Dear viewer, these subtitles were generated by a machine via the service YouTube and therefore are (very) buggy. If you are capable, please help us to create good quality subtitles: https://c3subtitles.de/talk/2090 Thanks!
[Music]
[Laughter]
[Music]
[Laughter]
okay so
Henrik uh was born between ET and Blade
Runner he's occasionally and breaking
things he's a computer scientist living
in Berlin and and Henrik will indulge us
today in the next hour why there is not
a single problem that should be solved
with blockchain except maybe Bitcoin so
here I am highly curious so here we go
Henrik over to
you hi my name is Henrik plutz I'm a
computer scientist living in Berlin and
this is blockchain 102
I have been doing things with
cryptography for about 15 years now I'm
not a cryptographer per se but mostly
interested in Communications protocols
I've been doing a lot of Access Control
Alid related
research um as of late I have my own
company we're doing payment
stuff fair warning I did have some
Bitcoin in the early
2010s uh I sold the last of it around
2016 I think and since then I've been
more and more concerned with the
basically the blockchain hype and how it
captures resources and resources does
not only refer to um electrical power
but also engineering capacity public
attention and and mind space basically
this talk is not going to be Bitcoin 101
I assume a basic knowledge of the
Bitcoin and ethereum networks at least
what they are and how they are used I'm
not going to to introduce the basic
concept of
blockchains what I will do is Spotlight
several
interesting uh projects and protocols in
in relation to
that I am going to play fast and loose
with the definitions I'm not going to
stick to a very specific definition of
what a blockchain is versus a
hashchain anything basically related or
in the vicinity of the D distributed ler
Technologies is fair
game I hope by the end of this talk you
will have noticed that I'm not a big fan
of anything I'm about to show
you and I do reserve the right to poke
fun at any and all bad
ideas as a
baseline I think Bitcoin is a work of
Genius it is a very elegant in its
Simplicity uh the original paper by zosi
Nakamoto in 2008 um showing the the
first combination proof of work
distributed Ledger techn distributed
Ledger and
hashchain um solved the bantine
agreement problem on a
permissionless in a permissionless
environment that is civil proof and only
be based on reasonable cryptographic
assumptions like I said it is elegant in
its
Simplicity it solves the problem for a
very specific Niche and um there are at
least three or four or design decisions
that are very integral and and
irreducible in the Bitcoin
system taking any of them out will harm
or break the entire system in obvious
and or non-obvious ways which of course
is why people are going to do
that um Bitcoin itself has only very
limited scripting in its transaction um
scheme it's not designed to to be a
programming language it's not designed
for smart contracts but the scripts are
merely a very nice serialization format
for authorization decisions um so that
you don't have
to don't have to hardcode into the
network all the possible authorization
schemes that are that should exist
should be able to exist but any user of
the network can um build an uh a script
that um authorizes is the spending of
funds in any way they like Bitcoin
is a very elegant scheme and it's mostly
useless that's the point that's my
that's what I'm sticking with it
sticking with since
um the
only purpose it can have is a global
decentralized globally available um
currency but it does have very very low
transaction
throughput and very high energy usage at
that etherum came
later um it tried to improve by having a
full blown true and complete smart
contract
language basically ethereum is a global
computer that as a side effect also
processes payment uh
transactions
first we're going to look at so Bitcoin
Bitcoin etherum both proof of work we're
going to look at the different proof of
something
schemes the easiest one of course is
proof of
authority um Works mostly like you would
imagine it's going to work you have the
normal transactions you have notes
that's verify that transactions are
correct they put them into a block and
sign the entire block uh with their own
private key and a sufficient quum of
authoritative nodes needs to sign a
transaction block for it to become valid
very simple very efficient and requires
trust in those
authorities how they are chosen is
completely out of scope and
um nonobvious it is the one of the
standard constructions for private or
permission blockchains so those that's
why we say those are basically just
glorified
databases um a slide Step Up is proof of
stake proof of stake though is basically
the same as proof of authority except
that Authority is now indirectly
established by some sort of stake such
as token Holdings uh if you hold enough
token of the underlying um um currency
you have more stake and there for more
Authority these systems May sometimes
offer an integrated punishment mechanism
called slashing so that if you ve your
Authority in an inappropriate way if you
lie you're you're
penalized currently proof of stake is
the Holy Grail for um the established
proof of work systems to get rid of this
energy waste stigma uh for example both
etherum and Y I'm going to talk about y
later on um currently are planning to
Pivot to a proof of stake based system
any day
now Pro of stake has a
very hard problem how do you initially
distribute it
stake it's that's why I said it's it's
essentially the same as with authority
you need to somehow select the
authorities you trust you need to select
Stak holders you trust
and they then get to determine what
happens on the
network a very popular mechanism to do
that is sale of tokens um which is why I
have this little red flag next to it uh
sale of tokens or initial coin offering
um I'm going to invent a network the
very cool uh cool
chain I'm going to sell $600 billion
worth of cool chain tokens and then you
all are on my network and I'm $600
million
richer I don't care what happens to the
network
afterwards an alternative to this is to
bootstrap the proof of stake system off
of an existing blockchain for example
the etherum chain or Y is going to do
that I think today which is yeah it
doesn't have the same problem if oh no
it doesn't have the same benefit for the
creators of the
network uh
still
the problem with the general problem
with proof of stake is that there is no
built-in defense against centralization
Bitcoin solves the centralization
problem by Shia physics um it's very
very hard to um have more than 51% of
the global computing power currently but
in a proof of stake system there is no
built in defense against anyone
accumulating 51% of stake on their
account or on any sock publicit accounts
this is what I mean when I say there's
no silver resistance because on the
internet nobody knows if you're a dog
and nobody knows um who and how many you
are or claim to
be
uh deeply ingrain problem is that even
if you bootstrap the thing
correctly you have no defense against it
becoming centralized later on by a stake
being transferred and and accumulated
