The chain of transaction blocks, or blockchain, is a trustless shared public ledger of bitcoin transactions, synchronized in a peer-to-peer network. Thanks to decentralization the ledger is immutable.
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Innovation potential of the blockchain, and of decentralized applications
1. Innovation potential of the blockchain,
and of decentralized applications
Jan Brejcha, Ph.D.
User experience consultant/Business developer
jan@brejcha.name
http://jan.brejcha.name
3. Summary
• This presentation aims at providing a brief introduction to distributed
ledgers, and their underlying technologies, such as the blockchain,
multisignature, and smart contracts.
• Potential use-cases are presented, as well as current applications of
the technologies.
• Decentralized applications (DAPPS) promise to innovate the current
business models, and create new ones.
• Early adopters or investors should exercise due diligence, as the
current platforms are still under heavy development.
4. About
Jan Brejcha, Ph.D.
Jan is an entrepreneur, lecturer, and researcher with a passion for
human-centered design and innovation. He has 8 years experience in
Business Development, 13 years in Marketing, 8 years in User
Experience/User Interface Consulting, 9 years in Human-Computer
Interaction Lecturing.
5. The Blockchain
• In 2008, Satoshi Nakamoto originally defined “an electronic coin as a
chain of digital signatures.” The coin transactions are timestamped
within a peer-to-peer network “by hashing them into an ongoing
chain of hash-based proof-of-work, forming a record that cannot be
changed without redoing the proof-of-work.”
• The chain of transaction blocks, or blockchain, is a trustless
(permissioned or permissionless) shared public ledger of
bitcoin transactions, synchronized in a peer-to-peer network.
Thanks to decentralization the ledger is immutable.
• The idea has been adopted by other developers (http://ethereum.org
or http://rootstock.io – combining the public blockchain with business
logic algorithms, or private blockchain initiatives – e.g.
http://r3cev.com/ by banks).
• Extending the use of the blockchain beyond finance helps to create
new business models, and potentially disrupt the current ones.
6. Consensus Mechanisms, 1/2
• Proof of work: “The solution to [a difficult mathematical] problem
(…) is included in the new block and acts as proof that the miner
expended significant computing effort. The competition to solve the
proof-of-work algorithm to earn reward and the right to record
transactions on the blockchain is the basis for bitcoin's security
model.” (Antonopoulos)
• Proof of stake: “Proof of stake is a system by which existing owners
of a currency can "stake" currency as interest-bearing collateral.”
(Antonopoulos)
• Under this protocol, a string of blocks is deemed valid only if the
nodes creating it demonstrate sufficient ownership of the asset
represented by the token to give them a compelling motive not to
subvert its value. Proof of stake would radically reduce computing
and transaction costs, enabling blockchains to facilitate much
smaller transactions. (Evans, et al.)
7. Consensus Mechanisms, 2/2
• Proof of burn: “The idea is that miners should show proof that
they burned some coins - that is, sent them to a verifiably
unspendable address. This is expensive from their individual point of
view, just like proof of work; but it consumes no resources other than
the burned underlying asset.” (bitcoin.it)
8. Multisignature (Multisig)
• Proposed in 2011 by Gavin Andresen, multisig has become a widely-
used method to secure bitcoin funds in wallets, or to provide a 3-
party escrow (2 of 3 signatures are needed to unlock a transfer,
when the buyer, seller and a trusted dispute agent have to come to a
consensus.)
• Multisig provides bitcoin transfers with an additional logic
layer, which can increase the number of possible use-cases.
• More complex use-cases would require the use of “if-then”
algorithms (business logic), which are targeted by smart contracts.
9. Smart Contracts
• First mentioned by Nick Szabo in 1997, smart contracts are event-
driven software applications (using an if-then structure). The
execution of the smart contract can be triggered by data on the
blockchain (e.g. a bitcoin payment), or data coming from the external
world using oracles (e.g. parliament election results).
• From an HCI design perspective, contracts are present in the world
in the form of constraints (physical: fences; semantic: traffic lights,
cash register readout; logical: at a vending machine enter a number
of the item to purchase). Smart contracts add an interaction layer to
the constraints (e.g., when inserting a coin into the vending machine,
entering a number, and taking the item from the machine).
• From a UX/UI design perspective, the smart contracts should be
presented within a UI properly presenting their underlying
mechanism.
10. Smart Contracts on the Blockchain:
Ethereum Use-cases
• By leveraging the above technologies we can create systems with no
central authority to provide trust, thus minimizing failure points, and
costs.
• Some of the areas that could benefit from the new technology:
Prediction Markets, Decentralized Exchanges, Crowdfunding,
Internet of Things, Voting and Governance, Gaming, Reputation
Systems, Social Networking, Chat Messaging, Insurance,
Healthcare, Arts, Ridesharing, Distributed Autonomous
Organizations, Trading (financial instruments or commodities),
Accounting, Communities, eCommerce, Physical Security, File
Storage, Ownership Stamping, Content, Microtransactions,
Community Management, Cloud Computing, Remittances, Smart
Contracts Management, Smart Assets, Wallets, Food,
Manufacturing, Data Storage, Messaging, Supply Chain.
