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PART (3)
BTA-Blockchain-Business-Foundations
Types of
Blockchain
Blockchain
Introduction:
Blockchain platforms are often described as being
either public or private platforms. What do these terms mean, and how do you
know which approach is the right approach for your solution or use case? In
this section, each approach, as well as the respective benefits and drawbacks
will be discussed.
either public or private platforms. What do these terms mean, and how do you
know which approach is the right approach for your solution or use case? In
this section, each approach, as well as the respective benefits and drawbacks
will be discussed.
Types of
Blockchain
In order to properly describe a blockchain
solution, additional terms must be entered into the conversation. A blockchain
solution can be measured and described against the following three metrics:
solution, additional terms must be entered into the conversation. A blockchain
solution can be measured and described against the following three metrics:
• Public vs. Private
Who can write data to the blockchain? Public
blockchains allow for large audiences or the public itself to add data to the ledger.
Bitcoin is a great example of a public blockchain network – there are no rules
or permissions around who can trade Bitcoin. Anyone can buy, sell, or send
Bitcoin to anyone else. A blockchain solution used to track how charitable
donations are used by a non-profit would be a great example of a private
solution. In such a solution, only designated officers of the non-profit
organization should be allowed to share metrics detailing how donations are
allocated and spent.
blockchains allow for large audiences or the public itself to add data to the ledger.
Bitcoin is a great example of a public blockchain network – there are no rules
or permissions around who can trade Bitcoin. Anyone can buy, sell, or send
Bitcoin to anyone else. A blockchain solution used to track how charitable
donations are used by a non-profit would be a great example of a private
solution. In such a solution, only designated officers of the non-profit
organization should be allowed to share metrics detailing how donations are
allocated and spent.
• Open vs. Closed
Who can read data from the blockchain? Open
blockchains allow large audiences or the public itself to consume all the ledger data.
Closed blockchains attempt to restrict read access. Once again, Bitcoin is a
great example of an Open platform; anyone in the world can use a blockchain
explorer to view the details of any Bitcoin transaction, whether they were a
participant or not. An example of a closed blockchain solution might be a
platform for managing elections. In such a solution it would be important that
only election officials have access to election results and the individual
votes cast by each voter – such information may not be well-suited for public
consumption.
blockchains allow large audiences or the public itself to consume all the ledger data.
Closed blockchains attempt to restrict read access. Once again, Bitcoin is a
great example of an Open platform; anyone in the world can use a blockchain
explorer to view the details of any Bitcoin transaction, whether they were a
participant or not. An example of a closed blockchain solution might be a
platform for managing elections. In such a solution it would be important that
only election officials have access to election results and the individual
votes cast by each voter – such information may not be well-suited for public
consumption.
• Permissoned vs. Permissionless
Platforms or solutions which are open and public
have little need for permissioning or
have little need for permissioning or
role-based access. Such platforms are described as
permissionless platforms because they do not have a native ability to track and
manage identity, and subsequently define and enforce permissions based on that
identity. This does NOT mean that you cannot build a permissioned solution on a
permissionless platform, it simply means if you choose to do so you are
responsible for designing and implementing a method to track and manage
identity and draw permissions against that identity.
permissionless platforms because they do not have a native ability to track and
manage identity, and subsequently define and enforce permissions based on that
identity. This does NOT mean that you cannot build a permissioned solution on a
permissionless platform, it simply means if you choose to do so you are
responsible for designing and implementing a method to track and manage
identity and draw permissions against that identity.
When designing a solution, a great way to determine
what type of blockchain is needed is to determine if all participants are
considered equal or should some have abilities or permissions that others do
not? Answering this will help guide the solution to use a permissioned or
permission-less blockchain technology.
what type of blockchain is needed is to determine if all participants are
considered equal or should some have abilities or permissions that others do
not? Answering this will help guide the solution to use a permissioned or
permission-less blockchain technology.
