BLOCKCHAIN INTRODUCTION

WHAT IS BLOCKCHAIN
Current Financial System BlockChain System

• Central authorities (bank, fed, notary, escrow, etc.) transfer • Distributed network of computers (nodes) that maintain a shared
actual value between two parties source of information

• Multiple intermediaries and record-keeping are required to • Transaction data is immutable

facilitate transfer of assets and create trust
• Peer to Peer transactions using digital tokens to represent assets
and value
BLOCKCHAIN VS BITCOIN

Bitcoin BlockChain
• A digital currency which was in a lot of • Distributed
ways the first demonstrable use of
BlockChain • Secure
• A protocol that supports a • Log file
decentralized, pseudo-anonymous,
peer-to-peer digital currency
INTRODUCTION TO BLOCKCHAIN
A BlockChain is a distributed secure log file or shared ledger
with technology to trust transactions without a central authority
Every viable transaction is stored
in the shared public ledger

A shared ledger technology allowing

any participant in the business network
to see the established (via
distributed consensus) system of
record (ledger) Transactions are placed in
blocks, which are linked by one
way hashes

Operates in a peer to peer

Each peer address is mode and is mostly based on
anonymous and multiple DNS and “seed nodes”
addresses may map to the same
transactor
 WHAT IS BLOCKCHAIN
A Brief Intro:
• BlockChains are essentially facilitated on a platform of distributed databases with
some inbuilt pre-agreed technical and business logic criteria, kept in sync via
peer-to-peer mechanisms and pre-agreed consensus algorithms. These are the
BlockChain Ledgers.

• Data stored on BlockChains are considered Immutable. Immutable means that

something is unchanging over time or unable to be changed.
• In a BlockChain context, once data has been written to a BlockChain no one, not even a
system administrator, can change it. This provides benefits for audit. As a provider of
data you can prove that your data hasn’t been altered, and as a recipient of data you
can be sure that the data hasn’t been altered. These benefits are useful for databases of
financial transactions.

• With respect to immutability, the way the data is structured is significant. There
are two key ideas: Hashes and Blocks.
 WHAT IS BLOCKCHAIN
A Brief Intro:
• Hashes
• A hash function is a type of mathematical function which turns data into a fingerprint
of that data called a hash. It’s like a formula or algorithm which takes the input data
(any data, whether it’s the entire Encyclopedia Britannica, or just the number ‘1’) and
turns it into an output of a fixed length, which represents the fingerprint of the data.
There are many types of hash functions e.g. SHA-256

• When you mash the phrase “Hello from Bits on Blocks!” through this function, you get
this fingerprint out:
389f9ef3822e5c88f4b140db82c459064711a52182a3e438b4ebc7ecda62b9bb (SHA-256 hash of the phrase).

• Two relevant properties of a good hash function are:

1. It’s hard to back-calculate the original data from the hash
2. If the input data changes in the slightest, the hash changes in an unpredictable way
 WHAT IS BLOCKCHAIN
A Brief Intro:
• Blocks
• An important idea in BlockChain is that transactions are bundled into blocks. Blocks
contain a number of transactions (e.g. payments) and also some other data including
the previous block’s hash. As each block includes the previous block’s hash as part of
its data, a chain of blocks is formed.
 WHAT IS BLOCKCHAIN
A Brief Intro:
• Blocks
• Creating a ledger of transactions with blocks that refer to previous blocks is a much
better idea than numbering pages in a book (in the case of a book ledger).
• In a book ledger with numbered pages, 1, 2, 3, etc. it would be easy to tear out
page 40 and replace it with another page 40 with slightly different transactions.
• The book’s integrity remains intact, with pages 39, 40, 41 becoming 39, 40, 41 –
no change. Also there is nothing in the page number ’40’ that reflects any of the
content in that page and the ordering of the pages is implicit from the page
numbers.

