Introduction to Blockchain Technology

1 Introduction to Blockchain Technology 1
1.1 Key blockchain concepts 1
What is a blockchain? 2
What are nodes? 4
What is cryptocurrency? 9
What are tokens? 10
What does distributed mean? 11
1.2 Summary 14
1.3 Test your knowledge 14

2 Key parts of blockchain technology 17
2.1 Cryptography 17
Machines that encrypted data in the past 17
Modern encryption 18
Private and public keys 18
2.2 What is a hash? 19
From blocks to hashes 20
2.3 Ledgers 21
Transactions and trade 21
2.4 The public witness 22
Computers that witness 23
2.5 Summary 27
2.6 Test your knowledge 28

3 The structure of the network: consensus algorithm 31
3.1 Proof of Work 31
3.2 Proof of Stake (PoS) 33
3.3 Delegated Proof of Stake 34
3.4 Proof of Authority 35
3.5 Proof of Elapsed Time 36
3.6 Proof of Capacity and Proof of Space 37
3.7 Proof of Burn 38
3.8 Hyperledger Fabric 39
3.9 Summary 40
3.10 Test your knowledge 41

4 Key blockchain networks and technologies 45
4.1 The history of blockchain networks 46
4.2 Top challenges for blockchain networks 47
4.3 A deeper dive into Bitcoin 48
The top challenges that face Bitcoin’s global adoption 49
Major Bitcoin contributors 50
4.4 Hyperledger 51
4.5 EOS’s delegated Proof of Stake 53
4.6 Ripple 55
4.7 Unearthing Ethereum 59
4.8 The Waves platform – a Russian blockchain 62
4.9 Summary 64
4.10 Test your knowledge 65

5 Second generation applications of Blockchain technology 69
5.1 Smart contracts 69
Smart contracts: origins and how they function 70
Creating and deploying smart contracts 71
5.2 Tokens 72
Token standards 73
Second generation tokens 74
5.3 Decentralized applications 74
How are DApps constructed? 75
5.4 Decentralized Autonomous Organizations (DAOs) 76
How DAOs work 78
Key takeaways about DAOs 78
Legality of DAOs 79
5.5 Summary 79
5.6 Test your knowledge 79

6 Expanding applications of blockchain 83
6.1 Decentralized identity 83
Online identity - the honey pot 83
Self-sovereign identity 84
What is identity? 85
History of identity documentation 86
Challenges of identity 87
6.2 Blockchain protected identity 88
Blockstack 89
Microsoft 89
IBM’s Trusted Identity 89
Civic 90
6.3 Blockchain and IoT 90
Toyota 91
IBM 92
6.4 Artificial Intelligence and blockchain 92
The history of Artificial Intelligence 93
Companies building blockchain technology for AI 93
SingularityNET 94
Enigma 94
Matrix AI network 94
6.5 Decentralized marketplaces and exchanges 94
Challenges of decentralized marketplaces 96
Lack of legal framework 96
Emerging developments 96
Loss of customer touch 97
Popular decentralized marketplaces and exchanges 97
OpenBazaar 97
ModulTrade 97
FundRequest 97
6.6 Summary 98
6.7 Test your knowledge 98

7 Blockchain and the world economy 101
7.1 Supply chain industry 101
Supply chain of the past 102
Supply chain of the future 102
Supply chain using blockchain technology 103
7.2 Cross-border money transfer 105
A little history in cross-border money transfer 105
Innovation in cross-border payment 106
Cross-border payment of the future 106
Top three challenges in cross-border money transfer 107
7.3 Financial change agents 108
The Ripple protocol 108
The R3 consortium 109
COTI 109
Everex 109
SendFriend 110
7.4 Summary 110
7.5 Test your knowledge 110

8 New frontiers in blockchain and business 113
8.1 Digital fiat currency 113
History of digital fiat currency 114
Top challenges in the digital fiat currency industry 115
Long-term effects to physical tenders 115
8.2 Disrupters in banking and currency 115
eCurrency 116
Blockstream - Liquid 116
Ripio 116
Woorton 116
BABB 117
8.3 Blockchain and insurance 117
History of insurance 118
Insurance of the present 118
Insurance of the future 118
Top challenges in the insurance industry 118
Blockchain startup companies in the insurance industry 119
Black 119
BlockRe 119
B3i 120
ChainThat 120
8.4 Intellectual property rights and providence 120
History of intellectual property rights 121
Intellectual property at present 121
Intellectual property of the future 122
Top challenges in the intellectual property rights industry 122
Digital reproduction 122
Coverage expansion of rights 122
Digital IP of the future 122
IPwe 123
LOCI 123
Vaultitude 124
8.5 Summary 124
8.6 Test your knowledge 125

9 Blockchain and people 129
9.1 Lean governments 129
9.2 Estonia’s e-Residency 130
9.3 Better authentication and notarization in China 131
9.4 The trust layer for the internet 131
9.5 Spam-free email 131
9.6 Blockchain oracles for IoT 132
9.7 IP and trusted authorship 133
9.8 Intellectual property rights 133
9.9 Government 135
Smart cities of China - Hangzhou 135
U.S. Department of Homeland Security 135
Singapore’s Smart Nation project 136
Singapore satellite cities in India 136
China’s Whole Country strategy 137
9.10 Financial capitals of the world 137
London 138
Exciting projects across the UK 138
9.11 Dubai’s 2020 goal 138
9.12 BitLicense of New York City 139
9.13 Malta, the blockchain island of the EU 140
9.14 German blockchain 140
9.15 French blockchain efforts 141
9.16 Summary 141
9.17 Test your knowledge 142

10 Blockchain and the inhibitors 143
10.1 Blockchain vulnerabilities 143
Smart contract vulnerabilities 143
Centralized public networks 144
Centralized private networks 145
10.2 Community fractures and feuds 145
10.3 Fraud and scams 146
Advanced fee schemes 147
Identity theft and credit card fraud 147
Internet and device hacking 147
Market manipulation 148
Pyramid and Ponzi schemes 149
10.4 Summary 150
10.5 Test your knowledge 150

Appendix A: Answer Keys 153

Index 155