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35C3 - A Blockchain Picture Book

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    35c3 preroll music
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    Herald: I'm very happy to be allowed to
    announce the following talk. It's called
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    "A Blockchain Picture Book" and it's held by
    Alex. Blockchain is a topic we hear
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    constantly everywhere in the media. It's
    sold as a solution for everybody and for
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    everything. Doesn't matter what. But how
    it really works and what it really is...
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    ...most people don't really have an idea. So,
    today we got a beginner's introduction
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    with pictures. So, please welcome Alex on
    stage with a big round of applause.
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    Applause
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    Alex: Hi. Yeah. My name is Alex and I'm
    from the Technical University of
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    Brunswick. I'm working in the Institute of
    application security. I suppose you're
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    here to see my blockchain picture book,
    right? But right from the start, this talk
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    is not about the newest cryptocurrencies
    out there and it's also not about in which
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    ICO should invest in. I'm absolutely
    clueless about that topic. Sorry to
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    disappoint you, maybe. I'm here to give you
    a very rough introduction to the idea and
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    the basics of this blockchain thing out
    there. So, maybe you can judge by your own.
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    So. I hope there are no blockchain experts
    in the audience, maybe. So this is a
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    foundation talk. That means I do not
    expect any technical or mathematical
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    backgrounds at all. So, let's just give it
    a try. Imagine the following situation.
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    Once upon a time, there were two people.
    Let's call them "Mary", on the left, and "Alex",
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    on the right. They wanted to trade with
    each other. Mary she wants to buy a house
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    from Alex. Thus , she brings the agreed
    amount of money. And Alex – on the picture –
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    brings the keys for this house that
    should be sold to Mary. But, since Mary and
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    Alex do not know each other, they do not
    trust each other, as well. So, they set up a
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    contract for this trade. Just to be on the
    safe side. Here on the right, you can see a
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    typical contract for trade, and it consists
    of some important informations like a
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    description of the object that should be
    sold: The house of Alex, maybe the address,
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    what's inside and stuff. the agreed amount
    of money – let's say the house costs half a
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    million, whatever. The persons who are
    involved in this trade – in this case Mary
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    and Alex. And of course the signatures. As
    a final step, this contract must be
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    timestamp for being valid. So, nowadays
    those kind of contracts usually exist as
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    digital documents. But for both the
    digital and the analog document, if an evil
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    party gets hands on all copies of this
    contract, he can modify it in a malicious
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    way. Let's say, removing the timestamp.
    This can void the contract and thus make
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    the trade invalid. By the way, the evil
    party can also be one of the persons
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    involved in this trade. So, let's say our
    Alex – the evil one – he wants to take the
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    money from Marry but also keep the house.
    Okay? This is our initial situation. So in
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    1990 Haber and Stornetta proposed in a
    scientific paper a cryptographical
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    solution for binding a time stamp undevisably
    to a digital document. What does
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    it mean? They both – the timestamp and the
    digital document – are merged into a new
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    document and can't be separated from each
    other without being damaged. So, we'll see
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    later how this exactly works. For now,
    let's pretend this block, which you can see
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    here, contains our digital document and the
    timestamp. And both are binded by some
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    mystical fancy cryptographic technique
    which is represented by this blue frame.
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    Okay? So, unfortunately, we still face a
    problem: That's our evil party – remember
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    Alex is the evil party? – He can just make
    this contract and all copies disappear and
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    claim they never existed before. So, to
    tackle this problem, Haber and Stornetta
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    and their paper further proposes a
    chaining technique for those blocks. All
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    of which contains of course a different
    contracts. So, the result is a chain of
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    blocks: The blockchain. Here we are. Hey!
    And since this is a chain, it's not
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    possible to remove one of the blocks.
    Removing a block from the inside of the
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    chain, will just break it completely, in a
    way that you can't put it together anymore
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    without damaging it, as we will see later.
    Okay? So, this doesn't prevent that anyone can
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    just make this whole chain disappear.