• However in a BlockChain, instead of referring to block numbers, blocks are referenced

by their hash and each block explicitly specifies which block (hash) it is building on.
• So, blocks are explicitly ordered by reference to previous block hashes, which reflect
content, instead of being ordered implicitly by a numbering system (1, 2, 3) which
is content-agnostic.
 WHAT IS BLOCKCHAIN
A Brief Intro:
• Blocks
• Key points
• Each block’s hash is derived from the
contents of the block
• Each block refers to the previous block’s
hash, not a sequential number
• Data in a BlockChain is internally
consistent, that is you can run some
checks on it, and if the data and hashes
don’t match up, there has definitely been
some tinkering.
TRANSACTION FLOW FOR BITCOIN (ANONYMOUS BC)
BLOCKCHAIN BENEFITS OVERVIEW
• Records and validates each and every transaction made in a cryptographic
manner
KEEPING • Multi-Signatures [public key cryptography, specifically ECC due to key-strength and shorter keys]
SECURE
RECORDS • Encrypted Communication [in particular for generalized B2B transactions]

• True Non-Repudiation: Transaction unlinkability while incorporating identity management and

auditability
• BlockChain mining discards the need of any third-party or central authority for P2P
transactions
EFFICIENT
VALUE needed to transfer value between two parties: Process and Cost Efficiency; Reduced internal risks;

TRANSFER Mitigate Man in the Middle

• Decentralization of the technology and distributed Ledger for smart contracts

development,
SMART exchange and signature
CONTRACTS • Transfer over Internet by anyone with computer or smart
phone
 BLOCKCHAIN CHALLENGES
Challenges
• BlockChain significantly alters the ▪ Increased Investment
need for trusted third-party Cumulative VC Investment in Virtual Currency &
authentication through a financial BlockChain Tech (USD millions)
institution
• Challenges of legacy infrastructure
• Challenges in understanding the
technology
• Complex cryptosystems
• Decentralized cryptosystems
• Attacks on Cryptosystems
• Government backing and standards
are currently in exploratory phase
only
• Can facilitate money laundering,
crime
• Currently cannot support a large
number of transactions and is not fast
enough
OVER $1 BILLION HAS BEEN INVESTED BY COMPANIES INTO BLOCKCHAIN
TECHNOLOGY
PERMISSIONED BLOCKCHAINS
A Permissioned BlockChain is a distributed secure log file or shared ledger
where the ledger is maintained in a private and secure walled garden
of participants Every viable transaction is stored
in the shared private ledger

A shared ledger technology allowing

any participant in the business network
to see the established (via
distributed consensus) system of
record (ledger) Transactions are placed in
blocks, which are linked by one
way hashes

Operates in a peer to peer

mode but among a known
Each peer address is discrete
community of private
and known and access is
databases or ledgers
controlled by a common trust
infrastructure of PKI based trust
anchors
 PKI-ENABLED PERMISSIONED BLOCKCHAIN
Symmetric Cryptographic
Systems
T ransaction Level 2:
Crypto Infrastructure: Threshold Crypto
Bob Alice Custom variants utilized and security levels to
meet / exceed what is openly available
Key Management
Module Multi Signature Schemes T ransaction Level 1:
Key Management and Multi-Signatures
Structure: Introduces non-circumventable
hierarchical auditability and unlinkable certificates

Per Transaction Integrated

B lock Chain Infrastructure Enablement
Management Unit
Level: Public Key Infrastructure (PKI):
Vetted and load-balanced means to bridge
external- and on- chain- services
Privilege Management Infrastructure (PMI):
Leverages existing Identity Providers and
Attribute Authorities through interoperable
Public Key Privilege Management
Infrastructure Infrastructure import

E.g.: DarkMatter Seamless SDK that integrates into your application; standardizes BLOCKCHAIN Security Schemes and Crypto Algorithms based on
Extended Functionality Version of Hyperledger Fabric
TRANSACTION FLOW EXAMPLE FOR PERMISSIONED BLOCKCHAIN

Bob gets a key agreement transaction

certificate for Alice’s accountID_A,
and extracts a transaction certificate and
corresponding private key from
his wallet in order to sign a transaction that
transfers z dollars from
accountID_B to accountID_A

[secured using the public key from Alice’s key

agreement transaction certificate and public key
Bob and Alice both have Bob’s bank has deposited x Bob sends the transaction
for Validator group]
BlockChain wallets on dollars into Bob’s BlockChain to a trusted Validating Peer
their mobile devices. accountID_B from an (VP) that broadcasts the
Bob owes Alice z dollars off-chain bank account transaction to all other VPs

Bob and Alice’s

transaction is added to
the BlockChain. Every
Each VP independently executes the subsequent block added
Each VP checks in state table All VPs reach consensus (using Bob and Alice receive confirmation
further increases the
That z ≤ accountID_B balance PBFT algorithm) on the order to transactions and incorporates them that their transaction has been
(as well as the state values that result from security of the previous
follow to execute the transactions executed
blocks
execution) into a new block – and the state
table is updated
DOES IGTF NEED BLOCKCHAINS?

