A general talk about blockchains, how they work, the implications, and a brief landscape analysis.

1. DEMYSTIFYING
BLOCKCHAINS
PRESENTED BY
.

2. SLIDE #
RUBEN TAN
2
Co-Founder & CTO of Neuroware
Technologist for life
Close to 15 years of software development
Co-founded Javascript Developers of
Malaysia Facebook Group
Frequent speaker on various technologists
Ruben Tan
ruben@neuroware.io

3. SLIDE # 3
… Malaysian company from 500 Startups
… to provide public blockchain APIs and toolkits
… Non-financial, blockchain-agnostic solutions
… Bank-backed Blockchain Hackathon in Singapore
1st
NEUROWARE - FIRST IN MANY THINGS

4. BLOCKCHAINS
Broad definitions

5. SLIDE # 5
Bitcoin Blockchain
DIFFERENTIATING BITCOIN AND BLOCKCHAINS

6. SLIDE # 6
Bitcoin Blockchain
DIFFERENTIATING BITCOIN AND BLOCKCHAINS
A peer-to-peer payment system
Open participation
Complete transparency
Identity/Audit obfuscation
A collection of technologies
Distributed by nature
Has a consensus algorithm
Enabling innovation

7. SLIDE # 7
GENERAL TRAITS OF BLOCKCHAINS
Blockchain stores data
Ledgers, DNS records, etc
Immutable once recorded
Everybody has a copy
Blockchain is a network
Fully distributed
Peer to peer connection
Has a consensus algorithm
Blockchain is infrastructure
Enables trust-less interaction
Enables high automation
Creates new business models

8. BITCOIN
The first blockchain

9. SLIDE # 9
Released in 2009 by Satoshi Nakamoto
Nobody knows who Satoshi Nakamoto is - this is a good thing!
USD 13 per coin in 2013, USD 1000+ per coin in 2017
Processing over 200k daily transactions… and growing
Market capitalisation at USD 17 trillion!
HISTORY OF BITCOIN

10. SLIDE # 10
Bitcoin stores a ledger
Each node stores a complete
copy of all transactions
Miner nodes work to secure
the ledger from attacks and
also mint new coins
Bitcoin is a network
Fully distributed, no central
authority controls it
Open participation where
anybody can join, or even
start mining coins
Bitcoin is p2p digital cash
Enables almost instant payments
to anybody anywhere in the world
Has escrow and multi-signature
features, thus making it possible to
automate settlements
BITCOIN TRAITS

11. SLIDE # 11
A bitcoin node stores a ledger of all transactions that has ever happened
The ledger is made out of blocks
Each block contains a series of transactions at a specific point of time
Each block contains condensed information about the previous block
This forms a chain of blocks which cannot be broken
DIVING DEEPER INTO BITCOIN
Block 1
T T T
T T T
T
Block 2
T T T
T T T
T T
Block 3
T T T
T T T
T T T
Block 4
T T T
T T T

12. SLIDE # 12
DIVING DEEPER INTO BITCOIN
Each node is connected to one another, maintaining a list of peers
Nodes stay consistent with each other through a consensus algorithm
called proof of work
New transactions can be created on any node, and once created is relayed
to other nodes
Transactions are packed into new blocks on the blockchain through a
process called mining

13. SLIDE # 13
PEER TO PEER GOSSIP
New transactions can be created on any node, and once created is relayed
to other nodes
Any node can create a transaction
New transactions are relayed to other nodes using a gossip protocol
New transactions reside in a pool
Miner nodes eventually will receive a copy of the transaction
T my node
miner

14. SLIDE # 14
DIVING DEEPER INTO BITCOIN
Miners are special nodes with the capability to add blocks to the chain
Miners ensure that everybody’s data is always consistent
Miners are also a source of new coins
Every time a new block is added to the chain, the miner that added it is
rewarded with newly created bitcoins
Miners must perform a proof-of-work to gain the right to add a block to
the chain
Miner Miner Miner Miner Miner Miner Miner

