An introduction to Blockchain with Mark Russinovich – BRK2049

>> GOOD MORNING,EVERYBODYHOW IS THE PARTY?YEAH?GOOD

GOOD?YEAHI'M IMPRESSED HOW MANY PEOPLE ARE HERE AFTER THE PARTY,ACTUALLYAND HOW MANY PEOPLE ARE HERE ON THE LAST DAY,SO THANK YOU FOR COMINGTHANK YOU FORSTAYING FORIGNITEHOW MANY PEOPLE ARE HERE BECAUSE YOU WANT TO LEARN HOW TO GET RICH FAST?[ Laughter ]OKAY

NOT THAT MANYGOOD WELL,SO MY NAME ISMARKI'M GOING TO THIS MORNING GIVE YOU AN INTRODUCTION TO BLOCK CHAIN,AND TO SET THE CONTEXT FOR BLOCK CHAIN,I'M GOING TO START WITH THE ROOTS OF WHERE BLOCK CHAIN CAME FROM WHICH IS A CRYPTOCURRENCY THAT I'M SURE EVERYBODY IN THE ROOM HAS HEARD OF CALLED BITCOINI'LL START BY TALKING A LITTLE BIT ABOUT BITCOIN,THEN I'LL GO INTO THE FOUNDATION OF BITCOIN WHICH SET THE STAGE FOR UNDERSTANDING BLOCK CHAIN THATREQUIRES A LITTLE BIT OFCRYPTOGRAPHY

SO I'M GOING TO COVERSOME CRYPT GRAPHIC BASICSSOME OF YOU MIGHT BE FAMILIAR WITH THECRYPTO GRAPHICBASICSSOME MIGHT BE FAMILIAR WITH THE TERMS BUT NOT EXACTLY SURE HOW THEY WORK I'LL BE GOING THROUGH THOSE BRIEFLY THEN I'LL GET TO THE MEAT OF BLOCK CHAINS

WHAT ARE TRANSACTIONS,WHAT ARE TRANSACTION CHAINS,WHAT ARE BLOCKSTHEN I'LL GET INTO SMART CONTRACTS AND CONSORTIUM BLOCK CHAINS WHICH IS WHERE BUSINESS COMES INTO PLAY AND I'LL TALK A LITTLE BIT AT THE END ABOUT WHAT MICROSOFT IS DOING WITH BLOCK CHAINSO LET'S GO AHEAD AND GET STARTEDI'M SURE EVERYBODY IN THE ROOM,LIKE I SAID, IS FAMILIAR WITH BITCOIN,AND BITCOIN MAINLY REALLY KICKED IN AT THE END OF LAST YEARTHE BITCOIN PRICES WERE GOING CRAZY

I'M SURE ALL YOUR FRIENDS AND FAMILY STARTED TO TALK ABOUT BITCOINI HAD FRIENDS WHO HAVE SONS AND CHILDREN THAT BASICALLY WERE LIKE I'M QUITTING COLLEGE,I'VE LEARNED HOW TO MAKE MONEY,I'M USING CRYPTOCURRENCY,DAD,AND I'M GETTING RICH AND I'LL NEVER HAVE TO WORK AGAINWELL,THEY'RE BACK IN SCHOOL NOW[ Laughter ]HOW MANY PEOPLE HAVE LOST MONEY ON BITCOIN BECAUSE YOU BOUGHT INTO THE MANIA?OKAYI CAN TELL YOU'RENOT WILLING TO ADMIT IT AT THISPOINT

BUT THIS CAUSED A FEAR OF MISSING OUT ALL THESE STORIES ABOUT PEOPLE GETTING RICH, AND THIS MANIA EVEN TRANSFERRED INTO THE BUSINESS WORLD WHERE YOU HAD COMPANIES LIKE LONG ISLAND ICED TEA CHANGING ITS NAME,PIVOTING AWAY FROM ICED TEA,IT'S DOING A DECENT JOB AT ICED TEA BUT THEY SAID WE CAN DO BETTER WITH BLOCK CHAIN AND SO THEY CHANGED THEIR NAMETO LONG BLOCK CHAIN AND THEIR STOCK PRICE WENTUP 200 THE NEXT DAYTHIS IS THE KIND OF CRAZINESS WE'RE SEEING HERE YOU CAN SEE BACK IN DECEMBER THAT BIG SPIKETHIS IS THE BITCOIN CURRENTPRICEIT'S COME DOWN,IT'S ABOVE WHERE IT WAS ABOUT A YEAR AGO BUT STILL FAR FROM THE HEIGHTS THAT IT ACHIEVED AND NOW THERE'S A WHOLE BUNCH OF PEOPLE THAT ARE SAYING THAT BITCOIN'S HYPE IS GONE, WE'RE HERE TO STAY IN THE LOWLANDS, THERE'S PEOPLE EVEN THAT ARE SAYING THAT BITCOIN IS A BUNCHOF NONSENSE LIKE WARREN BUFFETT,THIS IS AN EXPRESSION I DIDN'T EVER EXPECT TO HEAR OUT OF WARREN BUFFETT WHICH IS BITCOIN IS PROBABLY RAT POISON SQUARED

AND THE IRONIC THING ABOUT THIS IS THERE'S A CRYPTOCURRENCY CALLED RATCOIN, ITS PRICE DOUBLED THE NEXT DAY BECAUSE OF THIS[ Laughter ] MY OWN TALE OF LOWABOUT A YEAR AGO,TWO YEARS AGO,ACTUALLY,I DECIDED TOEXPERIMENT WITH CRYPTOCURRENCYI DIDN'T KNOW ANYTHING ABOUT IT BUT I WANTED TO LEARN ABOUT BLOCK CHAIN ANDCRYPTOCURRENCY SO I PLACED MODESTINVESTMENTS IN BITCOIN AND ANOTHER CRYPTOCURRENCY CALLEDETHEREAL WE'LL TALK ABOUT LATER$50 IN EACH

THIS WAS IN JULY IT HAD ACTUALLY REACHEDOVER $5,000 MY $50 TRANSLATEDINTO $5,000 LAST DECEMBERHERE IS WHERE IT WAS IN JULYIT DIDN'T CRASH AS HARD AS BITCOIN BUT I CHECKED THIS MORNING AND HERE IT IS

SO I CAN'T EVENBUY AN IPHONE XS NOW WITH THIS[ Laughter ] SO WHERE DID BITCOIN COME FROM? YOU MIGHT HAVE HEARD OF A PERSON NAMEDSATOSHIIAC MOTONOBODY KNOWS WHO IT ISTHERE'S ALL SORTS OFCONSPIRACY THEORIESBECAUSE THIS PAPER WASPUBLISHED UNDER THIS NAME BUT NOBODY HAS EVER BEEN IDENTIFIED AS THIS PERSON AS MUCH AS THE WHOLE WORLD HAS BEEN TRYING TO FIGURE IT OUT ANDTHERE'S VARIOUS PEOPLE COMING FORWARD AND SAYING I AMSATOSHINAKOMOTO

THERE'S AN EASY WAY TO PROVE YOU ARE HIM BUT NOBODY HAS DONE THATI'LL COME TO THAT IN AMINUTETHIS PAPER LAID OUT THE FUNDAMENTALS OF BLOCK CHILDREN CHILDREN — BLOCK CHAIN IN THE PURPOSE OFSERVING THE PURPOSE OF BITCOIN IT IS A VERY GOOD READ TO GET THE FUNDAMENTALSI'M GOING TO BE QUICKLY GOING THROUGH WHAT'S ON THE PAPER

IF YOU WANT A FIVE-PAGE READ ON WHAT THE FOUNDATION IS OF ALL THE MANIA,THAT PAPER IS A GREAT,SIMPLE EASY READ ON UNDERSTANDING THOSE BASICSAND THE REASON THAT IT'S VERY EASY TO PROVE WHOSATOSHI IS WHEN BITCOIN CRYPTOCURRENCYLAUNCHED, THE INITIAL TRANSACTION DEPOSITED A BUNCH OF BITCOIN INTOSATOSHI'S ACCOUNT AND SOME OF IT HAS BEEN SPENT BUT THERE'S ABOUT A MILLION BITCOIN LEFT IN THAT ACCOUNTAND ANYBODY THAT WANTS TO PROVE THEY'RE SATOSHI,ALL THEY HAVE TO DO IS SUBMIT A TRANSACTION FROM THAT ACCOUNT TO THE BITCOIN BLOCK CHAIN AND THAT PROVES THEY HAVE ACCESS TO THAT ACCOUNT WHICH ONLYSATOSHI SHOULD HAVE ACCESS TOTHISMILLION BITCOIN OBVIOUSLY IS A HUGE AMOUNT OF MONEY WHOEVER THIS IS,WHATEVER ORGANIZATION IT IS,AT ONE POINT IN TIME,YOU CAN SEE THIS PERSON WOULD HAVE BEEN THE 44th RICHEST PERSON IN THE WORLD, TENS OF BILLIONS OF DOLLARS OF NET WORTH BASED OFF OF THAT BITCOIN HAS COMEDOWN,OF COURSE

CRYPTOCURRENCY EVE I'VE BEEN TALKING ABOUT IN THE CONTEXT OF BITCOINWHY ISCRYPTOCURRENCY SO INTERESTING TO PEOPLEYOU NEED TO UNDERSTAND WHAT FIAT CURRENCY IS AND COMPARE THAT TOWHATCRYPTOCURRENCY ISBECAUSE THEY'RE VERY DIFFERENT FIAT CURRENCY IS ISSUED BY GOVERNMENT IT'S LIKE THE U

SDOLLARTHE GOVERNMENT PRINTS THE MONEY AND STANDS BEHIND THATMONEYAND WHAT THIS CAUSES IS THERE'S DELAYSIN SETTLEMENT WHEN ONE ENTITY PARTY WANTS TO PAY ANOTHER PARTY SOME MONEY,ESPECIALLY WHEN YOU'RE GOING ACROSS INTERNATIONAL BORDERS BECAUSE THEN YOU'RE GOING FROM ONE FIAT CURRENCY TO ANOTHER FIAT CURRENCY TYPICALLY OR ONE BANKING INSTITUTION TO ANOTHER ONE AND THAT MEAN THAT THERE'S SETTLEMENT TIMES THAT HAVE TO BE PUT IN PLACE TO MAKE SURE THAT NEITHER PARTY IS SCREWED OUT OF THEIR MONEY AS THIS THING IS IN TRANSIT WHICH IS WHY WHEN YOU DO A WIRE TRANSFER,IT'S USUALLY TWO OR THREE DAYS BEFORE THAT WIRE TRANSFERCLEARSTHERE'S ALSO IN MANY OF THESE SITUATIONS EVEN A NEED FOR AN INTERMEDIARY TO PROTECT BOTH PARTIES WHERE THEY CAN SIT AND HOLD THE MONEY KIND OF IN THIS INTERMEDIATE STATE,WHERE IF ONE PARTY DEFAULTS,THE OTHER PARTY IS PROTECTED

SO EVEN THAT INTERNATIONAL BANKING SYSTEMS HAVE ORGANIZATIONS THAT SIT THERE AS INTERMEDIATARIES FOR THOSECROSS-BORDER PAYMENTS WHICH MAKE THEM TAKE EVEN LONGER AND ADD A LOT OF COST OVERHEAD TO THE TRANSACTIONS THAT GO CROSS-BORDER THERE'S ALSO HIGH TRANSACTIONFEES USUALLY ASSOCIATED WITH ALL OF THIS FRICTION THAT'SCAUSED BY THESE INTERMEDIATARIES IN THE MIDDLE AND THE RISKS OF THESE PAYMENTS GOING FROM ONE PARTY TO ANOTHERSOCRYPTOCURRENCY AIMS AT ADDRESSING ALL OF THESEONE OF THE KEY ASPECTS OF CRYPTOCRYPTOCURRENCY IS IT'S DECENTRALIZED MEANING THERE'S NO SINGLE ORGANIZATION RESPONSIBLE FOR MANAGING IT

IT IS ANAUTONOMOUS SYSTEM THAT'S OPERATED BY A WHOLE NETWORK,A NETWORK OF PARTIES THAT DON'T HAVE TO TRUST EACH OTHER TO PARTICIPATE IN THAT NETWORKTHERE'S NO CLEARING INVOLVEDWHEN ONE PARTY SENDS BITCOIN TO ANOTHER PARTY ON THE NETWORK,IT'S EFFECTIVELYINSTANTANEOUS IT'S NOT QUITEINSTANTANEOUS,BUT WHEN THAT TRANSACTION IS EXECUTED AND ACCEPTED BY THE NETWORK,THEN EVERYBODY SEES THAT AS THE GROUND TRUTHTHERE'S NEWINTERMEDIATARIES

YOU CAN JUST SUBMIT A TRANSACTION TO THE NETWORK DIRECTLY AND SEND MONEY TO ANOTHER PARTY OR ANY OTHER PARTIES WITHOUT HAVING TOTO GO THROUGH INTERMEDIATARIES THAT ARE GOING TO SIT THERE AND PROTECT EACH OTHER BECAUSE THERE'S NO NEED FOR THAT PROTECTIONONE OF THE SPINOFF ASPECTS AND ONE OF THE REQUIREMENTS TO MAKE THIS TRUSTED DECENTRALIZED SYSTEM IS THERE'S AN IMMUTABLE HISTORY OF THE TRANSACTIONSWHEN I PAY SOMEBODY IN BITCOIN,WHAT GOES INTO THEBITCOIN NETWORK IS A LOG OF THAT TRANSACTION AND NOBODY CAN TAMPER WITH THAT LOG WITHOUT IT BEING VISIBLE THAT SOMEBODY TAMPERED WITH ITTHERE'S A WAY FOR SOMEBODY TO GO VERIFY THEAUTHENTICITY OF THAT TRANSACTION CHAIN LOG AND I'LL SHOW YOU HOW THAT'S DONE IN A MINUTESO THATCRYPTOCURRENCY IS BUILT ON TOP OF BLOCK CHAIN WHICH GIVES IT ALL THESE PROPERTIES

