Blockchain blueprint for a new economy pdf free download

This revolution started with a new fringe economy on the Internet, an alternative currency called Bitcoin that was issued and backed not by a central authority, but by automated consensus among networked users. Its true uniqueness, however, lay in the fact that it did not require the users to trust each other. Through algorithmic self-policing, any malicious attempt to defraud the system would be rejected. In a precise and technical definition, Bitcoin is digital cash that is transacted via the Internet in a decentralized trustless system using a public ledger called the blockchain.

Owens Jr. Andrew P. We provide download without ads , without redirections just one click download, click the button get the book. Sign in. Forgot your password? Password recovery. Recover your password. Get help. Book Free. For example, the Litecoin currency runs on the Litecoin protocol, which runs on the Litecoin blockchain.

Litecoin is very slightly adapted from Bitcoin to improve on a few features. A spreadsheet delineating some of the kinds of differences between Crypto 2. Until blockchain cryptography, digital cash was, like any other digital asset, infinitely copiable like our ability to save an email attachment any number of times , and there was no way to confirm that a certain batch of digital cash had not already been spent without a central intermediary.

Coin ownership is recorded in the public ledger and confirmed by cryptographic protocols and the mining community. The address is where others can send Bitcoin to you, and the private key is the cryptographic secret by which you can send Bitcoin to others.

Wallet software can also keep a copy of the blockchain—the record of all the transactions that have occurred in that currency—as part of the decentralized scheme by which coin transactions are verified.

Appendix A covers the practicalities of maintaining an altcoin wallet in more detail. Figure Bitcoin ewallet app and transferring Bitcoin image credits: Bitcoin ewallet developers and InterAksyon eWallet Services and Personal Cryptosecurity As responsible consumers, we are not used to many of the new aspects of blockchain technology and personal cryptosecurity; for example, having to back up our money.

If your private key is gone, your Bitcoin is gone. Personal cryptosecurity is a significant new area for consumer literacy, because the stakes are quite high to ensure that personal financial assets and transactions are protected in this new online venue of digital cash. Another element of personal cryptosecurity that many experts recommend is coin mixing, pooling your coins with other transactions so that they are more anonymous, using services like Dark Coin, Dark Wallet, and BitMixer.

Despite their current clunkiness in implementation, cryptocurrencies offer many great benefits in personal cryptosecurity. Credit card technology was not developed to be secure on the Internet the way that blockchain models are developing now. Paying with Bitcoin at any of the 30, vendors that accept it as of October e. It might also possibly entail a lower transaction fee Bitcoin transaction fees are much lower than merchant credit card processing fees. Mobile payment functionality is also needed for quick point-of-sale Bitcoin purchases for example, a cup of coffee via mobile phone.

CoinBeyond and other companies focus on mobile Bitcoin payments specifically, and BitPay and CoinBase have solutions for mobile checkout. Currency and payments make up the first and most obvious application. Bitcoin and its imitators could pave the way for currency, trade, and commerce as we know it to be completely redefined. More broadly, Bitcoin is not just a better version of Visa—it could also allow us to do things we have not even thought of yet.

Currency and payments is just the first application. With altcoins, you can allocate and trade resources between individuals in a completely decentralized, distributed, and global way. Thus, Blockchain 1. An oft-reported though disputed metric is that 70 percent of Bitcoin trades are made up of Chinese Yuan. Further, much of the Yuan-denominated trade must be speculation as is true for overall Bitcoin trade , as there are few physical-world vendors accepting Bitcoin and few consumers using the currency for the widespread consumption of goods and services.

Summary: Blockchain 1. New currency in blocks is being issued at a regular and known pace, with about Regulatory Status Government regulation is possibly one of the most significant factors as to whether the blockchain industry will develop into a full-fledged financial-services industry.

As of October , a handful of countries have completely banned Bitcoin: Bangladesh, 6 Chapter 1: Blockchain 1. Escrow transactions, bonded contracts, third-party arbitration, multiparty signature, etc. This is because the concepts and structure developed for Bitcoin are extremely portable and extensible. Whereas Blockchain 1. Table lists some of the different classes and examples of property and contracts that might be transferred with the blockchain.

All financial transactions could be reinvented on the blockchain, including stock, private equity, crowdfunding instruments, bonds, mutual funds, annuities, pensions, and all manner of derivatives futures, options, swaps, and other derivatives. Private records such as IOUs, loans, contracts, bets, signatures, wills, trusts, and escrows can be stored. Intangible assets e. PayPal was initially an innovative payments market solution outside of the traditional financial-services market, like Bitcoin, but has since become a more formal business within the regulated industry, collecting and validating detailed personal information about its customers.

