StudyDaddy Article Writing See the attached questions. and book 1)Create a new thread.As indicated above,create a new thread, choose a use case from section III, and a risk for adoption from section IV. Describe a real blockcha

See the attached questions. and book 1)Create a new thread.As indicated above,create a new thread, choose a use case from section III, and a risk for adoption from section IV. Describe a real blockcha

B l o c k C h a i n T e c h n o l o g y B e y o n d  B itc o in A b s tra c t A blockchain is essentially a distributed database of records or public ledger of alltransactions or                                 digitalevents that have been executed and shared am ong participating parties.Each transaction in                             the public ledger is verified by consensus ofa m ajority ofthe participants in the system .And,once                                     entered,inform ation can neverbe erased.The blockchain contains a certain and verifiable record of                               every single transaction ever m ade. Bitcoin, the decentralized peer­to­peer digitalcurrency, is the                           m ost popular exam ple that uses blockchain technology. The digitalcurrency bitcoin itself is highly                             controversialbutthe underlying blockchain technology has w orked flaw lessly and found w ide range of                             applications in both financial and non­financial w orld.     The m ain hypothesis is that the blockchain establishes a system of creating a ​distributed                             consensus ​in the digital online w orld. This allow s participating entities to know for certain that a                                 digital event happened by creating an irrefutable record in a public ledger. ​It opens the door for                                   developing a dem ocratic open and scalable digital econom y from a centralized one. There are                             trem endous opportunities in this disruptive technology and revolution in this space has just begun.     This w hite paperdescribes blockchain technology and som e com pelling specific applications in both                           financialand non­financialsector. W e then look atthe challenges ahead and business opportunities                             in this fundam ental technology that is all set to revolutionize our digital w orld.   2 Sutardja Center for Entrepreneurship & Technology Technical Report D ate: O ctober 16, 2015 A uthors M ichael C rosby, ​G oogle N achiappan, ​Y ahoo Pradhan Pattanayak,​ ​Y ahoo S anjeev V erm a, ​S am sung R esearch A m erica  Vignesh K alyanaram an,​ ​Fairchild S em iconductor This paper was created in an open classroom environment as part of a program within the Sutardja Center for                                       Entrepreneurship & Technologyand led byProf.Ikhlaq Sidhu atUC Berkeley. Thereshouldbenoproprietaryinformation                                     contained in thispaper.Noinformationcontainedinthispaperisintendedtoaffectorinfluencepublicrelationswithanyfirm                                           affiliated with any ofthe authors.The views represented are those ofthe authors alone and do notreflectthose ofthe                                             University of California Berkeley.  2 3 Sutardja Center for Entrepreneurship & Technology Technical Report In tro d u c tio n     A blockchain is essentially a distributed database of records or public ledger of all transactions or digital events that have been executed and shared am ong participating parties. Each transaction in the public ledger is verified by consensus of a m ajority of the participants in the system . And, once entered, inform ation can never be erased. The blockchain contains a certain and verifiable record of every single transaction ever m ade. To use a basic analogy, it is easy to steal a cookie from a cookie jar, kept in a secluded place than stealing the cookie from a cookie jar kept in a m arket place, being observed by thousands of people. Bitcoin is the m ost popular exam ple that is intrinsically tied to blockchain technology. It is also the m ost controversial one since it helps to enable a m ultibillion-dollar global m arket of anonym ous transactions w ithout any governm ental control. H ence it has to deal w ith a num ber of regulatory issues involving national governm ents and financial institutions. H ow ever, Blockchain technology itself is non-controversial and has w orked flaw lessly over the years and is being successfully applied to both financial and non-financial w orld applications. Last year, M arc Andreessen, the doyen of Silicon Valley’s capitalists, listed the blockchain ​distributed consensus m odel​ as the m ost im portant invention since the Internet itself. Johann Palychata from BN P Paribas w rote in the Quintessence m agazine that bitcoin’s blockchain, the softw are that allow s the digital currency to function should be considered as an invention like the steam or com bustion engine that has the potential to transform the w orld of finance and beyond. Current digital econom y is based on the reliance on a certain trusted authority. Our all online transactions rely on trusting som eone to tell us the truth— it can be an em ail service provider telling us that our em ail has been delivered; it can be a certification authority telling us that a certain digital certificate is trustw orthy; or it can be a social netw ork such as Facebook telling us that our posts regarding our life events have been shared only w ith our friends or it can be a bank telling us that our m oney has been delivered reliably to our dear ones in a rem ote country. The fact is that w e live our life precariously in the digital w orld by relying on a third entity for the security and privacy of our digital assets. The fact rem ains that these third party sources can be hacked, m anipulated or com prom ised. This is w here the blockchain technology com es handy. It has the potential to revolutionize the digital w orld by enabling ​a distributed consensus​ w here each and every online transaction, past and present, involving digital assets can be verified at any tim e in the future. It does this w ithout com prom ising the privacy of the digital assets and parties involved. The ​distributed consensus​ and anonym ity​ are tw o im portant characteristics of blockchain technology. 