Blockchain, the keyword itself implied series of blocks and assumed that blocks would have some information added to them. Distributed Ledger Technology The blockchain is not a strange keyword anymore in this era; everyone talks about it in their daily life. However, not everyone can understand blockchain clearly and explain the whole concept, so in a line, it is - "Series of blocks with linked cryptographic hashes in a chronological way."
Most of the people think - center Blockchain and Bitcoin are same! Yes, they feel like that. Well, it’s not the case they different, blockchain is an underlying concept of Bitcoin. Bitcoin made debut in 2009 and got attention from every tech-savvy over the globe as it was a system using blockchain and p2p network, and proposing a solution to resolve double spending problem[2] and enable borderless electronic payment transactions. It was a classic peer to peer transaction system owned and supported by the developer community and public. After 2009, when Bitcoin was struggling yet rising in the market, other incubator projects were in progress which could overcome potential problems faced in bitcoin system and provide faster transactions for electronic payment transactions. Also, tech pioneers started implementing blockchain in other fields such as real estate, healthcare, and education, etc. I will explain all these as we go through this document.
The origins of blockchain technology can be traced to 1991 when Stuart Haber and W. Scott Stornetta represented the initial effort on a cryptographically secured series of blocks. In 1992, they took advantage of Merkle trees (explained in the later section) and combined it into the design resulting in a new enhanced system which allowed to collect several documents in a block, and several blocks are linked together building a chain.
Well, that was long ago. At present, it wouldn’t be wrong to say that the blockchain technology gained significance in 2008 when a mysterious person named "Satoshi Nakamoto" came up with the Bitcoin white paper. Satoshi Nakamoto proposed a practical approach to solving the problem of double spending using same blockchain technology. Another fact which still amazes people is that nobody knows who Satoshi Nakamoto was and its still a mystery.
In 1991, Stuart Haber and W. Scott Stornetta did the first work on a cryptographically secured chain of blocks. To improve the efficiency of collecting several documents into one block, Bayer, Haber, and Stornetta in 1992, integrated Merkle trees (explained in the later section) to the blockchain. In the year 1998, Nick Szabo presented bit gold as an instrument for decentralized digital currency and smart contracts. Stefan Konst in the year 2000, introduced a general cryptographic theory of secured chain. An anonymous person or group was known as Satoshi Nakamoto (2008) in 2008 visualized the first distributed blockchain. In the year 2009, executed the distributed blockchain as the core element for digital currency bitcoin where it serves as an open ledger for all transactions. A blockchain database is handled autonomously with the help of peer-to-peer network and a distributed timestamping server. The double spending problem has resolved with the help of bitcoin implementation, without needing a trusted organization or an administrator. The bitcoin design has been a model and inspiration for other applications. The bitcoin blockchain file size reached 20 gigabytes in August 2014. The volume had grown to 30 gigabytes on January 2015, and from January 2016 to January 2017, the proportion has increased from 50 to 100 gigabytes. To refer to new applications of the distributed blockchain database, Blockchain 2.0 is used. The Blockchain 2.0 technologies go beyond transactions. They allow the value exchange without any influential intermediaries acting as arbiters of money and information. As of 2016, the implementations of Blockchain 2.0 requires an off-chain oracle to access any data which is external or to access any events based on the time or market conditions that need to interact with the blockchain. To investigate blockchain-based automated voting systems, the central securities depository of the Russian Federation(NSD) proclaimed a pilot project based on Nxt Blockchain 2.0 platform in 2016. IBM has opened a blockchain research center in Singapore in July 2016. The World Economic Forum met to discuss the development of governance models related to blockchain in November 2016 and also a Global Blockchain Forum is created by the industry trade groups which was an initiative of the Chamber of Digital Commerce.
The key term is distributed ledger technology (DLT), which includes blockchain and smart contracts. Distributed ledger is a type of data structure within a block.
The blockchain is a chronological chain of blocks, in which each block had a set of multiple transactions and added to the chain including timestamp and cryptographic hash, ultimately providing immutable records for all the transactions.
The block contains bundled transaction records, a reference to the previous block, proof of work and timestamp. The blockchain can reside across multiple computing devices (generally referred as nodes in the network), generally spread across locations or regions to form a distributed peer to peer network and it uses consensus algorithm to provide immutability.
We will have a look at blockchain and block data depiction as below -
The block data gives us an overview of all the things inside a block. As you can see that block 11 contains transactions that are hashed and bundled called tx_root, previous hash to block 10, a timestamp and nonce (proof of work). Tx_root is a Merkle tree, which contains hashes of all the transactions.
