 Hello, folks. I am Chris Demchak. I am the Grace Hopper chair of cyber security. I'm also the senior cyber scholar at our very own cyber and innovation policy institute over in sword. And this is the third in four lectures this spring on very basic topics. My attitude is that you need to know how these things happen, even if you cannot make them happen yourself. So the first one was on cyberspace and hacking. And it's available up on our very own video. And the second one was on artificial intelligence also. And today's lecture is on Bitcoin and blockchain. So what I'm hoping is to give you some basics so you can understand and read an article on it. And the last one, which is a horrifically scheduled, but my apologies. What is it? The eighth or ninth of June will be on quantum. Now, I did them in order of my own personal command. So the quantum one ought to be really interesting as well. So let's get started today on Bitcoin. We've all heard about it. We've all heard what it's supposed to Bitcoin millionaires are out there. And we're supposed to have some innate sense of what that means when they talk about miners and they talk about someone being hacked and losing their Bitcoin wallet and all that. And if you're like most of the world, first off, it just rolls off. You're like, what is going on? For some people, one of them being a senior financial minister, I believe in the UK, at the Bank of England, he said it was simply magical and useless. So what we're talking about is something is pretty difficult for most people to figure out. So let's start with it. Bitcoin is not blockchain. On the other hand, Bitcoin as a digital currency uses blockchain. That technology, that blockchain technology migrated out of Bitcoin into the business world as a way to have very secure and efficient transactions. And it also migrated with other cryptocurrencies that showed up as a way to be a currency, but also to accommodate this desire to have an automated, secured transaction process that you could distribute across a lot of people. And one of them, for example, you've probably heard about it, is Ethereum. And I'm going to talk about it as well. So let's talk about the timeline for Bitcoin. The first thing you need to know is that if you're in the cryptological community, by the way, at the end, if I make a mistake, I invite you to correct me. But the cryptological community always had a lot of puzzles, mathematical puzzles. And what we are pretty sure is that the persons who set up Bitcoin were obviously cryptologists. What happened is after the 2008 financial collapse, that person or persons were very angry that major middlemen in the world's large financial community were able to basically bring down the rest of us. And they wrote, or he wrote a paper under a pseudonym. It was Satoshi Yakamoto, something like this in 2009. And also designed the software that will become a key theme to what we're going to talk about in Bitcoin going forward. And in 2009, publishes the paper, produces the software, and invites people around the world to basically download the software and start mining Bitcoin. And at this moment, Bitcoin has absolutely no value. Now, Bitcoin continued to have no value for the next two years. What, but it did have was an enthusiastic group of folks who got into downloading the software and starting up these mathematical computations to mine that Bitcoin. Remember, you don't just mine it, you have to use the software and become part of the network. So by 2011, Bitcoin rises to a whole dollar per Bitcoin. This is nothing near what we hear about today. But that's because these enthusiasts started adding more enthusiasts. And we start seeing these ups and downs cycle ever since, you know, it's slowly increasing in value as anything that has enthusiasts would do. And it's in slowly, but it goes this way, right? It was promoted as a currency. So the idea originally is you were going to cut out the banking middleman that had ripped off your economy to begin with. But you would be able to go to any place and hand your digital passcode in and your Bitcoin, which associated with that digital passcode will buy you that Starbucks coffee. It turned out, for reasons I will explain, that making a distributed agreement takes a lot of time. And therefore I'm standing there trying to pay for my $5 Starbucks coffee. But I'm going to wait 47 minutes for the entire network to approve that I can make that transaction. It didn't work well as a currency, but it works and continues to work as a speculation device. So as long as people see that there are Bitcoin millionaires, then they want to buy a little Bitcoin. And as long as they want to buy a little Bitcoin, the value of Bitcoin goes up, right? And so it is working as a, quote, storage of value. And I have been reading a number of books on this recently to do this talk. And the promoters absolutely make that clear. There are also now a lot of competitor cryptocurrencies with no one would ever leave such a great example laying down and not try and get one themselves. And some very, very sketchy ones to boot. A current darling is the one called Dogecoin. I'm not going to talk about that, but a gamer darling is Ethereum. And I can talk about that. There's a lot of sketchiness goes on in the digital currency community. Now, there's a couple of words you need to understand as I tell you this story. And I will try and do it as quickly as possible. And I'm happy to re-explain any word if you hear me, but it doesn't stick and you need to have it come back. So words like hash, what is a hash? What is a digital signature? A little note about encryption. What the heck is a block? You always hear about permissionless and permissioned when you get into this community, particularly in blockchain itself. What's a miner? A word that is constantly used is consensus. And that's, by the way, how the network agrees that transaction is valid. And then, of course, at the end, I'll have just a quick comment about digital currency. After that, we'll walk into the technical aspects. How does it work? Bitcoin and then blockchain. So let's