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cool welcome welcome to day five the
final day of Devcon it has been an
incredible week we've gone deep into the
ethereum platform seen exactly what daps
are capable of I don't even think think
the beginning of that and today we start
off with a very special presentation by
Nick Zabo uh he is a blockchain Pioneer
and he is here to present on the history
of the
blockchain thank
you thank
you thank you so yeah I'm talk about
smart contracts and ethereum good
morning city of London ethereum
Developers
so I'm going to start off talking about
the origins of some of these ideas some
of the philosophical Origins um to left
here we have a ran to the right
Frederick kayak who had um were big um
political and philosophical Inspirations
to the cipher punks where many of these
ideas came out of and in uh so IR ran uh
I've never finished one of her books but
she was very influential nevertheless um
um she came up with the idea of gulz
Gulch which is a place you could um form
your own Independent Community and um
declare your independence from corrupt
institutions and society and pretty much
a complete fantasy when she wrote it
based on fake physics and stuff but um
Tim May who is in fact a physicist um
worked for Intel studying the um how to
prevent their protect their chips from
radiation um came up with the idea of
Gul Gul and cyberspace and kind of Ideal
to shoot for and
so
another and basically cryptography in
the cipher punks movement protect
yourself with cryptography that would be
your
Shield um and Frederick kayak another
big influence on us was uh said not so
fast he had studied the basis the
protocol layer underlying Society
underlying free market which we champion
and property contracts and if you go to
law school you'll study these in your
first year of law school property
contracts
Etc and all that requires security so we
wanted to apply computer science apply
the new technology take advantage of
Mo's law to uh minimize vulnerability to
strangers maximize security and solve am
and in doing so solve ambitious problems
of uh the haki in nature such as uh
privatize money and non-violently
enforce property and
contracts and so that is the where ideas
like smart contracts the first
blockchain designs and the first
cryptocurrency designs came out
of and if you wanted to sum that up in
all one thing it's try to secure as much
as possible so with cryptography
traditional cryptography you're just
trying to secure one narrow thing you
have communications and you're trying to
secure it from a third party you can't
really secure it from the party you're
talking to if they forward your email
doesn't matter how well your email is
encrypted um so it's try encryption
traditional encryption is trying to to
uh solve one narrow problem but now we
have the opportunity well let's let's go
back so now we have the opportunity with
ethereum um well let me go back so David
chman digital cash expanded this and
said let's let's apply this to money
let's try to make money the transfer of
money
private and so he solved a privacy
problem although the banks didn't like
that so it wasn't taken up but he had a
technical solution for solving the
Privacy problem what he didn't solve was
this problem right here and that is a
centralization problem and so there was
a bunch of digital cash startups David
Shams being among them that that they
either failed or they became Central Iz
systems like like
PayPal because we didn't know how to do
decentralization at that
point but
um
so so coming out of those experiences we
we we we expanded our definition of
security and we realized there were a
lot of bad assumptions being made in
security at that time one of the big
ones being The Trusted third party the
certificate Authority in an encryption
system is a classic example of a trusted
third party that got introduced and
pretty quickly they became D usurp at
the height of the internet bubble um
verason which basically specialized in
being a certificate Authority was worth
tens of billions of dollars just on that
basis alone that they own this
bottleneck in in a in the system of
cryptography um securing the Internet
it's it's gotten a little more broken up
now but it's still a
bottleneck as it's the domain name
system um and you can go back farther in
history
and see that um in industrial era around
the turn of the century 1900 early 1900s
we had a lot of very
centralized security Tech or a lot of
centralized industrial technology so
radio was centralized um
broadcast um railroads especially
railroad stations very centralized and
newspapers this is a picture of an old
steam press here or it could be a steam
press or run by diesel but the point is
a large large scale manufactur just a
few newspapers per per City or even per
country and that's and so when the
Communist came along Mr Vladimir Lenin
there um they had some mutinous soldiers
they had actually had some workers as
well but mostly they had mutinous
soldiers and they only had to take over
a few Urban places to get a strangle
hold in society the railroad stations
the handful of radio stations and the
