Equator begin exploring Blockchain Technology
As ever at Equator, we strive to explore and gather understanding of cutting edge Internet technologies through practical experimentation. Blockchain technology is the new kid on the block and has numerous potential applications across a range of industries. However, before we start fleshing out ideas and developing proofs of concept it’s important to understand what a Blockchain is, where it came from, where we currently are and where it’s going.
Bitcoin is Blockchain
In the wake of the 2008 Financial Crisis, Bitcoin appeared. Created by person(s) unknown operating under the pseudonym Satoshi Nakamoto, and has proven to be one of the most disruptive Internet technologies since the advent of the World Wide Web. Bitcoin’s central proposal is a deceptively simple one. Create a digital currency that:
- No centralized entity owns
- Is deflationary by design with a fixed supply
- Is public, anyone can participate in the network
- Operates correctly despite potential hostile actors
Bitcoin is a distributed public ledger. Every transaction is transmitted to the network and held in a pool of unconfirmed transactions we call the ‘mempool’. Bitcoin miners take transactions from the mempool and attempt to form them into “blocks” comprising many transactions.
But, how do we know a block is valid and the miners are honest? Bitcoin was one of the very first Blockchains to use a Proof of Work algorithm to secure its chain and provide consensus but what is Proof of Work? How does it operate?
When miners try to form blocks, what they’re essentially doing is trying to solve a mathematical puzzle. They squeeze transactions into a block, add the hash of the previous block, then add an arbitrary number (called a nonce) that hopefully causes the SHA-256 hash of the block to come out with enough leading zeroes to satisfy the difficulty the bitcoin blockchain requires. If not, the hashing algorithm is run again, this time with a different nonce. This is a one-way transform, there is no possible way to go directly from the hash to the original value. This proves to the network that Work (repeated hashing) must have been done.
These blocks are then transmitted around the network to every listening node for inclusion in the blockchain. A transaction is considered complete and irreversible once the transaction has received 6 or more confirmations.
Blockchain is not Bitcoin
The Blockchain technology space has advanced rapidly since the inception of Bitcoin with thousands looking at this new open source technology and wondering what can we do with these ideas and how do we build upon them?
One of the earliest Blockchains that recognised the potential beyond a store of value and acting as medium of exchange was the Ethereum project. Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract scripting functionality.
Ethereum and Bitcoin are both distributed public Blockchain networks but their purposes differ substantially. Bitcoin essentially uses Blockchain technology to provide an electronic cash app while Ethereum leverages the technology to provide a Turing complete virtual machine upon which decentralized apps (dApps) can be built. As a result, the code is published to the blockchain itself, thus providing several benefits including immutability, tamper proofing, security and censorship resistance since no one entity ‘owns’ the code.
Beyond public Blockchains
We’ve only considered public blockchains up until this point but there are important variations that have very strong applications in many arenas. Whilst anyone can join, transact, mine and more on a public blockchain; permissioned and private chains provide more fine-grained control to businesses looking to explore these technologies.
The private chain model, where only those who are explicitly invited to join are able to do so, is ideally suited to applications such as supply chain provenance. Consider the case of a fishing vessel bringing its catch home from the sea. IoT trackers can be embedded in containers to monitor the temperature of the content, their location, duration of stay at location and other factors with the data being reported back to the Blockchain in an immutable fashion. Once the data is written, it cannot be overwritten. The Blockchain can then be interrogated to uncover details about any shipment.
Permissioned chains are more appropriate where interaction with the public is expected to happen. Such a permissioned chain might have multiple roles associated with it such as member, validator and administrator. Consider the case of a large enterprise that wants to encourage loyalty amongst its various retail businesses. Each business would run its own validator node to help the network process transactions (a trusted role) whilst administrator level accounts would reside with the marketing department at head office. Every time a customer buys something, a voucher or discount for an associated service would be sent to their “wallet”. This voucher would in fact be a smart contract with a built-in expiry date and logical rules determining what it can be redeemed against and at which business.
Contemporary Blockchain technologies
Blockchain technologies continue to advance at breakneck speed with entities such as the Linux Foundation, Intel and IBM joining forces to create the Hyperledger suite of enterprise class blockchains. Hyperledger Fabric and Hyperledger Sawtooth are the two prime offerings from this collaboration and represent the next leap in transaction processing complexity and capabilities. Able to process smart contracts programmed in a range of languages, Sawtooth for example can implement a transaction processor enabling any Ethereum style contract to be able to live and execute on a Hyperledger Sawtooth blockchain.
Needless to say, the potential applications are vast. We’ve only scratched the surface of the possibilities with our supply chain provenance and user loyalty scheme scenarios. Consider a conglomerate of airlines and insurers where a permissioned blockchain is created to issue and resolve travel insurance documents. Using a trusted oracle to broadcast flight arrival and departure times, a smart contract travel insurance app would be able to automatically detect a delayed or cancelled flight. With the business logic already built into the resultant smart contract, the app would be able to manage the insurance and automatically file and resolve a claim in the case of a delayed flight.
More potential applications lie with the concept of identity. If we think about users applying for jobs, a permissioned chain might exist that holds the encrypted details of each user. The user would send a token to a potential employer that allows them to temporarily (10mins) access the details of the user. Alternatively, a central authority might exist where employers would buy access tokens to enable access to the details of those who had opted in, with those whose profiles are ultimately viewed being reward with a redeemable token meaning the users themselves are rewarded for sharing their details.
The sky is literally the limit and this technology provides new ways of doing things in a more secure, robust and reliable fashion. If you’d like to join Equator on our Blockchain journey and discover the potential it holds for your company drop us a line using the contact form below.