onto one big uh
stakeholder the other POS is proof of
storage I'm not going to talk about that
very much there's one very uh well
there's one um scheme that has gained
notor because basically the intruction
of the Chia
network uh crashed the global SSD Market
this was very very hard to buy any discs
at that
time
Al the operations on this network
destroy ssds in less than a year so it's
Al it's really expensive to to operate
even though it doesn't use electricity
it uses
ssds and basically there's no other use
so I'm not going to talk about
later
the funniest proof system and
actually um the thing I came across that
motiv motivated me to um give this talk
is proof of aapse time also called
poet the idea is uh very simple and
genius instead of computing hashes for
proof of work and proof of work in this
case means waiting sometime instead of
computing hashes you just do nothing you
go to
sleep compared to a proof of work system
this offers incredible Energy
savings and it's a dropin solution it
behaves exactly like a proof of work
system in any
any any network you can just swap out
the proof of work system for a proof of
elapsed time
system mostly it makes sense in
permissioned environments private
blockchains
I do have a small there is a very small
question teeny tiny teeny tiny issue
which guarantees do other notes have
that um no one cheats no one is going to
wake up earlier than
assigned well of course Intel
sgx it's the for those who who don't
know that sgx is the secure Enclave uh
in Intel processors Intel guarant
that um inside this processor secure
computation can take
place and um programs that run inside
The Enclave can prove that they are
running in an uh officially um
officially official Intel secure enclave
and are not being controlled by any
anybody else from the
outside and thus allow um trusted
execution
small problem obviously um this isn't
going to this wasn't going to um be
secure
forever uh there was a very nice um
break of int
SJ a year two years
ago it went so far that they offer an
attestation as a service service there
there's a Twitter account and if you
need anything signed by a real Intel sgx
Enclave anything at all any attestation
to to any any fact you can just tweet it
to this Twitter account and um they will
happily sign it for
you and this is one of the underlying
um topics I want to draw your attention
to is that uh some of these systems
appear to be secure but they're just
shifting the the security barrier
somewhere else and hope you don't look
um and and hope you don't look too
closely
as at how and where the security is
now um for example mobile coin is the
Other Extreme basically mobile coin has
a
proof I would call it proof of
complexity mobile coin is a mobile
device focused new cryptocurrency
started last year and it pulls every
cryptographic register
theirs they're using Stellar consensus
Network they have Z knowledge proofs for
everything rist Treader abstraction
schnore Anonymous signatures PS and
commitments you name it they have
it I'm
um there's a very good book uh about it
this mechanics of mobile coin uh I have
linked here so even though I'm showing
the this um part of the abstract to
scare you I'm very grateful that it
exists because not everyone has
um an abstract that so clearly states
what they are doing and and what they
hoping to achieve many of the
documentation a lot of the documentation
that I've been reading for this talk um
doesn't clearly tell you what they are
doing and
why two small problems with uh mobile
coin the entire token Supply is
pre-mined which is one of the other red
flags 85% of the current mobile coin uh
in existence and all the mobile coins
that will ever be in existence are held
by the creators of mobile coin they can
sell it to you at
will and their security against double
spending so they have security they have
privacy guarantees that probably maybe
are
good it's
um like I said it's very complex and I
wouldn't bet on there not being any
implementation
errors but AB absent any implementation
mistakes there privacy guarantees and
properties are probably good but their
security against double spending is
entirely reliant on sgx enclaves see
previous
slide
circling back to bitcoin and um misusing
Bitcoin I introduce it as not having an
entire fullblown um scripting language
but you can still do cool stuff with it
nevertheless uh one of the earliest
examples of that I saw was uh due to Dan
Kaminsky who sadly passed away this year
in 2011 in his Black Ops of tcpip talk
um he uh presented a tribute to Len
cesan who died that year
um on the Bitcoin main net that is
embedded in the Bitcoin
blockchain and th thus verifications of
the entire blockchain is dependent on
this tribute being
present which is a very nice idea and I
I'm not sure but I think it was one of
the first examples of this a lot of
people have embedded stuff into the
blockchain lat
on and a very um yeah moving Memorial to
a friend
another very cool hack uh that is
actually not being used as a hack
anymore but it's in production is the
lightning Network um starting in 2016
I'm going to explain this in a little
bit more detail but not entirely in
detail since we have other content to
get
to um what's interesting about the
lightning network is that it works with
Bitcoin more or less without changes
there were very small changes made to
the Bitcoin main
net uh but no fundamental changes
there's no new scripting language only
um new instructions in the existing
language it's a clever use of time locks
and multi signatures uh one of the
features that most people aren't aware
of is that not only can the Bitcoin
scripting language allow you to put
signature restrictions like possession
of a p private key on spending of
Bitcoins but you can also put a Time log
on it and can say that a specific amount
of Bitcoin can only be spent after some
time basically time either in uni
seconds or in um in block block height
since the Bitcoin Network as a whole has
a more or less
predictable block uh time of 10
minutes you
can rather reliably say that some some
amount of money cannot be spent for 48
hours for
example and that's the basic idea
here two parties collaborate to open a
so-called lightning Channel or payment
Channel um they need to fund this
channel on the main main
chain
um like I'm I'm putting the main chain
here and the lightning Channel or the
entire lightning Network at this point
so um a properly functioning lightning
Channel only is visible in two
transactions in the main
Network there's the funding transaction
the one up here that basically locks up
some money in escrow essentially
in escore for the
channel and after that um the two
parties exchange transactions amongst
themselves the main network does not
need to know about these
transactions and they can send money
back and
forth uh in this example both start with
for example two Bitcoins both commit to
Bitcoins for this channel so the channel
has an entire capacity of four Bitcoins
each party starts off with two Bitcoins
at first and then they can transfer or
exchange transactions that
transfer any arbitrary partial amount of
that in either
direction so I'm starting with um 2
