Blockchain - Overview
Published:
Lesson: 5
Topic: Blockchain
Author: Ashley Rosilier
At the most fundamental level, blockchain can be described as a distributed database that stores records across a network of different computers. That definition belies the revolutionary nature of the technology, however. Blockchain has been dubbed the “trust machine” [8] which gives testament to its most profound benefit: being able to establish trust between parties without the need for an intermediary. This capability has applications far beyond cryptocurrency and has the potential to transform the landscape of commerce and the interactions between human and machine.
History of Blockchain
Blockchain technology was catapulted into the limelight in 2009 as the backbone for the launch of the Bitcoin cryptocurrency, but blockchain as a concept has been around a several years longer. A cryptographically secured chain of time-stamped data blocks was first described by Bellcore researchers Stuart Haber and W. Scott Stornetta in 1991 as a way to maintain tamper-proof digital documents. These ideas were patented but did not find wide application at the time. The patent expired in 2004.
Haber’s and Stornetta’s work played a prominent role in the 2008 whitepaper on Bitcoin, published under the pseudonym Satoshi Nakomoto. Nakamoto also pulled in the concept of Proof of Work as a method for validating data by consensus of the network and protecting the system against fraud or failure of individual nodes.
Not long after the introduction of Bitcoin, there was interest in developing generic, self-programmable blockchains that could be used for applicatons other than cryptocurrency. Ethereum was the first blockchain-based distributed computing platform to allow developers to create and publish applications to run inside the block chain. Today there are numerous implementations of the blockchain methodology and applications in a growing number of domains.
Working Principles
There are are growing number of different implementations of blockchain, but they all share some common working principles that are central to the technology.
Decentralization - One of the key princples to blockchain is that the database is distributed and not centralized to a single server. The network is made up of individual “nodes” and each node maintains its own identical copy of the data “ledger”.
Immutability - When data is validated by the network, a new “block” is created and added to the “blockchain.” The new data is added simlutaneously to the data ledger on every individual node in the system. Once a new block is added to the chain, it cannot be changed or removed, hence there is immutability. If data on any particular node is corrupted (either intentionally or unintentionally), it is immediately evident to the system.
Auditability - Since the data blocks are added into an immutable, chronological chain, the entire data history is available at any time. Every node maintains an identical copy of the entire ledger which can be used to provide complete traceability of all transactions.
Fault Tolerance - By implementing a consensus protocol to validate new data added to the ledger, the blockchain demonstrates Byzantine Fault Tolerance. As long as 51% of the nodes are properly and honestly functioning, the system will be able to identify and discard faulty information and it wlll not compromise the overall integrity.
Types of Blockchain
The primary distinction between types of blockchain is the accessibility in terms of participation and viewing the data ledger.
Public Blockchain - In public blockchain, participation is completely open and does not require any authorization or validation of nodes. Consensus algorithms are implemented to protect the network from malicous actors. All operation is completely transparent, and the data ledgers can be viewed or audited by anyone at any time. Bitcoin is an example of a public blockchain. Public blockchains are referred to as “permissionless” because anyone can maintain a copy of the blockchain and participate in block validation.
Private Blockchain - Some later implemenations of blockchain introduced a central authority unit to control participation and access to the data ledger. This change can make the transaction speed faster and the system more efficient, but it is done at the expense of pure decentralization and immutability. This type of blockchain often makes sense in enterprise environments where privacy is preferred over complete transparency. Private blockchains are referred to as “permissioned” because every node joining the system is a known member of the organization.
Hybrid Blockchain - Hybrid blockchains, also known as “consortium” or “federated” blockchains, combine aspects of both public and private versions. In this type of system, node participation is controled by a central authority, but access/visibility to the data ledger is open to the public.
Application Areas
Blockchain began as a system for cryptocurrency, but its applications have been rapidly expanding. Any system that includes transactions between two, non-trusting parties can benefit from the implementation of blockchain. This includes domains ranging from real estate title transfers to supply chain tracking to identity verification.
References
[6] M. S. Ali, M. Vecchio, M. Pincheira, K. Dolui, F. Antonelli and M. H. Rehmani, “Applications of Blockchains in the Internet of Things: A Comprehensive Survey,” in IEEE Communications Surveys & Tutorials, vol. 21, no. 2, pp. 1676-1717, Secondquarter 2019, doi: 10.1109/COMST.2018.2886932.
[8] Economist (2015). Blockchain - The next big thing. Available at: https://www.economist.com/special-report/2015/05/07/the-next-big-thing
[9] Madaan, L., Kumar, A., & Bhushan, B. (2020). Working principle, Application areas and Challenges for Blockchain Technology. 2020 IEEE 9th International Conference on Communication Systems and Network Technologies (CSNT), 254–259. https://doi.org/10.1109/CSNT48778.2020.9115794
[10] Beck, Roman; Stenum Czepluch, Jacob; Lollike, Nikolaj; and Malone, Simon, “BLOCKCHAIN – THE GATEWAY TO TRUSTFREE CRYPTOGRAPHIC TRANSACTIONS” (2016). Research Papers. 153. http://aisel.aisnet.org/ecis2016_rp/153