Eris Industries - American Banker presentation deck

Private and confidential. Images and text (where applicable) copyright Eris Industries Limited, 2015.

What’s wrong with crypto

IT’S JUST SOFTWARE.

Idealism, pragmatism, and “blockchain 2.0”

Private and Confiden.al 2

Before we begin


Most people look at blockchains like this


We look at blockchains like this


Our theory: mathematical infrastructure will replace physical infrastructure

Current platform architecture requires that each market participant runs all of their own standalone human and machine infrastructure.

This is a nightmare, and extremely expensive, to scale.

BUT

What if we could run shared data infrastructure without the multiple-redundant, hierarchical, centralised points of failure?


Our theory: blockchains

Blockchains are distributed databases that house protocols for distributed data management

Blockchains allow for high verifiability, systemic resiliency, ease of use, and low operating costs out of the box


Our theory: smart contracts

Smart contracts are complex coded instructions which almost any blockchain is able to run and execute

Blockchains aren’t magical internet money machines - they’re just software and will do exactly what we tell them to do

What Bitcoin does for clearing and settlement, smart contracts can do for virtually any other business process


Addressing some common misconceptions

“Mining”

“Decentralisation”

“Network effects”


MINING

Is not required to validate transactions

Is not (always) required to secure the chain (depends on chaintype in question & system

design)

- - -

Is one of many possible security strategies

Is designed to incentivise nodes to propose valid blocks when no-one is in charge


DECENTRALISATION

Reverses cause and effect

Does not work within existing legal paradigms

Causes more commercial problems than it solves


NETWORK EFFECT

I’ll get to that in a bit.


What we do

Eris makes smart contracts easy to use.

You can use a blockchain and explore smart contracts’ potential in your organisation

Without needing to use a cryptocurrency

Without paying anything to anyone

Without being restricted to any one innovation


DEFINITIONS:

WHAT IS A BLOCKCHAIN?


How the internet currently works


On somebody else’s (central) server


Blockchains: no servers, simple hardware


REDEFINING THE BLOCKCHAIN: JUST ANOTHER DISTRIBUTED DATABASE

1) distributed rulebooks

2) that track changes made to them

3) where write permissions are controlled by public-private key

cryptography

and

4) as a result, we can be fairly certain that something which is on a

blockchain belongs there.(Sort of like French law

actually)


Blockchains give us verifiable data.

1) Signature rules - tell ‘em what you’re gonna say

Let’s agree on our ability to write to the data set.

2) Network rules - say it

Let’s agree how we communicate with each other.

3) History rules - tell ‘em what you said

Let’s agree on what the world-state of our data is and was, with the ability to easily check whether tampering has occurred.


RULE 1: TELL ‘EM WHAT YOU’RE GONNA SAY

Effectively: users’ rules of the game; pre-defined access permissions

Who can broadcast transactions?

What actions can a user perform?

How do they go about “spending” it?

Can I reference data “offchain?”


RULE 2: SAY IT

Open standard for common communication to achieve a common

goal

What can we say?

What do words mean?

Who do we listen to?


RULE 3: TELL ‘EM WHAT YOU SAID

Also known as the “consensus protocol”

Agreeing the truth

What has been said?

Who has said it?

Is the record correct?

“The dragon that eats its own tail:” what has happened (past) determines

what can happen (now and future)


PUT IT ALL TOGETHER

="Mais,!c’est!en!français… "


TRANSLATE IT INTO ENGLISH


Hey, presto.

That’s a blockchain application.


What Bitcoin demonstrated about the blockchain (as compared to other distributed

database types)

Security

Verifiability

Resiliency

SIMPLICITY & EASE OF USE


Permissioning simply makes these qualities commercially viable.

Accountability.

Controllability.

Repeatability.

Reversibility.


Permissioning means that blockchain solutions can be engineered…

to do exactly what you want them to do


DEFINITIONS:

WHAT IS A SMART CONTRACT?


