3.5: Blockchain and Encryption (Part 2)

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Из курса от партнера The Hong Kong University of Science and Technology

FinTech Foundations and Overview

12 оценки

The Hong Kong University of Science and Technology

FinTech Foundations and Overview

12 оценки

Our primary goal is to help you to understand FinTech and to become more confident and persuasive in your ability to analyze and make recommendations to executives within the finance industry regarding how to react to these changes. This FIRST MOOC ON FINTECH IN ASIA-PACIFIC offered by HKUST presents the views of several professors from the top business school in Asia as well as perspectives from industry professionals. HKUST has been ranked for many years as the number one EMBA program in the world, as the number one Finance program in Asia, and as the top MBA program in Asia by multiple independent rating and review journals and surveys. This course offers the combined strengths of HKUST in Business, Finance, and Technology as one the world's leading academic institutions on an important area of technology and business innovations. For students from outside Asia, this also gives an insight into changes happening in the most advanced FinTech markets of the world, since Asia leads worldwide in FinTech adoption and creative innovations. This course (FinTech Foundations and Overview) is part of the HKUST FinTech specialization, there will be 3 other courses in the specialization including FinTech Security & Regulation (RegTech), FinTech Risk Management, FinTech Innovative Disruption: Implications for Society. The FinTech specialization will be launched in Fall 2018, stay tuned!

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The Tech of FinTech

The Technology enabling and supporting FinTech is important to understand, and this module provides a brief introduction to each of the areas of technology that enable FinTech business changes, including identity and privacy technologies, blockchain and encryption, big data analytics, AI and automation, and consumer tech innovations. This introduction is designed to be at a level appropriate for business managers or students of business, and is not intended to excite or engage tech geeks.

3.2: Identity, Privacy, and Anonymity (Part 1)9:35

3.3: Identity, Privacy, and Anonymity (Part 2)8:56

3.4: Blockchain and Encryption (Part 1)8:23

3.5: Blockchain and Encryption (Part 2)8:28

3.6: Big Data and Analytics (Part 1)8:03

3.7: Big Data and Analytics (Part 2)8:40

3.8: AI, DSS, and Automation (Part 1)8:46

3.9: AI, DSS, and Automation (Part 2)8:16

3.10: Smartphones & Customer Tech (Part 1)8:54

3.11: Smartphones & Customer Tech (Part 2)6:36

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Theodore Henry King CLARK
Associate Professor
Information Systems, Business Statistics and Operations Management Department

How important is cryptography or encryption to this blockchain world?

I think, most importantly,

it helps us to address the trust problem and help us

to eliminate the role of a central clearinghouse or government too.

So, is that why blockchain is

a disruptive technology is because it eliminates the third party?

That's the innovation that blockchain point has.

Okay. So, we can do banking before,

we can do a lot of these things before,

blockchain eliminates the need for a central bank,

or a government, or a large institution.

We can have trust with people we've never met.

Right.

That's cool. And so, that's undue innovation.

One of the criticisms is efficiency,

is that it's kind of slow sometimes to update.

Is that an inherent problem to blockchain,

or is that a problem of bitcoin?

It is by design for blockchain.

Because we want the mining of each block to be

computationally demanding so that the transaction cannot be easily modified.

What if I had information that only a central clearing group would know,

so that I could make the mining easy but only if you knew a secret code?

Right.

That you could do fast, right?

Yes.

But you'd have to have a secret code that only a few people knew?

Yes.

That won't work with bitcoin?

That won't work with bitcoin.

But it might work for a government issue of a registry of deeds for land?

Exactly.

Okay. So blockchain is more than bitcoin,

it could be different than bitcoin,

we can use it in many different ways.

Bitcoin is simply one way of using blockchain for cryptocurrency?

Right, it's just one special case of it.

Okay, one special case.

But all of these cases have hash functions?

Yes.

And that's essentially encryption in action?

How does that work? What's this hash?

So, hash function in short terms,

it means that we take the input of any lengths but gives the output of a fixed length.

It is a one-way function,

which means that it is easy to go one way to the other,

but hard to go the other directions.

We can take the modular function as an example.

