Blockchain distributed ledger technology is evolving from the hype phase into one of greater maturity and long-term value creation. This graduate course overview examines how blockchains, networks, and social interaction patterns are related.
1. Blockchain Networks and People
Blockchain is
software for the
secure transfer of
value via the
internet
A network is a
group or system
of interconnected
people or things
Network Science is the
study of complex
phenomena using
networks (graph theory)
Blockchain
networks indicate
the emergence of
new patterns of
human interaction
Purdue University, Nov 8, 2018
Course Summary
Slides: http://slideshare.net/LaBlogga
Melanie Swan, Philosophy
melanie@blockchainstudies.org
TECH58100–PHIL 58000A
3. 8 Nov 2018
Blockchain Networks
Readings #1: Bitcoin & Network Science
2
Nakamoto, S. (2008). Bitcoin: P2P Electronic Cash
Original white paper for blockchain concept: having an
always-on Internet-based system checking in real-time 24-7
anytime anyone tries to spend digital cash, to control that it is
only being spent once (solution to double-spending problem)
Brandes et al. (2013). What is network science?
A network connects nodes, resource flow is not necessary
(example: Purdue alumni network)
A network is a model of a real-life phenomenon
Core-periphery:
densely-connected
core, sparsely-
connected periphery
Ego Network:
focal node (“ego”) and
directly-connected
nodes ( “alters”)
4. 8 Nov 2018
Blockchain Networks
Readings #2: Blockchain & Network Intro
3
Morabito. (2017). Blockchain for Business Innovation
Decentralized database: all peer nodes have a copy
Public blockchains vs. private blockchains (for business)
Proof of work and proof of stake consensus algorithms
Smart contracts: two or more parties, terms, consideration
Jackson. (2008). Social and Economic Networks Intro
General measures of network utility, efficiency, stability
Trade-offs in network design: stability vs. efficiency
Homophily: tendency of individuals to associate and bond with
others that are similar, “birds of a feather flock together”
Preferential attachment: “rich get richer”
5. 8 Nov 2018
Blockchain Networks
Readings #3: Water Industry & Scale-free
4
Lin et al. (2017). Blockchain and ICT E-Agriculture
IOT and blockchain networks (Bitcoin, Ripple, Monero)
indicate complex network behavior: small-world & scale-free
Interpretation: replicating the “regular” way of doing things
Sohn. (2017). Small-World and Scale-Free Network
Models for IoT Systems
Random networks (Erdős–Rényi, PMI,
1959): Normally-distributed; Gaussian
Small-world networks (Watts & Strogatz,
Nature, 1998): Power law; 80-20 pareto
distribution
Scale-free networks (Barabási & Albert,
Science, 1999): Fat-tailed distribution;
six degrees of separation; rich get richer
6. 8 Nov 2018
Blockchain Networks
Readings #4: Agriculture & Network Trust
5
Kim and Laskowski. (2017). Agriculture & Blockchain:
Sustainable Solutions for Food, Farmers, & Financing
Blockchain enables new models of local organizing: farmers
cooperatives, recourse against players with market power
Food safety, product traceability (salmonella outbreak)
Sustainability: financial, crop genetics, micro-insurance
Sherchan et al. (2013). Trust in Social Networks.
Humanity is good at producing material goods (“widgets”),
how can we also excel at producing intangible resources?
Social capital (trust, autonomy, inclusion, recognition, peace)
Incentive structures that promote social capital production
7. 8 Nov 2018
Blockchain Networks
Readings #5: Solar Energy & Network Stack
6
Adjeleian et al. (2018). How blockchain is
disrupting the Solar Energy industry
Incentives for transitioning to renewable resources
IOT carbon sequestration blockchain for carbon credits
Implied political power shift due to energy independence
Orlikowski and Scott. (2015). The algorithm and the
crowd: considering the materiality of service innovation
Digital services: shift to practice of buying airline tickets online
Building the trust stack: design structures to create social
capital in a digital network environment
Layers in the trust stack: infrastructure, interface,
application, network resources (trust, liquidity)
9. 8 Nov 2018
Blockchain Networks 8
“Better
horse”
Progression of a New Technology
“Horseless
carriage”
“Car” 3.0
2.0
1.0 Better internet: payments and
secure information transfer,
privacy-protected computing
Assets digitized and
registered to blockchains,
real-time valuation and
transfer, smart contracts
Large-scale social collaboration
technology: supplementing and
replacing governments, corporations,
and open-source communities
Source: Swan, M. (2015). Blockchain: Blueprint for a New Economy
Blockchain
11. 8 Nov 2018
Blockchain Networks
internet content.
10
information.
email.
voice.
video.
money.
