Unit - 3
Blockchain
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. The decentralised database managed by multiple participants is known as Distributed Ledger Technology (DLT).
Blockchain is a type of DLT in which transactions are recorded with an immutable cryptographic signature called as hash.
This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain.
Blockchains such as Bitcoin and Ethereum are constantly and continually growing as blocks are being added to the chain, which significantly adds to the security of the ledger.
Blockchain Core Components:
Setup of Blockchain and Network operations are based on the four core components that are –
The record of all transactions is a blockchain itself. Bitcoin is the original currency of the Bitcoin blockchain. It is decentralized, which serves its advantage.
Many nodes are linked to the Internet in a clustered way. It Stores the complete synchronized blockchain edition. At all points of time, each node in Peer-to-Peer networks agrees to one blockchain state, so that anyone can check a transaction independently. It works mainly on a decentralized system.
It is built on the Consensus Algorithm and protocol. It is a process that utilizes protocol and algorithm so that nodes will agree on the same state of the blockchain without having to trust one another. It is a series of rules that control the whole network operation and all core components. Since bitcoin is having a protocol so it is a member of the consensus Mechanism.
The original currency encourages participation in the decentralized network. While discussing blockchain we can consider an incentive as a transaction, so the transaction has to be secure, it means we have to check the security of an incentive by analysing the mutual behaviour of intermediates nodes. If intermediate nodes are Honest and participate successfully then they are awarded from a blockchain transaction. An incentive mechanism is receiver-collusion resistant or a receiver-non-competitive resistant, where the receiver and any party of his neighbours, using any strategic profile other than that, cannot maximize their anticipated amount of utilities.
Building a blockchain:
Step 1: Identify a Suitable Use-case
There are 3 things that blockchains can do well:
Step 2: Identify the Most Suitable Consensus Mechanism
The original blockchain, which powers the bitcoin crypto-currency, used proof of work as a consensus mechanism. But today there are multiple distributed ledger systems that offer a host of consensus mechanisms such as Proof of stake, Byzantine fault tolerant, Deposit based consensus, Federated Byzantine Agreement, Proof of Elapsed Time, Derived PBFT, Redundant Byzantine Fault Tolerance, Simplified Byzantine Fault Tolerance, Federated consensus, Round Robin, and Delegated Proof of Stake.
Depending upon your use-case, you need to choose the consensus mechanism that makes the most sense.
Step 3: Identify the Most Suitable Platform
There are many blockchain platforms today and most of them are free and open source. Depending upon the consensus mechanism you chose in step 2, you need to select the most suitable blockchain platform.
Some of the more popular platforms, in alphabetical order are:
Step 4: Designing the Nodes
Blockchain solutions can be permissioned (e.g., a government run land registry) or permission-less (e.g., Bitcoin, where anyone can become a miner). Blockchain solutions can be private (e.g., a contract management system implemented in a pharmaceutical company), public (e.g., an asset backed cryptocurrency) or hybrid (e.g., a group of banks running a shared KYC platform).
Another factor to consider at this stage is whether the nodes will run on the cloud, on-premises, or both. Then comes hardware configuration issues like processors, memory, and disk size. You also need to decide on the base operating systems (usually Ubuntu, CentOS, Debian, Fedora, Red Hat or Windows).
Step 5: Design the Blockchain Instance
Most blockchain platforms need very carefully planned configuration for the following elements:
Some parameters can be changed at run-time but some cannot, so this is a very crucial step.
Step 6: Building the APIs
Some blockchain platforms come with pre-made APIs while some don’t. The major categories of APIs needed are:
Step 7: Design the Admin and User Interface
At this stage you would need to choose the front end and programming languages (e.g., HTML5, CSS, PHP, C#, Java, JavaScript, Python, Ruby, Golang, Solidity, Angular JS Nodejs). You would also need to choose external databases (e.g., MySQL, MongoDB) as well as servers (including Web servers, FTP servers, mail servers).
