5. Blockchain Basics & Transactions, UTXO and Script Code

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    see MIT OpenCourseWare at GARY GENSLER: Thank you
    for everybody returning. As well as I must tell
    you, when I begin the session with
    that little shh, I picked up from a.
    congressman in Baltimore.As several of you know,

    I ' ve spent. a great deal of time around politics. And also among my functions. in national politics was that I was the treasurer of.
    the Maryland Democratic Party. Which, if you.
    anyone ever before asks you to be the treasurer of.
    a state celebration, come. I can provide you some.
    recommendations concerning what that'' s all about. when your home state legislator asks you to do it.So I had to quiet down the.
    yearly Jefferson Jackson Day dinners. I'' d organize these large dinners,.
    and there'' s 400, 500, 600 people at these dinners. I couldn'' t do it. I couldn ' t obtain their focus. And Also Congressman Elijah.
    Cummings shows up, and also he just leans right into the mic. Shh. As well as it quieted the.
    entire area down. I said, Congressman,.
    what is this? Is this something you'' ve. discovered in national politics, something you gained from.
    your preacher, your priest? He claimed, it functions every.
    time, works each time. So Elijah Cummings provided.
    me that little task. Blockchain and.
    money, we'' re here. I understand it ' s a little. bit like eating broccoli these last pair of. courses, because we underwent cryptography, and.
    then we relocated a little right into agreement methods. As well as today, we'' re mosting likely to choose. that up as well as try to complete up the layout little bits of Bitcoin. I wished to introduce,.
    however, one walk-in. We'' re going to have. walk-ins every now and then in this class. Yet Patrick Murck,.
    he'' s hiding over right here with the cap in the hoodie. He'' s got the look. for a legal representative who ' s been spending his time around.
    Bitcoin for 7 years.Now, he ' s presently associated. with Berkman Klein at Harvard. And I didn ' t recognize Patrick. was going to be below, so I ' m calling him out. He ' s additionally unique counsel'. of the Cooley law office.
    As well as he has a number. of customers that try to do the right. thing by the legislation.
    But often they. discover themselves managing the Stocks. and Exchange Compensation or other penalty. federal government organizations.
    However Patrick was. additionally basic guidance to the Bitcoin Structure. As well as for a short while,. you ran it, didn'' t you, prior to it kind of went smoke? PATRICK MURCK: Yes.

    [FAINT] GARY GENSLER: Yeah. However Patrick'' s the type.
    of attorney that puts on a hoodie and a baseball cap. He'' s a Bitcoin legal representative. If you ever before require Patrick for. one of your entrepreneurial initiatives, I'' m certain Cooley regulation.
    firm will certainly such as recommending you, too. AUDIENCE: Do you take bitcoin? GARY GENSLER: What'' s that? AUDIENCE: Does he take bitcoin? PATRICK MURCK: I have. [FAINT] Actually, I'' ve. never bought a bitcoin, ever. [INAUDIBLE] paid 100% in. bitcoin, so it ' s all great. [GIGGLING] GARY GENSLER: So. Patrick, when you obtain paid 100 % in. bitcoin from a client, how much time do you hold it? PATRICK MURCK: Well,. it depends, right? TARGET MARKET: [INAUDIBLE] PATRICK MURCK: Often,. in the very early days– not long,.
    because I had to spend for my mortgage and my youngster ' s. daycare as well as things like that', and they wear ' t take bitcoin. So I ' ve marketed a great deal of.
    bitcoin for many years. Something regretfully, however. I never got them. I just earned them.
    GARY GENSLER: Gained them–. so you ' re like a
    miner, besides you '

    re a. legal representative who obtains bitcoin. [LAUGHTER] PATRICK MURCK: I. mine with my mind. [GIGGLING] GARY GENSLER: The study
    . questions for today was, we were going to. resort to that last piece concerning transactions and something. called the unspent deal result, as well as script code that.
    is a computer system code that'' s made use of inside of Bitcoin. We ' re mosting likely to chat a. little about the style includes bringing all of it.
    with each other, as well as specifically around the reading, which.
    was the academic pedigree of Bitcoin. Which is additionally a.
    checking out that Patrick appoints when he does his research study.
    team at Harvard Regulation, as well. And after that, yes, all.
    of you are mosting likely to have the ability to take part. And also we'' re going to take a. study among every one of you regarding that'' s Satoshi Nakamoto. Ah, yeah, yeah, yeah. Or would you instead do more.
    on deals manuscript? [LAUGHTER] All right, we'' ll do. a little of both.The readings,

    obviously, the.
    Bitcoin Academic Pedigree, which we'' re going to chat. around in the last component. And I'' ll
    do a. little cold-calling as well as get some responses regarding what.
    you assumed from the analysis or if you'' re still skimming it. And after that there was a.
    CoinDesk article, just making feeling of it all. Therefore as I claimed, we'' ll go. via the deals. We ' ll do a bit of.
    placing everything together and also the Academic Pedigree.We ' ll have a little fun. You all are going. to have a possibility to tell us that Satoshi Nakamoto. is, or was, or the board. So purchases– you'' ve. seen this graph prior to. Yet deals, the.
    layout in a purchase ledger– not just in Bitcoin,.
    yet truly everything– is somebody on one.
    side of a transaction and also somebody on another.
    side of a deal. So in Bitcoin, there'' s an input. And also the input inside
    of Bitcoin. is an ID of a previous output. So not just is Bitcoin a series.
    of blocks of details– each block that has 1,000 to. 2,000 private purchases– but in a sense, there ' s a. different chain that ' s going on. I occasionally believe. of a blockchain as, yes, there ' s the chain. of large portions of data, yet there ' s additionally a

    chain. of private transactions.Shimon, is that a hand increased. or simply scratching your head? TARGET MARKET: I'' ll be extra careful. GARY GENSLER: No,.
    that'' s okay.
    Shimon is a faculty participant. of the Finance division here at Sloan.
    As well as several of you may take his. Finance 1 training course, I presume. Somebody in below is,
    most likely. So the input is. simply truly the idea of any place the result was.
    You can consider a. chain of a purchase.
    Can anybody tell me where. all deals originate from? Where '
    s type of the genesis. of the value, if you adhere to a purchase.
    chain back to its origin? Hugo. AUDIENCE: Coinbase. GARY GENSLER:.
    Coinbase– so anybody intend to state what a Coinbase is? TARGET MARKET: It'' s a generation. of a fresh minted bitcoin.GARY GENSLER: Right,. so the generation of a freshly produced bitcoin–. not the method that Patrick Murck
    obtained it when he ' s marketing. his services for the law, however just how a miner obtains it,. they get their transactions. Bear in mind initially, 50 coins. was what happened at first back in 2009. Currently it ' s 12 and also 1/2 coins. As well as in'a short couple– perhaps it ' s around. 18 or 20 months', it goes
    to 6 and 1/4 coins. And also it keeps splitting fifty percent. and also half and also fifty percent,
    eventually to no Coinbase. However every purchase,. fundamentally, had to go back all.
    the way to Coinbase– some Coinbase, some 50 or 25 or.
    12 as well as 1/2 coins being provided. And also after that the result– so a transaction layout.
    is rather straightforward, in a feeling. The input is a previous outcome.
    as well as a digital trademark, and afterwards, to whom do.
    you intend to send it. And it'' s sent out to. Bitcoin addresses. That ' s why we
    invested. just a minute– we simply glossed over what.
    a Bitcoin address is. It'' s kind of a translation. to a public secret, but it ' s not similar.
    to a public key.And certainly

