GDPR and distributed ledger: so who owns the data? Blockchain - what are the advantages of using distributed ledger technology

Technology distributed registry: Beyond blockchain. Report of the UK Government's Chief Scientific Adviser.

Preface

Human progress is characterized by the growth of new technologies and the human ingenuity that discovers them.

In the case of distributed ledger technology, we may be witnessing one of those possible explosions creative potential that allows you to achieve outstanding heights in innovation. It may be that this technology can provide new level trust in a wide range of services. Just as the open data policy, as we have already seen, has radically changed the relationship between citizens and the state, so the transparency of these technologies can change our financial markets, supply channels, customer and b2b services, and public registers.

We know that we will be challenged as Distributed Ledgers evolve and disrupt our understanding of data and how we store it. UK has unique opportunity study these phenomena and allow our public services and our economy to make the most of this technology. We already have world-class digital capabilities, innovative financial services, a strong research community and growing private sector expertise.

It is vital that our key assets - including the Alan Turing Institute, the Open Data Institute and the Digital Catapult think tank - work together with the private sector and international partners to unlock the full potential of this technology.

Therefore, we both take great joy in working together in leadership positions in this area and look forward to working with other agencies to develop these opportunities. And also, work on understanding how it can be applied this technology so that UK citizens and its economy can benefit significantly.

Introduction

The algorithms that enable distributed ledgers are powerful, disruptive innovations that have the potential to change the way public and private services are delivered, as well as increase productivity through a wide range of applications.

Registers have been at the heart of business since ancient times and were used to record information about many things, but mainly about assets such as money or property. At first, clay tablets were used for recording, then papyrus, parchment and paper. However, during all this time the only notable innovation was the introduction computer equipment, which was initially used simply to transfer information from paper to digital code. For the first time, algorithms are making it possible to co-create digital distributed ledgers that have properties and capabilities that go far beyond traditional paper ledgers.

A distributed ledger is essentially a database of assets that can be distributed across a network of diverse sites, geographic areas, or organizations. All network participants can have their own, identical copy of the ledger. Any changes to the registry are reflected in all copies within a few minutes, and in some cases, seconds. The assets in the registry can be financial, legal, physical or electronic. The security and reliability of the assets stored in the registry is carried out cryptographically using “keys” and signatures that control who can perform what actions in the register. general register. Registry entries can also be modified by one, a few, or all participants in the network, depending on the rules of the network.

This technology is based on the “blockchain,” a technology invented to create the peer-to-peer (decentralized) digital currency Bitcoin in 2008. Blockchain algorithms allow Bitcoin transactions to be combined into “blocks” and added to the “chain” of existing blocks using a cryptographic signature. The Bitcoin ledger is designed to be distributed and “unchecked,” meaning anyone can add a block of transactions as long as they can piece together the cryptographic puzzle to add each new block. The incentive for this is a reward in the form of twenty-five bitcoins for each “block” that completes the puzzle. Anyone with internet access and the computing power to complete the cryptographic puzzle can add blocks to the ledger. Such people are called “Bitcoin miners” (from the English “mine” to mine). The analogy with “mining” is quite appropriate, since the process of “mining” Bitcoins is energy-intensive, since it requires large computing power. It has been calculated that generating Bitcoin requires over 1 Gigawatt of power, which could be comparable to Ireland's electricity use.

Bitcoin is the electronic equivalent of cash. The authenticity of cash is verified by its appearance and certain characteristics, in the case of banknotes this is serial numbers and other means of protection. But in the case of cash, there is no ledger to record the transactions and there is also the problem of counterfeiting of both coins and banknotes. In the case of bitcoins, a transaction ledger guarantees their authenticity. Both money and bitcoins should be stored in safe place, in real or virtual wallets, respectively - and if they are not monitored properly, then both money and bitcoins can be stolen. The fundamental difference between conventional currencies and Bitcoins is that the former are issued by central banks, while the latter are issued in agreed quantities by the global “collaborative” effort that is Bitcoin technology. Cash as a method of exchange and trade dates back thousands of years and its origins include cowrie shells, minted coins and now Bitcoin.

But this report is not about Bitcoin. It's about the algorithmic technologies that make Bitcoin possible, and their potential to transform ledgers as tools capable of recording, producing, and securing huge amount transactions. So the basic blockchain approach can be modified to combine rules, smart contracts (the term “smart contracts” is also used), digital signatures and a number of other new tools.

