index

Applications

Understand the Blockchain Ecosystem

and How to Make it Work for You

—

Vikram Dhillon

David Metcalf

Max Hooper

Blockchain Enabled

Applications

Understand the Blockchain Ecosystem and

How to Make it Work for You

Vikram Dhillon

David Metcalf

Max Hooper

Blockchain Enabled Applications

Vikram

Dhillon

David

Metcalf

Orlando, Florida, USA

Max

Hooper

Orlando, Florida, USA

ISBN-13 (pbk): 978-1-48423080-0

ISBN-13 (electronic): 978-1-4842-3081-7

https://doi.org/10.1007/978-1-4842-3081-7

Library of Congress Control Number: 2017960811

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Technical Reviewer: Zeeshan Chawdhary

Coordinating Editor: Nancy Chen

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Printed on acid-free paper

Vikram Dhillon would like to dedicate this work to Aaron Hillel Swartz and his legacy.

David Metcalf would like to thank Katy, Adam and Andrew for their patience during the extended hours and effort while putting the book together and colleagues and students at UCF and through the NSF I-Corps program that identified the power of Bitcoin and Blockchain technology years ago and shared their knowledge and future strategies that inspired us to pursue this area of research early. Thank you to my coauthors and our outside collaborators and contributors, and of course to God for the wisdom, ability and grit to bring this effort to life.

Max Hooper would like to thank his coauthors and colleagues at UCF/METIL Lab, along with special thanks to Mindy Hooper for her help and support. Additionally, for God's inspiration, guidance, direction and wisdom, I would like to acknowledge His leadership.

