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A blockchain is a growing list of
records A record, recording or records may refer to: An item or collection of data Computing * Record (computer science) In computer science Computer science deals with the theoretical foundations of information, algorithms and the architectures ...
, called ''blocks'', that are linked using
cryptography Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or ''-logia ''-logy'' is a suffix in the English language, used with words originally adapted from Ancient Greek ending in (''- ...

cryptography
. Each block contains a
cryptographic hash A cryptographic hash function A hash function is any function Function or functionality may refer to: Computing * Function key A function key is a key on a computer A computer is a machine that can be programmed to carry out s ...
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. The term derives from rubber stamp Rubber sta ...

timestamp
, and transaction data (generally represented as a
Merkle tree In cryptography Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or ''-logia ''-logy'' is a suffix in the English language, used with words originally adapted from Ancient Gr ...
). By design, a blockchain is resistant to modification of its data. This is because once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks. For use as a distributed ledger, a blockchain is typically managed by a
peer-to-peer Peer-to-peer (P2P) computing or networking is a distributed application Distributed computing is a field of computer science that studies distributed systems. A ''distributed system'' is a system whose components are located on different co ...

peer-to-peer
network collectively adhering to a
protocol Protocol may refer to: Sociology and politics * Protocol (politics) Protocol originally (in Late Middle English, c. 15th century) meant the minutes or logbook taken at a meeting, upon which an agreement was based. The term now commonly refers to a ...
for inter-node communication and validating new blocks. Although blockchain records are not unalterable, blockchains may be considered
secure by design Secure by design (SBD), in software engineering, means that software products have been designed from the foundation to be secure. Alternate security tactics and patterns are considered at the beginning of a software design, and the best are s ...
and exemplify a distributed computing system with high
Byzantine fault tolerance A Byzantine fault (also interactive consistency, source congruency, error avalanche, Byzantine agreement problem, Byzantine generals problem, and Byzantine failure) is a condition of a computer system, particularly distributed computing systems, w ...
. The blockchain has been described as "an open,
distributed ledger A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. Unlike with a di ...
that can record transactions between two parties efficiently and in a verifiable and permanent way". The blockchain was invented by a person (or group of people) using the name
Satoshi Nakamoto is the name used by the presumed pseudonym A pseudonym () (originally: ψευδώνυμος in Greek) or alias () is a fictitious name that a person or group assumes for a particular purpose, which differs from their original or true name ( ...

Satoshi Nakamoto
in 2008 to serve as the public transaction
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 Balance may refer to: Common meanings * Balance (ability) in biomechanics * Balance (accounting) * Bal ...

ledger
of the
cryptocurrency A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange In economics Economics () is a social science Social science is the Branches of science, branch of s ...
bitcoin Bitcoin (₿) is a cryptocurrency A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange. Individual coin ownership records are stored in a ledger, which is a compu ...

bitcoin
. The identity of Satoshi Nakamoto remains unknown to date. The invention of the blockchain for bitcoin made it the first digital currency to solve the
double-spending Double-spending is a potential flaw in a Digital currency, digital cash scheme in which the same single digital token can be spent more than once. Unlike physical cash, a digital token consists of a digital file that can be duplicated or falsified. ...
problem without the need of a trusted authority or central
server Server may refer to: Computing *Server (computing) In computing Computing is any goal-oriented activity requiring, benefiting from, or creating computing machinery. It includes the study and experimentation of algorithmic processes and dev ...
. The bitcoin 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 collection of binary data which is designed to work as a medium of exchange In economics Economics () is a social science Social science is the Branches of science, branch of s ...
. The blockchain is considered a type of payment rail. Private blockchains have been proposed for business use but ''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 Health care fraud includes "snake oil Snake oil is a euphemism for deceptive marketing, health care fraud, or a scam. Similarly, "snake oil salesman" is a commo ...
". However, others have argued that permissioned blockchains, if carefully designed, may be more decentralized and therefore secure in practice than permissionless ones.


History

Cryptographer
David Chaum David Lee Chaum (born 1955) is an American computer scientist and List of cryptographers, cryptographer. He is known as a pioneer in cryptography and privacy-preserving technologies, and widely recognized as the inventor of Digital currency, digi ...
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 and W. Scott Stornetta. They wanted to implement a system where document timestamps could not be tampered with. In 1992, Haber, Stornetta, and Dave Bayer incorporated
Merkle tree In cryptography Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or ''-logia ''-logy'' is a suffix in the English language, used with words originally adapted from Ancient Gr ...
s to the design, which improved its efficiency by allowing several document certificates to be collected into one block. The first blockchain was conceptualized by a person (or group of people) known as
Satoshi Nakamoto is the name used by the presumed pseudonym A pseudonym () (originally: ψευδώνυμος in Greek) or alias () is a fictitious name that a person or group assumes for a particular purpose, which differs from their original or true name ( ...