BTCjam is an example of such decentralized blockchain-based peer-to-peer lending. The idea is that peer-to- peer fundraising models such as Kickstarter can supplant the need for traditional venture capital funding for startups. Investors in a crowdfunding campaign receive tokens that represent shares of the startup they support. In Japan, a Bitcoin crowdfunding site, bitFlyer, has launched as part of the general crowdfunding site fundFlyer. Opponents complain that there is currently no legal way to do crowdfunding whereby one actually owns shares in the underlying organization, and there may be different ways in which crowdfunding violates securities laws.

The workaround offered by crowdfunding platforms like Swarm and Koinify, as well as one-off crowdfundings like Ethereum is to sell nonshare items, such as early access to software. The result is that there can be de facto investors in cryptocurrency projects who are not getting much more than early access to open source software. Bitcoin Prediction Markets One example of new tech with old tech is Bitcoin prediction markets like Predictious and Fairlay.

The general concept of smart property is the notion of transacting all property in blockchain-based models.

Property could be physical-world hard assets like a home, car, bicycle, or computer, or intangible assets such as stock shares, reservations, or copyrights e. The owner can then sell the asset by transferring the private key to another party. Smart property, then, is property whose ownership is controlled via the blockchain, using contracts subject to existing law.

For example, a pre-established smart contract could automatically transfer the ownership of a vehicle title from the financing company to the individual owner when all the loan payments have been made as automatically confirmed by other blockchain-based smart contracts. In some cases, physical-world hard assets could quite literally be controlled with the blockchain. Absent preconfigured access tokens, when the user submits a real-time access request, the blockchain smart contract could send an acknowledgment or token access mechanism to the physical asset or user ewallet, such as a one-use QR code to open a rental car or hotel room.

Blockchain technology offers the ability to reinvent identity authentication and secure access in ways that are much more granular, flexible, and oriented to real-time demand than are currently possible, elegantly integrating physical-world hardware technologies with digital Internet-based software technologies.

We are not used to having cryptographically defined property rights that are self- enforced by code. The code is self-enforced by the technical infrastructure in the sense that it is bound to operate based on the underlying code and cannot deviate.

A property transfer specified in the code cannot but occur as encoded. Blockchain- based smart property thus contemplates the possibility of widespread decentralized trustless asset management systems as well as cryptographically activated assets. Making property smart allows it to be traded with much less trust. Colored coins One of the first implementations of smart property on the blockchain is colored coins.

The idea is similar to giving someone a dollar bill with an IOU for another property asset e. Thus, certain Bitcoins encode some other asset that can be securely transacted with the blockchain.

This model still requires some trust—in this case, that the asset called out in the memo field will be deployed as agreed. The basic idea is that colored coins are Bitcoins marked with certain properties to reflect certain digital or physical assets so that more complex transactions can be carried out with the blockchain. The transactions could be asset exchange, and also the conduct of various activities within communities, such as voting, tipping, and commenting in forums.

Each party must trust the other party to fulfill its side of the obligation. Smart contracts feature the same kind of agreement to act or not act, but they remove the need for one type of trust between parties. Autonomy means that after it is launched and running, a contract and its initiating agent need not be in further contact. Third, smart contracts are decentralized in that they do not subsist on a single centralized server; they are distributed and self-executing across network nodes.

Unlike a person, a vending machine behaves algorithmically; the same instruction set will be followed every time in every case. When you deposit money and make a selection, the item is released. A smart contract similarly cannot help but execute the prespecified code. This could be good or bad depending on the situation; either way, it is a new kind of situation in society that will require a heavy accommodation period if blockchain-based smart contracts are to become widespread.

Further, smart contracts impact not just contract law, but more broadly the notion of the social contract within society. Because it could be nearly impossible to enforce smart contracts with law as currently enacted for example, a decentralized code swatch running after the fact is difficult to control, regulate, or sue for damages , the legal framework is essentially pushed down to the level of the contract.

Parties agreeing to the contract could choose a legal framework to be incorporated into the code. Thus, there could be a multiplicity of legal frameworks, just as there could be a multiplicity of currencies.

