Blockchain Primer

December 2017
Parul Singh, Principal @Founder Collective

@parulia - 12-01-17
1.
Context
Why talk about blockchain?

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In June 2017, the cryptocurrency market cap grew 4X to break@parulia
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$345,777,000,000
Nov 29, 2017, Total Cryptocurrency Market Cap (55% is BTC)

Source: Coinmarketcap.com

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 5
Here are the early adopters in blockchain technology between 2014-2017.
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Are ICOs the new VC?

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Meanwhile, ICO fundraising speeds past traditional VC investment in June 2017.
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Regulation is coming too. In Nov 2017, the SEC took the unusual step of warning against celebrity
endorsements for ICOs. @parulia - 12-01-17 7
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Blockchain use cases seem compelling enough to warrant investment from organizations as
diverse as Deloitte, the FDA and Maersk. @parulia - 12-01-17 8
Startups are preparing. In April 2016 - AirBnB acquihired a bitcoin
payments team to help them keep up.
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In October 2017 - MIT adds blockchain verified digital diplomas
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2.
Fundamentals
Lets review whats under the
hood.

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Blockchain will do for
transactions what the internet
did for information.

Gina Rometti, CEO IBM

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From an internet of bits we are moving toward the internet of value.
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 Evolution of the network: from internet > decentralized blockchain. Put another way:
blockchain makes it possible for p2p communication to be secure enough for transactions.

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Key concepts
Blockchain Cryptocurrency Bitcoin

The underlying Application of A specific

technology blockchain for digital cryptocurrency
currency

Distributed Decentralized using The first

database (aka blockchain, secured fully-implemented
ledger) using cryptographic decentralized
hashes (aka fancy cryptocurrency
math)
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Blockchain Stack
Consensus layer: a protocol that describes the format of a ledger that
is publicly visible and a consensus function that anyone can use to
determine which of multiple candidate ledgers is the consensus ledger.
The protocol must also allow new blocks to be added to the ledger.
Mining layer: a protocol that incentivizes parties to maintain the
consensus and add blocks to the ledger.
Propagation layer: a protocol that determines how the ledger and
blocks are transmitted between nodes in the network.
Semantic layer: a specification of how new blocks must relate to
previous blocks and a protocol for verifying conformity with the
specification.
Application layer: application code that implements some desired
functionality.

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 How a blockchain transaction works

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That said, understanding how the technology works is like understanding MySQL replication - it
doesnt help you appreciate Pinterest or Uber. The use cases are what matters. @parulia - 12-01-17 17
3.
Use Cases
We dont invest in
technologies, we prefer to
invest in use cases - and that
filter applies here.
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Blockchain has four key functions

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Key sectors and blockchain use cases

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Some anticipate the biggest impact in fintech

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But all of these industries/use cases may be disrupted

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Joe wires money to a company
Current way: Problems: New way:
1) Joe gets wire info 1) Everything has to 1) Joe gets wallet
2) Joe sends the go through the address (public key) of
wire command to bank company
the bank 2) The bank 2) Joe sends amount to
3) The bank sends charges a fee recipient
the money to the 3) You can spoof 3) The blockchain
receiving bank the wire records the
command transaction
4) The company receives
the payment (verified
via ledger)
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Noah applies for a mortgage
Current way: Problems: New way:
1) Noah fills out 1) The system of record 1) Noah fills out an
an application is massively insecure application
2) Lender checks (equifax) 2) Digital identity &
2) Transactions require verification for: credit
Noahs credit
verification rating, original asset
score 3) Many parts can be ownership, transfer
spoofed of ownership,
4) Escrow is expensive payment
3) Faster & cutting out
govt. / intermediaries

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Parul goes to the doctor
Current way: Problems: New way:
1) Parul contacts a doctor 1) Slow and inefficient 1) EHR is replaced by a
who is preapproved by
2) Multiple (sometimes secure blockchain
my insurer
2) Parul visits dr who written!) confirmations 2) Insurer approvals are
enters notes into an needed for insurer verified by blockchain
EHR approval, transfer of 3) Payments are sent more
3) Parul visits another dr medical records, and quickly via blockchain
who must get written payments
permission for EHR
access
4) Insurers need to verify
every procedure before
payment

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4.
Blockchain
102
Going deeper

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Every large paradigm in the history of the human
species thus far narrowed or completely closed
some large gap; blockchain will narrow or
completely close a large gap as well. The printing
press closed the knowledge gap, the steam engine
closed the power gap, and the Internet is closing the
distance gap. Blockchain stands to close the
exponentially expanding trust gap.
Richie Etwaru

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Five Key Takeaways
1. Blockchain will do for transactions what the internet did for information.
2. Just like the internet, we can expect to see disruptive business models,
picks & shovels / infrastructure businesses, and existing industries
incorporating new technologies into their models.
3. Financial institutions are heavily investing in blockchain technologies
(maybe the way the military invested in early internet). IBM estimates
that 65% of large financial companies will have blockchain systems in
production by 2019.
4. Open information, frictionless / costless / near instantaneous
transactions & smart contracts will engender business models we
probably cant envision yet.
5. Increasingly, blockchain companies are going directly to insiders via
ICOs and bypassing traditional VC.