BLOCK CHAINS ARE ALSO CALLED DISTRIBUTED LEDGER TECHNOLOGY AND BLOCK CHAINS GET THEIR FUNDAMENTAL PROPERTIES THAT GIVECRYPTOCURRENCY THOSE PROPERTIES FROM CRYPTOGRAPHY,SO I'M GOING TO TALK A LITTLE BIT ABOUT THECRYPTOGRAPHIC BASICS INA SECOND BUT I WANT TO START OUT BY ASKING THIS QUESTION, WHY BLOCK CHAIN,BECAUSE REALLY,WHEN THERE'S A BUSINESS LOOKING AT BLOCK CHAIN AND I'M GOING TO TALK MORE ABOUT BUSINESS SCENARIOS IN A LITTLE BIT,THERE'S ONE QUESTION THAT YOU HAVE GOT TO ASK UP FRONT WHICH IS WHY DO YOU WANT TO USE BLOCK CHAIN FOR THISTHERE'S BEEN SO MANY COMPANIES THAT HAVE COME TOMICROSOFT AND SAID HEY,BLOCK CHAIN,WHAT CAN I USE IT FOR,OR HERE'S A PROBLEM,I WANT TO USE BLOCK CHAIN ON IT WHY,BECAUSE BLOCK CHAINSO IT'S LIKE A HAMMER LOOKING FOR NAILSAND SO YOU GOT TO STEP BACK AND SAY WHY DO YOU WANT TO USE BLOCK CHAIN,AND THE ANSWER,THE FUNDAMENTAL REASON TO USE BLOCK CHAIN ISTHAT THERE'S SEVERAL PARTIES THAT WANT TO INTERACT WITH EACH OTHER,TYPICALLYTRANSACT,SEND ASSETS FROM ONE TO ANOTHER,ANDNONE OF THE PARTIES TRUST EACH OTHER TO OPERATE THE DATABASE,AND THEY DON'T EVEN TRUST ANYBODY ELSE TO OPERATE THE DATABASE ON THEIR BEHALF OR THEY WOULD RATHER NOT BECAUSE THAT WOULD INTRODUCE FRICTION AND COST

AND SO THAT EFFECTIVELY MEANS THAT YOU GOT A NETWORK OF PARTIALLY OR FULLY UNTRUSTING PARTICIPANTS THAT WANT TO TRANSACT WITH ONE ANOTHER DIRECTLYAND NONE OF THEM TRUST ANY OF THEM TO OPERATE A DATABASE SO THE BENEFITS THAT BLOCK CHAIN GIVE YOU BESIDES THE ONE THAT I TALKED ABOUT IS THATYOU CAN'T CENSOR ON A BLOCK CHAINTHE NETWORK ACCEPTS TRANSACTIONS AND AS LONG AS SOME PARTY IS WILLING TO ACCEPT A TRANSACTION, THEY CAN PUT IT INTO THE BLOCK CHAIN SO IT'S VERY HARD TO KEEP TRANSACTIONS OUT IN A CENTRALIZED DATABASE CASE, IT WOULD BE VERY EASY FOR THE PARTY OPERATING IT TO SAY I'M NOT GOING TO ACCEPT THOSE TRANSACTIONSIT'S CAPABLE OFACCOMMODATING ANANONYMITY OR PSEUDO ANONYMITY MEANING THE PARTIES DON'T HAVE TO BE TIED BACK TO ANY REAL WORLDIDENTITIES

THEY'RE REPRESENTED WITHCRYPTOGRAPHICKEYS WHICH ARE FAIRLY ANONYMOUSTHERE'S WAYS YOU CAN ACTUALLY LOOKING AT THE TRANSACTIONS AND IF YOU HAVE GOT SOME CONNECTION TO A REALWORLD, YOUCANDEANONMIZE A KEY BUTEFFECTIVELY THEY'RE ANONYMOUSTHEY'RE RESILIENT TO FAILUREA WHOLE NETWORK IS MAINTAINING THE DATABASENOT ASINGLE SERVER OR NETWORK OF SERVER

EVERYBODY HAS GOT COPIES OF ITTHE IMMUTABILITY MEANS THERE'S A VERIFIABLE AUDIT LOG YOU CAN VAL DAY A TRANSACTION BASED OFF OF SIMPLY ITS TRANSACTION ID OR ITS HASH I'LL TALK ABOUTNOW, THE ALTERNATIVES IN MANY CASES WHERE SOMEBODYSAYS I WANT TO USE BLOCK CHAIN OR A CENTRALIZED DATABASE, A TRUSTED OPERATOR YOU WANT TO OUTSOURCE THE DATABASE TO AS THE MEMBERS OF YOUR PARTY WILL TRANSACT WITH ONE ANOTHERANOTHER OPTION IS TRUSTED EXECUTION ENVIRONMENTS ORTEs WHICH I'LL TALK ABOUT AT THE VERY END OF THE PRESENTATION WHICH AREENCLAVES WHERE IF YOUTRUST THE CODE IN THE ENCLAVE AND YOU TRUST THE ENCLAVE ITSELF,LIKE THE HARDWARE THAT IMPLEMENTS THAT ENCLAVE,THEN YOU CAN TRUST THAT ANYWHERE EVEN OUTSIDE OF YOUR OWN NETWORK,EVEN ON SOMEBODY ELSE'S MACHINE AND THAT MIGHT BE A WAY TO SOLVE THIS PROBLEM WITHOUT BLOCK CHAIN

ANDTHEN MULTIPARTYCRYPTOGRAPHY, THAT'S ANOTHER POTENTIAL SOLUTION TO THISLIKEUSING HOMOMORPHICENCRYPTIONS IF YOU ARE INTERESTED IN THE ANONYMITY ASPECTS OF BLOCK CAMPAIGN,YOU CAN GET THAT THROUGH OTHER MEANSI WANT YOU TO KEEP THAT IN MIND AS I GO THROUGH THE PRESENTATION IS BLOCK CHAIN IS NOT THE ANSWER TOEVERYTHING, IT'S AN ANSWER TO A VERY SPECIFIC SCENARIOLET'S TALK ABOUT THECRYPTOGRAPHIC BASICS STARTING WHICH THE HASH WHICH IS ALSO KNOWN AS A DIGESTTHIS IS A SUCCINCT REPRESENTATION OF SOMETHING VERY LONG,COULD BE VERY LONG

LIKE THE CLIFF'S NOTES FOR WAR AND PEACE, VERY SUCCINCT REPRESENTATION OF THE BOOK WAR AND PEACE AND THE KEY ASPECT OF THIS IS THAT CLIFF'S NOTES, YOU WILL NEVER FIND TWO CLIFF'S NOTES FOR DIFFERENT BOOKS THAT ARE THESAMEEVERYBOOK RESOLVES INTO A DIFFERENT CLIFF'S NOTES SUMMARY AND IT'S IMPOSSIBLE TO GO FROM THE CLIFF'S NOTES SUMMARY BACK TO THE BOOKIF I GIVE YOU THE CLIFF'S NOTES SUMMARY FOR "WAR AND PEACE" IT'S IMPOSSIBLE FOR YOU TO GO BACK AND PRODUCE THE WHOLE BOOK" WAR AND PEACE" THAT IS A PROPERTY CALLED ONE-WAY HASHING,WHICH MEANSTHAT I CANCREATE THE SUCCINCT REPRESENTATION BUT I CAN'T GO FROM THE SUCCINCT REPRESENTATION BACK TO THEORIGINAL I CAN DERIVE BASICALLY NO INFORMATION ABOUT THAT ORIGINAL FROM THE SUMMARY

NOW,WHEN IT COMES TO DIGITALHASHING, ORSUMMARIZATION,YOU HAVE GOT A CRYPTO GRAPHIC HASH FUNCTION,SHAW 256 IS THE ONE COMMONLY USE AND THAT'S WHERE YOU TAKE SOME INPUT AND TRANSFORM IT THROUGH THE HASH FUNCTION INTO A FIXED LENGTH SET OF BINARYIN THE CASE OFSHAW 256,IT'S 32BITES, OR 32 BITES OFBINARYTHISIS MORE SUCCINCT FORM BUT THE PROPERTY HERE IS THAT IF YOU CHANGE ANYTHING,YOU CHANGE ONE CHARACTER,YOU'RE GOING TO COME UP WITH COMPLETELY DIFFERENT HASHESSO HASHES ARE A GREAT WAY AND THESE FUNCTIONS ARE ALSO WHAT'S CALLED COLLISION RESISTANTIT'S EXTREMELY HARDOR IMPOSSIBLE TO FIND VIRTUALLY IMPOSSIBLETO FIND TWO DIFFERENT TEXTS THAT WILL RESULT IN THESAME HASH

IT'SGOT THIS COOL PROPERTY WHICHSEEMS COUNTERINTUITIVE THAT MEANS YOU CAN REPRESENT JUST ABOUT ANYTHINGUNIQUELY AND VERIFIABLY JUST WITH ITS HASH AND WE'LL BE TALKING ABOUT HASHES IN THE CONTEXT OF BLOCK CHAIN TRANSACTION IDs A LITTLE BIT LATERSECOND CONCEPT IS ENCRYPTIONI'M GOING TO TALK ABOUT THE ENCRYPTION WE'RE ALL FAMILIAR WITH WHICHISSYMMETRICENCRYPTION YOU TAKE IT THROUGH A SYMMETRIC ENCRYPTION ALGORITHM,WHICH HAS A KEY ASSOCIATED WITH IT AND THEN YOU PRODUCE SOME GARBAGE AND THIS GARBAGE RIGHT HERE LOOKS LIKE WHAT YOU SEE WHEN YOU ACCIDENTALLY OPEN A WORD DOCUMENT IN NOTEPAD

COME ON,I KNOW YOU HAVE DONE IT,I'VE DONE ITAND THEN YOU CAN TAKE THAT SAMEKEY AND DECRYPT ITSO AS LONG AS YOU GOT THE KEY,YOU CAN EITHER ENCRYPT OR DECRYPT AND GET BACK TO THE ORIGINAL CONTENTSBLOCK CHAINS RELY ON A VARIANT OF THISCALLED PUBLICKEYCRYPTOGRAPHY OR ASYMMETRIC CRYPTOGRAPHY WHERE THERE'S A LOCK AND TWO KEYS AND THE PROPERTY HERE IS THAT THE LOCK CAN BE TURNED ONE WAY BY ONE KEY AND CAN ONLY TURN THE OTHER WAY BY THE OTHER KEYTHAT'S SIMPLE KIND OF WAY TO THINK ABOUT THIS

SO IF I HAVE GOT THE GREINKE ORTHE PUBLIC KEY,I CAN MOVE FROM THELOCKED,UNLOCKED POSITION INTO THIS LOCKED POSITION ON THE LEFT SIDE BUT I CAN'T USE THE GREEN KEY TO GO TO THE LOCKED POSITION ON THE RIGHT SIDESO THE GREEN KEY CAN ONLY TURN THIS DIRECTION COUNTERCLOCKWISE, THE RED KEY OR THE PRIVATE KEY CAN TURN ANY OTHER DIRECTIONTHE WAY WELABEL THESE IS A BIT ARBITRARY IJUST DEFINE ONE AND SAY THIS IS THE PRIVATE KEY,THE OTHER ONE IS GOING TO BE THE PUBLIC KEYTHE IDEA HERE IS I CAN TAKE A PIECE OF TEXT AND THEN I CAN ENCRYPT IT WITH MY PUBLIC KEY WHICH MEANS TAKING IT FROMTHE LOCKED POSITION TOTHE UNLOCKED POSITION WITH THAT PUBLIC KEY

AND THEN THE PRIVATE KEY CAN BE USED TO GO ANDDECRYPT ITSO THIS WAY I CAN WITH MY PUBLIC KEY,ACTUALLY THISIS — I CAN ENCRYPT SOMETHING SO THAT ONLY THE INTENDED RECIPIENT CAN GET AT ITIF SOMEBODY CREATES A KEY PAIR AND THEY GIVE THEIR PUBLIC KEY OUT TO ANYBODY,NOW ANYBODY CAN TAKE THEIR PUBLIC KEY,ENCRYPT MESSAGES THAT ONLY THE PERSON WITH THE PRIVATE KEY CAN SEE BECAUSE THE PUBLIC KEY CANNOT GO THE OTHER WAY AND DESCRIPT THAT — DECRYPT THAT MESSAGETHAT'S ONE OF THE COOL PROPERTIES OF THE ASIMMITIC– ENCRYPTIONTHEY CAN TAKE THEIR PRIVATE KEY THAT CORRESPONDS TO THE PUBLIC KEY AND DECRYPT IT

THAT IS A WAY TO SECURELY SEND MESSAGES SUCH THAT ONLY THE RECEIVING PARTY, INTENDED PARTY CAN GET THEMTHERE'S ANOTHER USE FOR A PUBLIC KEY CRYPTTOGRAPHY WHICH ISN'T FOR SENDING MESSAGES THAT ARE ENCRYPTED BUT FORVERIFYING THAT SOMEBODY HAS LOOKED AT A MESSAGE AND BASICALLY STAMPED THEIR SEAL OF APPROVAL ON THE MESSAGE OR SAID ORGIVEN YOUEVIDENCE THAT THEY HAVE SEEN THAT MESSAGEAND THAT IS A PROCESSCALLED SIGNINGWITH SIGNING, YOU TAKETHE MESSAGE AND YOU ENCRYPT IT WITHYOUR PRIVATE KEY,AND AT THAT POINT,SOMEBODY WITH THE PUBLIC KEY CAN DECRYPT ITTHIS IS THE OPPOSITE

