2. Two truths and a lie
Aarthi Srinivasan 2
1. 32 MM raised in 60 seconds
2. Tinder on blockchain
3. 700+ MM raised without an office
and no ownership for investors
3. Hello
Aarthi Srinivasan 3
• Leads Personalization at Target
• 15+ years of experience in Managing products,
Engineering & Consulting
• Academic Background: MBA from Wharton, MS in
Computer Science from Stony Brook University and BS from
Madras University
4. What to expect today?
4
• Why do we need Blockchain?
• What is Blockchain?
• Types of Blockchain
• Problems with Adoption
• Investment trends and the future
Goal: Provide sufficient information for your opinion on blockchain
Aarthi Srinivasan
5. Trust the chain?
Aarthi Srinivasan 5
Store my identity on the
database with backups
Validation nodes confirms the data and
maintains copies of the record
Backup
Store my identity on
the blockchain
6. What is a Blockchain?
• A blockchain is a growing list of digital records or
blocks that are secured and linked. Each block
contains
• Link to the previous block (Hash value)
• Timestamp and
• Data
• Genesis block by Satoshi Nakamoto (Bitcoin paper) – 3rd
Jan 2009
“The Times 03/Jan/2009 Chancellor on brink of second bailout for
banks“
• Eliminate the intermediaries
• Creates a decentralized system
7. What is a blockchain?
Aarthi Srinivasan 7
A digital ledger in which transactions are validated
by a decentralized network of nodes (computers),
chain linked and recorded chronologically
Each block contains the previous block’s hash key, nonce (random
number that is incremented), timestamp and transactions.
Concept of validated proof-of-work for each transaction
Source - Bitcoin-paper
8. 8
Data 1
NAME OF BLOCK / HASH
Data 2
& more new Txs
Nonce – Random #
Prev block reference
/ Previous hash
Timestamp
Example Bitcoin Blocks
Data or Tx
3
NAME OF BLOCK / HASH
Data or Tx 4
& more new Txs
Nonce – Random #
Prev block reference
/ Previous hash
Timestamp
…...
9. Types of Blockchain
PERMISSIONLESS
PERMISSIONED
• Anyone can participate and validate a
block
• Common validation method proof of
work
• Ethereum fork using proof of stake (TBD
state)
• Restricted actors can validate a block
• Various methods of consensus are used
e.g. Byzanthine fault tolerance
10. 10
Example Blockchain Platforms
BITCOIN ETHEREUM HYPERLEDGER R3 CORDA
Ref – McKinse.comy, https://halobi.com/blog/descriptive-predictive-and-prescriptive-analytics-explained/
Permission
State
Permissionless
with basic
contracts
Permissionless with
smart contracts
(e.g. solidity)
Permissioned with
smart contracts (e.g.
Golang, Java)
Permissioned with
Smart contracts
(Kotlin, Java)
Smart Legal prose
Distributed
nodes
Distributed
system with all
accounts equal
access
Distributed system
with all accounts
equal access
Distributed system
with role-based
restricted access
Microledgers semi-
distributed systems
with restricted
access
Block creators External account External Account,
Contract account
Multiple roles such as
Validator or
Transactor
Multiple roles
including Notary
Cryptocurrency Bitcoin currency Ether or other
tokens via smart
contract
No currency
(chaincode tokens if
required)
No currency
Verification Proof of work
Data format:
Merkle tree (20
txs per sec)
Proof of work
Data format:
Patricia tree
Consensus based –
Modular &
Extensible
Consensus with
Financial sector as
focus area
11. Adoption Barriers
Aarthi Srinivasan 11
• Cryptocurrency is muddying the waters of Blockchain
technology
• Overvalued - Too many ICOs without a real product
• Lack of platform standardization and changing
protocols using forks
• Lack of regulation & unproven value (ROI)
• Learning curve / Migration efforts
13. 13Hackernoon, Techrecaps medium
Follow the Money
Blockchain Start ups
~$4B Funding (ICOs or VC)
Blockchain industry expected to grow to $20B by 2024*
Market cap for Crypto crossed $700B
Platforms for
Blochain
1
EOS 900M
Bitcoin2gen 233M
Tezos 232M
Platforms for
Currency Trading &
Cryptocoins
2
Coinbase 235M
Basis 133M
Blockchain 70M
Payments
Platforms
3
Circle 136MM
Ripple 93M
Colu 55M
15. 15
Where do I think this is headed?