Step 8: Adding Future Tech
You can greatly enhance the power of your Blockchain solution by integrating Artificial Intelligence, Biometrics, Bots, Cloud, Cognitive services, Containers, Data Analytics, Internet of Things and Machine Learning.
Principles:
The blockchain builds a digital trust platform, implying the near impossibility of tampering the information once it has been inputted and the capacity for all involved actors to verify and trace each step. Each time there is a new transaction, a new block is created and appended to the existing blocks, thus the name ‘blockchain’. All the blocks are updated on the network at the same time and contain the full history of the involved transactions, thus maintaining a chain of integrity (or a chain of trust).
Another important aspect of the blockchain technology are smart contracts. They refer to programs (algorithms) using the information contained in a blockchain to automatically fulfil an agreed upon procedure, such as a transaction or reporting. For instance, if a container has been loaded in a ship and that this event has been encoded in its bill of lading blockchain, then a smart contract can be used to automatically pay the terminal operator. Smart contracts thus expand the usefulness of blockchains by providing a unique and enforceable document.
Technologies:
Blockchain is a combination of three leading technologies:
Cryptography keys consist of two keys – Private key and Public key. These keys help in performing successful transactions between two parties. Each individual has these two keys, which they use to produce a secure digital identity reference. This secured identity is the most important aspect of Blockchain technology. In the world of cryptocurrency, this identity is referred to as ‘digital signature’ and is used for authorizing and controlling transactions.
The digital signature is merged with the peer-to-peer network; a large number of individuals who act as authorities use the digital signature in order to reach a consensus on transactions, among other issues. When they authorize a deal, it is certified by a mathematical verification, which results in a successful secured transaction between the two network-connected parties. So, to sum it up, Blockchain users employ cryptography keys to perform different types of digital interactions over the peer-to-peer network.
A cryptocurrency is virtual or digital money that takes the form of tokens or “coins.” While some cryptocurrencies have ventured into the physical world with credit cards or other projects, the large majority remain entirely intangible.
The “crypto” in cryptocurrencies refers to complicated cryptography that allows for the creation and processing of digital currencies and their transactions across decentralized systems. Alongside this important “crypto” feature of these currencies is a common commitment to decentralization; cryptocurrencies are typically developed as code by teams who build in mechanisms for issuance and other controls.
Cryptocurrencies are almost always designed to be free from government manipulation and control, although as they have grown more popular, this foundational aspect of the industry has come under fire. The currencies modelled after Bitcoin are collectively called altcoins, and in some cases “shit coins,” and have often tried to present themselves as modified or improved versions of Bitcoin. While some of these currencies may have some impressive features that Bitcoin does not, matching the level of security that Bitcoin’s networks achieve largely has yet to be seen by an altcoin.
Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss.
Smart contracts work by following simple “if/when…then…” statements that are written into code on a blockchain. A network of computers executes the actions when predetermined conditions have been met and verified. These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket. The blockchain is then updated when the transaction is completed. That means the transaction cannot be changed, and only parties who have been granted permission can see the results.
Within a smart contract, there can be as many stipulations as needed to satisfy the participants that the task will be completed satisfactorily. transactions, explore all possible exceptions, and define a framework for resolving disputes.
Then the smart contract can be programmed by a developer – although increasingly, organizations that use blockchain for business provide templates, web interfaces, and other online tools to simplify structuring smart contracts.
Features:
Smart contracts offer numerous advantages, for example, they are capable of tracking performance in real-time consequently bringing tremendous cost savings. Also, compliance and controlling can happen on the fly. To get external information a smart contract will use the help of information oracles that will feed it with external data. So simply put smart contracts are;
Self-executing, Self-verifying Tamper-resistant.
They can also.
Lower the cost of transactions, guarantee more security, Reduce the reliance that is placed on trusted intermediaries. Help turn legal obligations into automated processes.