THIS IS WHERE I TAKE MY PRIVATE KEY,I ENCRYPT SOMETHINGEVERYBODY HAS MY PUBLIC KEY SO I CAN HAND IT OUT TO EVERYBODY AND YOU CAN ALL DECRYPT IT WITH MY PUBLIC KEY THE ONLY KEY THAT CAN DECRYPT IT IS MY PUBLIC KEYNOW YOU KNOW I'M THE ONE THAT ENCRYPTEDITNOBODY ELSE COULD HAVE ENCRYPTED IT

IF I ENCRYPTED IT,THAT MIGHT MEAN SOMETHING LIKE I APPROVE OF THISSO THOSE JUST PLAYING THIS OUT LOOKS LIKE THISI TAKE A MESSAGE,I SEND THE MESSAGE,ACTUALLY,TOYOUI THENHASH THE MESSAGEYOU HASH THE MESSAGE SO WE BOTH HAVE HASHES

I SIGN MY HASHSO I BASICALLY ENCRYPT THE HASHWITH MY PRIVATE KEY,THEN I SEND YOU THAT ENCRYPTED MESSAGEYOU TAKE MY PUBLIC KEY,YOU DECRYPT IT,YOU GET OUT THE DECRYPTED HASH,AND IF THAT DECRYPTED HASH MATCHES THE HASH THAT YOU PRODUCED OF THE PLAIN TEXT,THEN YOU KNOW THAT ACTUALLY IAPPROVED OF THAT MESSAGE,I SIGNED THATMESSAGESO THAT'SSIGNING WITH ASYMMETRIC CRYPTOGRAPHYSO NOW WE'VE GOT BASICALLY THEBASICS OF CRYPTOGRAPHY

LET'S TALK ABOUT THE BLOCK CHAIN BASICS NOWFIRST TALKING ABOUTTRANSACTIONS I MENTIONED I WANTED TO SEND SOMEBODY SOMEBITCOINBOB WANTS TO PAYALTIS 10BITCOINBOB CREATES A TRANSACTION, THAT TRANSACTION HAS TO REFER TO A PREVIOUS TRANSACTION THAT HADGIVEN BOB 10 BITCOIN

THIS IS LIKE SAYING I'M TAKING THAT 10 BITCOIN AND I'M GOING TO GIVE IT TO ALICENOW THE WAY THATBOB SHOWS WHO HE'S GIVING IT TO IS TOEMBED WITH THAT TRANSACTION ALICE'S PUBLIC KEYSO THIS IS BASICALLY TELLING THE WORLD ALICE IS GETTING THISIF ANYBODY KNOWS ALICE'S PUBLIC KEY,THEY CAN SAY SEE THAT IT'S ALICE, EVERYBODY ELSE JUST SEES THERE'S A KEY THERE THAT WHOEVER OWNS THAT KEY IS ENTITLED TO THIS BITCOIN AND THEN WHAT I DO TO SHOW THAT I'M ACTUALLY WILLING TO GIVE MY 10 BITCOIN TO ALICE AS BOB IS THAT I SIGN THATTRANSACTION

SO I HASH IT,I ENCRYPT IT WITH MY PRIVATE KEY AND NOW ANYBODY THAT GETS MY PUBLIC KEY AND MY PUBLIC KEY IS IN THERE AS WELLANYBODY CAN LOOK AT MY PUBLIC KEY AND SEE THAT I'M THE ONE THAT ACTUALLYAUTHORIZED THIS TRANSFER OF THE 10 BITCOIN THAT I PROVED THAT I OWN TO ALICE AND SO THAT'S THE BASIC OF A BITCOIN TRANSACTION OR ANY KIND OFCRYPTOCURRENCY TRANSACTIONAND THEN WHATTHIS CAUSES, IF YOU RECALL,WHAT I SAID IS THAT THAT BITCOIN THAT I'M PAYING TO ALICE,I HAVE TO POINT BACK AT PREVIOUS TRANSACTIONS TO SHOW THAT I HAVE GOT THAT BITCOIN THAT THAT'S BITCOIN THAT I'M SPENDINGAND SO WHAT THIS CREATES IS A CHAIN OFTRANSACTIONS OVER TIME,WHERETHISBITCOIN TRANSFERS OWNERSHIP AS IT'S TRANSFERRED

SO LET'S SEE RIGHTHERE,OWNER ZERO SIGNED THIS TRANSACTION GIVING BITCOIN TO OWNER ONE,AND PLACING OWNER ONE'S PUBLIC KEY THEREAT THIS POINT,IT'S UNDER OWNER ONE'S CONTROLOWNER ONE CAN TAKE THIS BITCOIN AND GIVE IT TO SOMEBODY ELSE BY BRINGING UP THEIR PRIVATE KEY,CREATING A TRANSACTION,THAT AUTHORIZED PAYMENT TO SOMEBODY ELSE,AND THE CHAIN CONTINUES AND THEN ANYBODY CAN GO ANDVERIFY, LIKE I SAID,THAT OWNER ONE REALLY DIDAUTHORIZE THIS,TRANSFER TO OWNER TWO,OWNER TWO REALLY DID AUTHORIZE THIS TO OWNER THREE ANDTHEN THE CHAIN CONTINUESSO THIS IS A CHAIN OF TRANSACTIONS

THAT'S NOT THE REASON THAT BLOCK CHAIN GETS ITSNAMEI'LL TALK ABOUT THAT IN A MINUTEBUT WHAT I WANT TO SHOW YOU VERY QUICKLY HERE IS AN EXAMPLE OF A REAL TRANSACTION AND THE BITCOIN BLOCK CHAINSO THIS IS ONE OF THE VERYPOPULAR BITCOIN EXPLORERTOOLS,IT'S ATBLOCKCHAIN COM

IF YOU GO TO DATA,YOU CAN SEE BLOCKS WHICH I'LL TALK ABOUT IN A MINUTE BUT I'M GOING TO CLICK ON A BLOCK HEREYOU CAN SEE THAT THIS CONSISTS OF TRANSACTIONSAND WHEN I CLICK ON ONE OF THESE TRANSACTIONS, LET ME PICK A BETTER ONE,WHEN I CLICK ON ONE OF THESE TRANSACTIONS, THERE'S THE HASH OF THETRANSACTION, YOUCAN SEE THE SUMMARY ABOUT THE TRANSACTIONHEADER AND THEN IT SHOWS US WHO THIS BITCOIN WENT TO SO THERE'S BITCOIN RIGHT HERE,THIS IS REFERENCING SOME PREVIOUS TRANSACTIONAND THEN IT'S GOING OUT TO THESE ACCOUNTS AND THESE ACCOUNTS THEN EACH GET SOME OF THAT TRANSACTION

SO ONE OF THE THINGS YOU CAN DO IS IF I HAVE GOT 10 BITCOIN IN THE PREVIOUS TRANSACTION,I HAVE TO SPEND THE WHOLE THING WHEN I REFERENCE THAT TRANSACTION THAT GAVE ME 10 BITCOIN AND YOU MIGHT THINK WELL,THAT'S JUST A WASTE IF I HAVE GOT TO SPEND IT ALL,HOW DO I KEEP IT,THE ANSWER TO KEEPING IT IS THAT IF I WANT TO GIVE ALICE FIVE OF THAT,I SIMPLY MAKE AN OUTPUT THAT GIVES ALICE FIVE AND ANOTHER OUTPUT THAT GIVES ME BACK FIVE TO MY ACCOUNT AND THAT WAY I PRESERVE MY FIVE BITCOIN AND THEN I CAN REFER TO THAT FIVE BITCOIN IN A SUBSEQUENT TRANSACTIONSO THAT'S A QUICK LOOK AT A TRANSACTIONNOW, ONE OF THE BIG CHALLENGES HERE,THE FUNDAMENTAL CHALLENGES IS HOW YOU GET EVERYBODY TO AGREE ABOUT THE ORDER OF TRANSACTIONSWHICH ISTHE FUNDAMENTAL PROPERTY OF A DATABASE IS THIS HAPPENED BEFORE THAT

AND THE REASON THAT YOU NEED THAT,ESPECIALLY INCRYPTOCURRENCY,IS THAT YOU DON'T WANT A SITUATION WHERE BOB HAS A MILLION BITCOIN AND HE WANTS TO BUY A VANGOGHAND BOB TAKES THAT MILLIONBITCOIN AND SENDS IT TO ALICE WHOOWNS THE VAN GOGH AND THEN TURNS AROUND AND CREATES ANOTHER TRANSACTION GIVING JOE A MILLION BITCOIN TO BUY A MONETAND ONE OF THEM IS GOING TO GET SCREWED IT OF THEIRPAINTING IF THE NETWORK,DEPENDING ON WHICH TRANSACTION THE NETWORK DECIDES HAPPENED BEFORE THE OTHER ONESO ORDERING IS KEYAND THE QUESTION IS HOW DOES THE NETWORK COME TO AN AGREEMENT ABOUT THE ORDER OF THESE TRANSACTIONS

THAT'S A PROCESS CALLEDCONSENSUSAND THE CHALLENGE HERE IS THAT IN THE BIT CRYPTOCURRENCY NETWORKS,NOBODY TRUSTS ANYBODY ELSE AT MY HOUSE WE CALL THAT THANKSGIVING YOU MIGHT CALL THAT THE SAME THING SO THE SOLUTION TO THIS IS TO ACCEPT PROPOSALS FOR TRANSACTION ORDER AND REWARD WINNINGPROPOSALS,SO THERE'S NODES ON THE NETWORK THAT ARE CALLED MINERS THAT COLLECT UP TRANSACTIONS, THEY MAKE A BLOCK OF THEM,THEY SEND THEM OUT TO THE NETWORK AND THEN THE NETWORK THEN KIND OF DECIDES WHICH BLOCKS ARE THE NEXT BLOCK ON TOP OF THE PREVIOUS BLOCK THAT THE NETWORK HAS AGREED ON

AND THE WAYTHATIT INCENTS MINERS TO COLLECT THE TRANSACTIONS THROUGH BLOCKS IS A PROCESS CALLED MINING WHERE THE MINER GETS A REWARD FOR PRODUCING A BLOCK THAT THE NETWORK ACCEPTS TO PREVENTMINERS FROM SPAMMING THE NETWORK WITHBOGUS BLOCKS,TO MAKE IT SO THAT IT COSTS SOMETHING FOR THEM TO SUBMIT A BLOCK,WHICH HELPS ENSURE THAT THEY'RETRUSTWORTHY,THEY'VE GOT SOME INVESTMENT IN THENETWORK, AND ALSO TO SLOW DOWN THERATE OF BLOCK SUBMISSIONS SO THAT CONSENSUS CAN BE ACHIEVED WITHOUT LOTS OF DIFFERENT FORKS AS YOU WILL SEE, THERE IS A PROCESS CALLED PROOF OF WORK USED IN BITCOIN,ETHEREUM AND SEVERAL OTHERCRYPTOCURRENCIES BUT WHAT MINERS DO,THEY COLLECT THEIR TRANSACTIONS INTO BLOCKS,THESE TRANSACTIONS THEMSELVES ARE PART OF TRANSACTION CHAINS,THEY PUT THEM IN THE BLOCK AND THE WAY THAT THEY ADD THEIR BLOCK TO THE EXISTING BLOCKSIS THAT THEY HAVE THE HASH OF THE PREVIOUS BLOCK IN THAT BLOCK THAT THEY ADDAND SO NOW THIS CREATES ANIMMUTABLE CHAIN OF BLOCKSIF I GO MESS WITH BLOCK4561 THAT MAY INVALIDATE THAT HASH THAT'S INBLOCK 4526SOMEBODY LOOKING ATBLOCK 4562 WILL LOOK AT 61 WILL HASH IT AND IF THE HASH COMES OUT DIFFERENT THEY KNOW SOMEBODY MESSEDWITH 61 SO THAT'S THE IMMUTABILITY OF BLOCK CHAIN THROUGH THISHASHINGTHAT HAPPENS, THIS HASH CHAIN THAT GETS BUILT AS THE MINERS ADD BLOCKS

SO WHAT'S THIS PROOF OF WORK LIKE?THE IDEA ISTHAT IN THAT BLOCKHEADER,I'VE GOT TO MAKE THAT BLOCK HEADER HASH TO A PARTICULARVALUEAND IF YOU THINK ABOUT HASHING,HASHING IS JUST A RANDOM FUNCTION,BASICALLY,AND I CAN TAKE MESSAGES AND I CAN HASH THEM AND EACH MESSAGE COMES OUT WITH SOMETHING COMPLETELY DIFFERENT THE GOAL HERE WITH PROOF OF WORK IS I'VE GOT TO SOLVE A PUZZLE,I'VE GOT TO BASICALLY COME OUT WITH A HASH THAT HAS A CERTAIN NUMBER OF LEADING ZEROS IN ITAND THE MORE LEADING ZEROS I'VE GOT MY HASH HAS TO PRODUCE,THEHARDER IT IS TO FIND THAT NUMBER BECAUSE IF YOU TAKE THE NUMBER SPACE LIKE IT'S JUST25NUMBERS — 256 NUMBERS,THE NUMBER HAS GOT TO BE LESS THAN 128,I'VE JUST CUT OUT HALF OF MY HASHES ARE GOING TO BE INVALID SO BASICALLY I'VE GOT A 50 CHANCE OF SOLVING THE PUZZLE YOU CAN THINK IFI SAYTHAT THE NUMBER HAS TO BE LESS THAN EIGHT,THEN MY RANDOM NUMBER GENERATOR HAS TO TRY SO HARD TO GET A NUMBER LESS THAN EIGHT

