hello and welcome to future now the
podcast where we discuss new technologies and ideas and how they
might affect your future so today we’re talking about blockchain with Francis
Mendoza who is from the blockchain Innovation Society
he works in what is called the Internet of Things or IOT which are the systems
that all our wireless technology uses to communicate with each other this
technology has some pretty massive potential when paired of blockchain
which Francis is going to walk us through so let’s go ahead and check it
out hi my name is Francis Mendoza I’m a
rising senior here at Arizona State University I major in computer science
and I am the longest standing undergraduate researcher at the ASU
blockchain research lab and it’s been around since the fall of 2017 which is a
funny story considering how originally I wanted to go to U of A for college but I
was just delving into blockchain during my high school and I read an article was
released by the state press and it was how ASU and the – crypto currency was
funding an ASU blockchain research lab in the fall of 2017
so as fate would have it I would switch schools change my major to computer
science and the week before I would email professor Boskovic who heads the
lab asking if I can join and he said of course and ever since I’ve been doing
work in the space and I don’t regret it in terms of the actual research you do
what does that look like what kind of space are you working in so there are
many different applications for blockchain and many different
engineering challenges that have to be solved my work specifically deals with
utilizing blockchain technology within the Internet of Things
so basically everything or any interconnected device such as Amazon
Alexa – leads of autonomous drones and self-driving cars those are technically
Internet of Things devices and what I’m trying to do is essentially bring the
transparency and security benefits of the blockchain to basically host these
Internet of Things devices so you have a centralized platform not not centralized
but a standardized platform in order for those devices to talk to each other and
exchange data what do you mean by a standardized platform nobody wants to
really share their data they all want to keep it siloed under their corporate
umbrella which makes sense because that is how they generate a profit right and
as much as possible they want to extend their initial
IOT product to eventually a line of IOT products and here’s the limitation with
that so the business logic makes sense but there is an in curve in terms of the
limitations of the industry there’s no one industry that’s going to be a market
Dominator in the IOT space and that’s especially significant because well
unless you somehow manage to evade the wiles of antitrust regulators and have
billions of dollars of bankroll you can’t control the IOT space so the
alternative is you get different enterprises who have their own IOT
solutions who essentially work together it’s a cyber physical systems genie like
society will essentially tell this genie what it wants and the devices and
systems which are owned by different enterprises will essentially work
together in order to solve that problem and whoever participates in solving it
gets a cut of the profits and that’s that’s kind of the philosophy behind
blockchain itself right is this idea of cooperation oh yes absolutely so to
delve into the history of blockchain so so blockchain was originally devised
well it’s originally started out with Bitcoin in 2008 an anonymous writer by
the name of Satoshi Nakamoto he publishes the Bitcoin white paper and
basically his frustrations were with the central banking system and our current
the limitations of our current financial infrastructure so basically as he saw it
the reason why 2008 was able to happen was because he had a bunch of peers not
acting within the interest of the entire system and their actions essentially
caused like the 2008 housing crisis I’m not sure if you’re familiar with how the
details of those work but essentially it was like it all stems down to the
prisoner’s dilemma if you heard of it so oh so this is a very interesting age-old
psychological question so imagine that you and I went to jail alright so we
both committed some sort of crime now let’s say that the officer says if we
both admit we’re guilty right to doing the crime we only get two years at
prison right but if none of us say anything we all if not gonna say
anything we essentially get like let’s say five years right but then here’s the
catch so if you if you say that I did use if you declare yourself innocent and
you say that I’m guilty then essentially you go free but I have to spend ten
years and if I declare myself innocent you
declare you and declare you guilty I go free you’ve got ten years but if we both
say that we’re guilty about like we accuse each other of doing the crime we
both get life in prison so so the caveat to that is essentially what is good for
the individual is not necessarily good for the whole from a game theory
perspective it is much better off for both of us to just say nothing and just
do the three years however from an individual perspective my incentive to
go scot-free will you get like ten years in prison right then I mean that that’s
a very tempting incentive but I have to consider that you might do the same
thing so it’s sort of like a conflict of interest like yes I could say nothing
but if I say nothing I risk you betraying me so you go scot free and I
