History of the Blockchain

Transcript

[Music] cool welcome welcome to day five the final day of Devcon it has been an incredible week we've gone deep into the ethereum platform seen exactly what daps are capable of I don't even think think the beginning of that and today we start off with a very special presentation by Nick Zabo uh he is a blockchain Pioneer and he is here to present on the history of the blockchain thank you thank you thank you so yeah I'm talk about

smart contracts and ethereum good morning city of London ethereum Developers so I'm going to start off talking about the origins of some of these ideas some of the philosophical Origins um to left here we have a ran to the right Frederick kayak who had um were big um political and philosophical Inspirations to the cipher punks where many of these ideas came out of and in uh so IR ran uh I've never finished one of her books but she was very influential nevertheless um um she came up with the idea of gulz

Gulch which is a place you could um form your own Independent Community and um declare your independence from corrupt institutions and society and pretty much a complete fantasy when she wrote it based on fake physics and stuff but um Tim May who is in fact a physicist um worked for Intel studying the um how to prevent their protect their chips from radiation um came up with the idea of Gul Gul and cyberspace and kind of Ideal to shoot for and so another and basically cryptography in the cipher punks movement protect

yourself with cryptography that would be your Shield um and Frederick kayak another big influence on us was uh said not so fast he had studied the basis the protocol layer underlying Society underlying free market which we champion and property contracts and if you go to law school you'll study these in your first year of law school property contracts Etc and all that requires security so we wanted to apply computer science apply the new technology take advantage of Mo's law to uh minimize vulnerability to strangers maximize security and solve am

and in doing so solve ambitious problems of uh the haki in nature such as uh privatize money and non-violently enforce property and contracts and so that is the where ideas like smart contracts the first blockchain designs and the first cryptocurrency designs came out of and if you wanted to sum that up in all one thing it's try to secure as much as possible so with cryptography traditional cryptography you're just trying to secure one narrow thing you have communications and you're trying to secure it from a third party you can't really secure it from the party you're talking to if they forward your email doesn't matter how well your email is

encrypted um so it's try encryption traditional encryption is trying to to uh solve one narrow problem but now we have the opportunity well let's let's go back so now we have the opportunity with ethereum um well let me go back so David chman digital cash expanded this and said let's let's apply this to money let's try to make money the transfer of money private and so he solved a privacy problem although the banks didn't like that so it wasn't taken up but he had a technical solution for solving the Privacy problem what he didn't solve was this problem right here and that is a centralization problem and so there was a bunch of digital cash startups David

Shams being among them that that they either failed or they became Central Iz systems like like PayPal because we didn't know how to do decentralization at that point but um so so coming out of those experiences we we we we expanded our definition of security and we realized there were a lot of bad assumptions being made in security at that time one of the big ones being The Trusted third party the certificate Authority in an encryption system is a classic example of a trusted third party that got introduced and pretty quickly they became D usurp at the height of the internet bubble um verason which basically specialized in being a certificate Authority was worth

tens of billions of dollars just on that basis alone that they own this bottleneck in in a in the system of cryptography um securing the Internet it's it's gotten a little more broken up now but it's still a bottleneck as it's the domain name system um and you can go back farther in history and see that um in industrial era around the turn of the century 1900 early 1900s we had a lot of very centralized security Tech or a lot of centralized industrial technology so radio was centralized um broadcast um railroads especially railroad stations very centralized and newspapers this is a picture of an old

steam press here or it could be a steam press or run by diesel but the point is a large large scale manufactur just a few newspapers per per City or even per country and that's and so when the Communist came along Mr Vladimir Lenin there um they had some mutinous soldiers they had actually had some workers as well but mostly they had mutinous soldiers and they only had to take over a few Urban places to get a strangle hold in society the railroad stations the handful of radio stations and the handful of newspapers and they had control over Society um and physical wealth has not necessarily been very secure either so

the Aztecs um compelled tribute from tribes in in gold and amassed gold the uh Spanish looted the Aztec gold Sir Francis Drake there on the right um and other English Pirates looted their goal Jump Ahead in history from the Spanish Jump Ahead in history a little bit and the end of the gold standard part of the end of the gold standard the part the economists don't tell you because it it violates their assumptions of voluntary transactions is the German OTS during World War One and World War II are sending significant fractions of Allied and especially British boats to the bottom of the ocean so B British stopped being able to transport gold if you look

at the gold standard the way the the trust works and a gold standard anybody needs to be able to up to a gold window and C cash in their Bank notes for gold and because they couldn't transport gold around during the war that was one of the reasons the gold standard collapsed and then to the bottom right here we have Franklin Roosevelt who confiscated gold in the US and I didn't put a picture of an x-ray machine here but in in modern times gold is even less secure now so that that Bitcoin and ethereum is cryptocurrencies really um are superior to that now so so we did with we said let's take decentralization per computer science is much more automated and

secure so if we take um an ethereum blockchain um and put some smart contracts on it the sub it's only substitute in any given case for a small fraction of what these guys on the left the guys on the left the armies of accountants the armies of uh investigators police officers the armies of lawyers um in any given case there only going to substitute for a small fraction but the cost savings is so high that those those particular applications are going to be pretty compelling and especially cross cross National borders places because um in insecurity and just about all it right

now is very insecure no matter what the security people tell you there's hacks happening all the time this is the latest JP Morgan hack um identity theft um and what they had to do they had to have a strong partnership with law enforc enforcement the security isn't the protocol itself it is the police officers in traditional Finance it is law enforcement the accountants the investigators and lawyers so that's the reason big one of the big reasons that traditional Finance is stuck inside its National silos and it's highly regulated so um cryptocurrency and in particular today ethereum helps solve that so through decentral

and I'll talk a little bit here about what kind of decentralization is good so if you think of traditional Finance has thing called separation of Duties and one of the crucial things important in separation of Duties is that the people that are separated you need several people to perform a task to get it done so in that sense broad sense it's like ethereum um but you want independence you want each of the nodes to be independent as possible so one crude measure you can do is how many nodes we have um like four about nearly 400 nodes here for ethereum um but the actually more important thing to look at is look on the map and see the diversity you've got um a node there in the middle of the