It can sometimes be helpful to have a visual model
when planning your blockchain solution. Feel free to use a quadrant such as the
one below when mapping out a solution. For any envisioned use case, where does
it fit on the model below? In other words, which combination best describes
your desired solution?
when planning your blockchain solution. Feel free to use a quadrant such as the
one below when mapping out a solution. For any envisioned use case, where does
it fit on the model below? In other words, which combination best describes
your desired solution?
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Advanced-Blockchain-Technologies-on-Privacy-and-Scalability
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• Public / Open
Anyone can write data, anyone can read data
• Public / Closed
Anyone can write data, only a few can read
data
data
• Private / Open
Only a few can write data, many can read data
• Private / Closed
Only a few can write data, only a few can read
data
data
How Blocks Are
Created
Created
Introduction:
Capturing transactions on blocks, and the
subsequent validation process, can seem overwhelming to those new to the
technology. Fortunately understanding the process is not that hard. In this
section we’ll review the process by which transactions are recorded, added to
blocks, and validated using group consensus. This process is the heart of
blockchain and a cursory understanding of the major steps is an important step
in anyone’s blockchain education.
subsequent validation process, can seem overwhelming to those new to the
technology. Fortunately understanding the process is not that hard. In this
section we’ll review the process by which transactions are recorded, added to
blocks, and validated using group consensus. This process is the heart of
blockchain and a cursory understanding of the major steps is an important step
in anyone’s blockchain education.
How Blocks are
Created
Created
What is a “block”?
Perhaps the simplest analogy for understanding
blocks in a blockchain is to think about sheets of paper in a notebook. Imagine
an audience sitting in front of a stage. Each member in the audience has been
given an identical notebook and a pen. Anytime a transaction is to be recorded
on the ledger, the participants will walk up on the stage and announce their
transaction to the audience. The audience will then record the transaction in
their notebook, one transaction per line.
blocks in a blockchain is to think about sheets of paper in a notebook. Imagine
an audience sitting in front of a stage. Each member in the audience has been
given an identical notebook and a pen. Anytime a transaction is to be recorded
on the ledger, the participants will walk up on the stage and announce their
transaction to the audience. The audience will then record the transaction in
their notebook, one transaction per line.
Eventually, an entire page in the notebook will be
filled with transaction data. At this point, the audience will compare their
current sheet of paper with the current sheet of paper held by all the other
audience members. If the audience, collectively, finds a version of the data
that more than 50% agree on or share in common, this data is considered to be
the truth. If the audience is able to find a version of the transaction data
shared by the majority of the audience then two things happen:
filled with transaction data. At this point, the audience will compare their
current sheet of paper with the current sheet of paper held by all the other
audience members. If the audience, collectively, finds a version of the data
that more than 50% agree on or share in common, this data is considered to be
the truth. If the audience is able to find a version of the transaction data
shared by the majority of the audience then two things happen:
• Any participant who does not have the same data
as the majority will discard their block and obtain a new copy from those in
the majority, thus putting them back in sync with the rest of the
participants.
as the majority will discard their block and obtain a new copy from those in
the majority, thus putting them back in sync with the rest of the
participants.
• Once everyone is synced up, each participant will
begin the process again by recording announced transactions on a fresh sheet of
paper.
begin the process again by recording announced transactions on a fresh sheet of
paper.
If this process makes sense, congratulations! You
now understand a core concept of blockchain technology!
now understand a core concept of blockchain technology!
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Blockchain-Scaqe-Block-05 |
Two items of note:
• A block in a blockchain is just like a sheet of
paper in the sense that neither has to know or care what type of data is
recorded on it. Paper works equally well to store financial data, graphic data,
musical data, weather data, etc. Data points of vastly different types with no
relation to one another can happily co-exist on a block or on a piece of paper.
The block or sheet of paper is just a simple record keeping device.
paper in the sense that neither has to know or care what type of data is
recorded on it. Paper works equally well to store financial data, graphic data,
musical data, weather data, etc. Data points of vastly different types with no
relation to one another can happily co-exist on a block or on a piece of paper.