3 4 Sutardja Center for Entrepreneurship & Technology Technical Report The advantages of Blockchain technology outw eigh the regulatory issues and technical challenges. One key em erging use case of blockchain technology involves “​sm art contracts​”. Sm art contracts are basically com puter program s that can autom atically execute the term s of a contract. W hen a pre-configured condition in a sm art contract am ong participating entities is m et then the parties involved in a contractual agreem ent can be autom atically m ade paym ents as per the contract in a transparent m anner. Sm art Property​ is another related concept w hich is regarding controlling the ow nership of a property or asset via blockchain using Sm art Contracts. The property can be physical such as car, house, sm artphone etc. or it can be non-physical such as shares of a com pany. It should be noted here that even Bitcoin is not really a currency--Bitcoin is all about controlling the ow nership of m oney. Blockchain technology is finding applications in w ide range of areas— both ​financial​ and non-financial​. Financial​ institutions and banks no longer see blockchain technology as threat to traditional business m odels. The w orld’s biggest banks are in fact looking for opportunities in this area by doing research on innovative blockchain applications. In a recent interview Rain Lohm us of Estonia’s LH V bank told that they found Blockchain to be the m ost tested and secure for som e banking and finance related applications. N on-Financial​ applications opportunities are also endless. W e can envision putting proof of existence of all legal docum ents, health records, and loyalty paym ents in the m usic industry, notary, private securities and m arriage licenses in the blockchain. By storing the fingerprint of the digital asset instead of storing the digital asset itself, the anonym ity or privacy objective can be achieved. In this report, w e focus on the disruption that every industry in today’s digital econom y is facing today due to the em ergence of blockchain technology. Blockchain technology has potential to becom e the new engine of grow th in digital econom y w here w e are increasingly using Internet to conduct digital com m erce and share our personal data and life events. There are trem endous opportunities in this space and the revolution in this space has just begun. In this report w e focus on few key applications of Blockchain technology in the area of N otary, Insurance, private securities and few other interesting non-financial applications. W e begin by first describing som e history and the technology itself​.  S e c tio n  I: B lo c k C h a in  T e c h n o lo g y   1 . S h o rt H is to ry  o f B itc o in   4 5 Sutardja Center for Entrepreneurship & Technology Technical Report In year 2008, an individual or group w riting under the nam e of Satoshi N akam oto published a paper entitled “Bitcoin: A Peer-To-Peer Electronic Cash System ”. This paper described a peer-to-peer version of the electronic cash that w ould allow online paym ents to be sent directly from one party to another w ithout going through a financial institution. Bitcoin w as the first realization of this concept. N ow w ord cryptocurrencies is the label that is used to describe all netw orks and m edium s of exchange that uses cryptography to secure transactions-as against those system s w here the transactions are channeled through a centralized trusted entity. The author of the first paper w anted to rem ain anonym ous and hence no one know s Satoshi N akam oto to this day. A few m onths later, an open source program im plem enting the new protocol w as released that began w ith the Genesis block of 50 coins. Anyone can install this open source program and becom e part of the bitcoin peer-to-peer netw ork. It has grow n in popularity since then. – 2008 • August 18 Dom ain nam e "bitcoin.org" registered • October 31 Bitcoin design paper published • Novem ber 09 ​Bitcoin project registered at SourceForge.net – 2009 • January 3 Genesis block established at 18:15:05 GM T • January 9 Bitcoin v0.1 released and announced on the cryptography m ailing list • January 12 First Bitcoin transaction, in block 170 from Satoshi to Hal Finney The popularity of the Bitcoin has never ceased to increase since then. The underlying BlockChain technology is now finding new range of applications beyond finance. 2 . B lo c k c h a in  T e c h n o lo g y : H o w  d o e s  it w o rk ?   W e explain the concept of the blockchain by explaining how Bitcoin w orks since it is intrinsically linked to the Bitcoin. H ow ever, the blockchain technology is applicable to any digital asset transaction exchanged online. 5 6 Sutardja Center for Entrepreneurship & Technology Technical Report Figure 1. Traditional online financial transactions using third trusted party ( Banks, Paypal etc.). 1 Internet com m erce is exclusively tied to the financial institutions serving as the trusted third party w ho process and m ediate any electronic transaction. The role of trusted third party is to validate, safeguard and preserve transactions. A certain percentage of fraud is unavoidable in online transactions and that needs m ediation by financial transactions. This results in high transaction costs. Bitcoin uses cryptographic proof instead of the trust in the third party for tw o w illing parties to execute an online transaction over the Internet. Each transaction is protected through a digital signature. Each transaction is sent to the “public key” of the receiver digitally signed using the “private key” of the sender. In order to spend m oney, ow ner of the cryptocurrency needs to prove the ow nership of the “private key”. The entity receiving the digital currency verifies the digital signature –thus ow nership of corresponding “private key”--on the transaction using the “public key” of the sender. Each transaction is broadcast to every node in the Bitcoin netw ork and is then recorded in a public ledger after verification. Every single transaction needs to be verified for validity 1 http://w w w .coindesk.com /blockchain-lottery-m iners-rew arded/ 6 7 Sutardja Center for Entrepreneurship & Technology Technical Report before it is recorded in the public ledger. Verifying node needs to ensure tw o things before recording any transaction: 1. Spender ow ns the cryptocurrency— digital signature verification on the transaction. 2. Spender has sufficient cryptocurrency in his/her account: checking every transaction against spender’s account (“public key”) in the ledger to m ake sure that he/she has sufficient balance in his/her account. Figure 2. Financial Transactions using the Blockchain technology . 2 2 http://w w w .ft.com /intl/cm s/s/2/eb1f8256-7b4b-11e5-a1fe-567b37f80b64.htm l#axzz3qe4rV5dH 7 8 Sutardja Center for Entrepreneurship & Technology Technical Report H ow ever, there is question of m aintaining the order of these transactions that are broadcast to every other node in the Bitcoin peer-to-peer netw ork. The transactions do not com e in order in w hich they are generated and hence there is need for a system to m ake sure that double-spending of the cryptocurrency does not occur. Considering that the transactions are passed node by node through the Bitcoin netw ork, there is no guarantee that orders in w hich they are received at a node are the sam e order in w hich these transactions w ere generated. Figure 3. Double spending due to propagation delays in peer-to-peer network. This m eans that there is need to develop a m echanism so that the entire Bitcoin netw ork can agree regarding the order of transactions, w hich is a daunting task in a distributed system . 