A blockchain is a type of
distributed ledger technology (DLT) that consists of growing lists of
records, called ''blocks'', that are securely linked together using
cryptography
Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or ''-logia'', "study", respectively), is the practice and study of techniques for secure communication in the presence of adver ...
.
Each block contains a
cryptographic hash of the previous block, a
timestamp
A timestamp is a sequence of characters or encoded information identifying when a certain event occurred, usually giving date and time of day, sometimes accurate to a small fraction of a second. Timestamps do not have to be based on some absolut ...
, and transaction data (generally represented as a
Merkle tree, where
data nodes are represented by leaves). The timestamp proves that the transaction data existed when the block was created. Since each block contains information about the previous block, they effectively form a ''chain'' (compare
linked list
In computer science, a linked list is a linear collection of data elements whose order is not given by their physical placement in memory. Instead, each element points to the next. It is a data structure consisting of a collection of nodes whic ...
data structure), with each additional block linking to the ones before it. Consequently, blockchain transactions are irreversible in that, once they are recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.
Blockchains are typically managed by a
peer-to-peer (P2P) computer network for use as a public
distributed ledger, where nodes collectively adhere to a
consensus algorithm
A fundamental problem in distributed computing and multi-agent systems is to achieve overall system reliability in the presence of a number of faulty processes. This often requires coordinating processes to reach consensus, or agree on some data va ...
protocol
Protocol may refer to:
Sociology and politics
* Protocol (politics), a formal agreement between nation states
* Protocol (diplomacy), the etiquette of diplomacy and affairs of state
* Etiquette, a code of personal behavior
Science and technology
...
to add and validate new transaction blocks. Although blockchain records are not unalterable, since
blockchain forks are possible, blockchains may be considered
secure by design
Secure by design, in software engineering, means that software products and capabilities have been designed to be foundationally secure.
Alternate security strategies, tactics and patterns are considered at the beginning of a software design, ...
and exemplify a distributed computing system with high
Byzantine fault tolerance
A Byzantine fault (also Byzantine generals problem, interactive consistency, source congruency, error avalanche, Byzantine agreement problem, and Byzantine failure) is a condition of a computer system, particularly distributed computing systems, ...
.
A blockchain was created by a person (or group of people) using the name (or
pseudonym
A pseudonym (; ) or alias () is a fictitious name that a person or group assumes for a particular purpose, which differs from their original or true name (orthonym). This also differs from a new name that entirely or legally replaces an individua ...
)
Satoshi Nakamoto in 2008 to serve as the public
distributed ledger for
bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
cryptocurrency
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It i ...
transactions, based on previous work by
Stuart Haber
Stuart Haber is an American cryptographer and computer scientist, known for his contributions in cryptography and privacy-preserving technologies and widely recognized as the co-inventor of the blockchain. His 1991 paper "How to Time-Stamp a Dig ...
,
W. Scott Stornetta
Wakefield Scott Stornetta (born June 1959) is an American physicist and scientific researcher. His 1991 paper "How to Time-Stamp a Digital Document”, co-authored with Stuart Haber, won the 1992 Discover Award for Computer Software and is consid ...
, and
Dave Bayer. The implementation of the blockchain within bitcoin made it the first digital currency to solve the
double-spending problem without the need of a trusted authority or central
server
Server may refer to:
Computing
*Server (computing), a computer program or a device that provides functionality for other programs or devices, called clients
Role
* Waiting staff, those who work at a restaurant or a bar attending customers and su ...
. The
bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
design has inspired other applications and blockchains that are readable by the public and are widely used by
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
. The blockchain may be considered a type of
payment rail.
Private blockchains have been proposed for business use. ''Computerworld'' called the marketing of such privatized blockchains without a proper security model "
snake oil
Snake oil is a term used to describe deceptive marketing, health care fraud, or a scam. Similarly, "snake oil salesman" is a common expression used to describe someone who sells, promotes, or is a general proponent of some valueless or fraudu ...
";
however, others have argued that permissioned blockchains, if carefully designed, may be more decentralized and therefore more secure in practice than permissionless ones.
History
![2011-2021_blockchain_transactions](https://upload.wikimedia.org/wikipedia/commons/a/ac/2011-2021_blockchain_transactions.jpg)
Cryptographer
David Chaum
David Lee Chaum (born 1955) is an American computer scientist, cryptographer, and inventor. He is known as a pioneer in cryptography and privacy-preserving technologies, and widely recognized as the inventor of digital cash. His 1982 dissertatio ...
first proposed a blockchain-like protocol in his 1982 dissertation "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups." Further work on a cryptographically secured chain of blocks was described in 1991 by
Stuart Haber
Stuart Haber is an American cryptographer and computer scientist, known for his contributions in cryptography and privacy-preserving technologies and widely recognized as the co-inventor of the blockchain. His 1991 paper "How to Time-Stamp a Dig ...
and
W. Scott Stornetta
Wakefield Scott Stornetta (born June 1959) is an American physicist and scientific researcher. His 1991 paper "How to Time-Stamp a Digital Document”, co-authored with Stuart Haber, won the 1992 Discover Award for Computer Software and is consid ...
.
They wanted to implement a system wherein document timestamps could not be tampered with. In 1992, Haber, Stornetta, and
Dave Bayer incorporated
Merkle trees into the design, which improved its efficiency by allowing several document certificates to be collected into one block.
Under their company Surety, their document certificate hashes have been published in ''
The New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' every week since 1995.
The first decentralized blockchain was conceptualized by a person (or group of people) known as
Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a
Hashcash
Hashcash is a proof-of-work system used to limit email spam and denial-of-service attacks, and more recently has become known for its use in bitcoin (and other cryptocurrencies) as part of the mining algorithm. Hashcash was proposed in 1997 by Adam ...
-like method to
timestamp
A timestamp is a sequence of characters or encoded information identifying when a certain event occurred, usually giving date and time of day, sometimes accurate to a small fraction of a second. Timestamps do not have to be based on some absolut ...
blocks without requiring them to be signed by a trusted party and introducing a difficulty parameter to stabilize the rate at which blocks are added to the chain. The design was implemented the following year by Nakamoto as a core component of the cryptocurrency
bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
, where it serves as the public
ledger
A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, and would record each transaction as either a debit or credit in separate columns, and the ending or ...
for all transactions on the network.
In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20 GB (
gigabyte
The gigabyte () is a multiple of the unit byte for digital information. The prefix ''giga'' means 109 in the International System of Units (SI). Therefore, one gigabyte is one billion bytes. The unit symbol for the gigabyte is GB.
This defini ...
s). In January 2015, the size had grown to almost 30 GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50 GB to 100 GB in size. The ledger size had exceeded 200 GB by early 2020.