Platforms &
Payments
• Blockchain
platforms
• Wallet & trading
platforms
• Payments
• Identity protection
• Regulatory
compliance
Applications
• Decentralized
compute & Storage
• Cybersecurity (AI
face recognition)
• Supply chain safety
/ Manufacturing
• Phone apps
blockchain version
• Blockchain phone –
HTC, Finney
AI application with smart
contracts
• Finance protection
• Document fraud detection
• iOT safety & security
(Energy efficiency – grid+,
AV)
• Medical AI contracts
• Decentralized
Organizations (Refugee
crisis –Exsulcoin),
Immigration security,
Common Education
Standards)
5 10
Aarthi Srinivasan
16. What to expect today?
16
• Why do we need Blockchain?
• What is Blockchain?
• Types of Blockchain
• Problems with Adoption
• Investment Themes shaping the future
Goal: Provide sufficient information to have a view on the technology
Aarthi Srinivasan
19. Bitcoin protocol steps
Start: Broadcast
new transaction
Verification:
User Signature
& funds
Proof-of-work:
Prevent double
spending
Mining: Earn
bitcoin rewards
Recheck
transactions &
start new block
1
2
34
5
Search Engine Account e.g. ABC wants consumers to use its search engine and will pay 1 crypto coin (or some
fraction of a bitcoin as a reward) in return for every search.
20. Key Terms
Block / Blockchain
A block is a collection of verified new transactions that generally includes a timestamp, link to
previous block (prevhash) and pointers (Merkle tree root hash) to transactions in the block
ICO – Initial Coin Offering
Similar to stock offering it is the method of offering decentralized ownership for a company with crypto
coins. E.g. SingularityNet offered ownership stake with ICO “AGI” tokens. Currently there are ~10,000
AGI tokens each valued at $0.4137 @ 0.000530 Eth
Smart Contracts
Code that gets executed when a message hits the contract account. This code can read and
write to internal storage, send messages or create contracts. (computational steps limit
specified)
UXTO – Unspent Transaction
Outputs
Unspent transaction outputs (e.g. coins) that have been minted but not yet used or spent.
Each UTXO has a denomination (value) and a owner defined by a cryptographic public key e.g.
0x55…A….4EA3cf456700eDBa212531x
Mining The computer node which completes the proof-of-work first to generate a block’s hash is the
winning node. The node mines (creates) 12.5 bitcoins as reward for its effort.
Nonce A nonce is an arbitrary number that can only be used once
E.g. You find your hash for the proof-of-work by incrementing this nonce methodically
BTC Hash & Hash rate
In general, a hash is an index for a huge data set. A bitcoin hash is a algorithmically generated
number to identify a particular block.
Hash rate is the number of hashes per second
Proof-of-work
Method to verify that the sender has not double-spent his amount in various transactions by
confirming absence of transactions. E.g. User cannot spend all his 100 bitcoins and pay himself
the same 100 bitcoins.
Aarthi Srinivasan
20
21. How do we value nothing?
Aarthi Srinivasan 21
• There were approximately 300 ICOs (public coin offerings) valued at nearly $4B in 2017
• Bitcoin value is speculative as it is mined from nothing as it does not offer goods or services
• Value is based on the underlying data in the chain and the length of the verified blockchain
Traditional Stock Valuation using Discounted Cash Flow for companies such as Apple
Free Cash Flow = Earnings before Income Taxes EBIT(1-t) + Depreciation & Amortization – Changes WC – Capital Expenditure
Value of the Data in chain
e.g. Singularity Net AI
Length of verified block
e.g. 505,000 blocks long (as of Jan 31st,
2018)+
My Bitcoin Estimation
= Value driven by
demand
ASSUMPTION: Regulation of Bitcoin and support by government agencies
22. Ethereum & Decentralized Autonomous Organizations
Aarthi Srinivasan 22
• Ethereum accounts can be externally owned accounts (to send / receive messages) or
contract accounts (to execute contracts in addition to sending/receiving messages)
• Contract accounts can execute code and create contracts. e.g. Use blockchain search
engine “ABC” and earn 0.05 BTC for every search
• First Class Citizen property in Ethereum exists where contract accounts are equal to the
external accounts and can take on many roles based on their contract code
• The general concept of a "decentralized organization" is that of a virtual entity that has a certain
set of members or shareholders which, perhaps with a 67% majority, have the right to spend the
entity's funds and modify its code.