Indian Ocean that's really good you got Singapore you've got somewhere near Vietnam there those those are the best nodes because those those are most likely to be the the more likely to be the independent nodes and there's all sorts of other ways you can estimate Independence too but but the point is the the the actual sheer number of nodes is just a proxy measure of of something more important below that so to get to Smart contracts there are two ways people talk about smart contracts they're both valid um the way ethereum talks about it is Long Live just as sometimes a synonym for Long Live process a contractor distributed app the original and still quite

meaningful definition of smart contract is it acts like a contract um there's automated performance there's verification it's it's doing the function of of a contract or it's analogous to what a contract would do so typically in a smart contract of that kind you have two parties or you have one party in the blockchain something like that so now there's a strong distinction to be made between dry code smart contracts and wet code traditional law so I can go over it here there's uh laws based on our minds our wetwear um it's based on

anology um software TS the ground on Boolean logic bits um hard mathematics um the security um of law is based on the ultimate threat of ction that you're going to go to imprisonment if you violate a court order to pay somebody even in a civil lawsuit you could get charged with contempt and go to prison so that's ultimately what the security of of wet law grounds down on and for software for blockchains it grounds down on the replication of the blockchain and on cryptography so and the law is more flexible software is more rigid um and an area the law as I've said

tends to be bashed in jurisdictional silos um software tends to be independent grow seamlessly cross border lawsuits are very expensive especially if they're cross border um the software can get very very cheap once you amortise the capital costs so now I'm going to talk about a couple some applications um that that interest me that don't necessarily wiely get talked about so back in the day back um when writing was first invented um seals were were a really big deal if you go into the archaeological layers you'll find a lot of these this is a seal of of King Darius of Persia but they're Al also very commonly used for commercial

transactions um You' take your seal and you'd rub it on the clay and that would be your signature and it would also provide tamper evidence so today so today seals um are still widely used they're very important um they tend to go along with recording serial numbers you'll seal something up seal up a door seal up an Evidence bag um and so forth and write down the number and you get a log of what's there and you can go back and and verify things haven't been tampered with um now the blockchain could help quite significantly here um instead of keeping an insecure offline

log or or an even more insecure online log without the blockchain um you keep your log online you can keep it as as ongoing hashes and also as the descriptions of the evidence what's in the evidence bag itself if you want to use that for further smart contracts processing and that's a general pattern that's good in ethereum is that you put the proof of evidence on the blockchain for taking physical stuff and reflecting on blockchain you want to put the proof of evidence on the blockchain but you also want to have semantic information for um contract code to be able to play with and you can do this with physical spaces as well

and this is a scheme I came up with um guess over a decade ago now uh for smart property and I call it propl lets you can Google that online if you like um and basically what Propet do is they look to the blockchain to see who owns them um they're kind of like a SIM card and that they and and the electronics on your smartphone that they know where they're at they know um things they can sense in the environment but the main thing they know is who owns them and what the instructions are that they are to follow and one of the applications of this is the auto repo auto or more generally the auto repo collateral where um if you use your physical device is security for a loan then that can get

automatically repossessed and that that allows credit to be um much more efficiently used so there was for example an offshore rig that cost tens of billions of dollars an offshore facility uses collateral in a big business deal but since the the creditors did not actually have a way to gain physical control over it um they're out of luck and they're out of out tens of billions of dollars so they can't actually repossess the collateral right now whereas if they had these devices they could so current project I'm currently working on it's very fun um Financial assets on

the blockchain so the first generation which I invented in 1998 is the trust minimize tokens so you trust minimize a transfer of uh tokens from one person to another I call these secure property titles the most common name they're called now as colored coins and they trust to minimize again it's it's it's securing a particular thing it's securing the transfer of ownership of a thing but there's other things and even more important things you want to secure with financial assets and so the second generation is trust minimizing the cash flows that's that's what you really want your financial assets you want the dividends the coupons Etc so um that's what I'm working on now my partner Donald McIntyre and this is another cool one I recently worked on um this is social

networks plus ethereum so blockchains are back office technology you don't see them directly um in ethereum you have missed um as a wallet cross browser to allow you to interact directly but this is another interesting um way you could interact with blockchains and that is through social networks and so tip Bots are very are a very simple example of this now this is an architecture I designed for more decentralized version of tip Bots that can do more than more than tipping more than paying you can actually do some smart contract stuff initiated from a social network and you start off with um largely in the traditional web space linking your social Network accounts together and then you use them to

uh once you do that you can instruct from The Social Network the payments swaps other smart contract things and so in summary let's try to think about security more broadly instead of thinking narrowly we encryption is security and and nothing else is or transfer of tokens as security and nothing else is let's try to secure everything let's try to protect everything is important to us as much as we can and not like this though let's do it like this with ethereum thank you very [Applause] much