handful of newspapers and they had
control over
Society um and physical wealth has not
necessarily been very secure either so
the Aztecs um compelled tribute from
tribes in in gold and amassed gold the
uh Spanish looted the Aztec gold Sir
Francis Drake there on the right um and
other English Pirates looted their goal
Jump Ahead in history from the Spanish
Jump Ahead in history a little bit and
the end of the gold standard part of the
end of the gold standard the part the
economists don't tell you because it it
violates their assumptions of voluntary
transactions is the German OTS during
World War One and World War II are
sending significant fractions of Allied
and especially British boats to the
bottom of the ocean so B British stopped
being able to transport gold if you look
at the gold standard the way the the
trust works and a gold standard anybody
needs to be able to up to a gold window
and C cash in their Bank notes for gold
and because they couldn't transport gold
around during the war that was one of
the reasons the gold standard collapsed
and then to the bottom right here we
have Franklin Roosevelt who confiscated
gold in the
US and I didn't put a picture of an
x-ray machine here but in in modern
times gold is even less secure now so
that that Bitcoin and ethereum is
cryptocurrencies really um are superior
to that now so so we did with we said
let's take decentralization per computer
science is much more automated and
secure so if we take um an ethereum
blockchain um and put
some smart contracts on it the sub it's
only substitute in any given case for a
small fraction of what these guys on the
left the guys on the left the armies of
accountants the armies of uh
investigators police officers the armies
of
lawyers um in any given case there only
going to substitute for a small fraction
but the cost savings is so high that
those those particular applications are
going to be pretty
compelling and especially cross cross
National borders places because um in
insecurity and just about all it right
now is very insecure no matter what the
security people tell you there's hacks
happening all the time this is the
latest JP Morgan hack um identity theft
um and what they had to do they had to
have a strong partnership with law
enforc enforcement the security isn't
the protocol itself it is the police
officers in traditional Finance it is
law enforcement the accountants the
investigators and lawyers so that's the
reason big one of the big reasons that
traditional Finance is stuck inside its
National silos and it's highly
regulated
so um cryptocurrency and in particular
today ethereum helps solve that so
through decentral
and I'll talk a little bit here about
what kind of decentralization is good so
if you think of traditional Finance has
thing called separation of Duties and
one of the crucial things important in
separation of Duties is that the people
that are separated you need several
people to perform a task to get it done
so in that sense broad sense it's like
um
ethereum um but you want independence
you want each of the nodes to be
independent as possible
so one crude measure you can do is how
many nodes we have um like four about
nearly 400 nodes here for
ethereum um but the actually more
important thing to look at is look on
the map and see the diversity you've got
um a node there in the middle of the
Indian Ocean that's really good you got
Singapore you've
got somewhere near Vietnam there those
those are the best nodes because those
those are most likely to be the the more
likely to be the independent
nodes and there's all sorts of other
ways you can estimate Independence too
but but the point is the the the actual
sheer number of nodes is just a proxy
measure of of something more important
below
that so to get to Smart contracts there
are two ways people talk about smart
contracts they're both valid um the way
ethereum talks about it is Long Live
just as sometimes a synonym for Long
Live process a contractor distributed
app the original and still quite
meaningful definition of smart contract
is it acts like a contract um there's
automated performance there's
verification it's it's doing the
function of of a contract or it's
analogous to what a contract would do so
typically in a smart contract of that
kind you have two parties or you have
one party in the blockchain something
like
that so now there's a strong distinction
to be made between dry code smart
contracts and wet code traditional
law so
I can go over it here there's
uh laws based on our minds our wetwear
um it's based on
anology um software TS the ground on
Boolean logic bits um hard
mathematics um the security um of law is
based on the ultimate threat of ction
that you're going to go to imprisonment
if you violate a court order to pay
somebody even in a civil lawsuit you
could get charged with contempt and go
to prison so that's ultimately what the
security of of wet
law grounds down on and for software for
blockchains it grounds down on the
replication of the blockchain and on
cryptography
so and the law is more flexible software
is more rigid
um and an area the law as I've said
