Introduction to Blockchain - PDF Free Download

Introduction to Blockchain with focus on Energy June 1 st 2018 Tony Giroti tony@energy-blockchain.org Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org Content Copyright 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 1

Your Presenter Tony Giroti 25+ years in IT Bachelor and Masters in Electrical & Computer Engineering Developed Distributed Computing Platforms Developed High Availability Transaction Processing Applications Designed Fault-Tolerant, Massively-Scalable Supercomputers Entrepreneur, Founded a few Startups Spent last 12 yrs in Energy, Smartgrid and now Energy Blockchain Emeritus Council, Board member in US DOE GWAC, NIST SGIP 5 USPTO Patents Chairman, Energy Blockchain Consortium Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 2

Disclaimer Any product, individual or company mentioned in this webinar should not be construed as an endorsement by the Energy Blockchain Consortium. We have avoided the use of any names by choice so any mention is purely coincidental and for illustrative or informational purposes only. All participants are expected to conduct in the webinar per the professional, business like and common sense norms. Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 3

Energy Blockchain Webinar Series Series created by Energy Blockchain Consortium FREE to anyone registering (energy-blockchain.org/webinars) 12 Webinars: Held First Friday of every month @12 to 1pm EST 2018: Jun 1, Jul 6, Aug 3, Sep 7, Oct 5, Nov 2, Dec 7 2019: Jan 4, Feb 1, Mar 1, Apr 5, May 3 Webinars are also available for offline viewing About Energy Blockchain Consortium: A non-profit consortium of Companies interested in using Blockchain technology to solve the most compelling problems in the Energy industry. Join as members. energy-blockchain.org or send me an email tony@energy-blockchain.org Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 4

Topics How Blockchain started, Bitcoins and What is Blockchain? How does Blockchain work? A conceptual Blockchain Application (Example) What is the hype all about? The Energy Blockchain Is there any danger using Blockchain? What is its practical use in Energy industry (Example)? Energy Blockchain Potential Next Steps Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 5

Blockchain: How it all started? The Great Recession (2000-2010) and the Financial Crisis (2007-2008) Global Economic downturn Pseudo name Satoshi Nakamoto created Bitcoin paper Aug 18 th 08 Bitcoin.org domain, Jan 3 rd 09 Bitcoin started, May 22 nd 2010 10K BTC Pizza! Blockchain & Bitcoin are not the same Blockchain = technology, Bitcoin = app Bitcoin is a cryptocurrency a digital asset Digital Currency. Fixed supply 21M coins (rarity of Gold) Blockchain & Cryptography to control its creation & management A Fiat currency $, etc. Today: Blockchain for Tracking and Buying & Selling of any Goods or Assets Payments are not always necessary Also known as Digital Ledger Technology (DLT) Technology itself provides trust so intermediaries are not needed Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 6

What is Blockchain? The World Today A Company Bank, Utility, Insurance, ISO, Retailer Application The World with Blockchain (Next Gen. of Distributed Computing Platform) Company A Company B Company C Company D Blockchain Node A Blockchain Node B Blockchain Node C Blockchain Node D Business Logic SmartContractX SmartContractX SmartContractX SmartContractX Database Ledger A Ledger B Ledger C Ledger D Centralized Control (w or w/o distribution) Data: Company has 1 or more databases Business Logic: Company runs biz process Control: Company controls Data & App Trust: The Company is the Trusted Party Decisions: Made by The company History: The Company knows it Changes: Made by The Company Transactions: In Company s Database De-Centralized Control (Nodes are connected via P2P Network) Data in multiple databases i.e. in distributed Ledgers so multiple nodes have Same Data Business Logic: Same SmartContract runs in multiple companies Control: 1 Company DOES NOT Control Data & App. Who does? Individuals (Us), Node operators, others Trust: Blockchain technology is the Trusted Party & NOT company (So no people trust required Trustless Decisions: All Participants must agree on the Validity (CONSENSUS) History: All Participants know where the data came from (PROVENANCE) Changes: Data and SmartContract Logic CANNOT be changed (IMMUTABILITY) Transactions: Any Shared ledgers has ownership of assets or completion of transaction (FINALITY) Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 7