point 0.2 Bitcoins to B now the internal
state is that B has a bit more money
then I'm transferring in this example
1.5 in the other direction now B has
less money and and so on and so on and
so
on
um
these actions these
transactions are very fast since they
are
just signature two signatures and the
TCP
connection and therefore can happen
instantaneously at the end of uh that
channel both parties can mutually agree
to close the channel and only the last
date is written back onto the block the
the main
blockchain the cool thing about this is
that
um due to the clever use of time locks
and multi6 um all the amount of money in
the channel is protected against uh um a
cheating
party
um these uh in intermediate blocks need
to be signed signed by both
parties so the end transaction is signed
by both
parties but there is a democ class sword
basically
um hanging over this using the time
locks if any party cheats the other
party automatically gains the authority
to claim the entire F funds for
themselves this prevents the parties
from cheating because who wants to lose
two
Bitcoins but also means that um the
maximum outstanding amount of money on
this channel is limited to the escrow
amount this in the channel for example
in this example at no point can any
party owe the the other more than four
Bitcoins if you want to buy something
really
expensive or Bitcoins is a bit much but
if you want to buy something really
expensive um you cannot use this channel
you need to close it and open another
one
and that's the other big problem the
money that is held in escrow for this
channel cannot be used for anything
else if you open a lightning channel to
someone that money is gone for the
moment and even worse through the time
lock mechanism if the other party
misbehaves you cannot access the money
for some time 48 hours for
example so it is a very cool hack but I
don't think it has any particular
usefulness especially since um due to
this
[Music]
um
uh because the outstanding amount kog X
the outstanding
money amount cannot exceed the entire
Capac capacity of the channel it does
not um lend itself to being used for
example for
payments it's okay if you have a friend
and uh you lend them like a bit of money
today and they pay you back tomorrow
they after that you don't have any money
with you and they lend you something and
you pay them
back but uh for a channel to exist over
a long
time it's um mean amount needs to be
zero
it what must be the same on both sides
um While most transactions and most
systems are in a merchant and customer
relationship uh if I buy something I pay
money to the
merchant and very seldomly do they pay
me
money um this is the fundamental problem
of the lightning Network they do have an
extension I I've been um um drawing the
is uh with two participants lightning
channels can be chained so if A and B
have a channel and B and C have a
channel um there can be a value
transaction between a and C mediated
through
b but the problem that the um
outstanding amount on the channel cannot
exist exceed the funding amount doesn't
go
away back to something that was actually
designed to be programmable
etherum very shortly after the
introduction of etherum um there was the
Dao at that point that was a singular
noun um the decentralized autonomous
organization today Dao is mostly used as
a collective noun basically a DA but at
that point it was the
Dao was a cool
idea it's um from the code of law code
is law people basically you have a
venture capital fund um that anybody can
contribute money to Ether too and anyone
who has contributed money into the fund
has voting rights and um basically
governance rights on on the amount and
can can vote on where this money should
be
invested proportional to the amount of
money they
invested it had its own token at that
point
um and was
crowdfunded uh end of June
2016 and
sold at that time more than for more
than $150
million this didn't last long there was
a vulnerability in the so the Dow has a
function to split out
subow if um there's no consensus about
what's supposed to happen so the ma
majority of the um funders decide to do
something that a minority disagrees with
the minority can split out their money
into a child Dow that then behaves like
a normal
Dow and anyone can propose to create
such a child Dow the uh code that
processed that request had a
bug uh classic time of check time of use
buck um the smart contract first
retrieved the either um to be sent to
the child or from the main Dow and only
then checked the balance of
the account that proposed the
split uh but at that point a recursive
call is possible so you can Nest um this
problem uh which means the transaction
The Nest transaction happen so it uh
deducts money from the
main funds it into the child now uh
recursive call deduct money from Main
fund into child deduct money from Main
and so on and
um the check against the balance would
only happen
afterwards someone found this and well
people say Abus used
it um and by June 2016 like two weeks
later about 50 million
US dollar worth of um tokens where in
the child Dow that was controlled was
supposed to be controlled about to be
controlled by one
party luckily or as luck would have it
there was a build in a waiting period
for proposals to go through and people
to read their mails and stuff like that
that meant all the money that was in
this child Dow couldn't be transferred
out for at least 48 day for exactly 48
days so there was some discussion time
as to what should happen now this was
the big discussion of that time because
one party says uh code is law someone
used the code and obviously it's correct
what they did because the code allow
allowed
that though the main etherum Network did
not quite see it that
way which led to a hard Fork of the
entire
blockchain that's why we have ether and
etherum classic now and I don't think
anyone uses ethereum
classic uh like I said the Dow had its
own token was one of the first um there
is now a generic mechanism to create
your own tokens it's
the basically an a API
specification if your contract fulfills
the smart this
API then you are an erc20
token and these tokens behave like money
something you can
transfer um you can Cary the balance
those are the only relevant functions
um so if you put a contract onto the
ethereum blockchain that fulfills this
specification you have your own money
lots of people do that um there's more
than 480,000 token contracts currently
on the blockchain on the ethereum
blockchain and all the details of those
tokens are up to the Token Creator
obviously it's a smart contract it only
has an interface and you can deposit and
transfer money where this money comes
from oh this amount value comes from is
not specified entirely up to the Token
Creator these tokens can have their own
value independent of the
ather and some
do and that's how that
works what you can use this for is what
I call crypto enabled Financial
trickery since these tokens can
basically only be traded you can you
have do coin and you I if I would want
Doga coin I could buy it from you and
then you would have some other amount of
currency some other kind of
currency and now we have over 480,000
different kinds of currency to choose