Distributed ledger technologies can help government agencies collect taxes, pay pensions, issue passports, enter land registry records, guarantee supply chains for goods, and generally ensure the accuracy of records of government activities and services. In the UK's National Health Service, these technologies provide the opportunity to improve healthcare by improving and validating the quality of services, and securely sharing records in accordance with strict regulations. Depending on the circumstances, technology can enable individual service recipients to control access to personal data and discover who has used it.

Existing methods for managing data, especially personal data, typically use large, traditional IT systems located within a single institution. Added to these are a number of network management systems and messaging systems for communication with outside world, which increase the cost of using the IT system and its complexity. Highly centralized systems exhibit high costs of any failure. They can be vulnerable to cyber attacks, and the data is often out of sync, out of date, or simply incorrect.

In contrast, distributed ledgers are inherently much more secure from attacks because instead of a single database, they are multiple copies of the same database, and thus, to be successful, a cyber attack must be carried out on all copies simultaneously. The technology is also resistant to unauthorized modification or hacking, since network participants will immediately detect changes in one of the parts of the registry. In addition to this, the methods used to protect and update information mean that participants can share data and be confident that all copies of the ledger match each other at any given time.

But this does not mean that distributed ledgers are completely immune to cyber attacks, because if someone can find a way to “legally” change one copy, then they will change all copies of the ledger. Thus, ensuring the security of distributed registries is an important task and part of common problem ensuring the security of the digital infrastructure on which modern society depends.

Governments of some countries are already beginning to use distributed ledger technologies in their work. For example, the Estonian government has been experimenting with distributed ledger technology for several years, using one implementation of the technology known as KSI (Keyless Signature Infrastructure), developed by the Estonian company Guardtime.

KSI allows citizens to verify the accuracy of their records in government bases data. It also seems impossible for insiders with privileged access to work with data within a government network to carry out illegal activities. The ability to assure citizens that their data is correct and stored securely has allowed Estonia to launch electronic services, such as Electronic Business Register (e-Business Register) and Electronic Taxes (e-Tax). These services have reduced the administrative burden on the state and citizens. Estonia is one of the “Digital 5” or D5 group of countries, which also includes the UK, Israel, New Zealand and South Korea. There is an opportunity for the UK to work with and learn from these and other like-minded states on how to implement blockchain and related technologies.

The business community quickly appreciated the opportunities that opened up. Distributed ledgers can provide new ways to secure ownership and confirm the origin of goods or intellectual property. For example, Everledger provides a distributed ledger that guarantees the authenticity of diamonds from mining and cutting to sales and insurance. On the market with relatively high level document forgery, this technology makes authentication more efficient and makes it possible to reduce the number of fraud cases and prevent the entry of “blood diamonds” into the market.

The big challenge is communicating with senior policymakers and the public about the importance of these new technologies - and this is one of the main objectives of this report.

The first difficulty in communication is the strong association of blockchain technology with the Bitcoin system. Bitcoin is a cryptocurrency, so named because cryptography underlies the generation and tracking of the currency. Bitcoin is viewed with suspicion by citizens and government officials because it is associated with criminal transactions and “dark web” trading sites such as the Silk Road Internet portal on this moment not working. But digital cryptocurrencies are of interest to central banks and government financial institutions around the world, who are studying them with great interest. This is because the electronic distribution of digital currency provides high returns. And unlike physical currency, digital currency comes with a ledger of transactions that physical cash does not have.

The second communication challenge is the confusing range of terminology. The terminology is explained by Simon Taylor, who has provided a list of definitions at the end of this review. One term that can confuse users is “distributed,” which leads to the misconception that if something is distributed, there is therefore no entity or owner who fully controls it. This may or may not be the case - it all depends on the registry model chosen. In practice, there is a wide range of distributed ledger models with varying degrees of centralization and different types of access controls to meet different business needs. These can be either “uncontrolled” registries, which allow data to be added to anyone and cannot belong to anyone; and “controlled” registries, which may have one or more owners, and only they can add entries to the registry and check its contents.

The key idea is that by fully understanding this technology, government and private sector can choose the model that best suits a specific purpose, balancing security and centralized control for convenience and the ability to share data between institutions and individuals.

