1st Meetup Leona

Pavia
Blockchain Group First Meetup

Almo Collegio Borromeo – 4th October 2017
© Pavia Blockchain Group – 1st Meetup @CollegioBorromeo - 4 Oct 2017 Alessandro Leona 1
First of all: the place we are in today
• The oldest student college in

Italy
• Founded in 1561 (S. Carlo
Borromeo) to accommodate
young promising students in
economic hardship
• Federico Borromeo was one of
the first students
• Designed by Pellegrino Tibaldi
and hosting a wonderful hall of
frescoes by Nebbia and Zuccari,
with contributions from Richini
and Pollack
• Today it hosts 150 students
selected by public competition
• Network of more than 1.300
alumni (4.500 hosted since
foundation)
Courtesy: Collegio Borromeo, Alice Bracchi
MEETUP OBJECTIVES: DISCLAIMER
• Spread knowledge The information in this presentation and meetup is given for information purposes only.
• Map local blockchain skills You should not rely on any of the contents to make your investment decisions.
Investment in cryptocurrencies can lead to total loss of value, secret keys can be lost, accounts
• Meet blockchain enthusiasts and experts can be hacked, exchanges can bankrupt, transactions are irreversible and in most cases no
central authority can be contacted to reclaim your funds.
• Discuss use cases It is your duty to investigate legal and fiscal implications of your actions.
• Propose new ventures The information is provided on an ”as is” basis without warranty of accuracy and update.
If you decide to start investing in cryptocurrencies and or ICOs, do not invest more than you
are willing to fully lose.
Price fluctuations are very high, past rewards are not proxies of future incomes.
but most of all Have Fun!
Roles in the meetup
Image credit: The Matrix – Wachoswki sisters
Why spreading knowledge: Bitcoin history
Mt.Gox Bitcoin fork and

Genesis block
exchange born birth of BCH
100 Market cap at Silkroad
90 1Bn$, 2nd big shutdown by
2 pizzas for bubble due to Feds
80 TIME magazine BTC as legal
10.000 BTC Bitcoin Central
70 article, Mt.Gox payment in JPN
(25$) hack
60 breach and 1st Mt.Gox
50 great bubble filed for
40 1st echange rate bankruptcy
30 1USD=1.309BTC
20
10
0
apr-09
apr-10
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ott-09
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lug-09
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gen-09
gen-10
gen-11
gen-12
gen-13
gen-14
gen-15
gen-16
gen-17
5.000
«There is only one

4.500
4.000
thing in the world 3.500

BTC 3.000
worse than being
/ 2.500
talked about, and 2.000

USD 1.500
that is not being 1.000
talked about» 500

0
apr-09
apr-10
apr-11
apr-12
apr-13
apr-14
apr-15
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ott-09
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lug-09
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gen-09
gen-10
gen-11
gen-12
gen-13
gen-14
gen-15
gen-16
gen-17
Source: http://historyofbitcoin.org/; google trends; 99 bitcoins.com; Oscar Wilde
Problems that Alice and Bob are facing
• Bob wants to transfer a “message” to Alice on a public, permissionless

and censorship resistant network
• Alice wants to make sure that the message is really from Bob
• Alice wants to make sure that the message was not tampered with
• Alice wants to make sure that Bob sent the message only to Alice and
not to anybody else (double spending problem)
• Bob wants to make sure Alice received and acknowledged the message
Let’s start with the building blocks
PRIVAT EY
MERKLE
MIN
DLT
Credits: Lego ®
First, we need to talk about hash functions
Given an arbitrary input, a hash function produces a fixed output (e.g. SHA256 =>256 bit) satisfying the following:
• Collision Resistance: given x!=y it is very unlikely that H(x)=H(y) (e.g. for 2130 SHA256 hashes, this property is
satisfied in 99,8% of cases*)
• Hiding: given an arbitrary msg and an arbitrary r chosen from an high entropy probability distribution,
it is unfeasible to guess msg from H(msg || r)
• Puzzle friendliness: ∀ n-bit output Y, given k chosen from a high entropy probability distribution,
it’s infeasible to find x such that H(k || x) = y in less time than 2n (e.g. 2256 for SHA256)
SHA256 calculation method
Source: Merkle-Damgard construction, Princeton course on cryptography on Coursera, courtesy Stefano Paluello
* 2256≃1077, the order of magnitude of atoms in the known universe; 10 Mn TH/s is the current bitcoin computing power, it would take 1012 years to compute 2128 hashes (our universe is 14X109 years old…)
How does Bob sign a transaction?
Properties requested: 3 Primitives required
- Only Bob can sign his messages/documents/transactions
- Given a message and Bob’s signature, anybody can verify
- Bob’s signature cannot be copy/pasted to another document (sk, pk) := generateKeys(keysize)
secret key & private key generation
SIG := signature(sk, msg)
isValid := verify(msg, pk, SIG)
Bitcoin uses ECDSA (Elliptic Curve Digital

