Blockchain-based technologies
María-Cruz Valiente, Universidad Complutense de Madrid
Florian Tschorsch, Technical University of Berlin
1. Definition of the term
In recent years, blockchain(-based) technologies have attracted the interest of a wide variety of actors and stimulated a large amount of academic research. The topic is increasingly part of academic and public debates. Unfortunately, there is neither a formal definition nor a common understanding of what blockchain-based technologies means, that is, what properties and technical features the term implies. The main question that needs to be answered is: what fundamental requirements have to be met in order for a software to be classified as blockchain technology? Therefore, a good understanding of the term blockchain is needed to design, engineer, implement, and manage such technologies effectively.
In the literature, we can find several approaches to define the notion of blockchain. For example, García-Barriocanal et al. (2017) define blockchain as “the core data structure of a category of decentralized database architectures that rely on cryptographic techniques and distributed consensus to provide tamper-proof distributed ledgers”. Another definition is found in the writings by Governatori and colleagues, where blockchain is defined as “a network of geographically distributed computing nodes, sharing a common append-only data structure to record blocks of transactions, where revisions or tampering are made prohibitively difficult due to the modus operandi of the infrastructure” ( Governatori et al., 2018) According to Staples et al. (2017), a blockchain is “a computational platform” that executes smart contracts (i.e., a small piece of code deployed on the blockchain) as transactions; and a distributed database replicated across multiple nodes, which records the transactions between different parties. On the other hand, Janssen et al. (2020) point out that blockchain technologies must provide trust, anonymity, security and data integrity without having to use any third party controlling organisations. Iansiti and Lakhani (2017) remark that the definition of blockchain involves three basic concepts: transaction, block, and chain, where chain refers to the blocks connected in chronological order. For requirements elicitation, the work of Janssen et al. (2020) presents a conceptual framework for the adoption of blockchain technology, capturing the complex relationships between governance, business information (namely business processes), and technical issues.
In summary, we observe that the meaning of the word blockchain is and remains controversial. It has no standard technical definition. Rather it is used as a loose umbrella term to refer to systems that bear resemblance to the Bitcoin protocol, or more generally the Nakamoto Consensus (Narayanan and Clark, 2017). At the same time, we observe an effort to use Distributed Ledger Technology (DLT) as a reaction to this ambiguity classifying blockchains are a subset of DLTs. Hence, DLT becomes the technical accurate term, referring to consensus of replicated data in a peer-to-peer network.
2. Issues currently associated with the term
Blockchain technology originally emerged to support new forms of digital money. It was first proposed in the birth of Bitcoin by Satoshi Nakamoto in 2008 and presented at a time where the trust in banks and other financial institutions was at a low due to the world-wide financial crisis. In short, Bitcoin can be defined as the first and (at the time of writing) most popular cryptocurrency. It consists of a digital currency (i.e., bitcoin) and online payments (i.e., the Bitcoin network), which operates independently of a central bank (Swan, 2015). In this way, payments performed through Bitcoin avoid the services of a middleman, such as commercial banks, lawyers, and notaries, which destabilises adopted state monopolies on the production and verification of money and transactions (Karlstrøm, 2014). Since the blockchain records every single change made in the network (first and foremost to reject double spends), Bitcoin probably became the most transparent financial system. In the following, we look beyond Bitcoin to convey the technological diversity with respect to blockchains. By doing this, we intend to emphasise the difficulties to capture this technology in a single definition.
By the end of 2013, Vitalik Buterin created Ethereum, a general-purpose blockchain-based distributed computing technology (Buterin, 2014). Using Ethereum, developers can create web applications known as Decentralized Applications (DApps) without knowledge about the underlying mechanisms, such as peer-to-peer networks and blockchain in general.
Another complementary blockchain-based technology, Filecoin was created in 2017 as a decentralised storage network built on a decentralised market (Protocol Labs, 2017). Filecoin runs on a blockchain with a native token (i.e., filecoin), which miners earn (i.e., they compete to mine blocks with sizable rewards) by providing storage to customers. Clients on the other hand use filecoins to pay for storing and distributing data in the network.
