Utkarsh Chitranshi1 and Sunil Kumar Chawla2,∗
1 Computer Science and Engineering, CGC College of Engineering, Mohali, Punjab, India
2 ICAR-Indian Institute of Soybean Research, Indore, Madhya Pradesh, India
Abstract
Blockchain is an eccentric technology, at the same time, the most vaunted, least understood and most disrupting technology of the current era. The idea of blockchain is not so old. It is still in its infancy phase. In this chapter, we have tried to view blockchain from an application point of view, throwing some light on mining mechanism, participants of blockchain system, organized and versatile use cases; while demystifying the myths.Keywords: Blockchain, Bitcoin, myths, applications
The idea of cryptographically secured currency was first published in the year 1991 in a white paper written by S. Haber and W. S. Stornetta. Following this, the idea of decentralized digital currency came into existence in the late 90s. Then, Satoshi Nakamoto proposed the revolutionary idea of bitcoin [1]. After these successful applications a new renaissance began, which is now spreading in all domains and industries.
This chapter explains the nontraditional view of blockchain in multiple industries and the myths that surround the blockchain arcade. Simply defined, Blockchain gets its name from the way it stores transactional data, i.e., in forms of blocks that are linked together to form a chain of blocks [2]. The number of transactions grows, resulting in the blockchain growth. Various popular cryptocurrencies available on the market are shown in Table 15.1:
“Blockchain is shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be either tangible (e.g., a house, a car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a Blockchain network, reducing risk and cutting costs for all involved” [3].
To understand the subject matter better, let us go through some related definitions.
The advantages of Web 3.0 are:
The IoV refers to an online framework or a community in which users can instantly transfer value/money from one node to another, eliminating mediators and reducing the third-party costs. Anything that has financial value or has a social value can be moved between parties, including currency, property shares and even votes.
From a more reasonable perspective, the IoV is totally supported by blockchain paradigm, which is revolutionary technology supporting e-currency. This technology has disrupted how business is conducted in many sectors, such as banking and entertainment, and has started to impact the traditional industrial areas such as real estate and e-commerce. Hence, blockchain is creating a fair playing field between brands, consumers and lenders. The impact of the technology is that high-value transactions will no longer have to go through expensive, third-party mediators for safe authentication of transactions. This is done through the technology, which serves as a clear and distributed ledger, which is not handled by any sole authority and is universally accessible.
Hence, allowing for instant transactions of some entity called value, thus reduces uncertainty, while it also disproves the influence of third-party and middleman costs. From the consumer’s viewpoint, the IoV signifies the next echo of the digital age and has the potential to lessen the power of banks, financial lenders and large corporations by giving power to more decentralized and autonomous institutions. In the financial sector, the IoV will shape the fundamentals laid in the wake of the 2007-08 financial crisis, when accessible, short-term lenders filled the financing void that was left after banks chose to tighten their criteria for lending. However, industries and service providers will most likely view the IoV from a different point of view due to the fact that this development has drawbacks in terms of improving profit margins and retaining the current market proportion. After all, it is fair to infer that some service providers (e.g., brokers) will gradually become immaterial in the age of blockchain, while mediators who do survive nowadays will need to seek out fresh revenue streams. The exact impression of the IoV has yet to be seen, of course, but there’s no doubt that this evolution will shake up several industries and marketplaces in the long run.
For traditional companies, there exist a few means of collecting funds required for their development and expansion such as crowdfunding. A company can initially be a small venture and grow with time as its revenues permit, only being obliged to company owners; but at the same time, they have to wait for funds from external sources to set up. Consequently, companies may see external investors for initial assistance, who provide a rapid inflow of funds but typically come up with the option of giving them a share in the ownership. Other ways in which companies get money is by selling shares in their company and by selling bonds via an initial public offering (IPO). An Initial Coin Offering (ICO) is the cryptocurrency industry’s equivalent to an IPO in the conventional investment ecosphere. ICOs act as fundraisers of a kind; moreover, a company looking to create a new coin, app, or service can launch an ICO. Following the launch, interested investors buy the offerings, either with fiat currency or with pre-existing digital tokens like “ether.” In exchange, investors acquire a new cryptocurrency token specific to the ICO. Shareholders also expect that the token will perform remarkably well in the future, providing them with a stellar return on investment. The investor funds are used by the company holding the ICO as a means of sponsoring its goals, initiating its product, or starting its own digital currency. The startups use ICOs to dodge the difficult and controlled capital-raising required by venture capitalists or banks.