Contracts do not make anything possible that was previously impossible; rather, they allow common problems to be solved in a way that minimizes the need for trust. Minimal trust often makes things more convenient by taking human judgment out of the equation, thus allowing complete automation. A transaction can be created that sits on the blockchain and goes uninitiated until certain future events are triggered, either a certain time or event.

When the smart contract confirms the death, it can automatically send the funds. Another use case for smart contracts is setting up automatic payments for betting like limit orders in financial markets. A program or smart contract can be written that releases a payment when a specific value of a certain exchange good is triggered or when something transpires in the real world e. Smart contracts could also be deployed in pledge systems like Kickstarter.

No transaction is released until all funds are received. The intent of Table is to list some of the current high-profile projects, not to get into the descriptive details of how the projects differ technically or conceptually. Sample list of Blockchain 2. Wallets are obviously a core infrastructural element for cryptocurrencies, because they are the mechanism for the secure holding and transfer of Bitcoin and any cryptographic asset.

Chain has interfaces to make calls to the data available in full blockchain nodes, and standard information queries such as the Bitcoin balances by address and push notifications when there is activity with a certain address. There is also an opportunity to link blockchain development environments out to other major segments like the machine-to-machine M2M communication and Internet-of-Things IoT networks infrastructure for rapid application development.

Blockchain Ecosystem: Decentralized Storage, Communication, and Computation There is a need for a decentralized ecosystem surrounding the blockchain itself for full-solution operations. File storage could either be centralized like Dropbox or Google Drive or could be in the same decentralized architecture as the blockchain. IPFS stands for InterPlanetary File System, which refers to the need for a global and permanently accessible filesystem to resolve the problem of broken website links to files, well beyond the context of blockchain technology for the overall functionality of the Internet.

It cannot be assumed that blockchains will exist over time, and their preservation and accessibility is not trivial. A blockchain archival system like the Internet Archive and the Wayback Machine to store blockchains is needed. For example, it is great that someone established proof-of-existence of her will on the Bitcoin blockchain in , but how can we know that the will can be rehashed and authenticated in 60 years when it needs to be verified?

Further, the existence of these kinds of tools—those that archive out-of-use 20 Chapter 2: Blockchain 2. Ethereum: Turing-Complete Virtual Machine Blockchain technology is bringing together concepts and operations from several fields, including computing, communications networks, cryptography, and artificial intelligence. This has been fine for the Blockchain 1. Nakamoto envisioned not just sending money from point A to point B, but having programmable money and a full feature set to enable it.

One blockchain infrastructure project aiming to deliver a Turing- complete scripting language and Turing-complete platform is Ethereum. More fundamentally, Ethereum is a foundational general- purpose cryptocurrency platform that is a Turing-complete virtual machine meaning that it can run any coin, script, or cryptocurrency project. Each full node in the Ethereum network runs the Ethereum Virtual Machine for seamless distributed program smart contract execution. Ethereum has its own distributed ecosystem, which is envisioned to include file serving, messaging, and reputation vouching.

A third component is a reputation system, a way to establish reputation and reduce risk between agents in trustless networks, possibly provided by TrustDavis,61 or ideas developed in a hackathon project, Crypto Schwartz. Any individual or any other project can freely examine and work with the code of other projects and bring it into their own implementations. It means that good ideas can take seed more rapidly, become standardized through iteration, and be improved through the scrutiny and contributions of others.

Over time, smart contracts could become extremely complex and autonomous. The simplest smart contract might be a bet between two parties about the maximum temperature tomorrow. Tomorrow, the contract could be automatically completed by a software program checking the official temperature reading from a prespecified external source or oracle in this example, perhaps Weather.

Dapps Dapps, DAOs, DACs, and DASs are abbreviated terms for decentralized applications, decentralized autonomous organizations, decentralized autonomous corporations, and decentralized autonomous societies, respectively.

Essentially this group connotes a potential progression to increasingly complex and automated smart contracts that become more like self-contained entities, conducting preprogrammed and eventually self-programmed operations linked to a blockchain.

In some sense the whole wave of Blockchain 2. Different parties have different definitions of what constitutes a Dapp. Some current examples are listed in Table Third, the application may adapt its protocol in response to proposed improvements and market feedback, but all changes must be decided by majority consensus of its users.

Overall, however, at present every blockchain project may have a slightly different idea of the exact technicalities of what the term decentralized application comprises.

Perhaps some of these functions could be reinvented 24 Chapter 2: Blockchain 2. The same could be true for individuals as general humans first, and citizens on demand later. There are two apps, DriveShare and MetaDisk, which respectively enable users to rent out their unused hard disk space and store their files on the Storj network.

