Topic : Blockchain is currently one of the most loaded buzzwords within the IT industry due to the wealth creation of crypto currencies. Discuss the technology and the role it can have in other areas beyond currency.
Introduction: (Belle, 2017). The main advantage of this technology is that it does not allow copying or altering of digital information that is shared across peer devices. The prime usage for Blockchain is in the transaction of crypto currency called Bitcoin (Eyal et al., 2016). Further, this blockchain technology assignment will also discuss the role it holds for other areas, which is other than currency. This study will first discuss the underlying concept, and its advantages and disadvantages. This will be followed by the basic structure and its operation. The types of Blockchain will be discussed, which is followed by its uses other than currency.
Concept : The Blockchain is defined by Eyal (2017) as the digital ledger, which is The blockchain is a concept that is invented by Satoshi Nakamoto
This blockchain technology assignment discusses the technology in details and the way it is revolutionary in its concept. The digital ledger not only records the financial transaction but also anything, that has value to the stakeholders. The block chain is composed of a number of records called blocks. These blocks are connected using cryptography. Each of the blocks contains a cryptographic hash, a time stamp and a transaction data (Vigna and Casey, 2016). The process of using Blockchain starts with a user request for a transaction. The peer-to-peer network exists in the concept of Blockchain, which essentially consists of a number of privileged participants called peers. The activities and tasks of the network are distributed among the peers who process the transaction requests and records the updates. Hence, the requested transaction is processed through this network using special algorithms. These peers existing in this distributed network validates the transaction and updates the user status in the records. This means that for a new Blockchain a new block is created and in the case of an existing Blockchain, the new block is appended, and the record is updated and is shared (de Meijer, 2016). The new alteration is permanent and cannot be altered in any way. However, this Blockchain can be shared and distributed across the stakeholders. The Blockchain has the capability to share or crypto-currency, records, files, and information. It is important to note that there is not a centralized version of the record. On the other hand, the blocks are located at various locations (Eyal et al., 2016). This decentralised structure is maintained with the help to cryptographic hash as mentioned earlier.
Structure: The Blockchain technology as identified before is decentralized using cryptographic hash incorporated in blocks of information. The concept of decentralization in relation to the network is defined as the act of storing data across several nodes present in the network (Herbert and Litchfield, 2015). The information is communicated through ad-hoc message passing through a distributed network as indicated previously. The cryptographic technology used in this case is public-key cryptography. This cryptographic technology includes a long random string, which acts as a public key. The private key is present with the intended recipients, which acts as a password to the information. The sharing of information across this network is done through massive replication of data across the nodes. This means that each of the nodes contains one of the copies of the Blockchain. Multiple time-tamping schemes are utilised by this network in order to serialise changes and gain consensus.
The blocks of information consisted of validated transactions that include any type of data. The blocks are linked using the hashed crypts that include information regarding the location of the previous block. Clearly, the formation of the blocks is iterative. This iterative process helps to maintain the integrity of the information and mitigates the chances of duplication across the systems (Umeh, 2016). This means that authenticated users can gain access to the initial block by linearly following the hashed information provided in these blocks. The blocks can be the mother block, which is called the genesis block (Belle, 2017). The current block is the one that is generated at the current time. The orphan blocks are those that not allowed to be incorporated into the genesis block (Belle, 2017).
The peers or nodes present in the distributed network may maintain a different version of the Blockchain. However, as soon as the new version of the Blockchain is created, all the peers are informed of the new version, and the new version history in maintained across the network. Essentially the highest value score of the Blockchain determines whether the block will be forwarded or not. While updating of the old block, it is essential to note the existing blocks are not removed but the information is coded and is appended (Pon, 2016). This also aids to reduce work on redistributing as well as the underlying challenge of duplicity. The P2P network takes a certain time to generate a new block. This time is called block time. While some block chains generate a new block very frequently, the other Blockchains may require higher time for generating a new block. When the block generation is complete, the data or information existing within the Blockchain becomes sharable and verifiable.
(Source: Lin and Liao, 2017)
A hard fork is defined as a radical change in the protocol, which validates the previously invalid blocks. For example, orphan blocks. This means that a hard fork is a direct violation of the general non-editing rule of a block chain (Lin and Liao, 2017). In this case, a common consensus arrives across the nodes that may allow incorporation of the orphan block, in which case the new Blockchain is copied to all the nodes. In this case, there become two paths of the block chain. One path stores the old block chain. While the other path records the new block chain. The nodes that will store the older version of the Blockchain will no longer store the newer version, while those who will store the new version will not accept the older version (Lin and Liao, 2017). However, when the nodes storing the older version determine that the Blockchain has become obsolete, then they will upgrade their information to the newer Blockchain.