start with a hash. A hash simply speeds up the process of figuring out whether what you sent me works. So hash, you take letters, usually letters or numbers, and you run it through an established set of mathematical manipulations and then you coalesce them into a single line, often usually hexadecimal, but often numerical line, you look at it, and that hash can only be created from the data that you gave it. And that's the important part, is the hash represents the data as it was when you, the creator or a combiner, were looking at it. Actually, we use hashes all the time. Computers use hashes on a regular basis. If I send you emails, we'll hash the header to make sure that there were no errors in transit. So the header has information. It just has a hash. And at the other end, does the hash that is made at the other end match the hash that's embedded in the header? So therefore, were there no errors when it was sent? So let's take an example. Here's our message, hello. Now we're going to take each number, I mean each letter, give it a number. So here's hello in our little world. And we're going to just multiply them together, because the rule in our game is very simple. Take whatever the numbers are, multiply them. I now have a hash, right? Okay. So I send a message to, or Alice sends a message to Bob. Hello. And then I will send a message with the hash and my digital signature, and they have two different purposes. The hash says the message is exactly what I sent you. And the signature says, yes, it's me sending it to you. And so Bob can check with the hash whether the message hello was what I intended to send. And he can check with the signature that, oh, yes, it was indeed Alice who sent it. And it really matters that they exactly match. So then what you saw up there, 8, 6, 4, 0, 0, obviously is ludicrously simple. Let's take another example. Tiny change in one line makes a major change in what comes out. So here's our example. Our lovely brown fox. And note I have no period at the end of that sentence. Here's my second one. I added a period. That's all. Nothing else changed. That's the hash of the first one. And that's the hash of the second one. I'll give you a minute to notice there is no commonality, right? And that's why hashes matter because a tiny change will be reflected in the mistake. But let's turn it around. Let's say I have the hash from the first line with no period. And then I only get the hash on the second line, but I don't know what was changed. I can't go back either. That will matter in a moment. Okay, digital signature. You've heard a lot about them. Basically, a digital signature is a way to get a digital name and then the signature. So it's a public private key and I'll explain that a little bit more. But the way it's normally presented to you, which I find too little, is, well, you send someone your public key and they can decrypt a message to you or they can encrypt their own message, send it back to you, and then you can use your private key. And I was like, what does that mean? But what it does mean is that when I send a message with a hash on it, the person with my private key can determine that the hash, in fact, that they can use the private key to determine that that hash comes and has my name and it's me. But they can't actually pretend to be me because the public key is missing key components. So their public key won't produce the same thing as my private key produces if they decided to turn around and pretend to be me. So they can't. Basically, you tend to send it in two ways. Now, a lot of you don't have to send it in two messages, but any message you send you can put your digital signature on the bottom and they can know, yeah, Chris sent it. Or you can send in two messages, you can hash one with a digital signature, and therefore you're confirming both the quality of the message and the person who sent it. Right. Nobody can forge it in this at the moment in the public and private key as long as I keep my private key to myself. This is a really important thing that is absolutely critical for Bitcoin as well as we move along that you keep the private keys so very private. I read one book on Bitcoin where every other paragraph the author was saying, now close all the windows when you write down your private or you can't write down your private key, but when you write down your recovery seed, don't leave your phone up. In fact, take your phone out of the room. I mean, the paranoia is instructively amazing amongst these folks. And you can generate many signatures. So you can have one that's free medical exchanges and you can generate one for your taxes and one for your friends, whatever you want to do it. This simply says this is me. And as long as you have the key at the private key at the other end, you can prove that it is me who sent it. Okay. Encryption. I'm only going to make, this is where my my dear cryptologists in the audience hello, not going to tread heavily here. So you will have seen this term somewhere, the Shaw somewhere, it stands for secure hash algorithm now to tell you how difficult it is to keep encryption pure. This first issued a Shaw zero in 1993, but in two years, they had to have an upgrade and Shaw one. And then six years later, seven years later, they had to have another one Shaw two. And their variants of Shaw two where they keep lengthening the bits for security. And now they're working on Shaw three. And the reason they have to do it, it's not based on Shaw two is because even with all the efforts we're making, there are already ways, probabilistically ways to break into this encryption. It takes a long time and you get a really big number, a really big phrase at the other end when you have a cryptographically strong hash. I like this particular example. Here's the hash, the proper hash for hello. And it's longer than the hello itself. So it has interesting characteristics. Here's the key again. If you can keep your private key private, make mistakes by putting it someplace you in principle, in principle, you can splatter the internet with your messages, encrypted messages digitally