    Maybe. So, but the longer the chain gets,
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    the more people are involved in this chain,
    the higher the risk for evil parties
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    malicious task is discovered. OK? Clear so
    far? Right. But the problem remains: This
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    chain has to be stored somewhere. You
    remember it's digital? So let's say
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    another trusted party gets this task. So,
    here we are. This is our trusted party
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    which is in charge for blockchain. But, the
    thing is this trusted party can also fail
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    or become untrusted. And it doesn't have
    to be malicious at all. It also may happen
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    that the storage for blockchain fails or
    crashes or any data may be destroyed due to
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    any hardware failure, maybe, or a trusted
    party just deleted accidentally. Maybe. So,
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    it's like with every centralized service
    you have to trust. So, imagine your e-mail
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    provider just disappears tomorrow. How
    many services are you using which depends
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    on the e-mail address? OK. So, for that
    reason, the paper suggests to distribute
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    copies of our blockchain to a lot of other
    parties. So, here we are. Here you see a
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    lot of other parties – whoever they are – who
    owns a copy, an exact copy, of a blockchain.
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    Remember, this blue color represents
    something cryptographical. OK. So, you can
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    see there is no centralized storage
    anymore. Instead we have a large number of
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    participants which we can rely on. So,
    let's call this a decentralized network.
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    Remember this term. It will get important
    later. So, for now, even if some of those
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    parties fail, as long as the majority
    stores are valid and of course the same
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    copy of a blockchain, we can keep going.
    OK. You're still with me? Right. OK. So, the
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    question remains: How does mystical
    cryptography thing, stuff, whatever works.
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    laughs
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    This is how such a block actually looks
    like. And in fact, this is the first
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    blockchain block ever created. But, I
    suppose you're not really interested in a
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    math lecture. OK. So, as I promised, let's
    keep the mathematical details and stay
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    visual. But just for information: This
    is a block. Okay. Let's pretend, we observe
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    another trade. Alice and Bob are doing a
    trade and we can see, Alice wants to sell her
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    smartphone or whatever to Bob. So, do you
    remember those polaroid cameras, where you
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    could take a picture and it was printed
    instantly? You know them? I think they're
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    back in fashion now. So, while we observe the
    situation, we take a polaroid picture of
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    it. It's printed, and this picture attests
    this trade. So, we take this picture and
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    put it on a blackboard. Like this here. So,
    let's say, this picture represents a block.
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    You remember these blue framed blocks like
    we saw them before? OK. Somewhat later,
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    we observe another trade. Here, Charlie
    wants to sell his car to Peter. And again,
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    we take a picture. But this time, we hold
    the picture from before – the one, which is
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    already on the blackboard – into the
    background of the situation. Like here. So,
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    now, we take the new Polaroid picture and
    put it back to our blackboard. OK? So, what
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    do we see now? The first picture, which is
    our first block, appears in the background
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    of the second picture, which is our second
    block. So, let's say the second block is
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    chained to the first block. So, if someone
    evil wants to change the content of the
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    first block, he must also change the
    content of the second block. Which means
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    more effort for this evil party. Ok? So, of
    course let's keep doing the same. And add
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    the third picture to the board. Here we
    can see Eve and Alex, another Alex, trading
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    some goods. And in addition again we can
    see the second picture. It's in the
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    background of this third picture, so it's
    the same thing. The third is chained to the
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    second. OK. You're with me? Nice. And of
    course for the sake of completeness we add
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    the fourth block where Armin and Ed are
    trading. And this house is more expensive
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    this time. So again, we'll see the content
    of the third block in the fourth block.
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    That's their chain. So now we can see the
    big picture here. So if our evil party now
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    wants to change something on this first
    trade on the first picture, that means he
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    must change the second and the third and
    the fourth picture as well. Else this
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    modification is detectable. You agree? OK.
    So one can say we created our very special
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    kind of blockchain here, consisting of
    polaroid pictures, which represents blocks
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    of course. OK, so this effort can bring us
    some fancy properties. And at this point
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    it's important to say that some of these
    properties are optional. There are
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    different kinds of blockchain systems out
    there and most of the properties depends
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    on what kind of blockchain is in use and of
    course the use case. But let's just take a
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    look on some of the important properties,
    in my opinion. So return to our blackboard
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    here, which we constructed earlier. So we
    already observed this chaining mechanism.