from this
[Music]
um enables exciting opportunities of
Arbitrage if I find two marketplaces
that sell um token pairs at different
prices I can buy one token at the
cheaper price and sell it at the more
expensive price that's the classic thing
that you would also do do on a normal
Stock Exchange the cool thing about
etherum and smart contracts is that um
the smart contracts are executed
automatically and enforce automatically
the contract
stipulations no matter what they look
like one of them really mind blowing or
very yeah mind opening things that they
can you can do with that is an uncolored
flesh
loan basically it's a smart
contract that always has the following
form I give you some amount of
money you do whatever you
want and then you return the money with
some
fee plus some
fee
um you are completely free what to do
whatever you want in this step you
can like like I said exploit Arbitrage
opportunities you can sell something at
at a different Marketplace and then buy
back the uh important thing is that you
pay me back plus
interest and the cool thing about the
etherum or the the the smart contract
language is that this is guaranteed to
happen
atomically um either the entire thing
happens or nothing happens at all except
for some gas spending if um you cannot
return the amount for example because
your cool um arbit crash uh trick didn't
work
out it's reverted and never
happened um so I can enforce for you to
pay me some money and you can so that's
for me good for me good for me is I can
en force you to pay me some
interest and good for you you have a lot
of money like I said it's very good for
exploiting Arbitrage
opportunities and it's also very good
for exploiting smart contract
vulnerabilities because a lot of these
need some funding and if you have a
vulnerability that doubles your input
for example it's very cool if you can
lend if you can borrow $100 million for
like $10,000 in in
interest and then double
it and finally decentralized Finance
defi Dey Dey decentralized Finance Dy um
um it's just the umbrella and marketing
term for everything we just talked about
uh it allows most
uh operations that you can do uh with
traditional financial instruments but on
the
blockchain borrowing lending flesh
borrowing high frequency trading price
speculation and swapping between token
pairs like swapping Doga coin
for what's one of the other coins do do
do coin for tether or be something like
that
now this is one of the subjects
I'm most often laughing about because as
you can see on this slide there's a huge
a huge amount of money in
here there a
hell lot of money Bound in Dy
contracts but the
complexity
um means that very
often well code is law but the law did
does not always say what you thought it
is uh by my estimation and when I when I
search for that I I found this website
which
very graciously already has an entire
list I didn't need to compile it by my
estimation about approximately every
other week someone exploits a bug in one
of the dafy
systems to the tune of 10 to 100 million
us
do these are just from like the last two
months now for something completely
different
the Iota net
dark Iota is
um not a blockchain so like I said I
didn't don't want to dwell on the the
terms uh but they call themselves a
tangle it's a directed S A Clic graph
it's not a chain um but every every
transaction is supposed to confirm to
other
transactions it doesn't have any proof
of work so it's very fast and energy
efficient
it doesn't use a lot of energy I'm not
sure if it's efficient if it doesn't do
anything but it doesn't use a lot of
energy uh it doesn't have any proof of
work it doesn't have any proof of
anything really it doesn't have any
transaction fees you just are required
to trans uh verify to other
transactions uh it's designed or
marketed for Inn of things things
networks it's actually run by a
foundation uh with um located here in
Berlin and the the thing that sets it
apart from um one of the things that
sets it apart from all of the other
established players is that it's not a
decentralized
system their consensus protocol is that
they have a central coordinator that has
to sign off on every
transaction if the coordinator didn't
verify it it didn't happen they there
are several attacks on the Yota system
in the past and uh the
foundation could uh uh luckily could
stop the attacks by basically just
stopping the
coordinator like I said the coordinator
is just one of the things uh that makes
this one unique the other unique thing
about Yoda is that they want to be
unique they have their own or they had
they had their own home build cryp
cryptography one of the rules is never
rule your own cryptography and not only
did they build their own cryptography
they did it in
trinary so in their system there isn't
just Zer or one but they have minus one
Z or
one everything is a
twit and of course there uh custom built
uh trary hash function was
broken
in 2019 the the Yota Foundation did not
react favorably to this um
they it's um the second link on this
page has some of the history or some of
the meta history basically uh there were
very interesting Twitter discussions and
uh threats against the researchers
threats of legal
action
including the OTA Foundation claim
cling that or the creators I'm not sure
of the foundation itself the creators
claiming that they knew about the
vulnerability and it was there on
purpose to act as a sort of copy
protection uh their defense is that if
anybody would um copy the yot protocol
since everything is open source and
build a clone yot Network they could
then use this vulnerability to shut down
the other
network which is a bit of [ __ ]
[Music]
um in the aftermath they removed the
broken hash
function and replace it with one that's
based on kak the um um sha 3 hash
function but still in trinary and it's
still
broken nobody
cares it's still broken nobody
cares
okay let's move on in our alphabet soup
SSI it's not serers site include this
time SSI is supposed to stand for self-
Sovereign identities and Wikipedia
defines this as an approach to digital
identity that gives individuals control
of their digital
identities and no one knows what that
means there's no single standard nor
specification or shared understanding of
what this might be
um the graphic uh I put here is one
that's most often used to explain how
this is supposed to
work um it's indistinguishable from an
uh standard pki attribute certificate
issurance like you have an issuer that
issues a
certificate that's stored in a wallet
and can then pre presentent it to a
verifier for some reason some some
reason that nobody has been able to uh
explain to me to my satisfaction it's
also stored in the
blockchain what um this diagram lacks
and what most of these systems tend to
lack is a very crucial um additional
Arrow it's very good if um I have the
cryptographic proof that uh
some credential was really issued by a
certain
issuer but I still need to get trust in
that issue from
somewhere I I still need to know that
they are who they claim they are and
this is something that's basically
entirely ignored in all of the self-sign
identity uh schemes I've seen and coming
up on uh key terms there's this uh thing