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Note
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According to Andreas M. Antonopoulos, in the Bitcoin protocol, "Merkle trees are used to summarize all the transactions in a block, producing an overall digital fingerprint of the entire set of transactions, providing a very efficient process to verify whether a transaction is included in a block." |
Distributed ledger technologies like blockchain work on the peer to peer (p2p) network models, meaning every peer has same data and updates will be applied to all of them.
Aforementioned is more efficient than client-server architecture and no central control over changing states of the ledger.
The consensus is the process of achieving agreement among the network participants as to the correct state of data on the system, and it has been studied for many years from the distributed system’s perspective.
In the blockchain, as multiple participants are adding blocks, it may be you see different versions of the same block. For resolving these conflicts, the consensus algorithm varies with varying implementations of the blockchain. In Bitcoin, its determined by using the most extended chain rule, i.e., Proof of Work. There are others, like the Proof of Burn, Proof of Stake, Proof of Capacity, Proof of Elapsed Time, and many others, it all depends on the unique requirements of that blockchain system. Let’s have an in-depth look into all of them -
Before we start looking at the different algorithm, we need to understand few terms as follows -
Blockchain network (follows classic p2p network approach) is group computers directly connected to each other via the Internet and does not have any central server.
Peers also known as nodes in the network, provide the computing power and storage that is needed for the upkeep of the whole network. Such network is considered to be more secure than centralized networks because they do not have a single point of attack.
Hashing power or hash rate directly refers to the computing power of a node in the network, which is used to calculate and solve the math problem for creating and verifying a block in the blockchain. A higher hash power is better when mining(explained in the later section) as it increases the individual peers' opportunity of finding the next block and receiving the reward.
Mining is the backbone of the entire blockchain network. The mining process creates new blocks and verifies all transactions in blockchain network. Peers in the network compete for creating new blocks in blockchain and verifying the transactions and collect a reward. This reward is a "newly mined" coin or part of the coin which was never issued before, thus its also a way to produce new coins in the network. Also, the mining process helps in maintaining security.
Blockchain uses various consensus algorithms to distribute accounting rights to peers. Miners (nodes or peers in the network) with better hashing power and performance gets the accounting rights to solve the cryptographic hash problem easily and entitled for reward (New coin or part of the coin). However, accounting rights are allocated using a different algorithm in another consensus algorithms, such as for Proof of Stake, priority is given to nodes which own more coins in the network and retain them for a long time.
The reward is new coin or part of a coin issued to miners as the result of the mining process.
PoW is used in bitcoin, and the core design is to share the accounting rights and rewards through the hashing power rivalry (hash rate) between the nodes in the peer network. Based on the data of the prior block, the various nodes calculate the explicit solution of a mathematical problem. It’s challenging to solve the math problem. The first node that solves this math problem can produce the following block and get a specific amount of Bitcoin reward.
Satoshi Nakamoto studied HashCash and designed this mathematics problem in bitcoin. Steps in this process are as follows -
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Get the difficulty: Mining algorithm will see the hash rate of the whole network and adjust difficulty value accordingly.
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Collect transactions: Bundle all pending transactions and calculate the Merkle Root of these transactions. And put this in a new block with the 256-bit hash value of the preceding block, the current target hash value, Nonce arbitrary number and other required information.
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Calculating: Produce double SHA 256 in collect transactions steps by traversing the nonce number between 0 to 232 in step 2. The block can be announced if the calculated hash is less than or equal to the target value. Later verification with others nodes take place, and accounting is done.
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Restarting: Restarting is the way to calculate the hash again by previous step(collect transactions) if node can’t do it in given time. If any other node does this already, a process begins from the first step(Get difficulty) then.
Proof of work requires a lot of energy, and the possible threat to the blockchain system, because it can alter blockchain if some peers in the network own 51% of the ledger as all nodes trust the most extended chain in the network.
PoS was mentioned in the first bitcoin project, but it wasn’t used because of the robustness and other reasons. The initial application of PoS is PPCoin. The concept of this PoS algorithm is based on the age of coin. The coin age is calculated by multiplying its value by the period after it was produced. The longer any node keeps the coins, the more advantages it can get in the peer network. Coin holders will also receive a specific reward according to the how long they hold these coins.
PoS promotes the coins dwellers to increase the holding time. With the idea of coin age, the blockchain is no longer entirely relying on the PoW and efficiently solves problems of PoW. Ultimately, PoS improves the security of blockchain with the increasing value in the blockchain. The hackers or malicious peers need to acquire a massive number of coins and hold them long enough to attack.
