If you attend a blockchain meetup/conference and ask 100 people what they think a blockchain is, one of the following will happen:
- 80 will say they simply do not know. Maybe their boss sent them or they have read about it in the Wall Street Journal or the New York Times and they thought it was cool. Some of them may be legitimately interested in the subject, however odds are that most are just following the hypetrain.
- 20 will claim they are experts and they have been working with it since 2007 (bitcoin was created in the end of 2008). Of course they each have a different definition.
The above is fiction and should not be taken seriously. I have not been to any blockchain meetups or conferences as of yet. However, by the amount of different definitions seen on the internet, some partial truth can be found in those words. Things get even more interesting when the “public versus private/permissioned blockchain” debate heats up.
Disclaimer: We are going to be refering only to public blockchains for the rest of this post. This is not going to be a “how does a blockchain work” post as there are already a lot of good articles online on that topic (and a lot of bad ones).
First of all, to describe what a blockchain is, let’s define what a database is:
My definition of a blockchain:
A blockchain is a database that can be shared between a group of non-trusting individuals, without needing a central party to maintain the state of the database.
It is also often referred to by the name “Distributed Ledger Technology”, DLT for short.
Centralised vs Distributed Ledger, image source: https://cdn.ripple.com/wp-content/uploads/2015/06/ledgers.png
Properties of A Blockchain
- Transparency: Every transaction can be inspected by anyone (keyword: block explorer)
- Decentralization: Every node which maintains the network has a copy of the ledger. That creates redundancy and fault tolerance (i.e if a node fails or stops working, the rest of the nodes can keep maintaining the network without interruption).
Decentralization along with proper mechanisms to ensure that no faulty transactions get included in the ledger give birth to data integrity, the so-called immutability of the blockchain that everyone talks about. When a piece of information gets recorded, it is set in stone and cannot be rewritten (exceptions: hard fork,chain split).
Add transparency and decentralization together and you have a ledger which has 100% uptime, cannot be manipulated by powerful adversaries to their advantage (debatable) and is fully inspectable at any time.
Every single property of a blockchain on its own might not sound like too remarkable, however when combined together, new properties appear which in turn create the possibility for new revolutionary use cases.
Before we get into that, let’s clear some…
Common Misconsceptions
“Blockchains provide security”
This one is tricky, because security is often confused with confidentiality. A blockchain does not provide confidentiality (with the exception of cases like Zcash, Monero, Dash, PIVX which are blockchains with built-in privacy features).
“My business needs a blockchain!”
Definitely not true. If trust and robustness aren’t an issue, there’s nothing a blockchain can do that a regular database cannot. In this case you are better off with a traditional centralized database with proper backups.
“Blockchain is Bitcoin”
Bitcoin was the first of the “cryptocurrencies” that introduced blockchain technology as we know it today. Currently there are numerous different blockchains linked to different projects, each offering something unique atop the basic blockchain principles.
…And more
If trust and robustness aren’t an issue, there’s nothing a blockchain can do that a regular database cannot¹.
Blockchain Use Cases, a.k.a. “What a blockchain can do”
“The blockchain has the ability to enhance reliability in business processes by eliminating political and economic risks associated with trusting a centralized system.” — Vitalik Buterin
The decentralized nature of blockchain enables (amongst other things) the following:
- Reduce bureaucracy and fraud (digital identity systems)
- Make organizations more democratic and transparent (Decentralized Autonomous Organizations, DAOs)
- Better Supply Chain Management (track quality and location of products)
- Insurance services
- Fight censorship
Blockchain use cases, image source: https://www.bbvaopenmind.com/wp-content/uploads/2017/08/banafa-12-mitos-3.jpg
For each of the above use cases a quick search on your favorite search engine should provide you with enough details, possible implementations and/or relevant projects.
“But I might miss out! My scaled business needs blockchain or we are going to be out of competition!”
I will probably get called out for this, but at its current state blockchain cannot replace any scaled infrastructure. Currently VISA can handle tens of thousands of transactions per second, while Bitcoin and Ethereum are struggling with ten (not an exact number, but you get the point). Of course, scaling solutions are being actively researched but realistically we are still some years away from the needed scaling for blockchain to have radical impact and replace the giants of today’s modern industry. For more details I refer you to MultiChain’s blog post which, although posted two years ago, is quite relevant.
To sum up, I am a big fan of blockchain technologies, I’ve been hacking around Ethereum development for some 6 months now and can see why it can be so revolutionary. One must not follow the hype blindly. Always judge and pick a solution based on your needs and not based on what the masses do.
/rant
Shameless plug
I am a 5th year Electrical & Computer Engineering student from Greece. I am interested in infosec, blockchain research & applications in modern businesses, and autonomous vehicles. Learn more about what I do at gakonst.com
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