8 9 Sutardja Center for Entrepreneurship & Technology Technical Report Figure 4. Generation of Blockchain from unordered transactions. T he B itcoin solved this problem by a m echanism that is now popularly know n as B lockchain technology​. The Bitcoin system orders transactions by placing them in groups called blocks and then linking these blocks through w hat is called Blockchain. The transactions in one block are considered to have happened at the sam e tim e. These blocks are linked to each-other (like a chain) in a proper linear, chronological order w ith every block containing the hash of the previous block. There still rem ains one problem . Any node in the netw ork can collect unconfirm ed transactions and create a block and then broadcasts it to rest of the netw ork as a suggestion as to w hich block should be the next one in the blockchain. H ow does the netw ork decide w hich block should be next in the blockchain? There can be m ultiple blocks created by different nodes at the sam e tim e. O ne can’t rely on the order since blocks can arrive at different orders at different points in the netw ork. 9 10 Sutardja Center for Entrepreneurship & Technology Technical Report Bitcoin solves this problem by introducing a m athem atical puzzle: each block w ill be accepted in the blockchain provided it contains an answ er to a very special m athem atical problem . This is also know n as “proof of w ork”— node generating a block needs to prove that it has put enough com puting resources to solve a m athem atical puzzle. For instance, a node can be required to find a “nonce” w hich w hen hashed w ith transactions and hash of previous block produces a hash w ith certain num ber of leading zeros. The average effort required is exponential in the num ber of zero bits required but verification process is very sim ple and can be done by executing a single hash. Figure 5 M athem atical race to protect transactions-I. 3 This m athem atical puzzle is not trivial to solve and the com plexity of the problem can be adjusted so that on average it takes ten m inutes for a node in the Bitcoin netw ork to m ake a right guess and generate a block. There is very sm all probability that m ore than one block w ill be generated in the system at a given tim e. First node, to solve the problem , broadcasts the block to rest of the netw ork. O ccasionally, how ever, m ore than one block w ill be solved at the sam e tim e, leading to several possible branches. H ow ever, the m ath of solving is very com plicated and hence the blockchain quickly stabilizes, m eaning that every node is in 3 http://w w w .im ponderablethings.com /2013/07/how -bitcoin-w orks-under-hood.htm l 10 11 Sutardja Center for Entrepreneurship & Technology Technical Report agreem ent about the ordering of blocks a few back from the end of the chain. The nodes donating their com puting resources to solve the puzzle and generate block are called “m iner” nodes” and are financially aw arded for their efforts. Figure 6. M athem atical race to protect transactions-II 4 The netw ork only accepts the longest blockchain as the valid one. H ence, it is next to im possible for an attacker to introduce a fraudulent transaction since it has not only to generate a block by solving a m athem atical puzzle but it has to at the sam e tim e m athem atically race against the good nodes to generate all subsequent blocks in order for it m ake other nodes accept its transaction & block as the valid one. This job becom es even m ore difficult since blocks in the blockchain are linked cryptographically together. S e c tio n  II: E x is tin g  M a rk e t    Blockchain technology is finding applications in both financial and non-financial areas that traditionally relied on a third trusted online entity to validate and safeguard online transactions of digital assets. There w as another application “Sm art Contracts” that w as invented in year 1994 by N ick Szabo. It w as a great idea to autom atically execute contracts betw een participating parties. H ow ever, it did not find usage until the notion of crypto currencies or program m able 4 http://w w w .im ponderablethings.com /2013/07/how -bitcoin-w orks-under-hood.htm l 11 12 Sutardja Center for Entrepreneurship & Technology Technical Report paym ents cam e into existence. N ow tw o program s blockchain and sm art contract can w ork together to trigger paym ents w hen a preprogram m ed condition of a contractual agreem ent is triggered. Sm art Contracts are really the killer application of the cryptocurrency w orld. Sm art contracts are contracts w hich are autom atically enforced by com puter protocols. U sing blockchain technology it has becom e m uch m ore easier to register, verify and execute Sm art Contracts. O pen source com panies like ​Ethereum ​ and ​Codius​ are enabling Sm art Contracts using blockchain technology. M any com panies w hich operate on bitcoin and blockchain technologies are supporting Sm art Contracts. M any cases w here assets are transferred only on m eeting certain conditions w hich require Law yers to create a contract and Banks to provide Escrow service can be replaced by Sm art Contracts. Ethereum has created lot of excitem ent for its program m able platform capabilities. Ethereum allow s anyone to create their ow n cryptocurrency and use that to execute, pay for sm art contracts. Ethereum itself has its ow n cryptocurrency (ether) w hich is used to pay for the services. Ethereum is already pow ering w ide range of early applications in areas such as Governance, autonom ous banks, keyless access, crow dfunding, financial derivatives trading and settlem ent using sm art contracts. Also, there are a num ber of blockchains in existence to support w ide range of applications--not just cryptocurrency. Currently there are three approaches in Industry to support other applications and also to overcom e perceived lim itations of Bitcoin blockchain: A lternative B lockchains​ is a system of using the blockchain algorithm to achieve distributed consensus on a particular digital asset. They m ay share m iners w ith a parent netw ork such as Bitcoin’s--this is called m erged m ining. They have been suggested to im plem ent applications such as D N S, SSL certification authority, file storage and voting. Colored Coins​ is an open source protocol that describes class of m ethods for developers to create digital assets on top of Bitcoin blockchain by using its functionalities beyond digital currency. Sidechains​ are alternative blockchains w hich are backed by Bitcoins via Bitcoin contract--just as dollars and pounds used to be backed by Gold. O ne can possibly have a thousands of sidechains “pegged” to Bitcoin, all w ith different characteristics and purposes--all of them taking advantage of scarcity and resilience guaranteed by the Bitcoin blockchain. The Bitcoin blockchain can in turn iterate to support additional features for the experim ental sidechains--once they have been tried and tested. 12 13 Sutardja Center for Entrepreneurship & Technology Technical Report Com panies such as IBM , Sam sung, O verstock, Am azon, U BS, Citi, Ebay, Verizon W ireless to nam e a few are all exploring alternative and novel uses of the blockchain for their ow n applications. N ine of the w orld’s biggest banks including Barclays and Goldm an Sachs have recently ( Sept. 5 15, 2015) joined forces w ith the N ew York based financial technology firm R3 to create a fram ew ork for using the blockchain technology in the financial m arket. This is the first tim e banks have com e to w ork together to find applications of blockchain technology. Leading banks like JPM organ, State Street, U BS, Royal Bank O f Scotland, Credit Suisse, BBVA and Com m onw ealth Bank of Australia have joined this initiative. N ext, w e give a short description of w hat kind of interesting applications and projects innovative and visionary com panies are doing in this space.   