Satoshi Nakamoto initially designed bitcoin in such a way that participants could use the CPU power to mine and hashing power could match the peer nodes in the network. The idea behind this was to give each node equal opportunity to participate in the decision-making of the blockchain. As the technology evolved and bitcoin is rising, people came up with special mining machines. Owning multiple of such machine gives you more hashing power, and ordinary miners can rarely create any new blocks.
Top N nodes are elected in the network which has higher stakes and hashing power(At least 50% stakeholders would believe that enough decentralization is there)to have accounting rights and create blocks. The DPoS seems to be more power-saving and efficient than PoS and PoW.
Practical Byzantine Fault Tolerance could be an excellent method to resolve the transmission errors. This consensus algorithm works on communication between the master node and client node, and has five stages as below -
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Request
The master node creates a timestamp for the request coming from the client node.
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Pre-Prepare
The master node registers the request message came from the client node, assign an order number and broadcasts a pre-prepared message to other server nodes. They determine whether to accept or reject the request.
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Prepare
If any node accepts the request, it broadcasts a prepare message to all the other nodes and receives the prepare messages from the other nodes. If the majority of nodes accept the invitation, they will move to commit stage.
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Commit
All nodes in commit state will send commit message to each other. In the meantime, if a server node receives 2f+1 commit messages, it could consider that maximum nodes agree to accept the request, and executes the instructions within request message.
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Reply
Once instructions are executed, server node needs to respond to the client node. If the client could not get the reply due to network delay server nodes will have the request held, or if instructions have been executed already, server nodes only need to transmit the reply message repeatedly.
Raft algorithm was proposed in 2013 by Standford’s Ongaro and others. Raft attains the same effect as Paxos(which was hard to understand in 90’s) and is more suitable for engineering implementation.
Raft cluster contains five server nodes, and each node will have three states, i.e., leader, follower, and candidate. The leader handles all requests from clients. Out of five, maximum two nodes can crash at the same time, and three will work in the cluster.
As its a distributed ledger, everyone, who owns a decent computer with enough power, is allowed to use the source code and read-write ledger state.
However, these can be controlled based on what kind of blockchain you are using, i.e., permissioned or permissionless. Bitcoin is a permissionless blockchain technology; anyone can download and start using it.
The permissionless blockchain is publicly owned blockchain network, where anyone and can join the network without any signup process or verification and start contributing to reading/writing process of the ledger. Bitcoin is widely known case for such blockchain, and there are more.
The permissioned blockchain is private blockchain where membership is required in some form. To use permissioned blockchain network, we need to meet some predefined criteria. Permissioned blockchains are generally company owned.
Bitcoin, the name is well suited and catch attention from tech-savvy people. I have already discussed a little bitcoin earlier in this paper.
Bitcoin tales started in 2008 when Satoshi Nakamoto, proposed a solution to solve double spending problem and ditch central authorities those who take over the transaction from our very hands and take much time to process along with a fee.
Earlier when we did not have any currency, people used to trade stuff like crops, goods, etc. and fulfill their daily needs. But later on, the concept of currency was developed. It evolved and led to paper money in exchange for gold with world bank. Later on, keeping gold was not an option anymore, and government can print currency whenever in need. Printing money wasn’t a problem, but it caused to inflection and became invaluable over time. What we could purchase with 1 Unit is way costly nowadays.
Another problem was that people were stacking money in banks and banks could lend the same money up to 90% back to people. These financial institutions were acting as a central authority to circulate cash within society, and all the transactions, going through the are chargeable. This ultimate business model was efficient for financial institutions but not good for people who need privacy and security. Satoshi Nakamoto, rescued us by proving a practical approach to solve these problems.
In the financial sector, Bitcoin is the very first application to demonstrate tremendous potential. However, it also attracts government authorities to utilize such powerful technology and implement blockchain in a centralized manner. It may be for currency or maintaining other government affairs. Similarly, other tech giants and financial institutes are also exploring blockchain.
Bitcoin solves two problems - Double spending and Byzantine Generals problem. Double spending refers to idea where people or any institute reuses the currency in more than one transaction at the same time. When using the traditional money, double spending isn’t happening but if financial institutions maintain their ledgers and can produce this scenario all the time. Double spending can also be solved by internet transactions where centralized trusted institutions are used.
The other problem - Byzantine generals problem is related to distributed systems. In a distributed network, data amongst nodes can be distributed in peer to peer network, but there are chances that data could be attacked by hackers or malicious users to alter contents of data, compromising data consistency on nodes in the peer network. Normal nodes would have to validate this data across other nodes to identify tempered information, resulting in the need for corresponding consensus algorithm.
