THE BASICS OF BLOCKCHAIN Bettina Warburg, Bill Wagner PhD, and Tom Serres Copyright © 2019 Animal Ventures LLC All rights reserved.0 ISBN: 978-1-08-991944-5 1 2 Table of Contents Table of Contents About the Authors Bettina Warburg William Wagner, Ph. Tom Serres Acknowledgements Preface Chapter 1 – Blockchain Fundamentals Learning Objectives Let’s Get Going. A Foundational Change in Trade? Blockchain Fundamentals Defining Blockchain Elements of a Blockchain Qualities of Blockchains Blockchain and Economics Lowering Uncertainty in Trade Changing the Role of the Firm: A Nexus of Smart Contracts? Blockchain Technology The Origins of Bitcoin and Blockchain Types of Blockchains Evolving the Blockchain Stack Hurdles for Blockchain Adoption Business of Blockchain Use Cases Enterprise Blockchain Platforms Ethical and Other Issues with Blockchain Chapter Summary Key Terms Questions for Further Discussion Chapter 2 – The Technology Behind Blockchain Learning Objectives 3 Blockchain in Action –Are You Ready for a Blockchain Phone? Review of the Blockchain Technology Stack Monetizing the Blockchain Monetizing the Core Infrastructure Monetizing Middleware Monetizing the Decentralized Economy An Example: KoffeeKoin What is a Blockchain Wallet? Sorting Blocks Say Hello to My Little Friend –SHA-256! Rewarding Miners Consensus So, You Want to Be a Miner. Evolution of Mining Technology Mining Pools Cloud Mining Economics of Mining Can You Still Make Money with a Low-end Machine? Blockchain as a Service (BaaS) Information Technology Use Cases for Blockchain Storage IPFS Edge Computing Web 3.0 and Blockchain Obstacles in Blockchain Technology Sybil Attacks Key Management Scalability Dispute Resolution Updating and Governance Ethical and Other Issues with Blockchain Chapter Summary Key Terms Questions for Further Discussion 4 Chapter 3 – Bitcoin and Crypto-assets Learning Objectives Blockchain in Action –CryptoKitties?! What Are Crypto-assets? Cryptocurrencies Crypto-commodities Other Crypto-tokens What Are ICOs? Top Ten Cryptocurrencies by Market Capitalization Bitcoin Implications of Forks for Cryptocurrencies Altcoins Ethereum (ETH) Ripple (XRP) Bitcoin Cash (BCH) EOS (EOS) Litecoin (LTC) Cardano (ADA) Stellar / Chain (XLM) IOTA (MIOTA) Tronix (TRX) Up-and-Coming Cryptos to Watch Zcash (ZEC) Monero (XMR) Dfinity (DFN) Popular Cryptocurrency Scams FOMO-based ICOs Fake Exchanges Mining Pools Cybercrime and Cryptocurrencies What Makes a Good Token Project? Leadership Community Mission Security and Law 5 Exert Caution Digital Token Exchanges Coinbase Bitstamp Kraken Decentralized Exchanges OTC Crypto Exchanges Adoption Rate of Bitcoin Financial Modeling for Cryptocurrencies Blockchain Analytics Regulatory Considerations Ethical and Other Issues with Blockchain Chapter Summary Key Terms Questions for Further Discussion Chapter 4 – Ethereum and Smart Contracts Learning Objectives Blockchain in Action – Ethereum in Space Basics of Ethereum Ethereum Foundation Ethereum Virtual Machine (EVM) What is Ether? What is Gas? What Is a Smart Contract? History of Smart Contracts Roadmap of Ethereum Casper Plasma Governance On-chain Versus Off-chain Versus Side Chain? Mining Ethereum Ethereum Versus Bitcoin DAOs and DACs Ethical and Other Issues with Blockchain Chapter Summary Key Terms 6 Questions for Further Discussion Tutorial: Developing a Dapp for Ethereum Overview Running a Token Dapp Publishing and Using Your Token with MetaMask How to Write a Smart Contract Going Forward and Best Practices Chapter 5 – Project Management, Use Cases, and Hyperledger Learning Objectives Blockchain in Action – Making Giving Better Project Management: Developing a Use Case Identify a 10-Year, 5-Year, and 2-Year Vision Identify Beachhead(s) Map the Technical Ecosystem Develop a Hypothesis and KPI Sketch Out Prototype Ideas Project Management: Lifecycle for Dapps Do You Need a Blockchain? Evaluating Consensus Mechanisms Identifying a Suitable Blockchain Platform Design Architecture Configuring a Blockchain Application Building APIs Building Administrative and User Interfaces Testing and Scaling Roles in a Blockchain Project Blockchain Project Manager Blockchain Developer Blockchain