l o c k c h a i n
How does blockchain work [con’t]?
14. The acceptance of blockchain worldwide is triggering billions of dollars
of investment and real issues are being addressed by blockchain which
include legacy financial infrastructure - traditionally based on
centralized, unencrypted hub-and spoke database architecture. This is
not only expensive and inefficient but vulnerable to operational failure,
disaster recovery testing and cyber attack.
B l o c k c h a i n
Use Cases
Good evening. Thank you for the opportunity to present Distributed Ledger Technology to you.
I don’t have all the answers.
This presentation is a kick-starter to engage you in Distributed Ledger [aka blockchain] research and development.
I am not covering Smart Contracts or Decentralised Autonomous Organisations but both of these blockchain capabilities will be the future of Distributed Ledger for many years to come.
I am not covering the technical administration of mapping ‘paper’ laws to crypto laws, which is the biggest challenge at this point in time [May 2016]
This presentation will provide a general outline of what blockchain is, how blockchain works and interesting use-cases.
Distributed Ledger [blockchain] Technology, first became popular following the release of a whitepaper by Satoshi Nakamoto in January 2009.
Nakamato used the blockchain platform to deliver cryptocurrency.
This presentation is focussed on the platform and applications other than cryptocurrency.
From the mid-1950s forward, as IT evolved, we became accustomed to a new language: mainframes, databases, networks, servers, software, operating systems, and programming languages.
Since the early 1990s, the Internet ushered in another lexicon: browsing, website, Java, blogging, TCP/IP, SMTP, HTTP, URLs, and HTML.
Today, Distributed Ledger Technology, also known as blockchain, brings with it yet another new repertoire: consensus algorithms, smart contracts, Merkle Trees, lattice based cryptography, digital wallets, and transaction blocks.
The blockchain is a database distributed across the Internet. Each member of the blockchain has an identical copy of the blockchain database.
Blockchain stores a digital register of transactions.
This digital register is tamper-proof, immutable, transparent and has no single-point-of-failure.
Built on the Open Systems Interconnection [OSI] model, this protocol stack allows communication between hosts across geographical regions, organizations and domains.
The blockchain protocol as extension to the current OSI layer. The new layer adds economic and social value exchange to the mix, the same way as web application are developed today.
The main driving factors to standardize the protocol is interoperability between participating nodes. Across all kind of blockchains, simplicity for the development of new blockchains is possible without the need to reproduce low level and generic implementations.
In a later slide we will see how the Message Exchange works.
Here we see four different types of distributed blockchains.
The 1st is the traditional solo ledger, typically with one administrator.
The 2nd is a permissioned ledger with a private administration group.
The 3rd is a permissioned ledger with a public administration group.
The 4th is a non-permissioned ledger where the administration is distributed between the members of the blockchain.
Of these four groups, each can have multiple versions per group.
When reading, writing or discussing blockchain, it’s important to distinguish whether you are discussing permissioned [~Intranet] or non-permissioned [~Internet] given the different protocols and use-cases that can apply to each type.
Merkle trees are binary trees containing cryptographic hashes.
Depending on what programming languages you use, you may not need a Merkle Tree.
The Merkle tree allows verifying that a transaction exists in the block without having the entire block, by following its Merkle branch. Among other things this enables:
SPV (lightweight) clients
Blockchain pruning
Smart pool miners
The above diagram shows two transactions being hashed when there typically will be hundreds [or more] being hashed to the same Merkle Root.
See: https://en.wikipedia.org/wiki/Merkle_signature_scheme
If anyone has a smart phone with them now, you might like to log into
https://blockchain.info/ and see live transactions happening every second.
The “Height” is the number of blockchains since the creation of the Genesis block.
The “Age” is how long ago this most recent block was approved.
The “Transactions” is the number of transactions in the latest approved block.
These transactions are immutable.
“Total Sent”, as you can see is the value of the transactions in USD.
“Relayed By” is the miner who created that block.
“Size” is the block size [all under 1Mb]
As we saw earlier, this morning we were up to 412,111th block.
Unlike banks who can print money at a whim, 21 million bitcoins is the maximum number of bitcoin allowed to be mined.