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Privacy?
Its okay to trade with cash as you don’t need to tell anybody how much or less you are paying. But with if you want to pay the more significant amount, you would probably need to use banks or any other institution to make that transaction. Suppose I want to pay $2000 to my friend, using bank and banks will know how much I have paid to whom.
No privacy at all…
But, bitcoin others provides pseudonymous privacy making it hard to figure out anything except two parties involved in the exchange.
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Fees?
Suppose, I want to send money to some friend in India, I have to go through my bank/local reserve bank/federal reserve/international wire system and at last recipients bank. At each step, there will be a small fee applied to the transaction as no institution will do it for free.
But, with bitcoin, I have to pay a small fee once not twice or thrice for my transaction no matter what.
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Human Error?
People tend to make mistakes so they can send money to the wrong account, or the bank system could be compromised. Or, there may be chances that government prints money without letting you know. The currency flow in the market will increase, and ultimately the value will be down.
But with bitcoin, there is a limited number of coins supplied in the network. only 21,000,000 coins.
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Who is backing paper money?
Trust.
According to Treasury - "Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy."
Bitcoin resolves all these problems faced by us. But there are some limitations and area of improvement for bitcoin, and new alternatives are born, in the market.
Ethereum is another approach to resolve problems which couldn’t be addressed using bitcoin. It is an open-source blockchain-based distributed public computing platform and operating system which also feature smart contract functionality. "It supports a modified version of Nakamoto consensus via transaction based state transitions." Vitalik Buterin is a co-founder of Ethereum, and he analyzed the Bitcoin protocol, and it’s weaknesses, and proposed how this new solution approaches them as a “next generation smart contract & decentralized application platform.”
Ethereum is a cryptocurrency as well as a platform to provide smart contracts. It supports web 3.0 to create decentralized web applications as well.
Like its antecedent Bitcoin, Ethereum is also a protocol and network. Its native currency is called "Ether" or "ETH." People within Ethereum network transact with this currency, or if there are smart contracts, this currency will be used for the gas payments.
We can safely say that Ethereum is similar to bitcoin and other cryptocurrencies, which means that owners can use Ether for payments or keep it for longer times and possibly achieve capital gains from its growing value. As if today the cost of Ether is $722.34 and it up to $1200 in the past.
According to the official website, during the initial presale. 60 million ether were created, and 12 Million to support development fund. Nowadays approx five ETH are produced per block.
The Bitcoin gives one unique application of blockchain technology, a p2p electronic cash system that facilitates online Bitcoin transactions. So, Bitcoin blockchain network is used to keep track bitcoins and ownership of coins. On the other hand, the Ethereum blockchain network allow running the code of any decentralized application, such as web 3.0 applications and smart contracts.
In the Ethereum network mining is different from bitcoin. The minor work to gain Ether or ETH. These are the type of crypto network’s token that fuels the blockchain system and Ethereum network. Exceeding the capability for the trading cryptocurrency, Ethereum also allows application developers to pay for transaction fees and services on the Ethereum network.
Now we refer it ETH as A next-generation blockchain. I would also like to list few bullet points to give a bright idea about it.
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Faster transaction times - The Ethereum the block time about 14 to 15 seconds while Bitcoin has 10 minutes. Ethereum uses the Ghost protocol to achieve this.
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Economic model - Ethereum issues the same quantity of Ether each year ad infinitum while Bitcoin block rewards halve every four years, so over the time bitcoin mining is not an option.
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Costing - It depends on the computational complexity, bandwidth use, and storage needs. Bitcoin transactions compete equally with each other. Costing is called Gas in Ethereum blockchain and is limited per block, on the other hand, it is defined by the block size in Bitcoin.
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Crowd-funding - Ethereum was crowd-funded by developer community groups and companies. On the other hand, Bitcoin was released to the community. The early miners control most of the coins in the Bitcoin network.
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Pool mining - Using the Ghost protocol rewarding stale blocks, Ethereum controls centralized pool mining, so miners in the mining pools won’t have any advantage such as pool regarding block propagation.
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Hashing - Ethereum promotes decentralized mining by people using their GPU’s and uses a memory hard hashing algorithm named Ethash that alleviates against the use of ASICS hardware which is very efficient and dominating for Bitcoin mining.
Apart from these, the beauty lies in Ethereum Virtual Machine. It focuses on implementing security and executing untrusted code by workstations around the globe. More specifically we can say this project is designed to prevent Denial-of-service (DOS) attacks, which have become somewhat famous in the blockchain world. Moreover, the Ethereum Virtual Machine guarantees programs do not mess with each other’s state, providing communication can be established without any potential interference. It’s entirely isolated from main network and ideal for testing smart contracts and decentralized applications. Its based on Solidity language but there are other implementations in Ruby, C++, Python and some other coding languages.
