Bitcoin 2.0
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Transcript of Bitcoin 2.0
itCoin 2.0IS THIS THE FUTURE?
Supratika CHAKRAPANIGUO ZongrenNG Wen YingWONG See Wei Nina
Move over Bitcoin 1.0!
Little incentive to run a node – limit of 21 million coins
Problems with the intermediaries
Regulatory Issues Anonymity – a weapon
Bitcoin’s Blockchain Technology –
Most Valuable
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Smart ContractsComputer protocols that facilitate, verify, or enforce the negotiation or performance of a contract
All sorts of property that is valuable and controlled by digital means Property Car Rentals Smart Houses Employee HR Contracts Business Contracts
Provide much better observation and verification where proactive measures must fall short
Reduced transaction cost with contracting
Lock to selectively let in the owner and exclude third parties
Back door to let in the creditor
Creditor back door switched on only upon non-payment
Final payment permanently switches off the back door
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Smart Contracts on Car
Tim defaults on car loan
Bank contacts “Repo Man”
Repo Man contacts Tim to confiscate
car & keys
Tim defaults on car loan
Smart contract invokes lien – key
transferred to bank
Tim cannot enter his car
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Autonomous AgentsMinimal Human Effort
• Build Hardware
• No need to be aware of agent’s existence
Hardest to Create
• Navigate in dynamic environment
• Account for complexity and hostility
Fraud Manageme
nt
• Detect cheating nodes
• Remove/Neutralize
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DAO: Decentralized Autonomous Organizations
An entity that lives on the internet and exists autonomously
Heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do
Decentralized Applications (DA)
No internal property –
reputation not saleable asset
Decentralized Autonomous
Organizations (DAO)
Has internal capital – used as
reward
Makes decisions for itself
Collusions attacks treated
as a bug
Decentralized Organizations (DO)
Humans make decisions
Collusion attacks are a
feature
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Future of Finance
Artificial Intelligence DAO
Robotics Current Company
Humans at the EdgesAutomation at the Edges
Automation at the Centre
Humans at the Centre
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Final PointsKey objective is value creation or production
◦ Specific linkage between user actions and the resulting effects of those actions on the overall value to the organization
◦ Value growth via internal capital appreciation in the form of cryptocurrency or cryptographically secure tokenization of some sort
Like a start up - Requires a product/ market fit, business model realization and a lot of users/ customers
Blockchain and cryptocurrency-based protocols and platforms are just enablers for the consensus mechanism
◦ General Purpose – Ethereum, Bitcoin
◦ Specific Purpose – La’Zooz, Maidsafe
Block chainWhat is it?◦ A shared public ledger – A bookkeeping system that shows all confirmed
transactions
◦ Only confirmed transactions are included in the block chain
◦ Once each block chain is established, the contents cannot be deleted.
◦ Block chains are added onto existing block chains.
Transactions and Additions to the Block chain
Nodes in the Bitcoin Network
Transaction XYZ
Transaction XYZYES
Broadcast
Transaction ABEYES
Existing Block chain
Transactions and Additions to the Block chain
Bitcoin Miner
Transaction Block
Transaction ABEYES
Winning Block
Winning Bitcoin Miner
Challenge and the Proof of Work
Existing Block chainTransaction Block
Challenge
Bitcoin Miner X
Proof
Cryptographic Hash
Function00000002123which =< X. If X has more zeros: greater difficulty to find the proof
Winning Block
Nodes in the Bitcoin Network
Broadcast
Bitcoin Miner X
Reward
Transaction ABEYES
Choosing between blocks that simultaneously solve the proof of work
• Block that has the longest chain –required the most amount of computational work is the block that gets added to the existing chain.
Motivation
Background
A for-profit Bitcoin technology company that has secured c.
USD 15 million fund
Developing
Sidechain
Sidechain, a technology focused on improving on the blockchain:
- Interoperability- Smooth upgrade path for Bitcoin
1
Introduce interoperability between different currencies;
Allows user to seamlessly transfer bitcoins between an ecosystem of
sidechains and the main blockchain
2
Allow experimentation of improvement / additional features on Bitcoin system, on a sidechain separated
from main Blockchain. Bitcoin can be replicated in a sidechain where new
features are build on top of the original blockchain No need to create an alternative currency to test out
Will not risk damaging existing system
Sidechain
How it Works?
SidechainTwo-way peg – Means assets / coins are transferred at a fixed or deterministic exchange rateSidechain Extension – After transferring coins to the sidechain, this sidechain can be enhanced with better performance or privacy protections or add-on new extensions that supports other asset classes like stocks / bonds / smart contracts etc….Ecosystem of sidechains – Sidechains can have other sidechains for things like micropayments. They allow for experimentation and pre-release versions of future sidechains / beta version of Bitcoin itself
Application
1
User-friendly applications of sidechains
Change features of Bitcoins that are not ideal now e.gBlock reward diminishing
2
Issue asset chains that can be transferred amongst
blockchains e.g. Issue shares / bonds
Creation of a peer-to-peer marketplace for asset
exchange and innovation of a better coin system
CounterpartyThe equivalent of a digital currency exchange for anyone and everyone (decentralised)
Bitcoin
Counterparty
XBitcoin facilitates peer-to-peer payment network without the
need for a centralised financial institution
XCounterparty eliminates the need for not just banks but e.g. Audit / Investment Banks / Brokers / Stock exchanges / Clearing houses, and connect you with the
public Full fledge peer-to-peer financial platform
• Build on top of Bitcoin’s blockchain to tap on the hashing power that secures the Bitcoin network
• Free and open platform for everyone• Works by storing extra data in regular
Bitcoin transaction
CounterpartyHow it Works?
