Blockchain

Concepts

• Node or peers
  • entities that participate in distributed data storage
  • changes made by one have to be propagated to all others
• Shared ledger (shared, distributed, immutable, consensus based)
  • Block
    • time, sequence
    • hash, previous block hash (link)
    • transaction data
  • Blockchain
    • linked blocks
• Smart contract
  • an agreement or set of rules govern transaction
  • stored in blockchain
  • executed automatically / semi-automatically as part of transaction
  • clauses could be made partially / fully self-executing, self-enforcing, or both
• Permissions
  • Participant ID - by digital certificate
• Consensus
  • Ensure all peers in network have the same ledger
  • Keep out fraudulent transaction
  • Ensure chronological order
  • Algorithm
    • Proof of stake
      • validators hold certain percentage of the network's total value to validate transactions - provide increased protection from attack by reducing incentives for attack and make it very expensive
    • Multi-signature
      • majority of validators must agree
    • Practical byzantine fault tolerance
      • decision algorithm to settle disputes (faults)
      • Tendermint "TendermintCore is a high-performance blockchain consensus engine that enables you to run Byzantine fault tolerant applications"
    • Proof of work
      • mining based
      • all participants have to agree upon a common ledger and all participants have access to all entries ever recorded
      • unnecessary expensive for blockchain for business
      • when participants are anonymous, on bitcoin, necessary and commitment is expensive
      • machines with identical copies of the ledger team up to solve a puzzle given by network
      • first team solve the puzzle wins, and all other machines update their ledger to match that of the winning team
      • in bitcoin network, transactions validated by miners who get rewarded
• Transaction
  • Owner -> transaction data -> hash #transaction data -> private key signed hash
  • Authenticity check: pk signed hash + public key -> hash = #transaction data

Participants and roles

• user
• regulator (user with special permission to oversee transactions within the network)
• developer
• network operator - who have permissions and authority to define, create, manage and monitor network
• CA
• traditional processing systems and data sources

Characteristics

• Consensus - all participants must agree for a transaction to be valid
• Provenance - participants know where the asset came from and how its ownership changed over time
• Immutability - transaction is tamper-proof after recorded to the ledger
• Finality - ledger as the "single source of truth"
• Permissioned / Unpermissioned

Benefits

• Eliminate intermediaries - saves time and cost
• Efficient - shared ledger through distributed network
• Safe and secure (?) - ledger is tamper-evident, one transaction cannot be changed, can only be reversed with another transaction (with exception, HARD RESET)
• Enhances trust
  • every transaction builds on every other transaction
  • temper-evident
  • not owned by a single entity

Opportunities

• Reduce market friction
  • information - imperfect (duplicate, inconsistent), inaccessible, risks (hacking)
  • interaction - physical separation, intermediaries, delay, etc.
  • innovation - bureaucracy, legacy system, side effect of regulations, etc.

Platforms / frameworks

Hyperledger Fabric

• Driven by use cases
• Modular / extendable architecture for various industries

R3 Corda

• Driven by use case - financial service industry

Ethereum

• Field independent
• In contract to Fabric, not stand out in modularity but provision of generic platform

References

• Blockchain for Dummies IBM Limited Edition
• http://explore-ip.com/2017_Comparison-of-Ethereum-Hyperledger-Corda.pdf