Types: There are three types of Blockchains. The Public Blockchain is the one where, there are no restrictions for sharing, recording and validating. This means that these Blockchains are publicly available. Any user can use this Blockchain to record blocks, view the information or become a participant in the consensus protocol. This Blockchain uses the proof-of-work consensus algorithm, which requires no permission (Peters and Panayi, 2016). This means that in this case, any user can download the protocol and become a node to the distributed network. Further, in this case, any user can check whether the blocks can be added to the Blockchain. Examples of Blockchain include Bitcoin, Ethereum, Dash, Litecoin and the likes. This Blockchain type does not require infrastructural investment, which includes, dedicated servers, and decentralized applications (Lin and Liao, 2017).
The Private Blockchain, on the other hand, is the one, which has ‘write’ permission for using this Blockchain. These Blockchains are typically used within an organization, which does not wish to transact with unknown users. Apart from the ‘write’ permission, ‘read’ permission can also be controlled according to the needs of the organisation. While the Blockchain is decentralised, the controlling permission is centrally located. This is similar to the intranet, which is network technology that separated the public network from that existing within an organisation for its personal purpose. The data privacy rules are enforced in a similar way to the network firewall. Since this is a hybrid technology using centralised and decentralised concept, the risks to the information are increased several folds (Umeh, 2016). The major benefit it that it reduces the cost of using legacy systems as well as redundancy. Further, this method uses a limited number of user and hence is faster in contrast to public Blockchain. Examples include MONAX and Multichain.
Consortium Blockchains are similar to private Blockchain but are under a specific leadership. This means that consortium Blockchain protocol does not allow any user even in the private domain to participate in consensus protocol (Varshney, 2018). The consensus protocol consists of preselected administrators that have the permission to control the consensus and participation of individuals. However, the ‘read’ permission may be kept public and can be accessed by the public. This type of Blockchain is advanced in relation to security and privacy. While this type of Blockchain technology reduces the transaction costs in comparison to legacy technologies, they are also faster than the private Blockchain technology (Eyal, 2017). While the public Blockchain is disruptive to a business setting, the consortium Blockchain is not. However, the privacy protocols are centralised and hence, may lead to vulnerabilities in comparison to public Blockchain. Example of consortium Blockchain includes R3 used in Banks, EWF used in Energy, and B3i, which is used in Insurance.
Uses: Blockchain has been primarily developed for the use of currency transaction, especially crypto currency called Bitcoin. This technology used to record transaction related to Bitcoin occurring in the network. However, with major advancements and research, it is identified that this technology can prove to be a game-changer in the domain of network and security in various industries (Yli-Huumo et al., 2016).
Smart Contracts are the type of contracts that can be generated without any human intervention. Automation in drawing up of contracts between two more stakeholders has been argued to be vulnerable to moral hazards (Ølnes, 2016). However, with the adoption of Blockchain technology, this hazard can be reduced considerably. This technology will also allow for incorporating privacy and optimising its use among the stakeholders. However, there is much skepticism present in this area due to the legal status of this type of contracts. Hence, no applicable software is developed.
In the financial sector, the need for privacy, integrity, and consistency is essential. In order to ensure security, the banking sector has already implemented distributed ledger for Blockchain for bookkeeping and information sharing. According to research, it has been identified that there is a notable change in the speed of processing and information sharing (Guo & Liang, 2016). Speed and automation have already been recognised as an integral aspect of customer satisfaction in the banking sector (Peters and Panayi, 2016). This starts with account creations, transactions, and extracting information. While the legacy systems are cumbersome and are subject to potential risks and vulnerability, the incorruptible nature of Blockchain renders it a perfect substitute for speeding up the process, reducing cost, and improving security and privacy (Guo and Liang, 2016). However, skepticism still runs through the banking fraternity due to their inadequate success stories and a large number of ‘proof of concepts’. Similar to the banking industry, the insurance sector is the next appropriate sector that can utilise the potential of this technology.
The other functions that can utilise the concept of Blockchain include the sales department. The sales department of an organisation can utilise the concept to create permanent and easily sharable ledger system. This information can be used to compare, calculate and analyse the sales information within the department and across the organisation (Pon, 2016). Further, data inconsistency has been found to be a disadvantage of the existing technologies currently in use. Hence, Blockchain can be utilised to improve data management within this function.
Conclusion: The blockchain technology assignment focuses on discussing the Blockchain technology and accesses its use in industries other than currency. It is identified in this blockchain technology assignment that Blockchain uses building elements of information called blocks that are validated through the nodes present in a distributed network system. The technology uses the decentralised system, which helps to eliminate the risks of intrusion and loss of data. While the blocks are permanent upon validation, the collective decision of nodes can override the general protocol and may include invalidated blocks called the orphan blocks to the mother block. There are three types of Blockchain depending upon the protocol to choose the nodes, which can implement a consensus protocol. Among these, the consortium Blockchain is the fastest in terms of execution and the public Blockchain is the strongest in terms of security. The blockchain technology assignment also identifies that apart from currency, this technology can be used to share information like contracts, records, and files. In this blockchain technology assignment it is identified that the block chain technology can be utilised in banking sector, sales, insurance, and drawing up of smart contracts.
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