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 300px, An email box folder filled with spam messages. Email spam, also referred to as junk email, is unsolicited messages sent in bulk by email ( spamming). The name comes from a Monty ...
-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. The term derives from rubber stamp Rubber sta ...
blocks without requiring them to be signed by a trusted party and introducing a difficulty parameter to stabilize rate with 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 (₿) is a cryptocurrency A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange. Individual coin ownership records are stored in a ledger, which is a compu ...

bitcoin
, 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 Balance may refer to: Common meanings * Balance (ability) in biomechanics * Balance (accounting) * Bal ...

ledger
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 The byte is a unit of digital information that most commonly consists of eight bit The bit is a basic unit of information in computing Computing is any goal-oriented activity requiring, b ...

gigabyte
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 GiB 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 multinational Multinational may refer to: * Multinational corporation, a corporate organization operating in multiple countries * Multinational force, a military body from multiple countries * Multinational state, a s ...

Accenture
, an application of the
diffusion of innovations Diffusion of innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread. Everett Rogers, a professor of communication studies, popularized the theory in his book ''Diffusion of Innovations''; the book ...
theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the
early adopterAn early adopter or lighthouse customer is an early customer of a given company, product (business), product, or technology. The term originates from Everett M. Rogers' ''Diffusion of Innovations'' (1962). History Typically this will be a customer w ...
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 United States, American advocacy group that promotes the emerging industry behind blockchain technology, bitcoin, digital currency and digital assets. History Headquartered in Washington, D.C., the organizatio ...
. In May 2018,
Gartner Gartner, Inc, officially known as Gartner, is a Stamford, Connecticut Stamford () is a city in the U.S. state of Connecticut. It is the second-most populous city in Fairfield County, Connecticut, Fairfield County and Connecticut (behind B ...

Gartner
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

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. Concep ...
,
distributedDistribution may refer to: Mathematics *Distribution (mathematics) Distributions, also known as Schwartz distributions or generalized functions, are objects that generalize the classical notion of functions in mathematical analysis. Distr ...
, and oftentimes public, digital ledger consisting of records called ''blocks'' that is 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 Distributed computing is a field of computer science that studies distributed systems. A ''distributed system'' is a system whose components are located on different co ...

peer-to-peer
network and a distributed timestamping server. They are authenticated by
mass collaboration Mass collaboration is a form of collective action Collective action refers to action taken together by a group of people whose goal A goal is an idea of the future or desired result that a person or a group of people envision, Planning, plan ...

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 cooperative A cooperative (also known as co-operative, c ...
self-interest Self-interest generally refers to a focus on the needs or desires (''interests'') of one's . Most times, actions that display self-interest are often performed without conscious knowing. A number of , , and theories examine the role of self-inte ...
s. Such a design facilitates
robustRobustness is the property of being strong and healthy in constitution. When it is transposed into a system, it refers to the ability of tolerating perturbations that might affect the system’s functional body. In the same line ''robustness'' can be ...
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 ...

workflow
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 The scientific method is an Empirical evidence, empirical method of acquiring knowledge that has characterized the develop ...
from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of
double spending Double-spending is a potential flaw in a Digital currency, digital cash scheme in which the same single digital token can be spent more than once. Unlike physical cash, a digital token consists of a digital file that can be duplicated or falsified. ...
. 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 Offer and acceptance are generally recognised as essential requirements for the formation of a contract, and analysis of their operation is a traditional approach in contract law. The offer and acceptance formula, developed in the 19th century, ide ...
. Logically, a blockchain can be seen as consisting of several layers: * infrastructure (hardware) * networking (node discovery, information propagation and verification) *
consensus Consensus decision-making or consensus politics (often abbreviated to ''consensus'') is group decision-making processes in which participants develop and decide on proposals with the aim, or requirement, of acceptance by all. The focus on es ...
(
proof of work Proof may refer to: * Proof (truth), argument or sufficient evidence for the truth of a proposition * Alcohol proof, a measure of an alcoholic drink's strength Formal sciences * Formal proof, a construct in proof theory * Mathematical proof, a co ...
,
proof of stake Proof of stake (PoS) protocols are a class of Consensus (computer science), consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. This is done to avoid ...