• Decentralized applications (DApps), and organizations (DAOs)
11. Smart Contracts on the Blockchain:
Rootstock Use-cases
• Some of the areas that could benefit from the new technology:
Micropayment channels and Hub-and-Spoke networks, Peer-to-peer
distributed exchange, Retail Payment Systems, Escrow Services,
Crypto-assets Creation, Asset Securitization, Decentralized
remittances, IP Protection / Registry Voting System Micro-lending,
Supply Chain Traceability, Online Reputation & Digital Identity, In-
game Global Currency, Internet-gambling and Prediction Markets,
Fair-playing
12. DAO: Beyond Smart Contracts
A Decentralized Autonomous Organization is governed by a set of
software rules enacted by smart contracts on a blockchain. The
governance rules (voting, rewards, etc.) are then described in an
accompanying whitepaper.
DAOs can be incorporated for profit, or not for profit. The main use
cases would be:
• Global non-profit organizations
• Crowdfunding campaigns
• Political organizations
• Ecosystems around token creation and consumption
13. Conclusion
• Blockchain-based technologies can provide an innovation
opportunity of current business models, and can create new ones. In
this regard they can help create a blue ocean (uncontested market).
• The DAO is an example of a novel entity that could help lower
transaction and information costs, increase member (or token
holder) rewards, and improve the quality of the decision-making
process by integrating the wisdom of the crowds.
• As these technologies are quite young, they need to be thoroughly
tested to find both the most suitable use-cases, and potential
vulnerabilities (security, privacy issues).
• On the whole, blockchain-based technologies have a promising
potential, when applied to solve real user needs (e.g. financial
inclusion), and when presenting such solutions in a useful, usable,
and appealing way.
14. Resources: Online, 1/2
• ADRESEN, Gavin. M-of-N Standard Transactions. 2011-10-18. URL:
https://github.com/bitcoin/bips/blob/master/bip-0011.mediawiki
• BITCOIN.IT. Proof of Burn. URL: https://en.bitcoin.it/wiki/Proof_of_burn
• BUTERIN, Vitalik. DAOs, DACs, DAs and More: An Incomplete Terminology
Guide. 2014-05-06. URL: https://blog.ethereum.org/2014/05/06/daos-dacs-das-
and-more-an-incomplete-terminology-guide/
• BUTERIN, Vitalik. An Introduction to Futarchy. 2014-08-21. URL:
https://blog.ethereum.org/2014/08/21/introduction-futarchy/
• EVANS, Philip et al. Thinking Outside the Block: A Strategic Perspective on
Blockchain and Digital Tokens. URL: https://www.bcg.com/blockchain/thinking-
outside-the-blocks.html?linkId=32279022
• GOV.UK. Distributed Ledger Technology: beyond block chain. URL:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/4
92972/gs-16-1-distributed-ledger-technology.pdf
• IBM. Fast forward: Rethinking enterprises, ecosystems and economies with
blockchains”. URL: http://www-
935.ibm.com/services/us/gbs/thoughtleadership/blockchain/
15. Resources: Online, 2/2
• HANSON. Robin. Shall We Vote on Values, But Bet on Beliefs? Journal of
Political Philosophy, 2013. URL: http://hanson.gmu.edu/futarchy2013.pdf
• SZABO, Nick. 1997. Formalizing and Securing Relationships on Public
Networks. URL:
http://firstmonday.org/ojs/index.php/fm/rt/printerFriendly/548/469.
• NAKAMOTO, Satoshi. Bitcoin: A peer-to-peer electronic cash system. 2008.
URL: https://bitcoin.org/bitcoin.pdf
• NEEF, A. What the blockchain will mean for the economy and society. URL:
http://www.z-punkt.de/en/themen/artikel/blockchain/472
• WEF. What is the blockchain? URL:
https://www.youtube.com/watch?v=6WG7D47tGb0
16. Resources: Books
• ANTONOPOULOS, Andreas M. Mastering Bitcoin: unlocking digital
cryptocurrencies. O'Reilly Media, Inc., 2014. ISBN 978-1449374044. Available
commercially from Amazon. Czech translation:
https://www.bitcoinbook.info/translations/cs/book.pdf
• CHAMPAGNE, Phil. The Book of Satoshi–the Collected Writings of Bitcoin
Creator Satoshi Nakamoto. 2014. ISBN 978-0996061315. Available
commercially from Amazon.
• MOUGAYAR, William. The Business Blockchain: Promise, Practice, and
Application of the Next Internet Technology. 2016. ISBN 978-1119300311.
Available commercially from Amazon.
• TAPSCOTT, Don; TAPSCOTT, Alex. Blockchain Revolution: How the
Technology Behind Bitcoin is Changing Money, Business, and the World.
Penguin, 2016. ISBN 978-1101980132. Available commercially from Amazon.
• WATTENHOFER, Roger. The Science of the Blockchain. CreateSpace
Independent Publishing Platform, 2016. ISBN 978-1522751830. Available
commercially from Amazon.
19. Please, contact me for more
information:
Jan Brejcha, Ph.D.
User experience consultant/Business developer
jan@brejcha.name
http://jan.brejcha.name
https://www.linkedin.com/in/janbrejcha
https://twitter.com/jbrejcha