    , you require value. Value gauged in.
    bitcoins or satoshis, or if we'' re on the. Ethereum network, it would be an ether as well as. gas, and so on, et cetera.
    On 1,600 various. platforms, it could be a different native money. Lock time, I don'' t. assume lock time remained in any of the readings. Yet anyone intend to inform.
    me what a lock time is? It'' s relevant to several of. exactly how the technology goes.Anybody wish to take an assumption? Where'' s Alin? Not Alin the PhD, however Alin. from the digital money campaign. No? You'' re hiding. You wear'' t intend to say. what a lock time is? AUDIENCE: I assumed it'' s some. type of defense device for, I guess, dual investing. GARY GENSLER: It is a protection.
    mechanism, yet not a lot about double costs. Tom, did I see your hand up? AUDIENCE: This is a hunch. Is it when the.
    purchase is hashed? GARY GENSLER: It'' s when. It'' s about time. It ' s when the. transaction can take place.
    So now, it ' s. 2:45 on September 20. If you put a lock time
    . in at 2:50 or 2:55, it couldn ' t take place until 2:55. So you can actually. conditional the purchase.
    That ' s all lock time is. However you can state, it. can ' t happen until.You can place tomorrow ' s day. TARGET MARKET: The.
    counterparty establishes that, so it ' s like the. day on'a check? GARY GENSLER: It ' s a little. different than a day on a check. Since among the points.
    that gets verified in Bitcoin is, is that it will certainly not.
    confirm a purchase early. And also if you put October 6.
    on a transcribed check, the bank might still take'. it, although they probably shouldn ' t.
    So it resembles the. date on a check, other than it ' s verified and also. confirmed etc.
    I ' m mosting likely to take. Emily and after that Shimon.
    AUDIENCE: So if you were to establish.
    the lock time in the future, might'that ruin the.
    blocks'in the chain? What is kind of the. best chain of events that you ' re acknowledging.
    if you ' re picking to establish a lock time in the future? I presume the wider concern.
    would be, why would certainly you establish a lock time in the future?

    GARY GENSLER: Shimon,.
    were you answering that? TARGET MARKET: No, no, no.I wish to ask you, in the.
    [FAINT] concern section, is what objective does. it serve, ideal? TARGET MARKET: It ' s not an actually.
    Turing complete language, so you ' re not really attempting. to produce problems right here.
    However this is kind of a problem.
    GARY GENSLER: So. it ' s a condition. Due to the fact that at any. point, you might want a. problem of payment.
    You may want a condition.
    of payment on time. And also we ' re, in a. couple of slides, going to discuss the scripting.
    language, the machine language that enables
    . deals to happen. Shimon said, was.
    not Turing total. From the analyses,. any person desire to tell us what Turing full remains in. computer technology language?
    No? Anybody understand that Turing is? Any person see Replica Gamings. Anybody know what.
    the Turing Honor is? It ' s type of the Nobel Laureate. for computer system researchers. TARGET MARKET: Isn ' t that the. honor when the maker can actually can pass. as a human being? GARY GENSLER: Well, that ' s one.
    point related to Turing.But the Turing Honor. is a yearly award, type of like a Nobel Laureate,.
    however, for computer researchers. Turing complete permits.
    you to do loopholes inside of computer programs. And the manuscript language does.
    not permit that to occur. Every function requires to.
    kind of have some language. I understand Alin checking out.
    me to see I put on'' t dive. However to answer Emily ' s. question, it'' s just, there ' s so many various means. to condition a purchase. As Well As Satoshi Nakamoto. thought, well, let ' s placed it in here, right. in the transaction layout, that you can problem promptly.
    And afterwards two parties. could do that.
    To your question regarding. whether it could accidentally lead to double spending,.
    it'' s an excellent question.
    Can I hold it until we simply. do validation momentarily?
    So this is an one-of-a-kind. identifier for the input.
    But it ' s really distinctively.

    determining from'a past output.What ' s the block number? Is it from the 250,000 th. block or the 300,000 th block? So it takes. literally a block ID. And afterwards within that block,. which one of its 1,500 purchases might it be? So you can find any kind of purchase.
    on an entire blockchain by understanding the block, and. after that within the block, which transaction. It ' s just a data mechanism. on how to save information. And via this.
    system, there ' s a chain of purchases, as
    . well as a chain of blocks. And after that the'value we
    . chatted about that– I assume there ' s, if I. did my
    numbers right, 10 to the 8th satoshis. in every bitcoin.
    It ' s a little hard'. because I believe there ' s 10 to the ninth. gas in every ether. Which ' s a coin. That is what is a coin.
    When Satoshi Nakamoto did. this, it wasn ' t really a coin, due to the fact that it was a. question whether anyone would offer value. And till about 18. months later on, when those 2 pizzas chose.
    10,000 bitcoin, what was it? Or till somebody started.
    the initial exchange, a crypto exchange,.
    to trade that.So you can also have several. inputs as well as several outputs. As well as I ' m mosting likely to use an. example that I simply produced of, I intend to send out some bitcoins. to two different people.
    And I need some bitcoins. So I might get hold of. 3 former inputs. And these are just. Transaction ID 6, Index 3. Of course, it wouldn ' t be ID 6. It could be ID 300,000. But the factor being.
    is, order 10 bitcoin, so I wish to find three inputs. And I required to send out 6.
    bitcoins, let'' s say, to Amanda. You like that.
    And just due to the fact that you ' re. sitting up front, James, I ' m simply mosting likely to send 3. However I ' m not using Amanda ' s. name as well as James ' name. I ' m utilizing your Bitcoin address–
    Amanda ' s Bitcoin address,. and also James ' Bitcoin address.So as opposed to. being account-based, like if you have an account at.
    Financial institution of America, and you claim, I wish to send out $10,.
    I simply examine to make certain I have more than $10. In Bitcoin, I really have.
    to great individual transaction results that include up.
    to– in this situation, I wish to send 9 bitcoin,.
    6 to Amanda, three to James. Not actually, Amanda. So what'' s 10 minus 9? TARGET MARKET: 1. GARY GENSLER: Thanks. That was truly difficult. We go to MIT.
    However I could not. send out one back to me.
    I ' m going to send out. 0.9 back to me.This is kind of my change. So a Bitcoin deal.
    can either be equivalent, the inputs equate to the outputs. I can have sent out.
    one back to me. Yet I'' ve chose to.
    incentivize miners and leave a little additional, 0.1 bitcoin,.
    which would certainly be a great deal of cost, in fact. That would be about,.
    what, $640 or two? I probably wouldn'' t do that. I would most likely leave for a fee.
    10 or 20 or 100 satoshi possibly. I put on'' t recognize
    what the. current market is. However this is a purchase.
    Numerous inputs, multiple. results, yet you constantly have to return to on your own.
    What happens to these inputs. if this transaction really happens? They disappear. The actual inputs go away.
    when they go through this. Therefore inputs constantly.
    have to equivalent outputs. When a deal is verified,.
    one of the validation techniques is to ensure that the lock.
    time has really taken place, that you'' ve passed.
    the lock time. An additional validation point is.
    that inputs are above or equivalent to outcomes. If outcomes are.
    higher than inputs, the deal will.
    not be confirmed. The electronic trademarks.
    need to be verified, going simply back to.
    the prior slide.That electronic signature has. to be verified, also. And also that, this previous ID. and also index really exists. And this is getting to. your question Emily. It still exists. However these inputs,. as soon as you ' ve utilized them, they no much longer exist. in the data source.
    They ' re type of in the past. So that'' s the deals. That ' s the core.
    I recognize it ' s like. eating broccoli, yet it'' s a vital part of. all of blockchain modern technology. The Coinbase transaction.
    we'' ve currently discussed, so I'' ll slide over this rapidly. However it'' s a reward for. solving the puzzle. In the situation of Bitcoin, it ' s. fixing the evidence of work. Tom. TARGET MARKET: Sorry, can we go.
    back to the miner motivation. It'' s the 0.1 or 1 satoshis. And how is that various. than the cost of count on when you use a financial.
    institution as the [FAINT]?? GARY GENSLER: So Tom'' s concern. is, the miners ' business economics. Obviously, they obtain.
    their 12 and also 1/2 bitcoin, and they could obtain.
    some purchase fees. Tom'' s examine ' s the opposite side. Why is that any type of. different than paying some main intermediary? Any person wish to try doing this? I might cold-call, yet.
    does anyone desire to– this is an economics.
    question concerning markets.AUDIENCE: I would say. that the individual that is sending the deal. has the ability to pick just how much it will. pay for that transaction.
    And in the bank, it ' s. regulated, as well as you pay
    . Possibly that ' s one. of the differences.
    GARY GENSLER: All. right, so one distinction is that the financial institution is setting,. generally, a dealt with cost schedule, and this is.
    a decentralized market device for setting fees. Sean. AUDIENCE: The fee for.
    middlemans a whole lot higher contrasted to Bitcoin,.
    the purchase fees. GARY GENSLER: So.
    Sean'' s second factor is that, presently– this may. not be real in the future.
    But presently,. main middlemans are able to bill higher charges.
    than in this decentralized system. Alin? TARGET MARKET: I think that,.
    conceptually, it'' s not various from
    a. centralized intermediary. It'' s simply, the. features are the exact same. The amounts, perhaps.
    the quantity that I pay, the amount of the.
    charges are different, however the concepts are the exact same. GARY GENSLER: All right, so.
    Alin is generally stating, well, maybe it'' s. not so various. I suggest, though it could be.
    floating rather than fixed, it could be presently.
    reduced instead of higher, yet you'' re stating,. essentially,'it ' s concerning the