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 co ...
(
smart contract A smart contract is a computer program or a Transaction Protocol Data Unit, transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreemen ...
s/ dApps, if applicable)


Blocks

Blocks hold batches of valid transactions that are hashed and encoded into a
Merkle tree In cryptography Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or ''-logia ''-logy'' is a suffix in the English language, used with words originally adapted from Ancient Gr ...
. Each block includes the
cryptographic hash A cryptographic hash function A hash function is any function Function or functionality may refer to: Computing * Function key A function key is a key on a computer A computer is a machine that can be programmed to carry out s ...
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''. Sometimes separate blocks can be produced concurrently, creating a temporary
fork In cutlery or kitchenware, a fork (from la, furca 'pitchfork') is a utensil, now usually made of metal, whose long handle terminates in a head that branches into several narrow and often slightly curved tine (structural), tines with which one ...
. 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 the 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 Proof of work (PoW) is a form of Cryptography, cryptographic zero-knowledge proof in which one party (the ''prover'') proves to others (the ''verifiers'') that a certain amount of computational effort has been expended for some purpose. Verifiers ...
, 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 calculation that includes both arithmetical and non-arithmetical steps and which follows a well-defined model (e.g. an algorithm). Mechanical or electronic devices (or, History of computing hardware, historically, peop ...

computation
. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and
parallel Parallel may refer to: Computing * Parallel algorithm In computer science Computer science deals with the theoretical foundations of information, algorithms and the architectures of its computation as well as practical techniques for their a ...
manner.


Block time

The ''block time'' is the average time it takes for the network to generate one extra block in the blockchain. Some blockchains create a new block as frequently as every five seconds. 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 Ethereum is a decentralized, open-source blockchain A blockchain is a growing list of records, called ''blocks'', that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and trans ...

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 200px, A network based on the ''clients'' request services and resources from centralized server (computing)">servers Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads betw ...

peer-to-peer network
, 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 __NOTOC__ This is a list of Wikipedia articles of Latin phrases and their translation into English. To view all phrases on a single, lengthy document, see: * List of Latin phrases (full) The list also is divided alpha ...

ad hoc
message passing In computer science Computer science deals with the theoretical foundations of information, algorithms and the architectures of its computation as well as practical techniques for their application. Computer science is the study of , , ...
and distributed networking. Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of
failure Failure is the state or condition of not meeting a desirable or intended objective Objective may refer to: * Objective (optics), an element in a camera or microscope * ''The Objective'', a 2008 science fiction horror film * Objective pronoun ...

failure
. Blockchain security methods include the use of
public-key cryptography Public-key cryptography, or asymmetric cryptography, is a cryptographic system that uses pairs of keys KEYS (1440 AM broadcasting, AM) is a radio station serving the Corpus Christi, Texas, Corpus Christi, Texas area with a talk radio, talk ...
. 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 A knot is an intentional complication in Rope, cordage which may be practical or decorative, or both. Practical knots are classified by function, including hitches, bends, loop knots, and splic ...

node
in a decentralized system has a copy of the blockchain.
Data quality Data quality refers to the state of or 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 , and ". Moreover, data is deemed of high quality if it c ...
is maintained by massive database replication and computational trust. No centralized "official" copy exists and no user is "trusted" more than any other. Transactions are broadcast to the network using software. Messages are delivered on a
best-effort Best-effort delivery describes a network service in which the network Network, networking and networked may refer to: Science and technology * Network theory Network theory is the study of Graph (discrete mathematics), graphs as a represent ...
basis. Mining nodes validate transactions, add them to the block they are building, and then
broadcast Broadcasting is the distributionDistribution may refer to: Mathematics *Distribution (mathematics) Distributions, also known as Schwartz distributions or generalized functions, are objects that generalize the classical notion of functi ...
the completed block to other nodes. Blockchains use various time-stamping schemes, such as
proof-of-work Proof of work (PoW) is a form of cryptographic zero-knowledge proof in which one party (the ''prover'') proves to others (the ''verifiers'') that a certain amount of computational effort has been expended for some purpose. Verifiers can subseque ...
, to serialize changes. Alternative consensus methods include
proof-of-stake Proof of stake (PoS) protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their stake in the associated cryptocurrency. Description For a blockchain transaction to be recognized, it mu ...
. 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 ...

centralization
because the computer resources required to process larger amounts of data become more expensive.