The block or sheet of paper is just a simple record keeping device.
• In this example we made the assumption that
transactions are recorded until the sheet of paper is full, then that sheet is
validated by the entire audience. In reality, blocks are mined on a schedule.
Imagine the same scenario as above, but in this revision there’s a timer that
buzzes every XX seconds. When this buzzer goes off the audience compares their
sheets of paper.
transactions are recorded until the sheet of paper is full, then that sheet is
validated by the entire audience. In reality, blocks are mined on a schedule.
Imagine the same scenario as above, but in this revision there’s a timer that
buzzes every XX seconds. When this buzzer goes off the audience compares their
sheets of paper.
Group
Consensus
Consensus
A critical concept to be familiar with in
blockchain is that of group consensus. This is a simple concept which states
that there’s no way to know, without any room for doubt, what the absolute
truth is. Therefore, we assume the truth to be whatever the majority of participants
agree on. A great example of this is a police detective working to solve a
crime. Imagine that you are that detective. One day the police chief asks you
to investigate a bank robbery. Since you were not present when the bank was
robbed, you don’t know the actual truth of what happened. However, as a
detective it is your job to try to determine what transpired. So, you do what
any good detective would do in such a situation – you find witnesses to the
event and ask them what they observed.
blockchain is that of group consensus. This is a simple concept which states
that there’s no way to know, without any room for doubt, what the absolute
truth is. Therefore, we assume the truth to be whatever the majority of participants
agree on. A great example of this is a police detective working to solve a
crime. Imagine that you are that detective. One day the police chief asks you
to investigate a bank robbery. Since you were not present when the bank was
robbed, you don’t know the actual truth of what happened. However, as a
detective it is your job to try to determine what transpired. So, you do what
any good detective would do in such a situation – you find witnesses to the
event and ask them what they observed.
Imagine the following – you query ten witnesses
about the robbery. Eight out of those ten witnesses tell you one version of the
event – that four robbers ran out of the bank, jumped into a red sedan and
drove away from the bank heading north. Two of your ten witnesses tell a much
different story – that two robbers ran out of the bank, got into a white pickup
truck and drove away from the bank heading south.
about the robbery. Eight out of those ten witnesses tell you one version of the
event – that four robbers ran out of the bank, jumped into a red sedan and
drove away from the bank heading north. Two of your ten witnesses tell a much
different story – that two robbers ran out of the bank, got into a white pickup
truck and drove away from the bank heading south.
Which version is the truth? As a good detective
you’re likely to believe the version of the story told by the majority of the
participants. When you provide a suspect description you’ll most likely
describe four robbers in a red sedan heading north.
you’re likely to believe the version of the story told by the majority of the
participants. When you provide a suspect description you’ll most likely
describe four robbers in a red sedan heading north.
This same principal is used extensively in
blockchain – the truth is always assumed to be whatever the majority of
participants agree on.
blockchain – the truth is always assumed to be whatever the majority of
participants agree on.
How are Blocks “Chained” Together?
To link our sheets together we embed information
from the previous sheet of paper into the new, recently validated sheet. In
Blockchain, our sheet of paper is equal to a block. The act of embedding a
previous block of information into the current block of information is called
chaining. Hence, the name Blockchain.
from the previous sheet of paper into the new, recently validated sheet. In
Blockchain, our sheet of paper is equal to a block. The act of embedding a
previous block of information into the current block of information is called
chaining. Hence, the name Blockchain.
To chain blocks together today, all data in a block
is run through a special function called a “cryptographic hash”.
Cryptographic hashes create a unique output or identifier for a specific input.
is run through a special function called a “cryptographic hash”.
Cryptographic hashes create a unique output or identifier for a specific input.
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Therefore, the hash of each block will always be
unique based upon the inputs and attempting to change the data in a block will
result in a hash or ID that no longer matches the original value recorded on
the next block in the chain.
unique based upon the inputs and attempting to change the data in a block will
result in a hash or ID that no longer matches the original value recorded on
the next block in the chain.