    same.One min, Shimon,.
    allow me just– since you'' re faculty. You ' re mosting likely to
    actually. tell us the response.
    AUDIENCE: Concern–. is this necessary? GARY GENSLER: Excellent.
    concern– it'' s not mandatory. TARGET MARKET: To make sure that could develop.
    a large imbalance of rate of interest. GARY GENSLER: So.
    it'' s not compulsory. Charges are market-based.
    As well as sometimes, like. last December, they'were truly high. As well as currently they ' re. rather reduced, partly because the Bitcoin network is.
    not humming at complete capacity. It can readily fit 1,000 to.
    2,000 deals a block. As well as it'' s not such as. there ' s a jamming to obtain 10,000 and 20,000.
    deals right into a block, as there was last December. I'' m sorry, Shimon. TARGET MARKET: I assume.
    it'' s very different, in the feeling that.
    you'' re essentially blowing up the fee in a lot of.
    [FAINT] inflation.So even if when

    you wear'' t transact, you ' re paying implicitly for.
    other individuals'' s purchases, and'that ' s going to. modification with time. To make sure that ' s actually kind. of a smart mechanism of exactly how, structurally,.
    these are going to move in time.
    in the network, as it with any luck matures. GARY GENSLER: Why don'' t. we take another below– Alexis. TARGET MARKET: That'' s like when. you have [FAINT] they'' re going to keep the cash. And also they might use it for.
    making [INAUDIBLE] or whatever. So they generate income on a spread. Whereas right here, for.
    the situation of Bitcoin, the cash'' s mosting likely to. remain in the system, and it ' s mosting likely to flow. to an additional miner, that is mosting likely to utilize it for.
    another purchase. It will certainly remain within the.
    same network, I would say, as opposed to just going.
    to another destination.GARY GENSLER: I hear you

    . But it could really leave. the network to lawyers, like Patrick. Or it could leave the network. if you use it at Starbucks, if Starbucks would certainly approve it. So I'' m challenging.
    your thought, but you can test my own back. Why wear'' t we liquidate
    with. Eric, and then just carry on. AUDIENCE: The distinction.
    may be in the point of view. From the person that'' s. came from a deal, it'' s primarily the exact same thing. Yet if you assume.
    concerning it as a system, there'' s no single entity.
    collecting all the cash from purchases. You have a network, a.
    [FAINT] network, of [FAINT] that.
    are getting that. And also besides, once we obtain.
    out past the 21 million bitcoin generation cap,.
    after that all the systems should be using.
    [FAINT] somehow. And purchase fees.
    would be [INAUDIBLE]. GARY GENSLER: So Eric increases.
    2 points that I'' ll– there are various other factors, however.
    2 that I wish to repeat.One is, this

    is more.
    decentralized perhaps today than the existing commercial.
    banking system, as an example, for purchase handling,.
    or the purchase processing that Visa and First.
    Information do, which we'' ll study when we obtain to repayments. So it'' s potentially. extra decentralized. I assume you claimed it.
    was a lot more decentralized, however I'' m placing the.
    word potentially in there. And also 2 is that, at.
    the very least in bitcoin'' s situation, there ' s two revenue resources.
    for giving the services. The miners do it for the.
    Coinbase deals, 12 as well as 1/2 bitcoin per block,.
    about $80,000 US per block currently. But likewise, there'' s. this little reward of charges, which, in time, will.
    have to grow as you drop. If it'' s just going to be.
    one bitcoin per deal, and after that inevitably virtually.
    0 bitcoin for purchase, there will need to be more.
    satoshis in the fee side. As well as some different coins– not Bitcoin– are.
    a lot more modeled on charges, as well as some coins are much more.
    modeled on mining rewards.The business economics–.

    Satoshi Nakamoto,
    whomever he or she was,. or were, if it'' s a group, needed to analyze.
    a lot of economics. They'' ve survived for 10 years. It doesn'' t mean that ' s the. best established of microeconomics for a blockchain system. Tom, you look really cynical. TARGET MARKET: I'' m skeptical.
    But possibly this. would certainly be the moment where I take my 12-hour dive. GARY GENSLER: That'' s right.
    So you ' re about prepared. for your rabbit dive? Perhaps. TARGET MARKET: Possibly.
    GARY GENSLER: So the. Coinbase deal we ' ve talked a great deal around. The benefit, at the very least in Bitcoin,.
    halves every 210,000 blocks. A very essential point.
    that Nakamoto put in is, you couldn'' t utilize your.
    Coinbase reward for 100 blocks. So it was kind of stale.
    or frozen for 100 blocks. I can assume of two.
    factors, however possibly you all would consider another reason.Anybody wish to give it a shot. regarding why you might do it? Xiaojian Target Market: Maybe. you mine the block, and also you ' re trying to mine. a block that shouldn ' t be– or it ' s not lawful. You spend the cash right. away so you can obtain– GARY GENSLER: This is. the primary factor that ' s spoke about, not. only in'the literature, however in the very early blog message,. was, well, just how lots of blocks does the chain have to go.
    prior to everyone really thinks it'' s consensus? You can have claimed 5, 10, 20. Satoshi selected 100.
    blocks, saying, that, with any luck,.
    is rather resolved, or around 1,000 minutes. James.AUDIENCE: If you mine,
    and after that you can spend, couldn'' t you just perpetually produce blocks and afterwards pay yourself as well as create extra as well as make even more and also then keep building up [INAUDIBLE]?? GARY GENSLER: So James is asking, might you simply kind of video game the system and keep mining and also costs and mining and also investing? AUDIENCE: Then your benefits go down.GARY GENSLER: Sorry, Aviva? AUDIENCE: After that your honors drop in time.
    GARY GENSLER: Well, that takes 200,000 blocks.
    TARGET MARKET: But if there are a lot of you doing that at the exact same time, then you speed up the– GARY GENSLER: So
    in some methods, that ' s what miners are doing.
    Yet they have to wait 100 blocks. And also so that was what Satoshi was trying to obtain at. If you have to wait
    100 blocks, it ' s possibly currently the agreement chain.
    It'' s possibly been so validated, unless we entered into the problem– Patrick, you weren ' t here. But several of the pupils elevated the inquiry, well, suppose one country as
    big as China walled off their whole network, and simply
    China went one means as well as the rest of
    the globe went an additional? The concept of the instance is that, within 100 blocks or 1,000 minutes, in some way that would be discovered.But if it weren ' t, you might have a bit

    of what James is raising as a question. However that ' s at the very least the concept of the situation. It ' s constantly videotaped as the initially transaction in the Merkle Tree. Extremely technological factor, yet it has to roll up right into that darn thing we were speaking about, the information compression at the Merkle Tree. As well as right here ' s a little enjoyable truth. You can add 100 bytes of approximate data in a Coinbase.
    You might say, why does he elevate this? Well, due to the fact that it ' s. simply an enjoyable little place that some individuals share their. creative wit, creative things
    , send secret messages. to every various other, that, buried in the. Coinbase purchases, there is an entire forensics. of enjoyable little points that in some cases miners. put in to the Coinbase, for those of
    you. that are artistic. The really first genesis
    . block had this sentence. “The Times, January
    3,. 2009, Chancellor on verge “of 2nd bailout for financial institutions.” That was a headline out. of the Financial Times that says” Satoshi Nakamoto put.
    in the first block of Coinbase.It ' s just a little fun place. There ' s a playfulness'that goes. on amongst miners, occasionally speaking with each other.
    Did you ever before obtain a message? Did any person send you– PATRICK MURCK: Not. that I ' m familiar with. I understand what you ' re.
    speaking about. There ' s one miner that likes. to place Catholic catechisms in.
    GARY GENSLER: That has actually placed. in the whole catechism? PATRICK
    MURCK: In every block,. there ' s a little catechism that he places in. It ' s a Allegis mining swimming pool. It ' s a tiny one. So'there you go. GARY GENSLER: There you go. And do they pay you. in bitcoin, also? PATRICK MURCK: No,. they ' re not a client.GARY GENSLER
    : OK.'So all of it rolls right into a data source. called the unspent transaction output. These are the. unspent transactions. If it ' s been invested,. it'' s kind of
    burned. And bitcoin purchases. that haven ' t been invested fall right into this. And you can utilize it. It ' s developed because it.
    speeds up the entire system. Instead of going back and also.
    looking for all these points, there'' s really a. database that has all the unspent deals.
    I consist of in here.
    what I discover as a kind of intriguing. revelation or paradox.
    When Satoshi built Bitcoin,. and for the 16 variations that have actually come considering that.
    over the one decade, all the programmers, the.
    Bitcoin core designers, have actually maintained the unspent.
    transaction output, out a blockchain.
    especially, but in a data source called a LevelDB database.So those of you that