The words ''block'' and ''chain'' were used separately in Satoshi Nakamoto's original paper, but were eventually popularized as a single word, ''blockchain,'' by 2016.
According to
Accenture
Accenture plc is an Irish-American professional services company based in Dublin, specializing in information technology (IT) services and consulting. A ''Fortune'' Global 500 company, it reported revenues of $61.6 billion in 2022. Accentur ...
, an application of the
diffusion of innovations theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the
early adopter
An early adopter or lighthouse customer is an early customer of a given company, product, or technology. The term originates from Everett M. Rogers' ''Diffusion of Innovations'' (1962).
History
Typically, early adopters are customers who, in ad ...
s' phase. Industry trade groups joined to create the Global Blockchain Forum in 2016, an initiative of the
Chamber of Digital Commerce
The Chamber of Digital Commerce is an American advocacy group that promotes the emerging industry behind blockchain technology, bitcoin, digital currency and digital assets.
History
Headquartered in Washington, D.C., the organization was fou ...
.
In May 2018,
Gartner
Gartner, Inc is a technological research and consulting firm based in Stamford, Connecticut that conducts research on technology and shares this research both through private consulting as well as executive programs and conferences. Its clients ...
found that only 1% of
CIOs indicated any kind of blockchain adoption within their organisations, and only 8% of CIOs were in the short-term "planning or
ooking atactive experimentation with blockchain". For the year 2019 Gartner reported 5% of CIOs believed blockchain technology was a 'game-changer' for their business.
Structure and design
![Blockchain](https://upload.wikimedia.org/wikipedia/commons/9/98/Blockchain.svg)
A blockchain is a
decentralized
Decentralization or decentralisation is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group.
Conce ...
,
distributed, and often public, digital ledger consisting of records called ''blocks'' that are used to record transactions across many computers so that any involved block cannot be altered retroactively, without the alteration of all subsequent blocks. This allows the participants to verify and audit transactions independently and relatively inexpensively. A blockchain database is managed autonomously using a
peer-to-peer
Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer n ...
network and a distributed timestamping server. They are
authenticated
Authentication (from ''authentikos'', "real, genuine", from αὐθέντης ''authentes'', "author") is the act of proving an assertion, such as the identity of a computer system user. In contrast with identification, the act of indicati ...
by
mass collaboration powered by
collective
A collective is a group of entities that share or are motivated by at least one common issue or interest, or work together to achieve a common objective. Collectives can differ from cooperatives in that they are not necessarily focused upon an ...
self-interest
Self-interest generally refers to a focus on the needs or desires (''interests'') of one's self. Most times, actions that display self-interest are often performed without conscious knowing. A number of philosophical, psychological, and economi ...
s. Such a design facilitates
robust workflow
A workflow consists of an orchestrated and repeatable pattern of activity, enabled by the systematic organization of resources into processes that transform materials, provide services, or process information. It can be depicted as a sequence of ...
where participants' uncertainty regarding data security is marginal. The use of a blockchain removes the characteristic of infinite
reproducibility
Reproducibility, also known as replicability and repeatability, is a major principle underpinning the scientific method. For the findings of a study to be reproducible means that results obtained by an experiment or an observational study or in a ...
from a
digital asset
A digital asset is anything that exists only in digital form and comes with a distinct usage right. Data that do not possess that right are not considered assets.
''Digital assets'' include but are not exclusive to: digital documents, audible ...
. It confirms that each unit of value was transferred only once, solving the long-standing problem of
double-spending. A blockchain has been described as a ''value-exchange protocol''. A blockchain can maintain
title rights because, when properly set up to detail the exchange agreement, it provides a record that compels
offer and acceptance.
Logically, a blockchain can be seen as consisting of several layers:
* infrastructure (hardware)
*
networking
Network, networking and networked may refer to:
Science and technology
* Network theory, the study of graphs as a representation of relations between discrete objects
* Network science, an academic field that studies complex networks
Mathematics
...
(node discovery, information propagation and verification)
*
consensus (
proof of work,
proof of stake)
* data (blocks, transactions)
*
application
Application may refer to:
Mathematics and computing
* Application software, computer software designed to help the user to perform specific tasks
** Application layer, an abstraction layer that specifies protocols and interface methods used in a c ...
(
smart contract
A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the re ...
s/
decentralized applications, if applicable)
Blocks
Blocks hold batches of valid
transactions that are hashed and encoded into a
Merkle tree.
Each block includes the
cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.
This
iterative
Iteration is the repetition of a process in order to generate a (possibly unbounded) sequence of outcomes. Each repetition of the process is a single iteration, and the outcome of each iteration is then the starting point of the next iteration. ...
process confirms the integrity of the previous block, all the way back to the initial block, which is known as the ''genesis block'' (Block 0).
To assure the integrity of a block and the data contained in it, the block is usually
digitally signed
A digital signature is a mathematical scheme for verifying the authenticity of digital messages or documents. A valid digital signature, where the prerequisites are satisfied, gives a recipient very high confidence that the message was created b ...
.
Sometimes separate blocks can be produced concurrently, creating a temporary
fork. In addition to a secure
hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher score can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.
Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of history forever. Blockchains are typically built to add the score of new blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded decreases exponentially
as more blocks are built on top of it, eventually becoming very low. For example, bitcoin uses a
proof-of-work system, where the chain with the most cumulative proof-of-work is considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of
computation
Computation is any type of arithmetic or non-arithmetic calculation that follows a well-defined model (e.g., an algorithm).
Mechanical or electronic devices (or, historically, people) that perform computations are known as ''computers''. An es ...
. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and
parallel
Parallel is a geometric term of location which may refer to:
Computing
* Parallel algorithm
* Parallel computing
* Parallel metaheuristic
* Parallel (software), a UNIX utility for running programs in parallel
* Parallel Sysplex, a cluster of IBM ...
manner.
Block time
The ''block time'' is the average time it takes for the network to generate one extra block in the blockchain. By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for
Ethereum is set to between 14 and 15 seconds, while for bitcoin it is on average 10 minutes.
Hard forks
Decentralization
By storing data across its
peer-to-peer network
Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer n ...
, the blockchain eliminates a number of risks that come with data being held centrally. The decentralized blockchain may use
ad hoc
Ad hoc is a Latin phrase meaning literally 'to this'. In English, it typically signifies a solution for a specific purpose, problem, or task rather than a generalized solution adaptable to collateral instances. (Compare with ''a priori''.)
Com ...
message passing
In computer science, message passing is a technique for invoking behavior (i.e., running a program) on a computer. The invoking program sends a message to a process (which may be an actor or object) and relies on that process and its supporting i ...
and
distributed networking
Distributed networking is a distributed computing network system where components of the program and data depend on multiple sources.
