Blockchain & Crypto

Prerequsities

Prerequsities

Blockchain Simulation

Main components

  • TPS - its too little
     
  • PoW - not eco-friendly
     
  • Hashrate - its too much (40EH/s)
     
  • Smart contracts - its too stupid

 

Bitcoin Misconceptions

  • Lightning Network
  • RSK, Liquid Network
  • Full nodes in the space
  • MAST - smart contracts can be split into their individual parts--> . benefits in terms of privacy, transaction size and allowing for larger smart contracts
  • Schnorr Sigs (replacing ECDSA) - aggregation of multiple sigs into one
  • Confidental Transactions (CT), Bulletproofs - hiding amounts transacted

 

Bitcoin Updates

  • Transition to Proof-of-Stake
  • Layer 2:
    • State Channels: are the most basic layer 2 technique (Spankchain, Funfair, Raiden)
    • Plasma:  a scaling technique where operations are moved off-chain into a secondary blockchain, where they can be performed faster and at lower cost.
  • While the roadmap has considerably firmed up, there are still unsolved problems in blockchain sharding

 

Ethereum Updates

  • Cutting edge, untested
     
  • 10 x more buggy code
     
  • Different logic than SW on centralized machines
     
  • Potentially unchangeable
     
  • Different platforms, limited interoperability
     
  • Ethereum seems to be so far the winner

Smart Contracts

- ERC721 standard

Decentraland— an open source virtual world platform with ownership of items on it being tracked as Ethereum based collectibles, pieces of land. You can buy MANA, the native currency of the platform and pieces of land that are ERC721.

NFTs

DEcentralised FInance

  • 0x/AirSwap -set of open smart contracts for exchange of Ethereum based tokens. Developers can leverage these tools to create ‘relayers, --> essentially application interfaces that allow users to trade in a decentralized manner.
    -->off-chain order books with on-chain settlement

     
  • Augur/Gnosis - decentralized prediction market around any event . --> ‘wisdom of the crowd’ --> great hedging tools. anyone can create a market for around $40 USD and trade outcome shares for a few dollars in fees --> global risk allocation much more efficient
     
  • dy/dx -  creation, issuance, and trading of decentralized derivatives for ERC20 tokens
     
  • {Set} Protocol - indexing and collateralized baskets of ERC20 tokens of ERC20 tokens
     
  • Dharma -  protocol for debt tokenization in form of ERC20 token. What this means is that anyone can leverage their development tools and smart contracts to originate, underwrite, issue, and administer debt agreements without a central third party.

 

 

DeFi

DAI 

  • Dai is simply a loan against Ethereum. Anyone can create Dai — all that’s needed is ETH and the technical know-how to use a decentralized app
  • Most users — 99.999+% — will never need to create Dai, nor understand how it’s created.
  • Dai is always worth $1 USD each
  • It can be freely traded like any other ERC20 token
  • Anyone with an Ethereum wallet can own, accept, and transfer it
  • It can be exchanged without any middleman
  • No individual person or company has control over it
  • No government or authority can shut it down
  • More: http://bit.ly/2S72pMF

DAI  - How

 

  • First, ETH is turned into “wrapped ETH” (WETH), which is simply an ERC20 wrapping around ETH. This “tokenizes” ETH so it can be used like any other ERC20 token.
     

  • Next, WETH is turned into “pooled ETH” (PETH), which means it joins a large pool of Ethereum that is the collateral for all Dai created.
     

  • Once you have PETH, you can create a “collateralized debt position” (CDP), which locks up your PETH and allows you to draw Dai against your collateral, which is PETH.

    As you draw out Dai, the ratio of debt in the CDP increases. There is a debt limit that sets a maximum amount of Dai you can draw against your CDP.

    Once you have Dai, you can spend or trade it freely like any other ERC20 token.

DAI - Why?

 

  • You need a loan, and have an asset (ETH) to use as collateral for your loan
     
  • You believe ETH is going up in value. You can use your CDP to buy ETH on margin — you lock up your ETH in a CDP, draw Dai against it, use the Dai to buy more ETH on an exchange, and then use that ETH to further increase the size of your CDP.
    --> without any third-party or centralized authority

     
  • The demand for Dai drives the price above $1 USD. When this occurs, you can create Dai then immediately sell it on an exchange for greater than $1 USD. This is essentially free money, and is one of the mechanisms the Maker system uses to keep Dai pegged to $1 USD. Dai being worth over $1 USD encourages more Dai to be created.

DAI - Peg Mechanism

 

  • If Dai < $1 USD, CDP owners can pay down their debt at a cheaper price! 

  • fe. CDP with $1000 in ETH --> draw out 500 Dai
    to close the position --> pay back 500 Dai (paying debt destroys Dai).
     