    are closer. to computer scientific research than
    I could claim all the pros as well as. cons of a LevelDB data source.
    But I ' m simply. observing that, even within the most used first. central database for blockchain called Bitcoin, they picked. to use not a blockchain, however, fundamentally, a much more. requirement data source to maintain the unspent transaction output. Now, in a feeling, it'' s all part. of this blockchain option'. I ' m just stating,. it ' s one data source within the blockchain. world that ' s really not a blockchain.
    It ' s just kind of an. interesting paradox.
    Yet it additionally kind of. states, financially and technically,.
    Satoshi was attempting to create a money system. He wasn'' t attempting. to make use of blockchain for each bit of data. So this is the actual size of.
    the unspent transaction output. If you can'' t see, there ' s– I think it ' s around. 50 to 60 million. It'was higher.
    There had to do with 60. million unspent. It ' s not 60 million.

    bitcoins, since there ' s concerning 17 million bitcoin.So you could average it out.
    You can state, well,. each purchase has less than 1 bitcoin. Well actually, there ' s been. surveys and research studies showing that concerning fifty percent of these.
    54 million deals are so little that they pass the.
    regard to– they'' re called dust. That there ' s so few.
    satoshi that it'' s not also worth the costs.
    to try to retrieve them. They just amount to much less.
    than a fifty percent a percent of all the outstanding.
    bitcoin, but they'' re simply dirt. So perhaps out of these 54 million.
    unspent transaction outcomes, fifty percent of them will certainly never.
    be used, because it'' s not economically worthwhile.It ' s like the dimes

    in'. the top dresser cabinet that you all could not invest. There ' s this comparable'thing here. Hugo. AUDIENCE: Yeah, I guess I.
    have a question regarding that. It could not be.
    possible currently, however maybe with layers on top of.
    bitcoin that people can do these micro-transactions. Because like, our dimes.
    could be worth a great deal of money, [INAUDIBLE] GARY GENSLER: So.
    Hugo is raising that, much like the pennies in.
    your leading dresser drawer could be worth.
    something eventually, what I'' m referencing as.
    Bitcoin dust, regarding half of these unspent transaction.
    outputs, a satoshi below, 10 satoshi there, might.
    eventually deserve something. Asset. It'' s similar to the dimes in.
    your leading cabinet cabinet though. Have you lost them.
    in the meanwhile? They may be worth something. However in the meantime, have.
    you lost the personal trick to those little satoshis? I place on right here 3.
    minutes of time simply to offer you the.
    sense of the actual number of deals.
    that have happened.There ' s been 342

    million. deals on the Bitcoin network to day, or.
    as of a day or 2 ago when I put the slides together. So of the 340.
    million deals, only about 54 million.
    are still outstanding. The other 290 million have.
    been invested, if you wish. Yes. TARGET MARKET: So after that where are.
    these outstanding purchases saved? Are they still being consisted of.
    in the blocks themselves, where you add them.
    to the [INAUDIBLE]?? GARY GENSLER: Which superior.
    transactions, the 54 million that are still available? The 54 million all reside in.
    a data source within the Bitcoin software called the unspent.
    deal outcome, UTXO. As well as UTXO– these aren'' t. letters I ' m composing– that ' s a data source, 54.
    million purchases. Separately, they are in fact.
    in the blockchain itself. So all 340 million deals

    . that have actually ever before taken place remain in the blockchain.But to make it much easier for. the software program, the 54
    million that have never been spent. reside in a software application. Does that answer the question? Collaborate with me. TARGET MARKET: So it'' s a. dispersed data source among all the various nodes. GARY GENSLER: Correct. All 10,000 of the nodes.
    can have the complete UTXO collection. Some budget service providers.
    have the full UTXO set, but they wear'' t need to. Somewhat lightweight nodes.
    usually wear'' t, but

    can.But a lightweight.
    node would certainly never ever want to have all 340 million.
    and also the full blockchain. So fundamentally, they'' re. in multiple areas, since they'' re in the complete.
    blockchain, 10,000 nodes. As well as they'' re additionally in the UTXO,. not just on the 10,000 nodes, but periodically elsewhere. Alin. TARGET MARKET: So I heard you claim.
    the word spent transaction, which is a bit deceptive. Due to the fact that a purchase can.
    be invested and also not spent. Because, as an example, you.
    would certainly have 2 outputs. One outcome is invested by.
    a future deal, and the other.
    result is not spent. So it'' s a little bit deceptive.
    to say invested purchase, since that only takes place when.
    the deal has only one output which output is invested. GARY GENSLER: Well,.
    I'' m using it gently. I'' m stating that, of the 340
    . million deals that have occurred, 290– TARGET MARKET: Have an.
    result that is invested, or what are you claiming precisely? Due to the fact that transactions.
    have numerous outputs.They may have n, and. maybe k of them are invested.
    So the other. outcomes are unspent. GARY GENSLER: I'' m saying. there ' s 340 million– if I'did my data search. appropriately– and I ' m fallible, so I might not have
    . Yet if I did my information. source appropriately, there was 340 million.
    previous results. 290 million of them are gone. AUDIENCE: OK, so after that you.
    ought to state transaction outcomes, because those are various.
    than deals. GARY GENSLER: Yes. With the exception of it was.
    easier to place TXS. But of course, Alin'' s information. is, I believe, exact. AUDIENCE: [FAINT] so people can recognize that there
    is a distinction. in between a purchase as well as a deal output.GARY GENSLER: In significance,.
    what Alin'' s stating is, there ' s presently 54.
    million transaction results in the UTXO, which.
    also claims results. There had been, in the past,.
    one more 290 million outcomes that have already been invested. Are we together? So there'' s a scripting language.
    There ' s a bit. of computer code.
    I claimed there was no requirement. to take any type of computer scientific research prior to you were below. As well as my own computer system.
    programming is so old, since when I was programming,.
    it was in Fortran and also APL.And you can look that up. It ' s type of like. around with picture writing and also
    you know the Rosetta Stone. However Satoshi Nakamoto. determined to place a little bit of computer programs inside. And I'' m not going
    to. get the matter right, however there'' s several hundred,.
    but not several thousand, little operations.
    and codes that you can make use of in the Bitcoin manuscript. It'' s not Turing. full, which indicates you can'' t do a great deal of the. points that you can do in all the rest of computer technology. But it ' s more safe. In'essence, it has.
    less strike vectors. It ' s harder to bring.
    down a bit. It ' s a shows.
    code, as I said. For those interested,. it ' s called stack-based, where you
    kind of step the. code over one at a time'as it ' s being performed.And it gives some flexibility. As well as back to Emily'' s question. about why there was lock time, or Shimon'' s, scripting code. permits some conditionality, that it appears that.
    Nakamoto was trying to offer some.
    capability to condition a deal on events, yet.
    not so much conditionality, a lot versatility, that he.
    needed a Turing total. So he kind of, I'' m going
    to. state, picked a midway location. I think, you could.
    have actually developed Bitcoin and also claim there was no.
    scripting language. It was just mosting likely to be a.
    straight direction, relocating this input to one more result. Developed a bit of.
    computer system code, yet not a whole lot. That'' s what I think of the. business economics as well as the market for this. And also next Tuesday when we.
    speak about wise agreements– and also I guarantee you,.
    there'' s a factor for
    the madness of. my speaking about Turing full and scripting code. Since following Tuesday, we'' ll be. talking concerning smart agreements where they'' re a lot. a lot more flexible.
    Therefore this is type. of the foundational– as well as you put on'' t need. to understand anything more concerning computer system
    . scientific research than you desire, unless you choose Tom.
    down that bunny hole and spend even more time analysis.