Overview
Distributed networking, used in distributed computing, is the network system over which computer program ...
. One risk of a lack of decentralization is a so-called "51% attack" where a central entity can gain control of more than half of a network and can manipulate that specific blockchain record at will, allowing
double-spending.
Peer-to-peer blockchain networks lack centralized points of vulnerability that
computer crackers can exploit; likewise, they have no central point of
failure
Failure is the state or condition of not meeting a desirable or intended objective (goal), objective, and may be viewed as the opposite of Success (concept), success. The criteria for failure depends on context, and may be relative to a parti ...
. Blockchain security methods include the use of
public-key cryptography
Public-key cryptography, or asymmetric cryptography, is the field of cryptographic systems that use pairs of related keys. Each key pair consists of a public key and a corresponding private key. Key pairs are generated with cryptographic alg ...
. A ''public key'' (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A ''private key'' is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.
Every
node
In general, a node is a localized swelling (a "knot") or a point of intersection (a vertex).
Node may refer to:
In mathematics
*Vertex (graph theory), a vertex in a mathematical graph
*Vertex (geometry), a point where two or more curves, lines, ...
in a decentralized system has a copy of the blockchain.
Data quality
Data quality refers to the state of qualitative or quantitative pieces of information. There are many definitions of data quality, but data is generally considered high quality if it is "fit for tsintended uses in operations, decision making and ...
is maintained by massive database
replication and
computational trust In information security, computational trust is the generation of trusted authorities or user trust through cryptography. In centralised systems, security is typically based on the authenticated identity of external parties. Rigid authentication mec ...
. No centralized "official" copy exists and no user is "trusted" more than any other. Transactions are broadcast to the network using the software. Messages are delivered on a
best-effort
Best-effort delivery describes a network service in which the network does ''not'' provide any guarantee that data is delivered or that delivery meets any quality of service. In a best-effort network, all users obtain best-effort service. Under b ...
basis. Early blockchains rely on energy-intensive mining nodes to validate transactions,
add them to the block they are building, and then
broadcast
Broadcasting is the distribution of audio or video content to a dispersed audience via any electronic mass communications medium, but typically one using the electromagnetic spectrum ( radio waves), in a one-to-many model. Broadcasting began ...
the completed block to other nodes. Blockchains use various time-stamping schemes, such as
proof-of-work, to serialize changes. Later consensus methods include
proof of stake.
The growth of a decentralized blockchain is accompanied by the risk of
centralization
Centralisation or centralization (see spelling differences) is the process by which the activities of an organisation, particularly those regarding planning and decision-making, framing strategy and policies become concentrated within a particu ...
because the computer resources required to process larger amounts of data become more expensive.
Finality
Finality is the level of confidence that the well-formed block recently appended to the blockchain will not be revoked in the future (is "finalized") and thus can be trusted. Most distributed blockchain protocols, whether
proof of work or
proof of stake, cannot guarantee the finality of a freshly committed block, and instead rely on "probabilistic finality": as the block goes deeper into a blockchain, it is less likely to be altered or reverted by a newly found consensus.
Byzantine Fault Tolerance
A Byzantine fault (also Byzantine generals problem, interactive consistency, source congruency, error avalanche, Byzantine agreement problem, and Byzantine failure) is a condition of a computer system, particularly distributed computing systems, ...
-based proof-of-stake protocols purport to provide so called "absolute finality": a randomly chosen
validator proposes a block, the rest of validators vote on it, and, if a supermajority decision approves it, the block is irreversibly committed into the blockchain.
A modification of this method, an "economic finality", is used in practical protocols, like the Casper protocol used in
Ethereum: validators which sign two different blocks at the same position in the blockchain are subject to "slashing", where their leveraged stake is forfeited.
Openness
Open blockchains are more
user-friendly
Usability can be described as the capacity of a system to provide a condition for its users to perform the tasks safely, effectively, and efficiently while enjoying the experience. In software engineering, usability is the degree to which a soft ...
than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain. Proponents of permissioned or private chains argue that the term "blockchain" may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control">WP:MOSBOLD as a redirect target --> that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases. Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.
Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision. Nikolai Hampton of ''
Computerworld
''Computerworld'' (abbreviated as CW) is an ongoing decades old professional publication which in 2014 "went digital." Its audience is information technology (IT) and business technology professionals, and is available via a publication website ...
'' said that "many in-house blockchain solutions will be nothing more than cumbersome databases," and "without a clear security model, proprietary blockchains should be eyed with suspicion."
Permissionless (public) blockchain
An advantage to an open, permissionless, or public, blockchain network is that guarding against bad actors is not required and no
access control
In the fields of physical security and information security, access control (AC) is the selective restriction of access to a place or other resource, while access management describes the process. The act of ''accessing'' may mean consuming ...
is needed.
This means that applications can be added to the network without the approval or trust of others, using the blockchain as a
transport layer
In computer networking, the transport layer is a conceptual division of methods in the layered architecture of protocols in the network stack in the Internet protocol suite and the OSI model. The protocols of this layer provide end-to-end ...
.
Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include proof of work. To prolong the blockchain, bitcoin uses
Hashcash
Hashcash is a proof-of-work system used to limit email spam and denial-of-service attacks, and more recently has become known for its use in bitcoin (and other cryptocurrencies) as part of the mining algorithm. Hashcash was proposed in 1997 by Adam ...
puzzles. While Hashcash was designed in 1997 by
Adam Back
Adam Back (born July 1970) is a British cryptographer and cypherpunk. He is the CEO of Blockstream, which he co-founded in 2014. He invented Hashcash, which is used in the Bitcoin mining process.
Life
Back was born in London, England, in July ...
, the original idea was first proposed by
Cynthia Dwork and
Moni Naor and Eli Ponyatovski in their 1992 paper "Pricing via Processing or Combatting Junk Mail".
In 2016,
venture capital
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which ha ...
investment for blockchain-related projects was weakening in the USA but increasing in China.
Bitcoin and many other cryptocurrencies use open (public) blockchains. , bitcoin has the highest
market capitalization
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.
Market capitalization is equal to the market price per common share multiplied by t ...
.
Permissioned (private) blockchain
Permissioned blockchains use an access control layer to govern who has access to the network.
In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owner. They do not rely on anonymous nodes to validate transactions nor do they benefit from the
network effect. Permissioned blockchains can also go by the name of 'consortium' blockchains. It has been argued that permissioned blockchains can guarantee a certain level of decentralization, if carefully designed, as opposed to permissionless blockchains, which are often centralized in practice.
