Bitcoin Blockchain technology. Mihail Nikulin, Co-founder & CTO, Lykke

Transcription

1 Bitcoin Blockchain technology Mihail Nikulin, Co-founder & CTO, Lykke

2 What is money?

3 Copy protection consensus

4 Consensus based on top of proof of existence

5 Mining is burning electricity

6 Colored Coins BTC/ETH/Some tokens Colored coins/some tokens Issuer undefined Companies, Individuals Issuance limit limited Unlimited Price Defined by market Linked to the real asset Market risk Yes No Counterparty risk No (???) Issuer Protocol risk Miners/Smartcontract Counterparties/Smartcontract

7 Any centralized service is to be hacked

8 MultiSig wallet is needed

9 MultiSig wallets Multisignature wallets are used to deposit client s coins. The exchange does not take possession of the traded coins. 2-of-2 Multisig address requires two signature to spend coins from it: Client s signature Exchange signature Client 2-of -2 Multisig wallet Client + Exchange Exchange

10 MultiSig wallets advantages MultiSig wallet provides the following advantages: Coins flow control Exchange signature required for each transaction Client identification (KYC) registered clients only are allowed to trade Coins safety even if exchange is compromised clients will not lose their coins

11 MultiSig wallets refunds To guarantee funds recovery from the MultiSig wallet Exchange provides offchain «refund transaction» Client 2-of -2 Multisig wallet Client + Exchange Exchange Refund Offchain transaction nlocktime=31d Refund transaction can be broadcasted after 31 days

12 Bitcoin Scaling Issues 1 Mb blocks: 7 transactions per second (250 bytes/transaction) 220 mln transaction per year(!) Not enough for city, let alone the world

13 Bitcoin Scaling Issues 1 Billion transaction per day requires: 1.6 GB blocks 87 Tb/Year Centralization (!) 1 Billion people doing 2 transaction per day: 24 GB block 3.5 Tb/Day 1.27 Pb/Year Bigger block = Centralization Very few full nodes Very few miners De facto inability to validate blockchain

14 Bitcoin Scaling With Offchain Payment Channels Alice USD 2-of -2 Multisig wallet Client + Bob Bob 0. Output Refund Offchain transaction nlocktime=31d

15 Bitcoin Scaling With Offchain Payment Channels 100 USD transfer USD Alice 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction nlocktime=31d Offchain send 0. Output: 900 USD 100 USD 1. Output: 100 USD

16 Bitcoin Scaling With Offchain Payment Channels 100 USD transfer USD Alice 2-of -2 Multisig wallet Client + Bob Exchange Refund Offchain transaction nlocktime=31d Offchain send 0. Output: 900 USD 100 USD 1. Output: 100 USD

17 Bitcoin Scaling With Offchain Payment Channels more 100 USD transfer USD Alice 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction nlocktime=31d Offchain send 100 USD Offchain send 800 USD 200 USD 200 USD

18 Bitcoin Scaling With Offchain Payment Channels and more 100 USD transfer USD Alice 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction nlocktime=31d Offchain send 200 USD Offchain send 100 USD Offchain send 700 USD 300 USD 300 USD

19 Bitcoin Scaling With Offchain Payment Channels USD Alice 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction nlocktime=31d Offchain send 700 USD 300 USD 300 USD

20 Closing Payment Channel Alice USD 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction Offchain send nlocktime=31d USD Reverse nlocktime=30d send 50 USD nlocktime=29d Onchain send no locktime 700 USD 300 USD

21 Bidirectional Payment Channel Alice USD USD 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction nlocktime=31d

22 Bidirectional Payment Channel 300 USD bidirectional transfer USD Alice 2-of -2 Multisig wallet Client + Exchange Bob Refund Offchain transaction nlocktime=31d Offchain send 700 USD nlocktime=30d 300 USD

23 Bidirectional Payment Channel 50 USD reverse transfer USD Alice 2-of -2 Multisig wallet Client + Exchange Bob Refund Offchain transaction nlocktime=31d Offchain send nlocktime=30d Reverse send 750 USD nlocktime=29d 250 USD