    So there'' s four different kinds.
    of, I call them manuscript kinds. They'' re not actual manuscript. words, however you will certainly check out these every so often. And I simply desired.
    to cover these 4. The UTXO, bear in mind, has to do with.
    54 million deals. And also there'' s been a. great academic paper that I didn'' t designate that
    . was written earlier this year that investigated.
    the entire 54 million, every one of the unspent purchases. And this is just how it broke down. 81% are deals that send.
    to a hash of a Bitcoin address.Eight, 9 years back. when Satoshi produced this, that was not the most. preferred instruction.
    However it ' s essentially. sending an outcome to the hash, the compression,. the dedication of a
    Bitcoin address. We ' re now as much as 18%. This didn'' t exist three.
    as well as four years earlier, really. But 18% go to a.
    conditional script. It'' s a hash of a. conditional script. So somebody saying, Emily,.
    it'' s not also concerning time.'It ' s like, you can. just obtain it when all these other guidelines.
    that remain in the scripting language happen. And I'' m mosting likely to conceal the.
    conditions in a hash of it. And after that only 0.1% goes.
    the means that he first pictured nine years earlier,.
    straight to a Bitcoin address. So it'' s either to a hash. of a Bitcoin address, a hash of a conditional script,. and a little much less than 1 % now most likely to numerous trademarks. Definition, you require two out of.
    three or three out of five. Or think it or otherwise,.
    this academic paper shows that some claim 0 out of 1. Currently, it'' s tough to believe that.
    someone erroneously configured something to visit 0 trademarks,.
    but evidently someone did.So I just wished to.
    provide you a feeling there'' s some adaptability in the computer
    . code, not a lot of flexibility, yet just sufficient that you can do.
    things that are actually useful. As well as they'' re mosting likely to address a. lot of obstacles for Bitcoin. Hugo discussed layer 2. We'' re going to be discussing.
    layer 2 later in the semester, where there'' s an entire means to place. modern technology in addition to Bitcoin. As well as it'' s due to the fact that the. scripting language is there that you can do that. Any concerns on script? I know I'' m attempting to cover.
    a huge, substantial subject in 120 seconds or less. No? So just back to the entire– this is simply a review.What have we '

    ve discussed? There'' s that little bit. visuals once more. It ' s simply a bunch of blocks. That ' s what a blockchain is. Though today, we recognize. that underneath the blocks, we have an additional chain. I usually consider two chains– the chains of blocks. In Bitcoin, there ' s about
    . a fifty percent a million blocks. Yet below that, there'' s. all the deals that are, in reality, chained, also. 54 numerous those results.
    have not yet been spent and 290 million outcomes.
    have actually been invested. Yet beneath regarding a.
    half a million blocks, there'' s been 340 million.
    outputs, in a manner of speaking. It produces a database. Bitcoin is a.
    purchase database. Next Tuesday, we'' ll talk about. an account-based data source in Ethereum.But maybe

    a journal. which is transactions or a ledger which is balances. Satoshi Nakamoto decided.
    to do transactions right here. Somehow, I think it'' s. due to the fact that it was fewer attack vectors. Probably a little.
    bit more safe, however I'' m not totally sure. As well as until you solve the puzzle.
    as to that Satoshi Nakamoto is, we won'' t recognize the response. Naturally, hash functions.
    we spoke around, and also digital signatures,.
    and also a consensus protocol. So I like to think about.
    it in 3 pails, whether it'' s for a. supper party discussion or digging right into three lectures. It'' s the cryptography itself. We did that last Thursday. As well as if you need to.
    keep in mind anything, it'' s just 2.
    cryptographic primitives– hash features and also
    . digital signatures. How lots of people believe.
    they kind of approximately have what a hash feature is? All right, so I.
    shed half of you. [LAUGHTER] All right, exists anything.
    I can do for Lauren'' s table
    ? I didn ' t see a. solitary hand rise. Are you reading.
    your Facebook web page or are you listening.
    to the course? You'' ve got your computer open. What'' s your name. AUDIENCE: Matthew. GARY GENSLER: Matthew.
    All right, that might. have been that'you weren ' t paying attention to the course. Thank you. Exactly how can I aid in what.
    a hash feature is? My promise is to.
    bring everyone along. Nobody at your table.
    stated you even about got what a hash feature is. I'' m not attempting to. humiliate any person.'I ' m attempting to work this with. Nicholas, so give me a baseline. Did you review any kind of.
    of the readings? Maybe not. OK. AUDIENCE: I have, yes. GARY GENSLER: You have, OK. Hash functions came.
    along decades ago to aid assist in.
    database monitoring. Sometimes it'' s. called a pc registry. It ' s taking a great deal of data.
    as well as diminishing it down, pressing it, reducing it,.
    to possibly a collection of numbers.I think about it often as. a zip code for information. Down in Baltimore,. Maryland, I'' m in 2120– well, I expanded up in 21208. It was my moms and dad'' s postal code. I won'' t claim my present. We ' re being videoed. [GIGGLING] And also so I think of it a.
    bit like that. So a hash function that has.
    absolutely nothing to do with bitcoin came along to take a lot of.
    data as well as produce a computer registry. But through that, it likewise.
    became a method to do a commitment. Yes, your given name? AUDIENCE: Dana. GARY GENSLER: Dana? TARGET MARKET: Yeah, Dana. What enters into the hash feature.
    and appears as a hash, that'' s what I don ' t understand. GARY GENSLER: So what goes.
    in is any type of collection of data. Today, that could.
    be an entire film. It might be a photo of.
    everybody in this area. At first, it was primarily. alphanumeric data. Yet because, in. computer system technology, all information can be broken down. to a series of windows registries of 0 ' s or 1 ' s– computer systems started with–. actually the initial one began with computer system registries that.
    were either switched on or off.If they got on, call that a 1. If it was off, call it a 0. I'' m unsure which method it goes. I keep considering Alin. As well as so all information can.
    after that be brought down to a collection of 0'' s and also 1. As well as if you place 4 0'' s and also 1 ' s. before each various other, 2 times 2 times 2 times 2, 2 to the.
    4th is 16, suddenly, you see if you maintain.
    going 2 to something, you can get a great deal of information. So relax to.
    address your question Dana, when we chatted last.
    week regarding The New york city Times crossword problem– The New york city Times.
    may, if they wish, take the remedy of their.
    crossword problem and also hash it. And after that Stephanie? AUDIENCE: Yeah.GARY GENSLER: Stephanie likes. to do The New york city Times crossword challenge. And she wishes to know if she. correctly completed The
    New York Times crossword challenge. The New York City Times could. claim to her mobile phone, we ' re not going to really. provide'you the answer, yet we ' ll offer you the. hash of the solution. And also after that when she ' s ended up. as well as she'presses a switch, her application could say.
    whether her solution appropriately hashes to their own. TARGET MARKET: [INAUDIBLE] GARY GENSLER: Please. We'' re attempting
    to. find out right here together.
    TARGET MARKET: In the. situation of a blockchain, it ' s whatever dated you. loaded to the blockchain, and afterwards in Bitcoin, it'' s. simply the transactions.Is that right?