Contents

About the Authors �� xi

About the Technical Reviewer �� xiii

Acknowledgments ��xv

Introduction ��xvii

■Chapter 1: Behold the Dreamers �� 1

Paradigm Shift �� 1

Cypherpunk Community �� 3

Summary �� 5

■Chapter 2: The Gold Rush: Mining Bitcoin �� 7

Reaching Consensus �� 7

Mining Hardware �� 12

Startup Stories �� 13

New Consensus �� 14

Summary �� 14

References �� 14

■Chapter 3: Foundations of Blockchain �� 15

Transaction Workflow �� 15

Simple Payment Verification �� 21

Blockchain Forks �� 23

Summary �� 24

References �� 24

■ Contents

■Chapter 4: Unpacking Ethereum �� 25

Overview of Ethereum �� 25

Accounts in Ethereum �� 27

State, Storage, and Gas�� 30

Ethereum Virtual Machine �� 33

Solidity Programming Language �� 36

World Computer �� 38

Blockchain-as-a-Service �� 41

Decentralized Applications �� 42

Geth and Mist �� 44

Summary �� 44

References �� 45

■Chapter 5: Decentralized Organizations �� 47

Aragon Kernel �� 48

Identity Management �� 49

DAO/Company Walkthrough �� 50

Setting Up a DAO �� 50

Issuing Shares �� 54

Fundraising and Bylaws �� 63

Summary �� 66

References �� 66

■Chapter 6: The DAO Hacked �� 67

Introduction �� 67

The Team �� 69

The DAO �� 70

The ICO Highlights �� 72

The Hack �� 72

The Debate �� 75

The Split: ETH and ETC �� 76

■ Contents

The Future �� 77

Summary �� 78

■Chapter 7: Ethereum Tokens: High-Performance Computing �� 79

Tokens and Value Creation �� 79

Ethereum Computational Market �� 83

Golem Network �� 89

Application Registry�� 90

Transaction Framework �� 91

Supercomputing Organized by Network Mining �� 96

Buyer–Hub–Miner Interactions �� 101

Superglobal Operation System for Network Architecture �� 104

iEx�ec �� 106

Summary �� 109

References �� 109

■Chapter 8: Blockchain in Science �� 111

Reproducibility Crisis �� 111

Clinical Trials �� 115

Reputation System �� 119

Pharmaceutical Drug Tracking �� 122

Prediction Markets and Augar �� 123

Summary �� 124

■Chapter 9: Blockchain in Health Care �� 125

Payer–Providers–Patient Model �� 125

Workflow �� 127

Hot Switching �� 131

Waste Management: Capital One, Ark Invest, and Gem �� 131

Verifiable Data Audit �� 134

Summary �� 137

References �� 137

vii

■ Contents

■Chapter 10: The Hyperledger Project �� 139

Current Status �� 139

Governance �� 140

Fabric and Sawtooth�� 141

Decision Models: Do You Need a Blockchain? �� 144

Rapid Prototyping with Hyperledger Composer �� 147

Summary �� 149

■Chapter 11: Recent Developments in Blockchain �� 151

EOS Blockchain �� 151

Delegated Proof-of-Stake �� 154

Parallel Execution �� 157

Scheduling �� 159

Chain Core �� 160

Ethereum Enterprise Alliance �� 175

zk-SNARKs �� 177

Review of Quorum �� 177

Ethereum Enterprise Roadmap �� 180

Summary �� 181

References �� 181

■Chapter 12: Technological Revolutions and Financial Capital �� 183

State of the Blockchain Industry �� 184

Blockchain Solution �� 184

Venture Capital and ICOs �� 185

Initial Coin Offerings �� 185

Digital Currency Exchanges �� 189

Status of ICO Regulation�� 189

Pros and Cons of ICO Investments �� 190

Regulation Technology: RegChain �� 192

viii

■ Contents

New Blockchain Companies and Ideas �� 194

Homechain and SALT �� 194

Ambrosus, Numerai, and SWARM �� 194

Democratizing Investment Opportunities �� 195

Summary �� 196

■Appendix A: Building a Health Care Consortium �� 197

■Appendix B: References �� 207

■Index �� 213

About the Authors

Vikram Dhillon is a research fellow in the Institute of Simulation and Training at the University of Central Florida where he studies the integration of emerging technologies into existing infrastructure. The focus of his recent work has been on decentralized ledger technologies. He holds a Bachelor of Science degree in Molecular Biology from the University of Central Florida, where his focus was bioinformatics. Currently, he is a DO-MBA candidate at the College of Medicine, Nova Southeastern University. He is the author of several scientific papers in computational genomics and two books, the most recent one on blockchain enabled applications. He has also written in-depth articles for the Bitcoin Magazine and letters for the New York Times. He was previously funded by the National Science Foundation through the Innovation Corps program to study customer discovery and apply it to commercialize high-risk startup ideas. He is a member of the Linux Foundation and has been active in open source projects and initiatives for the past several years. He often speaks at local conferences and meetups about programming, design, security, and entrepreneurship.

He currently lives in Fort Lauderdale, Florida, and writes a technology-focused blog at opsbug.com.

David Metcalf has more than 20 years of experience in the design and

research of Web-based and mobile technologies converging to enable

learning and health care. Dr. Metcalf is Director of the Mixed Emerging

Technology Integration Lab (METIL) at UCF’s Institute for Simulation

and Training. The team has built mHealth solutions, simulations,

games, eLearning, mobile and enterprise IT systems for Google, J&J, the

Veterans Administration, U.S. military, and the UCF College of Medicine

among others. Recent projects include Lake Nona’s Intelligent Home

prototype and SignificantTechnology, a mobile-enabled online degree

and eResource kit. Dr. Metcalf encourages spin-offs from the lab as

part of the innovation process and has launched Moving Knowledge

and several other for-profit and nonprofit ventures as examples. In

addition to research and commercial investments, he supports social

entrepreneurship in education and health. Dr. Metcalf continues to bridge the gap between corporate learning and simulation techniques and nonprofit and social entrepreneurship. Simulation, mobilization, mobile patient records and medical decision support systems, visualization systems, scalability models, secure mobile data communications, gaming, innovation management, and operational excellence are his current research topics. Dr. Metcalf frequently presents at industry and research events shaping business strategy and use of technology to improve learning, health, and human performance. He is the coeditor and author of Connected Health (2017), HIMSS mHealth Innovation (2014) and the HIMSS Books bestseller mHealth: From Smartphones to Smart Systems (2012).