24 Bidirectional Payment Channel 10 USD reverse transfer USD Alice 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction nlocktime=31d Offchain send nlocktime=30d Reverse send nlocktime=29d Reverse send 760 USD nlocktime=29d 240 USD

25 Closing Bidirectional Payment Channel Alice USD 2-of -2 Multisig wallet Client + Bob Bob Refund Offchain transaction Offchain send nlocktime=31d USD Reverse nlocktime=30d send 50 USD nlocktime=29d Onchain send no locktime 760 USD 240 USD

26 Infinite Bidirectional Payment Channel OP_CHECKSECVENCEVERIFY (BIP-0112) relative lock-time is available on Bitcoin blockchain from May 2016 Alice USD 500 USD 2-of -2 Multisig wallet 500 USD Client + Bob Bob Revocable refund provided by Bob 0. Output: 500 USD to Bob sig 1. Output: 500 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day

27 Infinite Bidirectional Payment Channel 50 USD transfer Alice USD 500 USD 2-of -2 Multisig wallet 500 USD Client + Bob Bob Revocable refund provided by Bob 0. Output: 450 USD to Bob sig 1. Output: 550 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day

28 Infinite Bidirectional Payment Channel 100 USD transfer Alice USD 500 USD 2-of -2 Multisig wallet 500 USD Client + Bob Bob Revoced refund provided by Bob 0. Output: 450 USD to Bob sig 1. Output: 550 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day Revocable refund provided by Bob 0. Output: 550 USD to Bob sig 1. Output: 450 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day How Alice can assure Bob that previous transaction will never be broadcasted?

29 Penalty Channel Transaction 100 USD transfer Alice USD 500 USD 2-of -2 Multisig wallet 500 USD Client + Bob Bob Revoked refund has been broadcasted 0. Output: 450 USD to Bob sig 1000 USD 1. Output: 550 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day Revocable refund provided by Bob 0. Output: 550 USD to Bob sig 1. Output: 450 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day Penalty onchain transaction Bob has Alice key

30 Mirrored Refunds for Payment Channel Alice USD 500 USD 2-of -2 Multisig wallet 500 USD Client + Bob Bob Revocable refund provided by Bob 0. Output: 550 USD to Bob sig 1. Output: 450 USD to Alice +Bob multisig OR Alice sig OP_CHECKSECVENCEVERIFY 1 day How can Bob close the channel?

31 Mirrored Refunds for Payment Channel Trader USD 500 USD 2-of -2 Multisig wallet 500 USD Client + Bob Hub Revocable refund provided by Hub 0. Output: 500 USD to Hub sig 1. Output: 500 USD to Trader +Hub multisig OR Trader sig OP_CHECKSECVENCEVERIFY 1 day Revocable refund provided by Trader 0. Output: 500 USD to Trader sig 1. Output: 500 USD to Trader+Hub multisig OR Hub sig OP_CHECKSECVENCEVERIFY 1 day

32 3 Party Channels 100 USD 100 USD Bob Alice Carol

33 Offchain payments 14 / 25 Alice USD USD USD 10 USD Lykke Lykke Bob 300 USD Alice 700 USD USD USD 310 USD Lykke Lykke Bob

34 3 Party Channels Trust Issue Hm 100 USD I think I ll keep this 100 USD Bob Alice Carol

35 3 Party Channels Hash Locks Bob & H 100 USD to Bob & H Bob Alice H Carol 1. Generating random secret R 2. Public H=Hash(R) Hash-Locked contracts: 1. Using one-way hash functions Alice can prove that she sent funds to Carol off-chain 2. Alice pays to Contract (output: Bob & H) Bob needs to know R to spend the funds.