As with most new technologies, it is difficult to fully assess all future uses and threats. And in the case of each new technology the question is not whether the technology itself is good or bad. The questions are: what uses can the technology have? for what purpose? and in what form can it be used and how does it guarantee safety?

To answer these questions, the UK Government Science Office has convened a group of experts from business, government and academics to assess the potential of distributed ledgers for use by government and the private sector, and to identify the actions that government and other stakeholders will need to take to facilitate the use of distributed ledger technology. registries to obtain benefits and avoid possible harm. The purpose of this was to decipher the terminology of this technology for a policy audience and provide government officials with its concept and basis for their decisions on where it should be applied and how best to introduce it.

To summarize, distributed ledger technology provides governments with a platform to reduce fraud, corruption, errors and the cost of paper-intensive processes. It has the potential to redefine the relationship between government and citizen on issues of data sharing, transparency and trust. It has similar opportunities for the private sector.

This brief overview describes eight key recommendations from our experience. They are presented as a summary of key points across seven chapters that cover concept, technology, governance, privacy and security, disruptive potential, applications, and global perspectives. The chapters were written by experts in distributed ledger technology in a language that should be accessible to people who are not experts. I am extremely grateful to these experts for their guidance and insightful contributions.

Mark Walport, Chief Scientific Adviser to Her Majesty's Government, December 2015

To view the study results in detail, you can download the study in PDF format below.

What you need to know about two terms that are often used interchangeably.

Blockchain is gaining more and more attention, and even centralized entities such as banks and governments are starting to take an interest in how to use this technology.

However, there is another term - distributed ledger technology, or DLT. Ironically, the organizations that are showing the greatest interest in DLT are precisely those organizations that Bitcoin and blockchain wanted to replace - banks, governments and large corporations.

Recently, the Bank of England announced that with the help of blockchain and DLT it wants to inhale new life into its Instant Gross Payment System (RTGS). The terms “blockchain” and “distributed ledger technology” do not mean the same thing here, and it is important to understand the difference. Let's figure it out.

Distributed ledger technology

Distributed ledger technology is, as the name suggests, a database that is not stored and verified in any one location. Sounds similar to blockchain, right? But it's not him.

In a DLT, the creator of the ledger has greater control over how the ledger is used than in a blockchain. It can dictate how the network will be structured, what its goals will be, and how it will function. Doesn't sound very decentralized, does it?

At the same time, from a technical point of view, DLT is decentralized and is based on the same principles of consensus as blockchain. However, a situation in which one governing body controls what is supposedly a decentralized network is contrary to the principles of decentralization - at least ideologically.

DLT can be considered the first step towards blockchain, but an important difference is that a distributed ledger does not necessarily form a chain of blocks. Rather, such a ledger is stored on multiple servers that will interact with each other to ensure that all transactions made are recorded as accurately and timely as possible.

Among the companies that have chosen DLT over blockchain is Google. The company recently concluded partnership agreement with Digital Asset about introducing DLT into their cloud services. Volkswagen also announced collaboration with IOTA “as part of an experiment in the use of distributed ledger technology.”

Blockchain

On the other hand, we have blockchain. Blockchain is a form of distributed registry with specific technical content. As we all know, blockchain creates an immutable ledger governed by a decentralized network where all records are approved by consensus.

What distinguishes a blockchain from a DLT is the presence of cryptographic signatures and the fact that related groups of records form a chain of blocks. Additionally, depending on the purpose of a particular blockchain, the community and users can decide what its structure will be and how it will be managed.

A classic example of blockchain and decentralization is Bitcoin. Not only its technology and structure are decentralized, but also its organization and management. In DLT, only technology is decentralized, but corporate body- not necessary.

DLT and blockchain are not the same thing

It is important to understand that these terms mean different things, even if they are sometimes used interchangeably. Organizations like the Bank of England prefer to talk about DLTs to distance themselves from the hype and volatility that comes with blockchain and blockchain-based cryptocurrencies. On the other hand, some corporations use the buzzword “blockchain” for marketing purposes, even if they are actually offering something different.

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Distributed ledger technology: beyond blockchain. Report of the UK Government's Chief Scientific Adviser.

Preface

Human progress is characterized by the growth of new technologies and the human ingenuity that discovers them.