■ About the Authors

Max Hooper is the chief executive officer of Merging Traffic. He is

responsible for the company’s management and growth strategy,

serving as the corporate liaison to the financial services industry and

various capital formation groups. Prior to starting the company, he was

cofounder of Equity Broadcasting Corporation (EBC), a media company

that owned and operated more than 100 television stations across the

United States. He was responsible for activities in the cable, satellite,

investment banking, and technology industries and during his tenure it

grew to become one of the top 10 largest broadcasting companies in the

country. A lifelong learner, Hooper has earned five doctorate degrees:

PhD, DMin, PhD, ThD, and DMin from a variety of institutions. As an avid

runner, he has completed more than 100 marathons and an additional 20

ultra-marathons, which are 50-or 100-mile runs. He has completed the

Grand Slam of Ultra Running. Hooper is committed to his family and is a

husband, father to five children, and grandfather to seven grandsons. He is active in many organizations and serves on various boards of directors. He works globally with several ministries and nonprofit aid groups, and was honored to speak at the United Nations in New York in 2015.

xii

About the Technical Reviewer

Zeeshan Chawdhary is an avid technologist, with 13 years of experience in the industry. Having started his career in mobile development with J2ME in 2005, he ventured into Web development in 2006, and has extensive experience in building robust and scalable Web applications.

He has led teams to build Web and mobile apps for companies like Nokia, Motorola, Mercedes, GM, American Airlines, and Marriott while serving as chief technology officer for a San Francisco–based firm.

He is based in Mumbai, India, and has also dabbled with a few startups in India, leading teams in building a Houzz+Etsy model and car rental platform, in addition to authoring a few books on iOS, Windows Phone, and iBooks.

He currently works with an international team as director of development, serving clients with technologies like Magento, Wordpress, WooCommerce, Laravel, ReactJS, and .Net.

He can be reached at imzeeshanc@gmail.com or on Twitter at @imzeeshan.

xiii

Acknowledgments

The authors would like to acknowledge our editors Nancy Chen and Louise Corrigan for their help and guidance. The figures throughout this book were made with the help of Lucidchart. All figures from external sources were used with permission.

Introduction

Blockchain technology is poised to fundamentally change our online world. This is not some kind of miraculous, cure-all, money-making solution. One specific use of blockchain such as Bitcoin, but rather the fundamental shift for the offline world ushered in by the web with easy to use access to information and the ability to make digital copies of data or content in an unprecedented ease for distribution across the globe.

Hence the name, the World Wide Web. That interconnectivity has suffered fundamental problems when it comes to transactions - TRUST.

The fundamental shift that blockchain technology represents is a method for moving away from an attempt to have a central trusted authority in a massively distributed network. But instead to have multiple sources of trust that must all agree, based on an algorithm that this transaction can be trusted as valid.

Furthermore, most blockchain solutions offer an immutable and enduring record of a transaction as it is hard for any trusted or untrusted source to change or modify. This presents a completely new level of security, privacy, and TRUST to our online world. As you will see throughout this book, a variety of uses, protocols, and standards make up the current blockchain ecosystem.

We also strive to strike the perfect balance between being a technical reference and a how-to handbook that shows practical examples of both current and future state use cases. While not comprehensive, we do select for several high promise areas where blockchain technology is beginning to enable applications for an entirely new industry segment. We hope this book will inform you and provides a roadmap to your success leveraging blockchain technology to enable new applications for your business.

Throughout the book, you will see many examples of applications to reinforce key points. Early examples extend beyond financial transactions to cover other aspects of FinTech, RegTech (regulation), InsuranceTech, GovTech (eVoting, licensing, records and certification), HealthTech, and many others.

In order to understand these early examples, it is necessary to explore the Blockchain history; fundamentals of distributed trust; consensus; hardware, software and encryption in the early chapters.

Next, you’ll learn about the network transactions and simplified payments in Blockchain fundamentals.

We’ll compare this with the extended capabilities if Ethereum and specific characteristics like how gas works and distributed apps along with examples of Blockchain as a Service. To further extend these capabilities, two chapters are devoted to DAO/Decentralized Organizations and the details and examples in these areas. In Chapter 7, Ethereum Tokens are highlighted for value creation with various technology and business sector examples that highlight the power of Smart Contracts to allow multiple sources of value and rules to be embedded in the transactions directly. The next three chapters- 8, 9 and 10 segment examples into Blockchain in Science, Blockchain in Healthcare, and details on the structure of the Hyperledger Project, respectively. The final two chapters, 11 and 12 explore many recent developments and future trends, particularly in ICOs and the effect on financial markets and processes. Don’t miss the late-breaking Appendix with a detailed interview with the Hashed Health leadership team and their insights on Blockchain in Healthcare. We hope you find the information in this book useful as well as enjoyable as you explore The fundamentals, current best practices and future potential of Blockchain Enabled Applications. We welcome your feedback at info@metil.org.

xvii

CHAPTER 1