= Disadvantages of permissioned blockchain
=
Nikolai Hampton pointed out in ''
Computerworld
''Computerworld'' (abbreviated as CW) is an ongoing decades old professional publication which in 2014 "went digital." Its audience is information technology (IT) and business technology professionals, and is available via a publication website ...
'' that "There is also no need for a '51 percent' attack on a private blockchain, as the private blockchain (most likely) already controls 100 percent of all block creation resources. If you could attack or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their network and alter transactions however you wished."
This has a set of particularly profound adverse implications during a
financial crisis or
debt crisis like the
financial crisis of 2007–08
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
, where politically powerful actors may make decisions that favor some groups at the expense of others, and "the bitcoin blockchain is protected by the massive group mining effort. It's unlikely that any private blockchain will try to protect records using
gigawatts of computing power — it's time-consuming and expensive."
He also said, "Within a private blockchain there is also no 'race'; there's no incentive to use more power or discover blocks faster than competitors. This means that many in-house blockchain solutions will be nothing more than cumbersome databases."
Blockchain analysis
The
analysis of public blockchains has become increasingly important with the popularity of
bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
,
Ethereum,
litecoin
Litecoin (Abbreviation: LTC; sign: Ł) is a decentralized peer-to-peer cryptocurrency and open-source software project released under the MIT/X11 license. Inspired by Bitcoin, Litecoin was among the earliest altcoins, starting in October 2011. ...
and other
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
. A blockchain, if it is public, provides anyone who wants access to observe and analyse the chain data, given one has the know-how. The process of understanding and accessing the flow of crypto has been an issue for many cryptocurrencies, crypto exchanges and banks. The reason for this is accusations of blockchain-enabled cryptocurrencies enabling illicit
dark market trade of drugs, weapons, money laundering, etc. A common belief has been that cryptocurrency is private and untraceable, thus leading many actors to use it for illegal purposes. This is changing and now specialised tech companies provide blockchain tracking services, making crypto exchanges, law-enforcement and banks more aware of what is happening with crypto funds and
fiat
Fiat Automobiles S.p.A. (, , ; originally FIAT, it, Fabbrica Italiana Automobili di Torino, lit=Italian Automobiles Factory of Turin) is an Italian automobile manufacturer, formerly part of Fiat Chrysler Automobiles, and since 2021 a subsidiary ...
-crypto exchanges. The development, some argue, has led criminals to prioritise the use of new cryptos such as
Monero
Monero (; Abbreviation: XMR) is a decentralized cryptocurrency. It uses a public distributed ledger with privacy-enhancing technologies that obfuscate transactions to achieve anonymity and fungibility. Observers cannot decipher addresses tradi ...
. The question is about the public accessibility of blockchain data and the personal privacy of the very same data. It is a key debate in cryptocurrency and ultimately in the blockchain.
Standardisation
In April 2016,
Standards Australia submitted a proposal to the
International Organization for Standardization
The International Organization for Standardization (ISO ) is an international standard development organization composed of representatives from the national standards organizations of member countries. Membership requirements are given in Ar ...
to consider developing standards to support blockchain technology. This proposal resulted in the creation of ISO Technical Committee 307, Blockchain and Distributed Ledger Technologies.
The technical committee has working groups relating to blockchain terminology, reference architecture, security and privacy, identity, smart contracts, governance and interoperability for blockchain and DLT, as well as standards specific to industry sectors and generic government requirements.
More than 50 countries are participating in the standardization process together with external liaisons such as the
Society for Worldwide Interbank Financial Telecommunication (SWIFT), the
European Commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...
, the
International Federation of Surveyors
International Federation of Surveyors (abbreviated FIG, after the french: Fédération Internationale des Géomètres) is the UN-recognized global organization for the profession of surveying and related disciplines. It was established in 1878, , the
International Telecommunication Union
The International Telecommunication Union is a specialized agency of the United Nations responsible for many matters related to information and communication technologies. It was established on 17 May 1865 as the International Telegraph Unio ...
(ITU) and the
United Nations Economic Commission for Europe
The United Nations Economic Commission for Europe (ECE or UNECE) is one of the five regional commissions under the jurisdiction of the United Nations Economic and Social Council. It was established in order to promote economic cooperation and i ...
(UNECE).
Many other national standards bodies and open standards bodies are also working on blockchain standards. These include the
National Institute of Standards and Technology
The National Institute of Standards and Technology (NIST) is an agency of the United States Department of Commerce whose mission is to promote American innovation and industrial competitiveness. NIST's activities are organized into physical sci ...
(NIST), the
European Committee for Electrotechnical Standardization
CENELEC (french: Comité Européen de Normalisation Électrotechnique; en, European Committee for Electrotechnical Standardization) is responsible for European standardization in the area of electrical engineering. Together with ETSI (telecommun ...
(CENELEC), the
Institute of Electrical and Electronics Engineers
The Institute of Electrical and Electronics Engineers (IEEE) is a 501(c)(3) professional association for electronic engineering and electrical engineering (and associated disciplines) with its corporate office in New York City and its operation ...
(IEEE), the Organization for the Advancement of Structured Information Standards (
OASIS
In ecology, an oasis (; ) is a fertile area of a desert or semi-desert environment'ksar''with its surrounding feeding source, the palm grove, within a relational and circulatory nomadic system.”
The location of oases has been of critical imp ...
), and some individual participants in the
Internet Engineering Task Force
The Internet Engineering Task Force (IETF) is a standards organization for the Internet and is responsible for the technical standards that make up the Internet protocol suite (TCP/IP). It has no formal membership roster or requirements and a ...
(IETF).
Centralized blockchain
Although most of blockchain implementation are decentralized and distributed,
Oracle
An oracle is a person or agency considered to provide wise and insightful counsel or prophetic predictions, most notably including precognition of the future, inspired by deities. As such, it is a form of divination.
Description
The word '' ...
launched a centralized blockchain table feature in
Oracle 21c database. The Blockchain Table in
Oracle 21c database is a centralized blockchain which provide immutable feature. Compared to decentralized blockchains, centralized blockchains normally can provide a higher throughput and lower latency of transactions than consensus-based distributed blockchains.
Types
Currently, there are at least four types of blockchain networks — public blockchains, private blockchains,
consortium
A consortium (plural: consortia) is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for ...
blockchains and hybrid blockchains.
Public blockchains
A public blockchain has absolutely no access restrictions. Anyone with an
Internet
The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...
connection can send
transactions to it as well as become a validator (i.e., participate in the execution of a
consensus protocol). Usually, such networks offer
economic incentives for those who secure them and utilize some type of a
Proof of Stake or
Proof of Work algorithm.