A brief look at BlockChain applications in various industries…

 ELECTRONIC MEDICAL RECORDS AND HEALTH INSURANCE: MAKING SYSTEMS
INTEROPERABILITY A REALITY

PROBLEMS WITH HANDLING MEDICAL RECORDS TODAY ROLE OF BLOCK CHAIN

L ack of interoperability:
• Current systems generally disconnected from one Enablers
another – resulting in significant cost and delay (e.g.,
due to inefficient manual processes) when patients
change healthcare providers Hospital and Med. Centers Visit-Management

• Payer and provider systems are disconnected from one Peer to Peer Insurance System Mgmt.
another as well Medical Data Collection and Quantification

Peer-based Mediation and Legal System

A ttack Surface:

• Centralized healthcare data (maintained in on-site Paying Ransom when Access is denied
repositories powered by physical servers or on an IT
cloud) and heightened vulnerability to security breaches
(theft as well as potentially undetected
modification/falsification)

Linkages
SMART SOVEREIGNTY AND PROVENANCE

Counterfeit Product Detection Reduced Criminal

Activity

• Decentralized detection and control of the • Code hidden at point of sale

counterfeit drugs problem
• Revealed code checked for legitimacy &
• Smart tracking of quality of product and “freshness*”
manufacturing
• Alteration of code destroys value
• Tagging enables physical objects to be represented
virtually; tags (e.g., QR codes) can be securely • Protect against code reuse
hashed onto a BlockChain

• Tags/codes used for counterfeit product detection

today

• BlockChain as: world-wide tracking with

auditability and without undue infringement of
privacy
SMART CONTRACTS

Sign lease and insurance contracts: Pay: With:

Blockchain

Cryptocurrency

Digital value Smart right Basic smart Multiparty Distributed Distributed Distributed Distributed
exchange and obligation contract smart autonomous autonomous autonomous autonomous
contract business unit organization government society
Simple to Complex
Smart Contracts –

A family Consumer buys Landlord Seller lends Unit of a Self-driving Settlers of a Groups of
member sends a digital content remotely locks buyer funds to corporation trucks make previously settlers from
some bitcoin to stream nonpaying buy house issues its own P2P deliveries, uninhabited different areas
another family tenant out of bonds, and pay local toll area code their establish self-
apartment buyers monitor road fees, and own self- enforcing trade
payments via a buy local enforcing agreements
shared ledger electricity government
services

Simple Complex
HEALTHCARE BARRIERS: MANAGING CONTRACTUAL CORRECTIONS

HEALTHCARE BARRIERS

Barrier “Many hospitals are unwilling to digitally sign some documents because the
codes that HIPAA mandates may need to be manually corrected, and those
Root Cause
corrections will break a digital signature.”

Surmounting the Instead, such modifications can (and should) be captured in additional digital
Barrier signatures/follow-on transactions
HEALTHCARE BARRIERS-2: PATIENT MANAGEMENT OF OWN DATA

HEALTHCARE BARRIERS

Barrier “How to achieve the HealthCare Industry objective of Patients and Consumers
Root Cause ‘owning’ and controlling their own Health related data?”

Permissioned BlockChains with strong PKI based authentication of Identity

Surmounting the
would enable the Patient/Consumer to reliably control and manage their own
Barrier
HealthCare records
JURIDICAL BARRIERS: MANAGING JURISDICTION-SPECIFIC PRIVACY
LAWS

BARRIERS

Barrier Recording certain types of transactions in a public ledger may be disallowed in

a given country because of privacy laws
Root Cause

▪ Access to confidential data may be restricted within a permissioned

BlockChain
▪ A public BlockChain may include one-way hashes of confidential data, where
access to that data is controlled; the database(s) containing such data can be
Surmounting the
(partially or totally) purged, if necessary
Barrier
Also to think about: What about “Right to be Forgotten” ?
▪ Does purging the data from the associated off-chain database meet this
requirement?: If someone re-presents such data, they can prove that it
matches the corresponding immutable transactions on the BlockChain
FINANCIAL TRANSACTION BARRIERS: MANAGING TRANSACTIONAL
RECOURSE

BARRIERS

Barrier “It’s possible to undo lots of transactions in our current legal environment.
Reversing charges on credit cards is possible, for example, and is a desirable
Root Cause
feature of our current system.”