called a decentralized identifier did
which is supposed to be the the
abstraction uh there's a
w3c
standard on that and the registry
currently lists
114 mutually incompatible did
methods like I said it behaves like an
attribute
certificates uh this is called the
verifiable credential and one of the
only new things uh or one of the things
that established protocols don't have
it's not new is that they should support
selective
disclosure selective disclosure means if
I get a credential uh to multiple facts
like my name is Henrik my last name is
plutz I'm living in Berlin I can then
present this credential but block out
some of the
fields and just prove for example that
I'm living in Berlin if I want something
from Berlin
authorities they might not need to know
who I am just that I can prove that I
live in Berlin it's one of the key
features for example of the U proof
system um due to Stefan BR in 200000 I
think uh which um was built into
Microsoft
um card space I think and for some
reason completely vanish off the face of
the Earth nobody ever heard of it again
but it did solve all of this in 2000
already
um nevertheless all these uh self-or an
identity people are very eager to show
you their um their use cases and their
uh show showcases for example this one
um presenting information to an employer
in the future you will have your diploma
or your
Master's your master's degree as a
verifiable credential that you can then
attach to your uh CV when applying for a
new job and your employer will be able
to verify that and doesn't need to trust
that you didn't change your
grades
um is said very small insignificant
issue I the the the employer still
somehow needs to trust the issuer
I can go on the
blockchain and open the uh very cool
University of coolness and issue
master's degrees in coolness
n um and give everyone a
grades and I can prove that I really am
the uh cool University of
coolness but somehow the verifier the
potential employer still needs to know
whether I am an officially accredited
University whose master's degree is
worth anything and at that point you
have a very standard pki structure you
you have a central Authority like a list
of good
universities and from there on you can
delegate the trust down and you don't
need any don't need any of the
decentralized
stuff and in either case you don't need
any of the blockchain stuff I have never
understood why no that's not not all
right I made this point on Twitter once
and someone actually emailed me I I'm
I'm not sure either ID Union or lissy um
someone emailed me and said that um they
kind of know that they don't need it but
uh the problem they're solving is that
there are so many interested parties in
the space so many companies who want to
promote their own wallet
product that there's no way that they
can decide on a governance structure on
on a pki structure on who um trusts whom
and um who delegates trust where so
instead they're putting it all onto the
blockchain and thereby um completely
erasing the trace of where the trust
chain comes from and hope their uh
respective companies don't
notice so basically it's money
laundering for pki is what they're using
the blockchain for
a related standard in this space is didc
it's um from the identity Foundation
very cool domain name if I may say
so it's a long standards documents it's
a really long standless document it has
everything it has Json web messages Json
web token uh it has a custom as
synchronized request reply messaging
scheme with multiple parallel
asynchronous threats of communication
it has a rooting layer transport layer
Discovery there's everything in
there except Provisions for recipient
verification so I can have my uh uh
decentralized identify my verifiable
credential I could present my verifiable
credential to someone selectively so
that they only get to know what I want
them to know except I have no idea who
they
are which brings us to uh this this
year's news the ID
wallet uh exactly in the last week
before this year's German um
parliamentary elections our esteemed
government released an app one of the
intermediat released an app to a big um
PR funfar called ID wallet or released
the um use case for that which was
supposed to be a self- soverign identity
system based on
dcom um that could in the future should
be used for a lot of other
things we're completely ignoring we're
completely ignoring at this point that
Germany already has an Eid system that
works uh but it's not cool it's not
blockchain it's not
hip so this um ID Wallet
app you can use it to create a self
Sovereign identity called bases
ID and this self Sovereign identity is
created by having the Buon sign a data
set that they extracted from your
national ID card so the self Sovereign
identity is created by the bunus
essentially and you can then use this
identity to query the uh Federal
transport motor transport Authority for
a copy of your driver's license that
then is assigned to this
um um that is then assigned to this um
verifiable credential
nothing you couldn't just do with you
know a database a signature but um it is
a blockchain
system and it didn't end well few days
after public release the entire thing
was stopped the official reason giving
is that there was too much interest to
Too Much load due to unanticipated high
interest in the
system what um you will find on Twitter
if you um looking into um L viman and
flier who were the main um actors in the
space is that the entire thing was run
on very badly maintained infrastructure
there were DNS Zone transfers there were
open subdomains anything
you a lot of things not
good and uh the cool to grass is
that um little um
showed the Privacy problem mentioned
earlier
that even though I can verif present
present my verifiable credential to
someone in a secure way I have no idea
who I'm whom I'm presenting it to and
that's inherent in the protocol there's
no way to fix it and no plans to fix it
so the thing uh remains shut down for
the time being and probably for good
hopefully on the subject of silliness
nft NF T stands for nonf fungible
token um so for comparison the tokens I
talked about before the erc20 tokens are
fungible every token is the same every
to you can replace every token with any
other in Bitcoin even there there is no
stable token every time you spend
Bitcoin your existing Bitcoin gets
destroyed and a new Bitcoin is
created esc20 tokens don't really need
to exist in any exact meaning of the
phrase um but still it's it's just the
value there there is no countable token
and not only no accountable there's no
unique
token uh the other standard the newer
one ESC 721 specifies the API for
non-fungible
tokens what it essentially does is track
every token individually the token gets
a token
identifier token gets a token
identifier and and the blockchain
records who's the current the identifier
of the current owner of the token and
what the smart contract then allows is
um transferring the token from owner to
owner normally doesn't store any other
information other than um who the
current owner
is um
but so so this emulates basically a
collectible a token can be created on
the blockchain and then sold and resold
but now you might be asking where do
