WELCOME TO THE CRYPTO WORLD OF BLOCKCHAIN 

The first thing that comes to mind at the mention of ‘blockchain’ is most likely cryptocurrencies such as Bitcoin or Ethereum. Blockchain is the technology that is used to implement them. 

In the early 1990s, S. Haber and W.S. Stornetta published a paper called “How to timestamp a digital document”, pitching the idea of using cryptography to secure data integrity. If some sources claim that this idea was the first Blockchain (Source: Oberhaus, D.), others believe that it all began with the concept of the cryptocurrency bitcoin (Source: The Economist), which utilises Haber and Stornetta’s timestamp idea. Although the history of how the idea was first developed is not entirely clear, it is possible to trace it back to the moment when the first implementation of a blockchain was published. On January 9th 2009, the source code revision 0.1 of the cryptocurrency Bitcoin was uploaded to SourceForge. Even if it is unknown who is behind the first implementation of the blockchain technology, there is a name which appears in several instances: Satoshi Nakamoto. After more than a decade, it is still unclear if this is a natural person, a group or just a pseudonym (Source: Shepherd, T.). 

Due to the impact made by cryptocurrencies, Blockchain technology entered the spotlight of several industries and the European Commission. The EC not only identified this technology as one of the 16 advanced technologies (Source: European Commission) but also adopted a strategy (Source: European Commission) associated with it.

If this technology is so essential, what lies behind the Blockchain and its use cases? 

Besides the most known use case– cryptocurrencies– Blockchain is being used for various purposes such as IoT, non-fungible tokens, healthcare, supply chain management and social contracts. 

Although this technology is highly used nowadays, it is not always the best possible solution. In some cases, “traditional methods”, such as SQL databases, are better suited. Before identifying when and when not to implement a blockchain solution, here follows a brief overview of what the technology is all about. 

Firstly a blockchain (Source: Yaga et al.), as the name suggests, can be understood as a chain consisting of chainlinks (blocks). If a new block is added, it will be only appended to the previous one. This process will “forge” the blocks together. The new resulting block then consists of a dataset and the last block’s hash value. This value protects the chain’s integrity, and as a result, changing the chain is considered impossible. In simpler terms, a hash value is a unique number which can be used for identification purposes (i.e. MD5 checksum for file integrity). Without this value, there would be no way to determine if the previous datasets have been manipulated. If the chain, and therefore its datasets, is changed or used in a later state, the hash values cease to match. If the chain is then checked for data integrity by comparing each block to the hash value saved in the following block, there would be a disparity. This means that the chain can be described as broken into two pieces. First, there is high data integrity and redundancy through continuous checks of the chain and decentralisation of the data. A blockchain is typically decentralised and saved on various servers and nodes, while each of these servers is checking, adding and updating the Blockchain. 

It is essential to understand that the idea behind a blockchain is that data can only be written once in each block, and if there is a need for updating information, a new block needs to be created (Source: Yaga et al.). 

In contrast, traditional methods like SQL databases allow each dataset to be updated. A downside to this method is that the original data is overwritten, and the previous information gets lost in the process. In addition, the dataset is usually only saved on one server in this traditional approach. There is generally an added-option of backing up this database, but it typically only runs and gets worked on in one server. Since those databases have been used for decades, it is no surprise that the data processing occurs far quicker than utilizing a blockchain in some cases due to high optimization (Source: Chen et al.). 

When it comes to designing a blockchain network, there are four different ways to do so: 

Public: The earliest and most known BC implementation is bitcoin, based on public networks. In such a network, every action and transaction is visible to the public while granting users anonymous access. For each user, it is possible to set up a node or server and download the complete chain (Source: SAP). 

Private: The main difference between a public and a private network is that the remote has the power to control and restrict access to the network. However, the network is still designed as a decentralised peer-to-peer network (Source: IBM).

Permissioned: This can be understood as either a private or public blockchain– the baseline of this type of Blockchain is based on permissions. The administrator(s) can decide who receives access to it and its access rights (Source: IBM).

Consortium: In this case, the Blockchain is handled and managed by a consortium of organisations. This consortium has the authority to decide whether third parties can receive access to it (Source: Oracle). 

Smart Contracts

One of the essential features of this technology is so-called smart contracts (Source: IBM). These can be understood as programs stored in the chain. They consist of conditions such as “if/when/then”. If the conditions are proper, predefined parts of the contract will be executed. These contracts are often a crucial element of decision-making when choosing this technology. Furthermore, it enables the possibility of automatization and the option that those contracts can be closed between two or more entities (Source: Atzei et al.) . 

The problematic aspects of Blockchain

Like every other technology, this type has its advantages and disadvantages. While some claim that a BC is secure, others argue that this technology is also vulnerable to attacks (Source: Golosova & Romanovs). 

Another significant issue could be public regulation. For example, due to the specifications of a chain, it is impossible to erase data. In some instances, this is highly problematic when it comes to privacy. There are several strict data protection laws within the EU and the EU General Data Protection Regulation Art. 17 Right to erasure (Source: THE EUROPEAN PARLIAMENT AND OF THE COUNCIL), better known as the “right to be forgotten”. The technology is highly problematic in the case of the right to be forgotten since data within the chain can’t be changed, thus making it impossible to “forget”. On the other hand, this can be seen as a high level of transparency provided through this technology. 

Last but not least: When can Blockchain be used?

As stated above, a blockchain is not the best solution in every case. 

To help projects decide whether to use blockchain technology, Wüst and Gervais wrote a report, “Do you need Blockchain?” explaining when using the technology is a good choice and when it is a bad idea. To simplify the process, they came up with this diagram:

Source: Wüst and Gervais; own representation

Blockchain in Horizon 2020 Projects

The blockchain technology is one of the many advanced technologies that are used in the H2020 research project DigiPrime

DigiPrime is a digital manufacturing platform for connected, intelligent factories enabling a transition toward the circular economy. The project does make use of several aspects of this technology. Firstly, it allows the tracking of each transaction on the platform and thus life cycles of products, while data can’t be altered. Secondly, intelligent contracts set the framework of data sharing policies. 

Sure DigiPrime is using the technology, but does it make sense or would the use of another approach have been better suited? 

This can be answered by the questions provided by Wüst and Gervais. Indeed, data gets stored, and there are multiple writers. Furthermore, the project is built around a massive online platform, bringing several stakeholders together. Those stakeholders will make transactions, and thus some sort of Trusted Third Party (TTP) is needed. Since this TTP won’t always be online, BlockChain technology is the obvious choice. This will guarantee the required trust between various parties, but other aspects, such as smart contracts, of the technology are in use. 

It should be clear what the initial idea behind Blockchain is and how it does work in general. There are advantages, such as automation through smart contracts, and disadvantages. In some instances, Data Protection Laws can be a problem, and like in every technology, there are vulnerabilities which can be used for attacks. 

Indeed, it is an advanced technology and there are use cases where it does make sense to rely on a BlockChain. 

References

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