Apart from these most known blockchain-based technologies, we can find many research entries focused on presenting new forms of blockchain-based technologies. For example, Singh and Kim (2018) propose a blockchain technology aimed at building a secure and a trusted environment for intelligent vehicle communication. In another line of research, Wang and Su (2020) review the application of blockchain technology in the energy field. They highlight the advantages of applying blockchain which can be summarised in the following aspects: (i) distributed/decentralised energy supply systems; (ii) stakeholders can directly connect each other to conduct transactions at all levels through the blockchain network; (iii) energy and storage flows are controlled automatically through the implementation of smart contracts; and (iv) all energy flows and business activities are securely recorded.
A prime example to highlight the ambiguity of the term blockchain is the tension between so-called permissionless and permissioned blockchains. Permissionless blockchains, such as Bitcoin, do not require a permission to contribute to the consensus. The permission to generate a new block is organised in a completely decentralised manner. In contrast, permissioned blockchains, such as Hyperledger, define a closed group of nodes, who can contribute to the consensus. This group is often determined by a central entity. In the literature, both are referred to as blockchains. While permissionless blockchains are clearly in line with the Nakamoto consensus, permissioned blockchains exhibit more resemblance to the area of Byzantine fault tolerance (Lamport, Shostak, and Pease, 2019). Such ambiguities and many more misconceptions motivated articles that explore suitable application domains of blockchains by trying to give an answer to the question “do you need a blockchain?” (Wüst and Gervais, 2018). The dissonance clearly reveals the issues with the definition of the term blockchain.
3. Conclusion
Blockchains are supposed to offer diverse technological possibilities. With a range of use cases that go far beyond virtual currencies applications, they are proposed as a technological means to achieve trust, security, and privacy. After more than a decade of research and experimentation, however, the utility of blockchains seems to be circumscribed to few use cases, with cryptocurrencies still representing their most relevant application.
The value proposition of blockchain seems to be that of offering a global, open and censorship-resistant network for peer-to-peer transactions. Its key innovation is the deployment of consensus algorithms that offer reasonable security in open peer-to-peer networks. The main characteristics attributed to blockchain-based technologies include: (i) decentralised consensus, i.e., no central entity or third party is responsible for decision-making; (ii) immutable archive, i.e., an ordered list of transactions that cannot be removed or altered; (iii) transparency and verifiability, i.e., all recorded entries can be accessed and verified locally; (iv) resilience to failure, i.e., the system can handle Byzantine failure up to a certain threshold.
The term blockchain remains vague, even controversial. Often, the term is used merely to point at the ideologies that have been attached to it, with imprecise references to technological specifications. This makes it difficult to classify a given application as blockchain-based technology. While not clearly defined, blockchains typically exhibit a resemblance to Bitcoin, which is commonly considered its archetypal example, repeating its technical characteristics or following similar goals. From a purely technical point of view, blockchains are a type of DLT. Therefore, they can be understood as a distributed network of computers, ideally organised in a decentralised way, mutually agreeing on a common state while tolerating failures (incl. malicious behaviour) to some extent.
References
García-Barriocanal, E., Sánchez-Alonso, S., Sicilia, M.-A., 2017. Deploying Metadata on Blockchain Technologies, in: Garoufallou, E., Virkus, S., Siatri, R., Koutsomiha, D. (Eds.), Metadata and Semantic Research, Communications in Computer and Information Science. Springer International Publishing, Cham, pp. 38–49. https://doi.org/10.1007/978-3-319-70863-8_4
Governatori, G., Idelberger, F., Milosevic, Z., Riveret, R., Sartor, G., Xu, X., 2018. On legal contracts, imperative and declarative smart contracts, and blockchain systems. Artif. Intell. Law 26, 377–409. https://doi.org/10.1007/s10506-018-9223-3
Iansiti, M., Lakhani, K.R., 2017. The Truth About Blockchain. Harv. Bus. Rev. 95, 118–127.