signed and everyone can know it's from you and they can't read them. So in principle, all right, let's go for a block, the other word block block chain, you know, Bitcoin works in blocks minors mind blocks, what the heck is a block? A block is just a collection of transactions. And that is securely recorded by using hashes. See a visual picture of that. Every transaction occurs, it's put into a block. You know, I stole this from I think IBM, I think it had it down there somewhere, but an IBM presentation online, if you want to go look at it, they have one on blockchain. It's interesting. So you know, this should have lines and code in here, but that it's just a group of them grouped together under rules, why they should be grouped together. And then that hashed and they're connected through hashes to the next one. And they are people agree that okay, that's the next block, that's how the network agrees to that. And then this block grows as each group, according to rules, is then submitted to the network approved. It's got a hash showing this is the place it should go. It's right after this other one. And you end up with an irreversible chain. When the hash of that block is sent forward to the next block, nothing in that block can change, because if it changes at all, that next hash, the hash was sent forward to the next block is no longer valid. So you want to find out whether somebody changed a block. You go to the hash in the next block, and you go, is it the same? And remember, when you make that tiny change, if you're not the person making it, I mean making the hash and knowing everything that's in the hash, you cannot reproduce the hash that's in the next block. So it will be evident, publicly evident, that something in the first block changed. Let's look at a Bitcoin block. I find this very enlightening. So it has a header, where is it going to go and all this. And then it has all this interesting data. And this interesting data tells you a lot of things. This tells you what the person who produced the block, that's called the Bitcoin block, got. They got their reward was they were accredited. I mean, not handed it to. They were accredited 6.25 Bitcoins. I believe this is the target hash, but here's the part I want to focus on. Well, I'm going to make a comment about difficulty. The software, this doesn't come on any old way you do this. You have to download and work within the constraints of the Bitcoin software, which puts you in the network, right, has a difficulty level for finding a Bitcoin. And it varies. So the difficulty at the point at which this block was made is this. So here's the hash. But it's the hash of the previous block. So the previous block, which looked like this was all converted, just like hello was, and it was all compressed into a hash. And then put onto the next block. So nothing can change on the previous block without making a different hash indicating to everyone something went wrong in the previous block. This whole block gets hashed onto the next block. So you will always, that's the chain. You will always be able to see what went before, or at least be able to understand that what went before was or was not changed. That's the key. The other thing I want to point out is the nonce. The nonce is interesting because the nonce is key to mining. This turns out to be the number you are guessing when you mine. And that's what mining is about is figuring out the right number to put into the algorithm such that your efforts achieve the correct hash that's in the software. I say that very slowly. Mining is this massive computer effort, calculations to figure out whether the number you guessed, it's just one component of that calculation, will produce the hash that the software says is next in the sequence. That is mining. And it's cryptologically huge. All right, permission and permissionless, really straightforward. Permissionless, you all come down. No centralized authority. If you can access to it, you download the software, you can join in. Permissioned, some administrator says you can get in or you can't get in. One other thing that comes up is decentralized versus distributed. Don't be fooled. Decentralized is all about authority. Someone telling you what to do and distributed is all about locations, whether it's spread about. Okay, miners. So miners get paid for two things. They get paid for mining, for gathering all the computing power together and spending time with that software, grinding one after another, guesses to see if they get the next hash and doing it with the understanding that other people are doing exactly the same thing. So they're in a race to get there, right? The other thing they do is as a node, in order to have the privilege of mining, they have to agree to become a confirming node as well. And so they are also moving transactions into blocks for a fee. So that's what miners are doing. And it's not this is, you know, you can be a part-time miner, but on these days it's impossible. This is a full-time and expensive endeavor. And Bitcoin miners run the full nodes on these computers. So this is why, if I come with some, I say, oh, you know, I bought 10 Bitcoin X address, address, which is a time, remember, timestamp time and date. And, you know, so I've been credited with 10 Bitcoin around here, back here somewhere, you know, and I want to now spend it. So at that point, these guys have a full copy of all the transactions. That's what a full node does. It's not that big, actually. You'd think it was bigger than that. But it's actually not that big. They have a full copy, but they have the software and the software goes back and pulls up the transaction and checks the hashes. And, you know, so they have to themselves confirm it. They don't physically do it. This is automated. And what happens is you either say, yeah, my copy of the network says that's true. You have these 10 Bitcoin and you bought them and then, you know, there are, and your key, your private key is, in fact, the key that can unlock the hash that can let you have these coins. Or no, you can't. Now, miners running, particularly on the