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    This picture in a picture thing. You
    remember. So this mechanism makes our
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    blocks immutable and thus the contracts
    inside these blocks are immutable as well,
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    of course. So they can only be modified if
    the complete chain is also modified. So
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    let's take our board and place it anywhere
    in the public. This gives all the people
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    walking around the possibility to keep an
    eye on everything happening on our chain
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    on the board, and maybe detect any
    anomalies. So we can say, well, blockchain
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    is the coolest open source software,
    maybe. Other parties who make up our
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    distributed network - you remember we
    talked about that before - creates an exact
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    copy of our blackboard, and the updates,
    they copy every time something new
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    is appended to the chain. So if the original
    blockchain on this board becomes invalid
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    or disappears, or whatever, we can ask our
    distributed network for the last valid
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    copy of this chain and put it back on the
    board. But even if some of those parties
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    becomes malicious, as long as the majority
    of all parties is honest and own valid
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    copy of our block chain we could prevent
    fraud in it. And at least it's possible to
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    ensure anonymity for all involved parties.
    Parties of our distributed network, as well
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    as the parties involved in the contracts
    inside the blocks. OK, so in summary we can
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    say the contracts in our blockchain are
    immutable. The control over the blockchain
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    is decentralized and it's really hard to
    get the majority of the network to the bad
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    side, I suppose. Our block, our board and
    thus the blockchain and side are exposed
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    to public scrutiny and it's not possible
    to remove one of the blocks from inside
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    the chain without breaking it completely.
    We can provide anonymity to our distributed
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    network and the parties
    involved in the transactions or the
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    contracts inside the chain and at least we
    don't have to be at the mercy of a single
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    institution, like a bank or government or
    whatever. Okay, so looks like some fancy
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    properties. This are just some of a lot of
    properties which we can achieve. So let's
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    take a closer look on a common blockchain
    application. I suppose most of you here
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    heard of the so-called cryptocurrency
    stuff, especially bitcoin. Maybe some of
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    you own some bitcoin. Of course there are
    many more cryptocurrencies out there:
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    Woppercoin, OneCoin(?)... stuff. But
    let's talk about financial transaction on
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    a blockchain in general. So this is a
    classic German bank transfer form. Before
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    the times of online banking, this form was
    used to transfer money from one bank
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    account to another. Maybe some of you
    still remembered, you had to write
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    extremely clear - it was horrible - and you
    filled out this form, gave it to your bank
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    and they take care of everything else. So
    you can see some fields here: These are
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    the names of the sender and receiver of
    the money. The sender is on the bottom.
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    Here you can see the account numbers. This
    is the bank ID, and in this case you can
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    see it's the same bank. Of course the
    amount of money and the signature of the
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    sender, as well as the date. So for
    financial transactions via
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    cryptocurrencies like Bitcoin whatever, we
    don't need that much information. The only
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    information we need here, are the sender's
    and receiver's public keys. They are used
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    the same way as the account numbers, but
    they're much longer, more cryptical.
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    Of course, still we need the amount of
    money and the sender signature, which
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    also contains the timestamp. Remember this
    stuff is digital. So back in the good old
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    days we just fill out this form, put it
    into a special letter box in the bank and
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    forget about it. In cryptocurrencies, very
    simply said, all commission transactions
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    like this here are collected by our
    distributed network. So let's say our
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    distributed network collected seven
    pending transactions. So, but these
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    transactions are not in our blockchain
    yet. Let's get back to our blockchain.
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    We have five blocks currently with any
    contracts or transactions inside. So now
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    we face the question which of those
    transactions shall form our sixth block in
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    this chain. OK, you agree on this question.
    Maybe some of you would say: Hey, we have
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    some timestamps in the transaction. Why
    can't we use them. The thing is that our
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    distributor network is in different time
    zones and, I don't know, network delays
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    and all this stuff. So we need another
    solution for this question. I suppose some
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    of you already have an idea how to use
    this. So if all involved parties follows a
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    rule on how to find an agreement on
    something, whatever, we can call this a
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    consensus protocol. So maybe some of you
    heard this term before. Okay, so remember
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    it. Let's replace transactions and
    contracts with something much simpler.
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    Let's say some fancy symbols have been
    proposed as candidates for our next block,
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    the red one in the chain. So our
    distributed network, consisting of some
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    participants, now face the question. Which
    of those symbols shall form the next
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    block. And there are different ways to
    achieve this goal. So let's talk about the
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    best known consensus protocols. Maybe one
    of the most popular used by the bitcoin
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    network, it's the proof of work protocol.