spend ten years but if we both betray each other we’ll both get life in prison
so that prisoner’s dilemma is essentially what Satoshi believed as the
crux of the whole 2008 financial crisis so he thought of he had this critical
thought experiment how can we design a monetary system that essentially
incentivizes people to act in the best interest of the group and that is
directly correlated you know to their own benefit so what he did is now he
like he was a cryptographer and he was a computer expert so what he did is he
designed a Bitcoin cryptocurrency so unlike your traditional currency which
is controlled by the Federal Reserve Satoshi essentially believed that that
was a huge problem because just like that one of the central cruxes of
Bitcoin is that it’s a cryptocurrency it’s the world’s first currency in which
you don’t need to trust anyone at all in order for it to function whereas in our
traditional financial system you need to essentially trust these custodians of
the financial system the Federal Reserve other financial institutions and trust
that they’re doing the right thing with monetary policy etc so that essentially
your currency will still be usable so essentially Bitcoin was released in
2008 the key features of it are essentially it’s determined by the
market so the market sets the price so unlike fiat currency the US dollar which
is determined by whoever controls in this case our Federal Reserve Bitcoin is
directly determined by how many people buy into the system so by buying in they
place and so essentially as more people buy
into the system the value of Bitcoin is directly correlated with that the other
interesting thing about Bitcoin is that there will never be more than 21 million
Bitcoin ever and that’s very important because
by having a hard cap you will not experience essentially problems like I
wouldn’t want to say inflation that’s not the technically correct term but by
having a fixed supply you have a lot more stability in terms of preserving
the purchasing power the the currency is designed to be purely digital that’s the
first part and the second part was you didn’t want to peg it to the whim of
like some person who controls that currency it’s designed to be of the
people and for the people so by it’s a trade off essentially by allowing it to
be flexible and letting the market set the price and not having one person
since you can decide what this is worth and how much of it everyone gets it’s a
lot more volatile and that’s an important part of a currency so
volatility is basically how much a fluctuation the value of a currency has
and you typically don’t want that in the currency because how do I know if I
wanted to buy bread for five dollars how do I know my five dollars it’s still
worth five dollars that’s why people haven’t really switched over yet to
cryptocurrencies because the volatility issue is a very big one and that came up
a few years ago right wasn’t there I could be crash oh absolutely so the
interesting thing about cryptocurrencies is that their life cycles are they’re
very volatile at the beginning of but once they reach like with any other
network phenomena they reach a critical mass of adoption essentially their value
will stabilize at a certain point so and that’s the thing that’s with blockchain
technology as well so they have this property is when they start out they’re
very vulnerable so blockchain and which is the technology
that supports Bitcoin is essentially it’s part database it’s part a set of
cryptographic protocols it’s part it’s a distributed storage and computation
platform that doesn’t rely on any single party or any single person to
essentially ensure that the system operates smoothly so blockchain
essentially operates like this imagine Google Docs right so Google Docs
essentially works by having everyone have ax
to that same document right if someone makes a change everyone gets to see it
right so blockchain essentially works by like imagine so that Google Doc is
essentially a record of all the actions that everyone has ever done on the
blockchain network right and just like how you can view who wrote what in a
Google document you could essentially do the same with the blockchain
so a blockchain is essentially you have a bunch of computers right and they’re
all talking to each other and as they’re talking to each other and doing things
they’re all storing what they did into like a file that’s essentially the
history of what everything everyone has ever done since the beginning of when
that network started and that’s extremely important because one you
can’t change the record so you have perfect accountability of what everyone
did what anyone did at any given time and if something breaks you can trace to
a amazing level of precision who did what and why so essentially that’s the
first benefit of the blockchain network and with the analogy for Google Docs
essentially this record everyone who’s running on the blockchain protocol has a
copy of that record so it’s not like and you can’t change it because if you try
to change it essentially people will you suspect that you know you’re trying to
cheat and then they’ll just boot you off the system or no or not listen to you so
that’s essentially an inbuilt security feature of the blockchain but the other
important part of the blockchain is it’s not just immutable so it’s like you
can’t just change the record but distributed systems blockchain included
have this interesting property called fault tolerance so-so fault tolerance is