36 3 Party Channels Hash Locks Bob & H 100 USD to Bob & H Bob 100 USD to Carol & H Carol& H Alice Carol 1. Generating random secret R 2. Public H=Hash(R)

37 3 Party Channels Hash Locks Bob & H 100 USD to Bob & H Bob 100 USD to Carol & H Requires Carol signature and R Carol& H Alice Carol

38 3 Party Channels Hash Locks 100 USD to Bob & H Hub & H Requires Hub signature and R 100 USD to Carol & H Exchange & H Alice Hub Exchange 1. Generating random secret R 2. Public H=Hash(R)

39 3+ Party Channels Bob Carol Alice H Dave

40 Lightning Network Alice Dave 1. Generating random secret R 2. Public H=Hash(R) Alice wants to pay to Dave. Dave says: 1. Here is my H 2. If you know R consider payment fulfilled

41 Lightning Network Topology

42 Offchain Settlement 7 / 25 B T C C H AN N E L S S N AP S H O T 0 4 J U L Multisignature address Client Liquidity Hub 34i3ozADy8yknSPow4hfZevVUHE1gDEBMt zGsNecseFBYUEt2Q79vq5R4RJDsAjR7G GAkHd3dZhowFHqzQgmWGtCdKa1LDfQ9wT RgpgT11WJRW8vSqCTvny66eipGgYKWwz CN3UqxgZybCsEitdkMp8YUVmLaSweYvYH BFHeiYAo3BeGmzagQCzDobguVp7i6D5iR B73AV9i9EiVyuYYyTEWV55M3NfnTbjrpR TOTAL in 2249 BTC CHANNELS

43 Offchain Settlement Statistics 7 / 25 N U M B E R O F O P E R AT I O N S 2 8 J U N J U L Operation ONCHAIN OFFCHAIN TOTAL BUY SETTLEMENTS SELL SETTLEMENTS BLOCKCHAIN CASH OUT (BTC, LKK) CASHIN (fiat ) BLOCKCHAIN CASHIN (BTC, LKK) HUB S CHANNEL WITHDRAWALS CASHOUT (fiat )

44 Offchain Settlement Statistics 7 / 25 N U M B E R O F O P E R AT I O N S 2 8 J U N J U L Asset ONCHAIN OFFCHAIN TOTAL BTC USD LKK CHF EUR TIME LKK1 Y SLR GBP HCP JPY HKD XAU XPT XAG RUB RRB ILS TOTAL

45 Offchain Settlement Statistics 7 / 25 N U M B E R O F O P E R AT I O N S 2 8 J U N J U L Asset BUY SETTLEMENT OFFCHAIN BUY SETTLEMENT ONCHAIN SELL SETTLEMENT OFFCHAIN SELL SETTLEMENT ONCHAIN BTC USD LKK CHF EUR TIME LKK1Y SLR GBP HCP JPY HKD XAU XPT XAG RUB RRB ILS TOTAL

46 Offchain Fees 7 / Offchain Fees 2. Onchain fees (closing 2000 channels takes ~8 BTC) 3. Interest rates for lending Bitcoins

47 Offchain Settlement ToDo List 7 / Public offchain transaction history 2. Offchain coinholders structure 3. Public commitment transactions 4. Public service for the channels monitoring`

48 Ethereum multisig

49

50 MultisigWithdrawal function function Withdraw( address from, address to, amount, client s signature ) onlyowner hash = sha3( address from, address to, amount); CheckClientSign(hash, client s signature); MakeWithdrawal( );

51 MultisigWithdrawal function function Withdraw( address from, address to, amount, client s signature ) onlyowner Can not be changed hash = sha3( address from, address to, amount); CheckClientSign(hash, client s signature); MakeWithdrawal( );

52 StateChannel contract function PendingChannelClose( channel id channel state id, address1 to, address2 to, amount1, amount2, penalty2 hash, client1 signature client2 signature )

53 Private key backup

54 Private Key Backup Issue 9 / Digital key converted to 12 words Risk: Client may loose the paper backup 2. The key is stored on Lykke server It is protected by the encryption client s password so Lykke s staff can t steal it. Risk: The client can forget his / her password. 3. The key is stored on client s device Risk: The device can be wiped, stolen or broken.

55 Social Backup (competition finished) 9 / Request for backup are to be send to trustees (relatives and friends) using personal contacts (sms or s) 2. Parts of the private key distributed over the trustees 3. Trustee would need to install the LykkeWellet to save the backup

56 Social Backup Recovery 9 / = 1. sms selfie =