Application
Smart contracts can be used in a variety of fields, from healthcare to supply chain to financial services. Some examples are as follows:
1. Government voting system
Smart contracts provide a secure environment making the voting system less susceptible to manipulation. Votes using smart contracts would be ledger-protected, which is extremely difficult to decode.
Moreover, smart contracts could increase the turnover of voters, which is historically low due to the inefficient system that requires voters to line up, show identity, and complete forms. Voting, when transferred online using smart contracts, can increase the number of participants in a voting system.
2. Healthcare
Blockchain can store the encoded health records of patients with a private key. Only specific individuals would be granted access to the records for privacy concerns. Similarly, research can be conducted confidentially and securely using smart contracts.
All hospital receipts of patients can be stored on the blockchain and automatically shared with insurance companies as proof of service. Moreover, the ledger can be used for different activities, such as managing supplies, supervising drugs, and regulation compliance.
3. Supply chain
Traditionally, supply chains suffer due to paper-based systems where forms pass through multiple channels to get approvals. The laborious process increases the risk of fraud and loss.
Blockchain can nullify such risks by delivering an accessible and secure digital version to parties involved in the chain. Smart contracts can be used for inventory management and the automation of payments and tasks.
4. Financial services
Smart contracts help in transforming traditional financial services in multiple ways. In the case of insurance claims, they perform error checking, routing, and transfer payments to the user if everything is found appropriate.
Smart contracts incorporate critical tools for bookkeeping and eliminate the possibility of infiltration of accounting records. They also enable shareholders to take part in decision making in a transparent way. Also, they help in trade clearing, where the funds are transferred once the amounts of trade settlements are calculated.
Advantages
Disadvantages:
Applications:
Payment processing and money transfers
Arguably the most logical use for blockchain is to expedite the transfer of funds from one party to another. As noted, with banks removed from the equation, and validation of transactions ongoing 24 hours a day, seven days a week, most transactions processed over a blockchain can be settled within a matter of seconds.
Monitor supply chains
Blockchain also comes in particularly handy when it comes to monitoring supply chains. By removing paper-based trails, businesses should be able to pinpoint inefficiencies within their supply chains quickly, as well as locate items in real time. Further, blockchain would allow businesses, and possibly even consumers, to view how products performed from a quality-control perspective as they travelled from their place of origin to the retailer.
Data sharing
Cryptocurrency IOTA launched a beta version of its Data Marketplace in November, demonstrating that blockchain could be used as a marketplace to share or sell unused data. Since most enterprise data goes unused, blockchain could act as an intermediary to store and move this data to improve a host of industries.
Digital voting
Blockchain offers the ability to vote digitally, but it's transparent enough that any regulators would be able to see if something were changed on the network.
Real estate, land, and auto title transfers
One of the primary goals of blockchain is to take paper out of the equation, since paper trails are often a source of confusion
Workers' rights
Another interesting use for blockchain is to bolster the rights of workers around the globe.
Medical recordkeeping
The good news is the medical sector has already been moving away from paper for recordkeeping purposes for years. However, blockchain offers even more safety and convenience. In addition to storing patient records, the patient, who possesses the key to access these digital records, would be in control of who gains access to that data. It would be a means of strengthening the HIPAA laws that are designed to protect patient privacy.
Weapons tracking
One of the hot-button topics on any news network at the moment is gun control and/or weapons accountability. Blockchain could create a transparent and unchanging registry network that allows law enforcement and the federal government to track gun or weapon ownership, as well as keep a record of weapons sold privately.
Blockchain use cases:
Blockchain technology use cases categorized under specific
industries/applications:
1. Smart Contracts
Smart contracts Blockchain-based contracts enforced in real-time. They are created as an agreement between two or more parties without the involvement of any intermediary. The contract exists across a distributed and decentralized Blockchain network. Smart contracts are now a staple in healthcare, real estate, and even for government agencies.