    I see some people laughing. OK. So what
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    does it got to do with competition. Back
    to our initial question, which of the
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    symbols shall form the next block. So very
    simply said each time a new block shall be
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    created. And this means as long as there
    are pending transactions we'll need new
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    blocks. Our network holds the public race
    and everyone can take part in this race.
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    So the winner of the race can decide which
    symbol gets into the new block. Looks
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    simply. And in this race we can see that
    the winner party selects the heart symbol
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    for the next block. So it appears there.
    So the outcome of this race is known to
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    our distributed network. So each of those
    parties in this network appends the new
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    block into their own local blockchain copy
    holding this heart symbol inside. OK?
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    Right. Unfortunately, as some of you may
    know, this protocol has some drawbacks and
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    the most serious of these is probably the
    negative impact on the environment. That
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    means holding such races consumes many
    resources. And of course in reality not
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    motorcycles, but a very large number of
    highly specialized, high performance
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    computers take part in these races. And of
    course they need of a huge amount of power
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    which is not really great for environment.
    So for last year it was estimated that the
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    bitcoin network needed, at annual rate, as
    much power as the whole country of Denmark,
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    which is a lot. OK, so you don't like this
    protocol. Let's take a look on another
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    one. So this protocol depends on the vote
    of participants in the group. We call it
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    the consortium vote. This is one of the
    names for this protocol. Back to our
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    initial question with the fancy symbols.
    Which of them shall form the next block in
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    our chain? So instead of a huge network of
    unknown participants driving motorcycles
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    and holding races, this time we invited
    some parties in a fixed group. We called
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    this group consortium. So each time a new
    block shall be created, the participants
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    of this consortium hold a vote. It's
    similar to a democratic election. So the
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    symbol most parties voted for wins. It'
    that simple. So in this round we can see
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    two parties voted for the circle two
    parties voted for the heart and three
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    parties voted for a star symbol. So the
    star is selected by the will of the people
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    and thus appears in the next block. You
    agree? OK, so the outcome of this vote is
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    visible again to our distributed network
    which holds copies of our blockchain. So
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    each party in a distributed network
    appends a new block into their own local
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    copy holding the star symbol inside. So,
    great, we see no environmental drawbacks
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    here. Maybe this is the best solution. OK,
    some of you disagree. Yeah. Well the
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    topic here is the formation of the
    consortium. This is one of the drawbacks.
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    We can't ensure that the invited parties
    or participants of our consortium are
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    unbiased. Here we see a very huge doorman
    and this doorman only allows participants
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    to our consortium party who promises to
    vote for this circle symbol and nothing
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    else. So we can say he's kind of a filter.
    So since there are only participants who
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    refers the circle symbol and a consortium
    they also vote for it eventually. As you
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    can see here. So among all the drawbacks,
    this protocol may be misused for
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    corruption or whatever. OK, you're still
    with me? Nice. Okay let's check the last
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    consensus protocol, may we have more
    success here. So this one depends on the
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    share or stake of the system that everyone
    owns. This consensus protocol will be
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    called Proof of Stake. But what does it
    have to do with randomness? Maybe you ask.
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    So one last time we repeat our question,
    which of the symbols shall form the next
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    block in our chain? So let's pretend we
    have any system, let's say all existing
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    symbols in this world form our system. We
    can see the system. This is the circle on
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    the right side. And the whole system
    belongs to five parties, which are on the
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    bottom left. This five color parties. So
    this colored circle represents the stake
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    of each party on the system. So each round
    these parties vote on which symbol shall
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    form the next block. But this time the
    decision for who is the winner is made
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    randomly, taking into account the stake of
    each party. So we can call this a weighted
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    randomness. OK, so how does this exactly
    work? Let's imagine this roulette wheel. I
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    hope some of you know this kind of game.
    OK. Usually you spin the wheel, you throw
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    a ball on it and some time the wheel stops
    turning and the ball lands on any number
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    on this wheel and this number is the
    winner then. But instead of numbers this
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    time we distribute the symbol candidates
    on the wheel according of the stake of its
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    holder. OK, so let's play the game. That's
    how our wheel looks like and we spin it
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    and throw a ball on it. It keeps rolling
    and rolling and it stops at some point on
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    a symbol. Here it landed on the triangle.
