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PAPA JOHN’S, ANYONE?

2012 You just won a lottery. You find out that you’ve won 1 million units of a certain currency ‘X’. When you saw the ‘1 million’, you were insanely happy. But when you saw the ‘X’, you immediately knew you’d been scammed. What is ‘X’?

MATHEMATICS OF BLOCKCHAIN IMPLEMENTING AMCOIN – ASPIRING MIND’S OWN CRYPTOCURRENCY

WHAT THE HELL IS BLOCKCHAIN?

BTC – VALUE OVER THE YEARS USD VALUE OF I BTC 2017 7223 2016 739 2015 376 2014 337 2012 12

THE AGENDA What is it about bitcoin, that is causing this paradigm shift? What problem does bitcoin actually try to solve? How effectively does it actually solve that problem? What the hell is blockchain?

Let’s go to the bank No actually, let’s get rid of the bank! The implicit trust that we are forced to have The transaction fee we are forced to pay The time that we are forced to wait for

ISSUES THAT BLOKCHAIN TRIES TO ADDRESS Private Ledger(Sub prime crisis) vs. Open Ledger Centralized Authority vs. Distributed Authority Hackable vs. Immutable (Hashing + Network Consensus) Double Spending

BLOCKCHAIN IS AN ENCRYPTED LEDGER THAT Contains record of all transactions from the moment of genesis

LET’S DESIGN A NEW TRANSACTION SYSTEM con

LET’S DECENTRALIZE IT What if the central ledger gets corrputed Decentralized and synced over a peer to peer network The consensus helps in preventing malicious modification of transaction.

THE PROCESS A transaction is propagated through the network. Miners verify each transaction (No money + Double spending) A group of recent verified transactions are collected in a block The block is chained to the blockchain VIA HASHING This is broadcasted to all the nodes in P2P network, all of the nodes sync their copies of the blockchain Once a block is chained, all these transactions now become a permanent immutable part of blockchain (A new block is created every ten minutes)

WHAT DO MINERS DO? Miners validate whether James has enough balance to make the transaction. For bitcoin blockchain, explicit balance of wallets are not stored. Miner will calculate entire transaction history of James to find his balance. Once verified, this transaction becomes a part of the block

DOUBLE SPENDING SOLVED Each transaction is individually verified. So if James tries to send 500 bitcoins simultaneously to two people, the transaction that is verified first would go through. Once it goes through, it is broadcasted to all nodes, who update their copies of blokchain The second transaction, will now be invalidated by any miner who gets it, because now his wallet doesn’t have enough balance If two different miners verify and broadcast T1 and T2 simultaneously, the person who mines the next block, his T1/T2 will be kept, the other will be discarded.

INCENTIVE FOR MINING? 12.5BTC Mining Pools Depletion of Bitcoin? Difficulty of mining increases after certain time intervals Every 210,000 blocks mined that reward would be cut in half, until it eventually is reduced to zero after 64 halving events. So, there are total 21 million bitcoins to be mined, that’s it

MYSTERIOUS TERMS VERIFY HASHING CHAINING

ASSYMETRIC KEY CRYPTOGRAPHY RSA Primes p,q n = pq Generate key e and d Enc = (Plain ^ e) modulo n Plain = (Enc ^ d) modulo n

HASHING Deterministic Quick computation Pre image resistance Collision resistant High Min Entropy (Suppose you have an output value “Y”. If you choose a random value “k” from a wide distribution, it is infeasible to find a value X such that the hash of the concatenation of k and x will give the output Y.)

HASHING IN BLOCKCHAIN

BLOCK HEADER

TO SUMMARIZE A Blockchain is - Decentralized Immutable Public Anonymous

SO, WHY DO WE TRUST BITCOIN

IS IT HACKABLE? Network Consensus