Blockchain, smart contracts introduction

TL; DR- History, background - Solved problems - How it works wallets, transactions, mining - Ethereum, Smart contracts - Profit... All confirmed transactions are included in the block ch

Blockchain, smart contracts

introduction

©Lukasz Jarmulowicz 2016

TL; DR

- History, background

- Solved problems

- How it works (wallets, transactions, mining)

- Ethereum, Smart contracts

- Profit

Why bitcoin?

A general ledger contains all the accounts for recording transactions relating to a company's assets, liabilities, owners' equity, revenue, and expenses

Purpose: To have financial statement

Double spending Byzantine Generals Problem

More generally, the B.G.P poses the question

of how to establish trust between otherwise

unrelated parties over an untrusted network

like the Internet

The problem to be solved is:

● All loyal generals need to decide upon

the same plan of action

● A small number of traitors cannot cause

the loyal generals to adopt a bad plan

In October 2008, “Satoshi Nakamoto” published a paper describing the bitcoin digital currency In January 2009, Nakamoto released the first bitcoin software that launched the network and the first units of the bitcoin cryptocurrency,

called bitcoins.

Distributed ledger - Blockchain

The block chain is a shared public ledger on which the entire Bitcoin network

relies All confirmed transactions are included in the block chain This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender.

A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous

Davos 2016 - big attention

Even in Russia

https://www.youtube.com/watch?v=BXlAH2fhyoU

Ok, ok but how it works ?

Wallet

Transactions

Transaction signing - scripts inside

Small program inside each transaction that gets

executed to decide if a transaction is valid

Transaction chain gives balance

Confirming transactions - mining

Mining - blocks

Bitcoin mining is the process that puts

transactions into a block, to make sure everyone

has a consistent view of the transaction log

Mining is also the mechanism for new bitcoins to enter the system When a block is successfully mined, new bitcoins are generated in the block and paid to the miner

This mining bounty is large - currently 25 bitcoins per block (~ $14,000)

This is blockchain

Ethereum, smart contracts

Ethereum was initially proposed by Vitalik Buterin in late 2013 and in 2014 he described it as

"A Next-Generation Cryptocurrency and Decentralized Application Platform"

Ethereum's live blockchain was launched on 30 July 2015 The Ethereum software project was initially developed by a Swiss company, Ethereum Switzerland GmbH (EthSuisse) and a Swiss non-profit foundation, the Ethereum Foundation

Ethereum Virtual Machine

Programmable blockchain - Rather than give

users a set of pre-defined operations (e.g

bitcoin transactions), Ethereum allows users to

create their own operations of any complexity

they wish

Bitcoin blockchain was purely a list of

transactions, Ethereum’s basic unit is the

account The Ethereum blockchain tracks the

state of every account, and all state transitions

on the Ethereum blockchain are transfers of

value and information between accounts

Platform for many different types of decentralized blockchain applications, including but not limited to cryptocurrencies

Smart contracts

● Contracts lives on the Ethereum blockchain

● Have own Ethereum address and balance

● Can send and receive transactions

● “Activated” when you send a transaction to it

Smart contracts

● 4 Ethereum high level languages

○ Solidity (similar to js)

● Compile (Mix IDE)

● Deploy (you pay for

execution gas - > eth)

● Interacting with smart

contracts

● Mining - little different than bitcoin (few changes)

Plans for smart contracts usage

ETHEREUM AS A ‘WORLD

COMPUTER’

Computation on Ethereum is slow

and expensive

(currently similar to smartphone?!)

For computation, there are better,

cheaper and faster alternatives that

don’t require blockchains and all

that.

Ethereum can create various forms of economic alignment, shared purpose and coordination between thousands of anonymous people, at a fraction of a cost compared to

alternatives (legal frameworks)

Sharing economy (ex uber, airbnb) will be everywhere.

Decentralized autonomous organizations (“DAO”)

● Best comparable to a digital company, but without an attached legal entity

● The Owner (kind of admin) can add (or remove) voting members to the organization

● Any member can make a proposal (by sending transaction or execute contract)

● People vote on proposals

● Allows people to participate in risks & rewards of digital ventures

Thank you.

Questions?

©Lukasz Jarmulowicz 2016