Bitcoin, they have a great incentive to enforce the rules because their Bitcoin amounts and their chance of winning more depend on whether everybody falls the rules. So one of the things that happens is people can get kicked out of the network. They don't follow the rules. It's done contentially, but they can do it anyway. Other cryptocurrencies have different arrangements and different roles in addition to miners. We'll talk about Ethereum when we get there. Okay, finally, final couple, consensus. Consensus, when you have a large distributed network and you don't have central administrators, then how the heck do you figure out whether or not this is right or wrong, right? So in Bitcoin, basically, remember, I'm running a full node, somebody wants to add a block, my comes in, my program is checking whether or not that competes with another sales or transaction. It checks the network and it agree. I agree that this is a new block. It's in the right sequence. The hash matches, you know, right, in a sense, my node agrees. And 51% of them have to agree. Now, smaller portions can give you a confirmation, but if you finally get to 51% and 51%, excuse me, if you finally get across the whole network and 51% doesn't agree, then you have a rollback. So whatever just happened is a risk is gone. Okay, it's not valid. Therefore, that block doesn't exist. That new block, at least you're part of it, doesn't exist. And you're kicked out. Next time. Ethereum is a little different than that. Ethereum looked around and went, wow, that takes so long. And Ethereum as the second one is, it's also permissionless in its currency department. But it uses network groups and it basically does it in groups. So a smaller group will agree. Yep, that's a valid block. We agree. We'll add it to the chain. And they pass that results up to their peers. And then this round agrees and then this round agrees. And so you can get a confirmation much earlier and much more quickly in Ethereum. But in Ethereum, it's not driven and tied to software. It's tied to a design that is ongoing. And so in this and other cryptocurrencies or permissioned blockchains, or you can have an agreement at the lowest 20%. It's saying, yeah, that's 20%. That's good. Which offers a really, very interesting opportunities for theme. Digital currency, let's be blunt. Just a currency has no paper. Ta-da. China says it wants a digital currency. Sure, make one up. All right. It's not just cryptocurrency. It's a nice chart. I'm not going to go too far into it. But here we have universally accessible. And here we have some cryptocurrencies. And it's a lovely peer-to-peer arrangement. And this, my friends, this is what money is digitally today. China, Russia, and other countries are planning on making their own digital currency. And they want it for control. But they also want to get out of being controlled by the wider westernized system of monetary control. So we can talk about that later. How does Bitcoin actually work? Let's get to the nuts and bolts here. So I gave you a discussion about that. So now I can be a little faster in this discussion because of I use the word miner. So we have out there miners who are crunching away using massive electrical power. And they're coming up with a Bitcoin. And through some process, I get some Bitcoin. A, and I want to send B. And what I do is I say, I execute with my private key, and I go to whatever exchange, or I just have it on a separate device. And I go to miner, I get into the network and I go, I want to add my transaction to the next block. And I got to pay somebody to do that, some miner to do that for me because I'm just a consumer. I just got in Bitcoin. I'm doing any of that other stuff there. And so I'm going to send B, 10 Bitcoins, and they charge me some proportion of Bitcoins every time they go, yeah, I'll look at your stuff. It matters because by the way, the fees differ. And they get around to adding your transaction according to how much money you're willing to pay. So there's a there's an interesting opportunity to cheat people in there about, I send you 10 Bitcoin, you love it. Okay. And but then I turn around in the same pocket where I only have 10 Bitcoin, I send it to myself in another account, but I pay a lot higher fees. So this, this particular transaction goes through first. And by the time your transaction comes around, oh, I can't spend that twice. So you lose out. Meanwhile, if you haven't waited for the confirmations, and you've already given me the goods that I wanted for the 10 Bitcoin, you out, because now we can't, you usually have no recourse. A new block is mined approximately every 10 minutes that varies because the software actually controls that. And then as I said, all the full nodes are basically your enforcers. And there are rules, all these rules are made into the software code. The blocks can't be too big, they can't spend it twice. And there's only going to be 21 million Bitcoin ever, according to this, unless they vote to raise the cap, but they're not going to do it. Because if they do, then scarcity means the value, more Bitcoin means the value of what they hold will go down. So it's not in their interest to do it. It makes this another opportunity for the digital currencies. I already told you that they were guessing, but this gives you a different picture of that. So here's a block, a hash, remember the hash from the previous one at timestamp. This is the target root. And here's the guess. And then you come up with an answer. And that answer has to match the next, consider the next hash in the sequence that's in the software. Once they go, yep, that's the answer, you have just won your 6.5 at this time, your 6.5 Bitcoin, then that block is validated, it's hashed, and we move on to the next one. And off you go now trying to guess this nonce. In 2009 when it was started, this was like easy, you could do it on your own computer. I was offered this opportunity at the time, I have to tell you I don't regret this. I wasn't really willing to connect some random software to my banking account, which is what they wanted, but at the time