    GARY GENSLER: So in.
    Bitcoin and blockchain, they utilize hash features.
    in several huge ways. Everything you said was.
    proper, other than for the one thing when you claimed, it'' s simply.
    Because they actually make use of. hash features in the center of the evidence
    of job. Since the hash. pointer factors– block 3 points to obstruct. 2 as well as there ' s hashing.
    They use the hash feature to. press a bunch of information, what I call the Merkle.
    Tree, but it'' s taking 1,500 or 2,000 transactions.
    and pressing it right into one hash.So they '

    re hashing all.
    of these points up. It utilizes hash features in the.
    middle of the Bitcoin address. So the hash function.
    resembles electricity in the center of it, nearly. It'' s most likely used.
    six or eight areas, and also some I don'' t
    , in. any kind of method, understand myself or need to comprehend. Nicolas, how are we doing? Did we obtain a little closer? TARGET MARKET: Yes. GARY GENSLER: Lauren, did.
    we get a little closer? AUDIENCE: Yeah. GARY GENSLER: Matt? TARGET MARKET: Oh, yeah. GARY GENSLER: You'' re there. AUDIENCE: I ' m not there
    . yet, however I'' m better. GARY GENSLER: Drop In. Send me an e-mail. It'' s I'' m here like four days a week. Ben. AUDIENCE: So I assume.
    the time that I actually recognized hash.
    features was when I saw someone do a real-time demo.It ' s a web site called.
    [FAINT] Mind Budget. However you key in text,.
    and also in real time, it transforms it right into a hash. So GARY GENSLER: State the.
    site once more, Ben. AUDIENCE: It'' s GARY GENSLER:–.
    a recommendation. TARGET MARKET: You can additionally just.
    Google Mind Pocketbook blockchain. And you can enter message,.
    and also you see in real time it converts it right into.
    a Bitcoin address. If you change one letter, or.
    make one in uppercase or one in reduced instance, it.
    modifications in actual time. And it'' s just, you put any. text in, you put a password in, as well as it transforms it into.
    a blockchain address. And that'' s all a hash is. It translates message right into a hash.GARY GENSLER: Or an entire movie. We discussed the. network consensus, just how
    to actually settle on. the state of information without any centralized authority. You wear ' t have a main. financial institution or a commercial bank or a Facebook or a.
    parental system, if you wish. It'' s all of us out. there on the play ground figuring it out.
    together in some way. TARGET MARKET: Sorry, I.
    have a quesiton right here. For the proof of.
    work, my concern is, as an example, I.
    make a purchase, does it indicate I need to wait for.
    10 mins for the deal to be finished? Or for instance, when we do.
    Venmo, it'' s like instantaneous. I can quickly.
    obtain the outcomes. GARY GENSLER: Anton'' s. concern is, does it imply I need to wait 10 mins? Venmo therefore many other payment.
    techniques can go much more quickly.The solution to

    you is, yes. As well as that is just one of the.
    business difficulties to blockchain as we.
    understand it in Bitcoin. There are specific strategies.
    to that, layering in technology in addition to, they call it.
    layer 2 or lightning network. We'' re not going to dive.
    into lightning network. But everyone needs to hold.
    onto Anton'' s question.
    It ' s the ideal inquiry,. that if all of you bring your crucial reasoning.
    to this class about markets and also regarding industrial facts,.
    a little about the law and a little bit.
    about technology.Because that ' s what.
    we'' re trying to do. It'' s like, oh, well.
    does this actually matter? Will it work? Hugo. AUDIENCE: So simply a point.
    of opinion right here– GARY GENSLER: Contention? TARGET MARKET: A little bit. GARY GENSLER: Oh, excellent. I like that.AUDIENCE: So if
    you recognize the person that you'' re negotiating with, you can approve the transaction with 0 verifications. As long as it obtains into the mem pool and has a practical cost connected to it, then it will eventually obtain consisted of on a block, which'' s most likely great enough for the majority of people. GARY GENSLER: So what Hugo is stating is, an additional technique is to take counterparty danger, that Anton'' s– back to Anton ' s. concern– does it mean you have to.
    wait 10 mins? The actual technical.
    response to that is, no, you wear'' t have to wait. 10 minutes, unless you want final negotiation,.
    if you desire finality with no counterparty.
    danger, no commercial risk.Hugo is saying

    , well,.
    if I'' m ready to take some economic or commercial. counterparty danger, which is, in financing, you take. all of it the time, then maybe I can
    do it. in much less than 10 minutes.
    And also as a matter of fact, even. Starbucks, when Starbucks accepts your.
    credit scores card swipe, they'' re taking a little.
    bit of counterparty threat from the repayment handling.
    firm First Data. I don'' t mean to state that. it might not be additionally from Visa and the financial institutions. However I'' ll simply
    say. the payment system has some counterparty risk.Because last

    in our payment system doesn'' t occur. within seconds.
    So the real response–. thanks, Hugo. Tidy me up once more. You ought to do this constantly.
    Everyone must cleanse me up. It ' s that last.
    negotiation can take place. And so you need to.
    locate various other services, whether it ' s some.
    commercial setup with counterparty danger or. various other technical industrial arrangements.
    Shimon? AUDIENCE: Well, I ' ll. make a counterargument, which is that, 10 minutes is. not final settlement, right? Due to the fact that maybe forking. So it'' s essentially. the probability of the finality. rises with time, which is connected with exactly how.
    many blocks are affixed to [INAUDIBLE] GARY GENSLER: So Shimon'' s point. is that, also in 10 minutes, your possibility of. finality is not total. Because the block.
    may not be the block that'' s included

    the lengthiest chain.And lots of people. have claimed, you possibly need to wait three.
    blocks or six blocks. I think the lengthiest– I'' m mosting likely to use. the term loosely– orphaned chain has.
    been five blocks long. And also in Bitcoin, what'' s. the longest orphan? TARGET MARKET: It was.
    an unintended fork. It was 20 or even more blocks. Due to some insane things.
    that miners were doing, they accidentally.
    forked a blockchain. AUDIENCE: OK, as well as.
    what year was that? TARGET MARKET: So look.
    up March 2013 fork. And also there'' s another fork. afterwards, in 2015 perhaps. GARY GENSLER: Yeah, someone'' s. been down the rabbit hole. [LAUGHTER] All right, there'' s some. still probabilistic danger. Aviva, and afterwards we'' ll go on. TARGET MARKET: What'' s a fork. GARY GENSLER: So I.
    put on'' t have the chart up. Yet if you bear in mind,
    . there was the slide that showed the longest block.It was in black

    . As well as it had little purple blocks. That'' s a fork.
    There ' s some forks that wind up. being that both chains proceed for a long period of time. They ' re called tough forks. And also there is something called– Bitcoin as well as Bitcoin Money. have appeared of that.
    Many, the manner in which Alin was. using it, are disposed of.
    I ' m sorry, behind you,. remind me of your initial name?

