1 how blockchain technology came to be

1  BlockChain Technology in Artificial Intelligence Josh Marvel, Aishwarya Iyer, Jay Johnson, Payne Lacsamana Abstract ?—This research paper aims to explore how Blockchain technology in combination with Artificial Intelligence can be applied to various problems in government, business and finance. As well as looking at the history of how blockchain technology came to be and all the technologies that were founded using the blockchain. Bitcoin and other cryptocurrencies have splashed into the mainstream media and people are becoming more aware of the future uses of these technologies.

All these technologies also all for new artificial intelligence technologies in helping to analyze how society can use these technologies ethically. —————————— ? — ————————— I NTRODUCTION Over the years, we’ve been making our lives easier through the use of technology. From emails to books, contacting people from across the globe, technology has been a great helping hand in human interaction.

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Nowadays, people are finding ways to create a currency that anyone can use that is readily available via the Internet. Bitcoin technology is the newest solution for this goal. Alongside Bitcoin, there are various other cryptocurrencies that are also ready to use. One way to make sure that currencies are secure, is by creating blockchain technologies. Blockchain technologies have allowed for further development of a variety of technologies other than Bitcoin. Some inventions that share blockchain technology are smart contracts, digital identities, and lots of new cryptocurrencies.

1.B LOCKCHAIN 1.1 What is Blockchain? A blockchain is a digitized and public “ledger” of all cryptocurrency transactions.

Blocks are recorded and added in chronological order and allows users to keep track of each digital cryptocurrency transaction made.10 Each node gets an automatically downloaded copy of the blockchain. Blockchain technology works by using the Blockchain – made up of an electronic chain of hashes of digital signatures. Digital signatures are a form of asymmetric cryptography (i.e.

they use one private key and one public key) for demonstrating the authenticity of a digital message or documents. A valid digital signature gives a recipient reason to believe that the message was created by a known sender (i.e. it is authentic), that the sender cannot deny having sent the message (i.e. it is non-repudiable) and that the message  2  was not altered in transit (i.

e. that it has integrity). Digital signatures are commonly used for software distribution, financial transactions and in other cases where it is important to detect forgery or tampering.

To avoid a situation wherein a party could transfer an asset twice, the transactions are broadcast out to a distributed network of nodes to agree and approve the order of the transactions. Nodes in the network collect the broadcasts of the transactions into blocks, which are then hashed, and receive a timestamp. When a computer finds the proof, it broadcasts the block to all nodes.

Nodes accept the block only if all transactions in it are valid. Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash. Nodes work on a consensus system; that is, together with little coordination. Their behavior is such that they do not need to be identified, can leave and rejoin the network at will, accept the proof-of-work chain as proof of what happened while they were gone and express their acceptance of valid blocks by working on extending them and can reject invalid blocks by refusing to work on them. This process ultimately establishes a single, but distributed, agreed history for each transaction and creates a way for the receiver of an asset to know that the previous owners did not sign any earlier transactions.

Advocates argue that trust is increased among the parties because there is no possibility for abuse by a node in a dominant position, as there can be when a system relies upon a single trusted third party that may be breached or turned rogue. 15 This technology has proven itself and particularly has the great potential to bring change to fields of banking and finance. This technology allows fields to be independent of third parties which take huge fees in terms of transactions. 11 With blockchains, the individual can make a transaction without acquiring a massive fee. A block is a current part of a blockchain which records all the recent transactions.

Once this is done, the block goes into the blockchain as a permanent database. Each time a block is complete, a new one will automatically be generated. Each block contains a hash of the previous block and has all the information of different user addresses and balances.

The blockchain was mainly designed so that these cryptocurrency transactions cannot be deleted or misused. 8These blocks are added through cryptography, which ensure they are not tampered with. The data in each block can be distributed, but cannot be copied for other purposes. Currently Blockchains are being used with Bitcoin. Bitcoin is a technology that allows users to validate transactions, eliminating the need for a third party to process payments. Each payment made by Bitcoin is publicly stored in blocks and eventually in blockchain.

The blockchain database for Bitcoin is shared by numerous nodes in the system. When joining the system, each connected computer will receive a copy of the blockchain. Each block in a blockchain is made every 10 minutes through data mining. Blockchain technology is not without its issues though.