you could run it on your own computer now impossible. Now in order to get to this nonce, which is decimal points and tons and tons of zeros all the way down to something small, and you have to keep guessing the other end, you have to have a massive amount of electricity and specialized computers to do it. It's very volatile. Why? Not just because of the numbers of Bitcoin, everyone knows they're limited, but because people are betting on their value on the outside. And this volatility is pretty astounding. So Bitcoin really takes off in 2018, and here we are at the end of 2020. So there's a two year gap right there, and it goes pretty high. And then in 2021 comes along, and I believe it's right in here where Elon Musk says you can buy a Tesla with Bitcoin, I want some of that Bitcoin. And it goes up to here, but it's peak of 60. And Elon Musk says, nah, never mind. I don't want to do it. And it drops 30%. It's a speculation device. It's not a currency. However, if you want to do a straight line average, it is growing. And why is that? It's growing for the same reason Furby's grew when they said, I'm not making the price of a Furby. You remember Furby's? I'm dating myself little tiny creatures that would wake up and open their eyes. They were little mechanical robots for kids, sort of, because they were scarce. So by 2024, there will be no more mining of Bitcoin. And in fact, it's an interesting phenomenon of the software that the minor subsidies cut in half every four years. The point is, at this point, I have 6.5 in the data that I have, but if it's just happened and cut in half, it's going to be 3 at this point. And that means that people are not going to be quite as well rewarded for all this effort. And we should see fewer and fewer miners in there. 21 million and they are currently at 18 million Bitcoin. It really became clearly a currency that was anybody could join originally, highly portable. And it can subdivide. Today, if you want to spend $100 on a Bitcoin, you're going to get some 0.000 part of one. And they even give you a figure and a name for that, a Satoshi or a sat, which is 100 million Bitcoin. So you can have 100 millionth of a Bitcoin and you can buy that today. The other key that was designed into the system is that password, that private key is ginormous, hard to remember. And you obviously can't write it down. So everyone uses a way to access it with a password manager of some flavor. And you don't want to leave that online. You don't want to leave it on your computer. So you put it in specialized software called wallets. And every wallet has a recovery seed. Now, in this particular case, this is one called Trasor, and it's 12 specific words that you must memorize in exact order. And if you can do that and keep that in your head, and even if you can't find your passcode, your private key passcode anymore, you can nonetheless get online, give you a recovery seed, and you can actually get your Bitcoin. It's portable, but it's not fast. Seven transactions per second. On the other hand, which all ransomware criminals use on a regular basis, any single transaction can be any size. So the GDP of Finland could be in one single Bitcoin transaction if you wanted it. Now, there is another alternative, Ethereum. I keep mentioning it. Ethereum is interesting because Ethereum was created in 2015 by a Bitcoin miner who wanted to do more with the blockchain. And so he wanted to create a currency that could also have documents smart. It could work with a smart contract. And just think about it for a moment. A smart contract is what you think it is. You and I agree that something will happen at a certain date, at a certain time, and that X will be exchanged. A deed, a loan, something that is of value. And we execute in this hashed, stored, secured way. Well, you'd like a software that doesn't just nudge you. Could you come and execute on this? But in fact, it just executes it. And you have a series of conditions and all of this is in a chain so that neither of us can change what we agreed. Nor can we change what's about to be executed. If we agree to that, that becomes a smart contract. There's other problems with it. But nonetheless, that's the visioning of it. And you've got to be able to program that. And what Ethereum offered was a way to do that. Bitcoin was pure transaction. So Ethereum, its basic item is called Ether. It can be used as a digital currency and a store value. But it makes it possible to run all these other applications and smart contracts. Furthermore, they are validated more quickly every 12 seconds on Ethereum, where Bitcoin's approximately every 10 minutes or so now. And there's no fixed supply. So Ethers can keep on being made. If you look up on the valuation of Bitcoin versus Ethers, you find, of course, Ethers are quite low. Well, because there's no supply cap on it. They are both mined in the way I described that you have to prove that you did it. And it has to be established and agreed upon that you've done that. So these are the two of them. If you want to think about it that way, Bitcoin is the pure and Ethereum is the sort of, I play all the roles, if you will. Blockchain technology sort of spread out from Bitcoin as soon as Bitcoin sort of began to take off. Well, it wasn't that we didn't already know how to encrypt our ledgers. We didn't know how to, we passworded them, we encrypted them, we permissioned them, we had all of this. What we also had was very high maintenance costs. And the very high maintenance costs is exactly what the business community was trying to get rid of. So if I could figure out a way to automate all this, and, by the way, have all the great security of encrypted password and permission, why wouldn't you want to do this? And so we have the role of blockchain technology divorced, divorced from the Bitcoin. So blockchain becomes a more automated, distributed ledger, and very early on, very much about financial transactions. Now, what are the attractive aspects? Well, I don't have to necessarily have a central administrator, right? I don't necessarily have to use third parties. If I can just