Some of the largest, most known public blockchains are the bitcoin blockchain and the Ethereum blockchain.
Private blockchains
A private blockchain is permissioned.
One cannot join it unless invited by the network administrators. Participant and validator access is
restricted. To distinguish between open blockchains and other peer-to-peer decentralized database applications that are not open ad-hoc compute clusters, the terminology
Distributed Ledger (DLT) is normally used for private blockchains.
Hybrid blockchains
A hybrid blockchain has a combination of centralized and decentralized features. The exact workings of the chain can vary based on which portions of centralization and decentralization are used.
Sidechains
A sidechain is a designation for a blockchain ledger that runs in parallel to a primary blockchain. Entries from the primary blockchain (where said entries typically represent
digital asset
A digital asset is anything that exists only in digital form and comes with a distinct usage right. Data that do not possess that right are not considered assets.
''Digital assets'' include but are not exclusive to: digital documents, audible ...
s) can be linked to and from the sidechain; this allows the sidechain to otherwise operate independently of the primary blockchain (e.g., by using an alternate means of record keeping, alternate
consensus algorithm
A fundamental problem in distributed computing and multi-agent systems is to achieve overall system reliability in the presence of a number of faulty processes. This often requires coordinating processes to reach consensus, or agree on some data va ...
, etc.).
Uses
![Bitcoin](https://upload.wikimedia.org/wikipedia/commons/4/46/Bitcoin.svg)
Blockchain technology can be integrated into multiple areas. The primary use of blockchains is as a
distributed ledger for
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
such as
bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
; there were also a few other operational products that had matured from
proof of concept by late 2016.
As of 2016, some businesses have been testing the technology and conducting low-level implementation to gauge blockchain's effects on organizational efficiency in their
back office.
In 2019, it was estimated that around $2.9 billion were invested in blockchain technology, which represents an 89% increase from the year prior. Additionally, the International Data Corp has estimated that corporate investment into blockchain technology will reach $12.4 billion by 2022. Furthermore, According to
PricewaterhouseCoopers
PricewaterhouseCoopers is an international professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounting ...
(PwC), the second-largest professional services network in the world, blockchain technology has the potential to generate an annual business value of more than $3 trillion by 2030. PwC's estimate is further augmented by a 2018 study that they have conducted, in which PwC surveyed 600 business executives and determined that 84% have at least some exposure to utilizing blockchain technology, which indicates a significant demand and interest in blockchain technology.
In 2019 the
BBC World Service
The BBC World Service is an international broadcasting, international broadcaster owned and operated by the BBC, with funding from the Government of the United Kingdom, British Government through the Foreign Secretary, Foreign Secretary's o ...
radio and podcast series ''
Fifty Things That Made the Modern Economy'' identified blockchain as a technology that would have far-reaching consequences for economics and society. The economist and ''Financial Times'' journalist and broadcaster
Tim Harford
Timothy Douglas Harford (born 27 September 1973) is an English economic journalist who lives in Oxford.
Harford is the author of four economics books and writes his long-running ''Financial Times'' column, "The Undercover Economist", syndic ...
discussed why the underlying technology might have much wider applications and the challenges that needed to be overcome. First broadcast 29 June 2019.
The number of blockchain wallets quadrupled to 40 million between 2016 and 2020.
A paper published in 2022 discussed the potential use of blockchain technology in sustainable management
Cryptocurrencies
Most cryptocurrencies use blockchain technology to record transactions. For example, the
bitcoin network and
Ethereum network are both based on blockchain.
The criminal enterprise
Silk Road
The Silk Road () was a network of Eurasian trade routes active from the second century BCE until the mid-15th century. Spanning over 6,400 kilometers (4,000 miles), it played a central role in facilitating economic, cultural, political, and reli ...
, which operated on
Tor
Tor, TOR or ToR may refer to:
Places
* Tor, Pallars, a village in Spain
* Tor, former name of Sloviansk, Ukraine, a city
* Mount Tor, Tasmania, Australia, an extinct volcano
* Tor Bay, Devon, England
* Tor River, Western New Guinea, Indonesia
Sc ...
, utilized cryptocurrency for payments, some of which the
US federal government
The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a fed ...
has seized through research on the blockchain and
forfeiture.
Governments have mixed policies on the legality of their citizens or banks owning cryptocurrencies. China implements blockchain technology in several industries including a
national digital currency which launched in 2020. To strengthen their respective currencies, Western governments including the European Union and the United States have initiated similar projects.
Smart contracts
Blockchain-based
smart contract
A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the re ...
s are proposed contracts that can be partially or fully executed or enforced without human interaction. One of the main objectives of a smart contract is
automated escrow
An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacti ...
. A key feature of smart contracts is that they do not need a trusted third party (such as a trustee) to act as an intermediary between contracting entities — the blockchain network executes the contract on its own. This may reduce friction between entities when transferring value and could subsequently open the door to a higher level of transaction automation. An
IMF
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
staff discussion from 2018 reported that smart contracts based on blockchain technology might reduce
moral hazards and optimize the use of contracts in general. But "no viable smart contract systems have yet emerged." Due to the lack of widespread use their legal status was unclear.
Financial services
According to ''
Reason
Reason is the capacity of consciously applying logic by drawing conclusions from new or existing information, with the aim of seeking the truth. It is closely associated with such characteristically human activities as philosophy, science, ...
'', many banks have expressed interest in implementing
distributed ledgers for use in
banking
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Because ...
and are cooperating with companies creating private blockchains, and according to a September 2016
IBM study, this is occurring faster than expected.
Banks are interested in this technology not least because it has the potential to speed up
back office settlement systems. Moreover, as the blockchain industry has reached early maturity institutional appreciation has grown that it is, practically speaking, the infrastructure of a whole new financial industry, with all the implications which that entails.
Bank
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Because ...
s such as
UBS
UBS Group AG is a multinational Investment banking, investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres ...
are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.
Berenberg, a German bank, believes that blockchain is an "overhyped technology" that has had a large number of "proofs of concept", but still has major challenges, and very few success stories.
The blockchain has also given rise to
initial coin offerings (ICOs) as well as a new category of digital asset called security token offerings (STOs), also sometimes referred to as digital security offerings (DSOs). STO/DSOs may be conducted privately or on public, regulated stock exchange and are used to tokenize traditional assets such as company shares as well as more innovative ones like intellectual property, real estate, art, or individual products. A number of companies are active in this space providing services for compliant
tokenization, private STOs, and public STOs.
