Blockchain & Ethereum : Vitalik Buterin Keynote -1

In this post I broadly cover following topics as explained by Vitalik himself.

1. What is Ethereum ?
2. Why Decentralization & Memory ?
3. Why Ethereum ?
4. What is a Smart Contract?
5. Initial use-cases for blockchains
6. Namecoin
7. Current use-cases

But before that, some background.

Last week I got a chance to hear Vitalik Buterin (cofounder of Ethereum)live at a keynote from 2nd seat from front. It was an eyeopener, and here in this blog post I I will try to summarize what Vitalik gave as a keynote address, starting from scratch to going all the way to new Metropolis release for ethereum

I must pay my thanks to meet up groups in Singapore which are so active and have democratized hosting events for entrepreneurs. For those interested in live keynote, link is here https://www.youtube.com/watch?v=v21FeQX32a8

What is Ethereum ?

A general purpose public blockChain.

What is BlockChain? In simple words BlockChain is a decentralized computer network with some kind of memory. This definition captures essence of Blockchain : “decentralization & memory”.

But note we had decentralized networks for last 20 yrs , before blockchains existed— BitTorrent.

Why Decentralization ?

• One can build system/networks/protocols that are fully open & public where everyone can participate.
• There is no single party privileged over other party ; or no single party that one has to trust
• Build cross-nationals; interglobal systems

Why is MEMORY important?

• Let’s say that I have $100 and I send $100 to a friend now.

<actual transaction>[sender] — —$100 — — — -> [receiver]

<fake transaction> [sender] — — $100— — — -> [receiver]

• If one can create another transaction that looks exactly like the first transaction, 2nd transaction broadcasts the exact copy of the exact same $100 to another friend. I broadcast both of these transactions. Yay I have $100 to $200.
• In reality if money works this way the dollar would hyper-inflate faster than Zimbabwe’s. To have a system of true transactions of money (or any kind of digital value) money as an inherently social thing to a greater extent to an extent that simple messages are not .
• When I send a $100 to you that is not something that just myself & recipients have to care about. Transaction is of concern to any other person using (in the entire community that uses that currency) that might end up receiving that those digital dollars in the future. Anyone else in this community needs to know that I no longer have these units of money and that the recipient now does have these units of money so this is why currency needs some memory.
• Another example of system which requires Memory , would be Domain name registration. One needs to know who was 1st registrar of say domain microsoft.com & also to prevent some future fraudulent user to claim same domain.So in order to have a stable online economy, we need some notion of memory.

So now we know why we need (1) decentralization (2) memory

So decentralization + memory = BlockChain

Why Ethereum?

Blockchains existed before ethereum, viz. bitcoins and namecoins (for p2p domain). One realized there were other applications where one would need both like

• to register other type of digital assets
• to exchange digital assets
• for smart contracts
• crowdfunding

So it became obvious that one doesn’t needs to have 1 blockChain for all applications or 1 blockchain for each applications.

We need a platform — which understands general programming language,

If one needs to have a specific block-chain, you can encode rules in a programming language and upload to Blockchain, and than any user in the world can interact with this application by sending TXn. So you have same platform for many applications, usecases and industries.

Ethereum simplified the complexity of building you own application (that req decentralization & memory to complexity of building entire n/w from scratch ) to writing applications and cliking upload.

Smart Contracts :

Nick Szabo created Smart Contracts, with an analogy of vending machine.

Nick Szabo (@NickSzabo4) | Twitter

“ a vending machine is a very ancient kind of smart contract, supposedly going all the way back to coin-operated holy water dispensers in Ptolemaic Egypt.”

You put in $$ = water comes out . If u try really hard, u break the m/c

Or if its broken vending m/c , for 1 $ u might get 3 bottles. [2]

So idea was to use of hardware, of enforcing physical agreements and bringing them to digital world.

In Physical world — attack is expensive but defense is cheap.

In digital world : defense is cheap , attack is expensive. {a message encrypted with key generated in few ms, will take years for NSA to decrypt}. So the idea was to bring this Digital lockboxes and use them to enforce these conditional agreements i.e. smart contracts .

You need some notion of digital cache which is trustless. So now we have blockChain — which gives form of money which is digital.

So now we have a form of value which is natively decentralized and
digital. We can create computer programs and we can create systems where the digital money itself can belong to computer programs and the computer programs might have conditions of rewarding digital dollars , if a user solves a particular problem.

Initial use-cases for Blockchains & Smartcontracts :

so that was the kind of what one of the original use cases that probably
motivated lot of interest in smart contracts and general-purpose blockchains .

The reason why general-purpose blockchains are such a good fit is because if you have a general-purpose programming language then you can write smart contracts with any kind of conditions. For example :

• to represent bounties for math problems
• bounties for computational tasks
• escrow agreements
• financial agreements like insurance systems
• Potentially decentralized autonomous organizations

We started to realize that general-purpose blockchains are useful for any kind of application that benefits from decentralization and having some notion of memory.

So the number of applications that people got interested in, started to grow. Probably the first two things that people got excited about Ethereum were

1. Smart contracts

2. Using it as a platform to build a decentralized domain name system

About Namecoin (which did decentralized DNS)

Dot-Bit: Secure Decentralized DNS

Now you might wonder we already had a blockchain that would do decentralized domain name systems a- called namecoin and namecoin did not really go anywhere. Part of the reason why namecoin did not really go anywhere is because there weren’t really many things that were attached to it it was just a system by itself and there was not much incentive to integrate.

If you have a decentralized DNS that sits inside of ethereum and this is an environment where lots of different applications are going to exist & talk to each other and there’s going to be lots of user who care about using decentralized applications(DApp) for various purposes now you have a stronger network effect and you have a stronger kind of breeding ground.

This ticked off ethereum and people continued to get interested in using ethereum for a lot of these different use cases many of which had quite little to do with money, viz

• Decentralized provable blockchain based voting
• Identity management
• Supply chain tracking
• Various kinds of digital assets that were not financial — Videogame tokens
• Recording information in the blockchain (eg ethereum based decentralized Twitter)

Once you start creating a general purpose platform then all of these things start happening on top of it it. After last couple of years we are at this tipping point where the mainstream is starting to realize that block chains actually work & are actually really useful for these kinds of things.

(to be continued in next post)

For those interested, this might make more sense

Reference

[1]https://www.youtube.com/watch?v=v21FeQX32a8

[2] http://unenumerated.blogspot.sg/2006/12/from-vending-machines-to-smart.html