12. 8 Nov 2018
Blockchain Networks 11
Conceptual Definition:
Blockchain is a software protocol;
just as SMTP is a protocol for
sending email, blockchain is a
protocol for sending money
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
What is Blockchain/Distributed Ledger Tech?
13. 8 Nov 2018
Blockchain Networks
Blockchain Technology: What is it?
12
Blockchain technology is the secure distributed ledger
software that underlies cryptocurrencies like Bitcoin
“Internet of Money” leapfrog technology; Skype is an app allowing
phone calls via Internet without POTS; Bitcoin is an app allowing
money transfer via Internet without banks; ‘decentralized Paypal’
Internet
(decentralized network)
Blockchain
Bitcoin
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
Application
Layer
Protocol
Layer
Infrastructure
Layer
SMTP
Email
VoIP
Phone
calls
OSI Protocol Stack:
14. 8 Nov 2018
Blockchain Networks
Chain of linked blocks = a “blockchain”
13
Source: GREG/Smart Energy Meeting PWC, Blockchain101, Nov 2016
Each block stores information and contains a validated pointer (called a hash) to the
previous block. Each block is thus linked or “chained” to the last one
The chaining of blocks is tamper-proof, creating a immutable record of
events that is resistant to fraud and corruption
16. 8 Nov 2018
Blockchain Networks
killer apps.
15
secure transfer of value, of…
money & securities.
property.
contracts.
identity credentials.
17. 8 Nov 2018
Blockchain Networks
How does Bitcoin work?
Use eWallet app to submit transaction
16
Source: https://www.youtube.com/watch?v=t5JGQXCTe3c
Scan recipient’s address
and submit transaction
$ appears in recipient’s eWallet
Wallet has keys not money
Creates PKI Signature address pairs A new PKI signature for each transaction
18. 8 Nov 2018
Blockchain Networks
P2P network confirms & records transaction
17
Source: https://www.youtube.com/watch?v=t5JGQXCTe3c
Transaction computationally confirmed
Ledger account balances updated
Peer nodes maintain distributed ledger
Transactions submitted to a pool and miners assemble
new batch (block) of transactions each 10 min
Each block includes a cryptographic hash of the last
block, chaining the blocks, hence “Blockchain”
19. 8 Nov 2018
Blockchain Networks 18
public chains. private chains.
trustless. mined.
p2p software.
trusted. not-mined.
enterprise software.
20. 8 Nov 2018
Blockchain Networks
What is blockchain? Conceptual overview
1. Digital money (better version of PayPal/Venmo)
2. Enterprise software (digital asset inventories)
3. Inclusion technology (unbanked, credit, literacy)
4. Emerging legal jurisdiction (game theory not police)
5. Web 3.0: large-scale collaboration technology
(Web 3.0 = smart network, “Internet's new pipes”)
6. Truth verification method (rich information attributes)
19
Smart networks: intelligent autonomously-operating
networks, a new form of global computational
infrastructure that includes technologies such as
blockchain economic networks, deep learning pattern-
recognition networks, autonomous-strike UAVs, and high-
frequency trading networks
22. 8 Nov 2018
Blockchain Networks
Complex Systems
21
Can often characterize the macrostate and the
microstate, but what happens in the middle?
Macrostate:
GDP
Microstate: Rate of new
businesses formation,
new auto loans
Middle: Complexity
Source: Schweitzer, F., et al. 2009. Economic Networks: The New Challenges. Science. 325:422-5.
Simon, H.A. 1996. The Sciences of the Artificial. Third edition. MIT Press, Cambridge, MA.
Simon (1996): small groups of parts make up larger
assemblies (modules) from which the whole is built; the
parts of the module interact strongly
Whole
Assemblies
or Modules
Parts
Simon (1996)Schweitzer (2009)
23. 8 Nov 2018
Blockchain Networks
Huntington’s disease (0.0002% deaths, 2.27 per million)
Heart disease (30%/22% U.S./global deaths), Cancer (24% U.S. deaths)
“Natural Causes” attributed due to lack of causal model
22
Solving Disease and Health Challenges
Hard problems: probabilistic not deterministic
Genomics
100%
Behavior
33%
Genomics
33%
Environment
33%
Source: Pagidipati. 2013. Estimating Deaths From Cardiovascular Disease. Circulation. 127(6):749–756; National Cancer Institute.
2018. Cancer Statistics. https://www.cancer.gov/about-cancer/understanding/statistics
Deterministic
Probabilistic
40+ CAG repeats in
the HTT gene
24. 8 Nov 2018
Blockchain Networks
Problem: Prediction in Complex Systems
How are these events similar? different?
Is the Turkish coup an example in this trajectory?
How can networks be used to map the underlying
factors that give rise to macro-level formations?
23
1789 2010 ???
French
Revolution
Tiananmen
Square
Next
event
Arab
Spring
Turkish
coup?