The currency is used to purchase space on the Storj network via Metadisk and compensate network DriveShare storage providers. In the future, automatic markets could be applied in the sense of having limit orders and program trading for physical-world resource allocation. Truly smart grids e. Tradenets could even have embedded, automatically executing smart contracts to trigger the building of new transportation pods based on signals of population growth, demand, and business plan validity.

One possible path is bringing existing non-AI and non-blockchain rule-based systems onto the blockchain to further automate and empower their operations. This could include systems like chaining together simple if-this-then-that or IFTTT behavior and the open source Huginn platform for building agents that monitor situations and act on your behalf.

The blockchain is fundamentally a new paradigm for organizing activity with less friction and more efficiency, and at much greater scale than current paradigms. It is not just that blockchain technology is decentralized and that decentralization as a general model can work well now because there is a liquid enough underlying network with the Web interconnecting all humans, including for disintermediated transactions: blockchain technology affords a universal and global scope and scale that was previously impossible.

This can be true for resource allocation, in particular to allow for increasingly automated resource allocation of physical-world assets and also human assets. Perhaps all modes of human activity could be coordinated with blockchain technology to some degree, or at a minimum reinvented with blockchain concepts.

Further, blockchain technology is not just a better organizational model functionally, practically, and quantitatively; by requiring consensus to operate, the model could also have greater liberty, equality, and empowerment qualitatively. Thus, the blockchain is a complete solution that integrates both extrinsic and intrinsic and qualitative and quantitative benefits.

This is in the sense that it is necessary to understand the new ideas separately and together. These include concepts such as public-key and private-key cryptography, peer-to- peer file sharing, distributed computing, network models, pseudonymity, blockchain ledgers, cryptocurrency protocols, and cryptocurrency. This calls into question what might have seemed to be established definitions of traditional parameters of the modern world like currency, economics, trust, value, and exchange.

When you understand the concepts involved, not only is it possible to innovate blockchain-related solutions, but further, the concepts are portable to other contexts.

This extensibility of blockchain-related concepts may be the source of the greatest impact of blockchain technology as human agents understand these concepts and deploy them in every venue they can imagine. The Internet was a similar example of universality in application and extensibility of the core technology concept; it meant that everything could be done in a new way— quicker, with greater reach, in real time, on demand, via worldwide broadcast, at lower cost.

Blockchain technology is rich with new concepts that could become part of the standard intellectual vernacular and toolkit. Blockchain technology helps elucidate that everything we see and experience, every system in life, is economics to some degree: a system for allocating resources. The quantized structure of blockchain technology in the form of ledger transaction-level tracking could mean higher-resolution activity tracking, several orders of magnitude more detailed and extensive than we are accustomed to at present, a time at which we are still grateful for SKU-level tracking on a bill of materials.

The ethos and morality of tracking is a separate and interesting social-science topic to explore in the blockchain studies research agenda more generally. This is important, because economically savvy rational agents participating in the system i. In some sense, blockchain technology could be a supercomputer for reality. Any and all phenomena that can be quantized defined in discrete units or packages can be denoted this way and encoded and transacted in an automated fashion on the blockchain.

Blockchain technology could be joined with big data, layered onto the reactive-to-predictive transformation that is slowly under way in big-data science to allow the automated operation of large areas of tasks through smart contracts and economics. We thought big data was big, but the potential quantization and tracking and administration of all classes of activity and reality via blockchain technology at both lower and higher resolutions hints at the next orders-of-magnitude progression up from the current big-data era that is itself still developing.

Decentralized models can be especially effective at promoting freedom and economic transfer in countries with restrictive political regimes and capital controls. There is an argument that blockchain technology can more equitably address issues related to freedom, jurisdiction, censorship, and regulation, perhaps in ways that nation-state models and international diplomacy efforts regarding human rights cannot.

Irrespective of supporting the legitimacy of nation-states, there is a scale and jurisdiction acknowledgment and argument that certain operations are transnational and are more effectively administered, coordinated, monitored, and reviewed at a higher organizational level such as that of a World Trade Organization. The idea is to uplift transnational organizations from the limitations of geography- based, nation-state jurisdiction to a truly global cloud.

Blockchain governance is more congruent with the character and needs of transnational organizations than nation-state governance. Anyone worldwide could look up and confirm the activities of transnational organizations on the blockchain. This is precisely the sort of core infrastructural element that could allow humanity to scale to orders-of- magnitude larger progress with truly global organizations and coordination mechanisms. One activity for which this could make sense is the administration of the Internet.