  • If Dai < $1 USD, then buy cheaper DAI (fe 0.99 USD) --> pay off debt with a 1% discount == free money — $500 loan (500 Dai) --> 500 Dai for $495 (0.99 * 500 = 495, a 1% discount)
     
  • --> demand for Dai increases its price, until it approaches $1 USD.
    If Dai stays below $1, CDP owners continue to pay down debt and remove Dai from the system.

  • --> When Dai goes above $1 USD, Dai is created to feed the demand. It is this push and pull, creation and destruction, supply and demand which ensures that Dai always matches the $1 USD peg.

     

Industry Applications

Alternatives to Blockchain?

  • Receipts - Auditable data does not need to be decentralized.

    Receipts + public key cryptography = record of what happened in a way that prevents each party from changing things around later

    - signed by the parties involved, plus some sort of third-party auditor is a much cheaper and faster way to add data integrity
     
  • Central Database with API
     
  • Backup service - $0.25/GB for bandwidth plus $0.25/GB/month for storage vs. 1 satoshi/byte or about $84,000/GB of storage

In fact, of the 231 PoCs Gartner reported on, only 14 have moved into a limited scale live-in production environment, reflecting the immaturity of the market we’re seeing today.

 

The same report estimates only 10% of these projects will make it to a fully-scaled business model by 2020. Given this predicament, it’s no surprise seeing enterprises employing stricter vetting processes and restricting spending on DLT projects overall.

 

https://www.gartner.com/doc/3869368/blockchain-trials-industries-market-transition

In March 2017 a group of 30 enterprises announced formation of Ethereum Enterprise Alliance, which has recently grown to more than 200 members, making it probably the largest blockchain consortium today.
 

EEA’s focus in bringing Ethereum to the enterprise environment, meaning moving from a public, permissionless to a private, permissioned setting, which means it will be easier to provide better support for privacy and performance. There are some plans to support anchoring on the public Ethereum network as a way to securely timestamp the chain state.

Ethereum Enterprise Alliance

Supply Chain

  • Digitize Supply Chain Process
  • Track the paper trails of shipping containers
  • Reduce time spent in transit and shipping process
  • Enhance transparency and security of product information exchanged between parties
  • Reduce costs and complexity
  • Improve stock management
  • Reduce fraud and errors on the quality of products

https://www.youtube.com/watch?v=tdhpYQCWnCw

  • Ease of Publication & Distribution Independent validation

  • Immutable Records - Digital fingerprints (hashes) of the individual certificates issued, are placed permanently in a blockchain transaction

  • Reduced time to issue Certificates

  • Costs of re-issuing certificates in the case the hard copy is lost are minimal

  • Ease and instant authentication by interested parties (e.g. employers) even if the application used or the institution’s website no longer exists. Operational costs minimized

Academic Certificates

https://block.co/

September 2018, fifteen of the world’s largest banking and commodity companies announced the formation of komgo - a global blockchain-based trade financing platform.

 

Collaboration between: ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Société Génerale
 

While using ETHEREUM, it will launch with two initial products: a KYC process and a Letters of Credit product.

 

https://media.consensys.net/enterprise-blockchain-for-trade-financing-c005ec8fa079

Trade Finance - Komgo

https://etherisc.com/

Insurance

Industry Applications - EU level

  • Official exchange of eDocuments by national administrations

  • Exchange of access to electronic health records

  • eID and cross-border authentication of people and companies

  • Traceability of foodstuffs and pharmaceutical products

  • Validation of academic qualifications

  • Exchange of criminal records at EU level

European Blockchain Services Infrastructure

*Registry of audit-related files (proposed by European Court of Auditors)

- based “ECA Registry” that provides beneficiaries of EU funds with a tool to systematically register audit-relevant documents (e.g. invoices, proof of payments, supporting documents, bids, etc.), thus creating a trusted, fully digital audit-trail. The ECA Registry acts as a notarisation service that leverages on the unique features of (public) blockchains: security, transparency and immutability of the data. The system allows to: record on blockchain(s) imprints (hashes) of documents, as well as their metadata; link together imprints; grant third parties, including EC and member States’ authorities, access to imprints, metadata and the underlying documents (which are stored off chain) in real-time instead of ex-post.

  • Legislatívne:
  • - Status kryptomien
  • - Daňové regulácie
  • - Status tokenov a spôsob ICO

Výzvy:

  • Technické:
  • - Škálovateľnosť
  • - Bezpečnosť
  • - Užívateľské prostredie

Sources:

Thank you!

www.stanceldavid.sk

Presentation:

https://slides.com/stancel/kpmg
 

Contact & Newsletter @

Text

Crypto a Blockchain

By David Stancel

Crypto a Blockchain

For KPMG

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