Now let’s have a glance at the visual representation of Smart Contract, Decentralized application, and EVM after all this reading -
ZCash is a cryptocurrency like the bitcoin but with increased security and allows anonymity features. It helps in shielding the transactions by obscuring the parties and amounts of transactions. Zerocoin employs zero-knowledge proofs in the way of unlinkability, to prevent transaction graph analyses. This protocol indicates that any coin that passes through this is untraceable. Zerocoin does neither rely on digital signatures to validate coins nor does it require a central bank to prevent double spending. Zerocoin authenticates that they belong to a public list of valid coins (which can be maintained on the blockchain). Users may periodically “wash” their bitcoins via the Zerocoin protocol. So, it can be called as a decentralized mix. However, regular transactions must happen through bitcoin for the following reasons:
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ZCash requires longer to verify at a 128-bit security hash. Also, it needs to be broadcasted in the network and verified by each node. This increases the cost significantly higher than a bitcoin.
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ZCash has fixed denominations.
Zerocash can carefully instantiate the cryptographic ingredients of the construction to implement zk-SNARK. (Succinct Non-interactive ARgument of Knowledge or publicly-verifiable preprocessing zero knowledge SNARK). It can be applied in two ways – mint transactions and pour transactions.
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Mint transactions: It allows a user to convert a specified number of non-anonymous bitcoins into the same amount of zero coins belonging to a specified Zerocash address. The Zerocash node maintains a Merkle tree (hash tree in which every node is hashed with the labels of the child nodes). The mint transaction specifies the coin’s value, owner address, and serial number(unique). It employs an SHA-256 hash function and hides both the coin’s value and owner address.
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Pour transactions: It allows a user to make a private payment, by consuming some of the owner’s coins to produce new coins. Roughly, a pour transaction, for (up to) two input coins and (up to) two output coins, involves proving, in zero knowledge, that:
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the user owns the two input coins;
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each one of the input coins appears in some previous mint transaction or as the output coin of some previous pour transaction; and
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the total value of the input coins equals the absolute value of the output of the coins.
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Industry usage
In April 2018, Circle, the provider of crypto-investment options, added Zcash to its list. It can help to build Internet payment and privacy infrastructure. A study was conducted to about the linkability of ZCash. ZCash has two types of addresses: Z-addresses and t-addresses. Transactions between z and t addresses do not obscure the transaction amount thereby increasing the chances of traceability. But any transactions involving only Z-addresses are private.
Apart from the mainstream blockchain technology currencies otherwise known as Crypto-currency, there are various blockchain implementations that are prominent and widely dominate the crypto-economy.
Litecoin came into the blockchain technology scene in the year 2011, and was among the initial candidates following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was created by Charlie Lee, an MIT graduate, and former Google engineer. Litecoin is based on an open source global payment network that is autonomous and uses "script" as a working proof, which can be decoded with the help of consumer grade CPUs. Although Litecoin is similar to Bitcoin in various ways, it has a faster block generation rate and hence offers a quicker transaction confirmation. It is not only famous amongst developers; there are a growing number of merchants who accept Litecoin.
Ripple is a real-time global settlement network that offers instant, precise and inexpensive international payments. Ripple enables banks to settle overseas payments in real time, with end-to-end transparency, and at cheaper rates. Since its inception in 2012, Ripple’s blockchain tech has market assets of $1.26 billion, and its consensus ledger — its method of confirmation — doesn’t require mining, a feature that sets it apart from bitcoin and altcoins. Since Ripple’s structure doesn’t need mining, it reduces the usage of computing power and minimizes network latency. Ripple business approach is to distribute its value in a certain way that it effectively incentivizes specific behaviors. It plans to distribute XRP primarily through business development deals, dedicated incentives to liquidity providers who offer tighter spreads for payments and selling XRP to institutional buyers interested in investing in XRP.
Monero is a secure, private and untraceable blockchain method. This open-source cryptocurrency was released in April 2014 and soon bagged tremendous interest among the cryptography community and block-chain enthusiasts. The development of this cryptocurrency is entirely donation-based and is mostly community-driven. Monero was released with a strong focus on decentralization and scalability and enables complete privacy by using a unique technique called ‘ring signatures.’ With this technique, it would appear as a group of cryptographic signatures except having at least one real participant – but since they all seem valid, the real one cannot be isolated or traced.