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Blockchain 101 key concepts
Contracts, records and transactions
Decentralized ledger fixes many problems of the
internet - reducing single point of failure scenarios
Enabling p2p transactions - beyond file sharing
Cutting out intermediaries - increasing speed +
transparency

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Blockchain 102 key concepts
Transparency + disintermediation + trusted
transactions - companies will be disrupted by new
trust models
Network effects on steroids - tokens create incentives
to stay within a network that you partially own
Early adopter incentives - generating froth
Looking around corners
Government & currency
Disrupting VC itself

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Five Significant Obstacles to Adoption
1. This stuff is hard to explain.
2. Blockchain technology is immature. (Doesnt scale yet,
buggy, incomplete)
3. Adoption takes time. As a parallel, TCP/IP took 30
years.
4. Single use and localized applications will emerge first,
even so, we are at *early, early* adopter phase.
5. Trust, coordination, and technology becoming invisible
to consumers have to happen before this widely takes
hold.

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Key Blockchain Risk Factors
Lack of scalability: decentralized design require that every node fully participate in
every transaction which serves as a throttle on total transactions for major
blockchains
High cost per transaction: as is, this makes blockchain impractical for certain use
cases
Vulnerability to hacks and bugs: high-profile + expensive examples include DAO
($50M stolen) and Mt Gox ($470M stolen)
Tech immaturity: interoperability doesnt exist, standards are being devised, all
the v.0.x problems of any nascent technology exist now
Regulatory environment: has not caught up to innovations in the field
Burning bank: participation based distributed ledger systems may face the
same problem as a bank experiencing a run
Fake news / mob rule: if a distributed system uses consensus to say whats true,
what happens if 90% of the people are lying?
Inertia: getting enterprises and individuals to switch over to a new system requires
overcoming good enough bias

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5.
Representative
Startups
Were in the early activity
period

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OpenBazaar
Sector: P2P Marketplace
Description: Decentralized cryptocurrency
marketplace that enables its users to trade
online
Location: Washington DC
Founded: 2014
Funding to date: $4.2M
Investors:
Digital Currency Group
Andreessen Horowitz
BlueYard Capital
Union Square Ventures
William Mougayar
Andreessen Horowitz

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MedRec
Sector: EMR via Blockchain
Description: Decentralized record
management system for EMRs that uses
blockchain technology to manage
authentication, confidentiality,
accountability, and data sharing. A
modular design integrates with providers'
existing, local data-storage solutions,
enabling interoperability.
Location: Cambridge, MA
No investors or funding raised - MIT
Media Lab project
https://www.media.mit.edu/research/grou
ps/1454/medrec

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The DAO
Sector: Finance / VC
Description: Largest ever
crowd-sourced venture-like fund
Funding: raised $150M between
April-May 2016. Later was hacked &
shut down by exchanges in September
2016
Investors: 11,000 crowdfunders, none of
whom owned more than 4% of fund
Competitors: us??
Notes: DAO failed but its successors will
learn from its mistakes. The SEC also
later ruled that they were selling
securities, so path forward is unclear.

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Lightning Network
Sector: Infrastructure
Description: Software to allow crypto
holders to transfer funds w/o publishing
to the blockchain, possibly a solution to
the bitcoin scalability problem
Funding: Will raise soon?
Investors: N/A
Location: San Francisco
Founded: 2017