Quality Engineer Blockchain Legal Consultant Blockchain Web/UI Designer Use Cases Cross-functional Blockchain Use Cases Blockchain for Identity Management 7 Blockchain Use Cases for Asset Tracking Blockchain for Internet of Things (IoT) Integration Functional Area Blockchain Use Cases for Business Finance Marketing/Sales Supply Chain Management (SCM) Accounting Use Cases for Human Resources Use Cases for Specific Industries Insurance Real Estate Healthcare Energy Ethical and Other Issues with Blockchain Chapter Summary Key Terms Questions for Further Discussion Tutorial: Introduction to Hyperledger and Interactive Example Overview Why Enterprise Blockchains? Technical Overview of Hyperledger Fabric Implementing a Textbook Marketplace in Hyperledger Final Remarks Chapter 6 – The Future of Blockchain Learning Objectives Blockchain in Action – Using Blockchain to Fight Fake News Blockchain in the Future Adoption of Blockchain Blockchain Maturity Models Barriers to Adoption The Continuing Evolution of Blockchain Scalability Regulatory Issues 8 Interoperability Issues The Next Wave of Decentralized Computing Blockchain Hardware Quantum-Resistant Blockchains Blockchain and AI What Is AI? Blockchain and Society Blockchain Revolution and Legal Services Blockchain and Government Blockchain and Globalization Blockchain: Job Killer or Opportunity Generator? Leadership in a Blockchain World Ethical and Other Issues with Blockchain Chapter Summary Key Terms Questions for Further Discussion Tutorial: AI and Blockchain Overview Interactive Example: Using AI to predict coffee sales Using the Contract Final Remarks Table of Figures Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Glossary 9 10 About the Authors Bettina Warburg Bettina Warburg is a Co-Founder and Managing Partner of Warburg Serres Investments, an early stage venture capital fund focused on the decentralization of trade and Blockchain Technology.
She is a Co-Founder and Managing Partner of Animal Ventures, an investment advisory firm that builds and invests in tech startups, educates executives, and designs new ways for Fortune 500 companies to commercialize and leverage emergent technologies. These emergent opportunities include technologies such as Blockchain, Artificial Intelligence, Additive Manufacturing, and the Internet of Things. Animal Ventures has extensive experience in industries such as food, pharmaceuticals, healthcare, trucking, shipping, logistics, online marketplaces, and fin-tech in and around the broader world of supply chain activities. She is one of the first speakers at TED to unpack the topic of blockchain, and her talk, “How the Blockchain will radically transform the economy,” has been seen by over 5 million people, making it the most viewed TED talk on the topic of Blockchain to date.
Bettina’s collaboration with Wired Magazine to help explain Blockchain at 5 levels of difficulty has also been seen by over 2 Million people. She was executive producer of a show called Tech on Politics which featured interviews with some of the greatest minds in technology, media, venture capital, and government. Discussions rove over the convergence of technology, politics, and government. 11 Bettina lectures each semester as an Adjunct Professor at the University of Texas School of Information in Austin, and is co- author of Asset Chains: The Cognitive, Friction-free, and Blockchain enabled Future of Supply Chains, as well as The Basics of Blockchain.
She has given talks at TED, Wired, IBM Think, VMWare, The Business Council, Credit Suisse Latin American Investment Conference, Smart Cities, Merck & Co’s Annual Technology Innovation Conference, The Skoll World Forum, Salzburg Global Seminar, San Francisco’s City Innovate Summit, and numerous other conferences and universities around the world. Bettina’s work has been cited in publications such as Wired Magazine, BBC News, The Atlantic, Center for Public Impact, ICMA.org, and the San Francisco Chronicle. Bettina received her MSc from Oxford University and BS from Georgetown University’s School of Foreign Service, and developed a keen interest in global governance and cultural diplomacy. 12 13 William Wagner, Ph.
