UNDERSTANDING BLOCKCHAINS

t: @blockstarsiow: BlockStars.ioe: info@blockstars.io

FIRST WHO THE HELL ARE THESE GUYS?

@jamie247 @aronvanammers

13 years in startups, 6 of those consultancies focused on multi-market, cross departmental digital innovation & change management across complex global enterprise inc. Honda, Nike, Mastercard, Tesco.

As an entrepreneur he understands how to assess new market opportunities, build teams and convince money men to make the jump.

10 years CTO of I&DT, building full-service SaaS solutions for the Dutch medical sector (Curasoft).

With a background in model driven software development, he is passionate about building useful, high-quality, reusable and innovative software, continuous organizational development and entrepreneurship.

TOGETHER WE WILL FUND & LAUNCH 5 BLOCKCHAIN BASED STARTUPS ACROSS; INSURANCE, ECOMMERCE, FINTECH AND GAMING IN NEXT 12 MONTHS

WHAT IS A BLOCKCHAIN?

‘A distributed database that serves as a public ledger’= Truth Consensus

Hard Definition

Just a distributed database

Watch video 3:20 - 7:40

and yet just the Next Web● The Social Web connected us all, globally and

real time. ● Whilst liberating it has raised serious concerns

around privacy, identity and the security of the systems that power it.

● Greater connectivity and user data creation the problem has become compounded.

● The Social Web with its free tools has made people’s identity its product.

● ‘Data is the new oil’ ‘if its free you're the product’ are common expressions.

● It’s no coincidence the next phase of The Web, powered by blockchains, is the ‘Trust Web’.

● Infrastructure that removes questions of trust in p2p

AUTOMATIONOF WORK

ARTIFICIAL INTELLIGENCE

Convergence / NexusIOT

BIG DATA

Blockchains are the how all these things are: scaled, secured, transparent and codified with ethics.

Current and historical data is verifiable

Executed program logic is verifiable (“smart contracts”)

Programs and devices can become autonomous actors

Blockchain characteristics

WHY ARE THEY USEFUL?

GLOBAL FRICTIONLESS EXCHANGE

SCALE: Limitless scale of connectivity &

participation

TRUST: Removal of issues of trust between

actorsCOST: Removal of transactional cost

barriers to fractions

AREN’T THEY JUST ABOUT BITCOINS?

Decentralise Everything: ecosystem

Snapshot as of 23/06/15 See a live view here www.blockstars.io/ecosystem/charts/

Decentralise Everything: new apps

GENERAL CONCEPTS EXPLAINED

• Designed as decentralized currency• Solution to the "byzantine generals problem"

– No central control, yet a minority of bad actors can't game the system

• Inbuilt digital scarcity• Trustworthy ledger without the need to trust a single

party

Bitcoin Blockchain Purpose

1. Tokens

2. Electronic Transactions

3. Processing Hardware

4. Wallets

8 Core Elements of blockchains

See descriptions here: https://www.blockstars.io/blog/2015/02/what-is-a-blockchain/

5. Marketplaces

6. Governing Bodies

7. Exchanges

8. Applications

Bitcoin Blockchain Overview

Bitcoin Blockchain Overview

Mining (committing new transactions, deliberately wasteful)

Distribution & Verification (all users, efficient) - full or light nodes

Smart contracts: (small) complete computer programs

Deliberately wasteful mining is not inherent to blockchains• Private/semi-public blockchains• Other consensus mechanisms (e.g. proof of share)• Sidechains: future of Bitcoin?

Advanced blockchains

More advanced blockchainsMining (committing to the database, degrees of centralisation, efficient)

Distribution & Verification (all users, efficient) - full or light nodes

Smart Contracts shared rules between all participants.Part of the shared blockchain.

• If core logic is verified and incorruptible (smart contracts), higher levels of automation can be achieved.