THAT'S PROOF OF WORKYOU CAN SEE EXAMPLE OF THIS,I'VE GOT TO FIND A HASH THAT STARTS WITH FOUR ZEROS OF HELLO WORLD,THE BLOCK HEADER, PLUS I HAVE A NUMBER THAT I CAN MESS WITH IN THE BLOCK HEADER CALLED A NONSETHAT'S WHAT MINERSMANIPULATE, THIS NONSE,THEY SET IT AT ZERO,HASH, DID IT SOLVE THE PUZZLE,NO SET IT AT ONE,HASH,NO,DID I SOLVE THE PUZZLE AND IT GOES ON AND ON UNTIL THEY COME UP WITH ONE THAT SOLVES THE PUZZLE AND HERE'S A BLOCK,THEY SUBMIT IT TO THE NETWORKTHE NETWORK CAN EASILY VERIFY THEY ACTUALLY SOLVED THE PUZZLE

AND IF THEY HAVE,THEN THEY ADD IT TO THE BLOCK CHAINNOW, THE PROBLEM IS THAT MULTIPLE MINERS MIGHT FIND BLOCKS AT APPROXIMATELY THE SAME TIME AND THAT'S WHAT HAPPENED HERE IS THAT WE HAD A BLOCK CHAIN AND THEN TWO MINERS SOLVED THE PUZZLE AT APPROXIMATELY THE SAME TIME SO THE NODES ON THE NETWORK START TO GET TWO BLOCKS,BOTH VALID SETS OF TRANSACTIONS ON TOP OF THE PREVIOUS BLOCKQUESTIONIS,WHICH ONE DO THEY MINE ON?THE ANSWER IS IF I GET TWO AT APPROXIMATELY THE SAME TIME,I'M GOING TO MINE ON THE FIRST ONE THAT I'VE GOTAND SO THE NETWORK STARTS TO MINE AND TRY TO CREATE OTHER BLOCKS ON TOP OF SOMEFORK,AND IF I GET A BLOCKNOW THAT HAS OTHER BLOCKS THAT ARE DEEPER THAN THE ONE I'VE BEEN MINING ON,MEANING SOMEBODYHASGOT — THE NETWORK HAS GONE AHEAD AND MINED TWO BLOCKS WHILE I'M STILLMINING THE NEXT ONE DOWN HERE,THEN THE RULE IS I'VE GOT TO ACCEPT THE LONGEST ONE AND I'VE GOT TO DISCARD WHAT I'VE BEEN DOINGSO IN THIS CASE THEMINER,SOMEBODY'S MINING ON THAT LEFT FORK,BECAUSE THEY GOT THAT BLOCK FIRST,AND THEN THE NETWORK,THEY GET FROMTHENETWORK 234415 FROM THE OTHER FORK,THEY GO OH,CRAP,I JUST WASTED WORK ON THIS FORK THAT THE NETWORK IS GOING TO REJECT AND THEN THEY TOSS THAT BLOCK AWAY AND THEN THEY START WORKING ON THE LONGEST CHAIN

AND THAT'S HOW THE NETWORK CONVERGES OVER TIME SO HOW LONG SHOULD YOU WAIT BEFORE YOU CONSIDER THE FORKS UNLIKELY? BECAUSE THE FORK CAN HAPPEN IN THAT CASEOF MONET AND VAN GOGH,IF YOU ARE LOOKING AT THE WRONG FORK AND THAT FORK DIES,YOU MIGHT JUST BE OUT OF YOUR PAINTINGTHE RULE OF THUMB WITH BITCOIN IS WAIT FOR ANYTHING SIGNIFICANT ABOUT 60 MINUTESTHE MINING TIME,THE DIFFICULTY OF THE PUZZLES AUTOMATICALLY SET BY THE BITCOIN ALGORITHM TO TARGET A BLOCK BEING GENERATED ABOUT EVERY TEN MINUTES,AND SOAFTER SIX,THAT'S A HUGE AMOUNT OF MINING POWER THAT IS REQUIRED TOGOUNDO SIX BLOCKS LIKE THAT'S AN HOUROF MASSIVE COMPUTATION IF SOMEBODY WANTS TO SCREW WITH THE NETWORK AND UNDO THAT VAN GOGH TRANSACTION THAT'S SIX BLOCKS DEEP, THEY'VE GOT TOOVERWHELM THENETWORK WITH MINING POWER,SOMETHING VERY UNLIKELY

LIKE I MENTIONED,THE REWARD FOR MINERS IS SOMETHING CALLED COIN BASESO AUTOMATICALLY THE BITCOIN NETWORK GIVES MINERSA REWARD FOR GETTING A VALID TRANSACTION AND THIS IS THE FIRST TRANSACTION IN A BLOCK IS THIS COIN BASE THAT GIVES THEM SOME AMOUNT OF BITCOIN AND REWARD FOR THEM SPENDING THIS ENERGY IT STARTED OUTAT 50 AND IT HALVES OVER 210,000 BLOCKSWE'RE DOWNTO 125 BITCOIN THAT A MINER GETS,IT'S ROUGHLY EVERY THREE TO FOUR YEARS

YOU CAN SEE THE COIN BASE IS GOING TO GO TO ZERO,SOMETIME PAST 2030 AND SO MINERS ALSO ARE INCENTED TO MINE BLOCKS BECAUSE THEY GET TRANSACTION FEESNOW,WHAT ARE TRANSACTION FEES?THERE'S NO HARDCODED TRANSACTION FEES IN BITCOINTHEY'RE SIMPLY TRANSACTIONS THAT DON'TSPEND ALL OF THE BITCOIN THAT IS IN THEIR INPUTSO IF I'M SPENDING — IF I'M GIVINGALICE TEN BITCOIN,IMIGHT REFERENCE BITCOIN TRANSACTION,EARLIER ONE THAT GIVES ME 12,IF I GIVE ALICE 10,AND I DON'T SAY WHO IS GETTING THE REMAINING TWO,IT AUTOMATICALLY GOES TO THE MINER

AND THE REASON I MIGHT WANT TO DO THAT IS THAT MINERS,THEY LIKE MONEY,AND SO THEY WILL TAKE MY TRANSACTION ALONG WITH THE OTHER ONES AND GO OH,LOOK,IF I HAD MINED THIS ONE, I GET TWO BITCOINTHESE OTHERS I GET LESS THAN THAT SO LET ME GO AND PUT THIS IN THE NEXT BLOCK I'M GOING TO MINE AND THERE'S AFIXED NUMBER OF BLOCKS — BLOCKS HAVE A FIXED MAXIMUMSIZETHEY CANSUPPORT 1,000,2,000 TRANSACTIONSIF I WANT TO GET MY TRANSACTION IN SOONER THAN LATER,I MIGHT INCREASE THE FEE THAT I HAVE IN THAT TRANSACTION SO LET ME TAKE A QUICK LOOK AT BLOCKS

YOU KIND OF SAW A PREVIEW OF THIS HERETHESE ARE THE LATEST BLOCKS IN BITCOINIF I CLICK ON THIS,YOU CAN SEE THE BLOCK,YOU CAN SEE THE NUMBER OF TRANSACTIONS INTHIS ONE 635YOU CAN SEE THE OUTPUT TOTALS OF THE TRANSACTIONS,THE ESTIMATED TRANSACTION VOLUME,THE TRANSACTION FEE

SO THE MINERGOT 05 BITCOIN ON TOP OF THE 125 SO THEY GOT ROUGHLY 13 BITCOIN FOR MINING THIS BLOCK THEN YOU CAN SEE THIS IS A MINING POOLWE'LL COME BACK TO THAT IN A MINUTE

YOU CAN SEE THEDIFFICULTY THAT IS THE NUMBER OF LEADING ZEROS THEY HAVE TO SOLVE IN THEIRCRYPTOGRAPHIC PUZZLE AND HERE'S THE NONSETHEY TOOK THE HASH OF ALL THE TRANSACTIONS IN THE BLOCK,THEY MESSED WITH THIS VALUE,THEY CAME UP WITH THIS TO SOLVE THAT PUZZLE TO SATISFY THAT DIFFICULTYAND THERE'S THE BLOCK REPORT AND HERE'S ALLTHE TRANSACTIONS IN ITTHIS FIRST ONE IS THISCOIN-BASED TRANSACTION

PLUS THE MINING FEES SO ROUGHLY 14SO THAT'S A QUICK LOOK AT BLOCKSALLRIGHTSO MINING JUST A QUICK STOP ON MININGINORMALLY DON'T SEE PHOTOS OF MY BASEMENT BUT I THOUGHT YOU WOULD APPRECIATE THIS ONE

[ Laughter ]NO,I'M JUST KIDDING,OBVIOUSLYTHERE'S NO WAY I WOULD ALLOW THAT RAT'S NEST OF CABLES WITHOUT TIES AND PROPER LABELING IN MY BASEMENTTHIS IS MY BASEMENT [ Laughter ]I'M JUST KIDDINGTHESE ARE MINING OPERATIONS

MINING OPERATIONS THAT HAPPEN TO BE IN CHINAAND YOU CANSEE THE KIND OF MASS OF ELECTRICITY THAT'S BEING THROWN AT THAT PROBLEM OF TRYING TO MINE BLOCKSPEOPLE ARE SAYING THIS IS A HUGE PROBLEM FOR THE ENVIRONMENTJUST HOW BIG OF A PROBLEM FOR THEENVIRONMENT? HERE'S A SITE YOU CAN GO TO THAT TRACKS HOW MUCH ENERGY ESTIMATED IS BEING CONSUMED BY MINERS TRYING TO MINE BLOCKS AND THATVERTICAL AXIS IS TERAWATTS PER YEARYOU CAN SEE WE'REABOUT 73 TERAWATTS PER YEAR RIGHT NOW

I'LL PUT THAT IN PERSPECTIVEANYBODY HERE FROMAUSTRIA? SO THIS 73 TERAWATTS IS ABOUT THE SAME AMOUNT OF ENERGY THAT AUSTRIA CONSUMES EVERY YEARAND SO IN THIS NUMBER,IT KEEPS GROWINGTHERE'S A LOT OF CONTROVERSY,I'M NOT GOING TO GET INTOTHE DEFENSES PEOPLE HAVE OF THIS AMOUNT OF ENERGY SPENT ON BITCOIN AND OTHERCRYPTOCURRENCIES BUT THAT'S HOW MUCH ENERGY IT'S USINGNOW THERE'S THIS PROBLEM CALLED 51 ATTACK

I TALKED BEFORE ABOUT HAVING TO WAIT A CERTAIN AMOUNT OF TIME BEFORE YOU TRUST A BLOCK AND THAT IS IF SOMEBODY HAS SO MUCH MINING POWER,MORETHAN 50 OF THE NETWORK'S MINING POWER,THEY CANTHEORETICALLY MINE OFF THEIR OWN CHAIN AND THEY WILL CREATE LONGER CHAINS EVENTUALLY, SOONER OR LATER,JUST THROUGH STATISTICS, THAN THE REST OF THE NETWORKAND THAT GIVES THEM THE POWER TO GO UNDO THINGS AND DO DOUBLESPENDS AND THERE HAVE ACTUALLY BEEN CRYPTOCURRENCIES SMALLER THAN BITCOIN THAT HAVE BEEN HIT BY DOUBLE SPENDING ATTACKS BECAUSE THE SMALLER THE NETWORK,THE EASIER IT IS FOR SOMEBODY TO COME ALONG, SPEND A BUNCHOF MONEY TO ACCUMULATE POWER,MINING POWER AND OVERWHELM THE REST OF THE NETWORK AND DO A DOUBLE SPEND ATTACK ON ITSO THIS IS A REAL THREAT

AND WHEN IT COMES TO WHERE MINING ISCONCENTRATED,YOU CAN GO TO ANY BITCOIN STATS SITE AND SEE THIS BREAKDOWN OFMINERS MINING POOLSARE FORMEDWHERE PEOPLE SKIV MONEY INTO THE POOL,THE POOL BUYS HARDWARE AND IF A BLOCK IS FOUND,THEN REWARDS ARE SPENT OUT RELATIVE TO THE AMOUNT OF MONEY YOU PUT INTOTHE POOL SO IF YOU ARE A 1 OWNER OF A POOL,YOU GET 1OF THAT 13 BITCOIN THAT WAS MINED IF YOUR POOL MINED THAT BITCOINTHIS IS A WAY FOR PEOPLE TO AGGREGATE THEIR MONEY,GET ECONOMIES OF SCALE IN MINING POWERSO YOU CAN SEE MOST OF THE NETWORK NOW ISDOMINATED BY THESE MASSIVE MINING POOLSWHERE ARE THESE MINING POOLS LOCATED?YEAH

THERE'S THAT OTHER GREEN ONECZECH REPUBLICTHIS ISWHERE CHINA OBVIOUSLY HAS MORE THAN 50 OF THE HASH POWER IN THE WORLDIRONICALLY,THE CHINESE REGULATORS HAVE SAID CRYPTOCURRENCY IS ILLEGAL IN CHINAAND ALL YOU MINERS HAVE TO GET OUT