S e c tio n  III:  A p p lic a tio n s  o f T e c h n o lo g y ­C o m p e llin g  U s e   C a s e s  in  b o th  F in a n c ia l a n d  N o n ­F in a n c ia l A re a s     1 . F in a n c ia l A p p lic a tio n s :  1.1. Private Securities It is very expensive to take a com pany public. A syndicate of banks m ust w ork to underw rite the deal and attract investors. The stock exchanges list com pany shares for secondary m arket to function securely w ith trades settling and clearing in a tim ely m anner. It is now theoretically possible for com panies to directly issue the shares via the blockchain. These shares can then be purchased and sold in a secondary m arket that sits on top of the blockchain. H ere are som e exam ples: N A SD A Q Private Equity: ​N ASD AQ launched its Private Equity Exchange in 2014 . This is 6 m eant to provide the key functionalities like Cap table and investor relationship m anagem ent for the the pre-IPO or private com panies. The current process of trading stocks in this exchange is inefficient and slow due to involvem ent of m ultiple 3rd parties. N ASD AQ has joined hands w ith a San Francisco based Start-up called chain.com to 7 im plem ent private equity exchange on top of BlockChain. Chain.com is im plem enting BlockChain based sm art contracts to im plem ent exchange functionality. This product is expected to be fast, traceable and efficient. 5 http://w w w .reuters.com /article/2015/09/15/us-banks-blockchain-idUSKCN0RF24M 20150915 6 https://w w w .nasdaqprivatem arket.com / 7 http://chain.com / 13 14 Sutardja Center for Entrepreneurship & Technology Technical Report M edici​ is being developed as a securities exchange that uses the Counterparty im plem entations of Bitcoin 2.0. The goal here is to create a cutting edge stock m arket. Counterparty is a protocol that im plem ents traditional financial instrum ents as the self-executing sm art contracts. These sm art contracts facilitate, verify or enforce the negotiation of contract and elim inate the need for a physical docum ent. This elim inates the need for an interm ediary, such as broker, exchange or bank. B lockstream ​is an open source project w ith focus on sidechains--interoperable blockchains--to avoid fragm entation, security and other issues related to alternative crypto-currencies. U ses can range from registering securities, such as stocks, bonds and derivatives, to securing bank balances and m ortgages. Coinsetter ​is a N ew York based bitcoin exchange. It is w orking on a Project H ighline, a m ethod of using the blockchain to settle and clear financial transactions in T+ 10 m inutes rather than the custom ary T+3 or T+2 days. A ugur ​is a decentralized prediction m arket that w ill allow users to buy and sell shares in anticipation of an event w ith the probability that a specific outcom es w ill occur. This can also be used to m ake financial and econom ic forecasts based on the “w isdom of crow ds”. B itshares ​are digital tokens that reside in the blockchain and reference specific assets such as currencies or com m odities. The Token holders m ay have the unique feature of earning interest on com m odities, such as gold, and oil, as w ell as dollars, euros and currency instrum ents. 1.2. Insurance Assets w hich can be uniquely identified by one or m ore identifiers w hich are difficult to destroy or replicate can be registered in blockchain. This can be used to verify ow nership of an asset and also trace the transaction history. Any property (physical or digital such as real estate, autom obiles, physical assets, laptops, other valuables) can potentially be registered in blockchain and the ow nership, transaction history can be validated by anyone, especially insurers. Everledger​ is a com pany w hich creates perm anent ledger of diam ond certification and the transaction history of the diam ond using blockchain. The characteristics w hich uniquely identify the diam ond such as height, w idth, w eight, depth, color etc are hashed and registered in the ledger. The verification of diam onds can be done by insurance com panies, law enforcem ent agencies, ow ners and claim ants. Everledger provides a sim ple to use w eb service API for looking at a diam ond, create/read/update claim s (by insurance com panies) and create/read/update police reports on diam onds. 14 15 Sutardja Center for Entrepreneurship & Technology Technical Report 2 . N o n ­F in a n c ia l A p p lic a tio n s :  2.1. N otary P ublic  Verifying authenticity of the docum ent can be done using blockchain and elim inates the need for centralized authority. The docum ent certification service helps in Proof of O w nership (w ho authored it), Proof of Existence (at a certain tim e) and Proof of Integrity (not tam pered) of the docum ents. Since it is counterfeit-proof and can be verified by independent third parties these services are legally binding. U sing blockchain for notarization secures the privacy of the docum ent and those w ho seek certification. By publishing proof of publication using cryptographic hashes of files into block chain takes the notary tim estam ping to new level. It also elim inates the need for expensive notarization fees and ineffective w ays of transferring docum ents. Stam pery​ is a com pany w hich can stam p em ail or any files using blockchain. It sim plifies certifying of em ails by just em ailing them to an em ail specifically created for each custom er. Law firm s are using Stam pery’s technology for a very cost effective w ay to certify docum ents. Viacoin is the one of the com panies w hich uses ​clearinghouse protocol​ for​ ​notary service​. Block N otary​ is an iO S app w hich helps you to create proof of existence of any content (photo, files, any m edia) using TestN et3 or Bitcoin netw ork. Crypto Public N otary ​ w hich uses Blockchain of Bitcoin to notarize docum ents by using trivial am ount of bitcoins to record the file’s checksum in public blockchain. Proof of Existence ​is another service w hich uses blockchain to SH A256 digest of the docum ent in bitcoin blockchain. Ascribe​ is another com pany w hich does authorship certification using blockchain. It also offers transfer of ow nership service w ith attribution to the original author. 2.2. A pplications of B lockchain in the M usic Industry The m usic industry has gone a big change in last decade due to the grow th of Internet and availability of a num ber of stream ing services over the Internet. It is im pacting everyone in the m usic industry-artists, labels, publishers, songw riters and stream ing service providers. The process by w hich m usic royalties are determ ined has alw ays been convoluted one, but the rise of the Internet has m ade it even m ore com plex giving rise to the dem and of transparency in the royalty paym ents by artists and songw riters. 15 16 Sutardja Center for Entrepreneurship & Technology Technical Report This is w here the blockchain can play a role by m aintaining a com prehensive, accurate distributed database of m usic rights ow nership inform ation in a public ledger. In addition to rights ow nership inform ation, the royalty split for each w ork, as determ ined by “sm art contracts” could be added to the database. The “sm art contracts” w ould define relationships betw een different stakeholders (addresses) and autom ate their interactions (see Appendix for m ore details). 