BLOCKCHAIN TECHNOLOGY OVERVIEW
1.1 Definition
Blockchain technology enables the creation of a decentralized environment, where the cryptographically validated transactions and data are not under the control of any third party organization. Any transaction ever completed is recorded in an immutable ledger in a verifiable, secure, transparent and permanent way, with a timestamp and other details.
The blockchain term, originally block chain, was first coined in 2009, by (the still unknown) Satoshi Nakamoto, in the original source code for the virtual currency Bitcoin: “Nodes collect new transactions into a block, hash them into a hash tree”; “when they solve the proof-of-work, they broadcast the block to everyone and the block is added to the block chain” (Nakamoto, 2009).
The interrelated terms Blockchain, Cryptocurrency (currency that only exists digitally, using a decentralized system to record transactions) and Initial Coin Offering – ICO (the first sale of a cryptocurrency to the public, conducted raising funds to support a start-up) were added to the Merriam Webster Dictionary in March 2018
Blockchain technology enables the creation of a decentralized environment, where the cryptographically validated transactions and data are not under the control of any third party organization. Any transaction ever completed is recorded in an immutable ledger in a verifiable, secure, transparent and permanent way, with a timestamp and other details.
The blockchain term, originally block chain, was first coined in 2009, by (the still unknown) Satoshi Nakamoto, in the original source code for the virtual currency Bitcoin: “Nodes collect new transactions into a block, hash them into a hash tree”; “when they solve the proof-of-work, they broadcast the block to everyone and the block is added to the block chain” (Nakamoto, 2009).
The interrelated terms Blockchain, Cryptocurrency (currency that only exists digitally, using a decentralized system to record transactions) and Initial Coin Offering – ICO (the first sale of a cryptocurrency to the public, conducted raising funds to support a start-up) were added to the Merriam Webster Dictionary in March 2018
1.2 Characteristics
A blockchain is characterized by censorship resistance, immutability and global usability, and has a global network of validators called miners, who maintain it through block rewards, named cryptotokens (Jeremy Gartner, in Shulman, 2018).
Vitalik Buterin (2017), the creator of Ethereum, states that decentralization assures fault tolerance, attack resistance and collusion resistance. Also, that blockchain is decentralized on two of the three
The process of adding a new block (containing thousands of transactions) to a blockchain, by hash verification procedures, is named mining. The new block is linked to the last one in blockchain. Each blockchain starts with the genesis block, containing its settings (Dhillon et al., 2017).
The advantages of the blockchain technology are the following (Grech and Camilleri, 2017):
1.3 Platforms
There are many blockchain platforms, coin or smart contracts oriented, based on different consensus algorithms, and with different developing tools and programming languages (Body, 2018; Armasu, 2018), in this section a few of the most important are presented.
In October 2008, the Bitcoin (a compound of the words bit and coin) protocol, a fully peer-to-peer electronic cash system, and the corresponding white paper were announced by Nakamoto (2008) in the Cryptography mailing list (http://www.metzdowd.com/pipermail/cryptography/2008-October/014810.html). Launched in 2009, Bitcoin (http://bitcoin.org) is the first and best known blockchain network, mainly oriented on crypto-currency transactions. The network maintains consensus using a hash-based proof-of-work (PoW) distributed algorithm (Nakamoto, 2008). At the time of writing (March 2018), a new block is created on the Bitcoin network at each 10 minutes (https://blockchain.info/stats), and around 12 thousand nodes participate in the blockchain maintenance (mining process), almost 60% being located in the USA, China and Germany; in Romania there are 45 nodes (https://bitnodes.earn.com).
Ethereum (http://ethereum.org), described in a white paper by Buterin (2013) and launched as an open-source blockchain platform in 2015, defines smart contracts and is designed for a large variety of decentralized applications (DApps). A new block is added to Ethereum at each 10 seconds (https://ethstats.net), and the number of nodes is greater than 16 thousand, the USA, China and Russia running around 60% of them (http://ethernodes.org).