• Ethereum platform allows you to create your own new blockchain, modify the existing bitcoin
chain with scripts and/or create meta-protocols on top of blockchain protocol
• Given the power of Ethereum Contracts, we can create ”smart contracts” that can execute
code when it receives a message. E.g. a search engine user gets money for every search on
that engine
23. How is data stored in the block?
Aarthi Srinivasan
23
In order to save space in the verified blocks, the transaction data is stored in a Merkle tree with the root hash
of the data
25. Ripple vs Ethereum vs Bitcoin
Aarthi Srinivasan 25
Technical differences
Ethereum can be considered slightly different to the other two currencies, being geared towards
complicated interactions between several parties rather than consumer payments. CNBC has noted that
it provides numerous potential uses, such as reconciliation, enabling smart contracts to be distributed on
the Ethereum network.
While Ripple is only the fourth largest cryptocurrency in terms of market capitalization, being worth $36
billion currently, it has advantages over both Bitcoin and Ethereum which could provide an explosion in
is value in the foreseeable future.
Ripple is pre-mined, with one hundred billion units in existence, twenty billion of which are retained by
the creators of the currency. This differs from Bitcoin in particular, which is entirely based on the mining
of its network to a fixed rate of 21 million potential Bitcoin units.
The distributed platform provided by Ripple is particularly highly regarded, as it is tailored towards the
financial service sector. “The ability to transfer from one currency to another instantly becomes possible
with the XRP as the intermediary currency. Clearly, there’s a lot of excitement surrounding Ripple,” The
Motley Fool noted.
Max number of coins, Speed, Smart Contract capability are all differentiators
I am Aarthi Srinivasan, a product enthusiast who loves utilizing technology to solve world problems. I lead the personalization team at Target which includes the backend data science as well as the front end customer journey. I am thrilled by new technology and love to share it broadly so more folks can utilize these insights.
Why do we need the chain? Blockchain?
Assume your identity is stored on a secure database with backups in the cloud. Now if a hacker wants to create malware and edit your data they can do it and that change will also be backed up unless someone notices this terrible change.
However with the blockchain you can prevent this type of malware edits because the identity is stored in multiple other nodes that have validated the data. All these additional nodes have to be hacked in order to edit your original data. This difference will be spotted pretty soon when the next transaction arrives for validation.
Bitcoin block chain is approximately 505,000 blocks long (as of Jan 31st, 2018)
~268 ICOs in 2018 (28% growth over last year in just first quarter)
Over 80% increase in funding over 2017 just in the first quarter
FLP inconsitency – Reliability, Consistency and Latency will not be possible together. Compromises exist.
UTXO – Ethereum paper: unspent transaction outputs" or UTXO) that
have been minted and not yet spent, with each UTXO having a denomination and an owner (defined by a
20-byte address which is essentially a cryptographic public key[1]).
Once step (1) has taken place, after a few minutes some miner will include the transaction in a block, say
block number 270000. After about one hour, five more blocks will have been added to the chain after that block,
with each of those blocks indirectly pointing to the transaction and thus "confirming" it. At this point, the
merchant will accept the payment as finalized and deliver the product; since we are assuming this is a digital
good, delivery is instant. Now, the attacker creates another transaction sending the 100 BTC to himself. If the
attacker simply releases it into the wild, the transaction will not be processed; miners will attempt to run
APPLY(S,TX) and notice that TX consumes a UTXO which is no longer in the state. So instead, the attacker
creates a "fork" of the blockchain, starting by mining another version of block 270000 pointing to the same
block 269999 as a parent but with the new transaction in place of the old one. Because the block data is
different, this requires redoing the proof of work. Furthermore, the attacker's new version of block 270000 has a
different hash, so the original blocks 270001 to 270005 do not "point" to it; thus, the original chain and the
attacker's new chain are completely separate. The rule is that in a fork the longest blockchain (i.e.. the one
backed by the largest quantity of proof of work) is taken to be the truth, and so legitimate miners will work on
the 270005 chain while the attacker alone is working on the 270000 chain. In order for the attacker to make
his blockchain the longest, he would need to have more computational power than the rest of the network
combined in order to catch up (hence, "51% attack").
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ethereum.