With distributed ledger technology, we may be witnessing one of those potential explosions of creativity that allows for extraordinary heights of innovation. This technology may prove to be able to provide a new level of trust to a wide range of services. Just as the open data policy, as we have already seen, has radically changed the relationship between citizens and the state, so the transparency of these technologies can change for the better our financial markets, supply chains, client and b2b services, and public registers.

We know we will be challenged as Distributed Ledgers evolve and disrupt our understanding of data and how we store it. The UK is uniquely positioned to explore these phenomena and enable our public services and our economy to make the most of this technology. We already have world-class digital capabilities, innovative financial services, a strong research community and growing private sector expertise.

Therefore, we both take great joy in working together in leadership positions in this area and look forward to working with other agencies to develop these opportunities. And also work to understand how this technology can be applied so that UK citizens and its economy can benefit greatly from it.

Introduction

Registers have been at the heart of business since ancient times and were used to record information about many things, but mainly about assets such as money or property. At first, clay tablets were used for recording, then papyrus, parchment and paper. However, during all this time, the only noteworthy innovation was the introduction of computer technology, which at first was used simply to transfer information from paper to digital code. For the first time, algorithms are making it possible to co-create digital distributed ledgers that have properties and capabilities that go far beyond traditional paper ledgers.

A distributed ledger is essentially a database of assets that can be distributed across a network of diverse sites, geographic areas, or organizations. All network participants can have their own, identical copy of the ledger. Any changes to the registry are reflected in all copies within a few minutes, and in some cases, seconds. The assets in the registry can be financial, legal, physical or electronic. The security and reliability of the assets stored in the registry is carried out cryptographically using “keys” and signatures that control who can perform what actions in the general registry. Registry entries can also be modified by one, a few, or all participants in the network, depending on the rules of the network.

Bitcoin is the electronic equivalent of cash. The authenticity of cash is verified by its appearance and certain features, in the case of banknotes these are serial numbers and other security features. But in the case of cash, there is no ledger to record the transactions and there is also the problem of counterfeiting of both coins and banknotes. In the case of bitcoins, a transaction ledger guarantees their authenticity. Both money and bitcoins must be stored in a safe place, in a real or virtual wallet respectively - and if they are not properly monitored, then both money and bitcoins can be stolen. The fundamental difference between conventional currencies and Bitcoins is that the former are issued by central banks, while the latter are issued in agreed quantities by the global “collaborative” effort that is Bitcoin technology. Cash as a method of exchange and trade dates back thousands of years and its origins include cowrie shells, minted coins and now Bitcoin.

But this report is not about Bitcoin. It's about the algorithmic technologies that make Bitcoin possible, and their potential to transform ledgers as tools capable of recording, producing, and securing huge numbers of transactions. So the basic blockchain approach can be changed to combine rules, smart contracts (the term “smart contracts” is also used), digital signatures and a number of other new tools.

Existing methods for managing data, especially personal data, typically use large, traditional IT systems located within a single institution. Added to these are a number of network management systems and messaging systems for communication with the outside world, which increase the cost of using the IT system and its complexity. Highly centralized systems exhibit high costs of any failure. They can be vulnerable to cyber attacks, and the data is often out of sync, out of date, or simply incorrect.

But this does not mean that distributed ledgers are completely immune to cyber attacks, because if someone can find a way to “legally” change one copy, then they will change all copies of the ledger. Thus, ensuring the security of distributed registries is an important task and part of the overall problem of ensuring the security of the digital infrastructure on which modern society depends.

KSI allows citizens to verify the accuracy of their records in government databases. It also seems impossible for insiders with privileged access to work with data within a government network to carry out illegal activities. The ability to assure citizens that their data is correct and stored securely has enabled Estonia to launch electronic services such as the e-Business Register and e-Tax. These services have reduced the administrative burden on the state and citizens. Estonia is one of the “Digital 5” or D5 group of countries, which also includes the UK, Israel, New Zealand and South Korea. There is an opportunity for the UK to work with and learn from these and other like-minded states on how to implement blockchain and related technologies.

The business community quickly appreciated the opportunities that opened up. Distributed ledgers can provide new ways to secure ownership and confirm the origin of goods or intellectual property. For example, Everledger provides a distributed ledger that guarantees the authenticity of diamonds from mining and cutting to sales and insurance. In a market with relatively high levels of document forgery, this technology makes authentication more efficient and has the potential to reduce fraud and prevent blood diamonds from entering the market.