basically like a certain percentage of the computer nodes in a network at any
given time you have to assume that certain percentage of them will not act
within the best interest of the whole but the just default tolerance is
essentially it doesn’t matter how many nodes are not acting within the best
interest of the entire system as long as it’s below a certain percentage
essentially the network will continue to function so that’s a very interesting
property so it’s sort of I would say blockchain is essentially an electronic
democracy so it’s about it’s whoever like majority rules
so whatever the majority of the computer nodes
on this network say is the proper record that will be the record now that will be
the main version of truth and even you have if you have a certain percentage of
nodes saying no we disagree with that as long as if it’s below a certain
percentage essentially the network will continue to function and it’s not like
those guys who are not acting in the best interest will break it does that
make sense yeah okay that’s interesting so it’s probably not the word impossible
but it would be very difficult for some sort of I don’t know the right
terminology but essentially for oh yes so people have discussed concerns about
is it possible to hack a blockchain absolutely it is possible to hack a
blockchain however an important thing to note is there’s a difference between
being theoretically able to hack a blockchain which it is and being
practically able to hack a blockchain so if we’re talking about if you want to
practically hack a blockchain you got to do it well it’s smaller because the the
one of the interesting properties of blockchain is essentially it gets
stronger over time and it stems from the philosophy that all the nodes are
continuously just like adding records so essentially what you have is that you
have like all the data all the information is packaged into a unit
called a block right and then you have multiple blocks and or chained together
by some fancy math function called you know hash base cryptography so you chain
those together and basically you have a chain of blocks that’s why it’s called a
block chain and it’s called a block chain because essentially as you
continue to use a network more and more this block chain grows longer and if you
want to hack into a block chain you have to essentially rewrite the entire
history of the block chain to where that to up until where that transaction like
let’s say if you’re trying to change this transaction you have to rewrite the
entire history that proceeds that transaction in order to make it fit
versus trying to change one thing at a time like if you were trying to change
something in a traditional cloud server all you have to do is just change one
record and you know I hope someone doesn’t notice but with a blockchain you
have to rewrite all the records all the transactions ever since the beginning of
when that blockchain was created within a 10-minute window in order to
successfully pull it off and you have to do it in broad daylight we know and you
have to do it where everyone can see you because remember this
this is a democratized electronic network so all these computer nodes are
up constantly checking for the version of the truth and if they see that you
know you’re trying to rewrite the version of the truth they’re just
booting you from the network so so back to the crux of why like yes
theoretically you can hack a blockchain so you can launch moderately successful
attacks when it’s small and there’s not a lot of peer supporting that happened
yes it has so there are ways to hack the blockchain directly and there are ways
to hack the blockchain not because of the blockchain itself but through the
way was implemented so we call these like side channel attacks
so essentially you hear of exchanges being hacked
so essentially you might not be able to hack the blockchain directly but you
could find more success into hacking applications or some sort of side
Channel and then just shifting gears a bit if we’re looking into the future
there were three stages of blockchains evolution and we’re only in the first
stage right absolutely so the three stages of blockchain is evolution so we
have blockchain 1.0 2.0 and 3.0 we are currently we haven’t yet reached the
peak of blockchain 1.0 which primarily deals with cryptocurrencies and
financial technology so essentially the direction that we’re starting to see
right now is we actually actually we have two camps in and blockchain so we
have the first camp which are made up of like libertarians I would say like maybe
anarchists or like pure Bitcoin maximalist these are the people who
believe that blockchain should I mean not blockchain but Bitcoin should be a
essentially and other cryptocurrencies should be this niche tool to essentially
have independence away from the contemporary financial institutions
essentially they are able to hold a currency that is essentially not
controlled by any one party or a person related to the government and they have
absolute freedom of who to get to essentially transact that currency with
etc and you have the other other camp which is more moderate so these are the
people who are looking to find mass adoption within the blockchain industry
so like yeah it’s a niche and it started out is this a niche tool but they want
everyone to use it because there’s utility in
like accountability and security aspects of a blockchain like you can put your
