Distributed trust with blockchain

A blockchain is a distributed, replicated peer-to-peer network of databases that allows multiple, untrusted parties to make transactions without the intervention of a trusted third party and ensures an unalterable storage of the data over time.

Blockchain is one of the most hyped innovations in recent years. The rise and popularity of cryptocurrencies have contributed significantly to this. Blockchain with its core properties of distributed trust and immutability has the potential to revolutionise current litigation. However, as with many new innovations, it takes several moments of hype and reflection before a technology comes to fruition.

In order to enable broad adoption of the technology, it is necessary to abstract away the complexity for the users / software developers and at the same time make the functionality easily available. In this way, we lower the barrier to adoption of this technology.

Knowledge of how a blockchain works is not necessary for the use of this technology. However, being familiar with the properties of a blockchain and why they are relevant to business operations is essential.

This chapter about blockchain starts with an explanation of the properties of blockchain and then goes in-depth into how the technology works. After this in-depth study, we look at concrete usage examples and the application within the software development world.

Properties

A blockchain has the following properties.

Distributed Trust

Organisations that want to work together, but do not trust each other completely, can set up a private blockchain and invite business partners to record their transactions in a shared distributed ledger. Private blockchains can track assets through transactions they represent on the blockchain. They also share other features with public blockchains, such as a distributed, resilient, and redundant data storage system. A private blockchain implies a degree of trust between the members of a consortium, but no entity controls the storage and validation of transactions.

Combinations of private blockchain technology with public blockchains are also possible. Such a hybrid solution can leverage the strengths of both types of blockchains. Consider, for example, recording complete documents on a closed blockchain section, which are only accessible to the parties involved. However, the security features of these documents are stored in the public part, so that the information is stored more distributed and the risk of unwanted adjustments is much smaller.

Immutable

Once a transaction has been added to a blockchain, it can no longer be deleted or changed without the change being made transparent. It’s easy to see why tamper-resistant records are useful in many applications, but this feature also means that there is no direct way to delete or change previous records, even for legitimate or regulatory purposes.

Consensus

Consensus Mechanisms allow all affiliates to agree on the state of the system. That is, to prevent fraud or double expenditure without the need for a central authority.

“[Blockchain] provides a historical record that everyone in the network agrees to, it provides provenance — complete data integrity.” — Stewart Bond, IDC

Different consensus mechanisms have different trade-offs in terms of speed, scalability, energy consumption (might lead to environmental impact) and time to final capture.

How the technology works

A blockchain is literally a chain of blocks. The blocks in the blockchain contain the data from the blockchain. This encrypted data on the blockchain is stored on all systems, the so-called nodes, that are part of this blockchain network. This ensures decentralisation and distribution of data and together they also ensure consensus about what is correct and what is not.

Blocks in the blockchain are linked to each other via hashes. Such a hash is a letter and number representation of the content of a block.

The hash of the content of, for example, block 1 is included as part of the data in block 2. In addition, block 2 has its own data. For block 3, a hash is made of the entire content of block 2, including the hash of block 1 and stored in block 3 etc.

Here we immediately grasp an important property of the blockchain: its immutability. Short explanation: a change in the content of, say, block 1 of our example would mean that the hash over the content of the block changes. After all, the content is different. This means that, because we used this hash again in block 2, the hash that block 3 was started with is also invalid. Tampering with a blockchain is therefore immediately noticed and the system that makes the error is excluded until it has corrected the error.

The fact that we have distributed the data across many systems, and stored it securely and unalterably, means that we no longer need an intermediary to validate the transactions. The blockchain fulfils the role of intermediary here.

Prevent fraud

The world is built on trust. Unfortunately, confidence is often lacking. An example of a Dutch organisation that uses technology to gain more control is NEN.

NEN is a standards organisation. Until recently, a central storage facility was used for certifications. NEN is switching from this central storage to a blockchain to be able to guarantee the authenticity of a certificate. After all, if something is stored on the blockchain, it cannot be changed.

This is, of course, just a start. Because we have the option of storing data reliably and unchangeably, many opportunities arise for the rest of the chain. All measuring points in the chain could be registered, deviations are quickly identified and fully traceable to the source.

“The FBI claims there are 3,300 unrecognised universities worldwide, many of which at all levels sell degrees to anyone willing to pay the price, and that more than 50,000 PhDs are bought annually from diploma factories — slightly more than are legitimately earned. The fact that fake medical degrees appear to be extremely readily available clearly indicates that there are security concerns.” — A Rising Tide of Bogus Degrees, New York Times

Blockchain Technology can prevent this fraud because you no longer have to prove whether something is true or not due to the solid storage of data in the blockchain. Better to prevent than to cure!

In practice

But how are we actually going to use this blockchain technology? Blockchain is an interesting tool in the software developer’s toolbox. It is important to understand that it is only one instrument in a set of many. The central database, just to name an example, is also part of this toolbox. It is essential to always choose the right ingredients so that the most effective solution is developed in the context of realising IT and business objectives.

More and more we will see that suppliers of blockchain technology will offer their platform — directly or indirectly through a partner channel — as a service. An easily accessible entry-level where substantive knowledge of the technology is not required to reap its benefits. The use of open source software and technology within this service ensures essential transparency and thus confidence for the recipient of the service and users of the technology.

The system integrator parties (SIs) of the world will work with their customers to see what role blockchain can play in realising the customer’s objectives. Again, blockchain is just one tool in the great toolbox used to support the customer’s journey to digital leadership.

Independent Software Vendors (ISVs), companies that develop software, will rethink whether their service or their software will become smarter, more effective, more customer-friendly by applying blockchain technology. Easy access to a blockchain platform is essential for these companies. These parties want to focus on their unfair advantage and their added value. This means adding value to the solution that can be directly experienced by the user of the solution.

To get these integrators and software development companies enthusiastic about the blockchain platform, it is essential to reach the developer. Winning the developer’s heart and mind means investing in communities:

• Why this blockchain platform?
• How can I easily use the platform?
• Does the platform have the functionality I need?
• How can I use my current knowledge and skills?
• As a developer, how can I influence the development of the platform?
• And of course many more questions.

It is essential for success to bind software developers to your platform.

LTO Network

A concrete example of a company that offers blockchain technology as a platform and has developed a huge community around it is LTO Network. This Dutch organisation has developed a hybrid blockchain solution for companies. With this solution, you don’t have to throw everything you do and work with overboard. It is a security layer for existing processes, systems, currencies, automations and relationships.

Two examples of the utilisation of the properties of blockchain technology by LTO Network:

1. Proof-of-Existence: Integration into existing systems and applications to secure any type of data. Think of the software developers as described above.
2. Decentralised Workflows: Use blockchain technology to connect silos within and between companies for process optimisation between parties.

By abstracting the underlying blockchain technology away from the users / software developers and at the same time making the functionality easily available, they lower the adoption threshold of the technology.

The aforementioned (fraud) examples would have benefited enormously from the implementation of such a solution.

Conclusion

A blockchain is certainly not a silver bullet, but a technology, an instrument if you like, that can be used to provide technical details for the realisation of IT objectives and thus contribute to the growth of the company.

In the coming years we will be able to gain more and more accessible access to blockchain platforms to enrich our software solutions, where necessary, in order to be more successful as an organisation with more satisfied users.

What role can blockchain play in your services to make them more efficient, more effective, smarter and more customer-friendly?