The big challenge is communicating with senior policymakers and the public about the importance of these new technologies - and this is one of the main objectives of this report.

The first difficulty in communication is the strong association of blockchain technology with the Bitcoin system. Bitcoin is a cryptocurrency, so named because cryptography underlies the generation and tracking of the currency. Bitcoin is viewed with suspicion by citizens and government officials because it is associated with criminal transactions and dark web trading sites, such as the currently defunct Silk Road Internet portal. But digital cryptocurrencies are of interest to central banks and government financial institutions around the world, who are studying them with great interest. This is because the electronic distribution of digital currency provides high returns. And unlike physical currency, digital currency comes with a ledger of transactions that physical cash does not have.

The key idea is that by fully understanding this technology, government and the private sector can choose the model that best suits a given purpose, balancing security and centralized control for convenience and the ability to share data between agencies and individuals.

As with most new technologies, it is difficult to fully assess all future uses and threats. And with every new technology, the question is not whether the technology itself is good or bad. The questions are: what uses can the technology have? for what purpose? and in what form can it be used and how does it guarantee safety?

Mark Walport, Chief Scientific Adviser to Her Majesty's Government, December 2015

To view the study results in detail, you can download the study in PDF format below.

Distributed ledger technology, which began with the advent of Bitcoin, is rapidly growing into a crowdsourcing system capable of verifying any transaction. Will it be able to replace central banks, notaries and election commissions?

Text: John Plansky, Tim O'Donnell and Kimberly Richards
Translation: Elena Gordishevskaya

A precious work of art changes its owner. The names of the seller and buyer are not disclosed, however, the exchange is confirmed, the history of the origin and ownership of this piece of art is attached, and the piece itself is automatically insured against theft.

A voting machine is counting votes in a developing country with a notoriously corrupt political establishment. Although there is no central government database, every vote cast is identified and cannot be duplicated. The anonymity of voters is preserved, and the election results are not in doubt.

The banking consortium gains market share by trading in real time (instead of waiting three days for clearing) and guaranteeing loan placement within a day (instead of two weeks), all with minimal risk. These same banks begin to conduct one-day currency trading at the optimal exchange rate, reducing the costs of these operations tenfold. All such transactions are tracked and recorded so that the government can see the movement of capital across its borders and monitor transaction patterns that may indicate money laundering. But the identities of the sellers and buyers themselves are impossible to know.

The technology that could make all this possible is called blockchain (“block chain”). This was originally the formal name for search base data created for the digital currency Bitcoin, and today the term is widely used to refer to any distributed digital ledger that uses software algorithms for reliable and anonymous registration transactions. This technology is sometimes called distributed ledger(more general name) cryptocurrency(from digital currencies from which this technology originated), bitcoin(the most famous of the cryptocurrencies), as well as decentralized verification(main distinctive feature of this type systems).

At its core, blockchain is a self-sustaining peer-to-peer database technology for managing and recording transactions without the intervention of a central bank or clearing house. Since verification in blockchain technology occurs through algorithms and the coordination of the actions of many computers, the system is considered invulnerable to data manipulation or falsification, as well as political control. It was created to protect the network from possible domination by one computer or a group of computers. The identity of each participant remains fairly anonymous and is identified only by a pseudonym, and each transaction is secure. Moreover, because each central transaction is processed only once, on one shared digital ledger, blockchain reduces the redundancy and latency that characterizes today's banking system.

Companies that have already shown interest in blockchain technology include HP, Microsoft, IBM and Intel. In the financial services sector, some large firms are establishing partnerships with technology startups to explore opportunities in this area. For example, in October 2015, financial technology firm R3 announced the creation of a consortium of 25 banks aimed at developing a common crypto platform. The consortium included such influential banks as Citi, Bank of America, HSBC, Deutsche Bank, Morgan Stanley, UniCredit, Société Générale, Mitsubishi UFG financial group, National Australia Bank and Royal Bank of Canada. Another pioneer of this technology is Nasdaq, whose CEO Robert Greifeld, also in October 2015, introduced Nasdaq Linq to the general public. digital registry based on blockchain for transferring shares of private companies.