SO JUST CHECKED RECENTLY,AND BASICALLY THEY'RE ALL LIKE OKAY,YEAH,WHATEVERAND I THINK, I DON'T KNOW WHAT THEY'LL DO,MAYBE TAKE THE LEGALFRONT OFFSHORE AND LEAVE THE MINING HAPPENING IN CHINA, I DON'T KNOW WHAT KIND OFWORKAROUNDS THEY MIGHT FIND OR JUST GET A GIANT TANKER SHIP,SHIP THEIR MININGRIG OFF TO SOMEPLACE ELSE BUT THIS IS THE KIND OF INTERESTING THING THAT PEOPLE ARE WATCHING RIGHT NOW GIVEN ALL THAT CONCENTRATED MININGPOWER SO THAT'S A LOOK ATBITCOIN'S CRYPTOCURRENCY THERE'SABOUT 10,000 FULL BITCOIN NODES,MEANING NODES THAT PULL DOWN THE WHOLE DATABASE WHICH IS NOW HUNDREDS OF GIGABYTES IN SIZE,AND KEEP TRACK OF THE TRANSACTIONSAN EXAMPLE OF THAT WEBSITE IS ONE OF THOSE FULLNODES

THEY OBVIOUSLY ARE KEEPING TRACK OF ALL THE TRANSACTIONS THAT COME SO THAT THEY CAN SHOW YOU THOSE COOL STATSANYONE,YOU CAN START YOUR OWNFULL BITCOIN NODE JUST LAUNCH THE BITCOIN SOFTWARE, IT'S OPEN SOURCE,THERE'S DIFFERENT VERSIONS OF IT,JOIN IT TO THE NETWORK IT WILL PULL DOWN OVER A FEW DAYS, THE ENTIREBITCOIN BLOCK CHAIN,THEN YOU CAN START MESSING WITH THOSE STATISTICS YOURSELFYOU CAN EVEN GO CREATE YOUR OWN MINER AS WELL

AND THAT'S WHAT A LOT OF PEOPLE DO WITH THEIR HOME BASEMENTSI SEE PEOPLE GET WATER COOLED RIGS AND SEE IF THEY CAN MINE SOME BITCOIN WHAT THEY FAIL TO RECOGNIZE IS THEY'RE PAYING THE ELECTRICITY BILL FOR THAT AS WELL AS THE RIG BUT THAT'S THE WAY IT WORKSAND ANYBODY,YOU DON'T HAVE TO HAVE A FULL NODE OR ANYTHING TO GET BITCOINTHERE'SA BUNCH OF COIN EXCHANGES YOU CAN TAKE U

SMONEY AND BUY BITCOIN LIKE I DID AND THEN AT THAT POINT YOU CAN USE THE EXCHANGE,GO THERE AND DO BITCOIN TRANSACTIONS THROUGH THEMAND GET A WALLET YOU CANCARRY AROUND ONYOUR iPHONETHERE'S A BUNCH OF OTHER CRYPTOCRYPTOCURRENCIES ANYONE INVESTED IN THESE?LIGHT COIN XRP IS A CONTROVERSIAL ONE

IT'S NOT REALLY DECENTRALIZEDIT'S MANAGED BY THIS COMPANY CALLEDRIPPLE WHICH IS REALLY INTERESTED IN A CROSS-BORDER PAYMENT SYSTEM,THEY JUST HAPPEN TO HAVE A CRYPTOCURRENCY THEY USE TO FUEL THAT,BASICALLY PARTIES HAVE TO PAY XRP TOINITIATE THESE TRANSACT CROSS-BORDER PAYMENTS BUT THEY ARE IN FULL CONTROL OF THE ISSUANCE OF THIS CURRENCY JUST LIKE A FIAT CURRENCY WHERE THE GOVERNMENT IS AT SOME POINT BACK WHEN IT WAS PEAKED, IT'S ALSO TANKED LIKE EVERYTHING ELSE,IT PUT THEM AMONG THE WORLD'S RICHEST PEOPLETHE AMOUNT OFXRP THEYISSUED TO THEMSELVES WASABOUT $60 BILLION WORTH AT SOME POINT SO THAT ONE HAS SOME CONTROVERSY ASSOCIATED WITH ITTHEN THERE'SETHEREUM

HOW MANY PEOPLE OWN ETHER?A FEW OFYOUTHERE'S BEEN A BUNCH OF OTHERS THERE'S BEEN THOUSANDS OF WHAT ARE CALLED INITIAL COIN OFFERINGS WHERE COMPANIES COMEAND INSTEAD OFDOING VC FUNDRAISING,THEY ISSUE A COIN THEY DO AN ICL AND THEN PEOPLE CAN BUY INTO THE COIN,BASICALLY YOU'RE KIND OF BUYING INTO THE COMPANY AND THAT COIN MAYBE ORMAY NOT BE RELATED AT ALL TO WHAT THE COMPANY DOES BUT YOU CAN SEE THERE'S JUST BEEN AN INCREDIBLE RUN ON SCAMS OFICOs,PEOPLE PUMPING AND DUMPING THESEANYBODY BEEN CAUGHT BY ONE OF THESE?YOU'RE NOT GOING TO ADMIT IT

OH,ONE PERSONTHANK YOU FOR BEING HONEST,SIRHOW MANY PEOPLE WATCHED SILICON VALLEY?SO IF YOU HAVEN'T WATCHED IT,CAN WE ROLL THISMAYBE I HAVE TO DO IT>> I'M EMILY CHANG

THIS IS BLOOMBERG TECHNOLOGYDECENTRALIZED INTERNETCOMPANY PIED PIPER IS THE MOST RECENT VALLEY START-UP TO ICO JOINING US TO DISCUSS THEARCHITECT, BERTRAMGILLFOILWELCOME,BERTRAM >> IT'SGILLFOIL

>> OKAY TELL ME ABOUT YOUR PAST EXPERIENCE WITH CRYPTOCURRENCY>> I'VE BEEN MINING COIN SINCE 2009IT WAS A DIFFERENT SCENE THEN UNDERGROUNDONLY TRUE BELIEVERS>> I IMAGINE WHEN IT CAME TO LAUNCHED PIED PIPER COIN THAT YOU WERE THE TEAM'S HEAD CHEERLEADER

LET ME WEWE PHRASE THATWHAT ATTRACTED YOU PERSONALLY TO AN ICO?>> WHAT ATTRACTED ME WAS THEPASSAGEICO OFFERS ACROSS THE RIVER STICKS OF VENTURE CAPITALWHAT ATTRACTED ME WAS AN INFORMEDDISDAIN FOR TRADITIONAL FIATCURRENCYIT'S PAPER STAINED WITH THE GREASY FINGERPRINTS OF YOUR BANKS AND YOUR MINTSWHAT ATTRACTED ME WAS CRYPTOCURRENCY ISFUNDAMENTAL ANONYMITY THAT SHIELDS PRIVATE TRANSACTIONS FROM THE PEERING GREEN EYES OF THE ALL-KNOWING GOVERNMENTAL OVERLORDS

DOES THAT ANSWER YOUR QUESTION?>> YOU HAVE A RATHER BLEAK VIEW OF FINANCIAL INSTITUTIONS THAT HAVE WORKED FOR CENTURIES>> WORKED,HOW SO?>> THANK YOU,BERTRAM>> IT'S GILLFOIL>> STILL TO COME,THEAFTERMATH OF HOOLEY'S MANUFACTURING[ Laughter andApplause ] >> SO THAT KIND OF SUMMARIZES THE PHILOSOPHY OF SOME PEOPLE THAT ARE INTO CRYPTOCURRENCY

NOW I'M GOING TO SWITCH TOTALKING ABOUT SOMETHING THAT'S BASED OFF OF BLOCK CHAIN BUT NOTCRYPTOCURRENCY IT'S SMART CONTRACTSIT'S REALLY THE FOUNDATION FOR THE ENTERPRISE SCENARIOS THAT I'LL TALK ABOUT IN A LITTLE BITBASICALLY SMART CONTRACT, AT SOME POINT PEOPLE STARTED TO REALIZE THAT USING THE SIMPLE LANGUAGE THAT BITCOIN SCRIPT HAS IN IT THAT THEY COULD START TO PUT BUSINESS RULES IN IT LIKE PAY THIS ONLY TO THIS PERSON IF THIS OTHER PERSON HAS ALSO SIGNED THE TRANSACTION ANDPEOPLE STARTED ACTUALLY TO CREATE COMPLICATED APPS ON TOP OF IT BUT IT WAS VERY AWKWARD BECAUSE THE SCRIPT WAS NOT REALLY DESIGNED FOR THATSO THERE WERE SEVERAL OTHER BLOCK CHAINS THAT CAME OUT THAT HAD THIS FUNDAMENTAL CONCEPT OF AN APP THAT COULD BE RUN ON THE BLOCK CHAIN

WHAT DOES IT MEAN TO HAVE AN APP RUN ON THE BLOCK CHAIN? THE CODE AND THE STATE OF THE APP ARE STORED AS TRANSACTIONS IN THE BLOCK CHAINTHEY CAN HOLD THEMSELVES, THEY'VE GOT THEIR OWN ACCOUNTS SO THEY CAN HOLD MONEY AND THEY CAN USE THAT MONEY TO EXECUTETRANSACTIONS WITH OTHER ACCOUNTS OR OTHER BLOCK CHAINS OR SEND MONEY TOPEOPLETHEY'RE IMMUTABLE JUST LIKETRANSACTIONSFOR THECRYPTOCURRENCY TRANSACTIONS I TALKED ABOUT BECAUSE THEY'RE SITTING AS TRANSACTIONS IN THE BLOCK CHAIN FUNCTION CALLS TO THE SMART CONTRACT ARE ALSO ENCODED AS TRANSACTIONS WITH THE INPUT PARAMETERS AND THE FUNCTION NAME IN THE TRANSACTION THEY'RE PUBLICLY READABLE SO ANYBODY CAN GO LOOK AT ONE OF THESE THINGS

THEY'RE BITE CODE BECAUSE ALL OF THESE RUN WITH BASICALLY VIRTUAL MACHINES THAT IMPLEMENT BITE CODE BUT YOU CAN REVERSE BITE CODE INTO SOURCE CODE AND REVERSE WHAT THE SMART CONTRACTS AREDOINGTHEY'RE DETERMINISTIC BECAUSE ALL THE MINERS EXECUTE THESMART CONTRACT FUNCTION CALLS TO MAKE SURE THAT THEY'RE LEGAL BEFORE THEY SAY YEAH,THIS TRANSACTION CAN GO INTO THE BLOCK CHAINBECAUSE SOME OF THOSE FUNCTION CALLS CAN REFER TO STATE THAT WAS GENERATED BY PREVIOUS TRANSACTIONS LIKED,EVERY CALL IS EXECUTED AND TO PREVENT PEOPLEFROMDOS'ing THE NETWORK,WHAT YOU HAVE GOT TO DO ISESTIMATE ABOUT HOW MUCH GAS AND GAS IS LIKE THE UNITS OF COMPUTATION A SMART CONTRACT WILL CONSUME,IT'S HOW THE MINERS MEASURE HOW MUCH COMPUTATION A SMART CONTRACT EXECUTION TAKESYOU GOT TO ESTIMATE ABOUT HOW MUCH THAT IS

TRANSLATE THE GAS PRICE TO ETHER IN THE CASE OF ETHEREUM AND WHENYOU SEND A FUNCTION CALL TRANSACTION IN,YOU GIVE A CERTAIN AMOUNTOF ETHER TO THAT AND THEN THE SMART CONTRACTS EXECUTE AND THE MINERS REBATE YOU THE AMOUNT OF ETHER THAT WASN'T CONSUMED BY THE EXECUTION OF YOUR SMART CONTRACT FUNCTION CALLBUT THAT'S WHERE GAS COMES INTHAT'S WHY ETHER IS A KEY PART OF ITTHE MOST FAMOUS SMART CONTRACT IN THE WORLD IS SOMETHING CALLED CRYPTOKITTIESANYBODY FAMILIAR WITH THISONE?A FEW PEOPLE

ANYONE OWN A CRYPTO KITTY?YOU CAN GO TO CRYPTYKITTIESCOMIT'S BUILT ON TOP OF THEETHEREUMTHIS IS A SMART CONTRACT THAT TAKES KITTENS THAT ARE DEFINED BY A SET OFATTRIBUTES LIKE GENES,AND THE SMART CONTRACT MATES THEM TOGETHER,TWO KITTEN GENES, SO THAT'S A GENE AND THEN PRODUCES ANOTHER KITTEN SO THIS IS KIND OF THERANDOM GENERATION OFKITTENS AND THEN BASEDOFF OF THE GENES,YOU CAN LOOK AT A PICTURE OF THE KITTEN ANDPEOPLE REALLY WANT PRETTYKITTENS WITH GOOD GENES ENOUGH THAT THERE'S ABOUTOVER 200,000 PEOPLE HAVE BOUGHT THESE THINGS

SOMEBODY HAS EVENSPENT $100,000 ON WHAT'S CONSIDERED ONE OF THE DESIGNER KITTENS THAT HAS REALLY GREAT GENESSO THIS IS SOMETHING THAT REALLYGOT OUT OF CONTROLIT'S UNDER MORE CONTROL NOW BUT THIS STILL EXISTS,YOU CAN STILL GO BUY CRYPTOKITTIESTHAT'S MORE TRYING TO FOCUS ON CHARITY GIVING WHERE THEY SELLCRYPTOKITTIES AT AUCTIONS TO RAISE MONEYTHAT IS ONE OF THE MOST FAMOUS ONES

YOU CAN ACTUALLY GO TO THEETHEREUM BLOCK CHAIN AND SEE THECRYPTOATEY CONTRACT AND SEE ALLTHE TRANSACTIONS BECAUSE IT'S ALL OUT IN THE OPENSMART CONTRACTS BUSINESS LOGIC YOU PUT IN THE BLOCK CHAIN,A FUNCTIONWHERE ARE THE PLACES THAT WE'RE SEEING INTEREST IN THIS? BASICALLY EVERYWHERE AND THIS IS JUST SOME OF THEEXAMPLES THAT WE'VE SEEN,TRADE FINANCE,OF COURSE,USING BLOCK CHAIN WITH SMART CONTRACTS TO INITIATE TO DO CROSS-BORDER PAYMENTS AND SETTLEMENT ACROSS WITHOUT HAVING TO WORRY ABOUT INTERMEDIATARIES WHERE THE LOGIC OF DEFAULTS AND EVERYTHING ELSE IS ENCODED RIGHT INSIDE THE CODEDIGITAL MUSIC RIGHTS SO TRACKING WHO GETS PAID WHAT