• Automation beyond the business: decentralized autonomous organization (DAO)

–Participants have a stake–New forms of collaboration, commerce

Automation

BITCOIN BLOCKCHAIN CHALLENGES

• Governance. Who governs, how & to what end?• Volatility from conflict as a currency and asset class• 1% already own 99% of bitcoins and new issuance is controlled• Possibility of a 51% attack (already 60% miners driving agenda)• Inherent conflicts / trade-offs as a universal solution (currently

scalability / block size)• Constant possibility of a hardfork http://bit.ly/1eSmKOx• System always fighting efficiencies in mining / deliberately wasteful• What data is / isn’t stored directly in bitcoin blockchain?

Bitcoin Challenges

CURRENT STATE & LIMITATIONS

Bitcoin’s Future..?

Assumption being Bitcoin is even needed beyond payments infrastructure

DApp Stacks

• Technology largely at infrastructure level• Non bitcoin linked development generally

Ethereum based (Eris being a derivative of)• Lots of initiatives at early stages with many

duplication of tasks around key functions• Most deliberately proof of concepts to raise

funding not consumer ready• Limited standards in DApp dev

State of DApp tech stacks

9 x Building Blocks For Success

You can see each explained in detail here:

http://bit.ly/1CCpuVf

4. IDENTITY 5. REPUTATION

3. ROLES & RESPONSIBILITIES2. ON / OFF RAMPS

6. GOVERNANCE

1. BRIDGES

7. USABLE SECURITY

8. TOKEN OF EXCHANGE STABILITY

9. ECONOMICALLY VIABLE

PROCESSING NETWORKS

We believe there needs to be in place at least 9 building blocks for a scalable blockchain startup community focused on building businesses that rely on Dapps (Decentralized Apps)

Connecting the dotsAs mentioned there are still fundamental layers to fully secure the network around standards. One example is FreeTrust’s collaborative commercial attempt to develop bottom-up portable identity & reputation but there are many more all of which we try to directly support and engage with.

WHY USE A BLOCKCHAIN AT ALL?

• Reading and authenticating fast, efficient, no central bottleneck, but processing transactions is slow

• Private data doesn’t belong on the blockchain itself: data and logic is (semi-)public and identity can be triangulated

Probably not for everything...

Clear cases:• Verifiability• Traceability• Collaboration between organizations within shared

incorruptible rules• Devices as economic actors

More usage models to be discovered as it’s early stage

... yet unbeatable for some things

• Front ends: largely common web tech, with higher security standards

• Large pools of data: use peer-to-peer storage like IPFS

• Blockchain: hashing, timestamping, verified execution

Blockchains in the tech landscape

WIDER SOCIAL CONTEXT

The Trust Economy is broken.

Never before has there been lower

trust in institutions*; big business,

politicians, media and the financial

services industry.

*According to Endelman Trust Survey 2015

Blockchains can restore trust to:

● Data Privacy / Security

● Supply chains

● Governance

● Tax & accounting

● Corporate fraud

● Market manipulations

• Origins; from crypto developed for ‘trustless’ environment of war

• Trustless vs Trustful (you still need to trust something)• Offers a shortcut to exchange (cultural / economic)• Ethics can literally be hardcoded at genesis and

changed only by consensus• Each node (with permissions) can audit part or all of

network’s entire history

Blockchains = #Trust

Trust = New Currency• As you will see from Apple’s attacks

on Facebook & Google companies are waking up to fact trust is the battlefield

• Are Apple you next competitor?• Trust is THE new battle field• As we move from closed platforms

of control to open distributed networks loyalty becomes more fluid

• Friction to move based on trust and ethics

Lessons from NapsterNapster was simply a free algorithm that allowed people to

share their music libraries through a peer-2-peer network of

computers with pseudo anonymity. Its similarities with blockchain

include:

• Facilitation of peer to peer transactions / transfer

• Regulatory / business model sandbox

• Centralisation of servers was the legal weakness

• Napster legal case attacked Roles & Responsibilities

(something still undefined with DAOs)

The guys from Napster failed because they were kids with a

great idea but no contacts in the entertainment industry. It was

Apple that wrote the rules WITH the establishment. We think

major blockchain innovations in many industries will require

more than just coding skills. It will be more renovation than

revolution.

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