Nick Szabo, 1994

Quote courtesy of Tim Swanson’s presentation entitled “Defining Smart Contracts.”


Richard Gendal Brown, 2015

Quote courtesy of Tim Swanson’s presentation entitled “Defining Smart Contracts.”


Casey Kuhlman, 2015

“A smart contract is a script which allows for the cryptographically verifiable execution of code over

cryptographically verifiable data.”


Why this definition makes sense

Blockchains aren’t ledgers, they’re data stores

Blockchains = verifiable data (state)

Smart contracts = verifiable execution of code (write)

HP: “The contract is the transaction”

“The marmot is the contract”


What do all these definitions have in common?

Characteristics:

Scripts with state Almost any blockchain capable of running them

Benefits:

Can describe more complex data driven-processes Signature schemes apply to arbitrary data

Limitations:

Do not “self-enforce” (or “self-execute”) Work best when value is extrinsic to the data structure


HOW DO I USE SMART CONTRACTS?


Example: distributed Reddit (June 2014)


Example: People’s Republic of DOUG (June 2014)


Example: distributed YouTube (March 2015)


Examples: live pilots with MFIs

Watch this space.


WHO’S INTERESTED?


Basically everyone


Integrators, developers, consultants, think tanks

With the exception of marmcorp.com, no actual marmots are building with the Eris platform presently.

http://marmcorp.com


Other startups using similar technology


NETWORK EFFECT

(I was saving this for later, remember?)

Market ≠ Network

Like running the Facebook playbook for Enterprise Linux.


HOW SHOULD WE CHANGE OUR THINKING?


To begin with

Blockchains are not a scarce resource


Consequences

Dramatic expansion in feasible, application-specific blockchain use-cases

Shift of emphasis away from money, payments and “assets”, and towards process automation and data

management


Cryptocurrency is only one application of blockchain technology.

CRYPTOCURRENCY RULE 1

Open to all Evades government controls


Distributed architecture = resilient to interference/destruction


Relies on competitive “mining” and awards “Bitcoins” etc Process is automatic, no central third party required

Fraud difficult (but not impossible)


Getting away from the protocol and into the application: a how-to guide.

MyChain Rule 1:

Must be controllable in every respect All write permissions must be accessible through P/P key crypto

In 99.99% of cases in finance, cannot be open/fully public Can talk to my other databases

MyChain Rule 2:

Cryptocurrency got this mostly right

MyChain Rule 3:

Change any aspect of the system on command Commercial standards of data security/certainty needed


HOW TO AVOID “PUT IT ON A BLOCKCHAIN” SYNDROME


STEP 1: DEFINE THE PROBLEM

Does a blockchain solve a problem I have?

YES:

Coordinating actions of independent actors

Simplifying multiple processes into single process

Timely verification is paramount (e.g. settlement)

Reducing supervision and oversight cost

Need to scale without (much) hardware


DOES THIS SOLVE A PROBLEM I HAVE?

NO:

Requires speed (blockchains are comparatively slow)

Requires heavy computation (blockchains are passive)

Is fully automatic anyway (order of magnitude improvement harder to achieve; though blockchains could still be useful qua

secure open standard)


STEP 2: DESIGN YOUR APPLICATION

Source: “Solidity, Part 1: an Introduction to Smart Systems of Smart Contracts.” https://eng.erisindustries.com/tutorials/2015/03/11/solidity-1/

STEP 3: BUILD

STEP 4: ITERATE

Because the circumstances change

Because business changes

Because you’ll screw up

Because you’ll improve


TO RECAP:

Public blockchains = neat

Permissioned blockchains = neat for commerce

Smart contracts FTW in either case

Eris helps you manage your smart contract applications, no matter the chain


THE UPSHOT:

If you can write it in code,

you can run it on a blockchain.

Happy to answer

questions!

Business

Eris Industries - American Banker presentation deck