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 ...

user-friendly
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.html" ;"title="WP:MOSBOLD as a redirect target --> 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

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, e ...

access control
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 network A computer network is a group of computers that use a set of common communication protocols over digital signal, digital interconnections for the purpose of sharing resources located on or provided by the Node (netw ...
. Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include a proof of work. To prolong the blockchain, bitcoin uses
Hashcash Hashcash is a proof-of-work system used to limit email spam 300px, An email box folder filled with spam messages. Email spam, also referred to as junk email, is unsolicited messages sent in bulk by email ( spamming). The name comes from a Monty ...
puzzles. While Hashcash was designed in 1997 by Adam Back, the original idea was first proposed by
Cynthia Dwork Cynthia Dwork (born June 27, 1958) is an American computer scientist at Harvard University Harvard University is a Private university, private Ivy League research university in Cambridge, Massachusetts. Established in 1636 and named for its ...
and
Moni Naor Moni Naor ( he, מוני נאור) is an Israeli computer scientist, currently a professor at the Weizmann Institute of Science. Naor received his Ph.D. in 1989 at the University of California, Berkeley The University of California, Berk ...
and Eli Ponyatovski in their 1992 paper "Pricing via Processing or Combatting Junk Mail". In 2016,
venture capital Venture capital (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a ty ...
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.


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 Image:Metcalfe-Network-Effect.svg, Diagram illustrating the network effect in a few simple phone networks. The lines represent potential calls between phones. As the number of phones connected to the network grows, the number of potential calls avai ...

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 private 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 A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...
or
debt crisis Debt crisis is a situation in which a government (nation, state/province, county, or city etc.) loses the ability of paying back its governmental debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-u ...
like the
financial crisis of 2007–08 Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricatu ...
, 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 The watt (symbol: W) is a unit of Power (physics), power or radiant flux. In the International System of Units (SI), it is defined as a SI derived unit, derived unit of (in SI base units) 1 kg⋅m2⋅s−3 or, equivalently, 1 joule per second. I ...
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 (₿) is a cryptocurrency A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange. Individual coin ownership records are stored in a ledger, which is a compu ...

bitcoin
,
Ethereum Ethereum is a decentralized, open-source blockchain A blockchain is a growing list of records, called ''blocks'', that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and trans ...

Ethereum
,
litecoin Litecoin (LTC or Ł) is a peer-to-peer cryptocurrency and open-source software project released under the MIT License, MIT/X11 license. Litecoin was an early bitcoin spinoff or Cryptocurrency#Altcoins, altcoin, starting in October 2011. In techni ...

litecoin
and other
cryptocurrencies A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange In economics Economics () is a social science Social science is the Branches of science, branch of s ...
. 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, Turin) is an Italian automobile manufacturer, formerly part of Fiat Chrysler Automobiles Fiat Chrysler Automobile ...
crypto exchanges. The development, some argue, has led criminals to prioritise use of new cryptos such as Monero. The question is about public accessibility of blockchain data and the personal privacy of the very same data. It is a key debate in cryptocurrency and ultimately in blockchain.


Uses

Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a
distributed ledger A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. Unlike with a di ...
for
cryptocurrencies A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange In economics Economics () is a social science Social science is the Branches of science, branch of s ...
, most notably
bitcoin Bitcoin (₿) is a cryptocurrency A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange. Individual coin ownership records are stored in a ledger, which is a compu ...

bitcoin
. There are a few operational products maturing from
proof of concept Proof of concept (POC), also known as proof of principle, is a realization of a certain method or idea in order to demonstrate its feasibility study, feasibility, or a demonstration in principle with the aim of verifying that some concept or theo ...
by late 2016. Businesses have been thus far reluctant to place blockchain at the core of the business structure. Although businesses have been reluctant to fully implement blockchain, many have begun testing the technology and are conducting low-level implementation to gauge its effects on organizational efficiency. 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
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PricewaterhouseCoopers
(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 indicts a significant demand and interest in blockchain technology. Individual use of blockchain technology has also greatly increased since 2016. According to statistics in 2020, there were more than 40 million blockchain wallets in 2020 in comparison to around 10 million blockchain wallets in 2016.


Cryptocurrencies

Most cryptocurrencies use blockchain technology to record transactions. For example, the
bitcoin network The bitcoin network is a peer-to-peer 200px, A network based on the client–server model, where individual Client (computing), ''clients'' request services and resources from centralized server (computing), servers Peer-to-peer (P2P) c ...
and
Ethereum Ethereum is a decentralized, open-source blockchain A blockchain is a growing list of records, called ''blocks'', that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and trans ...