these jpegs come in from of which I've
heard so much what you can do in the
token standard is associate metadata
with a
token actually you can't you can
associate an URL with the token that can
point to
metadata and this metadata might then
optionally point to an asset file could
be video could be 3D model anything or
some other metadata like the name of the
token there's something I'm not going to
talk about that's called the
interplanetary file system it's a
decentralized storage system that
actually behaves mostly as you would
like it
to most crucially uh if if you point to
um an e ipfs address it's
immutable but that's not the standard uh
wasn't the standard for a long time for
a long time all the metad data and the
data was just stored on the server of
whoever minted the token or of the
platform that the token was minted on
and um
Moxy made this very cool demonstration
where you can look at the same The
Identical non-fungible token on
different platforms and it would display
differently because the metadata points
to a URL that can behave differently
depending on um where you come
from
so what are nfts good for basically
scams um one of the problems is that
there is no verification requirement no
relationship to any real Vault identity
anyone can mint any asset into an nft
and sell it they don't need proof of
ownership um and if you believe that I
have a very nice bridge to sell
you the different uh platforms where you
can create and sell nfts
um mostly are tired of the problem now
and are very much much slower to respond
to complaints now there are entire so so
there obvious apparently there are
people out there who just go through for
example Deviant Art take every image
from there um make an nft out of it and
try to sell it it's like if you go on
Twitter and say I need that on a t-shirt
there will be a bot that offers to sell
you that t-shirt even though it probably
doesn't have the um copyright on
whatever you responded
to uh very cool thing someone found on
Twitter the other day is that um related
to the previous slide if
um a lot of these platforms actually
stall the data the nft data just on
Google cloud services and Google's uh
takeown processes are still working so
you can remove the nft content without
um cooperation from the nft
platforms another problem it's very
complex the entire thing this leads to
many so even if there are no um
engineering or security vulnerabilities
in there this leads to a lot of
successful social engineering
attacks with the added benefit that any
token that has been
stolen now rightfully cot as law belongs
to the no owner there was this very um
famous case uh few months ago of The
Bard Apes very high-profile case um
someone uh got scammed out of three Apes
I think value like $2
million um they success petitioned the
trading platforms to stop halt trading
on these
tokens which doesn't B well for the
decentralized nature of this thing but
that's
that to me it's funny to um the people
affected it's
not uh since you have no verification
that an actual person is on the other
side or who is on the other side
um there's this phenomen
called um rackpull basically you start a
new project you announce borrow Apes
where yesterday's news we are now doing
evolved Apes they are better they are
better in every way they can be used in
games uh please buy them here enter
money
here and after you've received all the
money you just clean out the accounts
and vanish this is what happens couple
of times now I don't have all the
examples on
here sometimes it happens even in teams
there are a couple of posts of people
actually trying to start a project uh
and then complaining that the
administrator they
um uh they task they tasked with
keeping safekeeping of the secret Keys
just went and took all their money and
is gone
now in
conclusion
there's really not a lot of uses for any
of this except for Ponzi schemes and
tricking
people especially it's all self
referential you can do financial
instruments just fine everything works
great
it's not the um energy uh most energy
conserving way to do that but uh it can
give good return on vest of course you
always need to keep in mind that if you
earn money someone else lost
it so you can do uh the crypto enabled
Financial trickery just
fine but the core problem of any and all
blockchain projects is the Oracle
problem all the cryptographic stuff all
the verification zero knowledge proofs
what have you only works within the
system you cannot interface into the
real world in any meaningful
way um because if you need did if you
wanted to you would need a note that
acts as a mediator between the
blockchain world and the physical world
you need to trust that node to for
example accurately report sensor data or
to accurately
um um execute some
actions and if you can trust that node
to do that you can also trust the node
to do that without a
blockchain uh like one of the the
funniest projects I've heard was for
trash collect ction fairness and trash
collection there's a sensor in every
trash bin and trash collectors like M
municipal waste and every trash
collector um gets money for the trash
they collected based on the sensor
readings but the sensor nodes of course
um can't be part of any
blockchain no energy no nothing no no
connectivity so they just report all
their readings to a central server and
that Central server then records uh all
the data data on the blockchain and at
that point the central server could just
disperse the uh amount due for trash
collecting there's no need to direct the
blockchain into anything
here put into one sentence
cryptocurrencies have more or less by
definition only one use case and that's
Ponzi schemes and other
scams there can be I have said that
before there can be uh some benefit to
having uh pure time stamping service so
the blockchain
combines um time stamping and consensus
if you don't need the consensus because
anything you do is centralized by Nature
anyway there can be some upside to using
um a Merk tree or time stamping chain uh
without any of the um without any of the
blockchain overhead consensus
overhead so this is the end of this talk
I will be available for your questions
now hey yeah feel for
talk sorry wrong language so thank you
very much andri for this talk
um and I found it really uh good
actually as an overview of of what is
out there um okay so have questions um
and I'll 30 minutes for questions I see
we have roughly 14 15 questions by now
so it should be okay go through them one
by one so first question here it
goes why do you think Bitcoin is wasting
a lot of energy used for mining depends
on the difficulty the difficulty is
lower then Bitcoin will become more
energy efficient so the real problem is
is just that the Bitcoin price is used
as a speculative
asset
um the energy consumption can never get
lower except if the price collapses um
only if the price is below the cost of
energy will the energy consumption fall
otherwise you you do have obviously
there is the sashing capacity in the
world there are people there are groups
of people who do have both the hard and
the energy Supply to mine so if
everybody else mines less they have an
incentive to mine more a in order to get
