What we know … and what know we don’t know

Transcript:What we know … and what know we don’t know:
What we know … and what know we don’t know Campbell R. Harvey Duke University and NBER Revised February 21, 2018 Innovation and Cryptoventures Campbell R. Harvey 2018 2 Blockchain No one type of blockchain. It is a general classification. Public: Distributed ledger Blocks cryptographically linked with hashes Anyone can add blocks Generally transparent (Quorum partially) Verification done with DSA and history of blockchain Immutable PoW, PoS, PoI, PoA, … 3 Campbell R. Harvey 2018 Blockchain No one type of blockchain. It is a general classification. Private: Distributed ledger Blocks cryptographically linked with hashes Only permissioned can add blocks Generally transparent to permissioned parties Verification done with DSA and history of blockchain Mutable PoS, PoI, PoA, … 4 Campbell R. Harvey 2018 Blockchain Many different uses: Secure, quick, and efficient transactions (transactions are generally defined and they could involve transfer of property or the transfer of information as in a digital twin). Transactions need not involve cryptocurrency. Verification of ownership (again, generally defined, it could be you own your identity) Common feature: They disintermediate someone or some entity Everyone benefits – except the disrupted intermediary! 5 Campbell R. Harvey 2018 Blockchain Many visions: A single master chain. The bitcoin blockchain is currently the strongest and there are millions of “sidechains” that are connected to the master chain. There is programming flexibility on the side chains – though the master chain is inflexible. It is also possible the ethereum chain becomes the master chain. Multiple master chains. Here there are a small number of very secure master chains, like bitcoin and ethereum. Each has millions of side chains. It may be possible in the future to link the chains. Private and public chains. Depending on the need, there could be millions of private chains and a smaller number of public chains. The private chains are not necessarily connected to the public chains. Hybrid databases also exist using some blockchain features. 6 Campbell R. Harvey 2018 Blockchain Chain mechanics: Transactions are group together. A hash of the transaction block links the block to the next one. In the bitcoin blockchain, transactions are plaintext for anyone to see (i.e., not private). In other blockchains, the transactions may be encrypted or hashed. In bitcoin, transactions are unspent outputs. All new coins originate from miners. Each unspent transaction output is associated with a private key. If Alice pays Bob, then Alice opens her lockbox with