Blockchain: Hype Or Reality
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Bart Preneel September 2019 Blockchain: Hype or Reality Outline Blockchain: A short history of blockchain Hype or Reality? Opportunities PROF. DR. IR. BART PRENEEL COSIC, AN IMEC LAB AT KU LEUVEN, BELGIUM What can we learn from PKI? [email protected] Challenges ENISA SUMMER SCHOOL, HERAKLION Do you need a blockchain? 17 SEPTEMBER 2019 1 2 History Currencies = maintaining memory George Santaja (1864-1952) Those who cannot remember the past are condemned to repeat it Susa, Iran, ca 3300 BC Cuneiform, Sumeria, ca 2600 BC 3 Slide inspired by George Danezis4 1 Bart Preneel September 2019 Blockchain: Hype or Reality Hash functions (1975): one-way Digital signatures (1975): easy to compute but hard to invert “equivalent” to manual signature RIPEMD-160 SHA-256 X Donald agrees to SHA-512 Public key This is an input to a crypto- pay to Hillary 100 graphic hash function. The SHA-3 input is a very long string, that Bitcoins on Sept. is reduced by the hash function to a string of fixed 17 2019 length. There are additional f 1A3FD4128A198FB3CA345932 security conditions: it should Private key be very hard to find an input hashing to a given value (a preimage) or to find two colliding inputs (a collision). 5 6 Byzantine generals problem (1982) Merkle tree (1979) (can deal with at most 1/3 traitors) Using a hash function f to authenticate a set of messages through a x12 logarithmic number of values x5678 Applications: digital signatures, revocation… root 7 8 2 Bart Preneel September 2019 Blockchain: Hype or Reality Electronic cash (1985) [David Chaum] Timestamping (1990) Financial Institutions Collect documents and hash them with a Merkle tree (clearing and settlement) Chain these trees together with a hash chain 1990-1998 Publish intermediate values on a regular basis Issuer Acquirer Withdrawal Deposit or load on-line/off-line Payment hash (cash transfer) f f f Customer Merchant 0 chain t1 t2 t3 9 10 Timestamping: Surety Technologies (1994) Digital money 1996-2008 http://www.surety.com/ e-gold (1996-2008) ◦ currency backed by real commodity: gold ◦ centralized ledger of transactions ◦ becomes a crime magnet (1 million users) ◦ charges of money laundering and operating without a license ◦ assets liquidated: $90M in gold MojoNation (2000-2002) https://www.belspo.be/belspo/organisation/Publ/pub_ostc/NO/rNOb007_en.pdf ◦ peer-to-peer file storage service paid with “Mojo” Belgian TIMESEC project (1996-1998) ◦ collapsed under hyperinflation ◦ inspired BitTorrent tit-for-tat incentive scheme Estonia: Cybernetica 11 12 3 Bart Preneel September 2019 Blockchain: Hype or Reality Bitcoin Bitcoin (2008): Satoshi Nakamoto (paper October 2008 – mining January 2009) Everyone can produce money “While the system works well enough for most transactions, it still No central bank suffers from the inherent weaknesses of the trust based model.” Everyone can verify transactions “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. “ X Cryptocurrency with distributed generation and verification of money Open system where anyone can join 13 14 Paying with Bitcoin Paying with Bitcoin Donald Hillary Donald Hillary Block chain Block chain name amount name amount 1BxgB4tjcoDnz1LC7bRqyybbE8YNigUQn5 70.00 1BxgB4tjcoDnz1LC7bRqyybbE8YNigUQn5 70.00 19EULTY5DMyvDM6krKtcuvcUoHT4T3QmQL 80.02 19EULTY5DMyvDM6krKtcuvcUoHT4T3QmQL 80.02 1CMMwinpNduzooWeJ4sK9u7Lkp4YAyK2Lw 5.00 1CMMwinpNduzooWeJ4sK9u7Lkp4YAyK2Lw 5.00 16PVjaawyWqWnzyttJTAyv7hTcPNmRnVzY 2.50 +1.00 16PVjaawyWqWnzyttJTAyv7hTcPNmRnVzY 3.50 16LNAxwBQupD7yDC8RUSRhyb62BFAZtgae 0.17 16LNAxwBQupD7yDC8RUSRhyb62BFAZtgae 0.17 12tQUEb8zzdQSXkgt1553z7zS6Fm1cMQZB 10.00 -1,00 12tQUEb8zzdQSXkgt1553z7zS6Fm1cMQZB 9.00 16VT.wYYCLUNgzB8Xs8fYtWWxHR4wdyHm5 2.30 16VTrwYYCLUNgzB8Xs8fYtWWxHR4wdyHm5 2.30 15 16 4 Bart Preneel September 2019 Blockchain: Hype or Reality Paying with Bitcoin Paying with Bitcoin Anyone can verify a digital signature Public key Donald agrees to Anyone can verify whether the “account” of 12tQUEb8zzdQSXkgt15 pay to Hillary 53z7zS6Fm1cMQZB Donald contains enough money 1 Bitcoin. Sept. 17, 2019 Private key 17 18 Managing the blockchain Voting? Sybil attack Miners all over the world follow up all the transactions But due to communication errors or fraud there are multiple versions 19 20 5 Bart Preneel September 2019 Blockchain: Hype or Reality Puzzles (a lottery) – [Dwork-Naor’92][Hashcash] Block Chain: a public decentralized ledger Bitcoin transactions Block 1 Block 2 Block 3 block chain nonce2 nonce3 (240 nonce1 f “small”f “small”f “small” Gbyte) 0 t1 t2 t3 Also include in every block timestamp and difficulty level of puzzle 21 22 Why does Bitcoin have value? Market price in USD (market cap 185 B$) 1 Bitcoin $10,337 2019-09-15 China + Korea ban Mount Gox The worth of a thing 2011 bubble Cyprus crisis is the price it will bring 23 24 6 Bart Preneel September 2019 Blockchain: Hype or Reality Market price in USD (market cap 185 B$) Energy cost: 50-75 TWh per year (same as Greece) 1 Bitcoin $10,337 2019-09-15 Coinbase has grown from 5.5M to 20+M clients since Jan. 2017 Yet another hack 25 https://digiconomist.net/ 26 Energy cost: 50-75 TWh per year (same as Greece) Number of transactions per day 2-5 transactions/s Peak: 10 transactions/s large share goes to a few addresses Alipaypeak 256.000/s Visa peak 25.000/s Western Union peak: 750/s https://digiconomist.net/ 27 28 7 Bart Preneel September 2019 Blockchain: Hype or Reality Is Bitcoin is the money of the future? Is Bitcoin is the money of the future? 3 main purposes of money Computer scientists set the 2019 • medium of exchange monetary policy • store of value We don’t understand Bitcoin • unit of account 2013 29 30 Total value of all gold? 7.5 T$ Total market cap 270 B$ Total value of stock exchange? 70 T$ https://coinmarketcap.com/all/views/all/ Business and governments tend to dislike ◦ distributed control ◦ full transparency ◦ unclear governance (or anarchy) ◦ uncontrolled money supply Facebook libra? restrict ◦ write, verify or read ◦ to non-monetary applications 31 32 8 Bart Preneel September 2019 Blockchain: Hype or Reality Distributed Ledger: a range of solutions Blockchain opportunities Consortium/Hybrid Public Blockchain Fully Private Blockchain Blockchain • No central point of • Controlled by more than • Controlled by one Consensus Provenance Immutability control by individuals, two individuals, individual, corporation or corporations or corporations or government (no governments governments consensus needed) • Permissionless to • Permission on • Permission on participate participation from participation from owner • Concensus based on consortium necessary necessary Finality Transparency Accountability “proof of work” • Arbitrary consensus • Readability of the • Examples: mechanism blockchain can be public • Bitcoin • Readability of the or restricted to one blockchain can be public • Ethereum Reduce overheads and or restricted to the controls consortium trusted third parties Cost savings • Example: RSCOIN intermediaries (UCLondon) gatekeepers and censors 33 34 Shared replicated permissioned ledger Shared ledger 2015 Permissioned Smart Contracts Party A’s Records Counter-party Bank records records Ledger Security Ledger and Privacy Consensus Party C’s Records Auditor records Ledger Party B’s Records Ledger Smart contracts: $300M by 2023 (CACG 32%) All technical building blocks of distributed ledgers were developed by 1990 https://www.marketresearchfuture.com/reports/smart-contracts-market-4588 Figure https://blogs.wsj.com/cio/2016/02/02/cio-explainer-what-is-blockchain/ 35 36 9 Bart Preneel September 2019 Blockchain: Hype or Reality Gartner Hype Cycle Emerging Technologies The PKI hype (1996-2000): unified security 2003: PKI in slope of enlightenment E-mail Web 2014: cryptocurrencies just over the peak 2015: idem and crypto exchanges in trough of disillusionment 2016: blockchain at the peak Desktop 2017: blockchain just over the peak PKI 2018: blockchain sliding down, but a dedicated hype cycle for blockchain business VPN 2019: only Distributed Autonomous Organization (DAO): innovation trigger ERP 37 38 PKI: lessons learned (2): what worked PKI: lessons learned EMV (1993) High stock market valuations: “.com” hype EMV: 7.1 billion cards (55% of total) and 50 million terminals Single global PKI proposed in the late 1980s Highly centralized You cannot create trust out of cryptography (few exceptions) Hierarchical trust model Misaligned incentives invalidate business model: why should users pay for certificates? Interoperability problems High integration cost – resistance to change 39 Figure: Cryptomathic 40 10 Bart Preneel September 2019 Blockchain: Hype or Reality PKI: lessons learned (2): what “worked” PKI: lessons learned (2): what “worked” SSL/TLS (1995) SSL/TLS (1995): certificate transparency (2013) SSL/TLS certificates: 660 CAs in browser issued about 60 million server Certificate transparency: signed Merkle tree certificates used by 5 billion devices Browser vendors decide who is included Centralized way to detect mistakes or abuse Users need to trust union of all of the CAs by CAs Trust has been abused by several governments and companies ◦ e.g. Diginotar For social good Issue: privacy Revocation only implemented in browsers around 2001 Extended Validation (2007) – died around 2018 Recent addition since 2016: Let’s Encrypt: 50 million domains ◦ Price paid: limited checking 41 42