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 Fintech + Blockchain
Company Description Location URL Use Case Year Founded Funding Raised Funded By
Settlements
SETL Platform for settlements and payments UK setl.io Payments 2015 $39,000,000 Deloitte
Decentralized clearing machines for financial OTC Clearing Settlements Nyca Partners
clearmatics markets UK clearmatics.com Payments 2015 $1,000,000 Route 66 Ventures
Medici Ventures
Hudson Technologies
Celeridem Capital Management
Wicklow Capital
Proprietary Smart Security technology allows Clearing Kayon Partners
complex financial instruments to be modeled in an Settlements SenaHill Partners
easy to understand programming language and fully Payments DHVC
Symbiont digitized onto a distributed ledger NY symbiont.io Smart Contracts 2015 $7,000,000 Atlantic Merchant
Jungle Ventures
Silver8 Capital
RRE Ventures
Foxconn Technology Group
Arbor Ventures
IGNIA
American Express Business Travel
Consumer digital wallet supporting payments and Payments Lerer Hippeau Ventures
Abra transfers for bitcoin and over 50 fiat currencies Mountain View abra.com Transfers 2014 $30,000,000 First Round Capital
Digital Finance Group
GV
TechU Angels
SV Angel
Blockchain Capital
Lightspeed Venture Partners
Jeremy Liew
Eric Kagan
Institutional derivatives exchange platform for digital Trading Funders Club
LedgerX currencies NY ledgerx.com Clearing 2014 $12,900,000 Cross Pacific Capital Partners
Draper Associates
Expanding Capital
Battery Ventures
Greylock Partners
IVP (Institutional Venture Partners)
Todd Chaffee
Tusk Ventures
Largest dgital currency wallet service to buy and sell Payments Jordan Nof
Coinbase bitcoin SF coinbase.com Transfers 2012 $217,000,000 Spark Capital @parulia - 12-01-17 38
 Supply chain + Blockchain
Company Description Location URL Use Case Year Founded Funding Raised Funded By
Digital Currency Group
Provide transparency tools that assemble image, Plug and Play Tech Center
identity and location to create profile, product and story Tracking for all John Taysom
pages; provide traceability system confirms identities stakeholders Omidyar Group
and product attributes in tracking items through supply Transparency for end Merian Ventures
Provenance chains UK provenance.org users 2014 $1,000,000 Humanity United
Iterative Capital Management, L.P.
Vinny Lingham
Pantera Capital
Dr. Steven (Seven) Waterhouse
Colbeck Capital
Secures IoT device identities, data, and event logs and Crypto identity for Solon Mack Capital
automates IoT-dependent business logic through physical goods Mandra Capital
smart contracts and offers a blockchain as a service Tracking via IoT Social Starts
Chronicled platform for supply chain ecosystems SF chronicled.com Smart Contracts 2014 $9,000,000 Seattle Seahawks
Mercury Partners LLC
Rainer Busch
Oak Investment Partners
Bandel Carano, Tom Huseby
OMERS Ventures
Jim Orlando
Tom Huseby
Patended RFID technology for real-time asset tracking Tracking via IoT InnoCal Venture Capital
Mojix and supply chain management LA mojix.com Analytics platform 2004 $85,500,000 Red Rock Ventures

Secured distributed ledger technologies, network Crypto identity for

graph analytics, data interoperability and visualization physical goods
Context Labs for supply chain Cambridge, MA contextlabs.com tracking N/A N/A N/A

Develops technologies that streamline critical supply Tracking via IoT

Bext360 chains in emerging economies Denver, CO bext360.com Analytics platform 2016 $1,200,000 SKS Venture Partners
Offers a universal, secure ledger by which SKUs can
attest to digitally to their orgins and attributes. Products
include cryptographically secure smart contracts
governing an entire purchase cycle and Proof of Tracking via IoT Amino Capital

Skuchain
Provenance codes, a crypto-serialization solution to
track flow of goods on SKU level. Mountain View skuchain.com
Trade Finance
Smart Contracts 2014 N/A
Fenbushi Capital
Digital Currency Group @parulia - 12-01-17 39
 Marketplaces + Blockchain (1/2)
Year Funding
Company Description Location URL Use Case Founded Raised Funded By
Digital Currency Group
Andreessen Horowitz
BlueYard Capital
Union Square Ventures
William Mougayar
Decentralized cryptocurrency marketplace that enables its Washington openbazaar.or Andreessen Horowitz
OpenBazaar users to trade online DC g/ P2P Marketplace 2014 $4,200,000 Union Square Ventures
Arcade City P2P ridesharing platform connecting drivers to riders Austin, TX arcade.city P2P Marketplace 2016 N/A N/A
Ecommerce
Marketplace
Payment solution technology for marketplaces, lemonway.co Crowdfunding
Lemonway ecommerce, crowdfunding France m Payments 2007 $600,000 N/A
Proof of Process Technology enables traceability, BNP Paribas Cardif
transparency and data integrity, thus reducing costs and NASDAQ
complexity of the interactions between partners, customers, Otium Capital
auditors, and regulators. The solution offers a common Bruno Raillard, Pierre Entremont
audit trail, secured by blockchains and cryptography, where Digital Currency Group
stakeholders can collaborate without revealing their private Peer-to-Peer Network Open CNP
Stratumn and confidential data France stratumn.com Proof of Process Protocol 2015 $9,667,000 Otium Capital
Transactive grid (hybrid
device that measures a
buildings energy production
Launched Brooklyn Microgrid, a community-powered and use, and communicates
microgrid here in Brooklyn. This means our participants can with the network to Centrica
engage in a sustainable energy network and choose their lo3energy.co collectively manage energy) Braemar Energy Ventures
LO3 Energy preferred energy sources, locally. Brooklyn, NY m DTL 2012 N/A ConsenSys