    AUDIENCE: Erin.I don ' t understand.
    Allow me recognize if it ' s. not the ideal'time to ask this question.
    However I ' m getting a little bit baffled. between the most vital points we currently need to. understand, as well as the distinctions in between the
    innovation of. mining Bitcoins versus just transacting on the blockchain. What are the significant.
    distinctions we require to understand? GARY GENSLER: Very.
    good question, Erin. Erin'' s question of, what do. I require to understand about mining, what do I require to know.
    about deal, is it identical? I say sorry. They overlap, however.
    they'' re not the very same. So consider a Venn diagram. However it'' s a very good question.
    The essence of mining is. developing a motivation framework
    where there is no. main authority to confirm as well as put a new.
    collection of deals or data– I'' m going to state extensively, information– into the ledger, into the.
    approved state of what fact is. So mining assists with that. That'' s that whole process. In essence, that reaches.
    choose the next block of information? Purchases are included in the.
    information, but it'' s not identical.Mining is truly important, however. it ' s not the only element. In regards to.
    deals, then you have to actually think.
    of, well, there'' s this other point going on. Well, there ' s been 340 million.
    of these in the Bitcoin network until now. And has it been utilized currently? Has it been spent? Does it have a suitable.
    digital signature? If there'' s a time lock on
    . it, is there a problem? Might there even be this.
    little bit of scripting code that places various other.
    problems, like there has to be multiple trademarks? Has it been double spent? It was a great concern. They overlap a great deal. Something you can.
    simply bear in mind is, mining has to do with that there'' s. been a fifty percent a million blocks. Transactions, there'' s. been 340 million. So there have to be.
    something else going on in all those purchases. Does that help a bit? Kelly? AUDIENCE: Because we'' re. speaking about all the technical functions.
    as well as how they overlap, among the questions was,.
    what part of blockchain is novel to Satoshi? Is the uniqueness in.
    bringing all of it with each other, or is it one certain thing? Due to the fact that the paper.
    discussed the journal and creating the.
    reward, and afterwards type of solving the whole.
    Oriental Generals Problem.But I don ' t actually comprehend. Was there a particular.
    thing that unlocked the– GARY GENSLER: So.
    Kelly'' s concern, which is the heart of the. research questions is, what makes the entire Satoshi paper novel? Is it simply bringing.
    everything together, or is there something much more? I'' ll give you a hint. I believe there'' s another– I think that the wizard can.
    be just in uniting points. That in itself can.
    be large brilliant. AUDIENCE: There'' s likewise. the component that, creating the worth in the currency. Yet I don'' t know if that ' s–
    GARY GENSLER: Right, so. producing an incentive structure within there. Others? Derek.
    AUDIENCE: Yeah, I. have a concern.
    GARY GENSLER: Concern, or'. solution to Kelly ' s question? AUDIENCE: No, I'had an inquiry. GARY GENSLER: All right, I ' m. going to hold your inquiry,'Derek, simply for a second.Who ' s going to aid. me with– because
    it ' s central to the study concerns.
    TARGET MARKET: Simply. another point to add– the evidence of work that. Satoshi did on the agreement to [INAUDIBLE] it ' s additionally novel.
    GARY GENSLER: Yeah. But unique, though,. didn ' t Adam Back already do some. of it in hashcash. So its application was novel. I appear where I think. the brilliant is bringing it all together, as well as using.
    Adam Back ' s evidence of work in a way that really.
    resolved double spend. Adam Back was not dealing. with a double spend issue. He had different obstacles. It was concerning e-mail spam.
    Honestly, it didn ' t. even work with email.AUDIENCE: [INAUDIBLE] we.
    weren'' t counting [FAINT] job as a completely.
    unique point, his short article discussed how.
    it was already published. So I presume it'' s the application. GARY GENSLER: It ' s the
    . application specifically to the double invest. Currently, Patrick Murck,.
    would certainly you address it after that? This is someone that ran.
    the Bitcoin Structure, however he'' s an attorney, you know? PATRICK MURCK: I assume.
    that'' s dead-on. So typically– and I assume they.
    address it because particular paper– when somebody states,.
    what was a point that was various about.
    Bitcoin from everything else, the answer is Nakamoto.
    Consensus, right? And Nakamoto Agreement,.
    being the motivation framework pulling every little thing together.
    as well as aligning everybody to really develop.
    relied on signing events for this database, without.
    having to actually trust or identify those parties.And that ' s something that'. truly hadn '
    t existed previously. And also so that ' s actually unique. That'' s sort of the. innovation that I think you can associate to.
    that particular white paper. I likewise use this as a way.
    to give a tidy meaning of blockchain, which is a.
    severely abused term, as I'' m sure you ' ll find via.
    the remainder of this class.It ' s

    claiming, to.
    me, a blockchain is something that is birthed.
    from Nakamoto Agreement. Blockchains, as they.
    talk about in that paper, have existed for decades. That'' s not even a. unique data framework. Yet utilizing that to develop Nakamoto.
    Disadvantage– that'' s the important things
    . It constantly sort of. comes back to that.
    Anyways, maybe a much longer. discussion than you desired. GARY GENSLER: Great,.
    there we have it. You currently recognize that you'' re
    in a. course that has guest speakers. I do intend to claim on the guest.
    audio speaker point– and also Derek, I cognizant that.
    you have an inquiry, however we have 12 mins approximately. Next Tuesday, Larry.
    Lessig, who in some cases drifts right into this course,.
    has actually consented to visitor lecture with me. As well as so we'' re going
    to. co-do smart agreements. And also let me simply claim a.
    bit concerning Larry.You kind of

    see him right here. He bicycles over from Harvard. He'' s a constitutional.'scholar that ' s a remarkable. constitutional scholar.
    As well as although he came to be. a full professor at Harvard, they
    swiped him away. from Stanford in fact, where he was a full.
    teacher, as well, easily. But he'' s thoroughly created. Anybody in below a West Wing.
    follower, the tv series West Wing? He is the just– do you understand that Larry.
    Lessig remained in West Wing? AUDIENCE: No. GARY GENSLER: Now you do. Well, Larry was. As well as Christopher Lloyd played.
    Larry Lessig in one episode. Yet you'' ll go back
    and also'. you ' ll discover the episode. As well as Larry has a funny.
    tale about watching the recording of it. But Larry is a constitutional.
    scholar over at Harvard.He clerked for Justice. Scalia on the Supreme Court. He clerked for Posner. over in Chicago.
    He knows a whole lot about agreements. And also so I asked him if he'' d. help teach wise contracts next Tuesday. So Larry'' s mosting likely to– we ' re. mosting likely to Dog and Jeff it up right here next Tuesday. View out, Patrick.
    You could be up here eventually. This is not a course. that we ' re mosting likely to have a great deal of
    visitor lecturers. Later on in this. term, I really hope,'we ' re still in validating.
    Jeff Sprecher, that'' s the president.
    of Intercontinental Exchange, runs the New York.
    Stock market. Jeff is possibly joining us.
    on, I think it'' s November 15. But I really desire to remain.
    to the content etc. Derek, what'' s your inquiry? TARGET MARKET: I can comply with. up with you on that particular. GARY GENSLER: OK, follow up. All right, and after that we just.
    did transactions today.Remember, the hash feature. is The New York Times.
    We ' re in a little far better. area with Lauren ' s table currently. All right,'excellent, excellent. My objective is not to. embarrass anybody when I ask these inquiries. My objective is that all of us. gone along on this trip
    , that we somehow have some basis. Since it does connect. to understanding the commercial reality. and also the economics.
    We spoke about the moment. marking and the blocks, the Merkle Trees, which is not a.
    deep part of it, as well as obviously, digital trademarks. Component of the factor I.
    replay this each time is because, in.
    national politics, I, obviously, discovered that rep is.
    a truly important point. [GIGGLING] Yet I likewise assume it'' s. real in academic settings. And after that Bitcoin addresses,.
    and that'' s just a cleanup, that it'' s not an. identical to a public. And after that the evidence of job,.
    and back to the questions. Nakamoto Consensus.
    is, yes, all of this and also an incentive structure,.
    yet it'' s this proof of job. As well as to Erin'' s. inquiry, proof of job is a little bit different.
    than the transactions that we spoke about, but.
    there'' s a whole lot of overlap.And after that it creates.
    the native currency. And I'' ve remedied this.
    slide to 2140, obviously. The network is.
    truly important, as well, which there'' s all. these different actors on a network, 10,000 nodes.
    and also this several light nodes as well as the miners and the.
    extracting swimming pool operators. And they all have their.
    separate economics. As well as so if anybody intends to.
    come as well as get workplace hrs, speak about those business economics,.
    please come on in. If there'' s nothing you. bear in mind from the reading, I'' ve now review this. paper probably 6 times to type of slowly get.
    it with my head.But every

    time I.
    checked out the Clark paper, I go, wow, that really helps me. Since it'' s not such as. Satoshi Nakamoto just turned his fingers as well as there it– it was on the backs of.
    a great deal of cryptography, a great deal of technology earlier. But this is the.
    graph I transform back to, and it'' s occasionally helps me. Ah, there'' s time-stamping,.
    there'' s digital cache, there'' s proof of job
    ,. as well as just how these things. Maybe ten years from.
    now, they'' ll look back and also Nakamoto ' s stuff.

    will certainly simply'be built upon.That ' s the main inquiry.
    That ' s what some.
    of our coworkers are correcting at the.
    Digital Currency Campaign or'over at the. Computer System Sciences Laboratory. They ' re stating, can. they build on this as well as take it to one more degree? Right currently– as well as you'' ll
    see. throughout the term– there'' s not a great deal of. full scale applications of this technology.
    Yet it might just remain in. an entire line of this.
    Yes, as well as I can ' t bear in mind.
    your initial name, Aviva? AUDIENCE: I ' m Aviva. As well as that is the.
    other Indian woman. GARY GENSLER: That ' s. the various other Aviva. AUDIENCE: That ' s the
    . various other Indian woman. GARY GENSLER: Yeah,. yeah, it ' s crucial.
    Out of 100'people, we can.

