So what is Blockchain anyway? Karl Schwirz – Consultant Slalom Boston karl.schwirz@slalom.com | slalomtechboston.com | @DrKarl66

We’ve been hearing a lot about Blockchain

Bitcoin is the currency of choice for the dark web Early 2010’s – present I’m probably on a list now – so – your welcome for doing this research. Some interesting buys on the dark web - Credit Card Numbers / SSNs - Passports - Drugs - Stolen Netflix accounts - Fake College degrees - Coupons - Ricin – Walter White special - Pocket EMP - Jet - Hitman - Uranium

What is Blockchain? Simply put, blockchain is a distributed ledger or a decentralized database that is continually updating it’s digital ledger

Traditional transaction exchange Person A give money to person B

Centralized Banking Model Person A give money to person B via their bank

The potential problem with a centralized ledger? While a centralized database can be secure, as most banks are, it is possible to be hacked or someone with appropriate access can go ‘rogue’ and decimate the credibility database.

Possible solution to a centralized ledger?

A decentralized ledger

The Block s Header Timestamp Previous Hash Merkle Root Hash Nonce Body Transactions Merkle Root Hash Difficulty

The Block Header Timestamp Previous Hash Merkle Root Hash Nonce Body Transactions Merkle Root Hash Difficulty Data Transactions that are included in the block Can be one transaction or many transactions Miners can choose transactions by the transaction fees associated with them Worth noting this data doesn’t have to be in clear text. It can be encrypted so things like account numbers or names are protected.

The Block Previous Hash The previous block’s hash value is what connects each block on the chain together in sequence. Because it is included in the hashing of each new block you can quickly verify if the chain has been tampered with. Header Timestamp Previous Hash Nonce Body Transactions Merkle Root Hash Difficulty

The Block Hash function Hash function Hash function Tx Tx Tx Tx Merkle Root Hash Header Timestamp Previous Hash Nonce Body Transactions Merkle Root Merkle Root Hash Difficulty Hash function Hash Hash Hash function Hash Hash Hash Hash Hash function Tx Tx Tx Tx

The Block – Block Hash Header Timestamp Previous Hash Merkle Root Hash Nonce Body Transactions Block Hash Merkle Root Hash Difficulty SHA-256 Hash function

The Block – Block Hash Header Timestamp Previous Hash Nonce Body Transactions Difficulty The Blockchain has a target that is set for the hash value. The 256-bit number is the threshold for the result of the hash. Meaning the output of this number must fall below the target hash. Example: Block Hash- 00000000000000000086c7cf1966f48824c0bc4ee88d3cc b2307cfaaed078273 Merkle Root Hash Difficulty The larger the target, the more difficult the solution will be to find. Exmaple: Leading 18 characters must be 0’s

The Block – Block Hash Header Timestamp Previous Hash Merkle Root Hash Nonce Body Transactions Merkle Root Hash Difficulty Nonce 32-bit number that is used in conjunction with block header values to generate hash Values can be between 0 and 2^31 Only number that is flexible Values anywhere between 0 and 2,147,483,647 Nonce: Coined for or used on one occasion

The Block – Mining the block Header Timestamp Previous Hash Nonce Body Transactions Mining The correct value for the nonce must be done by completing the hash and checking the output for a valid value Running a hash algorithm is a complex mathematic equation require a lot of compute processing power When the nonce answer is found it is submitted to the rest of the nodes for validation A correct answer submission is called the Proof of Work Merkle Root Hash Difficulty - Mining used to be done by desktop computers with high CPU and GPU limits. That’s no longer feasible and specialized mining cards can be purchased for hashing optimization Cloud options are available as well. (Save a lot on electricity and ventilation) Lease a mining machine Provision your own machine and install / develop mining software Least hashing power. (Pay for someone’s rig and share in the profits) Proof of Stake – Miners are selected in a deterministic fashion based on their wealth (or stake). When the block is solved, their reward are the network fees. A lot cheaper and energy efficient.

And answer a question you might be asking yourself Tie it all together And answer a question you might be asking yourself Reward

Majority Rules In a contested result situation, 51% of the common answer is the authority. In order to take control of a block chain, you might as well put your resourcing into mining blocks legitimately and collect the mining rewards It is incredibly hard to corrupt or fool the Blockchain, one would need to rehash and mine all blocks with more compute power than everyone in the network combined in order to achieve 51% controlling authority.

Smart Contracts Instead of just processing currency transactions, code is executed on the participating nodes of the Blockchain. The code defines conditions of a contract that once met, trigger an action. Use shipping company example:

Azure’s Blockchain as a Service Ethereum Blockchain Network