Bitcoin, the cryptocurrency that began operating in early 2009, is the first implementation of what is known as Blockchain: a digital ledger, distributed and incorruptible, able to record all valuable information. After it became independent as a technology between 2013 and 2015, and thanks to the added execution of small programs called Smart Contracts, new use cases emerged. Around 2017, permissioned private versions, designed for the business environment, were launched. In 2020, the top implementations are at least in their second generation, with established use cases, several proposed, and many to discover.
While the term is being widely used along with revolutionary promises in many fields, exaggerated in more than one case, it is clear that this is a technology worth taking into account and one that we should leverage. Its main benefits include immutability (impossibility of changing the recorded history), traceability, and security, allowing users to eliminate intermediaries, accelerating times, and reducing costs.
A blockchain is a sequential data structure, replicated in a cryptographically secure peer-to-peer network made up of blocks that can only be added through consensus among its members.
Changing the network status involves grouping data into units known as blocks. These can only be added, they include a timestamp and are mathematically validated against all previous blocks. Any attempt to delete or modify a block invalidates all subsequent ones. This mainly ensures the characteristics of immutability and traceability.
By using a peer-to-peer network, instead of relying on a central server prone to attacks or downtime, members can communicate with each other to mathematically agree on the new state of the network. This mechanism and the intensive use of cryptographic techniques provide an unprecedented degree of IT security. Along with an ability to break the cryptography and control at least 51% of the network members, and alteration attempt would require a computing power capable of reconstructing the new state of the network, all of which would render the task unfeasible and inconvenient.
Blockchain networks can be public or private, with or without permissions, thus creating the following main categories:
- Public, not permissioned: anyone can participate and all the information is openly available. It is the preferred option for the implementation of cryptocurrencies and distributed applications (where transparency is provided and censorship is avoided). These networks use greater computational complexity, which makes them slower. There is no owner.
- Public, permissioned: each participant’s identity is verified to grant access, but all information is openly available to participants. It is usually used in voting systems and is implemented by a consortium of public and private actors.
- Private, permissioned: each participant is verified and approved. It is usually the preferred business option. The owner of the implementation is a company or a small group of companies. Mathematical complexity is decreased based on the reduced number of participants and their permissions, so the network is much faster. Some reach the granularity of creating specific channels between two participants, without affecting the mathematical security provided by the network.
A blockchain is at the backend of an application, taking the place of a traditional database. Since its storage capacity only increases, and it is also replicated in all the members of the network, it is recommended to keep only what is strictly necessary, using a database for everything else.
As two key points to decide on its implementation, users should analyze whether there will be different actors first, and if so, if more than one will be granted writing permission. If both conditions are not met, there are simpler solutions. A good reason for implementation is the need to eliminate intermediaries, allowing two or more parties to interact relying on the blockchain.
- It is possible to detect some common usage patterns, including:
- Decentralized Finance (DeFi), through a secure platform for making optimized payments, executing insurance, etc.
- Digital asset management, for the exchange of all kinds of goods between individuals or entities, such as tickets to shows, loyalty program points, real estate, etc.
- Supply chains, for the complete traceability of any product, from the producer to the final consumer, whether it be raw materials, food, or medicines, in the case of Pharmacovigilance. IoT (Internet-of-Things) devices are also commonly used for automated registration in different stages of a workflow.
- Governance, with the implementation of Citizen Identity systems, elections, budgets and public tenders to increase the efficiency, quality, and transparency of the State.
- Management of Intellectual Property, creating a record of the date, time, and authorship as reliable evidence certifying this data.
- Certified information of all kinds, ensuring its veracity, for example, University degrees.
Secure data sharing, centralizing information and allowing access to it to those who need it, for example, medical records or research data.
As a concept, blockchain is relatively new, with its first implementation (Bitcoin) in 2009, its opening to other uses in 2015, business versions emerging in 2017 and multiple proofs of concept in 2020. However, it involves the combination of multiple technologies that have been around for a long time and were creatively combined in a platform with disruptive uses.
Some consider that hearing the word “Blockchain” today is like talking about the Internet in the mid-90s, and we are reminded about the way the Internet transformed the world we live in for business, commerce, communications, and media. In fact, public blockchain networks are often compared to the Internet, while private networks would be more of a synonym for Intranet.
Without having to be certain about the future, it is clear that it is a tool worth knowing, mastering, and using. Not only does it add value and security in well-known use cases, but it also opens the door to new opportunities. Furthermore, in our currently globalized world, it is a matter of time before having to join an existing network will require the use of this technology. Huenei can help your business by providing Consulting, Network Architecture Design, and Application Development services, from the planning and definition of requirements to the final project deployment phase.