Some vulnerabilities are as follows: ? ” A SYN Flood attack is a form of Denial-of-Service attack in which an attacker sends repeated, rapid SYN  3  requests to a target's system in an attempt to consume enough server resources to make the system unresponsive to legitimate traffic. A SYN request is made when a server requests a connection to communicate with another server by sending a SYN (synchronize) message to the server. This is followed by a "handshake" procedure in which the two servers acknowledge one another. In a SYN Flood attack the server receiving the request is unable to complete the handshake procedure before a new request comes in, which ultimately floods the server's resources with requests and causes it to become unresponsive.” 15 ? “A Sybil attack occurs when an attacker fills a Blockchain mesh network with nodes controlled by him, which increases the probability of connecting only to attacker nodes. This type of attack can allow an attacker to refuse to relay blocks and transactions, even disconnecting an entry registration communication from the network.

It can also allow an attacker to relay only blocks that he creates.”15 ? Timing errors and attacks occurs if an attacker slows down or speeds up a nodes network time counter by connecting as multiple peer nodes and reporting inaccurate timestamps. In the blockchain, each individual block contains a list of transactions and a timestamp representing the time a block was created.

This allows the system to generate proof of the chronological order of the transactions as a guard. 1.2 T YPES OF B LOCKCHAINS As Bitcoin was the first implementation of Blockchains, the first models of this were easily accessible by the Internet with no permissions required. Since then, corporations have implemented instances in permissioned context. There are two types of blockchains that exist currently: permissionless blockchains and permissioned blockchains. Public blockchains are a form of peer-to-peer networking that allows nodes to take part in performing transactions without replying on third parties.

These types of blockchains are said to be permissionless since they do not require access to specific nodes. As blockchains are used to validate, store and maintain many records, permissionless blockchains are stored on public ledgers. Although this may seem very insecure, the exchanging of data happens off-chain. Miner nodes are forced to solve complex math problems known as “proof of works”, which is when a block is attached to a chain.

17. One very well known permissionless blockchain is Ethereum blockchain. This uses the Ether to allow the first node to mine the block. Once this block is validated and in the chain, it can never be deleted. Deleting this block is very difficult for attackers to complete.

The second type of blockchain is called permissioned blockchains. There are two varieties of permissioned blockchains, private blockchains and consortium blockchains. Although there are slight variations to both of these, there still is a distinction between the two as they both run on private networks. 17 Private blockchains are blockchains that the write permissions are centralized to one entity whereas the read permissions are public. These blockchains are based solely on the fact that only chosen participants can view Blockchain activity.

High privacy settings are also available to private blockchains because of the restrictions on the read and write permissions.17 Another advantage of private blockchains over public blockchains are that private blockchains can be easily modified4  and transactions can be verified by chosen participants. Consortium blockchains are blockchains in which the consensus process is mainly controlled by a set of trusted nodes. A block will be added to the chain once the consensus approves the transaction. The right to read a blockchain may be public or can be made private only for participants. These blockchains are considered decentralized because a blockchain model tends to appeal to companies.

17 1.3 B LOCKCHAIN S TANDARDS Cryptocurrency applications such as blockchains are well established and known in today’s day and age, but there are issues that come with applications becoming popular. One of the issues that is linked with blockchains, is trust.

The thought of having a autonomous and self-validating application that does not depend on any network communication is very difficult to think about. In the past, many people have secured their belongings, including money, in physical safes or have had it hidden from the world. This method is still useable in some forms of electronic security, such as offline hardware. Unfortunately, blockchain does not allow physical forms of electronic security. Blockchain is solely independent.

One of the main factors that attracts crowds is the ease of workflows and data-processing life-cycles. 16 Users mainly look for methods that solve particular problems without requiring additional efforts. 1.4 F URTHER U SES OF B LOCKCHAIN Blockchain technology has also paved the way for a technology called smart contracts. Blockchain smart contracts extend the functionality of Blockchain technology and expand the type of services facilitated through the blockchain. A range of services, which are inefficient and unsustainable, can be maintained through the blockchain technology smart contracts.