Dash formerly known as Darkcoin is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized master code network that makes transactions almost untraceable. Launched in January 2014, Dash experienced increasing popularity in a short span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. In March 2015, ‘Darkcoin’ was revamped to Dash, which stands for Digital Cash and operates under the alias DASH. Although rebranded the technological features such as Darksend, InstantX remained unchanged. In conclusion, Bitcoin continues to lead the pack of blockchain technology icons, regarding market capitalization, user base, and popularity. Nonetheless, it’s peers such as Ethereum and Zcash which are being used more for enterprise solutions are becoming popular, while some altcoins are being supported for superior or advanced features with regards to Bitcoins. Going by the current trend, blockchain technology is here to stay but how many of them will emerge leaders amid the growing competition, only time will tell.
There are many more blockchain based solutions and cryptocurrencies.
According to Harvard business review, blockchain is not a “disruptive” technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. The blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and slower due to its complexity. It is yet to be explored by many users to realize its real value. As the scale of its research increases, businesses will require an institutional change to get used to it.
Financial institutions, government and other retail industries all transact with consumers, and they will be notified of transactions via email, instant SMS or paper mails to their residence. Out of all, I think financial and retail industry have favorably adopted online technologies, providing consumers with the capability to access all sort of statements of the transactions and accounts and manage them online through a web portal or mobile application. But this is not the case with governments, it is more challenging, owing to many circumstances, including law, emerging in complicated business processes along with different technology and systems.
The governments of different nations are advancing with the digital agenda to face these challenges. Often they use web portals and mobile applications to provide a service(s) to consumers which acts as a gateway and operated by individual agencies with some level of trust and security. Some of the governments are more superior, implementing technologies such as omnichannel to provide an integrated account view.
I could see the challenge from my perspective; I handle many online accounts, and many of them require attention while some don’t. I will rely on getting notifications for important one with a to-do list type of information via the link. Complexity rises for when there are crossovers and connections between multiple things, such as SSN, tax, and employment are well connected and require dealing with government agencies all the time.
In such case, I tend to comply with administrative requirements; I retain all paper records all transaction which needs some effort in organizing and stacking and requires physical space to store them.
I live in the dilemma that which records to retire after the particular time. To save space and efforts I may scan everything and form a digital collection of all the paper records, but its still going to be the pain as it would have it’s own complexity and costs. I think financial institutions and others could afford to consolidate all my records and keep them in a secure place which I choose.
However, this system would need to be structured in such way that it provides the results of each action achieved, for example, payment transaction notifications, medical services offered, entitlement cards accepted and many more. This structure needs to be consistent something and follow proper amendments such as Fintech SWIFT format. And also provide access independent of any device any platform along with all the records in chronological order.
To implement blockchain in any industry, we have to consider the properties of the decentralized system over the centralized system and evaluate how decentralized solution may benefit the industry in long-term prospect. Till now in this report, I might have been favoring the blockchain, but it requires profound observation of the problem and ways to take advantage of blockchain technology and implement it. The fundamental properties we need to discuss or have a look for determining complexity perspective, are as below -
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Public Verifiability
Determine the correctness of system state. In DLTs, peers or minors in the network verifies the system state, while in a centralized system, we don’t have a way to confirm as we do in decentralized systems, and it’s more like we trust a central entity to provide use correct system state. Suppose, in a relational database; an employee runs a query and updates wrong information, that information becomes truth as soon as executed and updated in the database, and can be fixed with human observation and correction.
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Transparency
Transparency of data and process for updating system state and observer audience.
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Privacy
This is an essential aspect of any system and can be easily achieved in centralized systems.
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Integrity It requires some sort of public verifiability to ensure the retrieved information is correct or not.
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Redundancy Retaining data on multiple systems produce redundant data, and there significance and requirement are different in both systems.
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Trust Having authority to provide read/write access to a system.
Consider these facts; an industry can conclude adopting the blockchain technology. However, there is a tradeoff between privacy and transparency while deciding to implement the blockchain systems. Either a system full transparent by providing all information or private by hiding all info. DTL can ensure privacy as well as public verifiability without compromising any individual’s information with heavy usage of cryptography. Using such systems have their own merits and demerits such as Zerocash is a digital currency which provides full anonymous transactions with expensive hashing techniques.
I have read a lot about the blockchain use cases over time and really couldn’t see a clear use case to implement the decentralized solution. According to a research paper (Do you need blockchain), below flowchart simplify the process of choosing whether you want to apply blockchain solution or not.