2.3. D ecentralized proof of existence of docum ents Validating the existence or the possession of signed docum ents is very im portant in any legal solution. The traditional docum ent validation m odels rely on central authorities for storing and validating the docum ents, w hich present som e obvious security challenges. These m odels becom e even m ore difficult as the docum ents becom e older. The blockchain technology provides an alternative m odel to proof-of-existence and possession of legal docum ents. By leveraging the blockchain, a user can sim ply store the signature and tim estam p associated w ith a legal docum ent in the blockchain and validate it anytim e using native blockchain m echanism s. Proof of Existence ​is a sim ple service that allow s one to anonym ously and securely store online proof of existence of any docum ent. This service sim ply stores the cryptographic digest of the file, linked to the tim e in w hich a user subm its his/her docum ent. It is to be noted here that cryptographic digest or fingerprint--not the actual docum ent- is stored in blockchain, so user need not be w orried about the privacy aspect. This allow s then a user to later certify the existence of a docum ent that existed at a certain tim e. The m ajor advantages of this service is security and privacy that allow s a user to give decentralized proof of the docum ent that can’t be m odified by a third party. The existence of the docum ent is validated using blockchain that does not depend on a single centralized entity. Proof of Existence w ebservice is available at https://proofofexistence.com /​. 2.4. D ecentralized Storage Cloud file storage solutions such as D ropbox, Google D rive or O ne D rive are grow ing in popularity to store docum ents, photos, video and m usic files. D espite their 16 17 Sutardja Center for Entrepreneurship & Technology Technical Report popularity, cloud file storage solutions typically face challenges in areas such as security, privacy and data control. The m ajor issue is that one has to trust a third party w ith one’s confidential files. Storj ​provides a blockchain based peer-to-peer distributed cloud storage platform ( see Appendix for detailed description) that allow s users to transfer and share data w ithout relying on a third-party data provider. This allow s people to share unused internet bandw idth and spare disk space in their personal com puting devices to those looking to store large files in return for bitcoin based m icropaym ents. Absence of a central control elim inates m ost traditional data failures and outages, as w ell as significantly increasing security, privacy and data control. Storj platform depends upon a challenge algorithm to offer incentivization for users to properly participate in this netw ork. In this w ay, Storj platform can periodically cryptographically check the integrity and availability of a file, and offer direct rew ards to those m aintaining the file. H ere, bitcoin based m icropaym ents serve as both an incentive and paym ent w hile a separate blockchain is used as a datastore for file m etadata. 2.5. D ecentralized IoT The ​IO T ​ is increasingly becom ing popular technology in both the consum er and the enterprise space. A vast m ajority of IO T platform s are based on a centralized m odel in w hich as broker or hub controls the interaction betw een devices, H ow ever, this approach has becom e im practical for m any scenarios in w hich devices need to exchange data betw een them selves autonom ously. This specific requirem ent has lead to efforts tow ards decentralized IoT platform s. The blockchain technology facilitates the im plem entation of decentralized IoT platform s such as secured and trusted data exchange as w ell as record keeping. In such an architecture, the blockchain serves as the general ledger, keeping a trusted record of all the m essages exchanged betw een sm art devices in a decentralized IoT topology. IBM in partnership w ith Sam sung has developed a platform AD EPT (Autonom ous D ecentralized Peer To Peer Telem etry) that uses elem ents of the bitcoin’s underlying design to build a distributed netw ork of devices-a decentralized Internet of Things (IO T). AD EPT uses three protocols-BitTorrent ( file sharing), Ethereum ( Sm art Contracts) and TeleH ash ( Peer-To-Peer M essaging)-in the platform . 17 18 Sutardja Center for Entrepreneurship & Technology Technical Report Filam ent​ ​(see Appendix for details)is a startup that provides a decentralized IoT softw are stack that uses the bitcoin blockchain to enable devices to hold unique identities on a public ledger. 2.6. B lockChain based A nti-Counterfeit Solutions Counterfeiting is one of the biggest challenges in the m odern com m erce. It is one of the biggest challenge that digital com m erce w orld faces today. Existing solutions are based on reliance on trust on a third party trusted entity that introduces a logical friction betw een m erchants and consum ers. The blockchain technology w ith its decentralized im plem entation and security capabilities provide an alternative to existing anti-counterfeiting m echanism s. O ne can envision a scenario, in w hich brands, m erchants and m arketplaces are part of a blockchain netw ork w ith nodes storing inform ation to validate the authenticity of the products. W ith the use of this technology, stakeholders in the supply chain need not rely on a centralized entity for authenticity of the branded products. B lockV erify​ (​see Appendix for details)provides blockchain based anti-counterfeit solutions that introduce transparency to supply chains. It is finding applications in pharm aceutical, luxury item s, diam onds and electronics industries. 2.7. Internet A pplications N am ecoin​ is an alternative blockchain technology (w ith sm all variations) that is used to im plem ent decentralized version of D om ain N am e Server (D N S) that is resilient to censorship. Current D N S servers are controlled by governm ents and large corporations, and could abuse their pow er to censor, hijack, or spy on your Internet usage. U se of Blockchain technology m eans since D N S or phonebook of the Internet is m aintained in a decentralized m anner and every user can have the sam e phone book data on their com puter. Public K ey Infrastructure (PK I) technology is w idely used for centralized distribution and m anagem ent of digital certificates. Every device needs to have root certificate of the Certification Authority (CA) to verify digital signature. W hile PK I have been w idely deployed and incredibly successful, dependence on a CA m akes scalability an issue. 