    So the triangle is the winner symbol for
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    our next block and appears there
    eventually as you can see on the top
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    right. Okay? You're with me. All right. So
    what happens when the stake of one of
  • 28:17 - 28:24
    these parties is significantly larger
    than the stake of others? Here, our red
  • 28:24 - 28:33
    stakeholder is a very rich man and holds
    the majority of the system, so as you can
  • 28:33 - 28:38
    imagine even if our system chooses
    randomly, since this randomness is
  • 28:38 - 28:43
    weighted, his chance to be chosen is
    significantly larger than the chance of
  • 28:43 - 28:57
    others. So, of course, there are even more
    consensus protocols out there and you can
  • 28:57 - 29:03
    spend a few hours talking about them. But
    to get to the point, every effort to reach
  • 29:03 - 29:08
    a fair consensus seems to come with
    drawbacks and depending on our use case
  • 29:08 - 29:14
    and the blockchain system which we are
    using those drawbacks can have negative
  • 29:14 - 29:19
    impacts. So why are we still putting all
    this effort into this blockchain science,
  • 29:19 - 29:26
    you may ask. Let's get back to our initial
    situation, where Mary and Alex traded and
  • 29:26 - 29:31
    Mary wanted to buy a house from Alex. You
    remember? So here Mary has to trust Alex,
  • 29:31 - 29:38
    that the house he sells to her is really
    his own property and that he won't revoke
  • 29:38 - 29:46
    the trade afterwards. On the other hand
    Alex has to trust Mary that she gives him
  • 29:46 - 29:54
    the promised amount of money for this
    house. So if a bank is involved in this
  • 29:54 - 29:59
    trade they both, Mary and Alex, have to
    trust this bank for transferring the money
  • 29:59 - 30:04
    safely from Mary to Alex, and of course
    the right amount of money and right
  • 30:04 - 30:13
    currency. And in big trades like house
    selling, usually a notary is involved.
  • 30:13 - 30:22
    Mary and Alex have to trust this
    notary to be impartial.
  • 30:22 - 30:30
    So we see, traditionally such
    trades involves a lot of trust and
  • 30:30 - 30:35
    trusting in such things as trades is not
    really popular as there has been a lot of
  • 30:35 - 30:42
    disappointments in the past. As you may
    know. And all this blockchain science is
  • 30:42 - 30:49
    the most promising approach for mitigating
    the need of this trust so far. But I think
  • 30:49 - 30:55
    we're still a long way from reaching this
    goal. So let's see what the future may
  • 30:55 - 31:09
    bring us. Thanks for attention.
    applause
  • 31:09 - 31:14
    Herald: Thank you very much for this nice
    introduction. If you have questions please
  • 31:14 - 31:25
    go to the mics. There's three simple
    rules to follow now. First, if you want to
  • 31:25 - 31:30
    ask a question, a question is normally one
    sentence ended by a question mark. Nothing
  • 31:30 - 31:36
    else. Second if you speak into mic keep it
    close to your mouth just like you would
  • 31:36 - 31:42
    like to bite into it. But please don't do
    so. And third for everybody who is leaving
  • 31:42 - 31:49
    now, please do this quietly. Thank you very
    much. So let's start with a question from
  • 31:49 - 31:54
    the Internet.
    Q: Hi. There is a question from IoC. So
  • 31:54 - 31:59
    you talked about how blockchains provide
    anonymity and could you explain what that
  • 31:59 - 32:03
    means in the context of a blockchain,
    because after all it's like real people
  • 32:03 - 32:08
    having a transaction. So what is the
    definition of anonymity in this context?
  • 32:08 - 32:12
    A: This is a very technical question, I
    suppose. For the technical people
  • 32:12 - 32:17
    anonymity means we don't have names like
    we've seen on the German bank transfer
  • 32:17 - 32:21
    form, where we can exactly see Mary and
    Alex are trading. So you have the names
  • 32:21 - 32:25
    and you exactly know who those people are.
    In the technical case, that means we use
  • 32:25 - 32:30
    public keys. And of course we can create
    public keys without seeing the person
  • 32:30 - 32:36
    behind it. So in this case it's possible
    to ensure anonymity, but as some of you may
  • 32:36 - 32:41
    know, comes some drawbacks. It's,
    yeah, technical.
  • 32:41 - 32:48
    Herald: Microphone number three.