15. SLIDE # 15
Miner Miner Miner Miner Miner Miner Miner
Thousands of miners race to solve a math puzzle
MINING PROCESS

16. SLIDE # 16
Miner Miner Miner Miner Miner Miner Miner
First to solve gets the right to add a new block
MINING PROCESS

17. SLIDE # 17
Miner Miner Miner Miner Miner Miner Miner
Miner is rewarded with new coins and transaction fees
MINING PROCESS
Block 1
T T T
T T T
T
Block 2
T T T
T T T
T T
Block 3
T T T
T T T
T T T
Block 4
T T T
T T T
New Block
T T T
T T
New block with proof-of-work is broadcasted to all other nodes

18. SLIDE # 18
Auto-adjusting difficulty acts as traffic control
AUTO-ADJUSTING DIFFICULTY

19. SLIDE # 19
EARLY MINING RIGS

20. SLIDE # 20
MODERN MINING RIGS

21. SLIDE # 21
BITCOIN
Completely autonomous and fully open
participation with no central authority
Comes with high programmability to allow for
the creation of smart contracts easily
Neutral platform with strong consistency
guarantees to allow trustless transactions
BITCOIN VS CONVENTIONAL
CONVENTIONAL
Low autonomy using highly propriety
infrastructure and subject to strict regulations
Hard to automate and digitise due to existing
infrastructure and regulations
Requires users to trust institutions that may or
may not have their best interests in mind

22. THE IMPLICATIONS
Back to blockchains please?

23. SLIDE # 23
EVOLUTION OF TOPOLOGIES/BUSINESS MODELS
CloudCentralised Distributed
Single point of failure
Expensive to scale
Basically outsourced
infrastructure
Mitigates failure
Requires trust
More secure as more
nodes exist/join
Highly resilient to data
loss and attacks
Evolution

24. SLIDE # 24
EVOLUTION OF BUSINESS MODELS
CloudCentralised Distributed
Telephone Service
Walmart
Taxi Services
Whatsapp
Amazon
Uber
Firechat
Open Bazaar
Lazooz
Evolution

25. SLIDE # 25
PROBLEM WITH DISTRIBUTED TOPOLOGY
Distributed systems are subject to byzantine attacks
where malicious nodes can issue faulty updates
Any distributed system (even centralised ones) need to
have a consensus algorithm to ensure consistency
Consensus is always a tradeoff - there is no one
single perfect algorithm for all situations
Blockchains is distributed by nature:
Needs a way to ensure consistency between nodes
Must have a consensus algorithm that works

26. SLIDE # 26
BENEFITS OF BLOCKCHAINS
Save cost - move from expensive client-server
oriented structure (and cost of running/renting a
complete data centre) to utilising commodity hardware
Enable innovation - blockchains can be used to
create ecosystems with open participation, which in
turn will create new business models/opportunities
Strong fundamentals - most blockchains have
strong cryptography fundamentals, better base to
work on than to rely on custom implementations
Trustless neutrality - blockchains are neutral, and
can be used as a platform to conduct transactions
without the need of an intervening third-party

27. SLIDE # 27
SAVING COST THROUGH DECENTRALISING
Save cost - move from expensive client-server oriented structure (and cost
of running/renting a complete data centre) to utilising commodity hardware
Data centre rental/building cost
Hardware cost
Electricity cost
Maintenance personnel salary
Security hardware cost
Security personnel cost

28. SLIDE # 28
SAVING COST THROUGH DECENTRALISING
Save cost - move from expensive client-server oriented structure (and cost
of running/renting a complete data centre) to utilising commodity hardware
Data centre rental/building cost
Hardware cost
Electricity cost
Maintenance personnel salary
Security hardware cost
Security personnel cost

29. SLIDE # 29
ENABLING INNOVATION THROUGH ECOSYSTEMS
Enable innovation - blockchains can be used to create ecosystems with
open participation, which in turn will create new business models/
opportunities
Internal
Services
Firewall
Business
Contracts
Integration
System
Startup
Vendor
Public API
Research
Roadblocks are
everywhere!