New technology services within the Internet of Things (IoT) can also benefit from and accelerate through the automated management of blockchain structured control conditions. The structured conditions are referred to as ‘contracts’, using the broader definition of this terminology that is not restricted to legal contracts. The counterparties can be institutions, individuals, intelligent computing agents, or IoT devices. Some aspects of this technology are as follows: ? “A security control mechanism that permits or prohibits access to an off-chain resource in an intelligent manner, and allows contracts to be time-bound, condition-bound, or open-ended and rolling-over.” ? “A mechanism to hold a secure, public record of contracts on the blockchain, in a manner that allows automated determination of their validity, and release of their details to authorized entities upon  5  validation.” 9 In Order to keep records preserved, steps need to be taken from the onset of their creation.

For example, standards for long term preservation are relevant to systems of registering land titles because of the long term value of these records to society. long-term preservation of information in digital form requires that technical dangers to the longevity of authentic information be addressed. This may include rapid changes to software, hardware, network links to related information and failure to capture or loss of semantic information. In addition to technical issues there are also organizational, legal, industrial, scientific and cultural issues to be considered in protecting records over the long term.

2 Blockchain in IoT The Internet of things does not only concern devices. Internet of things can be any product that is given a digital identity, can be tracked or verified. While the origin of a product can be protected by writing to a certain block, it is not true for the mechanism that is used to connect to the real object. 11 Blockchains are mainly designed as the basis for applications that involve transactions and interactions.

14. These applications include smart contracts or other processes that support the Internet of Things. There are three benefits of using blockchains for IoT’s. The first is to build trust.

Blockchains intend to create a trust between parties and devices and reduce the risk of collusions and tampering. The second benefit of using blockchains is to reduce the costs. This happens by removing overhead which is associated with intermediaries. And lastly to accelerate transactions from days to near instantaneous. 146  3 B ITCOIN 3.

1 What is Bitcoin? Bitcoin was invented by Satoshi Nakamoto in 2009. The goal of creating a bitcoin was to create a new and innovative “electronic cash system” (CNET) that was completely decentralized with no servers or authority. Bitcoin is simply, digital currency. This type of currency is decentralized–meaning–there is no involvement with the government-like institution 6 or any authority-like figures that control it. The owners of the currency remain completely anonymous, and the only way of identifying the owner is through encryption keys–which are unique to each individual. Each bitcoin is “mined” by powerful and intelligent computers that are connected to the Internet.

3.2 Current Uses Nowadays, Bitcoin is a functional currency, resulting in vendors allowing payments to be made using this electronic currency. 3.2.

1 Computers Computers are one of the biggest products that are bought with Bitcoins or other cryptocurrencies. Newegg is one of the biggest online retailers for computer parts. They currently accept payment of bitcoins, and it’s as simple as sending the correct amount of bitcoins to the their receiving address.

3.2.2 Travel For people who love to travel, another product that can be purchased using Bitcoins is airline tickets and hotel rooms 7. Although not all airlines accept this currency, more and more currently do. Bitcoin also makes the hassle of currency conversion, making it easier to withdraw money for purchasing travel necessities and souvenirs. One can also purchase train tickets using bitcoin.

3.2.3 Food More and more food restaurants are also beginning to accept Bitcoin as a way of purchasing food. Bitcoin is an upcoming method of purchase because of the fast and cheaper process. The process could be as simple as Apple pay where you are able to quickly pay with your Smartphone. 3.

3 Consequences Bitcoin is one of the first and most publicly known cryptocurrencies around the world. These technologies offer new ways for economic empowerment to individuals around the world. Even though the first recorded purchase of an item was actually for pizza, the use of bitcoin and other cryptocurrencies have been a powerful tool for criminal activities such as human trafficking and illegal weapons sales 12. Because of the anonymity of bitcoin, it was being used a lot as the primary currency for sales or services on the deep web such as The Silk Road. With these cryptocurrencies having so very little guidelines and laws to follows it is up to the developers and computer scientists to find ways to better further develop bitcoin use with ethics.