tends to be bashed in jurisdictional
silos um software tends to be
independent grow seamlessly cross border
lawsuits are very expensive especially
if they're cross border um the software
can get very very cheap once you
amortise the capital costs so now I'm
going to talk about a couple some
applications um that that interest me
that don't necessarily wiely get talked
about
so back in the day back um when writing
was first
invented um seals were were a really big
deal if you go into the archaeological
layers you'll find a lot of these this
is a seal of of King Darius of Persia
but they're Al also very commonly used
for commercial
transactions um You' take your seal and
you'd rub it on the clay and that would
be your signature and it would also
provide tamper
evidence so
today so today seals um are still widely
used they're very important um they tend
to go along with recording serial
numbers you'll seal something up seal up
a door seal up an Evidence bag um and so
forth and write down the number and you
get a log of what's there and you can go
back and and verify things haven't been
tampered with um now the blockchain
could help quite significantly here um
instead of keeping an insecure offline
log or or an even more insecure online
log without the
blockchain um you keep your log online
you can keep it as as ongoing hashes and
also as the
descriptions of the evidence what's in
the evidence bag itself if you want to
use that for
further smart contracts processing and
that's a general pattern that's good in
ethereum is that you put the proof of
evidence on the blockchain for taking
physical stuff and reflecting on
blockchain you want to put the proof of
evidence on the blockchain but you also
want to have semantic information for um
contract code to be able to play
with and you can do this with physical
spaces as well
and this is a scheme I came up with um
guess over a decade ago now uh for smart
property and I call it propl lets you
can Google that online if you like um
and basically what Propet do is they
look to the blockchain to see who owns
them um they're kind of like a SIM card
and that they and and the electronics on
your smartphone that they know where
they're at they
know um things they can sense in the
environment but the main thing they know
is who owns them and what the
instructions are that they are to
follow and one of the applications of
this is the auto repo auto or more
generally the auto repo collateral
where um if you use your physical device
is security for a loan then that can get
automatically repossessed and that that
allows credit to be um much more
efficiently
used so there was for example an
offshore rig that cost tens of billions
of dollars an offshore facility uses
collateral in a big business deal but
since the the creditors did not actually
have a way to gain physical control over
it um they're out of luck and they're
out of out tens of billions of dollars
so they can't actually repossess the
collateral right now whereas if they had
these devices they
could
so current project I'm currently working
on it's very fun um Financial assets on
the blockchain so the first generation
which I invented in 1998 is the trust
minimize tokens so you trust minimize a
transfer of uh tokens from one person to
another I call these secure property
titles the most common name they're
called now as colored coins and they
trust to minimize again it's it's it's
securing a particular thing it's
securing the transfer of ownership of a
thing but there's other things and even
more important things you want to secure
with financial assets and so the second
generation
is trust minimizing the cash flows
that's that's what you really want your
financial assets you want the dividends
the coupons Etc so um that's what I'm
working on now my partner Donald
McIntyre and this is another cool one I
recently worked on um this is social
networks plus ethereum so blockchains
are back office technology you don't see
them directly um in ethereum you have
missed um as a wallet cross browser to
allow you to interact directly but this
is another interesting um way you could
interact with blockchains and that is
through social networks and so tip Bots
are very are a very simple example of
this now this is an architecture I
designed for more decentralized version
of tip Bots that can do more than more
than tipping more than paying you can
actually do some smart contract stuff
initiated from a social
network and you start off with um
largely in the traditional web space
linking your social Network accounts
together and then you use them to
uh once you do that you can instruct
from The Social Network the payments
swaps other smart contract
things and so in summary let's try to
think about security more broadly
instead of thinking narrowly we
encryption is security and and nothing
else is or transfer of tokens as
security and nothing else is let's try
to secure everything let's try to
protect everything is important to us as
much as we
can and not like this
though let's do it like this with
ethereum thank you very
[Applause]
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much