Games
Blockchain technology, such as cryptocurrencies and
non-fungible tokens (NFTs), has been used in video games for
monetization. Many
live-service games offer in-game customization options, such as character skins or other in-game items, which the players can earn and trade with other players using in-game currency. Some games also allow for trading of virtual items using real-world currency, but this may be illegal in some countries where video games are seen as akin to gambling, and has led to
gray market issues such as
skin gambling
In video games, skin gambling is the use of virtual goods, often cosmetic in-game items such as "Skin (computing)#Video gaming, skins", as virtual currency to bet on the outcome of eSports, professional matches or on other games of chance. It is ...
, and thus publishers typically have shied away from allowing players to earn real-world funds from games.
Blockchain games typically allow players to trade these in-game items for cryptocurrency, which can then be exchanged for money.
The first known game to use blockchain technologies was ''
CryptoKitties'', launched in November 2017, where the player would purchase NFTs with Ethereum cryptocurrency, each NFT consisting of a
virtual pet that the player could breed with others to create offspring with combined traits as new NFTs.
The game made headlines in December 2017 when one virtual pet sold for more than
US$
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
100,000. ''CryptoKitties'' also illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network in early 2018 with approximately 30% of all Ethereum transactions being for the game.
By the early 2020s, there had not been a breakout success in video games using blockchain, as these games tend to focus on using blockchain for speculation instead of more traditional forms of gameplay, which offers limited appeal to most players. Such games also represent a high risk to investors as their revenues can be difficult to predict.
However, limited successes of some games, such as ''
Axie Infinity
''Axie Infinity'' is a non-fungible token-based online video game developed by Vietnamese studio Sky Mavis, known for its in-game economy which uses Ethereum-based cryptocurrencies.
Players of Axie Infinity collect and mint NFTs which represent ...
'' during the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
, and corporate plans towards
metaverse
In science fiction, the "metaverse" is a hypothetical iteration of the Internet as a single, universal, and immersive virtual world that is facilitated by the use of virtual reality (VR) and augmented reality (AR) headsets. In colloquial usage, ...
content, refueled interest in the area of GameFi, a term describing the intersection of video games and financing typically backed by blockchain currency, in the second half of 2021. Several major publishers, including
Ubisoft
Ubisoft Entertainment SA (; ; formerly Ubi Soft Entertainment SA) is a French video game publisher headquartered in Saint-Mandé with development studios across the world. Its video game franchises include '' Assassin's Creed'', ''Far Cry'', '' ...
,
Electronic Arts
Electronic Arts Inc. (EA) is an American video game company headquartered in Redwood City, California. Founded in May 1982 by Apple employee Trip Hawkins, the company was a pioneer of the early home computer game industry and promoted the d ...
, and
Take Two Interactive
Take-Two Interactive Software, Inc. is an American video game holding company based in New York City and founded by Ryan Brant in September 1993.
The company owns two major publishing labels, Rockstar Games and 2K, which operate internal g ...
, have stated that blockchain and NFT-based games are under serious consideration for their companies in the future.
In October 2021,
Valve Corporation
Valve Corporation is an American video game developer, video game publisher, publisher, and digital distribution company headquartered in Bellevue, Washington. It is the developer of the software distribution platform Steam (service), Steam an ...
banned blockchain games, including those using cryptocurrency and
NFTs, from being hosted on its
Steam
Steam is a substance containing water in the gas phase, and sometimes also an aerosol of liquid water droplets, or air. This may occur due to evaporation or due to boiling, where heat is applied until water reaches the enthalpy of vaporization ...
digital storefront service, which is widely used for personal computer gaming, claiming that this was an extension of their policy banning games that offered in-game items with real-world value. Valve's prior history with
gambling
Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three el ...
, specifically
skin gambling
In video games, skin gambling is the use of virtual goods, often cosmetic in-game items such as "Skin (computing)#Video gaming, skins", as virtual currency to bet on the outcome of eSports, professional matches or on other games of chance. It is ...
, was speculated to be a factor in the decision to ban blockchain games.
[ Journalists and players responded positively to Valve's decision as blockchain and NFT games have a reputation for scams and fraud among most PC gamers,] Epic Games
Epic Games, Inc. is an American video game and software developer and publisher based in Cary, North Carolina. The company was founded by Tim Sweeney as Potomac Computer Systems in 1991, originally located in his parents' house in Potomac, M ...
, which runs the Epic Games Store in competition to Steam, said that they would be open to accepted blockchain games, in the wake of Valve's refusal.
Supply chain
There have been several different efforts to employ blockchains in supply chain management
In commerce, supply chain management (SCM) is the management of the flow of goods and services including all processes that transform raw materials into final products between businesses and locations. This can include the movement and stor ...
.
* Shipping industry — Incumbent shipping companies and startups have begun to leverage blockchain technology to facilitate the emergence of a blockchain-based platform ecosystem Many markets are structured as platform ecosystems, they can be open or closed platforms, where a stable core (such as a smartphone operating system or a music streaming service) mediates the relationship between a wide range of complements (like ap ...
that would create value across the global shipping supply chains.
* Precious commodities mining — Blockchain technology has been used for tracking the origins of gemstones and other precious commodities. In 2016, ''The Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' reported that the blockchain technology company Everledger was partnering with IBM's blockchain-based tracking service to trace the origin of diamonds to ensure that they were ethically mined. As of 2019, the Diamond Trading Company
The Diamond Trading Company (DTC) is the rough diamond sales and distribution arm of the De Beers Family of Companies. The DTC sorts, values and sells about 35% of the world’s rough diamonds by value. The DTC has a combination of wholly owned ...
(DTC) has been involved in building a diamond trading supply chain product called Tracr.
* Food supply — As of 2018, Walmart
Walmart Inc. (; formerly Wal-Mart Stores, Inc.) is an American multinational retail corporation that operates a chain of hypermarkets (also called supercenters), discount department stores, and grocery stores from the United States, headquarter ...
and IBM were running a trial to use a blockchain-backed system for supply chain
In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, acti ...
monitoring for lettuce and spinach — all nodes of the blockchain were administered by Walmart and were located on the IBM cloud
In meteorology, a cloud is an aerosol consisting of a visible mass of miniature liquid droplets, frozen crystals, or other particles suspended in the atmosphere of a planetary body or similar space. Water or various other chemicals may co ...
.
* Fashion industry — There is an opaque relationship between brands, distributors, and customers in the fashion industry, which will prevent the sustainable and stable development of the fashion industry. Blockchain makes up for this shortcoming and makes information transparent, solving the difficulty of sustainable development of the industry.
Domain names
There are several different efforts to offer domain name services via the blockchain. These domain names can be controlled by the use of a private key, which purports to allow for uncensorable websites. This would also bypass a registrar's ability to suppress domains used for fraud, abuse, or illegal content.