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 Marketplaces + Blockchain (2/2)
Year Funding
Company Description Location URL Use Case Founded Raised Funded By
Yuan Capital
Clarissa Zhang
RRE Ventures
21.co built first computer with native hardware and software Peter Thiel
support for the Bitcoin protocol. Developers use it to build Andreessen Horowitz
bitcoin-payable apps and services. 21.co rebranded to launch Mark Pincus
Earn.com, a token-based social network, where senders pay users San Francisco, Khosla Ventures
21.co in digital currency to complete tasks CA earn.com Marketplace 2013 $121,050,000 Qualcomm Ventures
Ethereum-based decentralized platform that can be used to create
newsrooms and stations blockchain-based marketplaces
where citizens and journalists form communities around a shared
purpose and set of standards, financially support factual reporting,
nd investigative work, and substantially limit misinformation Smart Contracts
Civil through effective collaborative-editing methods NY joincivil.com Marketplace 2017 $5,000,000 ConsenSys
CyberMiles is a blockchain protocol being developed and
optimized for business and marketplace applications. CM is being
developed as a fat protocol, consisting of a blockchain-based
virtual machine, and defined modules of middle-layer software
stacks operating outside the chain, to support decentralized
processes governed by smart contracts implemented on the
network.CM is working closely with 5miles, a leading c2c
marketplace operator with more than 12 million users in the US.
5miles is expected to be the first platform to utilize CyberMiles cm.5miles.co Smart Contracts
CyberMiles blockchain protocol. N/A m Marketplace 2017 ICO ICO (+ partnership with 5Miles)
bitJob P2P MarketPlace for students, freelancers and employers. Tel Aviv bitjob.io Marketplace 2016 $2,000,000 ICO
Full and comprehensive combination of e-commerce services
such as smart contracts, cryptocurrency payments, integration with iico.storiqa.co Ecommerce 4 425 ETH
Storiqa third-party services and 24/7 support Switzerland m Payments 2017 ($1.6M USD) ICO

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 Healthcare + Blockchain
Year
Company Description Location URL Use Case Founded Funding Raised Funded By
Decentralized record management system for EMRs
that uses blockchain technology to manage
authentication, confidentiality, accountability, and data
sharing. A modular design integrates with providers' https://www.media.mit.
existing, local data-storage solutions, enabling edu/research/groups/1
MedRec interoperability. Cambridge, MA 454/medrec EMR via Blockchain N/A N/A N/A
KEC Ventures
Jeff Parkinson
Pelion Venture Partners
Ben Dahl
Digital Currency Group
RRE Ventures
Tiller Partners
Partner with industry leaders (Philips) to identify Fenbushi Capital
problems they want to solve for their network, and then Blockchain Capital
launch a federated blockchain to support the pilot Danmar Capital
running on GemOS (OS enables connecting to any Amplify.LA
Gem blockchain, data store, access controls) LA gem.com 2013 $12,500,000 Robert Wolfson
https://deepmind.com/
Google applied/deepmind-heal
DeepMind Building an auditing system for healthcare data UK th/ EMR via Blockchain 2010 N/A Google
Payments
Identity
ERP
Consortium of healthcare companies focused on IoT
HashedHealth ausing blockchain and DLT Nashville, TN hashedhealth.com Clinical Trials 2016 $1,000,000 Martin Ventures
Engine for collecting data and recording it in the Data Collection
Tierion blockchain Hartford, CT tierion.com/ Hash API 2015 $26,000,000 ICO

Individual-centric data store for health information, Personal Record

owned & controlled by the patient, built for security & Management via N/A (raised $500K
YouBase privacy with blockchain Englewood, CO youbase.io Blockchain Wallet 2016 $1,000,000 10/2017)

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6.
Cryptomania
...

