Wrocław Blockchain Meetup
#4 Meetup, 22 May 2017
WiFi: wedrowkipubb / wedrowki2016
Venue
Agenda
- 18:15 - Blockchains, how to they work?
- 18:45 - Short break
- 19:00 - Lightning talks
- 20:00 - Open Mic & Networking
Lightning Talks
- Ethereum Transactions?
Tomasz Drwięga
- Parity-Bitcoin
Marek Kotewicz
Join our slack
Contact the organizers
Blockchains,
how do they work?
Marek Kotewicz
Introduction for developers
- What is blockchain / blockchain technology?
- Decentralization?
- Consensus?
- Incentives?
- What is Bitcoin?
- What is Ethereum?
- Glossary
Client:
Let's build a bank from scratch!
You (developer):
What are the requirements?
Possible Actions:
-
Transfer (who, fromAccount, toAccount, value)
-
BalanceOf (account)
Example Interaction:
User X transfers $5 from account A1 to account A5
Database
API
User X
User Y
User Z
Questions?
- Is any user allowed to send funds from every account?
- Can you send more than you have?
- Can you send funds twice?
- How do we verify users?
- What is the initial state of the database (Genesis)?
Answers:
- No, each user controls a single account.
- No, you can't send more than you have.
- No, when you send funds you don't control them any more.
- User need to prove they exist (KYC) and then we'll give them some credentials.
- We control the database anyway, so we can just alter the records :)
Database
API
User X
User Y
User Z
Admin
Authenticate
Enforce Rules
Persist State
Trusted Zone
Bank
- Authenticates the user
- Authorizes the user
- Checks the rules
- Does the transfer (atomicly)
- Persists new state
User
- Sends a transfer requests
- Adds credentials
- Trusts Bank to perform requested action
If users want to query account balance often Bank's API becomes a bottleneck.
Can we do better, can we avoid the bank?
A State Machine
State + Transitions
A State Machine
State + Transition
BalanceOf(A) = 10
BalanceOf(B) = 0
BalanceOf(A) = 5
BalanceOf(B) = 5
Transfer(A, B, 5)
Let's limit ourselves
a little bit
Account balances are updated once a day.
BalanceOf(A) = 10
BalanceOf(B) = 0
BalanceOf(C) = 0
BalanceOf(A) = 0
BalanceOf(B) = 5
BalanceOf(C) = 5
Day 1
Day 2
Transition
(list of transactions)
-
transfer(A, B, 5)
-
transfer(A, C, 5)
+
Transactions
+
Transactions
+
Transactions
Database
API
User X
User Y
User Z
Each user can now query the database locally
(at least during a day)
What if the Bank could let users do transitions locally?
User X
User Y
User Z
If users can do everything locally the Bank is not needed!
Problems to solve
- How to authenticate users?
- How to enforce the rules?
Why?
- We need to trust the Bank
- The Bank is intermediary:
- weakest link / bottleneck
- operational cost == fees!
Public-key cryptography
Authentication
Alice's Public Key
Alice's Private Key
Bob's Public Key
Bob's Private Key
Sign with Private
verify with Public
Alice's Private Key
Message
Signature
Sign with Private
verify with Public
Alice's Public Key
Message
Signature
Alice sent it!
Given a list of transactions and a previous state
we can compute the current one
transfer(A, B, 5)
Alice's Signature
transfer(B, C, 5)
Bob's Signature
That's a blockchain!
transfer(A, B, 5)
Alice's Signature
transfer(B, C, 5)
Bob's Signature
transfer(B, A, 5)
Bob's Signature
Transactions packed together in blocks,
linked to each other to encode time-relations.
Single Block
Block Number | 5 |
Date | 18:00 13.02.2017 |
Expected State | (Block Hash) |
Previous Block State | (Chain Link) |
List of transactions |
We don't store the whole State in a block.
Instead we just store a list of transactions, perform transition and check if the State is the same as expected.
Ok, so the nodes can just broadcast the state transitions, right?
No, because of double spend.
User A
User C
User B
Users cannot trust one another.
or propagation time may vary
transfer(A, B, 5)
Alice's Signature
transfer(A, C, 5)
Alice's Signature
Ok, so we can just collect all transactions and submit a block once a day
Yes, but everyone can submit their own block, how do you know which one is "the correct one"?
If anyone can submit a next valid block how do we choose the one?
Maybe let's try to limit who can submit a new block?
Consensus Mechanisms
- Proof of Authority (centralized):
- Only "the Bank" can submit new blocks
- Alice submits even blocks, Bob submits odd ones
- Proof of Work (decentralized):
- The first one to solve a difficult puzzle can submit a new block
Single Block
Block Number | 5 |
Date | 18:00 13.02.2017 |
Expected State | (Block Hash) |
Previous Block State | (Chain Link) |
List of transactions | |
Puzzle / Consensus Proof | Block Number + 5 = ? |
We need a puzzle that is:
1. Trivial to validate
2. Difficult to compute
One-way functions
e.g. Crypto... Hash Functions
DATA
)
f(
= hash
BlockHash
)
sha256(
= 0x000...
Nonce
Puzzle: Find a Nonce that hashed together with current block hash gives a hash starting with X zeros
Canonical Chain
transfer(A, B, 5)
Alice's Signature
transfer(B, C, 5)
Bob's Signature
transfer(B, A, 5)
Bob's Signature
transfer(B, C, 5)
Bob's Signature
Longest in some metric
Consensus ensures the blocks are produced in expected rate via
Difficulty Adjustment / Protocol Delays
Ok, so why would I ever waste my computing power to submit new blocks?
It's incentivized - You will earn money
(and it's called mining)
Summary
- State + Transition = New State
- Block = (State, Transactions)
- Decentralized Consensus:
- Who can submit a new block?
- Nodes are broadcasting signed transactions
- Miners are producing and broadcasting new blocks
- Nodes are processing new blocks and performing state transition
What is Bitcoin?
Bitcoin is the first public blockchain ever.
Block Time | 10 minutes |
Consensus | Proof of Work - hashcash |
State | Account Balances of BTC / UTXO* |
Transactions | Value Transfers* |
Launched | 2009 |
What is Ethereum?
Ethereum is the World Computer
Block Time | 14 seconds |
Consensus | Proof of Work - ethash* |
State | Arbitrary |
Transactions | Turing-complete / programmable |
Launched | 2015 |
I'm most probably out of time
So let's jump to glossary
List of important words
- Genesis Block
- Blockchain
- Protocol
- Consensus
- Incentives
- Miner
- Hashing Power
- Hard/Soft Fork
- Canonical Chain
- Chain re-org
Any questions?
- Decentralization
- Distributed Ledger
- Bitcoin
- UTXO
- Ethereum / EVM
- Smart Contracts
- Altcoins
- Tokens
- Fiat currency
Ethereum Transactions
Tomasz Drwięga
Parity-Bitcoin
Marek Kotewicz
Thanks!
See you next time!
Join our slack, mailto:tomasz.drwiega@gmail.com
Blockchain Meetup #4
By Tomasz Drwięga
Blockchain Meetup #4
- 749