Ethereum
network are both based on blockchain. On 8 May 2018
Facebook Facebook is an American online social media and social networking service owned by Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, an ...

Facebook
confirmed that it would open a new blockchain group which would be headed by David Marcus, who previously was in charge of Facebook Messenger, Messenger. Facebook's planned cryptocurrency platform, Libra (cryptocurrency), Libra (now known as Diem), was formally announced on June 18, 2019. The criminal enterprise Silk Road (marketplace), Silk Road, which operated on Tor (anonymity network), Tor, utilized cryptocurrency for payments, some of which, the federal government has seized through research on the blockchain and Forfeiture (law), forfeiture. Legality of bitcoin by country or territory, Governments have mixed policies on the legality of their citizens or banks owning cryptocurrencies. China implements blockchain technology in several industries including a Central bank digital currency, national digital currency which launched in 2020. In order 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 Data Unit, transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreemen ...
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 automation, automated escrow. 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 International Monetary Fund, IMF staff discussion 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 is unclear.


Financial services

According to ''Reason (magazine), Reason'', many banks have expressed interest in implementing
distributed ledger A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. Unlike with a di ...
s for use in banking 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 because it has potential to speed up back office settlement systems. Banks such as UBS 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 Bank, 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. In December 2018, Bitwala launched Europe's first regulated blockchain banking solution that enables users to manage both their bitcoin and euro deposits in one place with the safety and convenience of a German bank account. The bank account is hosted by the Berlin-based solarisBank. Mojaloop is designed to deliver financial support to people living in areas Unbanked, underserved by banks. It of use to migrants sending Remittance#Major operators, remittances 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 a 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.


Video games

A blockchain game ''CryptoKitties'', launched in November 2017. The game made headlines in December 2017 when a cryptokitty character - an in-game virtual pet - was sold for more than United States dollar, US$100,000. ''CryptoKitties'' illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network with about 30% of all Ethereum transactions being for the game. ''CryptoKitties'' also demonstrated how blockchains can be used to catalog game assets (digital assets).


Energy trading

Blockchain is also being used in peer-to-peer energy trading.


Supply chain

There are a number of efforts and industry organizations working to employ blockchains in supply chain management. * Mining — Blockchain technology allows wholesalers, retailers, and customers to track the origins of gemstones and other precious commodities. In 2016, The Wall Street Journal reported that the blockchain technology company, Everledger was partnering with IBM's blockchain-based tracking service to trace the origin of diamonds to insure that they were ethically mined. DTC, the Diamond Trading Company has been involved in building a diamond trading supply chain product called Tracr. * Food supply — Blockchain technology is being used to allow retailers and consumers to Produce traceability, track the provenance of meat and other food products from their origins to stores and restaurants. Walmart and IBM are running a trial to use a blockchain-backed system for supply chain monitoring for lettuce and spinach — all nodes of the blockchain are administered by Walmart and are located on the IBM cloud computing, cloud. One cited benefit is that the system will enable rapid tracing of contaminated produce. Fogo de Chao, a Brazilian themed restaurant chain that features grilled meats, announced a partnership with HerdX, a blockchain-tech company focused on the food industry, that will enable suppliers, wholesalers, and diners to trace the beef served in Fogo de Chao restaurants back to the farm where it was raised. Some analysts are less convinced that most consumers will be that interested in this capability. * Shipping Walmart Canada uses a blockchain-based system developed by DLT Labs, a blockchain SaaS provider, that allows the retailer to track shipments and deliveries handled by dozens of third-party trucking companies. One reported benefit is that the blockchain-based system enables automated invoicing that reduces disputed billing, which in turn reduces delays in Walmart paying the freight transport companies. * Blockchain software development — The Linux Foundation's blockchain initiative, Hyperledger, Hyperledger Grid develops open components for blockchain supply chain solutions. The goal of the project, said the foundation, was to "accelerate the development of blockchain-based solutions to cross-industry supply chain problems."


Anti-counterfeiting

Blockchain could be used in detecting counterfeits by associating unique identifiers to products, documents and shipments, and storing records associated to 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 European Union Intellectual Property Office, EUIPO 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 to authenticate certificates.


