BLOCKCHAIN
CHAPTER 1- INTRODUCTION
FACTS
Blockchain is a hot topic around the
world these days.
Many thought that Blockchain is Bitcoin or any
other cryptocurrency.
Blockchain: trusted
transactions
BLOCKCHAIN- DEFINITION
Blockchain is a shared immutable
ledger for recording the history of
transactions.
A business blockchain, such as IBM
Blockchain and the Linux Foundation’s
Hyperledger Project, provides a
permissioned network with known
identities.
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BUSINESS NETWORKS AND ASSETS TRANSFER
• An asset is anything that can be
owned or controlled to produce
value, for example, goods and
services.
• Assets can be:
o Tangible, for example, shipping
containers, food products,
spare parts, and land
o Intangible, for example, intellectual
properties (patents and trademarks),
financial (bonds and invoices), and
digital goods (music and eBook)
• Assets are transferred through
business networks that are Each participant records
composed of participants (for transactions in ledgers. The ledger
example, customers, suppliers, is a log of transactions, and is the
service providers, and banks) across key system of record for asset
regulatory and geographical exchange for a business.
boundaries. Contracts are a set of business
terms that
• Transactions describe the exchange of
should be met by participants before
assets between participants.
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BUSINESS NETWORKS, WEALTH, AND
MARKETS
• Business networks benefit from
connectivity:
– Participants are customers,
suppliers,
banks, and partners.
– Crosses geographical and
regulatory boundaries.
• Wealth is generated by the flow of
goods and services across a business
network as transactions and contracts.
• Markets are central to this process:
– Public (for example, a fruit
market or car auction).
– Private (for example, supply chain
financing or bonds).
BUSINESS NETWORKS AND MARKET GROWTH
• A market is the flow of assets across business networks:
• oPublic (market or car auction).
• oPrivate (supply chain financing or bonds).
• Inefficiencies in business networks arise due to:
• Geographical and regulatory boundaries.
• Multiple ledgers that are maintained by participants for multiple business networks.
• Participants requirements for trusted transactions.
• Business network inefficiencies reduce:
oGrowth of markets.
oGrowth of wealth that is generated from markets.
BUSINESS NETWORKS: PROBLEM
Participant
Participant A’s B’s records
records Bank
records
Insurer Regulator
records records
Auditor records
… inefficient, expensive, and vulnerable
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SOLUTION: A SHARED, REPLICATED, PERMISSIONED
LEDGER …
Participant B
Bank
Participant A
Blockch
ain
Regulator Auditor
Insurer
… with consensus, provenance, immutability, and finality 1
BLOCKCHAIN FOR BUSINESS: REQUIREMENTS
Append-only Business
distributed system of terms that
records that are are run with
shared across transactions.
business networks. Shared Ledger Smart Contract
Transactions Transactions
are secure with are provably
appropriate endorsed by
visibility. Privacy Accountability
relevant
participants.
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SHARED LEDGER
Records all
transactions
across business
• Shared between participants.
networks.
• Participants may have their
own copy through
replication.
• Permissioned, so participants see
only the appropriate transactions.
• THE shared system of record.
• Immutable due to an append-only
data structure.
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SMART
CONTRACT
Business rules that are
associated with the
• Verifiable and signed.
transaction.
• Business rules, which are written in
programming languages, and
supported by the blockchain
technology.
• Examples:
o Defines contractual conditions
under which a bond transfer
occurs.
o Defines rules on which a
vehicle can be transferred
to a new owner.
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PRIVACY
The ledger is
shared, but
• Participants require:
• Appropriate privacy and
participants require
• confidentiality
privacy and
• between subsets of confidentiality.
participants.
• An identity that is
not linked to a
transaction.
• Transactions must be
authenticated.
• Cryptography is central to
these processes.
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ACCOUNTABILITY
The ledger is a
• Participants endorse provable source
transactions:
of information.
o Consensus: Participants
agree that a transaction is
valid:
Business network
decides who
endorses
transactions.
Endorsed transactions
are added to the ledger
with appropriate
confidentiality.
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The ledger is a
• Assets have a verifiable audit trail:
provable source
o Provenance: Participants know
where the asset came from and
of information.
how its ownership has
changed over time.
o Immutability: No participant can
tamper with a transaction after it
is agreed upon. Transactions
cannot be modified, inserted, or
deleted.
o Finality: There is only one place
to determine the ownership of
an asset or completion of a
transaction (the shared ledger).
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