company you can track your company operations on the blockchain or your
financial transactions on the blockchain and essentially what you’re like there’s
huge benefit in the financial sector because of one one of the fundamental
utility one of the points of fundamental utility for a blockchain is essentially
you’re able to get rid of the middleman so it’s direct peer-to-peer transaction
and in the business world there are a lot of intermediaries especially is
something like escrow or like compliance officers with blockchain you don’t
really need that anymore because you’ve basically outsourced the compliance and
the management to software and you can’t bribe software you can and everyone will
have a complete record of like who’s doing what so there is no conflicts of
interest and there’s no corruption everything happens much faster and it’s
a lot cheaper and more efficient in the long run so there’s like a lot of great
reasons as to why financial institutions now are thinking of actively
implementing block chains especially banks banks haven’t really evolved based
on their from a long time and they see blockchain is like so one of the things
that they have to jump on the Bank bandwagon for or else risk being
obsolete because there’s just too many efficiency and security benefits from
the blockchain that you wouldn’t get anywhere else so we haven’t reached peak
adoption for blockchain 1.0 and because there’s still a lot of regulatory issues
and there’s still some engineering challenges that need to be resolved as
well as getting a critical mass both the public and other financial institutions
who accept it as a standard so right now we’re people are just doing pilots and
trying it out but we’re now starting to move past that because now we’re
starting to see some very successful use cases for example ripple ripple is
essentially a crypto currency in which you’re able to send remittances from one
person to another to another it’s like when you send money to a relative over
overseas or something so typically how it works is that like if you want to
send money overseas you have to pay something like – like Western Union
alright but with ripple essentially because
you’re essentially getting rid of the middleman
like Western Union or some other company in this case you’re able to charge a lot
lower because you don’t have the expense of you know the human capital needed to
upkeep that because it’s literally just software so essentially you’re able to
do that entire thing for a cheaper and a lot faster too so essentially what
happens is that consumers get to walk away with like if I send like my grandma
one hundred US dollars like she will get almost exactly one hundred US dollars
because like the overhead is so small whereas if you do that for contemporary
institution the overhead is a lot larger for that so we’re starting to see use
cases and it’s not just a ripple but there’s a bunch of successful use cases
that are starting to come out and the ones that are that don’t have high value
are starting to get weeded out over time so that’s blockchain 1.0 blockchain 2.0
is primarily about smart infrastructure smart cities the application of
essentially just like smart property and smart assets in general and that’s where
IOT really comes into the picture that’s really my line of work and then
blockchain 3.0 is primarily concerned about actually overhauling traditional
institutions from the ground up so they are more democratized by nature and
they’re running on this blockchain so there is more accountability there is so
there’s more accountability and there’s more security and there’s more
cooperability because now you have a shared set of standards that’s
essentially electronic cuz like essentially what happens is that it’s
supposed like Bitcoin and blockchain supposed to be a peerless borderless
technology in which as long as it doesn’t matter what your political
affiliations are or like what government structure like your home country is like
if you adopt a set of standards essentially you’re able to interact with
people like from the other side of the world in terms of like financial
services cooperation etcetera so an example of something like that would be
blockchain based voting so essentially I see a future in which you can literally
put votes on the blockchain and remember that whole immutable record thing you
can literally have a cluster of computers actively check the voting
history you know like the voting history of who voted for what right and make
sure that those votes are accurate Enders and
there’s not like a person tampering with the results of those votes and that’s
very important for democracy transparency and accountability are very
are basically two very important pillars for democracy and blockchain is a
quintessential technology in order to assist that so there’s a lot of great
things that seems about about blockchain moving forward is there any potential
for consequences or negative things coming out of implementing this kind of
technology negative consequences I would say come from their implementation so
right now a problem with the Bitcoin blockchain is that the people who have
the most money are the ones that are more inclined to control the
cryptocurrency which is ironic considering how the entire purpose of it
was to ensure that you have a fair balanced cryptocurrency that’s owned by
the people it’s not really centered around any one party so you see a lot
like I would say 60% of the Bitcoin nodes are actually centered in China so