30. SLIDE # 30
ENABLING INNOVATION THROUGH ECOSYSTEMS
Enable innovation - blockchains can be used to create ecosystems with
open participation, which in turn will create new business models/
opportunities
Internal
Services
Blockchain Startup
Vendor
ResearchBlockchain
Blockchain
Blockchain
Lower barrier of
entry and better
ecosystem
Open participation
drives innovation

31. SLIDE # 31
RELY ON BLOCKCHAIN’S STRONG FUNDAMENTALS
Strong fundamentals - most blockchains have strong cryptography
fundamentals, better base to work on than to rely on custom
implementations
SWIFT network lost 81
million USD to a cyber heist
in 2016
LinkedIn was breached,
more than 117 million
accounts compromised

32. SLIDE # 32
RELY ON BLOCKCHAIN’S STRONG FUNDAMENTALS
Strong fundamentals - most blockchains have strong cryptography
fundamentals, better base to work on than to rely on custom
implementations
Immutable Data Strong Cryptography Strong Consistency
Blockchains

33. SLIDE # 33
STREAMLINE PROCESSES THROUGH NEUTRALITY
Trustless neutrality - blockchains are neutral, and can be used as a
platform to conduct transactions without the need of an intervening third-
party
Corporate
A
Corporate
B
Database DatabaseWhose data can I trust?

34. SLIDE # 34
STREAMLINE PROCESSES THROUGH NEUTRALITY
Trustless neutrality - blockchains are neutral, and can be used as a
platform to conduct transactions without the need of an intervening third-
party
Corporate
A
Corporate
B
All nodes are equal and
consistent, no trust needed
Blockchains Blockchains

35. LANDSCAPE ANALYSIS
The monumental impact of blockchains

36. SLIDE # 36
Immutable, tamper-proof audit-trail
Data easily shared and verified, forced transaction through protocol
Vastly increased security, less vulnerable to attack or outage
Programmable contracts that can radically reduce human errors and costs
“While Fintech Disrupts Banks,
the Blockchains Disrupt Fintech"
PwC, March 2016 Global FinTech Report
ENABLING AND DISRUPTIVE TECHNOLOGY

37. SLIDE # 37
As of January 2016, more than 60 banks and leading financial institutions have made
statements confirming that they are actively working on blockchain projects.
TAKING THE FINANCE WORLD BY STORM

38. SLIDE # 38
multiple blockchains for cross-
boarder payments and loyalty
Exploring KYC and AML
via the blockchains
Patented a blockchain
based wire transfer system
Blockchain based
loyalty platform
Blockchain based
remittance platform
Blockchain based
trade finance platform
Custom blockchain
for settlements
BIG NAMES IN THE INDUSTRY

39. SLIDE #
BITCOIN TRADING VOLUME
39

40. SLIDE #
FINANCIAL GIANTS ENTERING THE FRAY
40

41. SLIDE #
CONSORTIUMS ARE FORMING WORLDWIDE
41

42. SLIDE #
BLOCKCHAIN EMBASSY ASIA
42

43. SLIDE #
BLOCKCHAIN ECOSYSTEM
43

44. SLIDE #
HONG KONG 2016 BUDGET PLAN
44
‘Government will encourage the industry and relevant
organisations to explore the application of “Blockchain”
technology in the financial services industry, with a view to
developing its potential to reduce suspicious transactions and
bring down transaction costs.’
63rd paragraph, 2016 Hong Kong Budget Plan

45. SLIDE #
SINGAPORE
45
There are other technologies, like blockchains, which is used
for bitcoin, but can also be used for many other applications
like real-time gross settlement, or trade finance verification. So
our banks and our regulators must keep up to date and up to
scratch with these developments
UOB 80th anniversary dinner, Prime Minister Lee

46. SLIDE #
ZUG, SWITZERLAND
46
The city of Zug, Switzerland, has announced it will pilot a
bitcoin payments project that will allow local citizens to pay for
public services using digital currency.

47. SLIDE #
DELAWARE, UNITED STATES
47
‘Amendments to Sections 219, 224 and 232 and related
provisions are intended to provide specific statutory authority
for Delaware corporations to use networks of electronic
databases (examples of which are described currently as
'distributed ledgers' or a 'blockchain') for the creation and
maintenance of corporate records, including the corporation’s
stock ledger’
Delaware moving towards accepting corporate
records on the blockchain

48. SLIDE #
SENEGAL AND TUNISIA
48
Placed national currency on the blockchain, or converted
national currency into digital form on the blockchain

49. BLOCKCHAINS - Q&A?
A gateway into distributed technologies

50. THANK YOU
LEARN MORE ABOUT
http://neuroware.io