Namecoin is a cryptocurrency that supports the ".bit" top-level domain
A top-level domain (TLD) is one of the domains at the highest level in the hierarchical Domain Name System of the Internet after the root domain. The top-level domain names are installed in the root zone of the name space. For all domains in ...
(TLD). Namecoin was forked from bitcoin in 2011. The .bit TLD is not sanctioned by ICANN
The Internet Corporation for Assigned Names and Numbers (ICANN ) is an American multistakeholder group and nonprofit organization responsible for coordinating the maintenance and procedures of several databases related to the namespaces ...
, instead requiring an alternative DNS root.[ As of 2015, it was used by 28 websites, out of 120,000 registered names.] Namecoin was dropped by OpenNIC
OpenNIC (also referred to as the OpenNIC Project) is a user-owned and -controlled top-level Domain name registry, Network Information Center that offers a non-national alternative to traditional top-level domain (TLD) Domain name registry, registri ...
in 2019, due to malware and potential other legal issues. Other blockchain alternatives to ICANN include The Handshake Network,[ EmerDNS, and Unstoppable Domains.][
Specific TLDs include ".eth", ".luxe", and ".kred", which are associated with the Ethereum blockchain through the Ethereum Name Service (ENS). The .kred TLD also acts as an alternative to conventional ]cryptocurrency wallet
A cryptocurrency wallet is a device, physical medium, program or a service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often a ...
addresses, as a convenience for transferring cryptocurrency.
Other uses
Blockchain technology can be used to create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, such as wireless users or musicians. The Gartner 2019 CIO Survey reported 2% of higher education respondents had launched blockchain projects and another 18% were planning academic projects in the next 24 months. In 2017, IBM partnered with ASCAP
The American Society of Composers, Authors, and Publishers (ASCAP) () is an American not-for-profit performance-rights organization (PRO) that collectively licenses the public performance rights of its members' musical works to venues, broadca ...
and PRS for Music to adopt blockchain technology in music distribution. Imogen Heap's Mycelia service has also been proposed as a blockchain-based alternative "that gives artists more control over how their songs and associated data circulate among fans and other musicians."
New distribution methods are available for the insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
industry such as peer-to-peer insurance
Peer-to-peer insurance is a reciprocity insurance contract through the Collaborative consumption concept.
General
The aims of peer-to-peer insurance are to save money through reduced overhead costs, increase transparency, reduce inefficiencies, a ...
, parametric insurance Parametric insurance (also called index-based insurance) is a non-traditional insurance product that offers pre-specified payouts based upon a trigger event. Trigger events depend on the nature of the parametric policy and can include environmental ...
and microinsurance
Microinsurance is the protection of low-income people (those living on between approximately $1 and $4 per day( below $4)) against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involve ...
following the adoption of blockchain. The sharing economy
In capitalism, the sharing economy is a socio-economic system built around the sharing of resources. It often involves a way of purchasing goods and services that differs from the traditional business model of companies hiring employees to produce ...
and IoT
The Internet of things (IoT) describes physical objects (or groups of such objects) with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other com ...
are also set to benefit from blockchains because they involve many collaborating peers. The use of blockchain in libraries is being studied with a grant from the U.S. Institute of Museum and Library Services.
Other blockchain designs include Hyperledger, a collaborative effort from the Linux Foundation
The Linux Foundation (LF) is a non-profit technology consortium founded in 2000 as a merger between Open Source Development Labs and the Free Standards Group to standardize Linux, support its growth, and promote its commercial adoption. Additi ...
to support blockchain-based distributed ledgers, with projects under this initiative including Hyperledger Burrow (by Monax) and Hyperledger Fabric (spearheaded by IBM). Another is Quorum, a permissionable private blockchain by JPMorgan Chase
JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City and incorporated in Delaware. As of 2022, JPMorgan Chase is the largest bank in the United States, the ...
with private storage, used for contract applications.
Oracle
An oracle is a person or agency considered to provide wise and insightful counsel or prophetic predictions, most notably including precognition of the future, inspired by deities. As such, it is a form of divination.
Description
The word '' ...
introduced a blockchain table feature in its Oracle 21c database.
Blockchain is also being used in peer-to-peer energy trading
Net metering (or net energy metering, NEM) is an electricity billing mechanism that allows consumers who generate some or all of their own electricity to use that electricity anytime, instead of when it is generated. This is particularly importa ...
.
Blockchain could be used in detecting counterfeits by associating unique identifiers to products, documents and shipments, and storing records associated with transactions that cannot be forged or altered. It is however argued that blockchain technology needs to be supplemented with technologies that provide a strong binding between physical objects and blockchain systems. The EUIPO
The European Union Intellectual Property Office (EUIPO; french: links=no, Office de l'Union européenne pour la propriété intellectuelle), founded in 1994, is the European Union Agency responsible for the registration of the European Union trad ...
established an Anti-Counterfeiting Blockathon Forum, with the objective of "defining, piloting and implementing" an anti-counterfeiting infrastructure at the European level. The Dutch Standardisation organisation NEN uses blockchain together with QR Codes
A QR code (an initialism for quick response code) is a type of matrix barcode (or two-dimensional barcode) invented in 1994 by the Japanese company Denso Wave. A barcode is a machine-readable optical label that can contain information about the ...
to authenticate certificates.
2022 Jan 30 Beijing and Shanghai are among the cities designated by China to trial blockchain applications.
Blockchain interoperability
With the increasing number of blockchain systems appearing, even only those that support cryptocurrencies, blockchain interoperability is becoming a topic of major importance. The objective is to support transferring assets from one blockchain system to another blockchain system. Wegner stated that " interoperability is the ability of two or more software components to cooperate despite differences in language, interface, and execution platform". The objective of blockchain interoperability is therefore to support such cooperation among blockchain systems, despite those kinds of differences.
There are already several blockchain interoperability solutions available. They can be classified into three categories: cryptocurrency interoperability approaches, blockchain engines, and blockchain connectors.
Several individual IETF participants produced the draft of a blockchain interoperability architecture.
Energy consumption concerns
Some cryptocurrencies use blockchain mining — the peer-to-peer computer computations by which transactions are validated and verified. This requires a large amount of energy. In June 2018 the Bank for International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
The BIS carries out its work thr ...
criticized the use of public proof-of-work blockchains for their high energy consumption.
Early concern over the high energy consumption was a factor in later blockchains such as Cardano (2017), Solana (2020) and Polkadot (2020) adopting the less energy-intensive proof-of-stake model. Researchers have estimated that Bitcoin consumes 100,000 times as much energy as proof-of-stake networks.
In 2021, a study by Cambridge University
, mottoeng = Literal: From here, light and sacred draughts.
Non literal: From this place, we gain enlightenment and precious knowledge.
