Abstract
Blockchain is a digital, distributed, and decentralized network to store information in a tamper-proof way with an automated way to enforce trust among different participants. An open distributed ledger can record all transactions between different parties efficiently in a verifiable and permanent way. It captures and builds consensus among participants in the network. Each block is uniquely connected to the previous blocks via a digital signature which means that making a change to a record without disturbing the previous records in the chain is not possible, thus rendering the information tamper-proof. Blockchain holds the potential to disrupt any form of transaction that requires information to be trusted. This means that all intermediaries of trust, as they exist today, exposed to disruption in some form with the initiation of Blockchain technology. Blockchain works by validating transactions through a distributed network in order to create a permanent, verified, and unalterable ledger of information.
TopIntroduction
Satoshi Nakamoto invented the Blockchain in 2008 (Economist, 2015) to serve as the public transaction ledger of the cryptocurrency bitcoin. Nakamoto’s research paper (Nakamoto, 2008), contained the blueprint that most modern cryptocurrency schemes follow (although with variations and modifications). Bitcoin was just the first of many Blockchain applications. The invention of Blockchain for bitcoin was the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. This technology became fully recognized in 2009 with the launch of the Bitcoin network, the first of many modern cryptocurrencies.
The words Block and Chain were used separately in Satoshi Nakamoto's original paper (Nakamoto, 2008), and by 2016 became mainstream, as a single term, Blockchain. The label Blockchain 2.0 refers to new applications of the distributed Blockchain database (Kariappa, 2015). As of 2016, Blockchain 2.0 implementations continue to require an off-chain oracle to access any external data or events based on time or market conditions to interact with the Blockchain (Gray, 2017). In July 2016, IBM opened a Blockchain Innovation Research Center in Singapore (Williams, 2016). A working group for the World Economic Forum met in November 2016 to discuss the development of governance models related to Blockchain. According to Accenture, the Blockchains attained a 13.5% adoption rate within financial services domain in 2016 (Raconteur, 2016). In May 2018, Gartner found that only 1% of Chief Information Officer's (CIO) indicated any kind of Blockchain adoption within their organizations, and only 8% of CIOs were in the short-term “planning or looking at active experimentation with Blockchain” (Artificiallawyer, 2018). In November 2018, Conservative Member of the European Parliament, Emma McClarkin mooted a plan to utilize Blockchain technology to boost trade backed by the European Parliament’s Trade Committee (McClarkin, 2018).
Figure 1 shows blockchain developments on a timeline.
Market Research predicts that, by 2024, global Blockchain market expected to be worth over $20 billion (Transparencymarketresearch, 2018). Recently, the Dubai government announced that they would put 100% of their records pertaining to land registry on Blockchain. Dubai Land Department (DLD), in fact, has claimed to be the first such governmental department anywhere in the world, to adopt Blockchain for such high-level tasks (Das, 2017). The Republic of Georgia declared that they would use Blockchain technology to validate property-related government transactions. Countries like Sweden, Honduras and others are also developing such similar Blockchain-based systems, for enabling secured e-Governance (Shin, 2017). Gartner projects that Blockchain’s business value will grow to $176 billion by 2025 (Garneto, Kandaswamy, Lovelock, & Reynolds, 2017). The European Union’s commercial research group, the European Innovation Council (EIC), has launched a program to grant 2.7 billion euros to 1000 projects, that are developing systems and solutions using Blockchain technology (Shin, 2017). Andhra Pradesh has become the first state in India to pilot Blockchain technology in two departments and plans to deploy it across the administration (Firstpost, 2017).
Key Terms in this Chapter
ITU: The International Telecommunication Union.
Wealth: Generated by the flow of goods and services across business networks.
Asset: Anything that is capable of being on its own or controlled to produce value is an asset. Types of assets are tangible (e.g., a house) and intangible (e.g., a mortgage). Intangible assets are subdivided into financial (e.g., bond), intellectual (e.g., patents), and digital (e.g., music).
Bitcoin: It is a digital currency, created, and held electronically. Operated as a decentralized application that directly control the transfer of digital currency. It will keep the full history of transaction.
IEEE: The Institute of Electrical and Electronics Engineers.
Ledger: It is the system of record for a business. It records asset transfer between participants. Business will have multiple ledgers for multiple business networks in which they participate.
Transaction: An asset transfer.
Participants: Members of a business network. These can be customer, supplier, government, regulator. They usually reside in an organization and have specific identities and roles.
Blockchain Network User: A person, organization, entity, business, government, etc. which is utilizing the Blockchain network.
Contract: Conditions for transaction to occur.
Data Exhaust: Data exhaust (or digital exhaust) refers to the by-products of human usage of the internet, including structured and unstructured data, especially in relation to past interactions.
Elliptic Curve Diffie- Hellman-Merkle (ECDHM): Elliptic Curve Diffie-Hellman-Merkle (ECDHM) addresses are Bitcoin address schemes that increase privacy. ECDHM addresses be shared publicly and are used by senders and receivers to secretly derive traditional Bitcoin addresses that passive Blockchain observers cannot predict. The result is that ECDHM addresses can be “reused” without the loss of privacy that usually occurs from traditional Bitcoin address reuse.
Market: Central to the process. Can be public (fruit market, car auction) and private (supply chain financing, bonds).
Cloud Computing: Cloud computing is an ICT sourcing and delivery model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.
MITM Attack: In cryptography and computer security, a man-in-the-middle attack is an attack where the attacker secretly relays and possibly alters the communication between two parties who believe they are directly communicating with each other.