1989 2016
Source: Handbook of Cliometrics. 2016. Editors: Diebolt, Claude, Haupert, Michael (Eds.)
25. 8 Nov 2018
Blockchain Networks
Claim:
Networks are a way to analyze “the middle”
24
Map relationships between agents to see intermediate
structure, dynamic emergence
26. 8 Nov 2018
Blockchain Networks
Drawing the Graph
1. What is the domain?
2. What are the entities in this domain? (nodes)
3. What are the relationships between them? (edges)
25
Simple Graph of
Entities and
Relationships
Domain: Social Network Domain: Financial System
Nodes: People
Edges: Know one another Edges: Financial obligation
(1: cash deposits, 2: loans)
Nodes: Banks
27. 8 Nov 2018
Blockchain Networks
Network Science
Network Science = The study of graphs as a
representation of relations between entities
Nodes and edges (entities and relationships between them)
Seven Bridges of Königsberg (Euler, 1736, graph theory)
26
node or
28. 8 Nov 2018
Blockchain Networks
Network Science
Seven Bridges of Königsberg (Euler, 1736, graph theory)
Problem: walk around the city, crossing each bridge only once
Euler: mathematical proof that it cannot be done, using
(inventing) graph theory; shifting math from ‘science of quantity’
to more abstract structures such as topology
27
node or
Kant’s Tomb, Kaliningrad
Cathedral (formerly Königsberg)
31. 8 Nov 2018
Blockchain Networks
Example: Systemic Financial Risk
Risk of financial contagion (how “catching” the collapse
of one bank would be to others given linked exposure)
30
Source: IMF, June 2016, Systemic Risk Among Deutsche Bank and Global Systemically Important Banks
Legend:
• Blue, purple and green nodes
correspond to European, US and
Asian banks
• Arrow thickness captures total
linkages (both inward and outward),
• Arrow direction is net spillover
• Node size corresponds to asset value
32. 8 Nov 2018
Blockchain Networks
Example: How are brain and body linked?
31
Sources: Murphy, Bassett, et al. 2018. Structure, function, and control of the human musculoskeletal network. PLOS Biology.
Davies, J.A. 2014. Life Unfolding: How the Human Body Creates Itself. Oxford: Oxford University Press.
Summary:
Employ network theory methods
to map neural control mechanisms
to the musculoskeletal system
Summary: study biological
networks: larger patterns of
gene expression and cellular
interconnection
Biological musculoskeletal network
33. 8 Nov 2018
Blockchain Networks
Drawing the Graph
Different ways to organize information
32
Traditional Method Network Science Method
34. 8 Nov 2018
Blockchain Networks
Network Properties
Use networks to analyze innovation rate, collaboration
with other departments/firms, how decisions are made
33
Degree of connectivity
of network
• V:={1,2,3,4,5,6}
• E:={{1,2},{1,5},{2,3},{2,5},{3,4},{4,5},{4,6}}
How quickly is a new
idea disseminated?
Who is a key influencer
in decisions?
35. 8 Nov 2018
Blockchain Networks
Build a Social Graph – How does it work?
Compile table listing names and number of interactions
34
• V:={1,2,3,4,5,6}
• E:={{1,2},{1,5},{2,3},{2,5},{3,4},{4,5},{4,6}}
Source: https://www.teachengineering.org/activities/view/uno_graphtheory_lesson01_activity1
Data
Network Modeling
36. 8 Nov 2018
Blockchain Networks
Build a Social Graph – How does it work?
Example: Medea (Euripides), 431 BC
Level 1 analysis: purely quantitative, based on # interactions
35
• V:={1,2,3,4,5,6}
• E:={{1,2},{1,5},{2,3},{2,5},{3,4},{4,5},{4,6}}
Source: https://www.teachengineering.org/activities/view/uno_graphtheory_lesson01_activity1
Basic Interaction Map Network Modeling Network Analysis
Medea
Jason
37. 8 Nov 2018
Blockchain Networks
Build a Social Graph
Example: tweet activity during conference
36
• V:={1,2,3,4,5,6}
• E:={{1,2},{1,5},{2,3},{2,5},{3,4},{4,5},{4,6}}
Source: https://pegasusdata.com/2012/12/06/just-in-time-sociology-new-field-digital-humanities/
Conference
Agenda
38. 8 Nov 2018
Blockchain Networks
Build a Social Graph
Example: tweet activity during conference
37
• V:={1,2,3,4,5,6}
• E:={{1,2},{1,5},{2,3},{2,5},{3,4},{4,5},{4,6}}
Source: https://pegasusdata.com/2012/12/06/just-in-time-sociology-new-field-digital-humanities/
Keynote:
Paula Tubaro
Conference
Organizer:
Frederic Kaplan