First applications of Blockchain are Bitcoin and Ethereum, but there is still a to explore and familiarize with its uncovered uses. Let us discuss a few use cases here. Firstly, if you think about the online verification of card and badges, you will have to scan the card or punch in the number to verify if this authentic. The reason why it is not efficient is that of the cost of services that are hosted in the cloud. In contrast with the use the Blockchain, we don’t have to build our identity infrastructure as we will be using Ethereum’s open Blockchain to store the details of identity and query it. Secondly, you cannot tamper the data that uses blockchain technology. When the records are stored in paper ledgers, they can tamper quickly, but a blockchain which is the linked chain of data blocks cannot tamper. Since the blockchain is inside the computer the thought of physical damage is ruled out. Each block has a hash id of previous block’s hash which binds them tightly together and makes it hard to tamper. Even if someone tampers the records, it is known or visible. Here is the diagram that explains the complete scenario,
The checkout travel chain is the new way for getting investments. With the help of this, anyone anywhere can become an investor. ICOs offer something called tokens are stored in Blockchain wallet and can be used to pay for the services to your company. Theoretically, you can see them like stocks and shares which you can also sell or exchange them when its value increases - these are digital assets.
Blockchain network can be used to create digital contracts. For contracts between any two parties where once does not stick to the consent can come to the rescue of digital contracts. In an example of the tenant not paying the landlord on a monthly basis, a consistent code can be written which tells the computer to transfer the amount from tenant’s bank account to landlord’s bank account. Another good example is to enforce the digital contract if the client refuses to pay for the services provided.
Digital voting is another big use case of blockchain technology. It is believed that the number of participants that come out, stand in queue and vote are less and lessening each year. What if could let people sit at home and vote for their desired candidate. There are many security concerns to that because hackers can modify your data or can know which candidate you considered to vote. So to avoid this Blockchain solution can be used which can provide anonymity and better security and can bring in more participants.
We know that data can be on free storage services like Gmail and Dropbox, but it is very hard not to think if our files are read or peeped in by cloud services host. On the other hand, data on blockchain are decentralized and is stored on different computers on the network with high encryption. There is also the provision to rent out our storage if you have excess space locally. To combine, this will provide increased efficiency and reduced costs, control of customer and high-level trust in the repository or transactional data. Gun safety is another one where blockchain can be used to track the gun ownership and possession related information. It can be used to monitor the criminal id history and attempts to purchase which is very important with all the recent news of the illegal and unethical use of guns in the United States.
There seem to be various use cases for blockchain implementation, and we will discuss most relevant one below -
Supply Chain Management (SCM) consists of various intermediate storage and production cycles for the flow of goods and services until they reach the final destination. Typically, many firms cooperate and trade on a global scale within a given product supply chain and lead to complexity of managing the whole life cycle of the product and expenses for inventory, processes, and failure detection management are pretty expensive. Nowadays many companies like Everledger, are in the market with their blockchain based solutions and these can help in improving the efficiency of the supply chain in the long run.
The payment transactions take multiple steps, and banks do not settle them immediately. For example, If Alice needs to send $200 to Bob, Alice’s account is charged with $200 and Bob’s account ought to be credited with the same sum. On the off chance that the records are at a similar bank, the bank can apply these progressions to their books because the aggregate charge furthermore, credit measure of the bank stays indistinguishable.
If Alice in any case, has her account at bank ABC and Bob at bank XYZ, the aggregate charge of bank ABC progressions while charging Alice’s account. Correspondingly, if Bank XYZ credits Bob’s account without charging another account with the same esteem, the total of all charges and all credits at Bank XYZ would never again be equivalent. This can be comprehended, if every one of the banks has a record with the other bank (generally alluded to as a Nostro account). At that point, bank ABC could charge Alice’s account and credit XYZ’s account while bank XYZ would charge ABC’s account and credit Bob’s account while adjusting the particular Nostro account. By and by this would prompt huge obligations between banks.
Ripple is one of the blockchain solutions for achieving smoother payment transactions.
A Decentralized Autonomous Organizations (DAO) is an association that is run self-rulingly through an arrangement of brilliant contracts. As opposed to conventional associations or organizations, there is no focal control or administration; instead, a DAO is characterized by a set of standards encoded in keen gets that describe how the DAO carries on and how it develops. Commonly, a DAO has numerous speculators to choose by voting how the assets of the DAO should be offered.
As the objective of such an association is to be administered in an entirely decentralized manner and the speculators, for the most part, don’t know or believe each other. A permissionless blockchain is usually a solid match for such a plan. Decentralized self-ruling associations are, be that as it may, an uncommon case. For a few applications, a devoted permissioned blockchain might be helpful for a solitary DAO. Much of the time, be that as it may, DAOs don’t require their particular blockchain yet are more qualified to expand over a current blockchain with officially existing money.