How Blockchain works? 1 3 widgets Example: Andy sold 3 widgets to Bob. Rate is $1 per unit. Andy Company A $3 2 Blockchain Node A SmartContract: Amt = Units x 1 Ledger A Tx Bob $3 4 Tx Company B Blockchain Node B SmartContract: Amt = Units x 1 Ledger B 6 Provisional Unconfirmed Transactions Memory Pool Tx 7 Tx Company C Blockchain Node SmartContract: Amt = Units x 1 Ledger C Provisional Unconfirmed Transactions Memory Pool Tx Ty 9 3 Node A Creates a digitally signed TRANSACTION (a) 3 Widgets from Andy to Bob Tx (b) $3 from Bob to Andy 5 Node B: VERIFICATION of Transaction (a) Does it comply with Blockchain rule (b) Is its Digital Signature ok (c) Are there any conflicts with prev transactions 8 Node C: VERIFICATION of Transaction (a) Does it comply with Blockchain rule (b) Is its Digital Signature ok (c) Are there any conflicts Like Transactions, BLOCKS also Propagated from Node to Node and linked as a Chain. Hence BLOCKCHAIN 11 Periodically VALIDATORS create Blocks (a) If Node C was a VALIDATOR it creates a BLOCK in Ledger C (b) VALIDATOR is rewarded (from transaction charge) Hash: 32 bytes unique ID of BLOCK Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 8 10 Link to Prev Hash Time Stamp A set of Transactions Tx Ty

Inner Workings: Consensus, Trust How do validators validate a transaction and block? What is the agreement? Who s in control? Distributed trustless Consensus is the Primary Innovation of Blockchain PoW PoS PoA 1 Proof of Work Anyone with compute power can do All actors solve math problem The winner is the leader with brute power The Miner Leader creates a block. Others verify Leader is financially rewarded Cheating is difficult. 32TwH per year Flaw: Miner > 51% resource can hijack 2 Proof of Stake Created to solve energy issue Brings mining back into the chain Actors w/ stake replace energy use Leader who creates block is chosen deterministically by their stake Min % stake may be required to participate 3 Proof of Authority Only pre-approved accounts are Validators Authority Nodes Earn the right, uphold high standard, reputation 4 Multi-signature 5 Practical Byzantine Fault Tolerance (BFT) Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 9

Inner Workings: Smart Contract Computer SW to enforce pre neg-ed contract in distributed environment Nick Szabo coined circa 1994 Transaction mgmt. protocol Key Points No 3 rd parties needed Each transaction is trackable and irreversible (immutable) Provides security superior to traditional contract law Reduces transaction costs associated with contracting Advance but Foundational Topics to understand Custom Logic possible with degrees of Turing-completeness Byzantine Fault Tolerance (BFT): Built-in feature of Blockchains Smart Contract = (a) replicate asset registries, (b) with cryptographic has chains, (b) Contract execution, (d) BFT replication, (e) Transaction management Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 10

A Blockchain Application A Blockchain App An app that allows me to sell widgets at $1 per unit and discount of 10% over 10 units The World with Blockchain (Nodes are connected via P2P network) Company A Company B Company C Company D Blockchain Node A Blockchain Node B Blockchain Node C Blockchain Node D Smart ContractX: Rate $1 per unit with 10% disc. for over 10 units SmartContractX SmartContractX SmartContractX SmartContractX Transactions Tx, Ty, Ta, Tb, Tc.. : Ledger A Ledger B Ledger C Ledger D - Andy sold 3 widgets to Bob: Bob Andy $3 - Cathy sold 10 widget to Dan: Dan Cathy $9 - Emily sold 1 widgets to Frank: Emily Frank $1 Block 123 BLOCK hash Block 124 BLOCK Hash Block 125 BLOCK Hash Block 126 BLOCK Hash - Gina sold Previous Block Hash Previous Block Hash Previous Block Hash Previous Block Hash Time Stamp Time Stamp Time Stamp Time Stamp Blocks - 123, 124, 125, 126 Transactions Tx Ty Transactions Ta Transactions Tc Tc Tc Transactions Td Te Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 11

