Blockchain 3.0, the Encryption of Innovation. This talk looks beyond the immediate economic benefits and risks of distributed ledgers and considers the broader societal innovations implied by blockchain technology. The possibility of innovation and creating and participating in different and multiple self-determined political and economic systems could mobilize how we create ourselves as individuals and societies. Blockchain technology invites the possibility of creating a social world that gives greater weight to the values we apparently care about: freedom, trust, and dignity

1. Global Future of Blockchain
Melanie Swan
Philosophy, Purdue University
melanie@BlockchainStudies.org
Blockchain 3.0, the Encryption of Innovation
Seoul, South Korea, May 17, 2018
Slides: http://slideshare.net/LaBlogga
좋은 아침

2. 1
Melanie Swan, Technology Theorist
 Founder, Institute for Blockchain Studies
 Philosophy Department, Purdue University,
Indiana, USA
 Singularity University Instructor; Institute for Ethics
and Emerging Technology Affiliate Scholar; EDGE
invited contributor; FQXi Advisor
Traditional Markets Background
Economics and Financial
Theory Leadership
New Economies research group
Source: http://www.melanieswan.com, http://blockchainstudies.org
https://www.facebook.com/groups/NewEconomies

3. Blockchain
2
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
 To inspire us to
build this world
2015

4. basics.
3

5. internet content.
4
information.
email.
voice.
video.
money.

6. 5
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?

7. Blockchain Technology: What is it?
6
 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:

8. Two Fundamental Eras of Network Computing
7
Source: Expanded from Mark Sigal, http://radar.oreilly.com/2011/10/post-pc-revolution.html
I. Transfer Information II. Transfer Value
6 7
2020s 2030s
Simple networks Smart networks

9. blockchain.
8
software.
secure transfer of money.
via the internet.

10. killer apps.
9
secure transfer of value, of…
money & securities.
property.
contracts.
identity credentials.

11. 10
public blockchains. private blockchains.
trustless. mined.
p2p software.
trusted. not-mined.
enterprise software.

12. How does Bitcoin work?
Use eWallet app to submit transaction
11
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

13. P2P network confirms & records transaction
12
Source: https://www.youtube.com/watch?v=t5JGQXCTe3c
Transaction computationally confirmed
Ledger account balances updated
Peer nodes maintain distributed ledger
with consensus-based mining
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”

14. mining.
Source: https://www.illumina.com/science/technology/next-generation-sequencing.html
13
Proof of Work: secure but expensive.

15. What is Bitcoin mining?
14
 Mining is the accounting function to record
transactions, fee-based (120,000,000 KRW)
 Mining ASICs “find new blocks” (proof of work)
 Network regularly issues random 32-bit nonces
(numbers) per specified cryptographic parameters
 Mining software constantly makes nonce guesses
 At the rate of 2^32 (4 billion) hashes (guesses)/second
 One machine at random guesses the 32-bit nonce
 Winning machine confirms and records the
transactions, and collects the rewards
 All nodes confirm the transactions and append the
new block to their copy of the distributed ledger
 “Wasteful” effort deters malicious players
Sample
code:
Run the software
yourself:
Fast because ASICs
represent the hashing
algorithm as
hardware

16. adoption: hype vs. value-creation.
15
$2.1 billion 2018 global spend (IDC).
57% global corporations (Juniper).
$325 billion USD asset class.
1551 cryptocurrencies.
1206 token projects.
Sources: https://www.cnbc.com/2017/07/31/blockchain-technology-considered-by-57-percent-of-big-corporations-study.html,
https://coinmarketcap.com/all/views/all/, https://www.stateofthedapps.com/,
https://blogs.wsj.com/cio/2018/02/06/business-interest-in-blockchain-picks-up-while-cryptocurrency-causes-conniptions/

17. When to use Blockchain Technology
16
 Blockchain is enterprise
software
 Solid business use case
 How does a decentralized
solution improve over a
centralized one?
 Ideal use case:
 Many parties in the value chain
 Intensity of information and
monetary exchange
Use Case Example:
Factom: Health
insurance claims billing
• Automated claims
billing, validation,
payment, and
settlement
• Multi-party value chain:
patient, service
provider, billing agent,
insurance company,
payor, government,
collections
adoption: hype vs. value-creation.

18. sample applications.
17

19. 18
financial services.
quantified risk: 2.5 yr payback (securities clearing
3-days to 2-days).

20. 19
food supply chain safety monitoring.
chain of custody.

21. 20
vaccine cold
storage tracking.

22. 21
birth registry, QR code resumes.
MIT Digital Certificates (diplomas); Criminal Records

23. 22
vehicle information chains.

24. 23
supply chain asset tracking.
 Application-specific views and credentials issued to multiple
parties in the value chain using single shared blockchain
 Blockchain-registered digital assets, real-time balance sheets

25. 24
enterprise platform comparison.
Source: https://medium.com/@philippsandner/comparison-of-ethereum-hyperledger-fabric-and-corda-21c1bb9442f6

26. 25
blockchains in space.
Jan. 13, 2018 - NASA has awarded a grant to the University of Akron for
research into data analysis and other topics related to space exploration. The
allocation will help a team led by associate professor Jin Wei to pioneer a
resilient networking system based in part on the Ethereum blockchain.

27. network futures.
26

28. peer-hosted.
Source: https://bitnodes.21.co
27
Bitcoin: 10,493 nodes.

29. peer-hosted.
Source: https://www.ethernodes.org/network/1
28
Ethereum: 15,055 nodes.

30. store money.
29
old model.
networks.
banks.
new model.