The Ethereum main network is a public network that is open to anyone, but it is possible to run a private Ethereum network, which allows for certain advantages, like faster processing and private transactions within a permissioned group of known participants. Developed by JP Morgan, Quorum (https://www.jpmorgan.com/global/Quorum) is such an enterprise-focused version of Ethereum.
Sidechain is a term that permits scaling and was recently defined as a custom ‘rule-set’ used to offload computations from another chain, while relying on the mainchain for issues requiring the highest levels of security (Konstantopoulos, 2017).
Hyperledger (https://www.hyperledger.org/projects) is a Linux Foundation Project and incubates and promotes a range of business blockchain technologies, including distributed ledger frameworks, smart contract engines, client libraries, graphical interfaces, utility libraries and sample applications. Hyperledger Fabric (https://developer.ibm.com/blockchain), developed by IBM and Digital Asset in 2017, is a fully integrated enterprise-ready blockchain platform designed for business. A Fabric network comprises peer nodes, which execute smart contracts, called chaincode, access ledger data, endorse transactions and interface with applications. Hyperledger Iroha was designed as a mobile-first blockchain, to be simple and easy to incorporate into infrastructural projects.
The Microsoft Azure ecosystem proposes a cryptographically secure, shared, distributed ledger, coming with scenarios as easy-to-deploy templates for the most popular ledgers (https://azure.microsoft.com/en-us/solutions/blockchain).
The IOTA blockchain (http://iota.org) was developed to enable fee-less micro-transactions for the Internet of Things, as a solution for the interoperability and sharing of resources. The main innovation of IOTA is the Tangle: the structure of blockchain is not any more linear, but peer-to-peer, and the consensus is an intrinsic part of the system. IOTA comes with a platform for developing decentralized applications for which value is transferred without any fees (http://www.tangleblog.com/what-is-iota-what-is-the-tangle). It opens the door to the next decentralized systems, which are not based on the blocks cryptographically connected in a linear fashion (Murphy, 2018).
Nebulas (https://nebulas.io) is a self-evolving blockchain system with “a decentralized platform which provides a search framework for all blockchains”. Referred as the new “Google for Blockchain”, Nebulas would search among decentralized applications (DApps), smart contracts and user’s blockchain assets, thus turning of public data into private data (Gorsline, 2018).
A technology in development, called Hashgraph (https://hashgraph.com), is presented in its white paper as a decentralized public ledger based on a new consensus protocol, that aims to boast faster and cheaper transactions than the blockchain.
A blockchain is characterized by censorship resistance, immutability and global usability, and has a global network of validators called miners, who maintain it through block rewards, named cryptotokens (Jeremy Gartner, in Shulman, 2018).
Vitalik Buterin (2017), the creator of Ethereum, states that decentralization assures fault tolerance, attack resistance and collusion resistance. Also, that blockchain is decentralized on two of the three
- possible axes in software decentralization:
- politically decentralized - meaning that no one controls it;
- architecturally decentralized - no infrastructural central point of failure exists;
- logically centralized - there is one commonly agreed state and the system behaves like a single computer.
The process of adding a new block (containing thousands of transactions) to a blockchain, by hash verification procedures, is named mining. The new block is linked to the last one in blockchain. Each blockchain starts with the genesis block, containing its settings (Dhillon et al., 2017).
The advantages of the blockchain technology are the following (Grech and Camilleri, 2017):
- self-sovereignty - users identify themselves and maintain control over the storage and management of personal data;
- trust - the technical infrastructure offers secure operations (payments or issue of certificates);
- transparency and provenance - to perform transactions in knowledge that each party has the capacity to enter into that transaction;
- immutability - records are written and stored permanently, without the possibility of modification;
- disintermediation - no need for a central controlling authority to manage transactions or keep records;
- collaboration - ability of parties to transact directly with each other without the need for third-parties.