have a network and I can do my business and they will all approve that this is a chain, that's a chain, and it cannot be changed. So nobody can cheat me. Looks good. Trust, provenance, everything we discussed in Bitcoin, something was very attractive for business community. And also the chain of transactions. Therefore, you can't go back and say, no, no, I never agreed to that. Well, because we have the hash, and this is what it says. You go, oh, that's someone's altered that. Well, I'll hash it. And it looks just like the hash that was contemporaneously put into the next block. So no, nobody altered it. You agree to it. You're stuck. And irreversibility was attractive for that reason as well. Also, relatively resilient. All these people have copies. And so your house burns down, my apologies. Your copy, your node goes down, but all the rest of these people have copies. So there's a certain amount of resilience that just comes into it. So very attractive aspects of blockchain. The original blockchain system was also quite administered because at the same time, yes, I love the fact that all these people can see this network and it's very attractive. But I'm a little controller of what they're doing. It can be permissionless. But the interest at the beginning was to make it more permissioned because they could control who could actually even see the transactions. So the way that it happens is basically you and I agree on something. We're going to signal a message to the network that we are going to have the following conditions for transactions. And other participants say, yep, I'm going to join right in. I understand that these are the conditions and the rest of the network goes, okay, I was told these are the conditions. You've agreed the conditions. The conditions are being met. Yes, it's done. It's verified. And so the networks in a blockchain, remember this sounds a lot like Bitcoin, doesn't it? Are the authenticators. And they guard against double spending or for this matter in this context of altering the transaction, right? If they're paid for it, you often have a competition to get paid and therefore they get either at speed to validate or it's other reasons. But they get paid for something because people don't like to just hang out networks. Now if it's a private network, maybe they're paid because of their salary, right? And finally, if they're part of the network, as every transaction goes through, you don't have to tell them the transaction happened. They'll automatically know. A decentralized public ledger. Remember what I told you early on about if you can encrypt the message and you hash it and then you send on a digital signature, you can publish it all over the friggin internet, more or less, with some restrictions. And you know, nobody can read it without a whole lot of effort. So here we have this idea that I can have all these public ledgers and something happened. Everyone agreed at the time it happened. No one can go back and change that. It can't change it, argue with it or otherwise and it is publicly available to everyone in the network. Very attractive. So there's four kinds of blockchains today. There's the public ones I told you about. You all come down, generally no access, I mean, no restrictions, no permissions. There's private blockchains these days and these tend to be permissioned. You can have a halfway in between called the hybrid. The private blockchains, these are the ones that you will see in organizations and financial institutions. And in fact, terminology is growing up. There's a ton of terminology here. And for this, by the way, I highly recommend that Wiki is your friend. Every time a new term comes up, I find that somebody has decided this is important enough to define on Wikipedia. So feel free if you're pursuing this and just go look at Wikipedia. This is not a point of contention, generally speaking. So a new terminology, a distributed ledger is generally spoken now of as a private blockchain. But remember we had this sort of pre-cyber equivalent, well not pre-cyber, but pre-blockchain, pure equivalent. They already had ledgers and already had distributed ledgers. I just want these. Hybrid combines them. Sometimes this part's distributed, you know, you all come in, this part, no, I'm keeping this close hold. And then they have the interesting thing called sidechain, which is a ledger that has connectivity to the main ledger and it runs in parallel. And sometimes it can actually have a different means of actually recording or its consensus could be lower or higher and then it pumps its results back up into a block on the main chain. And those are called sidechains. The promise of blockchain was really this whole new fast automated world that was efficient, right? And for the folks that were originally pushing it, they really wanted to get rid of government regulation period. And I got to tell you the business community wasn't opposed to that. So as soon as the opportunity came up, you saw the hype begin everywhere. Almost in 2016, 17, you couldn't read some, I'm stating the case, but you could hardly read a business article or journal that didn't have something on blockchain and how it will make it so much better for everything, you know. It's immutable, it's public, it's giant. Oh, it's secured by everyone who's involved, the incentive to make it pure sounds so much like what we heard on the internet a long time ago, right? But it is true that if the authenticity and other aspects can be solved, it can produce a sort of trustless environment that is to say, I don't trust you. And if the rules are broken, I know that you broke them, right? And so as long as you can keep the rules going and the rules make it imminently obvious that someone has broken them, there you are. The other part about it that was very attractive is, but this is particularly digital currencies, is that it offered an opportunity for people to move money around very quickly that could move at the places where corruption was very heavy. Remember the guy who set up blockchain, I mean, Bitcoin in particular was angry at what had happened