DIAMOND TRACING,SO TRACK SOMETHING CALLED TRACK AND TRACE WHERE YOU SAY THIS IS A DIAMONDINITIATEDIN A MINE THAT'S FRIENDLY TO LABOR AND THEN THAT'S HOW I KNOW THAT I BOUGHT SOMETHING THAT IS NOT A BLOOD DIAMONDREAL ESTATESO YOU CAN IMAGINE A SMART CONTRACT THAT SAYS I'VE GOT A STATE, THE SMART CONTRACT HAS SOME STATE WHICH ISHOUSE IS READY TO BE SOLD AND TO GET TO THAT STATE,YOU HAVE GOT TO HAVE THE INSPECTOR FIRE A TRANSACTION,CALL A FUNCTION,FIRE A TRANSACTION INTO THE SMART CONTRACT THAT SAYS INSPECTOR SIGNS OFFANOTHER ONE THAT SAYS ESCROW HAS BEEN PAID

AND SO ONAND THEN ONCE THOSE SETS OF CONDITIONS HAVE BEEN MET,THE SMART CONTRACT SAYSOKAY,MY STATE IS NOW HOUSE IS READY TO BE SOLD AND NOW YOU HAVE JUST GOTTEN RID OF ALL THEINTERMEDIATARIES AND PAPERWORK REQUIRED TO KEEP TRACK OF THESE THINGS,IT'S VISIBLE FOR EVERYBODY TO SEETHAT'S AN EXAMPLE THERESUPPLY CHAIN MANAGEMENT,KEEPING TRACK OF WHO HAS WHAT ACROSS A DISTRIBUTED NETWORK OF PARTIES THAT ARE MOVING SOMETHING ALONG,I'LL TALK MORE ABOUT THAT IN A LITTLE BIT ANDTHE LIST GOES ON AND ONNOT JUST ETHEREUM IS AS A SMART CONTRACT-BASED LEDGER

THERE'S HYPERLEDGER FABRIC,ETHEREUM I MENTIONED QUORUM AND RIPPLE ITSELF THESE ARE ALL SMART CONTRACT BLOCK CHAINSTHEIR FUNDAMENTAL PURPOSE ISN'TCRYPTOCURRENCIES,IT IS BUSINESS PROPERTIES ON TOP OFBLOCK CHAINS LET'S TAKE A QUICK LOOK AT ETHEREUM SMART CONTRACTS

I'M GOING TOSWITCH TO VIZIO CODE HERE AND SHOW YOU A SMART CONTRACTTHIS IS IN THEETHEREUM LANGUAGE SOLIDITY SO THESE FILES HAVE SOL AND THERE'S ACTUALLY A VISUAL STUDIO CODE PLUG-IN THAT UNDERSTANDSSOLIDITY SYNTAX AND THAT'S WHAT I'M LOOKING AT THISREFRIGERATION TRANSPORTATION SMART CONTRACT WHICH IS GOING TO TRACK AN ITEM AND MAKE SURE ITDOESN'T FALL OUT OF HEALTH SAFETY GUIDELINES,HUMIDITY ANDTEMPERATURE CALL THIS CONSTRUCTOR AND SAY THIS PARTICULARITEM,REFRIGERATOR TRANSPORT ITEM,ITS MAXIMUM TEMPERATURE IS THIS,ITS MINIMUM TEMPERATURE IS THAT AND SOONAND THEN SMART TRANSACTIONS CAN BE FIRED INTO IT THAT REPORTED THE CURRENT HUMIDITY AND TEMPERATURE ALONG WITH THE TIME STAMP AND THEN THAT'S RECORDED IN THE SMART CONTRACT YOU CAN ALSO QUERY THE STATE AND SAYOKAY,WHEN'S THE LASTTELL MEMORY TRY THIS THING GOT,WHAT WAS THE TEMPERATURE

AND THEN YOU CAN ALSO TRANSFERRESPONSIBILITYTHIS ONE ONE SHIPPER GIVING IT TO ANOTHER ONE,THEY CAN ASSIGN NOW THIS ITEM TO THE OTHER SHIPPER,THAT'SRECORDED AS A TRANSACTIONANYBODY CAN LOOK IN THE BLOCK CHAIN AND SEE IT AND NOW THAT SHIPPER,THE ONE IT'S BEEN GIVEN TOCAN CALL THAT INJUST FUNCTION ONLY THE OWNERCAN CALL THAT INJUST FUNCTIONWHAT I'M GOING TO DO IS DEPLOY THIS TO THE ETHEREUM TEST NETWORK

TO DO THATI'M GOING TO UNLOCK SOME ETHEREUMETHEREUM TEST NETWORK THAT IS BASICALLY FREE TO USE,THIS IS WHERE YOU CAN EXPERIMENTIT'S PUBLICJUST LIKE THE MAIN ETHEREUM NETWORK OR MAIN NETAND IT'S GOT ITS OWNCONCEPT OF ETHER

WHOOPSPERSONAL UNLOCKI'M USEDTO TYPING FOR LINUX, BY THE WAYANDSO WHAT I CAN DO IS NOW COMPILE

SO WHAT IT'S DOING IS COMPILING THAT SMART CONTRACTS,CREATING A TRANSACTION THAT INCLUDES THAT SMART CONTRACT BITE CODE IN IT AND SUBMITTING IT TO THEETHEREUM TEST NETWORK AND WHAT WE'RE GOING TO GET BACK IS THE ADDRESS OF THE SMART CONTRACT NETWORK WHICH IS THE HASH OF THE TRANSACTION THAT SAYS INITIAL CREATION AND NOW WHEN I WANT TO FIRE TRANSACTIONS OR CALL FUNCTIONS INTO THAT SMART CONTRACT,ISIMPLY REFERENCE THAT SMART CONTRACT ADDRESS, WITH THE FUNCTION CALL WHICH IS REPRESENTED AGAIN WITH SOME BITE CODE THAT SAYS THIS IS THE FUNCTION, THESE ARETHE INPUTS SO WHAT I'M GOING TO DO AFTER THIS IS DONE IS RUN A LITTLE SCRIPT HERE CALLED TX NEGATIVE,WHICH ISGOING TO HERE SET THE THING OUT OF COMPLIANCE BY SENDING AND CALLINGTHIS INGEST TELEMETRY FUNCTION WE SAW WITH A VALUE THAT EXCEEDS THE INITIAL VALUE I HAD SET FOR THISTHIS IS DEPLOYING WE'RE GOING TO GET THE SMART CONTRACT ADDRESS HERE IN A SECONDYOU WILL SEETHAT IN THE ROBSEN NETWORKTAKING A LITTLE BIT LONGER THAN NORMAL

GIVE IT ANOTHER SECOND AND THEN WHAT I'LL DO IS COME BACK TO IT AND MOVE ONOKAYLET ME COME BACK TO THAT IN A SECONDTHAT WILL SURELY FINISH IN ANOTHER — THERE ITGOES HERE HERE'S THE SMART CONTRACT ADDRESS RIGHT HERE

IF IGO TOTHE — WHOOPS ROBSTON NETWORKEXPLORER,WHICHLETS US VIEWOKAYI'M NOT SUREOH,THERE IT IS

IT JUST SHOWED UPLET ME SEE HERE IT ISTHIS IS THE TRANSACTION THAT HAS PUT OUR SMART CONTRACT, YOU CAN SEE SMART CONTRACT CREATION RIGHT HEREAND YOU CAN SEE THE TRANSACTION HASH

IF I CLICK ON THAT,THIS IS THE SMART CONTRACT BITE CODE THAT WE JUST SUBMITTED TO THE ROBSTON NETWORKNOW THAT WIFE GOT THAT THERE, WE CAN THEN EXECUTEFUNCTIONS AGAINST IT LIKEI'M GOING TO DO LIKE IMENTIONED THIS CHANGING THE STATE OF THAT CONTRACTI'M GOING TO USE A DIFFERENT ROBSTON ACCOUNT TO DOTHATACCOUNTS UP KEY DOESN'T WORK WELL ON THIS THING

YOU CAN SEE THAT IT DOESN'T REALLY WORK AT ALLALLRIGHTAND NOW WHAT I CAN DO ISGO BACK TO CODE AND I CAN SAY TRUFFLE,WHICH IS THE DEV ENVIRONMENT,TX NEGATIVEDOTJS NETWORK ROBSTONAND THEN WHAT'S GOING TO COME BACK HERE AFTER A SECOND IS THAT'S FIRING THAT,CALLING THAT INGEST NETWORK THING AND THIS IS ALSO GOING TO CALL A FUNCTION THAT CHECKS THE COMPLIANCE STATUS AND YOU'RE GOING TO SEE THAT THIS IS GOING TO COME BACK AS THIS THING IS OUT OF COMPLIANCE

NOW THAT I'VE FIRED A TRANSACTION IN THERE THAT SAYSTHIS REFRIDGATED ITEM HASEXCEEDED THE HUMIDITY BECAUSE I SENT IN A 60,IT SMACKS A SET TO 50,SO NOW YOU CAN SEE COMPLIANCE STATUS IS FALSE SO THAT'S AN EXAMPLE OF A REALWORLD KIND OF CONTRACT BEING EXECUTED ON A REALETHEREUM BLOCK CHAINSO SPEAKING OF ETHEREUM BLOCK CHAINS,I'VE BEEN SHOWING YOU PUBLIC ETHEREUMTHEY'RE IN PUBLIC BITCOIN BUT WHAT'S COMING NOWFOR ENTERPRISES ARE PRIVATE BLOCK CHAINSONES WHERE THEY'RE NOT PUBLIC,ONLY CERTAIN PARTIES CAN PARTICIPATE IN THEM ANDTHISIS TYPICAL ARCHITECTURE THAT WE SEEBLOCK CHAINS AT THE VERY BOTTOM OR THE LEDGER,YOU HAVE IDENTITY AND KEY MANAGEMENT

YOU HAVE GOT THESE USERS THAT DON'T WANT TO MANAGE THOSE RAW KEYS TO SIGN THINGSTHEY ACTUALLY WANT TO PUT THEM IN KEY MANAGEMENT,HIERARCHICAL KEY SERVER, MANAGEMENT SERVERS LIKE KEY VAULT AND THEY WANT TO USE REAL IDENTITIES TO UNLOCK THOSEKEYS LIKE ONES THROUGH PROVISION DIRECTORY,THEY'VE GOT A CONSORTIUM GOVERNANCE ON TOP WHICH IS WHO CAN BE PART OF THIS NETWORK WHAT RULES DO THEY HAVE TO ABIDE BY,WHAT IS THE SOFTWARE THAT THEY NEED TO RUN TO BE PART OF THISAND THEN YOU HAVE APPS THAT RUN ONTOP OF THIS THAT ALLOW THEM TO DO THE SMART CONTRACTY THINGSONE OF THE BENEFITS YOU GET OUT OF THE BEING IN THE CONSORTIUMS IS YOU DON'T NEED TO DO PROOF OF WORK

IF YOU TAKE A LOOK ATCONSENSUSLING A CONSENSUS –ALGORITHMSTHEETHEREUM NETWORK THETRANSACTION LATENCY IS –NOBODY TRUSTS ANYBODYIN CONFIDENTIAL OR PRIVATE NETWORK YOU CAN USEBYZANTINE TOLERANCE WHICH OPERATE AT MUCH SMALLER SCALE,THEY CAN GIVE YOU BETTER PERFORMANCE EVEN WHEN PEOPLE DON'T TRUST EACH OTHERPROOF OF STAKE WHICH NOW THERE'SATTEMPTS TO INTRODUCE THAT INTO PUBLIC NETWORKS BUT THAT CAN WORK IN PRIVATE NETWORKS THE ONE THAT'S MOST COMMONLY USED IN CONSORTIUM NETWORKS IS PROOF OF AUTHORITY WHICH SAYS THESE ARE THEPARTICIPANTS THAT CAN VOTE AND SAY THAT THESE ARE VALID TRANSACTIONS AND VALID BLOCKS

WE TRUST THEM ALL, THE NETWORK TRUSTS THESE PARTICULAR ENTITIESAND THEN YOU CAN ALSO DO FAULT TOLERANT CONSENSUSTHIS ONE REQUIRES EVERYBODY TO REALLY TRUST EACH OTHER WHICH IS EVERYBODY IS GOING TO BEHAVE APPROPRIATELY WHICH IS NORMALLY NOT THE CASE EVEN IN CONSORTIUM BLOCK CHAINSTHIS ONE YOU RARELY SEEWE'VE HAD LOTS OF DIFFERENT SCENARIOS WHERE WE PARTNERED WITH CUSTOMERS ON CONSORTIUM BLOCK CHAINS