1.3 Platforms
There are many blockchain platforms, coin or smart contracts oriented, based on different consensus algorithms, and with different developing tools and programming languages (Body, 2018; Armasu, 2018), in this section a few of the most important are presented.
In October 2008, the Bitcoin (a compound of the words bit and coin) protocol, a fully peer-to-peer electronic cash system, and the corresponding white paper were announced by Nakamoto (2008) in the Cryptography mailing list (http://www.metzdowd.com/pipermail/cryptography/2008-October/014810.html). Launched in 2009, Bitcoin (http://bitcoin.org) is the first and best known blockchain network, mainly oriented on crypto-currency transactions. The network maintains consensus using a hash-based proof-of-work (PoW) distributed algorithm (Nakamoto, 2008). At the time of writing (March 2018), a new block is created on the Bitcoin network at each 10 minutes (https://blockchain.info/stats), and around 12 thousand nodes participate in the blockchain maintenance (mining process), almost 60% being located in the USA, China and Germany; in Romania there are 45 nodes (https://bitnodes.earn.com).
Ethereum (http://ethereum.org), described in a white paper by Buterin (2013) and launched as an open-source blockchain platform in 2015, defines smart contracts and is designed for a large variety of decentralized applications (DApps). A new block is added to Ethereum at each 10 seconds (https://ethstats.net), and the number of nodes is greater than 16 thousand, the USA, China and Russia running around 60% of them (http://ethernodes.org).
The Ethereum main network is a public network that is open to anyone, but it is possible to run a private Ethereum network, which allows for certain advantages, like faster processing and private transactions within a permissioned group of known participants. Developed by JP Morgan, Quorum (https://www.jpmorgan.com/global/Quorum) is such an enterprise-focused version of Ethereum.
Sidechain is a term that permits scaling and was recently defined as a custom ‘rule-set’ used to offload computations from another chain, while relying on the mainchain for issues requiring the highest levels of security (Konstantopoulos, 2017).
Hyperledger (https://www.hyperledger.org/projects) is a Linux Foundation Project and incubates and promotes a range of business blockchain technologies, including distributed ledger frameworks, smart contract engines, client libraries, graphical interfaces, utility libraries and sample applications. Hyperledger Fabric (https://developer.ibm.com/blockchain), developed by IBM and Digital Asset in 2017, is a fully integrated enterprise-ready blockchain platform designed for business. A Fabric network comprises peer nodes, which execute smart contracts, called chaincode, access ledger data, endorse transactions and interface with applications. Hyperledger Iroha was designed as a mobile-first blockchain, to be simple and easy to incorporate into infrastructural projects.
The Microsoft Azure ecosystem proposes a cryptographically secure, shared, distributed ledger, coming with scenarios as easy-to-deploy templates for the most popular ledgers (https://azure.microsoft.com/en-us/solutions/blockchain).
The IOTA blockchain (http://iota.org) was developed to enable fee-less micro-transactions for the Internet of Things, as a solution for the interoperability and sharing of resources. The main innovation of IOTA is the Tangle: the structure of blockchain is not any more linear, but peer-to-peer, and the consensus is an intrinsic part of the system. IOTA comes with a platform for developing decentralized applications for which value is transferred without any fees (http://www.tangleblog.com/what-is-iota-what-is-the-tangle). It opens the door to the next decentralized systems, which are not based on the blocks cryptographically connected in a linear fashion (Murphy, 2018).
Nebulas (https://nebulas.io) is a self-evolving blockchain system with “a decentralized platform which provides a search framework for all blockchains”. Referred as the new “Google for Blockchain”, Nebulas would search among decentralized applications (DApps), smart contracts and user’s blockchain assets, thus turning of public data into private data (Gorsline, 2018).
A technology in development, called Hashgraph (https://hashgraph.com), is presented in its white paper as a decentralized public ledger based on a new consensus protocol, that aims to boast faster and cheaper transactions than the blockchain.
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