In this simplified process, there are multiple pending transactions that are compiled into a block.
The successful miner compiles these transactions into a block.
The block is broadcast to members of the blockchain.
When consensus approval is reached, the block is authenticated – then added to the blockchain and becomes visible to anyone with an Internet connection.
Bob then receives his token from Alice.
Point 01 covers the uses cases for Distributed Ledger Technology [blockchain].
[we will examine a couple of these later]
Point 02 shows the [symbolic] global blockchain network.
Points 03 & 04 cover original non-permissioned blockchain and the newer permissioned blockchain approach.
Point 05 the contractual non-crypto-currency approach
Point 06 the crypto-currency approach
Points 07 & 08 show the two main validation types for crypto-currencies and subsequent child options.
Point 04 is the start of a permissioned blockchain. The permissioned blockchain has a different consensus algorithm and each permissioned consensus algorithm can be very different.
Consensus by the majority of permissioned blockchain members or consensus by the majority of executive members or as the Australian Securities Exchange has today, consensus by a single administrator.
Consensus for permissioned blockchains may be public or private.
An example of private may be an internal voting system to elect the best and fairest award.
An example of public may be where an escrow system is used to manage a system.
There are numerous types of permissioned ledgers and this number continues to grow as more entrepreneurs upload their innovations.
CryptoCorp [https://cryptocorp.co/] provides fraud detection and recoverability services that protect your customers.
Ripple Labs [https://ripple.com/] have a consortium of over 50 international banks including CBA, Westpac, ANZ, Bank of NZ, as well as banks in the UK and USA.
A quick Google of the other names will reveal a range of new business capabilities.
As mentioned earlier, Blockchain is a tamper-proof, immutable, transparent distributed ledger with no single-point-of-failure.
That means no need for Disaster Recovery resourcing [and associated cost].
The insider threat with traditional databases disappears and the panopticon approach keeps blockchain users in check much more easily than traditional systems.
Use cases for Smart Property, Land Titles, House Titles, Securities and more can be built on the blockchain.
Source: https://writers.bitcoin.com/wp-content/uploads/2015/08/possibilities.png
This “Beyond Bitcoin” chart shows current [in green] and future [in purple] use cases.
Texas-based Factom [http://factom.org/] back-end infrastructure allows corporations, governments and organizations to securely integrate, manage and secure data of any type, from any source, and at a massive scale. The result, Factom says, is a new generation of audit and accountability tools for a safer, more affordable way to handle secure and tamper-proof transactions.
EverLedger, an Australian start-up based in London uses blockchain to “fingerprint” diamonds.
Source: http://www.lilychowdesignsthings.com/beyond-bitcoin-1/
This system has three stages:
1. Establish an e-ID (electronic identity) for each diamond, by digitising its attributes and a laser-inscribed serial number onto an authoritative block chain ledger
2. Assign a digital passport to the diamond to record its travel, transaction history and provenance
3. Detect and guard against illegal activities or fraudulent behaviour
Leanne Kemp, Founder and CEO of Everledger:
https://www.youtube.com/watch?v=V2pPTtLThlw
[8 minutes]
Source: http://www.coindesk.com/bitcoin-technology-could-reshape-medical-experiences/
If a person chose to, they could record their private key to a fitness band worn on their wrist.
When they create this private key, they can create rules and establish named individuals who could verify access to their medical records – especially in an emergency.
This approach would use a multi-signature approach for health record access.
Their fitness band would also have a public key that a paramedic could access to help identify the victim.
Solutions like this already exist.
Multi-Sig demo 7m48s
https://www.youtube.com/watch?v=oUSVmLegj8k
If you wish to test different scenarios, IBM and Microsoft both offer Blockchain as a Service.
If you wish to build your own, you may like to utilize Amazon Web Services.
A Blockchain Summit is being held in Melbourne late next month [28-30 June].
Simply Google Australian Blockchain Summit 2016 or visit:
www.blockchainsummit.com.au/
![Agenda
What is Distributed Ledger Technology [blockchain]
How does blockchain work
Use Cases
◦ Smart Property
◦ Diamonds
◦ Health
Wrap Up
B l o c k c h a i n](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)