YOU CAN SEE JUST A LIST OF THEM HERE OF SOME OF THE KEY ONES THAT WE'VE TALKEDABOUT PUBLICLY AND I'M GOING TO JUST TALK ABOUT THREE OF THEM JUST TO GIVE YOU AN EXAMPLE OF WHAT WE'RE SEEINGCUSTOMERS DOING WITH THESE CONSORTIUM BLOCK CHAINS STARTING WITH MRSKSOMRSK IS A SHIPPING COMPANYTHEY OPERATE HUNDREDS OF SHIPS AROUND THE WORLD ONE OF THE LARGEST CONTAINER SHIPPERS AND THEY PARTNERED WITH US AND WITH ERNST &YOUNG,WITH SALISWATSON,INSURANCE ISV TO CREATE A NETWORK CALLED ENSURE WAVETHE IDEA HERE AND THE REASON THAT MRS WAS MOTIVATED TO DO THIS IS THEY HAVESHIPS THAT PASS THROUGH DIFFERENT WATERS AND THEY BUY INSURANCE FOR THE SHIPS FROM A VARIETY OF INSURANCE COMPANIES DEPENDING ON WHAT PART OF THE WORLD THEY'RE IN, THEY MIGHT GET DIFFERENT RATES AND DEPENDING ON WHICH KIND OF ITEMS THEY'VE GOT ON THE SHIP AS WELL

THE CHALLENGES THEY'VE RUN INTO IT ARE AS THEY'RE MOVING BETWEEN WATERS OR MOVING BETWEEN INSURANCE COMPANIES OR MOVING INTO WATERS THAT REQUIRE DIFFERENT POLICIES LIKE THEY'RE MOVING INTO WAR ZONE, THEIR SHIP REQUIRES MORE INSURANCE IS DISPUTES AS TO OKAY,WHICH POLICY WAS EFFECTIVE WHEN,HOW MUCH MONEY DOESMRSX OWE THE INSURANCE COMPANIES, WHAT THE LIABILITIESTHE INSURANCE COMPANY OWESMRSK AND SOME DISPUTES THAT DON'T COME UP THAT OFTEN BUT WHEN THEY DO COME UP THEY COST A LOT OF TIME AND MONEY FOR EVERYBODY INVOLVEDSO WHAT THEY'RE DOING IS PUTTING THIS ON A BLOCK CHAIN SO WHEN A SHIP MOVES INTO WAR ZONE WATER,IT FIRES A TRANSACTION INTO THE SMART CONTRACT THAT'S TRACKING THAT SHIP,THAT CAUSES THE INSURANCE POLICY TO KICK IN AT THAT POINT BY CONNECTING THAT TO AN EXTERNAL BUSINESS SYSTEM THATSAYS INSURANCE RATES HAVE GONE UP,STARTTRACKING THIS AND WHEN IT COMES OUT OF THE WATER IT GOES BACK DOWN,IT FIRES ANOTHER TRANSACTION SAYING REMOVE THAT POLICY OR LOWER THE LIABILITY ON THAT POLICYAND THAT'S BEING DONE BY HUMANS RIGHT NOW ON THESHIPS OR PEOPLE TRACKING THE SHIPSWHAT THEY'RE GOING TO BE DOING IS WIRING THE SHIPS TOGPS AND THE BLOCK CHAIN TO SHE'S THINGS FIRE AUTOMATICALLY, NO HUMAN IS INVOLVED,IT'S AUTOMATED AS THE SHIP MOVES AROUND,THE INSURANCE IS BEING TRACKED AUTOMATICALLY SO THAT'S AN EXAMPLE THERE

ANOTHER ONE IS ONE THAT WE DID OURSELVES WITH SOME PARTNERSINCLUDING ELECTRONIC ARTS ONMAKING SURE THAT ARTISTS THAT PRODUCE ARTIFACTS FOR GAMES AND THE PUBLISHERS OF THOSE GAMES GET THEIR ROYALTIES PAID IN ATIMELY MANNERRIGHT NOW WITH EXISTING KIND OF ROYALTY PAYMENT SYSTEMS,I DON'T KNOW IF ANYBODY IN HERE HAS EVER PUBLISHED SOMETHING WHERE YOU WERE OWEDA ROYALTY BUT HAVING BEEN A BOOKAUTHOR,IT'S STILL DONE BY PAPER, I GET IT LIKE THREE OR FOUR MONTHS LATER,THERE'S NO WAY FOR ME TO KNOW IF WHAT THEY'RE TELLING ME I'MOWED WITHTHIS KIND OF SYSTEM PUT IN A BLOCK CHAIN IN THE GAMEPUBLISHING BUSINESS IT'S ROUGHLY 45 TO 60 DAYS BEFORE THE PUBLISHER GETS PAID FOR A SALE OFAN ITEMLIKE ONE OF THE GAMETITLESIT'S ANOTHER 75 DAYS BEFORE THE ARTIST GETS PAID BY THE PUBLISHER

TO SHORTEN ALL THAT AND TO GIVE PEOPLE REALTIME VISIBILITY INTO WHAT THEY'RE OWED AND HOW THEIR TITLE IS DOING,PUTTING THIS ON BLOCK CHAINTHESE SALES ON BLOCK CHAIN ALL THE PARTICIPATING PUBLISHERS AND ARTISTS THAT WANT TO BE PART OF THIS,THERE'S ALREADY A BUNCH SIGNED UP NOW HAVEREALTIME VISIBILITY INTO HOW MANY ITEMS ARE SOLD ON WHICHDAYS,KNOWING EXACTLY HOW MANY THEY'RE OWED BECAUSE OF THAT AND THEY CAN GET THEIR PAYMENTS MORE QUICKLY ANDTHERE'S FEWER DISPUTES BECAUSE IT'S ALL OUT THERE IN THE OPEN FOR THEM TO ALL SEE ITTHE THIRD ONE I WANT TO HIGHLIGHT IS WEB JETTHIS ONE COMPANYIS A HOTEL COMPANY THAT DOES TRAVEL BOOKINGS AND THEY ALSO OWN SOME HOTEL CHAINS BASED OUT OF A AUSTRALIA,AND THE TRAVEL BUSINESS IS ONE OF THOSE VERY DECENTRALIZEDBUSINESSES WHERE HOTEL INVENTORY CHANGES HANDS,SOMETIMES AS MUCH AS FIVE TIMES GOING FROM THE HOTEL SAYING I'VE GOT A ROOM TO SOMEBODY BUYING THAT ROOM THROUGH TRAVELAGENTS AND BROKERS AND OTHER INTERMEDIATARIES

AND EACH ONE HAS THEIR OWN DATABASEAND SO WHATHAPPENS IS THAT SOMEBODY THINKS A ROOM IS AVAILABLE,IT'S REALLY NOT AVAILABLE ANYMORE BECAUSE IT'S ALREADY BEEN SOLD ORTHAT ROOM GETSLOST,NOBODY IS TRANSACTING IT BETWEEN ONE PARTY AND ANOTHER,IT GETS DROPPED AND SO THIS LEADS TO A TON OF WASTE, A TON OF FRAUDTHERE'S ABOUT $10 BILLION PER YEAR IN FRAUDAND WASTE AND THE TRAVEL BUSINESS THROUGH THESE KINDS OF PROBLEMSAND SO WHAT WEB JET HAS CREATED IS THISBLOCK CHAIN NETWORKCALLED REZ CHAIN AND REZ CHAINIS WHERE THEY TRACK THESE TRANSACTIONS AMONG ALL OF THE TRAVEL AGENTS AND THE HOTEL SUPPLIERS AND THE OTHER PARTIES AS PART OFTHIS THEY'VE ALREADY REDUCED THE NUMBER OF DISPUTED TRANSACTIONS BY 90 SINCE PUTTING THIS INTO PRODUCTION JUST A FEW MONTHS AGO

THAT'S AN EXAMPLE OF BLOCK CHAINNOBODY REALLY WANTS TO TRUST ANYBODY ELSE RUNNING THIS CENTRALIZED THING ANDBLOCK CHAIN COULD COME AND GIVE THATDECENTRALIZE AND VISIBILITYONE OF THE THINGS I WANT TO MENTION IS THAT THERE'S LIKE I SAID,I SHOWED YOU EARLIER THERE'S TONS OF OTHER EXAMPLES OF THE BLOCK CHAINS IN PRODUCTIONOR GOING TO PRODUCTION LIKE3M FOOD SAFETY,TAMPERPROOFCONTAINERSPHARMACEUTICAL GET BOTTLED IN THOSE

THEY CAN BE CHECKED FOR AUTHENTICITY THEY HAVEN'T BEEN TAMPERED AND WITH THAT GOES THROUGH A SUPPLY CHAIN ALL THE WAY OUT THROUGH PHARMACY AND BY TRACKING THAT ON A BLOCK CHAIN WITHIOT SAYING EVERY STEP OF THE WAYCHECKING TO MAKE SURE THIS THING HASN'T BEEN TAMPERED WITH YOU CAN VERIFY THE DRUG YOU GET AT THE PHARMACY IS ACTUALLY THE LEGITIMATE DRUG PRODUCED BY A FACTORYWE'VE GOT A BUNCH OF BLOCK CHAIN INITIATIVES AT MICROSOFT I MENTIONED I WAS GOING TO WRAP UP WITHONE OF THEM IS BLOCK CHAINS IN THEMARKETPLACESOWE HAVE RESOURCE MANAGER TEMPLATES YOU CAN GO INTO THE MARKETPLACETHERE'S ROUGHLY 12 OR 13 OF THEM FOR ROUGHLY FOUR OR FIVE OR SIX DIFFERENT LEDGERTYPES WHERE YOU CAN GO AND WITHIN A FEW MINUTES DEPLOYA SINGLE NODE FOR YOUR OWN DEV TEST OF A BLOCKCHAIN, MULTINODE FOR A LARGER PROOF OF CONCEPT

OR A MULTIMEMBER ONE YOU MIGHT WANT TO EVEN PUT INTO PRODUCTION WHERE YOU'RE COLLABORATING WITH OTHER PARTIESSO THETEMPLATES SUPPORT ALL OF THESE INCLUDING ETHEREUM WHERE YOU CAN STAND UP DIFFERENT NODES FOR DIFFERENT ASSUREREGIONS FOR HIGHER AVAILABILITYIT'S A QUICK WAY TO GET STARTED JUST WITH THE CORE OF A BLOCK CHAINONE OF THE THINGS WE'VE SEEN AS WE'VE BEEN WORKING WITH CUSTOMERS IS THAT THIS KIND OF STUFF MANAGING THIS LOW-LEVEL STUFF IS VERY COMPLICATEDSETTING UP THE BLOCK CHAIN NETWORK AND THEN IF THAT'STAKEN CARE OF FOR YOU BY THE TEMPLATE,THE NEXT LEVEL UP IS HOWDO I WIRE THIS UP WITHAZURE KEY VAULT,HOW DO I LOOK AT THIS IN A SQL DATABASE IN THE HISTORY OF THE TRANSACTIONS,HOW DO I KICKOFF A WORKFLOW TO MYCRM DATABASE IF BLOCK CHAIN NEEDS TO KICK OFF SOMETHING THERE,HOW DO I CREATE APIs AND FRONT END AND AUTHENTICATION FOR PEOPLE TO BE ABLE TO INTERACT WITH THE BLOCK CHAIN

ALL OF THAT IS LEFT AS AN EXERCISE FORTHE READERUNTIL WE DEVELOP THIS WHICH AIMS AT TAKING ALL THAT STUFF AND MAKING IT GO AWAYIT'S CALLED AZURE BLOCK CHAIN WORKBENCH AND WE AUTO GENERATE A BLOCK CHAIN APPLICATION PLATFORM FOR YOU WHEN YOU GO CREATE ONEYOU CAN CREATE ONE OF THESE IN A FEW MINUTESUNDERNEATH THE HOOD YOU'RE GETTING AN AZURE DATABASE,YOU'RE GETTING A WEB FRONT END,AN AZURE APP SERVICE,YOU'RE GETTING BUSINESS LOGIC ON AZURE APP SERVICEYOU'RE GETTING ZALMERIN APPS THAT ARE AUTOMATICALLY GENERATED WITH INTERFACES TO INTERACT WITH THE BLOCK CHAIN

YOU'REGETTING AZURE DIRECTORY STOOD UP AND CONNECT WITH IDENTITIES AND KEYS STORED IN KEY VAULT AND YOU'RE GETTING A WEB INTERFACE WHEREADMINISTRATOR OR SOMEBODY INTERACTING WITH THE APPLICATION CAN GO AND SEE WHAT'S GOING ON AND EXECUTETRANSACTIONS, BUT NOT KNOWING THEY'RE EXECUTING TRANSACTIONSBASICALLY JUST SETTING PROPERTIES ON A SMART CONTRACTAND WHAT HAPPENS UNDERNEATH THE HOOD IS KEYIS FETCHED OUT OFAZURE KEY VAULT,TRANSACTION IS CREATED,TRANSACTION IS FIRED IN THE BLOCK CHAIN AND THAT'S JUST ALL INVISIBLE UNDERNEATH AND WE STARTED BY REALLY SAYING ETHEREUM BUT WE'RE GOING TO BE RELEASING OTHERSUPPORT FOR OTHER LEDGERS COMING UPI'M GOING TO SHOW YOU A QUICK DEMO OF THIS

NOW,IF YOU SAW USSTANDING UP HERE RIGHT BEFORE THE PRESENTATION, IT WAS BECAUSE I WANTED TO SHOW YOU THAT TRACK AND TRACE EXAMPLE WITH AN IOT DEVICE HERE AND IT'S NOTWORKING IS ONE SIGNAL I GOT AND THAT IS BECAUSE THERE'S SOMETHING WRONG WITH THE ITDEVICE SO I'LL JUSTSHOW YOUTHIS IN THE UXSO HERE I'VE GOTTHEREFRIGERATED TRANSPORT — LET ME SHOW YOU HOW I CREATE ONE OF THESEI WANT TO CREATE A NEW APPLICATION

OH,SORRYI WANT TO CREATE A NEW APPLICATION HERE SO THIS IS THE BLOCK CHAIN WORKBENCH I'VE CREATED AN INSTANCE FOR MYSELF AND I'VE GOT A BUNCH OFAPPLICATIONS ALREADY DEPLOYED BUT I WANT TO CREATE A NEW ONEI UPLOAD THE CONTRACT CONFIGURATION