Use cases:
BurstIQ (healthcare)
BurstIQ used Big Data-based smart contracts to facilitate the transfer of sensitive medical data between patients and doctors. These contracts specify clear outlines and parameters for data sharing. They contain personalized health plans and other relevant details for individual patients.
Propy (real estate)
Propy is a real estate platform that uses a Blockchain-based title registry system. It automates all transactions for brokers, realtors, and their clients. Thanks to Blockchain tech, Propy makes title issuance instant and allows the buying/selling of properties via cryptocurrency.
2. Internet of Things (IoT)
The Internet of Things (IoT) industry is growing rapidly with billions of connected devices. The latest forecasts suggest that by 2030, there’ll be 50 billion devices in use globally. As this number continues to grow, it will increase vulnerabilities as hackers can easily breach your data through a single connected device. By integrating Blockchain technology in IoT devices, the possibility of data breaches can be reduced to a great extent.
Use cases:
HYPR (IoT/Cybersecurity)
HYPR takes cybersecurity to the next level by combining smartphone technology with the highly secure FIDO token. This is the secret behind its True Password less Authentication feature. Through its decentralized credential solutions and biometric authentication, HYPR makes IoT devices tamper-proof.
(IoT/Cybersecurity)
Xage boasts of being the world’s first Blockchain-based cybersecurity platform exclusively for catering to IoT firms functioning in energy, transportation, manufacturing, etc. Xage’s technology can handle and manage billions of devices simultaneously. It extends zero trust identity, data security, and local/remote access for physical and digital operations in the cloud, OT, and IT.
3. Money Transfer
Money transfer and payment processing are the most excellent Blockchain technology use cases. Blockchain tech enables lightning-fast transactions in real-time. This has already transformed the BFSI sector for good as it saves both time and money (mostly eliminates transaction fees charged by banks/financial institutions).
Use cases:
Circle (FinTech)
Circle uses USD Coin (USDC), the fastest-growing regulated Stable coin, to help individuals run and establish their internet business. The platform offers around seven cryptocurrencies (Bitcoin, Monero, Zcash, etc.). Every month, Circle handles over $2 billion in cryptocurrency investments and exchanges.
Chain Analysis (FinTech/Cybersecurity)
Chain analysis offers Blockchain data and analysis reports to financial institutions, exchanges, and government agencies across the globe. Essentially, it focuses on helping institutions monitor cryptocurrency exchanges. Chain analysis compliance and investigation tools enable to monitor and identify fraudulent transactions, money laundering, and compliance violations, thereby building a reliable Blockchain-based economy.
5. Logistics
Data siloing and lack of communication and transparency are the most pertinent issues of the logistics industry. Such obstacles become even more pronounced since thousands of companies operate in this domain, costing business time and money. This is where Blockchain’s data transparency comes in handy. Blockchain tech can acknowledge data sources and automate processes, thereby building greater trust and transparency within the logistics industry.
Use cases:
DHL (Supply chain management, Logistics)
Everyone knows that DHL is a shipping giant DHL that has a global presence. It leverages Blockchain-powered logistics to track and record information related to shipments while maintaining the integrity of transactions.
Maersk (Supply chain management, Logistics)
Another shipping giant, Maersk, has collaborated with IBM to bring Blockchain into the global trade scenario. Through this partnership, Maersk aims to leverage Blockchain tech’s potential to better understand and optimize supply chain management and digitally track products across international borders in real-time.
References:
1. Internet of Things(IoT): Systems and Applications: Mehmet R. Yuce, Jamil Y. Khan
2. Cloud Computing – Concepts, Technology and Architecture Pearson Thomas Erl
3. Block Chain: Blueprint for a New Economy, O’Reilly, Melanie Swan
4. Designing Reality: How to Survive and Thrive in the Third Digital Revolution by Prof. Niel Gershenfeld.
5. Simon Haykin, “Communication Systems”, 4th Edition, Wiley India