in 2008 and considered, must have considered corruption, certainly looks like it, right? So, you know, people have been turning to blockchain to the extent that they can in places where you have a significant problem with the financial system, right? It does, however, mean that criminals love it, right? They can bypass traditional financial intermediaries, which would be the regulators, which would be finding out whether you are money laundering from your sex trafficking or your pornography or whatever you're doing as well. This was not missed by the criminal community who thought that was a really great idea, right? Today, though, we see completely innocent, if you will, or aboveboard uses of blockchain insurance company. The more people share assuming that blockchain is or a digital currency, not blockchain Bitcoin, is used as a storage of value. You would expect that this would be heavily used in the coming world of the Internet of Things. When your refrigerator is, if it matters that your refrigerator is reporting the coldness of your refrigeration, but more likely it's telling you what you bought at the store so it can tell the refrigerator company so that they can share that with marketing, so they can share that with the local food chains, that's not transaction value, that's actual data value. There's a lot of things people might want to share and not have anyone be able to change. Online voting is a good one. One thing I thought I had is we are running around with our vaccine cards, but it would be very nice if we had a blockchain for the vaccine card so that we wouldn't have to say is that card fake, because if we could check on the blockchain, we will see whether or not when they were vaccinated it was actually noted in a block. If it wasn't, which you remember, the block cannot be changed. If it wasn't, then clearly the card's a fake, right? Or there was an error too. Others, I'm just going to leave them up. Hyperledger, Linux loves to work on this so it's working on ways for all of us to get involved in this, but the banks are deeply in it, it's JPMorgan Chase. I like this one, proof of existence is an online service that verifies the existence of computer files. I know nothing more about that than having seen this and if I had the time I would have looked it up. I like the title, proof of existence. Financial institutions went from everybody exchanging, exchanging, exchanging to, okay, let's just put it in one common distributed ledger. Here's some other new things. I talked about smart contracts, but here's another one, the decentralized autonomous organizations. Not just sharing, but also making other rules about what we shall do together, but in a decentralized and autonomous way using blockchain technology. Very interesting. And it could, this is one of the organizations got hacked pretty profoundly using Ethereum in 2016. So not always the best thing in the world. Okay, let's do Ethereum really, really quickly. I'm looking at the time. Ethereum, remember, was created by a blockchain a Bitcoin miner. So this guy wanted to take the good stuff from Bitcoin and make it even better. So Ethereum is also permissionless. It's non hierarchical. And for it, the block is a batches of transactions. Okay. So each block is just like Bitcoin. It has a identifier and it notes all the information. Remember that hashes it forward and it agrees. And there's something called a merkle tree, which just the way to think about it is everything underneath, each of them are hashed into a single hash. And if that hash, you get this merkle tree later and you hash them along. And if those don't match, then something changed. Got that. That's like a Christmas tree. If the star on the top was your hash, everything underneath has to be exactly the same. So you got that. And you move the tree to another room. And then you do the same thing. And the hash doesn't match. Somebody took off an ornament. So let's think about it. Ethereum is faster because it parses it into those little groups. A little group agrees with the peers. Yep, it's good. It's good. Moves on to the next little group. You agree with that first group says so this is all one group. So one note in a sense they agreed. And so it moves much more quickly to propagate through the network. And the miners, there are miners in here. Miners maintain the list of these transactions explicitly. And they get paid. And they're paid in Bitcoin. I mean, they're paid in ethers. Here's an interesting aspect about it. Because sometimes you get a node that gets two suggested blocks at the same time. What Bitcoin does is it throws them out. But what Ethereum does is says, well, Bitcoin actually just says 51% agree on one or the other. Ethereum uses something called the longest chain. So I guess gotten two blocks presented to me at one time. And this block comes along a chain that has six other chains. And this block comes along and has 15. I'm going to pick the one that goes with 15 because that means it's a more consistent thread. And what happens is these end up disappearing. That these, you know, abandoned chains will end up disappearing. For DoD. Yeah, let's take that question at the end. It's a good question about how soon might we see this in DoD. I think that's a really good discussion at the end. Thank you. All right. I mean, I'm actually coming towards the end here. It feels like a long time, but we've got a lot to go. So at the moment, the miners are rewarded. Remember, the smallest unit of Bitcoin was a set. And the smallest unit in Ethereum is a way. And it's 10 to the minus 18. So you can buy a lot of little ones. They are creating an Ethereum 2.0 right now. And they're trying to move it from that you make a Bitcoin, make an ether and get paid for it to how many of them do you have? How long have you had it? You know, it's a proof of stake. That means you can vote. It also means it's going to kind of discourage people from mining. And if they're the ones that are making a list and keeping it of all the transactions, I'm not sure how Ethereum is going to make that happen. I know there's an interest in doing