Research is being done that aims to develop autonomous ethically guided cryptocurrencies( or AEGC)12. “The goal of AEGC is to possess a type of artificial intelligence that senses its environment, gathers and analyses data, and autonomously makes decisions guided by  7  particular ethical principles. It also would function as a digital cryptocurrency that can serve as a medium of exchange, unit of account, and store of value.”12 A cryptocurrency of this magnitude would be huge as it would allow artificial intelligence to play a big role as a sort of judge to prevent lots of purchases of illegal items or services with cryptocurrencies. The way it seems that scientists are going about this is the AI would gather data and make decisions based on a fixed set of ethical principles that have been programmed into it. This AI could hopefully even be built on existing platforms such as Bitcoin.

12 4 C RYPTOCURRENCY 4.1 What is Cryptocurrency? Cryptocurrency is a digital money system that secures transactions. The most and well-known type of cryptocurrency is Bitcoin. The only difference between physical transactions and electronic transactions is that electronic transactions are decentralized and are not controlled by the authority. Each company can have their own version of a currency which is called a token, which can be traded for various goods or services that companies provide. In order to purchase a cryptocurrency, you will need to exchange real currency.

Cryptocurrencies work alongside a specific technology called blockchains. People can earn small amounts of cryptocurrencies by using their computers to process all the transactions on the blockchain. Anyone with access to the internet and suitable hardware can participate in mining.

The process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle. The owner of the computer who solves the puzzle is awarded the reward, which is the transaction fee associated with transactions compiled on the block. 4.

1.1 B ITCOIN M INING Back in the early days of bitcoin, anyone with a spare computer can mine with it. One just needs their desktop CPU and GPU to solve the computationally difficult puzzles to earn bitcoins. Now that bitcoin has become the industry it is today, it has become more complicated and more expensive to mine bitcoins like before. As the number of bitcoin miners skyrocketed, the difficulty of the puzzles increased. And the more difficult the puzzles, the higher the value of bitcoin became.

The bitcoin miners found out that gaming systems did a better job of solving the puzzles faster, and so more people moved to that. Now, mining bitcoins requires far more than a gaming CPU to handle bitcoin mining since the ones from before would easily overheat. Those better hardware can cost thousands of dollars to buy. That doesn’t include the cost to run the hardware with its need for electricity, the8  electricity to keep everything cool, and a strong stable internet connection.

Some would also take up a lot of space, requiring more electricity and cooling. And so, anyone interested in making a bitcoin mining system should make sure that the cost of the equipment doesn’t outweigh the earnings. 4.1.2 C LOUD M INING Of course, one who lacks the money, space, and equipment can opt to mine on the cloud instead.

However, doing that will hold the same risks as storing data on the cloud; even more so when it comes to leaving currency in systems owned by someone else. There’s also the matter of paying for hosting and downtimes out of your control. Right now, there are several providers that specializes in cloud mining. 4.2 ICO’s ICO’s stand for initial coin offerings. They use blockchain technology to offer tokens to investors.

These tokens are essentially cryptocurrency that will eventually be able to be bought and sold. ICO’s were first started as a way for individuals or companies to raise financial support for new ideas. The public is able to participate in ICO’s by establishing a blockchain and sending Ethereum or bitcoin as a way of investing in the technology 1.

In return the investors would receive a certain amount of tokens depending on how much they invested. A token could represent different things, it could be a license to use a software program, membership into a community, or a financial asset. The most common one are the financial assets, these tokens would have very little value until the coin was released on the bigger cryptocurrency exchange markets. However, once on the crypto exchange markets the price of the tokens could greatly increase or decrease depending on the technology of the blockchain. A good metaphor to explain this is the same as investing in a business or startup You invest a certain amount of money into a business and in return you are given stock of that company. This stock isn’t worth much at first but depending on how the business does the stock could one day be worth a lot.

This is essentially the same as ICO’s but with less regulations as their is very little regulations of cryptocurrencies currently. 5 C ONCLUSION Blockchain technology has given us a new way of creating many new technologies. These technologies such as bitcoin could one day be implemented to replace cash currency. The further uses of blockchain technology also allows for even further use in many different businesses. It is important, however, that as we develop these technologies we also take into account how as a society we will use these technologies ethically for  9  the betterment of the community.10  R EFERENCES 1 Zetzsche, Dirk A.

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