Some related terms of significance are mentioned below:
Note: Where third-party oversight is required, blockchain reduces the burden on the regulatory system by making it easier for auditors and regulators to review relevant transaction details and verify compliance.
A block of a typical blockchain has the following three parts, as shown in Figure 15.1:
Blockchain does not replace:
Instead, the blockchain provides certified evidence of transactions.
When participants are unidentified (e.g., in the Bitcoin world), commitment is almost unaffordable. “On the Bitcoin network, consensus is reached through proof of work.” The network tests each machine that saves a ledger copy with a complex puzzle based on the ledger version. Machines with same ledger copies unite to crack the puzzle they have been asked to solve. The first team to answer the puzzle is the winner, and all other machines update their ledgers to match that of the victorious team. The notion is that the majority wins as it has the highest computing power to solve its puzzle first. Proof of work is valuable on an unrestricted/open blockchain, such as the one used for Bitcoin, but it consumes substantial computing power and electricity, making it an elegant way to reach consensus [5].
The market capital of different cryptocurrencies can be found out with respect to the transactions performed using those currencies shown in Figure 15.2. The current total market capitalization of leading cryptocurrencies is $323.43 Bn.
Started by the Linux Foundation, Hyperledger is an open source community which is highly suitable for enterprises. Hyperledger Fabric is a specialized blockchain framework for the implementation in which Hyperledger schemes are presented by the Linux Foundation. It is also a container technology which proposes a linked architecture and pluggable, substitutable facilities using modular technology [4].
Other functionalities consist of:
Dissimilar to the other blockchain applications, Hyperledger Fabric fulfills all five main fundamentals of a blockchain for private chains:
Decentralized applications (DApps) are the apps that run on a peer-to-peer network of nodes rather than a single node, i.e., a computer. They are a type of software program programmed to exist on the internet in such a way that is controlled by a distributed entity.
The steps to creating DApps are:
Blockchain technology is widely used in the advertising industry. A new problem of the 21st century is data theft, i.e., companies are looking for the personal information of users and customers mainly for data analytics, which would increase sales and the market capitalization of the company [8]. The Cambridge Analytica data scandal is the best example of losing control of personal user data. There are three types of advertising:
The Know Your Customer system, commonly known as KYC, is a campaign started by many companies so that only verified and authorized users are in the system. We can guarantee a transparent system with blockchain. Many browsers have been developed which allow advertisers to pay a small amount and the viewers who visit the site will be paid an incentive. Blockchain is poised to help media and entertainment companies, as it can create a digital rights database; for example, if an artist creates a music album he/she can directly sell it to the user by means of digital rights. One can use smart contracts to pay the amount to the artist, without the use of a third entity. All this results in far better data privacy over which users have control. Moreover, it creates a true digital identity to use the digital assets. There are ad frauds that are performed by the bots created by other firms just to influence the market. For tackling these kinds of problems one needs a platform, which is free from third-party involvement. The digital media faces an uncontrolled situation which is the fraud performed by the automatic programs called bots. The losses due to Ad fraud by the end of 2017 were around $16.4 billion. This problem has been solved by startups like MetaX and adChain [7].