1
Get Bitcoins: because the platform operates upon Bitcoin’s capabilities
3 Create a Counterwallet: To store your currencies and perform actions - List “asset”- Give out dividends - Place bets etc…
2
Get XCP: The internal currency used to perform your actions.
Benefits and Uses____________________________________________________________1 Create Tokens: Almost like
creating a stock and list it. Public can buy a share into it and you can issue dividends, confer voting rights etc
2 Fundraising: Fund raise from public without a Bank hence it’s the same nature as crowdfunding
3 Access global market: Unbounded by exchanges; e.g. issuing equity on Counterparty anyone can buy vs issue on SGX
4 Automated Clearing-house: The system records and clears every transaction immediately, no need for clearing-house cost & time saving
5 Peer=to-peer Derivatives & Trades: self-executing all sorts of smart contracts such as asset exchange / binary options etc.
HyperledgerA platform that allows Real time settlement of transactions
Values can be moved across the globe in real-timejust like sending an email.- No transaction time and fees- Little settlement risk- Increase liquidity
Decentralised Settlement: Instead of having a centralised institution hold the ledgers (records of account value), ledgers are shared, replicated to multiple parties in the system Hyperledger
Decentralised Settlement
Ethereum
Why?
Aim?
Failure of Bitcoin 1.0’s applications to
scalability Scalable as cryptocurrency; ‘light clients’
Not scalable for coloredcoins etc
Superior foundational protocol
Allow other decentralized applications to build on top
of it instead of Bitcoin
Improvements on existing
cryptocurrency
Fees to prevent abuse eg loops
Transaction fee for each computational step of script
execution; Higher fees for expensive operations eg
storage accesses
Mining Algorithm
Dagger: more memory hard than Scrypt
Block propagation
Faster block confirmation times
Basis for trust-less interaction
Ethereum Smart ContractsAutonomous agent
simulated by the blockchain
More possible transaction types
Multi-signature escrows
Authorize a withdrawal
asynchronously
Savings accounts
Peer-to-peer gambling
Creating your own currency
What can it do?
Owner: max 1%‘Bank’: 0.05%
Owner+bank: 100%
Allows any P2P gambling protocol
Incentivizing P2P protocols
Decentralized ‘Dropbox’
Human-friendly
addresses
BitMessage, Tor
Web of trust
Identity and reputation systems
Web 3.0
Content and name resolution (“DNS 2.0″) will exist in the distributed P2P
realm
Net Neutrality
Content moves faster and grows stronger with demand instead of
straining under load
Ethereum – current statusMay 2014 - Regulations: Digital Finance Compliance Association was created with the purpose of interfacing
with the Swiss authorities and providing guidance while also providing assistance and advice for current and new members
Ether sale: lasted 42 days, July-Sep 2014, and collected a total of 31,531 BTC, worth $18,439,086 at the time of the sale, in exchange for about 60,102,216 ETH.
Going forward: Web 3.0: anonymous, decentralized. HTML/Javascript based engine and Ehereum bindings: can tie together contracts with HTML/Javascript
based front-ends
Nov 2014: MIST – decentralized app browser
Feb 2015: Whisper group chat
Asked to join the World Wide Web Consortium (W3C) and participate in the Web Payments Interest Group. The membership includes some of the largest banks, payments companies, tech companies and telecoms in the world.
- Example of Ethereum applicationTarget Applications without servers by enlisting users to participate in the management and security of these
applications’ data
Data-driven interactions which are both autonomous and legally compliant
Decerver: Distributed Application Server Developers can build distributed applications which easily interact with a diverse set of blockchain and
peer-to-peer protocols, all of which have been harmonized in an interactive layer that can be accessed via a JavaScript runtime
Thelonious Customizable, smart-contract enabled, smart-contract controlled blockchain design
Derived from the Ethereum protocol
Gives developers the control to define their own state-of-the-art blockchain
ConclusionInvest in technology, not the reward (coins) Cannot tell which coin will be more accepted in relation to fiat currency in the future
Invest in companies that are developing applications that are monetizable Venture capital aspect
Need for technological specialist who is able to advise on viability of product (eg proprietary code, demand, scalability)
Investment in supporting infrastructure E.g. storage, smart contracts for employees
R&D aspect: prepare for regulations in future
Smart-contract enabled ownership
Eg electronic hotel doors, cutting out middleman etc
Potential for government-issued coins Ability of government to fix exchange rate
Loss of centralization & anonymity
Nick Szabo -- The Idea of Smart Contracts (Nick Szabo -- The Idea of Smart Contracts) (Last Accessed: 15th April 2015) http://szabo.best.vwh.net/smart_contracts_idea.html
What Does it Take to Succeed as a Decentralized Autonomous Organization? (Coin Desk RSS) (Last Accessed:15th April 2015) http://www.coindesk.com/succeed-as-decentralized-autonomous-organization/
Vitalik Buterin. (Last Accessed: 22nd March 2015, Created on 19th September 2013). Retrieved from https://bitcoinmagazine.com/7050/bootstrapping-a-decentralized-autonomous-corporation-part-i/
Adam Hofman (Last Accessed: 22nd March 2015, Created on 5th June 2014). Retrieved from https://bitcoinmagazine.com/13763/swarm-redefines-crowdfunding/
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References