    have 2 Avivas, you know? We might also have two.
    Aviva ' s if there ' s two.AUDIENCE: [INAUDIBLE] name ' s Priya.
    AUDIENCE: I ' m Priya. GARY GENSLER: Pria–.
    oh, I ' m sorry. Thank you. TARGET MARKET: So I was.
    just considering, as one of the applications.'of the hash feature– so does the hash function. really change the data? So I ' m believing currently that. every person ' s saving information in the cloud, so can you. save a hash feature rather of your actual data, and. then so it can be pressed? GARY GENSLER: Really good. inquiry– my summary of it– though others ' probably. would be a lot more professional. My recap is, you get a selection. You might do either. So let'' s take it in blockchain. instead of in the cloud. You can choose to save in.
    a blockchain just hashes, and have the complete.
    picture elsewhere. Let'' s claim you were going.
    to do a whole data source of– TARGET MARKET: A library.GARY GENSLER:

    Of what? TARGET MARKET: I'' d
    say. like a collection. GARY GENSLER: A library– and also so there ' s 100,000.
    publications in the library. You could hash.
    all 100,000 publications, and afterwards save the hashes in. the blockchain and not the books themselves. And that would develop a. blockchain of the commitments to those books.
    Or you might in fact, I. assumption, put the books themselves right into the blockchain. Now, I saw some trembling.
    heads in the center. Alin from the Digital.
    Currency Campaign. AUDIENCE: The means I comprehend.
    this is, the answer is no. You can keep the hash. That doesn'' t change the information. The keeping of the hash.
    enables you to verify that you have the data. But the truth that.
    you store the hash doesn'' t mean that
    . you keep the data. GARY GENSLER: However Alin,.
    there'' s a two-part inquiry. You shouldn ' t get.
    eliminate guide, due to the fact that hashes are one way. You'' re not able to take the
    . hash as well as recreate the look.You can ' t

    take the hash and.
    recreate The New york city Times crossword problem. But you wear'' t need to shop. them in the exact same location. Thank you, because it'' s. 2 parts the question. You could store the.
    hashes in the cloud as well as store guides.
    elsewhere. Yet you still require to.
    store guide, perhaps. So who is Satoshi Nakamoto? We have simply a handful of.
    mins, yet can every table– each table'' s going. to take four minutes.And amongst yourselves, decide. that is Satoshi Nakamoto.
    So just how are we doing? That ' s your solution. to Satoshi Nakamoto? AUDIENCE: We would state,. possibly numerous individuals, led by Hal Finney. GARY GENSLER: OK, so the. first one is, numerous individuals, possibly led by Hal Finney. TARGET MARKET: NSA. AUDIENCE: Something within the.
    federal government or a government. GARY GENSLER: So table number.
    2 is, government actor, US or foreign. TARGET MARKET: I wear'' t know if. it matters, however perhaps US.
    GARY GENSLER: United States, however. it could not matter. Exactly how are we doing over right here? AUDIENCE: Dorian Nakamoto. GARY GENSLER: Dorian Nakamoto– so you'' re opting for. the Newsweek tale. Pria, sorry regarding the.
    name thing before. Your table, that– TARGET MARKET: A number.
    of crypto punks. GARY GENSLER: What'' s. that, a lot of crypto– AUDIENCE: Punks. GARY GENSLER: Punks. AUDIENCE: Plus financial experts–.
    it'' s like a group of people. GARY GENSLER: So a team of.
    crypto punks and also economic experts. And also how do you mean.
    crypto punks, though? TARGET MARKET: Cipher punks. GARY GENSLER: Cipher punks,.
    cipher punks, actually. Where are we below? AUDIENCE: NSA. GARY GENSLER: Oh,.
    the NSA, all right. TARGET MARKET: People with.
    motivation as well as the ability. GARY GENSLER: Oh, so.
    rewards and also capacity, you think it'' s

    guy called Gary Gensler. [GIGGLING] GARY GENSLER: There.
    is a word for that, yet I can'' t say that on tape.
    Kelly, Anton, 2 Alins. what do we have below, Jihee. TARGET MARKET: Let''
    s go. with Nick Szabo.
    GARY GENSLER: Nick Szabo,. who composed the first paper on wise contracts. So Aviva is Nick Szabo. My hash table– [GIGGLING] GARY GENSLER: Who do you choose? TARGET MARKET: We in fact.
    did have him, Szabo. GARY GENSLER: All.
    right, you can claim another table for Nick Szabo.Put another vote alongside him. Below? TARGET MARKET: We ' re. selecting you, Gary.
    GARY GENSLER: No, no, begun. AUDIENCE: We believe it ' s. Craig Steven Wright.
    GARY GENSLER: Craig. Wright, the Australian
    . Oh, my god. Oh, Patrick Murck'' s table. is going to go last. Right here? TARGET MARKET: Bill Belichick. GARY GENSLER: Expense Belichick. TARGET MARKET: Alan Greenspan. GARY GENSLER: Alan Greenspan. I in fact know Alan. He'' s truly talented,.
    however I wear'' t assume Andrea would certainly allow him do this. Here, that do we have? TARGET MARKET: [INAUDIBLE] GARY GENSLER: That? AUDIENCE: [FAINT], me. GARY GENSLER: No, no, however who– you'' re saying you created it? No, no, this table. TARGET MARKET: This table is.
    stating he developed it. GARY GENSLER: Nick Szabo,.
    so an additional for Nick Szabo. So does any person desire to.
    tell us why it'' s the NSA? Oh, Patrick Murck,'I ' m sorry. What ' s this table? PATRICK MURCK:. Well, I said, if I– so I don'' t know.
    However if I did'understand, I would.
    say that I don ' t recognize, and also I would develop
    as much. obfuscation as possible.So I assume I was. the most awful person to contend a table for this. And also I did them only.
    an injustice in their hunt for Satoshi. However I'' ll
    allow. someone else talk. No, I put on'' t know.
    GARY GENSLER: However. if he did understand, he would state he doesn ' t know. Derek, who did. your table opt for? AUDIENCE: We said Craig Wright.
    PATRICK MURCK: You. can see my impact. GARY GENSLER: Oh, my gosh. So allow me ask this, due to the fact that.
    it'' s simply for enjoyable, one minute.Somebody stated that. it was the NSA.
    Do you want to state why? TARGET MARKET: Since,. perhaps, they have the most advanced.
    cryptography in the globe. And also if anybody was doing.
    this, to have a system where all the dark money in the world.
    was flowing around as opposed to $100 costs, you would certainly create.
    this and also create it in a manner where you could hack it.
    backwards as well as figure it out. And also they have the ability. GARY GENSLER: Wow. Hugo. AUDIENCE: Even more [INAUDIBLE] money.
    is experiencing [INAUDIBLE] right currently than it.
    is through Bitcoin. GARY GENSLER: So Hugo would certainly.
    claim that, if it was the NSA, it didn'' t work out. for them also well. And those of you that.
    claimed Craig Wright, I heard some others in.
    the room that stated, no. So who stated Craig Wright? Which two tables.
    stated Craig Wright? Isabella and Ben, why did.
    you pick Craig Wright? AUDIENCE: So I.
    read a bunch of it. And also essentially, people assessed.
    the English used in the email, and also they think it traced.
    back to Australia.And then we.

    [ INAUDIBLE] from there. GARY GENSLER: All right, so.
    just the language analytics for Craig Wright. And also those that claimed.
    it can'' t possibly be Craig Wright, who did that? Alin? TARGET MARKET: Yeah, so.
    he began a website. He stated, oh, right here'' s. cryptographic proof that I'' m Satoshi Nakamoto. But he really bungled it. Like, if you are.
    Nakamoto, you can show you'' re Nakamoto
    by. spending the very first coin. Yet he couldn''
    t do. that, so begun, man. GARY GENSLER: So Alin.
    states, he failed the examination. He didn'' t invest the
    . first coins from 2009. Three tables selected Nick Szabo. Why'' d you select Nick Szabo, simply.
    any type of one of the 3 tables? Because we'' re mosting likely to chat.
    about him in the next lecture. No? All right, look, this.
    was a little bit of enjoyable. I just assumed it.
    would be worthwhile. Because the only.
    person in the room that actually knows.
    that Satoshi Nakamoto is isn'' t going to inform us.

    [GIGGLING] However you'' re. welcome back whenever. Thank you. We'' ll see you next Tuesday. Bear In Mind, Larry Lessig is right here,.
    so please do the readings. Please, let'' s having fun.

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