The Benefits of Blockchain | Jack Saba

So 21 million Bitcoin supply and demand, this is really interesting. So who here has ever downloaded a song illegally?

Yeah.

Right? So the issue is that you can duplicate assets on the internet. And so that's fine for music, not if you're the producer, but it's fine for music. It's not OK if you want to ensure that something has value and that you send something across the internet. And so this network was the first time online that you could guarantee that you're sending value to someone, it's going to be final, the transaction's final so it can't be taken back, and it's guaranteed to be valid. So this was really the big innovation. What the Bitcoin network provided us was an efficient way to transfer money. It's an immutable record system, so the transactions can't be changed once you have it. It is somewhat anonymous, because when I send money it's not Jack Saba sending this money, It's a long string of numbers that represent my account. And it's transparent. All transactions that have happened on the Bitcoin network can be searched. So these core principles are what everyone looked at and they said, this is really interesting, and let's see where this goes. So there's no company that owns Bitcoin. It is a decentralized network that was created by an anonymous author. So in 2008, they released the white paper. And it laid out the principles of how the network would operate and what it would do and what the rules were for engagement. It really lived in the corners of the internet. There was kind of like the cypherpunks that enjoyed it, and then it was used on the Silk Road to buy drugs and guns and all these things, and then libertarians kind of found it, and they loved it because no government needed to control the currency, no bank needed to touch it, it was their property, their own, and it started to come out of the corners of the internet. in early 2003, it passed $100 and then $1,000 that same year. Around 2015, institutions started to look at the technology. They said Bitcoin's whatever, you know, it's this online thing to do this illegal stuff, I don't know that I like that, but the underlying principle, the underlying technology and these principles of immutability and efficient transactions in a trustless network, that's really interesting. So in 2015, The big institutions started to take a look at this, because what they saw was that it's secure and redundant. So not only is it really hard to change information that's been added to it, if your database is eliminated, you just have to get it up and running and then download the transactions again, because it already exists everywhere. So it's secure and redundant. Trustless engagement and consensus. So I can send money to someone that I do not know, and if they receive that money, they can have the assurance that that is theirs now. It can't be taken back from them. They don't need to trust me, they need to trust the network that they've received what they have. And consensus is the agreement on what's happened. Smart contracts, these are so cool. So these are business logic hardcoded into the blockchain. So just if-then statements that execute without anybody's input. So an example of that would be, Free onboard shipping. So if I have a container coming from China to San Francisco and the terms of the agreement are when it lands in San Francisco I pay the vendor, instead of having to go through the process of receiving it, filing the paperwork, sending the money, you can have a smart contract that when it is scanned at the port the value is sent to the company. So it's an if-then statement. If received then send money. And it's all done without the human touch and it's all done in these contracts that self-execute. Any questions on that? Yes.

Are these contracts that self-execute added onto the blockchain along with the numbers that are guessed by the computers?

So they are on the Ethereum network. So you have Bitcoin and Ethereum, and on the Ethereum network they're hardcoded into the blockchain. And so if an input comes through, it just hits it and then it validates it and it sends the money. So the process of mining validates transactions, Smart contracts live within the blockchain and are just self-executed. So 2 slightly different things. Pardon me? Not necessarily. In the age of IoT, you're going to be able to have— you can use these smart contracts so that devices can just communicate directly with each other. So the input does not have to be human. Yeah.

Or whatever, you can't change it once it's done?

You can— so in an enterprise environment, you would be able to make updates to it and new agreements with it. But it is hardcoded. And so if it was something significant, you wouldn't be able to. But that also means that if a bad actor wanted to come along and say, if this $5 million worth of goods received, don't send it to that account, send it to this account, they wouldn't be able to. So you need to have agreement on how things change.

What happens with these smart contracts in countries like— I'm from Argentina, so if you import something into the country, the government has to know about it. Like, what's the truth of it then?

So you wouldn't be able to do this— so a lot of technocrats, a lot of people that love this technology think that this can completely exist outside of government control or government oversight, which is just not practical. So this would be something where it would make the government's job easier. Because they would be able to see the transaction and they would know that, okay, this was actually a $5 million transaction and you reported $2 million, we can now get you for fraud on something like that. So it creates more transparency into the involvement. Yes?

You mentioned security up there, what if you had someone go into the network, mimic other nodes, and try to corrupt the system?

So you would need 50% of the network power in order to do that, which means that it's possible, but with something like Bitcoin, for example, It would require a military-grade budget in order to do it. So it's possible, it's just very, very difficult. Yeah?

Since the difficulty is increasing day by day, people are gathering together on pools to mine, so it somehow affects the distribution.

Yes, it does. It centralizes the distribution.

If you have 2 pools in control, so you can make Maybe do something wrong.

You could, and then what would happen is they would act in malice, and then the rest of the community would say, you're now controlling the network, we're going somewhere else. So it's multiple stakeholders, this kind of game theory where people have different reasons for participating, but we're all going towards the same end goal, and if someone acts poorly, you can then just move somewhere else and bring the value with you.

Yes? So what's hard coding to blockchain?

So we'll get into it a little bit, but Bitcoin's network, if I wanted to add like a document or something, I would just hash the information to it, right? It would live in my database and then I would put a pointer to it. Ethereum is much more flexible. Bitcoin's very rigid, hard to work with. Ethereum's very flexible, and so you can actually create smart contracts that operate in the network. So it's a difference between adding information to it And operating within it.

Oh, so smart contracts are going to be in the form of coding? Yes.

So it's business logic hardcoded into the contract.

Conditions.

Say it again?

Conditions.

Yeah, exactly. And so the last thing it gives us is digital scarcity, is what we talked about with the music. So before, you could duplicate things. But now, because the way that you send money is— for example, on Bitcoin, the way you send money is I have a public address, that people can see, but I have a private key and that's my signature, and without that you can't transfer the value. So what you have is a guaranteed way to have one asset, one owner. You have not been able to do that on the internet before.

Yes? Is that the same as a bank account?

Not necessarily, because in a bank account you can get hacked and like all these different things and you need a central— it is, you're right, it's similar to a bank account, but the model around it is different. that relies on central authorities, which then rely on trusted third parties, this is what you're doing, you're doing this in a decentralized way. So on the internet, you couldn't represent one asset, whether that asset is a skin in a game, a representation of a share, or anything else, in a way without third parties. So now you can do it in a completely peer-to-peer network in a way that guarantees it to be secure. Yeah. So you're saying that the blockchain is a way to Why can't someone hack your ID key? They can. Like I recently was hacked and that sucked. So they went into the T-Mobile and they took a fake ID that had my name on it and they said, I'm moving my cell phone number from this phone to that phone. And then so all my 2-factor authentications got taken. So you can't, so the tech, like the blockchain can't be manipulated very easily, But you have other security risks you need to worry about.