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At its core, bitcoin is a smart currency, designed by
very forward-thinking engineers. It eliminates the
need for banks, gets rid of credit card fees, currency
exchange fees, money transfer fees, and reduces
the need for lawyers in transitions all good things.

Peter Diamandis
Founder and chairman of the X Prize Foundation

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46

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7.
Appendix
Other stuff you should
probably know

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Blockchain is a vast, global distributed ledger or
database running on millions of devices and open to
anyone, where not just information but anything of
value money, but also titles, deeds, identities, even
votes can be moved, stored and managed securely
and privately. Trust is established through mass
collaboration and clever code rather than by powerful
intermediaries like governments and banks.
Alex Tapscott, Author of the Blockchain Revolution

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@parulia - 12-01-1751
Supply chain use cases (1 / 5)
Use Case Problem
Cold Chain Monitoring Shipments needing constant
refrigeration are spoiled if they lose
temperature
Cause of temperature loss and
liability is unclear in complex global
supply chains
Regulation requires securing of the
"event logs" in the cold chain
inability to take corrective actions in a
timely manner
Chronicled Solution
Temperature monitoring via low
cost, disposable and reusable
sensors
Regulatory compliance by design,
including CFR 21 Part 11
Position tracking
Real-time alerts
Easy deployment option based on
SmartPhone and NFC/BLE
communication
Large scale implementations
supported via IoT gateways
Integration with ERP and supply
chain solutions
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Supply chain use cases (2 / 5)
Use Case Problem
Tamper Proof Sealing Packaging can be copied or
tampered and counterfeits sold
High-precision products, devices,
machines, and hardware can fail
if tampered
Banker's boxes with archival
documents are difficult to seal
Chronicled Solution
CryptoSeal provides strong
cryptographic identity to a
physical item with a tamperproof
sticker
Produced in various shapes and
sizes, round,
thermometer-shaped, etc.
Tamper-evident adhesive
sticker similar to registration
sticker on license plate and
breaks into tiny pieces
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Supply chain use cases (3 / 5)
Use Case Problem
Supply Chain Inability to establish the legitimacy
Compliance of inter-party event logs
Traditional tracking solutions are
hosted in private databases and
not interoperable
High integration costs because
multi-party data exchange
Centralized solutions create
vendor lock-in
Chronicled Solution
Decentralized,
blockchain-based back end
Hub and spoke data exchange
to minimize integration costs
Truthful and legit by design via
an immutable ledger
Easy integration with existing
ERP and SCM systems,
packaging line solutions, and
hardware scanners
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Supply chain use cases (4 / 5)
Use Case Problem
Supply Chain Goods, documents, and money
Automation flows in supply chain are all
manual processes (e.g.,
payments are made upon manual
verification of delivery)
The friction between IoT
platforms, ERP, supply chain, MS
Word, and financial
record-keeping systems results in
a slow digitization of supply chain
Untrusted data from IoT devices
(e.g., GPS, temperature loggers)
cripple the ability to automate
business processes and is not
secure enough to support
financial flows
Chronicled Solution
Smart contracts, i.e. business
contracts codified on the
blockchain, can support
multiple-parties including
shipper, receiver, and also
third-party insurance and
financing parties
When a shipment with a trusted
IoT chip arrives, and signs a
random string sent from the
hardware scanner, this can be
used as evidence of arrival in
the smart contract, and money
flow can be automated
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Supply chain use cases (5 / 5)
Use Case Problem
Secure Product Serial number, QR code, UPC
Identity code, and barcode systems are
all easily cloned and copied
The security is insufficient to
support supply chain automation
or M2M identity verification and
payments
Approximately $2 trillion per year
of luxury products are
counterfeited
Chronicled Solution
NFC or BLE "identity chips" are
embedded into products at time
of manufacture
The chip can be used to power
identity verification,
authentication, as well as
consumer engagement
experiences
Smart phone-based
experiences include, buy-it-now,
operating manual, warranty
claim card, etc
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 Further reading:
CoinDesk State of Blockchain Q3 2017
CB Insights Bitcoin & Blockchain reports
Total Cryptocurrency Market Capitalization
Blockgeeks - community & additional resources on technical topics
Ty Dancos Introductory Syllabus

Essays:
The Truth About Blockchain - Harvard Business Review, Jan 2017
We Already Know Blockchain's Killer Apps - Hackernoon
Making Sense of Smart Contracts - Coindesk
Blockchain - Why Care - Russ Wilcox @Pillar
Blockchain Massively Simplified - Richie Etwaru, TedX Talk
Stop Defining Blockchain in Terms of Today's Commercial Internet - Fast
Company
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