If such experiments live up to expectations, blockchain technology will become a fundamentally new and decisive force in any trading platform where trust is paramount and people need protection from identity theft, including the public sector (government records management and election vote counting), healthcare (where data is anonymous but easily accessible), retail trade(making expensive purchases such as car rental or real estate), as well as, of course, all types of financial services. In fact, some forward-thinking banks are already exploring options for using blockchain technology to change the way they conduct trading and settlement, back-office operations, investment and fixed asset management. They understand that technology can be the differentiator of their potential, enabling them to process transactions more efficiently, securely, privately, securely and quickly. By providing access to data through a common digital platform, blockchain may change the way transactions are conducted in the same way that geo-positioning systems (GPS) changed transportation.

No matter how impressive the potential of the technology, doubts about it are no less serious. Distributed ledgers are so new, complex and subject to rapid change that it is difficult to predict what they might evolve into or guarantee that they will work at all. In August 2015, research and advisory firm Gartner Group said in a report that cryptocurrency was going through its “cycle of maturity”: it had passed the “peak of inflated expectations” and was heading towards the “trough of lost illusions.” Another research firm, Forrester, titled its 2015 report on blockchain technology “Don't Believe in Miracles,” advising entrepreneurs to wait five to ten years before jumping into blockchain, partly due to legal restrictions.

At the same time, some organizations are vigorously promoting research and development in this area. “The distributed payments technology embodied in Bitcoin has real potential,” Bank of England chief economist Andrew Haldane said in September 2015. “On the surface, it solves a major problem in monetary economics: how to establish trust—the essence of money—in a distributed network.”

The main thing now is to act without haste. Don't try to transform right away existing systems in the blockchain. Instead, explore how distributed ledger technology can be used against your business, and how your company can use it to get ahead instead. Run one or two pilot projects. In any case, your investment should be relevant to the benefit you offer and meet the basic needs of your business partners and clients, ensuring speed, convenience and control over their transactions. Develop a clear strategy that will bring profit to your company, regardless of whether blockchain fulfills its transformative role.

The Origins of Blockchain Technology

Decentralized digital currency emerged in 2008 as a counterculture initiative. In its early years, it was often described as a covert protest against the global banking system in response to the financial crisis, and Bitcoin was used as an alternative currency in money laundering and illicit schemes. trading platforms on the "dark web" like Silk Road (which was methodically dismantled law enforcement agencies). The name of the creator of the Bitcoin protocol, Satoshi Nakamoto, is believed to be a pseudonym, and separate attempts to establish his/her real identity have not yielded any conclusive results. In 2008, Nakamoto published specifications for the Bitcoin system, and in 2009 he opened software system for a peer-to-peer network. At that time, 1000 bitcoins were worth less than $3.

From the very beginning, digital currency received recognition from the legal financial sector as a potential dark horse and a possible investment object. The value of Bitcoin began to skyrocket after 2010. It reached its peak on November 29, 2013, when one unit of Bitcoin sold for $1,125. Since then, its price has corrected significantly and fluctuated between $200 and $400 for most of 2015. But the fate of this currency has not yet been finally decided, as well as the boundaries of its recognition.

Anyone can try to create Bitcoin, but it's not that easy. The technique of creating Bitcoin, known as “mining,” was created specifically to protect the value of the currency through scarcity. Bitcoins can only be created in limited quantities: each Bitcoin takes on average about 10 minutes to create, and each subsequent Bitcoin is slightly more difficult to create than the previous one. Processing each Bitcoin requires such high costs computing power what is this digital currency They are even criticized for not being environmentally friendly - so much carbon is released into the atmosphere to power computers. As a medium of exchange, Bitcoin, like the US dollar or any other currency, has no intrinsic value. It can be bought and sold, but you cannot automatically buy back a traded item, such as gold. However, just as most currencies have a government and central bank behind them, the value of Bitcoin is verified by the peer-to-peer network that created it. Anyone who buys Bitcoin knows it is trustworthy because it and all other Bitcoins are tracked by the same distributed ledger from the moment they are created.

The distributed ledger, the first blockchain ledger created for Bitcoin and setting the template for the rest, represents the most advanced and potentially important aspect this technology. Participants interact with each other behind pseudonyms, and their real personal data is encrypted. The registry uses public key encryption, which is virtually impossible to break because the message can only be unlocked if the public and private elements (the latter known only to the recipient) are combined.