essentially this presents a centralization problem because the
architecture was designed so that people around the world essentially set up
their own Bitcoin own to be able to you know receive and transact and mine their
own Bitcoin but it appears that one of the weaknesses in implementation is that
if you have more capital you have the ability to get more nodes and therefore
you have control over a lot of the supply so essentially what I would say
sociological or economic attack that they figured out is that essentially
have these things called Bitcoin whales so Bitcoin whales are essentially a
small minority of people who own a lot of the cryptocurrency and remember how I
said market controls the price so essentially their behavior whether it’s
buying or selling will have a huge impact on to the fluctuation of that
price so typical strategies that a whale what is that or a group of whales
essentially like dump they would essentially try to short their holdings
so shorting is essentially when you sell whatever asset you have so that you
cause it so then in incites a panic if your uncertainty doubt so that the the
price goes down so that you can buy back in so essentially with the same amount
of money that you had you get more of that asset so I’ve seen whales and try
the shorting tactic over and over again and especially if they had the money to
begin with in order to mine the cryptocurrency or to buy it outright
from the exchange they directly effect the price and evaluation of that and
essentially what happens those people who had weak hands in this industry now
he had the transfer of wealth from those who were able to hold and from like
those who were who didn’t have a lot of who did who had weak hands on in the
cryptocurrency to begin with so we’re starting to see an inadvertent transfer
of wealth but that’s purely from an implementation standpoint it’s really a
genius system because if you’re AME if you’re acting within the against the
best interests Internet of the network no matter what you do like people have
always have the option to opt out and really it’s the decision of the
overwhelming majority that gets to decide what like the essentially the
fate of that blockchain network or that cryptocurrency or whatever is hosted on
it before we end is there anything about this subject blockchain this is a very
well we’re living in a very interesting time because essentially this is
basically like the 90s this is like the 90s I when it comes to the Internet so
essentially like like to draw parallels there is this very slow build-up a lot
of experimentation there’s a lot of enterprises that come and go but then at
a certain point it starts to boom in a sense of which now you’re starting to
reach mass adoption so the history before was that people they’re like
there’s always a hype cycle when it comes to any new technology so what
would essentially happened was back in 2017 Bitcoin reached like December 2017
you reach like around 18 K right and people were so hype it was the next big
thing but what you had was a bunch of people investing in a technology they
did not understand so to reiterate again for everyone out there blockchain is
essentially it’s a new computing paradigm it’s a new storage paradigm and
it’s also a new a business transaction paradigm but instead of just transacting
with a middlemen in between your transactions now you’re able to directly
interact directly with the person you want to talk to without any intermediate
intermediary at all so there it’s not controlled by anyone the blockchain
network is essentially controlled by you the people who are actively using a
network the users are the owners there is no one person who was too powerful
and essentially there is accountability trust and security throughout this
network so that’s essentially what blockchain is and in terms of the
history so far so people got super hyped in December 2017 and of course that was
a bubble it popped people became disappointed investors became
disillusioned and now we were in this period of a long crypto winter so that
happened like we had that exact same period in the 90s with the internet so
people invested in you know comms and then that bubble bust and then
essentially what’s happening now is that we’re starting to see this a great
culling period of all these projects that don’t have value so the ones that
don’t have value will essentially get wiped from the marketplace and the ones
who do have value they’ll stay and essentially they will become the next
blockchain Barons they will become the blockchain Barons of this age those use
cases are the Amazons the Google’s the Facebook’s of the blockchain era so now
with ending I would say less than five years we’re going to see the use cases
and the companies that we will probably start to use on an everyday basis but
they’re built on the blockchain so it’s a very exciting time it’s not too late
to join and I would if anything since we’re not even past blockchain 1.0 we’re
still just getting started and it’s a very exciting future and I can’t wait to
see what it holds that’s francis mendoza from the block
chain innovation society share in the future of blockchain and the internet of
things we are in stage one of a three stage development of blockchain
technology and so the future still has so much to tell from cryptocurrency to
smart cities and for the state press I am Balan over stoles McNair

Future Now: Blockchain and the Internet of Things
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