Transcript Document
Bitcoin 101 and Beyond
Jonathan Levin
VP Business Development, Chainalysis GmbH
Bitcoin’s design primitives
• Every transaction is public to prevent double spending
• Interactions are done using throwaway pseudonyms
• Fees were not initially considered in November 2008 but were a later addition
• Directed Acyclic Graph – Append only ledger
• Proof of work used to help new nodes that are entering the network quickly choose
the correct global state
• The Blockchain was designed to minimize bloat
• Keeps track of checksums rather than tokens
New Privacy Model
Traditional Privacy Model
Party
Transactions
Trusted Third
Party
Counterparty
Public
New Privacy Model
Party
Counterparty
Pseudonyms
Transactions
Public
Pseudonyms are cryptographic keys that are used to sign transactions in Bitcoin
Bitcoin Transaction JSON
{
"hash":"a6d9c176ecb041c2184327b8375981127f3632758a7a8e61b041343efc3bcb6e",
"ver":1,
"vin_sz":1,
"vout_sz":2,
"lock_time":0,
"size":257,
"in":[
{
"prev_out":{
"hash":"b5045e7daad205d1a204b544414af74fe66b67052838851514146eae5423e325",
"n":0
},
"scriptSig":"304402200e3d4711092794574e9b2be11728cc7e44a63525613f75ebc71375f0a6dd080d02202ef
1123328b3ecddddb0bed77960adccac5bbe317dfb0ce149eeee76498c19b101
04a36b5d3b4caa05aec80752f2e2805e4401fbdbe21be1011dc60c358c5fc4d3bedd1e03161fb4b
3a021c3764da57fee0d73570f3570f1b3dd92a1b06aae968846"
}
],
"out":[
{
"value":"300.00000000",
"scriptPubKey":"OP_DUP OP_HASH160 0331e5256416bc11ecf9088091f8424819553a10 OP_EQUALVERIFY OP_CHECKSIG"
},
{
"value":"699.99950000",
"scriptPubKey":"OP_DUP OP_HASH160 4186719d739ae983d8c75a0cb82958e94b7ae81e OP_EQUALVERIFY OP_CHECKSIG"
}
]
}
Note the amount of inputs
not present!!!
http://codesuppository.blogspot.com/
Bitcoin: Plumbing Analogy
• Each transaction is dependent on a previous transaction output
• Outputs can be combined and split up with ability to have 749 inputs and outputs
• Wallet implementations prioritized lower fees rather than privacy
• Transaction graph grows in complexity but can be looked at in a time series since it
is append only
• There is no mapping from inputs to outputs
• However Bitcoin is far from anonymous
Proof of work: Anonymous consensus
Proof of work: Reality Check
Engineering the base layer
Blockchain.info
Decentralised
2009
Bitcoin
Bitcoin
Stellar?
Coinbase
Traditional
Banking
Centralised
Trust minimization
between parties
Cost minimization
Onename
Zerocash
Bitcoin
Circle
Paypal
Authenticated
identities
Anonymous
Zerocash
Untraceable
Circle
Bitcoin
Ripple
Colored
coins
Traceable
Model of Innovation
-
Open source community with baked in incentives to form a new currency drives
competition
-
Development on the Bitcoin protocol is slow due to the amounts of money at stake
-
Lock-in drivers e.g. number of users, number of developers, VC money, security of
the ledger, trust in the system.
-
The security of the Bitcoin ledger and the creation of digital scarcity is perhaps the
most important characteristic of these ledgers and might ensure its survival with
additional functionality being added e.g. Side-chains
3 Components to look for:
Economic model
Security model
Scripting ability
Litmus test for a killer app
-
Does the use case require trust minimization between parties?
-
Does it not require every participant to identify themselves when participating? Put
another way do we need to give participants the ability to maintain a level of privacy?
-
Do we need auditability in several directions?
-
How time sensitive is the underlying application? Will latency matter?
-
Could the system achieve an efficient outcome with a rigid rule that governs provable
digital scarcity?
-
Do you need a purely fungible commodity at core? (digital currency, storage, elec, etc)
-
Do you need fragmented supply?
-
What is our current solution to the requirements above? How much does it depend on a
single player and what is the cost of the system?
Contact
Email: [email protected]
Twitter: @jony_levin