AND THENI UPLOAD — OH,GREATWHERE WAS I?THIS IS APIECE OF METADATATHAT YOUCREATEI WANTED TO LOOK AT THIS INNOTEPADALL THAT IS IS A LITTLE PIECE OF METADATA THAT GOES ALONG WITH THE SOLIDITY CONTRACT WHICH IS THE ONE WE JUST LOOKED ATTHIS ISTHE EXACT SAME THING WE JUST LOOKED AT

OKAY,IGNORE I WANT TO DEPLOY THISSO IT TAKES ABOUT A HALF AN HOUR TO SET UP THAT METADATATAKE THAT SMART CONTRACT WHICH HAS THIS DATA INFORMATION, BLOCK CHAIN WORKBENCHLOOKS AT THE METADATA,LOOKS AT THE SMART CONTRACT AND AUTOMATICALLY PRODUCES THE WEB UX,THE APPLICATION CLIENTS,LIKE I MENTIONED FOR MOBILEDEVICESI DIDN'T MEAN TO DEPLOY THAT BUT IT'S DEPLOYING

HERE'S AN EXISTING ONE I DEPLOYEDI'M GOING TO CREATE A NEW CONTRACT ON ITI SHOULD HAVE WAITEDTHE NETWORKIS LAGGINGI PRESSED THE NEW CONTRACT BUTTON

I'M GETTING A LAGWHAT THIS NEW CONTRACT BUTTON IS GOING TO DO IS CREATE AN INSTANCE IN THAT SMART CONTRACT,REFRIGERATED SMART CONTRACT THAT I WOULD DO WHEN I'MCREATE — SHIPPING A NEW ITEM AS SOON AS THIS RESPONDSOKAYOH

I HAVE NO IDEA WHAT'S GOING ON WITH THIS NETWORK TODAYBUT ALL RIGHT I'M GOING TO MOVE ON AND COME BACK TOTHAT AND SEE IF IT SUDDENLY STARTS LISTENING TO MEBY TALKING ABOUT ONE MORE THING THAT WE'RE DOING WHICH IS TAKING A LOOK ATHOW WE CAN BETTER HELPBLOCK CHAINS WORK IN THE ENTERPRISEWHAT I TALKED ABOUT SO FAR ARE THE BASICS OF BLOCK CHAINS AND THERE'S SOME LIMITATIONS WITH THE PUBLIC BLOCK CHAINS LIKE THE LOW PERFORMANCE THAT THEY GET

THE LOW PERFORMANCE THEY GET BECAUSE THEY'RE USING PROOF OF WORK EVEN PROOF OF AUTHORITY IS RELATIVELY LOW PERFORMANCE WHEN COMPARED TO SOMETHING LIKEJUSTQUORUM-BASED PAXOS ALGORITHMS WHERE YOU TRUST THE PARTIES TO ALL BE OPERATING BECAUSE THEN YOU ONLY HAVE TO BASICALLY HAVE ONE OF THEM VALIDATE WHAT'S GOING ONTHERE'S LACK OF FLEXIBLE CONFIDENTIALITY THIS IS PERHAPS THE BIGGEST PROBLEM WITH ENTERPRISE BLOCK CHAINSTHAT SUPPLIER SCENARIO THAT ITOLD YOU ABOUT EARLIER,ITEM MOVING THROUGH A SUPPLY CHAIN,LOTS OF SUPPLIERS BEING THEREONE OF THE CHALLENGES WITH THAT IS THAT IF YOU HAVE GOT SOMETHING WHERE YOU DON'T WANT DIFFERENT SUPPLIERSTO SEE WHAT'S GOING ON WITH DIFFERENT KINDS OF SHIPMENTS MOVING THROUGHOUT THE NETWORK OR YOU HAVE GOT FINANCE WHERE YOU DON'T WANT THE PARTIES TO SEE THE FACT THAT THERE WAS EVEN A TRANSACTION BETWEEN THESE TWO PARTIES,MUCH LESS THE VALUE OF THAT TRANSACTION,THEN YOU HAVE GOT TODO SOME KINDOF GYRATIONS TO TRY TO OBSECRATE WHAT'S GOING ON

THERE'S A FEWEFFORTS YOU CAN SEE WHAT'S GOING ON TO ADDRESS THAT ONE OF THEM IS CALLED PRIVATE TRANSACTIONS WHEREIF YOU WANT TO SENDSOME MONEY TO ME OR SOMEBODYELSE,I CAN ENCRYPT THAT TRANSACTION SO ONLY THEY CAN SEE ITTHE REST OF THE NETWORK JUST SEESTHE ENCRYPTEDTRANSACTIONTHEY WITH THEIR KEY CAN DESCRIPT AND IT SEE ITTHEY CAN NOW I'VE GIVEN THEMTHAT ITEM

THERE'S SOME CHALLENGES WITH THATONCE I'VE GIVEN SOMEBODY SOMETHING LIKE THAT,THEY CAN'T REALLY GIVE IT TO SOMEBODY ELSE WITHOUT REVEALING SOME INFORMATION ABOUT THE FACT THAT THEY GOT IT FROM ME BECAUSE EVERYBODY SAID DO YOU REALLY OWN THATPROVE TO ME THAT YOU REALLY OWN THATTHERE'S SOMETHING ELSE BEINGDEVELOPED CALLED ZERO KNOWLEDGE PROOFS WHICH IS A CRYPTOGRAPHIC WAY TOPROVE TO SOMEBODY SOMETHING WITHOUTREVEALING ANY OTHER INFORMATION USING ZERO KNOWLEDGE PROOF,I WOULD BE ABLE TO SAY TO YOU I PROVE TO YOU I GOT THIS MONEY THROUGH VALID MEANS ON THE NETWORK BUT I DON'T HAVE TO TELL YOU WHO I GOT IT FROM AND YOU TRUST THAT ASSERTION BASED OFF THE CRYPTOGRAPHY

IT'S VERY COMPLICATED CRYPTOGRAPHY AND IT'S VERY SLOW AND IT'S REALLY HARD TO APPLY TO GENERAL CASES BUT THERE'S BEEN A TREMENDOUS AMOUNT OF RESEARCH TO MAKE THAT MORE FLEXIBLE AND HIGHER PERFORMANCE BUT NEVERTHELESS IT'S VERY COMPLICATED AND RIGIDWE'VE BEEN WORKING ON SOMETHING CALLED CONFIDENTIALCONSORTIUM FRAMEWORK FOR ENTERPRISE BLOCK CHAIN WHICH IS ALLOWING YOU TO CREATE A TRUSTED NETWORK OFF TRUSTED EXECUTION ENVIRONMENTS REMEMBER I TALKED ABOUT THESE BLACK BOXES,YOU CAN TRUST THE CODE INSIDE THEM,YOU TRUST THE PROVIDER LIKE INTEL SGXTHAT CREATES THAT BLACK BOXTHAT MEANS IF I HAVE AN ALGORITHM, AND SOME DATA,I COULD HAVE YOU RUN IT ON YOUR COMPUTER KNOWING THAT YOU'RE NOT GOING TO BE ABLE TO MESS WITH IT OR SEE THAT DATABECAUSE INTEL SGX IS GOING TO KEEP YOU AWAY FROM THAT DATA AND AWAY FROM THAT TAMPERING WITH THAT CODE

AND THE WAY THATI KNOW THAT I CAN TRUST IT IS I GET ANASSERTION FROMSGX, YOUR COMPUTER THAT SAYS I'M AN SGX PROCESSOR,THIS IS THE CODE THAT I'M PROTECTINGAND NOW I CAN SAY OKAY,THAT'S THE CODE THAT I TRUST, I CAN ESTABLISH YOU'RE CONNECTED WITH IT AND GIVE IT KEYS TO DECRYPT DATAYOU CAN THINK OF THIS CONFIDENTIAL NETWORKING AS JUST THE COMPUTERS DOING IT AMONG THEMSELVESARE YOU RUNNING CODE THAT I TRUST,IF SO, I'M GOING TO RELEASE KEYS TO YOU AND NOW WE ALL HAVE THE KEYS AND WE CAN ALL DO THESE TRANSACTIONS AND NOW ONCE YOU GOTTHIS,YOU CAN DOLOW-LATENCY PERFORMANCE

AND TRANSACTION AND VERY HIGH TRANSACTION THROUGH-PUT BECAUSE ALL THE NODES TRUST EACH OTHERYOU CAN DO THAT FAULT TOLERANT CONSENSUS ALGORITHMTHE ONE THAT IS BASICALLY ANY DISTRIBUTED SYSTEM EXECUTES AND I WANT TO SHOW YOU THIS IN ACTIONCOCO FRAMEWORK IS ACTUALLY GOING TO BE RELEASED IN OPEN SOURCE BY THE END OFTHE YEAR AND IT'S GOING TO SUPPORT INITIALLY ETHEREUM

AND I'M GOINGTO SHOWYOU SO THIS IS — I'M IMPLEMENTING A MILLION ETHEREUMTRANSACTIONS,ETHER TRANSACTIONS,ON A PRIVATE BLOCK CHAIN NETWORKOF 15 NODESAND WHAT THIS IS GOING TO DO IS SHOW US THE TRANSACTIONTHROUGH-PUTTHE TRANSACTION THROUGH-PUT ON THE PUBLIC ETHEREUM NETWORK IS ROUGHLY TEN TRANSACTIONS PER SECOND

BUTWITHTHIS,WHAT WE'RE GOING TO SEE IS SOMETHING MUCH BETTER THANTHATYOU CAN SEETHAT IT'SABOUT OVER 6,000TRANSACTIONS PER SECOND THIS IS MORE LIKE REAL DATABASE THROUGH-PUTJUST TO SHOW YOU THERE'S OVERHEAD OF ETHEREUM ITSELFWE'VE CREATED A VERY SIMPLEBITCOIN TYPE OF PROTOCOL

THIS WILL SHOW YOU KIND OFHOW FASTCOCO CAN JUST COREGULAR — OR THECONSORTIUM BLOCK CHAIN FRAMEWORK CAN DO REGULAR TRANSACTIONS THE OTHER ASPECT ABOUTTHIS,YOU CAN IMPLEMENTARBITRARY CONFIDENT WITHIALTY ON TOP OF THISYOU CAN SAYENCLAVE ONLY SHOW TRANSACTIONS TO THESE PEOPLELIKE,FOR EXAMPLE,ONLY SHOW THOSE SUPPLY CHAINTRANSACTIONS TO THE ORIGINATOR AND THE TARGETNOBODY ELSE

OR THE RETAILER CAN SEE THEM ALL OR IN A FINANCIAL SYSTEM,ONLY PARTICIPANTS IN THE TRANSACTION CAN SEE THE CONTENTS OF THE TRANSACTION OR EVENSEE THAT THEY HAPPENED BUT THE AUDITOR COULD SEE THEM ALLALL OF THE CONFIDENTIALITY MODELS ARE VERY SIMPLE TO IMPLEMENT BECAUSE IT'S JUSTLIKEIMPLEMENTING ACCESS CONTROL AND STANDARD ENTERPRISE WORKLOADYOU CAN SEE RIGHT THERE WE HIT CLOSE TO 60,000 TRANSACTIONS PER SECONDTHAT'S ACROSS 15 NODES AND WE'RE GOING TO BE DRIVING US UPTO100,500 NODES AND EXPECT THIS TO GET UP INTO THE SEVERAL HUNDRED THOUSANDTRANSACTIONSTHIS WILL BE OPEN SOURCE

YOU CAN DEPLOYAZURE CONFIDENTIALMACHINES,ANYINTEL,WE EXPECT CUSTOMERS TO BUILD TRUSTED NETWORKS ON THEIR OWN IN OTHER CLOUDS EVEN AND WITH NODES IN AZURESO THAT'S A QUICK LOOK AT SOME OF THE THINGS WE'RE DOING WITH BLOCK CHAIN SOWITHTHAT,I WANT TO GO AHEAD AND WRAP IT UPHEREJUST GIVING YOU A SUMMARY HERE OF THE THINGS THAT I TALKED ABOUT AND GOING BACK TO THIS QUESTIONBECAUSE REALLY THIS IS WHERE IT'S ALL AT

IF YOU ARE AT A COMPANY AND YOU ARE LOOKING AT BLOCK CHAIN,GOT TO ASK YOURSELVES DO YOU HAVE A SCENARIO WHERE THERE'S MULTIPLEPARTICIPANTS,NONEOF THEM TRUSTED TO OPERATE THE DATABASE AND THEY DON'T EVEN WANT TO OUTSOURCE THE OPERATION OF THE DATABASEIF THE ANSWER IS NO TO EITHER OF THOSE OR TO BOTH OF THOSE,THEN IT'S PROBABLY NOT A GOOD BLOCK CHAIN SCENARIO WHERE YOU CAN SOLVE THE PROBLEM MUCH MORESIMPLY WITHA CENTRALIZED DATABASE APPROACHWITH THAT I WANT TO CONCLUDEI WANT TO SAY IF YOU ARE INVESTED IN BITCOIN,HOW MANY OF YOU OWN BITCOIN?OKAYHOLD ON TO IT

IT'S SUPPOSED TO GO BACK UP THAT'S WHAT EVERYBODY IS SAYING THESE DAYSIN FACT,SOMEBODY JUST CAME OUT YESTERDAY,SOME ANALYST AND SAID BITCOIN IS GOING TO SKYROCKET SOONSO FOR EVERYBODY ELSE,DO NOT BUY IT[ Laughter ]ALL RIGHT

WITH THAT,THANK YOU VERY MUCHHOPE YOU

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