BitCoin and the Blockchain

Doug Twitchell

PhD, University of Arizona
Illinois State University, 11 years
Boise State University, since August
Teaching: All InfoSec, Cryptography, Networking
Research: Deception, policy compliance, Bayesian analysis
This presentation: https://twitched.github.io/blockchain_presentation/
@dtwitched

Pre-ransomware advice:
- Backup
- Patch
- Turn off unneeded features

Post-ransomware advice:
- Backup
- Patch
- Turn off unneeded features
— matt blaze (@mattblaze) May 13, 2017

Today

BitCoin and its building blocks
Ethereum and "smart" contracts
Private blockchains

₿itCoin

	BitCoin	Cash	Payment Card
Use for Purchases	X	X	X
Reversible			X
Stores Value	X	X
Anonymous	pseudo	X
Ledger	consensus		central
Central Authority		X	X

BitCoin Components

Blockchain
- Cryptographic Hash functions
- Digital signatures
- Transaction information
Mining
Scripts
Rules

The Blockchain

Big Numbers

$$2^{128} \\ = 340,282,366,920,938,463,463,374,607,431,768,211,456 \\ \approx 3 \times 10^{38}$$

Odds of winning Powerball lottery four times: 1 in
$$ \\ 7,290,021,363,225,027,714,833,921,447,179,536 \\ \approx 7 \times 10^{33}$$

Cryptographic Hash Functions

H(Doug) → aa1cda9fb50938bfd033eb7b79c4fc0b3ec87a18433bfa02c8d5a68f2c3157e2

H(Hawley Troxell) → 469b53d0d17fdc622bded61a6e4a5720bd25a290890ea01d7687167ec6a2f3c3

H(We the people of the United...) → 63a43b7fc439f05fbf2b0d25d40b860b426a6abeb087ead2b2c4cae0b95c839d

H(Star Wars as a compressed video) → 31c4ba98d4a14a71b6da13830f1c3c508cbf93c89a348d382f76070a23588d6b

H(Bob should pay Alice 4 BitCoins) → fef45d0c7e08bfafa7551e9ec27ee06c9fba6ef86665e1a8f77eeb23b495e1e9

H(Bob should pay Alice 5 BitCoins) → 3ef34acc394f1ac5d5671c339ffe65b5aa976f88862fe4e87c24b4e3f237cce0

SHA256

Digital Signatures

The Blockchain

Decentralization and Mining

Mining

Proof of Work: Who does the most work?
Proof of Stake: Who's willing to bet the most?
Proof of Authority: Who's been designated?

Scripts

All transactions include a script

Payments:

  OP_DUP
  OP_HASH160
  69e02e18...
  OP_EQUALVERIFY
  OP_CHECKSIG

BitCoin scripts are limited in what they can do (no loops)

Scripts

BitCoin Scripts can be used to:

Destroy BitCoins (Proof of Burn)
Insert arbitrary data (also Proof of Burn)
Pay to a script, which is run by recipient
Escrow Payments (transactions require three signatures)
Efficient Micropayments (escrow adding up small payments)

Rules

To have a valid currency, we want to:

Regularly and efficiently validate transaction blocks
Incentivize miners to do validations
Increase the supply of currency over time

Rules

To have a valid currency, we want to:

Regularly and efficiently validate transaction blocks
- Bitcoin: Every 10 minutes
- Ethereum: Every minute
Incentivize miners to do validations
- BitCoin: 25 BitCoins per block mined, transaction fees
- Ethereum: 5 Ether per block mined, transaction & Gas fees
Increase the supply of currency over time
- BitCoin: 25 BitCoins per block mined, halved every 210k blocks. Total: 21m
- Ethereum: 60m start, 15m per year mined, no cap, but mining will change

Ethereum Scripts

Difference between Ethereum and BitCoin: Scripts

Ethereum scripts can do anything a computer can do

Require purchasing "Gas"

Ethereum Scripts

Ethereum Scripts can be used to:

Create complicated smart contracts
Create Distributed Autonomous Organizations (DAOs)
Do whatever as long as you pay for it (loops)

pragma solidity ^0.4.2;
  // Proof of Existence contract, version 1
  contract ProofOfExistence1 {
    bytes32 public proof;
    // calculate and store the proof for a document
    function notarize(string document) {
      proof = calculateProof(document);
    }
  // helper function to get a document's sha256
    function calculateProof(string document) constant returns (bytes32) {
      return sha256(document);
    }
  }

The DAO

Blockchain thoughts: The Good

BitCoin is currently a viable currency ($30B)
Cryptocurrencies work well in the digital world
- Micropayments
- Low transaction fees
- Guaranteed escrow
Smart contracts
Innovation: LiteCoin, ZeroCoin, Monero, private blockchains, etc.