Bitcoin, Blockchain, Smart Contracts and Decentralized Autonomous Organizations: The Future

Bitcoin, Blockchain, Smart Contracts & Decentralized Autonomous Organizations:

The Future.

Sebastian Zontek

Deep.BI – real-time data streams analytics

Want to get free Whooper? ImageCredits:MSNBC

How to get free Whooper? Go to Arnhem, Netherlands

and pay with bitcoin! ImageCredits:BurgerKing

Other cryptocurrencies: •  Namecoin •  I/O Coin •  NuBits

Bitcoin: cryptocurrency based on blockchain invented in 2008

ImageCredits:flickr.com/photos/aukirk/

I want this Whooper! How do I pay with bitcoin?

Example bitcoin wallet app

More than 100,000 merchants now accept bitcoin

Imagecredits:coinmap.org

Satoshi Nakamoto, bitcoin creator, still remains anonymous

Bitcoin does not have a central bank

Bitcoin is run by peer-to-peer network of nodes. It’s a kind of Decentralized Autonomous Organization (DAO).

ImageSource:bootstrapgo.prusac.com

Who maintains transaction history?

ImageCredits:ilovegraffiA.deMiners

How the miners are paid?

Every ~10 minutes a lucky one gets

~10,000 USD (25 bitcoins)

Imagecredits:JanSochor

What miners really do?

Once every ~10 min. miners collect a few hundred transactions and combine them in a "block". In order to mine a block and validate the transaction, miners compete to solve a difficult mathematical equation (a "hash function"). The miner that solves the equation first further processes the block and broadcasts this "proof-of-work" to the bitcoin network. The other miners check the proof-of-work and the validity of the transactions. If they approve, the winning miner gets a reward of 25 newly minted bitcoin, which is the incentive for miners to provide computing power. Adjusting the difficulty of the puzzle ensures that the supply of new bitcoins remains steady.

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ImageCredits:theanglergame.com

Other cryptocurrencies: •  Namecoin •  I/O Coin •  NuBits

Bitcoin price and market

Market Cap: 15M BTC 6,5B USD

On avg. 120k transactions per day (~$75M exchanged)

Blockchain = distributed ledger

Immutable; an “append-only” database hardened against tampering and revision, even by its operators.

Blockchain = chain of blocks Block = set of transactions

transactions

Blocks created by Miners

How blockchain is constructed

Is blockchain technology useful in other than the bitcoin application?

Badly kept standard ledgers make troubles

Eviction of Mariana Izaguirre’s family due to disorder in the Property Institute in Honduras.

After many of such incidents PI have asked Factom, an American startup, to provide a prototype of a blockchain-based land registry.

ImageSource:RevistazoHonduras

Blockchain replaces trusted third party

Blockchain offers a way for people who do not know or trust each other to create a record of who owns what

that will compel the assent of everyone concerned. ImageCredits:AgnosAcPreachersKid

Blockchain is chain of being sure about things. It can thus be a registry

of anything worth tracking closely.

Smart Contract: any contract which is capable of executing or enforcing itself

The main purpose of designing smart contracts is to enable people to trade and do business with strangers, usually over the internet, without the need for a large

centralized authority site to act as a middleman. ImageSource:independent.co.uk

Land Luxury goods Digital rights

Cars Bonds People Loans Bets

…

Blockchain / smart contracts

applications

How the miners are paid?

Every ~10 minutes a lucky one gets

~10,000 USD (25 bitcoins)

More blockchain use cases

Source:letstalkpayments.com

Libertarians dream

A world, where more and more state regulations are replaced with private contracts between individuals—contracts which blockchain

based programming would make self-enforcing.

Problems & Risks

51% attack

Concentration of miner pools within single organizations (currently most come from China).

Controlling a majority of network hash rate gives a power to revise transaction history and prevent new

transactions from confirming.

Impact on environment through pointless computing

Miners solve 450 thousand trillion solutions per second, and this needs c.a. 40 terawatt-hours of energy,

almost two-thirds of what the 10m people in Los Angeles County get through.

Limited scalability through 1MB block size (~1400 transactions in one block)

Current blockchain can process max. 7 bitcoin transactions per second

compared to 1,736 Visa handles in America. Blocks could be made bigger; but bigger blocks would

take longer to propagate through the network, worsening the risks of blockchain forking.

And getting community-wide consensus how to solve these problems is hard…

Drop us an email to learn more about deep, real-time blockchain analysis:

blockchain@deep.bi

Follow us Twitter: @_DeepBI, @SebastianZontek

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