What is the hype all about? No Monopolies Multi-fold increase in Security capability Cost Overheads can be significantly reduced Rise of the Scaled Intermediaries Game Changing Benefits Decision is encoded in code & Validators Individuals can be in control of their data Blockchain is Decentralized Blockchain empowers Decision Maker Blockchain can Disintermediate Blockchain is based on Democratization A simple minority cannot hijack the value for the masses Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 12

Energy Blockchain The use of Blockchain in Energy industry is Energy Blockchain. Coined Circa Feb 2018 by the Energy Blockchain Consortium Tracking Energy assets or use for trading & payments Electricity, water, gas, oil, gas, energy data, from Gen. to Consumption Track any Asset, any Data, Process any Transaction, Perform instant Settlements P2P trading, Wholesale Electricity Trading on ISO with market participants Use in both Regulated markets & De-Regulated markets Permissioned Blockchain: Perfect for Utilities, Oil & Gas co., Regulators, Policy Makers Huge Advantage: Cheaper transactions, Lower latencies, Higher Control No need for ICO, cryptocurrency or rely on exchanges & anonymous users No danger from Immutability of Smart Contract Issues Use PoS or PoA for Consensus and Validation (not PoW) Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 14

Energy Blockchain Use Peer to Peer Energy Trading Wholesale Market Settlement Energy Data Management Energy Forecasting Energy M&V Net Energy Metering DER Service Coordination Grid Security Customer Data & Service Retail Billing EV Charging Energy Storage Microgrid Network operator REC & Carbon Trading Price Responsive Demand Response Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 15

P2P Trading - Transactive Energy Transaction P C O 1. Price Signals (optional) 2 3 5 2. Produces Electricity I P C U O ISO / RTO Producer Consumer Utility Operations Micro Grid IT Grid / Blockchain 8 B 6 4 7 U 1 Electricity Grid Energy Market Note: P & C may be connected to a feeder line originating from the same substation or the two maybe on different feeder lines on two substations I 3. Places Order with pre-negotiated price with P or (b) Buys via Exchange, Consumes Electricity 4. Removes KWH from Producer into Grid 5. Balancing Function, Manage Load, Frequency, Power Factor 6. SmartContract, Billing and Settlement 7. Proof of Authority (Confirmation), Customer Service 8. Proof of Stake (Other) B Blockchain Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 16

Energy Blockchain Potential? Bi-Directional DERs Massive Transformation Prosumers Renewables EV Smartgrid Off Grid Storage Disintermediate Blockchain + = Accelerated Disruption Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 17

Other Blockchain terms? Digital Wallet: Like a Global Bank Account. E.g. Bitcoin Wallet. Hash Function: Is a SW algorithm to map data of any size to fixed size Popular Digital Currencies: Bitcoin BTC, Ethereum ETH, Ripple XRP, Bitcoin Cash BCH, Cardano ADA, Litecoin LTC Some popular Blockchains: Ethereum ($75B): In 2017, 3 our of 4 projects developed on Ethereum Ripple ($30B): Banking - Real time Settlement & Currency Exchange IOTA ($15B): Specializes in IoT. Consensus is Tangle Qtum ($5B): Combines Bitcoin and Ethereum with PoS Coinbase ($2B): Digital Currency Wallet and Exchange Hyperledger (Apache foundation) ICO: Initial Coin offering Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 18

What Next? Questions & Ideas : Contact Tony Giroti, tony@energy-blockchain.org Go to energy-blockchain.org/webinars to register or watch next webinars Come Join the Energy Blockchain Consortium and be part of this journey Don t do it alone or with unknown players Work with Peers and Partners and manage this Disruption smartly Get involved in real Blockchain projects and implementations The Energy Blockchain Consortium energy-blockchain.org Jun 1, 2018 CONTENT COPYRIGHT 2018, ENERGY BLOCKCHAIN CONSORTIUM, Tony Giroti, tony@energy-blockchain.org 19