, established =
, other_name = The Chancellor, Masters and Schola ...
determined that Bitcoin (at 121 terawatt-hours per year) used more electricity than Argentina (at 121TWh) and the Netherlands (109TWh). According to Digiconomist, one bitcoin transaction required 708 kilowatt-hours of electrical energy, the amount an average U.S. household consumed in 24 days.
In February 2021, U.S. Treasury secretary Janet Yellen
Janet Louise Yellen (born August 13, 1946) is an American economist serving as the 78th United States secretary of the treasury since January 26, 2021. She previously served as the 15th chair of the Federal Reserve from 2014 to 2018. Yellen is t ...
called Bitcoin "an extremely inefficient way to conduct transactions", saying "the amount of energy consumed in processing those transactions is staggering". In March 2021, Bill Gates
William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
stated that "Bitcoin uses more electricity per transaction than any other method known to mankind", adding "It's not a great climate thing."
Nicholas Weaver, of the International Computer Science Institute at the University of California, Berkeley
The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public land-grant research university in Berkeley, California. Established in 1868 as the University of California, it is the state's first land-grant u ...
, examined blockchain's online security, and the energy efficiency of proof-of-work public blockchains, and in both cases found it grossly inadequate. The 31TWh-45TWh of electricity used for bitcoin in 2018 produced 17-23 million tonnes of . By 2022, the University of Cambridge and Digiconomist estimated that the two largest proof-of-work blockchains, Bitcoin and Ethereum, together used twice as much electricity in one year as the whole of Sweden, leading to the release of up to 120 million tonnes of each year.
Some cryptocurrency developers are considering moving from the proof-of-work model to the proof-of-stake model.
Academic research
In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the ...
access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker
Tucker may refer to:
Places United States
* Tucker, Arkansas
* Tucker, Georgia
* Tucker, Mississippi
* Tucker, Missouri
* Tucker, Utah, ghost town
* Tucker County, West Virginia
Outer space
* Tucker (crater), a small lunar impact crater in the s ...
(2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology. Many universities have founded departments focusing on crypto and blockchain, including MIT, in 2017. In the same year, Edinburgh
Edinburgh ( ; gd, Dùn Èideann ) is the capital city of Scotland and one of its 32 Council areas of Scotland, council areas. Historically part of the county of Midlothian (interchangeably Edinburghshire before 1921), it is located in Lothian ...
became "one of the first big European universities to launch a blockchain course", according to the ''Financial Times''.
Adoption decision
Motivations for adopting blockchain technology (an aspect of innovation adoptation) have been investigated by researchers. For example, Janssen, et al. provided a framework for analysis, and Koens & Poll pointed out that adoption could be heavily driven by non-technical factors. Based on behavioral models, Li has discussed the differences between adoption at the individual level and organizational levels.
Collaboration
Scholars in business and management have started studying the role of blockchains to support collaboration. It has been argued that blockchains can foster both cooperation (i.e., prevention of opportunistic behavior) and coordination (i.e., communication and information sharing). Thanks to reliability, transparency, traceability of records, and information immutability, blockchains facilitate collaboration in a way that differs both from the traditional use of contracts and from relational norms. Contrary to contracts, blockchains do not directly rely on the legal system to enforce agreements. In addition, contrary to the use of relational norms, blockchains do not require a trust or direct connections between collaborators.
Blockchain and internal audit
The need for internal audits to provide effective oversight of organizational efficiency will require a change in the way that information is accessed in new formats. Blockchain adoption requires a framework to identify the risk of exposure associated with transactions using blockchain. The Institute of Internal Auditors
The Institute of Internal Auditors (IIA) is an organization which advocates, provides educational conferences, and develops standards, guidance, and certifications for the internal audit profession.
History
Established in 1941, the IIA today ...
has identified the need for internal auditors to address this transformational technology. New methods are required to develop audit plans that identify threats and risks. The Internal Audit Foundation study, ''Blockchain and Internal Audit,'' assesses these factors. The American Institute of Certified Public Accountants has outlined new roles for auditors as a result of blockchain.
Journals
In September 2015, the first peer-reviewed academic journal dedicated to cryptocurrency and blockchain technology research, ''Ledger'', was announced. The inaugural issue was published in December 2016. The journal covers aspects of mathematics
Mathematics is an area of knowledge that includes the topics of numbers, formulas and related structures, shapes and the spaces in which they are contained, and quantities and their changes. These topics are represented in modern mathematics ...
, computer science
Computer science is the study of computation, automation, and information. Computer science spans theoretical disciplines (such as algorithms, theory of computation, information theory, and automation) to Applied science, practical discipli ...
, engineering
Engineering is the use of scientific method, scientific principles to design and build machines, structures, and other items, including bridges, tunnels, roads, vehicles, and buildings. The discipline of engineering encompasses a broad rang ...
, law, economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
and philosophy
Philosophy (from , ) is the systematized study of general and fundamental questions, such as those about existence, reason, knowledge, values, mind, and language. Such questions are often posed as problems to be studied or resolved. Some ...
that relate to cryptocurrencies such as bitcoin.
The journal encourages authors to digitally sign a file hash of submitted papers, which are then timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address on the first page of their papers for non-repudiation purposes.[ ]
See also
* Changelog
A changelog is a log or record of all notable changes made to a project. The project is often a website or software project, and the changelog usually includes records of changes such as bug fixes, new features, etc. Some open-source projects i ...
– a record of all notable changes made to a project
* Checklist
A checklist is a type of job aid used in repetitive tasks to reduce failure by compensating for potential limits of human memory and attention. It helps to ensure consistency and completeness in carrying out a task. A basic example is the " to d ...
– an informational aid used to reduce failure
* Economics of digitization
* Privacy and blockchain
A blockchain is a shared database that records transactions between two parties in an immutable ledger. Blockchain documents and confirms pseudonymous ownership of all transactions in a verifiable and sustainable way. After a transaction is validat ...
* Version control – a record of all changes (mostly of software project) in a form of a graph
References
Further reading
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* D. Puthal, N. Malik, S. P. Mohanty, E. Kougianos, and G. Das,
Everything you Wanted to Know about the Blockchain
, ''IEEE Consumer Electronics Magazine'', Volume 7, Issue 4, July 2018, pp. 06–14.
* David L. Portilla, David J. Kappos, Minh Van Ngo, Sasha Rosenthal-Larrea, John D. Buretta and Christopher K. Fargo, Cravath, Swaine & Moore LLP,
Blockchain in the Banking Sector: A Review of the Landscape and Opportunities
, ''Harvard Law School of Corporate Governance'', posted on Friday, January 28, 2022
External links
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