Internet administration organizations have a transnational purview but are based in nation-state localities. Wikipedia is a similar transnational public good that is currently subject to a local jurisdiction that could impose on the organization an artificial or biased agenda. Namecoin is an alternative DNS that is transnational and cannot be controlled by any government or corporation.

The censorship issue is that in a URL such as google. Therefore, a decentralized DNS means that top-level domains can exist that are not controlled by anyone, and they have DNS lookup tables shared on a peer-to- peer network. As long as there are volunteers running the decentralized DNS server software, alternative domains registered in this system can be accessed. Authorities cannot impose rules to affect the operation of a well-designed and executed global peer-to-peer top-level domain.

Namecoin is not at present intended for the registration of all domains, but as a free speech mechanism for domains that might be sensitive to censorship for example, in countries with limited political freedom.

The top-level domain for Namecoin is. Interested parties register. Because the top-level domain. According to the Bitcoin Contact website as of October , there are , The key point is that. Just as there are benefits to having decentralized currency transactions, there are benefits to having many other kinds of decentralized transactions.

Other critics as with Bitcoin in general point out how the key features of decentralized DNS services cheap and anonymous domain name creation, and a system that places domain names out of the reach of central authorities enable bad players and illegality. P2P decentralized top-level domain from BitShares.

The project points out how the decentralized DNS model eliminates the certificate authority as the third-party intermediary which can leave URLs vulnerable to attack , and that a blockchain model can also be more secure because you lose control of your domain only if you share the private key. It aims to create an unalterable historical record by encoding Twitter feeds to a blockchain. Any tweets mentioning certain prespecified keywords like Ukraine or ebola are encoded into the Alexandria blockchain using Florincoin, a cryptocurrency based on Bitcoin and Litecoin with quick transaction processing 40 seconds and a longer memo annotation field conceptually: Memocoin.

This method captures tweets that might be censored out later by takedown requests. Decentralized DNS Functionality Beyond Free Speech: Digital Identity Beyond its genesis motivation to enable free speech and provide a countermeasure to the centralized control of the Internet, there are other important uses of decentralized DNS functionality in the developing Blockchain 3.

Namecoin functionality might offer such a solution. Namecoin is used to store URLs, but it can store any information. Therefore, just as Bitcoin has uses beyond currency, Namecoin has uses beyond DNS for storing information more generally. Using the nondomain namespaces of Namecoin, we can store information that would otherwise be hard to securely or conveniently exchange.

This could speed access to all aspects of websites, simultaneously improving user experience, anonymity, and security. Some other Bitcoin wallet services and exchanges, like Coinbase, have allowed Bitcoin to be sent to email addresses for some time. The OneName service is a more secure solution. OneName is an open source protocol built on the Namecoin protocol that puts users in charge of their digital identity verification, rather than allowing centralized social media sites 34 Chapter 3: Blockchain 3.

BitID is a decentralized authentication protocol that takes advantage of Bitcoin wallets as a form of identification and QR codes for service or platform access points. It enables users to access an online account by verifying themselves with their wallet address and uses a mobile device as the private-key authenticator.

Bithandle offers short-handle registration, verification, and ecommerce service. An obvious problem with the mainstream adoption of Bitcoin is the unwieldy character Bitcoin address, or QR code, needed to send and receive funds. Instead, Bithandle gives users the ability to link a short handle to a Bitcoin address, which is confirmed initially with real-life identity and looked up in the blockchain on demand at any future moment.

Bithandle thus helps streamline user interactions with websites in several ways. Third, the Bithandle service can provide real-time blockchain lookups to confirm user digital identity at any future time on demand—for example, to reauthorize a user for subsequent purchases.

In the case of the Internet, net neutrality is the principle that Internet service providers should enable access to all content and applications regardless of the source and without favoring or blocking particular products or websites. The concept is similar for cryptocurrencies: Bitcoin neutrality means the ability for all persons everywhere to be able to easily adopt Bitcoin. For example, the Islamic Bank of Bitcoin is investigating ways to conduct Sharia-compliant banking with Bitcoin. A similar project is a mobile cryptowallet app, Saldo.

Digital Divide of Bitcoin The term digital divide has typically referred to the gap between those who have access to certain technologies and those who do not. In the case of cryptocurrencies, if they are applied with the principles of neutrality, everyone worldwide might start to have access.