So, for example, what 2010 mult 36 will give us 30,

which we can calculate easily.

But, given the result of 30,

there will be unlimited possibilities that concludes to 30 more than 36,

that's what we meant by that.

And if I make a small change or even a tiny bit of data?

It's going to look entirely different.

It's a totally new hash?

Totally new.

So, it's clearly wrong, you changed it?

Even a tiny bit,

even a penny change?

Yes.

It's all wrong?

And that the entire nose on this network will detect this change.

And if I change something in history,

every block thereafter is invalid?

Right.

That's a problem. So it breaks the whole chain, so I can't do that?

Right.

But it's easy to compute,

we could just do that on our PC,

we can compute the hash?

With a blink of time.

But it's hard to find the right one?

Right.

Okay. All right, so it's a complicated function.

So, you've got an example here of a hash function, how does that work?

So, if you hash the input of a letter A,

this long string is what we are going to get as the hash function of it.

I would like to enter that into my phone.

Right.

So, how do I deal with the long hash like that?

With long hash like this one,

we don't need to remember the whole thing.

Oh, good. Okay.

Yeah. As customers, we can only remember our original password or original code.

Okay.

Like letter A.

Or we can also use a QR,

a code to be able to be recognized by the computer interface,

but a lot of data really easily with our phone.

Okay. So, what do we do with the hash function,

how does it help us?

One important application can be commitment.

Commitment allows one to commit to why aren't you always out revealing the why to others.

Like what?

Say that Alice and Bob both participate in a mathematics contest,

and Alice got her answer first.

But she doesn't want to reveal-

Obviously, she's smarter.

Alice will be happy to hear that.

Yes. Okay, but Bob is a little slow?

Bob is a little slow.

Okay.

But Alice doesn't want to give the answer to Bob,

because Bob can claim that he got the same answer, right?

Of course, that's what guys do.

Bob says not really.

Not really. Okay. So, but Alice is concerned

he would copy and say that he was first but even he's lying.

Yeah.

So, now she can say,

"Bob here's my hash."

Yes, exactly.

And he can say, "Oh,

I don't have that same hash.

I better work on it some more." Okay.

Also, he can check Alice's answer to

see if it really gives the same hash to save Alice's line.

Oh, but he can also check and see if

he has the same answer as Alice to see if he's right?

Yeah.

Without being given the answer,

you're giving the key to grade your own problem without knowing the answer.

Right.

Okay. All right.

So, document integrity, how does this help?

So when we download a file from website,

the website can provide a hash value.

But once we have this file,

we can compute the hash and then we can compare those two hash values.

If they are consistent with each other,

we can be confident to say that the file has not been compromised yet.

Okay. So my video is what I think it is,

my program is what I think it is.

This is not just data,

this could be a whole program, right?

Right. Yes.

Yeah. So it can be any link of things that can have a hash?

We deals photos, whatever, to validate.

Yeah. Okay. And you said password storage also works?

Many websites now store passwords of clients in the hashed forms.

So when customers input their password,

the hash of it got to be compared with the stored hash.

Okay. So you can indeed validate,

like if I call up and say I can't remember my password,

and they say, "Well, I can't tell you what it is because it's saved in the hash form."

But I could say, "Well,

could I try a couple of versions" and you said, "No, that's not it.

That's not it. Yep, that's the one."

So, I could check it.

I'm not sure I want to give customer service my password,

but I might be able to type it in and the bank could say, "That's the one."

Right.

Without seeing it?

Yeah, bank won't have any idea what your possible combinations are.

Right. So they can't recreate

my password but they could tell me, "You got the hash right."

Okay. So that's cool.

All right, well thank you very much.

Now, the bottom line on this,

DLT is more than blockchain.

Blockchain is more than bitcoin.

Bitcoin is an application.

DLT and encryption are critical to many aspects of FinTech.

Not just blockchain, many other areas use encryption,

use distributed ledger, but blockchain clearly demonstrated DLT works.

Right.

So it's a powerful technology that opens up the door to many,

many new ways of doing business inventory.

Okay, thank you very much for your time.

Thank you, Ted.

Okay.

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