Signature Algorythm)
Public key is the bitcoin wallet address
How is tamper resistance ensured?
Blockchain: a global timestamped, distributed ledger of cryptographically signed digital asset transfers where
a consensus mechanism ensures that transactions are correct and assets are not double spended
Changing data in a block

results in CORRUPTION of
all the following blocks
and therefore of all the
blockchain
Ok, still one step to solve,

if we only have one
owner of the ledger
Image credits: ”La banda degli onesti”
How do we create a censorship resistant, tamperproof and public ledger?
CENTRALISED LEDGER DISTRIBUTED LEDGER
Bitcoin proof of work is

implementing a “Byzantine fault
tolerant” mechanism
In practice if the majority of

nodes cooperates to produce the
longest and trusted chain, any
attacker is outpaced
Apart from cash vis-à-vis With distributed ledgers and a

transactions, you need a consensus mechanism, a central
central trustable authority to authority is no longer needed,
“clear” your transactions provided nodes agree to make the
the system to work
How does the nodes network look like?
https://bitnodes.21.co/nodes/live-map/
A very simplified block diagram of consensus
New broadcasted
Block n-1 Block n transactions Generate
Hn+1=H(new block)
H(Bn-2) H(Bn-1)
HEADER: S1, R1, BTC1
.timestamp S2, R2, BTC2
.nonce
.difficulty … Generate nonce Computational effort is
.#transactions required in order for the
.Merkle root hash
TRANSACTIONS network to cooperate
. S1, R1, BTC1 for rightful functioning
. S2, R2, BTC2
…
NO
H(Hn+1,nonce) of the consensus
< difficulty? scheme
YES It is more lucrative to

Every full node
. Validates blocks behave well than to try
Node broadcasts to forge the system
. Checks consistency of transactions (signature, unspent outputs)
new block
. Is not rewarded
Mining nodes, in addition:

. Given the target difficulty, tries to solve PoW
Node is rewarded
. Is eventually rewarded
. Signals for protocol updates (e.g. SegWit2X, Bitcoin core, Emergent, …)
So, how does the blockchain work?
Consensus is reached through PoW
Source: PwC
Put it all together (almost)
https://anders.com/blockchain/
How does a miner look like?
Examples Antminer D3: a game changer for Dash?
• 15 Gh/s
• 1.600 USD (sold out, beware of scam sellers)
• 1.200 W
• 72 days (for now…) payback mining Dash (X11)
Source: www.cryptocompare.com, www.bitmain.com, pool.bitcoin.com
Monetary supply of bitcoins is centrally controlled
18.000.000
50BTC/block 25BTC/block 12,5BTC/block
16.000.000
14.000.000 • 1 block every 10 minutes

• If miners are too fast (slow), difficulty is
12.000.000
increased (reduced), assessed every
10.000.000
2016 blocks (2 weeks)
• Inflation method: halving of reward
8.000.000 every 4 years (in volumes)
• Today avg seignorage fees distributed:
6.000.000 24*6*12,5*4.200 = 7,6 M$/day
(2,7Bn$/y)
4.000.000
• Maximum # of BTC in circulation = 21 Mn
2.000.000
0
gen-09 gen-10 gen-11 gen-12 gen-13 gen-14 gen-15 gen-16 gen-17
Why 21 million bitcoins?
How
many • Blocks mined in 4y: 4*365*24*6= 210.240
BTC • Rewards = 50+25+12,5+6,25+…=50*∑i (1/2)i= 100
• Total reward = 21.024.000 => 21 Mn
issued in
total?
How
much
gold on
earth?
Source: www.gold.org, blockchain.info
How many other crypto currencies are out there?
100%=144Bn USD*
Scale effect and
first mover
advantage?
*USD supply is 4.000 BnUSD, Sources:coinmarketcap.com , tradingeconomics.com
How do I buy, store and use bitcoins?
Exchanges Wallets Merchants
10 ATM in Italia
(1 in TAG-MI)
Who is Satoshi Nakamoto?
“Satoshi” means "clear thinking, quick witted; wise"