Bill Wagner is Associate Chair of Accounting & Information Systems at Villanova University, and a researcher at Animal Ventures. He has been a professor of Information Systems at Villanova University since 1991. Bill received his Ph. in MIS from the University of Kentucky in 1992.
While at Villanova he has developed over 30 new MIS courses, including “Enterprise Systems”, “Mobile Application Development” and “Applied Artificial Intelligence. Wagner has also taught courses on Database Management, Enterprise Systems and Applications, CRM and Data Analytics, Big Data, Decision Support, and Applied AI. In 2004 he was identified as an “industry thought leader” by SAP. In 2015, Bill was the recipient of the Meyer award for Innovation, Creativity, and Entrepreneurship and was a co-winner of the 2011 Global Consortium of Entrepreneurship Center’s award for Excellence.
He is the coordinator for the SAP University Alliance and has helped many students get started in IT consulting careers. He has been involved in several startups and was CTO of a mobile application development firm. He has supervised dozens of graduate and undergraduate independent studies, and many of his students have successfully pursued advanced graduate degrees. Bill has received numerous awards including the Tonkinson Award for Innovative Curriculum, 2001, The Villanova Institute for Teaching and Learning grant for distant learning, 1999, The Villanova Summer Research Grant, 1999; The Carpenter Scholarship, The College of Business and Economics (MBA Program), The University of Kentucky, 1987, The Hagen Fellowship, The College of Arts and Sciences, University of 14 Kentucky, 1983, and was a Member of Agora Excavation Staff, Athens, Greece, 1981.
He has co-authored four books and over 35 journal articles in IT- related fields that have been published in top journals. 15 16 Tom Serres Tom Serres is a Co-Founder and Managing Partner of Warburg Serres Investments, an early stage venture capital fund focused on the decentralization of Trade and Blockchain Technology. He is a Co-Founder and Managing Partner of Animal Ventures, an investment advisory firm that builds and invests in tech startups, educates executives, and designs new ways for Fortune 500 companies to commercialize and leverage emergent technologies. These emergent opportunities include technologies such as Blockchain, Artificial Intelligence, Additive Manufacturing, and the Internet of Things.
Animal Ventures has extensive experience in industries such as food, pharmaceuticals, healthcare, trucking, shipping, logistics, online marketplaces, and fin-tech in and around the broader world of supply chain activities. Tom lectures each semester as an Adjunct Professor at the University of Texas School of Information in Austin, and is Co- Author of Asset Chains: The Cognitive, Friction-Free, and Blockchain-enabled Future of Supply Chains, as well as The Basics of Blockchain. He is an entrepreneur with experience and expertise in a wide variety of sectors. Prior to his brief deployment at the Boston Consulting Group, Tom started his first company, Rally — the largest political fundraising platform in the United States.
Rally garnered widespread attention for raising the largest online-only Series A funding round ever and was recognized as one of the most promising companies of 2013. While serving as Founder and CEO of Rally, Tom was named one of America’s Most Promising CEOs under 35 by Forbes. Tom previously hosted a show called Tech on Politics which featured interviews with some of the greatest minds in technology, 17 media, venture capital, and government. Discussions rove over the convergences of technology, politics, and government.
Tom attended the University of Texas at Austin McCombs School of Business, and is an occasional writer and speaker on these topics; he and his work can be found in such diverse outlets as Wired, CNN, Bloomberg, and CNBC. 18 19 Acknowledgements Learning to Unlearn In today’s fast-paced world of technological innovation, unlearning is as important as learning. To appreciate massive technological shifts occurring in the world, sometimes you have to unlearn the old to adopt the new. Blockchain and its impact on the decentralization of our economy is no different.
This book will provide you with some of the early building blocks to dive in head first – allowing you to lose yourself in the rabbit hole many of us have come to love. Take the red pill, and we’ll show you how deep the rabbit hole goes! We have been navigating the world of blockchain, the decentralized economy, the future of supply chain, and industry 4.0 for almost a decade. During that journey, we have met a number of people that have helped shape our vision of the future and inspired our continued efforts. The following names are in no particular order and is likely not an exhaustive list of the people that drove us to dedicate several years toward the creation of this textbook.
It’s important to note, that this textbook is just the beginning. It is version 1.0, and likely the first of many iterations.