31. change.
30
https://www.coindesk.com/jpmorgan-says-it-may-have-to-adapt-to-counter-crypto-adoption
“…financial institutions…face the risk that
payment processing and other services could
be disrupted by technologies, such as
cryptocurrencies, that require no
intermediation”
Annual 10K, Mar 2018

32. power of the press.
31
old model.
networks.
newspapers.
new model.

33. power of the wallet.
32
old model.
peer networks.
banks.
new model.

34. blockchain
economics.
33

35. Blockchain Economics
 New economic model’s distinguishing aspects
1. Open platform business model
 vs. proprietary platform (GOOG, FB, NFLX)
2. Initial Coin Offerings as a novel and
official financing method for projects
3. Token-based money supply
34
Source: Swan, M. Forthcoming. Blockchain Economic Networks. Palgrave Macmillan.
Two-way network effects
(Metcalfe’s Law (n2 ))

36. 35
participation.
earn money.
access resources.
vote on decisions.
tokens = “money +”.
functions of money.
store of value.
medium of exchange.
unit of account.
+

37. participation
. 36
information
internet: static
information
social internet:
engage with
content
token internet:
participate in the
community economy

38. 37
net settlement.
payment channels.
digital credit systems.
Source: http://timreview.ca/article/1109
rethink debt.

39. Rethink Debt with
Net Settlement and Payment Channels
38
Source: Extended from https://www.investinblockchain.com/lightning-network-bitcoin-scaling
Opening
Transaction:
Broadcast to
Network
Interim Transactions: Signed
between Wallets (both
parties agree and are
obligated; not Broadcast to
Network)
USD $50
Alice opens $50 “Monthly Payment
Channel” with Starbucks
Closing Transaction:
Broadcast to
Network
Alice consumes coffee and
Starbucks adjusts the refund
balance from the initial deposit
USD $5
4/1/18
4/30/18
1
2
Close “Monthly Payment
Channel”: Starbucks broadcasts
last refund amount to network
Starbucks
Coffee
USD $50
USD $45
Starbucks acknowledges with
unbroadcast refund of $50
4/2/18
USD $5
3
4/3/18
USD $5
4
4/4/18
USD $40
USD $35
USD $35
3
0

40. 39
real-time balance sheets.
off-balance sheet obligations
disappear.
diminished risk.
Source: http://www.europeanfinancialreview.com/?p=21755
rethink risk.

41. business networks.
40
digitized assets.
instantaneous transactability.
shared business processes.
single ledger.
the world is your VPN
Source: https://www.coindesk.com/ico-tracker

42. Rethink Risk with
Black Swan Smart Contracts
 Financial options (put/call) used to
control/manufacture exposure
 Convexity (Fig. 1): control down-side
risk, upside gain, anti-fragile (robust)
 Concavity: undesirable risk profile
 Taleb: map event probabilities as
s-curve (Fig. 2) in medicine, etc.
 Convex-linear-concave profile
 Use programmable risk dropdown
feature of smart contracts to
manage risk in more domains
41
Sources: Swan, M. Submitted. Programmable Risk: Black Swan Smart Contracts, IEEE;
Taleb, Medicine: https://arxiv.org/ftp/arxiv/papers/1208/1208.1189.pdf
Figure 1
Figure 2

43. smart contracts.
42
Launched: Nov 2017
500,000 sold, total: USD$40 million
Source: http://fortune.com/2018/02/13/cryptokitties-ethereum-ios-launch-china-ether
cryptokitties.

44. global inclusion.
43
banking & credit.
land registry.
identity.
electricity.
vaccines & medicine.
Source: https://www.unicef.org.au/blog/unicef-in-action/april-2017/photos-vaccines-reach-most-remote-places-earth
Digital health wallet

45. future-class tech.
44
blockchain networks are a
new class of global
computational infrastructure.

46. smart networks.
45
 Future of AI: intelligence “baked in” to smart networks
 Blockchains to confirm authenticity and transfer value
 Deep Learning algorithms for predictive identification

47. deep learning chains.
46
 Autonomous Driving &
Drone Delivery, Social
Robotics
 Deep Learning (CNNs):
identify what things are
 Blockchain: secure
automation technology
 Track arbitrarily-many units,
audit, upgrade
 Legal liability,
accountability, remuneration

48. fleet management.
47
secure automated

49. data.
48
big data ≠ smart data.
clean, standardized,
interoperable.
Source: http://www.oyster-ims.com/media/resources/dealing-information-growth-dark-data-six-practical-steps
40 EB 2020e

50. scale.
49
Source: https://www.illumina.com/science/technology/next-generation-sequencing.html
Population:
7.5 bn people worldwide
big health data.

51. 50
automation economy.
human-machine collaboration.
coordinate fleet-many items.

52. risks.
technology: scalability.
political: regulation.
social: adoption.
Rapid
Adoption
Unfavorable
Regulation
Favorable
Regulation
Slow
Adoption
Future Scenarios
51

53. 52
 First country with an official blockchain technology policy
South Korea leads
Proposed Policy toward Blockchain Technology
It is the policy of the South Korea to lead in encouraging the
development and use of blockchain technology (distributed
ledgers) pursuant to the following objectives:
• Facilitate industry growth,
• Safeguard consumer interest,
• Deliver more choice to more persons,
• Encourage positive behaviors such as trust, and
• Retard harmful behaviors such as resource expropriation

54. Global Future of Blockchain
Melanie Swan
Philosophy, Purdue University
melanie@BlockchainStudies.org
Blockchain 3.0, the Encryption of Innovation
Seoul, South Korea, May 17, 2018
Slides: http://slideshare.net/LaBlogga
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