    M3: You showed us different ways of
  • 32:48 - 33:00
    choosing which transaction is next. But I
    don't know if there is a possibility that
  • 33:00 - 33:10
    some transaction will be lost? Like, you
    know, it doesn't take -
  • 33:10 - 33:14
    A: You mean like one of the transactions
    just disappears from this cloud thing?
  • 33:14 - 33:19
    M3: Yeah, because all others are chosen
    before it.
  • 33:19 - 33:22
    Like - or how long does it take to do the
    vote?
  • 33:22 - 33:26
    A: Oh that really depends on the protocol
    as some of you may know in case of
  • 33:26 - 33:32
    blockchain which has this time minute
    stuff. That means I think every 10 minutes
  • 33:32 - 33:36
    we'll do a new round because of this
    cryptographical hash whatever, but it
  • 33:36 - 33:41
    absolutely depends on the protocol. As
    this voting protocol works completely
  • 33:41 - 33:47
    different. So that's the reason why I
    didn't want to go into details, because it
  • 33:47 - 33:51
    depends on the protocol. So we can talk
    about it later if you want to but I think
  • 33:51 - 33:57
    this is out of scope here.
    Herald: Microphone number two, please.
  • 33:57 - 34:01
    M2: Thanks for the talk. A lot of the
    examples I see on blockchain are
  • 34:01 - 34:05
    basically database owned by one company.
    So it doesn't really. So what is it for
  • 34:05 - 34:09
    you the most exciting usage of blockchain
    that you see today?
  • 34:09 - 34:17
    A: I cannot answer this question because I
    don't truly know what kind of solutions
  • 34:17 - 34:24
    are there. Of course I know the popular
    stuff like hyper legend whatever. For me
  • 34:24 - 34:29
    personally the current solution are not
    really cool, but because of technical
  • 34:29 - 34:34
    backgrounds. But I can imagine that the
    distributed computing protocols behind
  • 34:34 - 34:40
    this blockchain thing can lead us to some
    very cool stuff. But we need to put much
  • 34:40 - 34:45
    more science inside it and that means,
    really science.
  • 34:45 - 34:50
    applause
  • 34:50 - 34:53
    Herald: We have another question at
    microphone number two.
  • 34:53 - 34:59
    M2: Great talk. Yeah. For distributed
    computation, there was already a lot of
  • 34:59 - 35:01
    work.
    Herald: Sorry, can you go a bit closer to
  • 35:01 - 35:04
    the mic please?
    M2: Sorry. If one of the most interesting
  • 35:04 - 35:09
    usage is distributed computation, there
    was city at home there is a bunch of bla
  • 35:09 - 35:15
    bla bla at home so I'm not sure. Then
    again, what's the competitive advantage
  • 35:15 - 35:22
    let's say of blockchain to those previous
    distributed computation protocols?
  • 35:22 - 35:28
    A: I'm not sure if I understand your
    question but do you ask, what exactly is
  • 35:28 - 35:30
    new about all
    this thing?
  • 35:30 - 35:37
    M2: If the advantage is distributed
    computation, that was done before. And I'm
  • 35:37 - 35:42
    not sure what's the advantage of doing it
    by a blockchain.
  • 35:42 - 35:48
    A: Technically a blockchain is absolutely
    nothing new. So distributed computing is a
  • 35:48 - 35:53
    quite old topic it's nothing else than
    just a distributed database in fact with
  • 35:53 - 35:58
    some other properties which can be
    combined. So that means blockchain is a
  • 35:58 - 36:05
    combination, for me personally, of a lot
    of techniques. So I think we just should
  • 36:05 - 36:12
    use many more distributed computing
    solutions for stuff like financial
  • 36:12 - 36:17
    transactions or smart contract stuff
    whatever. So this blockchain term you must
  • 36:17 - 36:25
    be really careful with it.
    Herald: That's a very nice warning. So
  • 36:25 - 36:28
    please give a warm round of applause for
    Alex.
  • 36:28 - 36:35
    Applause
  • 36:35 - 36:37
    35c3 music
  • 36:37 - 36:57
    subtitles created by c3subtitles.de
    in the year 2020. Join, and help us!
Title:
35C3 - A Blockchain Picture Book
Description:

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Video Language:
English
Duration:
36:57

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