18 19 Sutardja Center for Entrepreneurship & Technology Technical Report The characteristics of the BlockChain can help address som e of the lim itations of the PK I by using K eyless Security Infrastructure (K SI). K SI uses cryptographic hash function, allow ing verification to rely only on the security of hash functions and the availability of a blockchain. S e c tio n  IV : R is k s  fo r A d o p tio n     BlockChain is a prom ising breakthrough technology. As w e described before, there are vast array of applications or problem s that can be solved using BlockChain based technology. That spans from Financial ( rem ittance to investm ent banking ) to non-financial applications like N otary services. M ost of these are radical innovations. As it happens w ith adoption w ith radical innovations, there are significant risks of adoption. Behavior change: Change is constant, but there is resistance to change. In the w orld of a non-tangible trusted third party, that BlockChain presents, custom ers need to get used to the fact that there electronic transactions are safe, secured and com plete. The present day interm ediaries like Visa or M astercard ( in case of a credit cards ) w ill also go through change roles and responsibility. W e envision that they w ill also invest and m ove their platform s to be BlockChain-based. They w ill continue to provide the custom er relationship kind of services. Scaling: Scaling of the current nascent services based on BlockChain presents a challenge. Im agine yourself executing a BlockChain transaction for the first tim e. You w ill have to go through dow nloading the entire set of existing BlockChains and validate before executing your first transaction. This m ay take hours or longer as the num ber of blocks increase exponentially. Bootstrapping: M oving the existing contracts or business docum ents/fram ew orks to the new BlockChain based m ethodology presents a significant set of m igration tasks that need to be executed. For exam ple in case of Real Estate ow nerships/liens, the existing docum ents lying in County or Escrow com panies need to be m igrated to the equivalent BlockChain form . This m ay involve tim e and cost. Governm ent Regulations: In the new w orld of BlockChain-based transactions, Governm ent agencies like FTC, SEC, etc m ay slow dow n the adoption by introducing new law s to m onitor and regulate the industry for com pliance. In U SA, this m ay in a w ay help adoption as these agencies carry custom er trust. In m ore controlled econom ies like in China, the adoption w ill face significant headw ind. 19 20 Sutardja Center for Entrepreneurship & Technology Technical Report Fraudulent Activities: Given the pseudonym ous nature of BlockChain transactions, coupled w ith ease of m oving valuables, the bad guys m ay m isuse this for fraudulent activities like m oney trafficking. That said, w ith enough regulations and technology support law enforcem ent agencies w ill be able to m onitor and prosecute them . Q uantum Com puting : The basis of BlockChain technology relies on the very fact that 8 it is m athem atically im possible for a single party to gam e the system due to lack of needed com pute pow er. But w ith the advent of Q uantum Com puters ( in future ), the cryptographic keys m ay be easy enough to crack through sheer brute force approach w ithin a reasonable tim e. This w ill bring the w hole system to its knee. The counter-argum ent w ould be for keys to becom e even stronger so that they m ay not be easy to crack. S e c tio n  V : C o rp o ra te  F u n d in g  &  In te re s t    In 2015, the bitcoin currency has reached yearly highs in both volum e and price over the course of Septem ber-O ctober. The digital currency is gaining traction both in the consum er m arketplace, as a tradeable security, and w ith regulators. It isn't just digital-currency enthusiasts that are bullish. Equity research firm W edbush expects it to rise to $600 because of the grow ing adoption. 8 ​http://w w w .m akeuseof.com /tag/quantum -com puters-end-cryptography/ 20 21 Sutardja Center for Entrepreneurship & Technology Technical Report Figure 7. Bitcoin price in 2015 . 9 This enthusiasm m ay be because of the large quantities of capital being injected into the digital infrastructure. Excitem ent grow s as Bitcoin and blockchain firm s have received a record U S$1 Billion in investm ents as the year com es to an end. Am erican Express, Bain Capital, D eloitte, Goldm an Sachs, M asterCard, the N ew York Life Insurance Com pany, the N ew York Stock Exchange -- all of them have poured m illions of dollars into Bitcoin firm s recently.    Corporate funding into Bitcoin & Blockchain infrastructure is grow ing and generating interest in several segm ents. N asdaq is tapping blockchain technology to create a m ore secure, efficient system to trade stocks. D ocuSign, a com pany that specializes in electronic contracts, just unveiled a joint idea w ith Visa to use blockchain to track car rentals and reduce paperw ork. M icrosoft w ill unveil details about its venture into "sm art contracts" that use blockchain technology. M eanw hile, this new obsession w ith blockchain technology has reached a point that com panies are even experim enting w ith creating sm aller, "private blockchains" inside their ow n offices. They hire com panies like BlockCypher, a startup out of Redw ood City, California to develop blockchain technology w ithin their business. Figure 8. VC funding in Sept/Oct 2015. 9 http://w w w .vox.com /technology/2015/10/31/9651168/bitcoin-grow ing 21 22 Sutardja Center for Entrepreneurship & Technology Technical Report S e c tio n  V I: C o n c lu s io n s   To conclude, Blockchain is the technology backbone of Bitcoin. The distributed ledger functionality coupled w ith security of BlockChain, m akes it very attractive technology to solve the current Financial as w ell as non-financial business problem s. As far as the technology is concerned, the cryptocurrency based tech is either in the dow nw ard slope of inflated expectations or in trough of disillusionm ent as show n in Figure 8 below . Figure 9. ​ Showing Cryptocurrencies in the trough of disillusionment in Gartner’s Hype Cycle . 10 10 http://w w w .gartner.com /new sroom /id/3114217 22 23 Sutardja Center for Entrepreneurship & Technology Technical Report There is enorm ous interest in BlockChain based business applications and hence num erous Start-ups w orking on them . The adoption definitely faces strong headw ind as described before. The large Financial institutions like Visa, M astercard, Banks, N ASD AQ , etc., are investing in exploring application of current business m odels on BlockChain. In fact, som e of them are searching for the new business m odels in the w orld of BlockChain. Som e w ould like to stay ahead of the curve in term s of transform ed regulatory environm ents of BlockChain. 11 To conclude, w e envision BlockChain to go through slow adoption due to the risks associated. M ost of the Startups w ill fail w ith few w inners. W e should be seeing significant adoption in a decade or tw o.     