“Naka” can mean “medium, inside, or relationship”
“Moto” can mean “origin”, or “foundation”.
?
Craig Wright
Satoshi Nakamoto
Hal Finney
Nick Szabo
Neal King
Vladimir Oksman Shinichi Mochizuki
Charles Bry
So, is blockchain only for cryptovalues transactions?
Food tracking: Ezlab+E&Y Charity: Helperbit P2P energy exchanges: share&charge
Precious metals/stones: Identity mgmt: uPort, Uniquid Notarization&timestamping:

Everledger, Bitreserve Ethernity wall, open
What is Ethereum?
Vitalik Buterin (1994, Russia, now living in Toronto),
Limits of Bitcoin protocol in 2014 devised a decentralised computer through:
- an Ethereum Virtual Machine, running scripts (smart
• Lack of states, a state is derived contracts) on a network of nodes
looking backwards at the chain - a messaging platform (whisper)
of transactions - a storage platform (swarm)
• Lack of Turing completeness: - a crypto currency (Ether) to pay for services and mining fees
bitcoin protocol allows some
computation (e.g. colored coins)
but not everything is possible
• Value blindness: a scripting
protocol linking BTC to USD Whereas bitcoin works on transactions,
value cannot be written (e.g. for Ethereum works on Accounts:
a hedging contract) - Externally owned (controlled by private
• Blockchain blindness: unspent
keys)
transaction outputs disregard
- Contract accounts (controlled by
block data such as nonce and
hash of previous block, limiting contract code)
random applications such as
gaming Consensus running on PoW but switching
to PoS soon
How does a smart contract look like?
Killer application of Ethereum: Initial Coin Offering
Funds raised Mn$ (in green ongoing ICOs)
EOS 300
Tezos
FileCoin 205
232
• + Other 215 for a total of 2,5 Bn$ raised
Bancor Network Token 153 • Many scams, frauds and thefts due to weak security
Status Network Token 102
MobileGo 53,07 • Mainly Proof of concepts
Monetha
Basic Attention Token
37
36
• ICOs overtaking VC this summer
Civic 33 • SEC, China and S.Korea starting to rule/ban ICOs
Polybius 31,65
Blackmoon Crypto 30
Storj 30
Agrello Delta 27,5
Stox 27,48
Decentraland 26,29
SONM 26
FunFair 26
Tierion 25,04
OmiseGo 25
Monaco 25
Aragon 25
Aeternity 24,99
Everex 22,63
KickCoin 22,34
Pillar 21,99
AventCoin 20,2
Rivetz 19,71
MCAP 19,26
OpenANX 18,76
Ethereum 18,5
Centra 17,41
Source: icotracker.net, ico-list.com, cryptocompare.com
Blockchain startups appearing in every field, but beware of scams
What’s next?
Resources
coin.dance: lots on info on nodes, coinmarketcap.com: capitalization cryptocompare.com: comparison whattomine.com: ranking on
protocols polls, polytics, … and trends by cryptocurrency and ratings of exchanges, miners, mining activities profitability
wallets, ICOs, …
coindesk.com: blockchain and etherscan.com: Ethereum hacked.com: trading signals blockchain.info: bitcoin blockchain
crypto news, market reports, blockchain browser, smart browser
opinions, … contracts source codes

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Pavia

Blockchain Group First Meetup

• The oldest student college in

Courtesy: Collegio Borromeo, Alice Bracchi

Image credit: The Matrix – Wachoswki sisters

Mt.Gox Bitcoin fork and

«There is only one

thing in the world 3.500

talked about, and 2.000

talked about» 500

• Bob wants to transfer a “message” to Alice on a public, permissionless

SHA256 calculation method

SIG := signature(sk, msg)

isValid := verify(msg, pk, SIG)

Bitcoin uses ECDSA (Elliptic Curve Digital

Public key is the bitcoin wallet address

Changing data in a block

Ok, still one step to solve,

Image credits: ”La banda degli onesti”

CENTRALISED LEDGER DISTRIBUTED LEDGER

Bitcoin proof of work is

In practice if the majority of

Apart from cash vis-à-vis With distributed ledgers and a

YES It is more lucrative to

Mining nodes, in addition:

Consensus is reached through PoW

Source: www.cryptocompare.com, www.bitmain.com, pool.bitcoin.com

14.000.000 • 1 block every 10 minutes

Source: www.gold.org, blockchain.info

*USD supply is 4.000 BnUSD, Sources:coinmarketcap.com , tradingeconomics.com

“Satoshi” means "clear thinking, quick witted; wise"

Food tracking: Ezlab+E&Y Charity: Helperbit P2P energy exchanges: share&charge

Precious metals/stones: Identity mgmt: uPort, Uniquid Notarization&timestamping:

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