more rewards and B at some point the
rewards shift if if you have a group
that is large enough to um have 51% of
the hashing capacity of the world they
can then just do double spending on the
blockchain they can then do uh scams
outright so there is the incentives to
have the the incentives mean that the
hashing capacity needs to increase or
stay the same except if the energy price
is too low to too high at that point the
um hash rate is kept by the energy
Supply and at some point it becomes
profitable to just do the but double
spinning attack and everything collapses
entirely you
second question since man invented
currency it has always been based on
trust whether in Gold real estate or the
economic strength of a Nation it has
been known even longer that greed eats
the minds which why it is
deadly however neither of these is an
argument for me to demonize the entire
blockchain technology in your opinion
how would a blockchain
in the context of a digital currency
have to be
implemented
uh so what's the ideal implementation of
of a blockchain
currency there isn't one um like I said
so proof of work only Burns rainforests
for very little gain proof of stake is
um just a different form of authority
it's just a different thing you're
trusting in um with no physical and no
cryptographic guarantees of anything
that you would want to
guarantee
um if you have currency you need to have
Trust basically and at that point you
can formalize the trust uh like we're
currently trusting the euro to be
something worth because the European
Union is wor
something thanks would you also take a
look at proof of burn consensus it is
described as a PW without energy waste
miners can burn coins to get the right
to produce PL blocks proof of
work no I haven't I haven't seen that
it's doesn't sound like proof of work
it's like a form of proof of stake
basically the now so proof it here it's
called proof of burn consensus and it
says it's described as through of work
it right yeah but you you already need
to get the things you burn from
somewhere and at that point it just
tottles all the way
down all right uh regarding lightning
Channel how does the the Damas sword
that you mentioned and previous cheating
work roughly I suppose technically
from okay so there's two time locks
involved and um basically I showed this
exchange between the two parties M and
in order for them to send me their
signature under the new
state I first have to send them a
signature that guarantees them the money
in 48
hours so I enable them to completely
clean out the account in 48 hours and
only then will they send me the thing I
asked
for and the other thing has a Time log
of 24 hours so if either if the party
that I'm not sure about the order but um
the first party that
misbehaves um needs to broadcast
basically needs to broadcast their
misbehavior on the blockchain for to be
um so they need to broadcast the
transaction they want to
execute and which point I have a certain
time amount 24 hours or 48 hours to
broadcast my um transaction that they
gave me beforehand basically as a um um
as a proof yeah as as a ticking time
bomb or a counter um okay counter escr
so they need to misbehave on the
blockchain publicly Vis visibly visible
in which case I can transmit my um uh
it's it's like an
um hostage in which case I can transmit
the thing I have they gave me to
entirely counter the thing so it's
basically implemented U by integrating
then blockchain at this point steps out
of the the lightning
Channel
yeah um why do you think that proof of
space and time has no use cases for from
what um the person that asked said
question reads it solves a lot of
problems uh BTC has so Bitcoin um and
the nakama Nakamoto consensus is
completely reinvented it is very
decentralized has a minimal Hardware
requirement the pool protocol is very
robust it is auditable because it uses
variant of lisp and solves a lot of
attacks that are possible on block a lot
of
proteins so one of the
thing one of the hints you might get is
that nobody uses it if it would if
something is is a good solution it's
likely someone is using it uh that's the
che cheeky answer the other is that it
isn't as um environmentally conscious
for example as their proponents make it
out to be because it destroys ssds and
that's also a lot of energy waste and
then haard do electros electronic waste
um so yeah that's that's basically that
I think ipfs if you want to have
distributed storage ipfs is a way to go
probably uh and it still needs though it
still needs someone to operate it that's
the problem that's
true um did you explore the use of Ln
for messing payment information instead
of just sending value as a content type
for within a payment
service alen aen here it's WR capital L
capital N I'm not sure either what it
stands for the lightning Network and
what was the question so did you explore
the use of lightning Network for message
messaging payment information instead of
just sending value as content type for
for within a payment service so instead
of no I did
not yeah I don't think I know what
messaging on Ln would
be okay fair enough uh did you consider
the concept of atomic cross Shard
compatibility what radex solved with
Cassandra
no
um I only have a break idea of what
you're saying but um
no yeah this is the unfortunately we
can't ask back I also have the text I
read to you so uh if the person maybe
can can quickly submit um a
clarification then we can can cover that
on uh could you elaborate on issues with
blockchain
re uh so yeah here it's blockchain and
then small re e so with it with uh can
you could you elaborate on issues with
blockchain re or physical or digital
asset tracking ieg in terms of real
decentralization or the con consequences
of no real decentralization than so yeah
that's what I said that's basically the
Oracle problem in a different form you
need someone to ENT the asset
information into the blockchain at which
point you have someone that you trust to
correctly enter that um I wanted to look
this example up unfortunately I didn't
find it again I I saw that on Twitter
where someone um described their um
blockchain experience um where someone
built an an asset management system and
it was entirely great Inventory
management and we buy blue widgets and
red widgets and it entirely tracks them
from source to or from origin to Des
ation and then they asked so what
happens if we buy 10 black widgets and
someone enters the we bought 10 red
widgets at which point the other side
fell completely silent um so it's just a
different form of the Oracle
problem and and also the ACT problem for
example Germany has the the current
German federal government has a
blockchain strategy where they want to
investigate having the G the um
um um register of which area belongs to
whom on the
blockchain which backs the question
why because um there are not that many
um things that a state naturally has to
do but providing for the security of of
um real estate certainly one of them uh
since um if there's a transaction on the
blockchain or the blockchain says this
plot of land belongs to me who am I
going to call to enforce that the
blockchain police and that that's the