B ib lio g ra p h y 1. Bitcoin: A Peer-to_peer Electronic Cash System 2. Sm art Contracts: N ick Szabo 3. Form alizing and Securing Relationships on Public N etw orks: N ick Szabo 4. Introduction To Sm art Contracts 5. The U ltim ate List of Bitcoin and Blockchain W hite Papers 6. Bitcoin Tutorial 7. A Risk-Based View of W hy Banks are Experim enting w ith Bitcoin and the Block 8. Blockchain:The Inform ation Technology of The Future 9. Bitcoin 2.0 Applications 10.Beyond Bitcoin:How the Blockchain Can Pow er a N ew G eneration of Enterprise Softw are 11.Forget Bitcoin-W hat is the Blockchain and W hy Should You Care? 12.Alternative Blockchains: a. Alternative Blockchains b. Colored Coins c. Sidechains 13.Internet of Things: a. IBM and Sam sung Reveal Proof of Concept of Blockchain-Pow ered Internet of Things. b. ADEPT c. Filam ent 14.M usic: 11 ​http://risktech-forum.com/opinion/a-risk-based-view-of-why-banks-are-experimenting-with-bitcoin-and-the-block 23 24 Sutardja Center for Entrepreneurship & Technology Technical Report a. Fair M usic:Transparency and Paym ent Flow s in the M usic Industry b. Bitcoin For Rockstars c. Your Stream ing M usic Paym ents are G oing W here? d. PeerTracks e. U jo 15.Distributed Storage: a. How Blockchain Tech Could Revolutionize Data Storage b. Storj c. M etadisk 16.Q uantum Com puters: The End of Cryptography?       A p p e n d ix     A . B lo c k C h a in  fo r A n ti­C o u n te rfe it S o lu tio n :    B lockV erify​ ​provides blockchain based anti-counterfeit solutions that introduce transparency to supply chains. It is finding applications in pharm aceutical, luxury item s, diam onds and electronics industries. For exam ple, pharm aceutical industry can use BlockVerify anti-counterfeit solutions to prevent fake pharm aceuticals from entering the m arket. This addresses a big problem that affects both the econom y and people w ho need m edicine. Sim ilarly luxury good m anufacturers can use this technology to build system for verifying the authenticity of luxury goods providing a w in-w in situation for consum ers and m anufacturers of the luxury goods alike. D iam ond industry can use this technology to build trust in D iam ond certificates and prevent fraud. Electronics industry can use this technology to ensure that consum ers get genuine products. 24 25 Sutardja Center for Entrepreneurship & Technology Technical Report Any industry can use BlockVerify technology to define a process that its products go through to ensure their authenticity. This is how BlockVerify w orks: ● ​ ​Each product is labelled w ith a Block Verify tag. ● ​ ​Each product is validated and recorded in the BlockChain that prevents even com panies from counterfeiting their ow n goods. ● ​ ​Supply chain uses BlockChain technology to verify each product. ● ​ ​Retail locations can use m obile devices for verification to ensure genuineness of the goods received. ● ​ ​Sim ilarly a consum er buying the product can verify that the product is genuine and activate it. Each product has a recorded history perm anently recorded in the blockchain--allow ing everyone in the supply chain to authenticate the genuineness of the product. ChainLink ​is another anti-counterfeiting application that uses colored coins to prevent faked luxury goods, such as handbags and w atches, from entering the m arket. The service m akes secondary m arkets such as ​eB ay​ and ​Craigslist​ safer by adding a layer of trust.     B . B lo c k C h a in  in  Io T     Filam ent​ ​is a startup that provides a decentralized IoT softw are stack that uses the bitcoin blockchain to enable devices to hold unique identities on a public ledger. The goal here is to create a sm art device directory that w ould enable Filam ent IoT devices to securely com m unicate, execute sm art contracts and send m icrotransactions. Filam ent technology stack uses five layers-blocknam e, telehash, sm art contracts, pennybank and BitTorrent. Each device is equipped w ith the ability to handle com m unications on all five layers. U sing blocknam e, devices are able to create a unique identifiers w hich are stored in a part of the device’s em bedded chip and recorded on the blockchain. Telehash, in turn, provides end-to-end encrypted com m unications and BitTorrent enables the file sharing. 25 26 Sutardja Center for Entrepreneurship & Technology Technical Report Paym ents for the devices’ use is handled by sm art contracts, w hich allow s the term s of the paym ents and access to the device to be controlled program m atically. Filam ent uses a bitcoin-based protocol that it has developed called Pennybank for m icrotransactions on its platform , in part of unique need of IoT devices. IoT devices are not high pow er and they are not alw ays online, Pennybank creates escrow service betw een tw o IoT devices, allow ing them to settle transactions w hen they are connected online.       C . B lo c k C h a in  in  M u s ic  In d u s try : F a ir  M u s ic ­T ra n s p a re n c y  a n d  P a y m e n ts  F lo w  in  M u s ic   In d u s try     The m usic industry has gone a big change in last decade due to the grow th of Internet and availability of a num ber of stream ing services over the Internet. It is im pacting everyone in the m usic industry-artists, labels, publishers, songw riters and stream ing service providers. The process by w hich m usic royalties are determ ined has alw ays been convoluted one, but the rise of the Internet has m ade it even m ore com plex giving rise to the dem and of transparency in the royalty paym ents by artists and songw riters. The Rethink M usic initiative at the Berklee College of M usic’s Institute of Creative Entrepreneurship spent the last year exam ining the practices of the m usic industry in its report “Fair M usic Transparency and Paym ent Flow s in the M usic Industry”. According to this report 20% to 50% of m oney generated by stream ing services never goes back to those artists w hose songs w ere played. The relationships am ong rights, royalties, processes and participants are hopelessly com plex and outdated. The royalty paym ent distribution is overly com plicated-m oney only m akes it to artists and songw riters after passing through a num ber of interm ediaries, each w ith its ow n accounting processes, tim elines, fee structures, and reporting standards. This m eans that artists and songw riters are com pletely oblivious to their rights and how they are paid for their perform ances. 26 27 Sutardja Center for Entrepreneurship & Technology Technical Report A quick prim er: Every tim e a song is stream ed or played tw o types of royalties are paid. The larger chunk goes to the perform ing artist or, m ore precisely, to the com pany that ow ns the rights to those royalties, usually a record label. The other chunk goes to the songw riter or, again to the com pany controlling the rights. Stream ing service providers som etim es do not even m ake direct paym ents but rather rely on organizations that m anage royalties to large groups of copyright ow ners. A part of the royalty paym ents go to these interm ediaries. Figure 10. Royalty Paym ents in a stream ing service. Figure 10 show s the typical w ay that the royalties for a song stream ed on Apple M usic, Spotify, Tidal or a rival subscription service w ould be go the various stakeholders. It is even m ore com plicated than that. There can be deals betw een stream ing service providers and labels that artists and songw riters m ight be totally oblivious to. There is need in the m usic industry eco-system that tracks songs being played and various rights associated w ith each played song. Also, there is need to link this to a paym ent m ethod. M usic Industry basically needs sim plified rights ow nership 27 28 Sutardja Center for Entrepreneurship & Technology Technical Report inform ation: w ho m ade it and w ho ow ns the rights to it. Currently there is no central database available that keeps track of this inform ation regarding m usic. In reality, the inform ation about w ho did w hat on a given record alm ost alw ays exists in distributed databases that do not synch w ith each other. This is w here the blockchain can play a role by m aintaining a com prehensive, accurate distributed database of m usic rights ow nership inform ation in a public ledger. In addition to rights ow nership inform ation, the royalty split for each w ork, as determ ined by “sm art contracts” could be added to the database. For instance, each song, rights-holder, songw riter and payer w ould have its ow n unique address on the ledger. The “sm art contracts” w ould define relationships betw een different stakeholders (addresses) and autom ate their interactions. Each tim e a song is played, the m oney w ould be autom atically split am ong the stakeholders according to the set term s, and each stakeholder’s account w ould instantly reflect the additional revenue. “​PeerTracks​” and “​U jo​” are tw o startups in this space.  