To link or chain blocks of data together the header
of the current block contains the hash of the last (validated) block. Changing
the data on any block in a Blockchain will result in a completely different
hash and the new hash will not match the hash in the next block header thus
breaking the Blockchain and invalidating all blocks linked to where the change
was made. This gives Blockchain its property of immutability (can’t be changed)
and makes it highly censorship-resistant.
of the current block contains the hash of the last (validated) block. Changing
the data on any block in a Blockchain will result in a completely different
hash and the new hash will not match the hash in the next block header thus
breaking the Blockchain and invalidating all blocks linked to where the change
was made. This gives Blockchain its property of immutability (can’t be changed)
and makes it highly censorship-resistant.
The height of a block simply refers to the number
of blocks on the chain after the one in question. Block height is an indicator
of the security of the data on the block; changing data in any block requires
an attacker to change every subsequent block. The more of those blocks an
attacker must alter, the more difficult it becomes to pull off an attack.
of blocks on the chain after the one in question. Block height is an indicator
of the security of the data on the block; changing data in any block requires
an attacker to change every subsequent block. The more of those blocks an
attacker must alter, the more difficult it becomes to pull off an attack.
Cryptography
and Hashing
and Hashing
Introduction:
Cryptography is used extensively in Blockchain to
address concerns around privacy, ensure data integrity, and to help facilitate
group consensus processes. Cryptography is the study of how to send information
back and forth securely in the presence of adversaries.
address concerns around privacy, ensure data integrity, and to help facilitate
group consensus processes. Cryptography is the study of how to send information
back and forth securely in the presence of adversaries.
There are a number of benefits to Blockchain
solutions which include being publicly verifiable, secure, transparent, and
cost-effective.
solutions which include being publicly verifiable, secure, transparent, and
cost-effective.
Blockchain also enables tokenization models that
can enable organizations of all sizes to create truly digitized physical
assets, provide fractional ownership solutions and create opportunities to
decrease processing times while helping to remove unneeded
intermediaries.
can enable organizations of all sizes to create truly digitized physical
assets, provide fractional ownership solutions and create opportunities to
decrease processing times while helping to remove unneeded
intermediaries.
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Advanced-Blockchain-Technologies-on-Privacy-and-Scalability-01 |
Some of the primary benefits of Blockchain are that
it leverages a decentralized infrastructure, is a completely trustless
environment, and provides immutability by cryptographically linking all blocks
together. All blocks on the Blockchain are indexed using a Merkle Tree. A
Merkle Tree is a lightweight digital fingerprint of all the transactions within
a block which serves as an index to the blockchain.
it leverages a decentralized infrastructure, is a completely trustless
environment, and provides immutability by cryptographically linking all blocks
together. All blocks on the Blockchain are indexed using a Merkle Tree. A
Merkle Tree is a lightweight digital fingerprint of all the transactions within
a block which serves as an index to the blockchain.
Hashing
A hash function is a one-way function that takes
any type of data as input and converts it to a unique 20- digit character code.
For example, the letter ‘c’ could be given as the input, and through hashing,
it would be converted to a 20-digit code. If the letter were to be changed to
an ‘a’ the 20-digit code would be completely different. If the input were a 20
GB video file, the resulting hash would still be a 20-digit code that is
completely unique. Hashing is especially useful in blockchain as blockchains
need to constantly compare large amounts of data quickly with every other node
on the network.
any type of data as input and converts it to a unique 20- digit character code.
For example, the letter ‘c’ could be given as the input, and through hashing,
it would be converted to a 20-digit code. If the letter were to be changed to
an ‘a’ the 20-digit code would be completely different. If the input were a 20
GB video file, the resulting hash would still be a 20-digit code that is
completely unique. Hashing is especially useful in blockchain as blockchains
need to constantly compare large amounts of data quickly with every other node
on the network.