▪ Immutability does not imply inability to reverse a transaction via a follow-on

Surmounting the linked transaction
Barrier ▪ BlockChains can be made interoperable with legacy systems such as credit
card processing
PERMISSIONED BLOCKCHAINS FOR IGTF?
 CHOOSING THE RIGHT BLOCKCHAIN SCHEMES: ARCHITECTURE IS KEY

Why IGTF might consider adopting permissioned BlockChains - instead of permission-

less BlockChain that does not address abuse prevention or suitable recourse

Universality Immutability and Privacy/Confidentiality Authentication

Non and
Repudiation Authorization

• Collects transaction • Append-only and • Ensure authorized • Derived from PKI

records from diverse set tamperproof qualities user access and standards-based
of systems create selective disclosure ID management
high-confidence audit
trail

• Rigorous incorporation
of identity management
in order to meaningfully
enable transaction non-
repudiation
 NATURAL BLOCKCHAIN + IGTF INTERSECTIONS
Permissioned BC potentially has a place in IGTF:
• What are the natural intersections for Permissioned BC and IGTF?
• Permissioned BC is dependent on strongest authentication of actors within the system, to ensure
non-repudiation on transactions, just the same as Grid/Supercomputing
• Digital Signing of transactions for confidentiality and integrity purposes (in addition to
Identity/Access controls identified above) makes PKI the natural (the BEST) solution for
permissioned BC, same as is used for IGTF
• BC Nodes should be run on strongly audited and securely operated infrastructure, which is what
IGTF requires of Authentication Providers, and potentially to a lesser degree the Attribute
Authority providers (I can be convinced of the latter perhaps)
• Global trust infrastructure at known levels of assurance is already in place for IGTF, this could
potentially allow easy deployment of global BC
• But do we need a new level of hardware based certificates for BC operations?
• What are the natural items that an IGTF BC infrastructure would be need for?
• Global Identities? (Individuals, nodes, services, LRAs?)
• Global Virtual Organizations with added benefit of transparency?
• Distribution of anchors and CRLs via BC?
ACHIEVABLE PERMISSIONED BLOCKCHAINS
Integrated at Individual Use Case Systems e.g.
VO’s
Symmetric Cryptographic Systems
T ransaction Level
Crypto
2: Infrastructure: Underlying
algorithms (state-of-art and customized) are
crypto
Crypto Schemes should ensure interoperability
key
and a multi-faceted audit capability within a
Key Management distributed trust framework while maintaining
Module Multi Signature Schemes
resistance against traffic analysis
T ransaction Level
1: Key and Multi-Signatures
Integrated Management
Management Unit Structure: are critical
B lock Chain Infrastructure Enablement Level
Integrated at IGTF Infrastructure [ Based on Hyperledger-Provided Framework]:
Level PublicKey Infrastructure (PKI):Achieved
through a hybrid PKI- and BlockChain- model
Privilege Management Infrastructure (PMI):
Proper Node (Client) and Membership Services
Public Key Privilege Management (Privilege Management Servers) to be designed
Infrastructure Infrastructure
INFRASTRUCTURE SCALABILITY IS KEY

Symmetric Cryptographic Systems

Key Management IGTF adopted infrastructure architecture could

Module provide the distributed ledgers where
Multi Signature Schemes
BlockChains are kept, with a number of potential
use
Any cases.
adopted PKI trust infrastructure architecture
should support multiple Certificate Authorities
Integrated
audited to common Trust policies either as a
Management Unit
hierarchy of scalable servers/services or by
Integrated at IGTF Infrastructure
Level splitting the responsibility (partitioning) into a set
of (relatively) disjoint (distributed) sets
G oals achievable via potential expansion
of e xisting IGTF framework and
DarkMatter-
Public Key Privilege Management
e nabled Permissioned BlockChain SDK’s
Infrastructure Infrastructure
i ntegrated in existing architectures
DARKMATTER + IGTF + BLOCKCHAIN

Questions?

[email protected]
THANK YOU