same that's asset tracking that's
inventor
management at which point I already have
a centralized trusted
Authority um next question did you
consider the
concept we had that uh could you
elaborate on uh so we had that too uh
my apologies everything you describe has
been used for decades in finance from
Short Selling to the most complex
derivatives why should digital
currencies be any
different in the stock market it has
been always true everything that
everything depends on whether there's
more fools than papers or more papers
than
fools sure sure I'm I'm not
against entirely not arguing against
using
well certainly
um traditional financial instruments are
not better than blockchain financial
instruments or vice versa it's just that
the blockchain ones also have the energy
usage of usage of Sweden for the
equivalent of four transactions per
second
um that's basically a small
town it's not the New York Stock
Exchange the New York Stock Exchange has
a much much much much lower energy
footprint than the blockchains the div
different blockchains and a much much
much much much much higher transaction
throughput okay so we have now uh 12
questions left and I believe we have
something like five minutes so
we okay okay perfect so I
just I just heard that we have 10 more
minutes so that's awesome thank you um
so how does i n by Microsoft fit the
stated description of
SSI yeah I haven't looked into ion I
know of it and I actually didn't find
that much
information um so I cannot quite answer
that okay
it's Bitcoin it's the same problem as
one so these SSI things tend to ignore
the the main problem is trusting The
Source the main problem is not writing
or the the um cryptographic credentials
or verification signatures
certificates I don't think ion does
anything particular
good fair enough why does SSI need
blockchain I don't know is it like a pgp
key server but with but with blockchain
like I said so it doesn't it's just cool
and
integrated and it blurs the
technological lines you don't actually
know how it works anymore the
complicated thing is trusting or getting
a trust chain to the
issue and the way I understood it is
proponents believe if they they put this
trust chain into the blockchain
or basically if it's on the blockchain
it's trusted but the blockchain doesn't
add anything except maybe for time
stamps but you can have time stamps much
more
cheaply um your main point is that
blockchain crypto is only useful for
proof to prove
scarcity and is therefore only useful as
money nothing else but I guess this was
the point of
block of Bitcoin in the first place the
whole scam started later
then yeah you can so it's absolutely the
same scam as everything every scammer
before them like selling valuable stocks
penny stocks like that um my point is
that there blockchain technology so
there is no use for Block technology
except maybe exactly this very small
Niche for Global globally
centralized civil proof um currency with
no prior trust in the um
participants though it comes at a very
high energy
cost and removing any of these words
from the sentence completely collapses
the the rationale for
that and you don't need any blockchain
proof of work
anymore uh thanks how how could one
benefit from
irrationally
the market sorry
that sorry you're dropping out uh how
how could one benefit irrationally of
the market F nfts silly coins without
fail falling prey to
it sure if I understand question yeah
yeah i' so the yeah the the question is
how to profit of nfts without you know
being the prey I think it's a first
mover thing um you win if you are the
first and you need to keep very very
good care of your digital security um
obsc in order to not lose anything even
then it's Basics Bic pyramid scheme
scam Bas so the the short answer is if
you can be successful if you already are
successful
scammer
and then you know what to
do okay how much energy do Payment
Systems you use overall consume please
also count it uh count in the
dependencies yes
um I had this number once I don't have
it
anymore uh
let's yeah I don't have it anymore the
um calculation was
like the entire Global Financial System
including all banks uh computer
secretaries cleaning
crews
consumes B of
magnitude like a tenth maybe a quarter
of the Bitcoin
network but that includes all banks I'm
I'm not sure about the exact number but
it was less it was not that much less it
was like half or
quarter uh But it includes all banks all
banks and all support
staff all the vacuums that CLE the
hallways and stuff like that that's
that's insightful thanks are you aware
of open Tim stamps.org a service that
lets all
right um so great proof of existence for
law
purposes
mhm right um so my issue with open time
stamps is that they still depend on the
blockchain or the Bitcoin blockchain or
ethereum blockchain um my point is that
blockchain the one thing you
need one of the things you might need a
blockchain for is to find a
consensus for proof of existence you
don't need a
consensus proof of existence works
because the thing itself that that
that's that is it so the thing is um
actionable in itself if you publish
something onto a
merry like certificate
transparency this publication is
effective in itself you don't need a
consensus whether this publication
happened because obviously it happened
because it's on there or didn't if it's
not on
there um you don't need any um
blockchain consensus for that the only
thing you need a blockchain the only
thing they use it for is because they
are afraid of their own
courage H in order to tether their
system to an existing
system but this doesn't need to be a
block actually was a company or several
companies that did something similar by
just P using a standard Merk tree and
Publishing the current uh hash of the
tree the current hat into the New York
Times the news sper of record and then
there's like a 100,000 copies of uh that
day's hash it's very hard to modify
afterwards and gives you proof of
existence without wasting any
energy yeah questions come P pouring in
actually so I don't think that we'll be
able to all cover them uh would it be
okay for people to contact you um sure
do we have uh uh afterwards like I don't
know video conference stuff or whatever
I'm I'm not
sure or contact me
directly I think it would be easiest if
if people could contact you directly um
I think you you had it on your last
slide maybe you could repeat how people
could reach out to you yeah I have uh I
have an email address a threa URL and uh
Twitter Henrik
clutz h e n r y k p l o e t
z cool thank you um yeah so maybe one
one short
[Music]
question stop is there any use for the
blockchain then it seems that there's no
point of it at
all exactly so there's use it's scams uh
if you don't think that's a legitimate
use there probably
isn't I'm fully in support of at least
if not Banning it for example for public
projects that there's really no reason
why our government should spend any
money on
that yeah so thank you thank you very
much um Henrik for for this talk for the
for your for all your patience and and
questions that you answered I think it
was great I think the the um amount of
questions also shows some interest um so
my pleasure
[Music]
where