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The Blockchain land:

Is there Consensus over Consensus?

Vasily Suvorov, VP Technology Strategy

March 18, 2016

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Can we talk about blockchain

without the Hype?

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What is Distributed Ledger Technology? (AKA Blockchain)

Decentralized Data-Sharing Technology that:

Connects participants in a business ecosystem without a central entity or intermediary

Maintains real-time, add-only, unchangeable ledger and history of transactions

Automates business rules execution

Made possible by a unique combination of Peer-to-peer communications,

Strong encryption,Distributed consensus and

Smart contracts

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Consensus is the most fundamental part of the DLT/Blockchain tech

and yet

poorly understood

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What I’ll cover

• What is consensus?

• Examples of consensus mechanisms

• PoW, PoS, Byzantine, Federated and Crypto-Based

• The Big Question

• Do we need Consensus Protocols and Distributed Shared Ledgers?

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Back to School Time!

Byzantine Agreement Protocol.

In a synchronous network, let P be a n-player protocol, whose player set is common

knowledge among the players, t a positive integer such that n ≥ 2t + 1. We say that P is an

arbitrary-value (respectively, binary) (n, t)-Byzantine agreement protocol with soundness σ ∈

(0, 1) if, for every set of values V not containing the special symbol ⊥ (respectively, for V = {0,

1}), in an execution in which at most t of the players are malicious and in which every player i

starts with an initial value vi ∈ V , every honest player j halts with probability 1, outputting a

value outi ∈ V ∪{⊥} so as to satisfy, with probability at least σ, the following two conditions:

1. Agreement: There exists out ∈ V ∪ {⊥} such that outi = out for all honest players i.

2. Consistency: if, for some value v ∈ V , vi = v for all honest players, then out = v.

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Let’s Use Pictures Instead!

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PoW – Consensus for a Censorship Resistant Network

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• Ideal for Trustless Environments

• Requires Cryptocurrency

• Needs cheap electricity

• Relies on Game Theory to align incentives

• Highly scalable

• Slow by design

• Transaction finality is not immediate

• Favors infrequent, high-value operations

• Difficult to upgrade

• Privacy?

• Decentralization?

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PoS – Scalable Consensus for Public & Private Ledgers

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• Good for Low-Trust Environments

• Requires Cryptocurrency

• Relies on Complex Rules to align incentives

• Highly scalable

• Theoretically faster than PoW

• Transaction finality is not immediate

• Builds foundation for Governance

• Microtransactions?

• Privacy?

• Decentralization?

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BFT/Federated – Fast Consensus with Finality

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• Requires higher level of trust / identity

• Does not require a Cryptocurrency

• Relies on multiple voting rounds

• Scalability is limited

• Faster than PoW or PoS

• Transaction finality is immediate

• Easy to govern and upgrade

• Privacy?

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Identity/Crypto-Based – Distributed Ledgers without a

Ledger

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• Requires a way to manage identities

• Does not require a Cryptocurrency

• Does not require a shared Ledger

• Relies on Smart Contracts & Message Routing

• Scalability is high

• Fast

• Transaction finality is immediate

• Easy to govern and upgrade

• Highest level of privacy

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Consensus techniques – Overview

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Network Size

Th

rou

gh

pu

t

< 100 tx/s

High

Latency

> 10K tx/s

Network

Latency

< 20 nodes > 1000 nodes

Stellar / Ripple

IOTA

Ethereum PoW

Bitcoin POW

Kadena

Tendermint

Symbiont

Ethereum PoS*

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Next Gen, Decentralized EDI Technology

Making Smart Contracts Enforceable and Data Private

• No Single Blockchain or DLT

• History is maintained by Nodes, Flow(s) manage

relationships between nodes

• Histories can be connected, if deals are related

• Notary & Oracle Services are defined

• Sophisticated Identity Services

• Smart Contracts iterate over state

• Business process (Flow) updates a state

• State transition (input > output) is logged

• Multiple Fin related classes are pre-defined

• Business prose (PDF) is attached

• Consensus is pluggable

• Notaries can be validating or not

• Notaries can run a BFT or CFT (Raft) protocol

• Notaries can be regional or global (Network Map)

Party A Party B

Notary

OracleFlow

Flow

Flow

Flow

Corda – network of Ledgers

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Blockchains are inefficient

databases!

The Big Question!

Shall we just go with distributed, crypto based ”Smart Contracts” ?

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Thank You!

&

Questions?