The term " blockchain"("block chain") got its name from the way transactions are stored. For example, every time Bitcoin is created or changes hands, the ledger automatically creates new entry o a transaction consisting of blocks of data, each of which is encrypted by changing ("hashing") part of the previous block. The cryptographic connection between one block and the next forms something like a chain. This process creates a mathematical difficulty in creating a successful forgery because blocks of transactions, like individual transactions, are continuously confirmed. The algorithms also include creating an ID for each seller and buyer by adding these IDs to a block.

One of the most remarkable features of blockchain architecture is its decentralized technology, thanks to which every transaction is securely recorded. When a blockchain transaction occurs (for example, selling Bitcoin), a number of independent computers connected through the network process the algorithm and confirm the calculations made by others.

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In this article, we will evaluate the core business functionality of major enterprise-focused platforms, including Ethereum, Hyperledger Fabric, and R3 Corda, in terms of what influence is based on. software and how the system as a whole is optimized, whether through traditional distributed systems or on a modern blockchain basis.

Blockchain has both similarities and differences compared to distributed ledger technologies such as Hyperledger Fabric or R3 Corda. To make an informed assessment of blockchain and distributed ledger platforms and their value to enterprises, it is useful to categorize platforms based on their basic functionality and characteristics. Because blockchains are built on the principles of cryptography and data configuration, some of their functions can be replicated in coordinated database systems, while others are only feasible in a true blockchain environment.

Delineation of basic technologies

In particular, we will focus on three key areas of functionality:

Data coordination - how information and trust are distributed among system participants
Internal cryptoeconomic levels of motivation - how system participants are economically motivated to ensure the functioning of the system in the context of game theory and mechanism design
Integration into the digital commodification of assets - how systems can integrate into the economy of digital goods. Sometimes, as a nominal characteristic, this is called.

The main goals of blockchain: what does a business want to achieve with this technology?

The goals of blockchains such as Ethereum are similar to those of distributed ledgers. Determining what a business hopes to achieve with blockchain technology can be difficult because, as was the case with the Internet in the 1990s, businesses do not yet know how to conceptualize the use of this powerful tool. Today, blockchain technology is known to be capable of implementing various functions, but how to implement these functions into business solutions requires a deeper understanding and appreciation of the underlying capabilities.

The three main axes explored—data processing and coordination, trusted and immutable records, and asset digitalization—are broad enough to cover the main applications of blockchain and at the same time extrapolate these functions to business scenarios. Discussing these three aspects helps answer the question of why a business should use this technology.

Efficient processing and coordination of information

If improved distributed system structure or database coordination is the sole purpose of a protocol or platform, then a blockchain is not necessarily needed. Blockchain platforms have traditionally promoted the concepts of improved data coordination and distributed consensus mechanisms, where data is transferred and maintained by the technology platform. Despite their usefulness, much of this desired functionality can be achieved through improved coordination of a centralized database or improved design of distributed systems. This study seeks to determine the extent to which platforms and protocols attempt to optimize existing data coordination functionality versus introducing new blockchain functionality. Blockchains are designed to do more than just advanced data coordination.

Immutable/trusted record of products and transactions

The original thesis about why we need blockchains was built on the concept of digitalization of trust. Andrew Keys promoted the following theme: “Just as the Internet has led to the digitalization of information, blockchains are leading to the digitalization of trust and agreements.” This insightful thesis embodies the ethos of what blockchains hope to achieve, while setting the stage for the path ahead. An additional variable can be considered the digitalization of cost. When value is tied to the trust embedded in the system, certain alignment structures and incentive mechanisms will incentivize appropriate behavior in the system, leading to a viable platform.

Immutability is often used synonymously with trust in system design, i.e. if the system is immutable, then you can trust that bad behavior will not go unpunished. But in our analysis of platform protocols, it is also important to evaluate the mechanisms for implementing a trusted system that provide a business model that can benefit platform users (further exploration through cryptoeconomics).

Asset digitalization

Digitalization of goods and assets is considered main goal most blockchains and distributed ledger platforms. If businesses are looking to digitalize assets, distributed ledger or coordinated databases may offer some possibilities, but much consideration must be given to the accessibility of such digital goods. Since coordinated databases are actually located on central administration or distributed among a group or subgroups of counterparties through an old software paradigm, the level of digitalization may be limited depending on the freedom offered by the digitalization platform. Although the concept of digitalization of goods may seem like a simple process, the different motivational dynamics and economic considerations on how to digitalize products such as real estate, human attention and even electricity require serious consideration of what type of platform could be responsible for digitalization, as some retailers platforms in different cases demonstrate varying degrees of “vendor lock-in” and dependence on a centrally managed platform.