There are three main ways to implement blockchain: 1) using an existing code, 2) creating new smart contracts, and 3) creating a developer-friendly framework. Bitcoin, Ethereum and Cosmos SDK are examples of each respectively [11]. Bcoin and Btcd are two other substitutes; also, Inter-Blockchain Communication is another protocol which can be used instead of Cosmos. It’s very simple to use; Ethereum uses the solidity programming language and its unit is ether. Ethereum has been a major focus of interest because of its ability to indulge in multipurpose projects; it can even be used by people who are not very aware of programming [13]. The most advantageous feature of Ethereum [3] is that it has the most active and developed community. Microsoft Azure and IBM offer services at a cost which is not very suitable for everyone who aims to use blockchain; hence, development of blockchain technology is quite costly. Microsoft Azure is a game changer which gives free services to beginners so that they can understand how to use it. It has very broad commercial adaptability in almost all the big economies. A user or organization can also pay extra for faster transactions. Proof of work is merely the waste of resources as it uses direct economic state to complete the transaction. It may get transformed to proof-of-stake concept in the future, where there is no such requirement to generate a proof of work. The Enterprise Ethereum Alliance is a group of large IT firms which have joined resources to develop the Ethereum, the main ones are Microsoft, Accenture, Intel, and ING, along with the Indian giant WIPRO [15]. Distributed applications or DApps are a new approach which decentralizes the workload and focuses on sharing of resources, which uses a “gas” model which acts like a token and is used to increase or decrease the speed of transaction [16]. Ethereum consortium is a model which consists of a leader and has submembers; the leader acts like a switch in computer networking which directs the flow of information from one node to another [9]. Plasma smart contracts are very efficient in promotional marketing; it contains the whole contract and the payment model for both the advertiser and the publisher [2].
Table 15.2 gives a detailed understanding of top brands and companies working in the advertising industry that use blockchain [17].
Blockchain has also shown promise in helping to solve the humanitarian issue of this era– the refugee problem. Datarella has led an effort to solve the problem on the Syrian front. Blockchain technology bypasses the problems created by bureaucracy and international conflicts. This technology acts like a decentralized banking system for people who do not have a bank account. It dispenses with the problem of international socioeconomic distances, as transfer remittances are a very costly way of transferring money in certain remote regions of the world. It makes the transfer of money to migrants very easy.
Voter fraud can be prevented by the use of distributed ledgers, which gives us an un-hackable electronic voting technique. It can be a better alternative than the traditional electronic voting machine (EVM). Government efficiency can also be improved. The Government of India should adopt the methods from the UAE government, which aims to implement blockchain in office work and public benefits. By accepting this technology the bureaucracy will banish corruption and fraud will become predictable. Also, some states in India have accepted the proposal of converting all the land records into a single chain. Blockchain has emerged as a very rewarding technology for the field of cybersecurity. Classified data and important records of institutions can now be digitally preserved. Industries that handle highly sensitive information, like defense and aerospace, need a foolproof way to store data; blockchain can be used to do so.
Other fields of interests are financial (trading, deal organization, equities, settlements, peer-to-peer lending), insurance (claim filings, fraud prediction, telematics and ratings), media (digital rights management, art authentication, ticket purchase, goods tracking, advertisement click frauds using bots, and real-time sale), computer science (DNS, expanse of market, API platform plays), medical (records sharing, compliance, DNA sequencing, prescription sharing), asset titles (diamonds, car leasing and sales, home mortgage pay ments), government (voting, vehicle registration, copyrights), identity (personal, objects, digital assets, refugee tracking, employee reviews), IoT (device directories, grid monitoring, smart home, operations like water flow), payments (B2B, micropayments, tax payments), consumer (Uber, Apple Pay, P2P, digital rewards, cross company, loyalty rewards tracking), and supply chain management (agriculture food authentication, pharmaceutical tracking, shipping and logistics management) (see Table 15.3).
The revenue trend graph has been significantly increasing throughout the past decade. It’s expected to reach $20000 million by the year 2025. Due to the backing up of the internet, blockchain has the upper hand due to the community of this technology, which is very active and supports the development of this project. Projects like the Hyperledger, chain operation standard 1 and R3 consortium are prominent in development and research. Indian entrepreneurs are also working on creating a change after realizing the potential of this technology. Most of them are based in the metropolitan cities. These startups are eager to launch their products in the near future. Indian startups are also working on blockchain-based applications at full force. Recently, New Street Technologies has backed up $2 million funding. A list of a few of the startups [14] is given in Table 15.4:
In a nutshell, blockchain provides key business benefits of minimizing the time and cost factors involved in a transaction along with tightening the security. Enhanced privacy, improved audibility due to shared ledger, and increased operational efficiency are significant takeaways of the technology. Building trust with blockchain over a network is an important issue to handle. Healthcare, financial services such as banking, government sectors like defense, and pharmaceuticals are some famous application areas of blockchain. A great many areas of blockchain still need to be researched, such as infrastructure, protocols, environment, strategies, and applications. Several issues and challenges are wide open to be worked upon.
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