it so that they can simply reduce the energy cost of mining, right? I'm leaving with a final thing called NFTs. You're going to see a lot of this in the headlines. Non-fungible token. Here's how you have to think about it. It simply means that I own something digital and I submit a hash of that. And I say I want this in a blockchain showing I own it and all the other stuff that's in this block. And therefore, somebody else comes along and says no, no, no, no. I own that picture of, you know, blah, blah, blah. I can point back to where I established the ownership for that. And it can't be altered. It's just like a blockchain. So it's mine. I can't pick it up and do anything with it. I can't, you know, I can sell ownership of it, but I can't pick it up and do anything with it. It's called non-fungible. It's not a currency. What a good example to try and keep in mind. The original creator of whatever it is I just bought and called mine is not constrained from making others more or less just like it, but the one I have, you know, it's like having a numbered print. The one I have is mine. And so what you see are people are buying land in games completely separate from the owner and developer of the game. They're buying land in games and using non-fungible and making them into non-fungible tokens. They're representing a non-fungible token. So I own this land, game developer, and everybody else playing the game because I have these NFTs. There's a very interesting effort to make the NFTs pay people for playing games. That's another discussion. All right. So let's get to security real quickly. I see the time is just always going too quickly. It's critical. Everything I talk about in all these talks, they are cyber's offspring. They're built on the same shoddy cyberspace as anything else. They inherit a lot of the vulnerabilities and we're only seeing them now because the computing power has finally shown up that we can process all this stuff. But it also means it's processing all this stuff on that cyberspace and it gives you, you see the very similar hype. Here's what we were promised. Here's what we got and all the stuff ends up being fodder for criminal behavior and other issues. It complexity. We're just going to have mistakes. You've got to do rollbacks. It just happens. It slows things down. It's a whole new vocabulary. These things don't scale easily if 41 million people have to agree on something, even if it's only 51% and it's automated. Transaction costs, huge drain. When a bunch of people went to play a particular game that was very popular and it was tied to ethers from Ethereum, it literally slowed down the entire Ethereum network. Of course, there's human error. I just made a mistake and then there's a fight about whether it was a mistake and then there's security flaws. If half the network can't keep their machines clean, someone hacks you. You've lost all your Bitcoin or you've lost your ether or your transactions are garbled up. You've got to go fix that. The 51% descent problem, this is something we can discuss. Of course, there's the governments. It's governance by agreement. We can change the rules and all the value that you've accumulated up till now, if those miners in Bitcoin go, yeah, the 21 million, let's make more. Now, mining is very expensive. Of course, there's privacy. I'm going to buy this. I'm going to note it. I'm going to give a hash on it. It's going to be probably record and now everybody knows that I bought a Lamborghini on my professor price, my professor salary. The decentralized nature, well, it is good that you can't attack everyone simultaneously, but if you're an insider, there's nobody looking to see what the insiders are doing. And of course, there's cultural acceptance. And the same sorts of things that you saw on Bitcoin attach to, very often attached to blockchain. Here's one that I want to make a note of, is miners are recognizing that that Bitcoin problem of a cap is going to be a problem in the future. And those transaction histories can be dominated if you are more than 51% of the entire network. So China currently dominates Bitcoin mining. What's to say that they don't basically get all of them, more than 51% of all the notes, and they just rewrite all of the transaction history. So you who are carrying the clear and true story of the transaction, but you're, I'm sorry, you're only in 49% of the group, you lose, right? And of course, it's only, you know, pseudonymity, it's not really anonymity, and anonymity, right? And we leave the ethical issues like they are huge, right? So what we're also seeing now is the private blockchains are really coming out of the woodwork, and they are beginning to dominate in clouds and other places as a way to do security. Okay, final one on encryption. Crypt, encryption ain't perfect. The reason NIST has to keep adding to it is because they're finding ways to basically get in up to, you know, X number of rounds, you know, 80 rounds for a Shaw 512, and we found folks being able to break into 57 of them. So, and now we have quantum computing coming down the line. So all of the things I've described to you require that that hash and that the cryptological representation of that hash be relatively secure, what happens when quantum can basically break it in minutes rather than weeks or months, right? And finally, we just have the influencer part, but this is particularly a Bitcoin and digital currency problem. They just say things, they tweet whatever, it plummets, right? At the moment, a China's announced a crackdown on that Bitcoin mining. So it's going to be really interesting to see what the effects of that are going forward. So the bottom line is we've got to be real skeptical. You need to know how it works. Not necessarily know how it's done. I know how to do it, I guess we would say, but you need to know how it works. So that when we talk about it, applying it to the Navy or the DoD, that we have some, you know, some informed positions on it, this is the only cartoon I could find on it. So it's all about being skeptical. All right, my friends, let's go to the questions.