Healthcare

In response to the 2020 COVID-19 pandemic, The Wall Street Journal reported that Ernst & Young was working on a blockchain to help employers, governments, airlines and others keep track of people who have had antibody tests and could be immune to the virus. Hospitals and vendors also utilized a blockchain for needed medical equipment. Additionally, blockchain technology was being used in China to speed up the time it takes for health insurance payments to be paid to health-care providers and patients.


Domain names

Blockchain domain names are another use of blockchain on the rise. Unlike regular domain names, blockchain domain names are entirely an asset of the domain owner and can only be controlled by the owner through a private key. Blockchain domains pave the way to having sites that are more resistant to censorship and thus enable freedom of speech as there are no authorities or individuals that can intervene on controlling a domain except the private key holder. They could be a better option to replace the traditional cryptocurrency wallet addresses as one can easily memorize the domain and use it for receiving payments. Organizations providing blockchain domain name services include Unstoppable Domains, Namecoin and Ethereum Name Services.


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 and PRS for Music to adopt blockchain technology in music distribution. Imogen Heap's Mycelia service has also been proposed as 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 industry such as peer-to-peer insurance, parametric insurance and microinsurance following the adoption of blockchain. The sharing economy and Internet of Things, IoT are also set to benefit from blockchains because they involve many collaborating peers. Online voting is another application of the blockchain. The use of blockchain in libraries is being studied with a grant from the U.S. Institute of Museum and Library Services. Other designs include: * Hyperledger is a cross-industry collaborative effort from the Linux Foundation to support blockchain-based distributed ledgers, with projects under this initiative including Hyperledger Burrow (by Monax) and Hyperledger Fabric (spearheaded by IBM). * Quorum – a permissionable private blockchain by JPMorgan Chase with private storage, used for contract applications. *Tezos, decentralized voting. *Proof of Existence (service), Proof of Existence is an online service that verifies the existence of computer files as of a specific time.


Types

Currently, there are at least four types of blockchain networks — public blockchains, private blockchains, consortium blockchains and hybrid blockchains.


Public blockchains

A public blockchain has absolutely no access restrictions. Anyone with an Internet connection can send Financial transaction, transactions to it as well as become a validator (i.e., participate in the execution of a Consensus (computer science), consensus protocol). Usually, such networks offer Incentive, economic incentives for those who secure them and utilize some type of a Proof-of-stake, Proof of Stake or Proof-of-work system, 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 Closed platform, 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 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 assets) 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 (computer science), consensus algorithm, etc.).


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 in three categories: cryptocurrency interoperability approaches, blockchain engines, and blockchain connectors. The IETF has a recent Blockchain-interop working group that already produced the draft of a blockchain interoperability architecture.


Academic research

In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker (2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology.


Adoption decision

Motivations for adopting blockchain technology have been investigated by researchers. Janssen et al. provided a framework for analysis. Koens & Poll pointed out that adoption could be heavily driven by non-technical factors. Based on behavioral models, LiLi, Jerry (2020), "Blockchain technology adoption: Examining the Fundamental Drivers", ''Proceedings of the 2nd International Conference on Management Science and Industrial Engineering'', ACM Publication, April 2020, pp. 253–260. https://dl.acm.org/doi/abs/10.1145/3396743.3396750 discussed the differences between adoption at individual level and at organization level.


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 trust or direct connections between collaborators.


Blockchain and internal audit

The need for internal audit 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 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.


Energy use of proof-of-work blockchains

The Bank for International Settlements has criticized the public proof-of-work blockchains for high energy consumption. Nicholas Weaver, of the International Computer Science Institute at the University of California, Berkeley examines blockchain's online security, and the energy efficiency of proof-of-work public blockchains, and in both cases finds it grossly inadequate. The 31—45 TWh of electricity used for bitcoin in 2018 produced 17—22.9 MtCO2.


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, computer science, engineering, law, economics and philosophy that relate to cryptocurrencies such as bitcoin. The journal encourages authors to Digital signature, digitally sign a Hash function, file hash of submitted papers, which are then Trusted timestamping, timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers for non-repudiation purposes.


See also

* Version control – a record of all changes (mostly of software project) in a form of a graph * Changelog – a record of all notable changes made to a project * Checklist – an informational aid used to reduce failure * Economics of digitization * Privacy and blockchain


References


Further reading

* * * * * * * * * D. Puthal, N. Malik, Saraju Mohanty, 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.


External links

* {{Semantic Web Bitcoin Blockchains, Cryptocurrencies Database models Emerging technologies Financial metadata Computer-related introductions in 2009 Information systems Writing systems Mathematical tools Counting instruments Encodings Decentralization 21st-century inventions