Records and registers, such as property rights systems and , are also implemented using distributed ledger systems, although their level of interaction with the economic motivation layer is quite limited in the case of dependence on a closed private system, and the penetration of such assets into the digital ecosystem or market when built on closed systems will be greatly slowed down. To promote true digital goods in an ever-evolving digital ecosystem, a free market system is needed that takes full advantage of the various aspects that an open market can provide.

Assessing Database Coordination Performance

Database coordination: characteristics

While there has been in-depth analysis of the functionality of these platforms in the context of characteristics such as immutability, security, manageability and performance, much more is achieved by understanding the foundations on which these architectures are built.

To properly coordinate data in distributed systems, many tools have been invented and implemented. An example is the strong emphasis on tools such as Hadoop and various ensembles in the ecosystem, including Spark, Hive and ZooKeeper. The use of these products demonstrates the active integration of distributed system tools and protocols. Further parallels can be seen in protocols such as Tendermint, a consensus machine, problem solving Byzantine generals, which has similar functionality to tools such as Apache ZooKeeper. Research has also been carried out towards event sourcing databases capable of reproducing some of the desired functions of coordinated data exchange systems.

By evaluating tools such as Apache Kafka and how data streaming services are able to achieve significant levels of throughput in an enterprise environment, it is possible to establish the functional differences between blockchain and distributed ledger based different levels depending on these database coordination and optimization tools for fundamental concepts. Ethereum implementations, including Plasma, use tools like MapReduce to enhance certain map functionality on top of the UTXO and accounting model, while folding the components into Merkle proofs, although it is important to understand that the base layer of the protocol still relies on Ethereum as to the root blockchain. By understanding these details, you can gain insight into how to better evaluate the technological characteristics of these software platforms.

Data coordination: platform comparison

IBM Fabric

A deep dive into Fabric's architecture reveals that the platform has created a sophisticated development environment that focuses on delivering improved throughput based on detailed software architecture configuration for optimal performance in a distributed systems environment. The movement of chaincode between the client and a network of distributed confirming nodes, along with transaction mechanisms and the transfer of evidence that satisfies the confirmation policy, is implemented in closed system, while the gossip protocol, which distributes transactions through private channels, ensures the coordination of large amounts of data. While such an infrastructure is resilient and effective, additional attention needs to be paid to how the architecture enables multi-party coordination structures, where the network may end up with multiple channels that may be difficult to manage.

Hyperledger Fabric Architecture

This figure shows part of the Fabric's architectural configuration and how the components are organized into a system designed for advanced information processing and maximum transaction throughput.

The basic idea is that channels provide a way for transactions to move within the platform. Looking at the architecture, ordering service nodes serve to record transactions in the Apache Kafka ordering service. In the streaming ecosystem, Kafka is powerful tool with the ability to add transactions different types into separate clusters and then Kafka partitions.

In such a design, data can be distributed across clusters to form a distributed storage platform capable of recording data structures, sometimes called "blocks" or "states" in the context of their key/value storage configuration. What this software framework recognizes is the concept that all participants and data structures in an ecosystem are embedded in the sense that they function primarily alongside other users of the software ecosystem.

Apache Kafka

Fabric does use a ledger-type substructure that implements some hashed data storage, but it should be recognized that the hash configuration does not inherit the original architectural design associated with Bitcoin or Ethereum-derived blockchain systems. Although blocks of data are combined into packets and subject to events like deliver To further create a hashed transaction relationship, you need to understand that this process does not necessarily translate the data into a modification of the system state. Rather, blocks are configured so that information is stored in a database-type structure with different instances of hashes.

In the Fabric ecosystem deliver-events are called blocks, while chaincode passes through deploy-events to further secure data in chain-sections of the ordering service structure. The configuration of data structures and modules of this system makes transactional throughput, which should be expected from a distributed database architecture, however, it must be recognized that the task of coordinating assets and code in the Fabric ecosystem is still not completely solved, since assets and values do not necessarily have digital representation, which can be coordinated in the registry.