D . B lo c k C h a in  fo r D is trib u te d  S to ra g e     Cloud storage,as it exists today, operates through data providers serving as trusted third party. Figure 11 show s the traditional cloud based storage architecture to transfer and store the data through a trusted cloud service providers such as Google drive, D ropbox and O ne drive. They enforce industry standard redundancy policy by storing m ultiple copies of the data ( typically three copies). H ow ever, there is no standard w ay of doing end-to-end encryption and hence the traditional cloud based architecture is open to variety of security threats such as m alw are, m an-in-the m iddle attacks and application hacks that can expose sensitive and private consum er or corporate data.    28 29 Sutardja Center for Entrepreneurship & Technology Technical Report   Figure 11. Standard Cloud Based Storage  12       Figure 12. M etadisk Based Storage 13 The challenges of the traditional storage netw ork can be m et by im plem enting a peer-to-peer cloud storage netw ork providing end-to-end encryption, w here users can securely transfer and share data w ithout relying on a third party for security and reliability. It rem oves the reliability since there is no dependency on a third party and hence it elim inates traditional data failures and outages. M oreover, it significantly im proves the security and privacy of the data. Storj​ is a peer-to-peer cloud storage netw ork that uses ​M etaD isk​, a block-chain based decentralized file storage application. It addresses m any of the shortcom ings that w e find in a traditional cloud-based storage system . 12 https://github.com /Storj/w hitepapers/blob/m aster/m etadisk/M etadisk% 20W hitepaper.pdf 13 https://github.com /Storj/w hitepapers/blob/m aster/m etadisk/M etadisk% 20W hitepaper.pdf 29 30 Sutardja Center for Entrepreneurship & Technology Technical Report Figure 13. Visualizing the Sharding Process . 14 Storj netw ork allow s client-side encryption of the file, w here the user uses his/her private key to encrypt the file w hile storing it in Storj peer-to-peer netw ork. M etaD isk provides the interface through w hich a node can find available storage locations in the netw ork. It then transfers the file to at least three separate locations to achieve the industry standard redundancy. It is to be noted here that any user ( individual or enterprise) in the netw ork can lease his or her spare disk space and unused spare bandw idth. A user leasing his or her hard drive space to the netw ork is called farm er. The file is first split into a num ber of sm aller files or shards and then encrypted before transm itting them to the netw ork for storage ( see Figure 13). A hash is then com puted on encrypted file ( or shard)--w hich is then used as unique identifier and a w ay to detect file tam pering. Storj netw ork uses this to spot check the integrity of the file ( or shard) w ithout having to access them directly. Storj netw ork uses the blockchain to achieve consensus on file location and integrity. This inform ation is added as extra m etadata along w ith the standard transaction. The extra m etadata stored in the blockchain are file ( or shard) hash, the netw ork locations of the shards and M erkle roots (M erkle root is the hash of all the hashes of all the transactions in the block). There is alw ays an issue of bloating of blockchain w hen additional m etadata is added to the blockchain. M etaD isk paper discusses various optim ization and scaling m echanism s. 14 http://storj.io/storj.pdf 30 31 Sutardja Center for Entrepreneurship & Technology Technical Report Figure 14 M etadata Insertion in the Blockchain . 15 O ne interesting part of the Storj netw ork is that pricing of storage space is determ ined by the m arket--dem and and supply basis. Farm ers ( those leasing their resources) are able to set ask and client bids. Prices can also vary based on bandw idth, location and speed. For instance, a com m ercial server can charge m ore than a standard laptop or sm artphone. O ne of the problem in the standard peer-to-peer netw ork is insufficient num ber of peers. Storj solves this problem by paying farm ers through cryptocurrency (SJCX)for leasing their bandw idth and spare disk space. SJCX allow s users to pay for resources on the Storj netw ork through M etaD isk portals. The Storj softw are acts as an autonom ous agent setting the m arket price in SJCX increm ents of the resources leased. Storj softw are periodically offers participating farm ers for continuing to lease their resources. 15 http://storj.io/storj.pdf 31 32 Sutardja Center for Entrepreneurship & Technology Technical Report Figure 15. 100 GB of Data Storage for 1 Year, Full Utilization, Dark Blue: Storage Cost, Light Blue: Cost for Full Data Retrieval from M etaDisk 16 Figure 15 show s the saving that can be achieved by using M etaD isk over D ropbox ( $99/year for 100 GB for a year). In this exam ple, paper assum es VPS provider D igital O cean that charges $5/m onth for a 1 TB of transfer--$0.0049 per GB at full utilization. W ith M etaD isk, 100 GB of storage w ould cost a total of $1.47 ( 0.49 tim es 3) to store w ith 3 redundancy, and $0.49 to fully retrieve. By adopting a pay per usage, a user need not pay for the storage space they really do not need. Further, it has to be noted here that ongoing operating costs of a centralized data storage of m aintaining a data center-rent, em ployee costs, regulatory burden legal fees, etc. w ill rem ain fixed or increase year over year. This w ill lim it their ability to com pete w ith a decentralized m odel.                 16 https://github.com /Storj/w hitepapers/blob/m aster/m etadisk/M etadisk% 20W hitepaper.pdf 32 33 Sutardja Center for Entrepreneurship & Technology Technical Report E . B lo c k c h a in ’s  G ro w in g  P o p u la rity     1 . B itc o in  V e n tu re  c a p ita l in v e s tm e n ts  in  m illio n s   17 2 . B itc o in  is  in c re a s in g ly  b e c o m in g  in te rn a tio n a l 17 ​http://w w w .vox.com /technology/2015/10/31/9651168/bitcoin-grow ing 33 34 Sutardja Center for Entrepreneurship & Technology Technical Report 3 . M o re  B itc o in  T ra n s a c tio n s  T h a n  E v e r  34 35 Sutardja Center for Entrepreneurship & Technology Technical Report 35

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