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Automotive - Observe history of the vehicle from assembly to sale, improve parts management process
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Banking, Financial, Fintech - Streamline current cross-border payments processing and improve security, solve double spending
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Cloud Storage - Cheaper decentralized systems transactions, Crowdsourcing unused cloud storage in the decentralized network
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Credit History - Chronological, accurate, transparent, and accessible credit reports
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Cybersecurity - Improve validity of data integrity and reduce no single point of failures in systems
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Donations - Improve crowdfunding campaigns and prevent donations fraud with auditable trails
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Education - Improve academic credentials verification and federated records of teachers and students
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Energy - Provide competitively peer to peer energy transfer and smart utility metering
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Forecasting - Combine blockchain with machine learning algorithms to provide forecasts and history
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Government and Voting - Verifiable audit trails to Reduce voter fraud, inefficiencies, Provide integrity of citizen registry data
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Gun Safety - Tracking gun title and ownership, criminal identity history, purchase, etc.
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Human Resources - Improve background checks, payments, and benefits processes
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Insurance - Improve multi-party contracts, risk contract efficiency, claims adjudication, disputes
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IoT - The capacity for IoT applications to offer transactional data to blockchains
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Law enforcement - The integrity of data evidence, a chronological chain of events
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Legal - Smart contracts with prescribed rules, termination dates, and convenience for appropriate individuals.
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Marketing - Bypass agents, providing more cost-effective advertisements
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Media - Control of ownership rights Anti-piracy / copyright infringement Use of smart contracts for artist pay/legal procedures Cryptographic, secure, and anti-3rd party payments
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Medical / Healthcare - Store secure patient databases on the blockchain Improve Claims Adjudication process Improve patient-to-hospital or patient-to-doctor transactions with transparency Overall Efficiency, privacy, and ownership of patient health data
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Public Transportation/Ride Sharing - Streamline common transit process, more accurate payments for ride, gas, and wear and tear
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Real Estate - Transparency within contracts, property information verification, record decentralization, Record, track, transfer land titles
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Travel - Manage Passenger ID, boarding, passport, payments, and other documentation digitally and verify during travel
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Wills and Inheritances - Smart contracts to handle the legality of will and allocation of inheritances
During this study, I have been reading a lot of articles and papers to understand and implement the blockchain and decentralized solutions. I could do a basic implementation as below -
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Karl W, Arthur G (2017) Do you need a Blockchain? - Retrieved from: https://eprint.iacr.org/2017/375.pdf
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Accenture (2015) Blockchain Technology: Preparing for Change, Retrieved from: https://www.accenture.com/ae-en/~/media/Accenture/next-gen/top-tenchallenges/challenge4/pdfs/Accenture-2016-Top-10-Challenges-04-Blockchain-Technology.pdf
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Ali, A. (2017). Blockchain Technology - ICANN58. Retrieved from https://www.slideshare.net/abderrahmanaitali/blockchain-technology-icann58
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Antonopoulos, A. M. (2015). Mastering Bitcoin. Sebastopol, CA: O’Reilly Media. BBN Times. (2017) : Promoting E Governance with blockchain Retrieved from: https://www.bbntimes.com/en/society/promoting-egovernance-with-blockchain
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bitcoincash.org. (2017). Bitcoin Cash. Retrieved from https://www.bitcoincash.org
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Blockchain S.A. (2017). Hash Rate. Retrieved from https://blockchain.info/de/charts/hashrate?daysAverageString=7
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Bourgi, S. (2017, October 18). Segwit2x: The Hard Fork That Failed to Activate. Hacked.com. Retrieved from https://hacked.com/segwit2x-the-hard-fork-that-failed-to-activate/
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Buterin, V. (2013, March 12). Bitcoin Network Shaken by Blockchain Fork. Bitcoin Magazine.Retrieved from https://bitcoinmagazine.com/articles/bitcoin-network-shaken-by-blockchain-fork1363144448/
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Caetano, R. (2015). Learning bitcoin (1.st ed., Community experience distilled). Packt Publishing.
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CoinMarketCap. (2017). Cryptocurrency Market Capitalizations. Retrieved from https://coinmarketcap.com/coins/views/all/
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Fairley, P. (2017). The Ridiculous Amount of Energy It Takes to Run Bitcoin: Running Bitcoin uses a small city’s worth of electricity. Intel and others want to make a more sustainable blockchain. Retrieved from https://spectrum.ieee.org/energy/policy/the-ridiculous-amount-of-energy-it-takes-torun-bitcoin