A BRIEF INTRODUCTION TO BLOCKCHAIN

NANCY LIAO ’05

JOHN R. RABEN/SULLIVAN & C
R
OMW
E
LEXECUTIVE DIRECTOR YLS
ASSOCIATE RESEARCH SCHOLAR IN LAW
“BLOCKCHAIN” HAS MANY MEANINGS

“To understand the power of bolckchani systems, and the things they can do, it is important to
distinguish between three things that are commonly muddled up, namely the bitcoin
currency, the specific blockchain that underpins it and the idea of blockchains in
general.”
The Trust Machine,THE ECONOMIST, Oct. 31,
2015
“BLOCKCHAIN” HAS MANY MEANINGS

Phone Bolckchani

• The daeiof a phone • The of

naiahckecodlbi
network tundearlies•Bitcoin
cbhoThe
lcikcfhanicteps or another
• Acifphone
pseci network coin offering
(e.g., AT&T) • Bitcoinanother ro nyecroucryptrc
• A specficuse of the
phone network
(e.g., fax)
WHAT IS BLOCKCHAIN?

A technology
: t aht

permits
onsto
itcansartbe gathered into blocks
and recorded;
scrynpblocks
togiraphaicahlyc in chronological order;
allows
ledger
gni t the
lusto
er be accessed by
and
different servers.
WHAT IS A DISTRIBUTED LEDGER?

Centralized Ledger DsbirtuetdLedger

entC
A
il Node A

NodeE Node B
B
tneiC
l
B
kna C
tneiC
l

enC
tiD
l Node D Node C

•There are multiple ledgers, but Bank holds the “golden record” • There is one ledger. All
sedoNhave some level of access
• Client B must reconcilesown
ti ledger against that of Bank, and to that ledger.
must convince Bank of the “true state” of the Bank ledger if • All Nodes agree to a prootcol that determines the “true state” of the
discrepancies arise ledger at any point in time. The application of this
protocol is sometimes called “achieving consensus.”
WHAT IS A DISTRIBUTED LEDGER?

Single Entity Multiple Entities

 HOW MIGHT A DISTRIBUTED LEDGER?KRW
O

onsianctsrusing
teDigital
rtiaeUsers
hi tt iSignatures
ni Users Boradcast their
onsito
tcansart One or more oevtagteBlocks
Nodes lidrgantedonsianctsrit
Nodes Nodes beginngidatival
each
onitcansrt

Nodes Consensus Block

”gne“true
is
itcechained
alfetr s to
Broadcast protocol
de s u prior Block
Blocksother
hto
cae
WHERE MIGHT BLOCKCHAIN USEH
Y
?O
G
A
R
P
T
Y
P
R
C

Initiation and • Digital

Broadcasting of Signatures
Transaction • Private/Public
Keys
Validation of • Proof of Work and certain
Transaction alternatives

Chaining • Hash
Blocks Function
THE POWER OF DISTRIBUTED LEDGERS

It can be usedrecord
o t esoht It can be used otallow
It can be usedtransfer
ot transfersf ovalue or owners of assets to
It can be used whtiouta central e u
orl a
the
v ownership of assets ownership of assets exercise certain rights
It can be usedocreate
t or
eulav associated with ownership,
authority by individuals or • A human • These sdrocer may
issue assets gn i e b or
and to record the
entities with no basis to trust a be very
difficult to exercise of those
each other Smart
alter, such
Contract rights.
can that they
initiate are • Proxy Voting
the sometimes
transfer called
effectively
immutable

The degree of trust between users determines the

technological configuration of a distributed
HOW MIGHT DISTRIBUTED LEDGER
S
DIFFER?
L
AS
OP
O
RP

Participation Open Closed

Permission Permissionless Permissioned
Ledger Design One ledger One ledger or Segregated ledgers
Validation Methodology depends on degree of trust between nodes. Where there is no
basis for trust, may be achieved through proof of work, which requires the
algorithmic solving of a cryptographic hash.
Consensus Mechanism Mechanism depends on degree of trust between nodes. Where there is
no centralized authority, consensus may be determined
algorithmically.
QUESTIONS?

udeNancy
.e@
olayilo.ycanani L