Janssen, M., Weerakkody, V., Ismagilova, E., Sivarajah, U., Irani, Z., 2020. A framework for analysing blockchain technology adoption: Integrating institutional, market and technical factors. Int. J. Inf. Manag. 50, 302–309. https://doi.org/10.1016/j.ijinfomgt.2019.08.012
Karlstrøm, H., 2014. Do libertarians dream of electric coins? The material embeddedness of Bitcoin. Distinktion J. Soc. Theory 15, 23–36. https://doi.org/10.1080/1600910X.2013.870083
Lamport, L., Shostak, R., & Pease, M. 2019. The Byzantine generals problem. In Concurrency: the Works of Leslie Lamport (pp. 203-226).
Nakamoto, S. 2019. Bitcoin: A peer-to-peer electronic cash system.
Narayanan and Clark. “Bitcoin’s academic pedigree.” Communications of the ACM, 60(12), 2017.
Singh, M., Kim, S., 2018. Branch based blockchain technology in intelligent vehicle. Comput. Netw. 145, 219–231. https://doi.org/10.1016/j.comnet.2018.08.016
Staples, M., Chen, S., Falamaki, S., Ponomarev, A., Rimba, P., Tran, A. B., Weber, I., Xu, X., Zhu, J., 2017. Risks and opportunities for systems using blockchain and smart contracts. Data61 (CSIRO), Sydney. https://doi.org/10.4225/08/596E5AB7917BC
Wang, Q., Su, M., 2020. Integrating blockchain technology into the energy sector — from theory of blockchain to research and application of energy blockchain. Comput. Sci. Rev. 37, 100275. https://doi.org/10.1016/j.cosrev.2020.100275
Wüst, K., Gervais, A., 2018. “Do you need a blockchain?”. In Crypto Valley Conference on Blockchain Technology (CVCBT 2018).
Florian Idelberger (not verified)
PUBLISHED ON: 27 Nov, 2020 - 18:57
This entry highlights the various definitions from other works very well and I think the conclusion captures the essence very concisely. It is really a difficult task, with so many tensions and different interpretations.
Still, there might still be room for improvement and some general remarks:
Maybe the tensions in these definitions could be made more explicit, instead of letting the quotes speak for themselves – especially for a glossary that would be helpful and guide the reader. (or instead a shorter conclusion up top)
In the conclusion, I think you accurately capture the definition of blockchain technologies – however maybe an emphasis could be added that what generally sets (permissionless) blockchains apart from other DLTs is often the economic and social system/aspect that is part of the consensus system. This also applies to the definition you cite from us (Governatori 2018), thanks for citing , at least as quoted I now think it is too general.
Regarding the “main question that needs to be answered” - I agree that this is the question, but I would say a good understanding is necessary in general, especially also for researchers and society, not just to design/engineer/implement/manage.
Some minor thoughts that came to mind:
• Maybe one way to delineate blockchain technologies could also be by examples that have similar characteristics but are definitely not blockchains, such as Git, Bittorrent, Distributed Databases and similar.
• When you quote Karlstrom 2014, on the destabilization of state monopolies, do you agree with this or simply give this as an overview of the literature? In my view, while some people claim this, there is so far not sufficient evidence for this. (Especially with now certain regulations applying and in most cases money flows being more easily traceable than f.e. cash)
• The section on different works elaborating certain blockchain use cases and Filecoin could be skipped in my opinion – while blockchains with a specific use case have cropped up again and again, either in practice or in literature, I think the discussion of various systems design papers on specific use cases does not help to narrow the definition.
Martin Florian (not verified)
PUBLISHED ON: 30 Nov, 2020 - 10:54
This is a very difficult text to write and the authors did a wonderful job! I actually struggle to find anything substantial to add.
The critique on the hype surrounding the term could be voiced a bit more explicitly. Marketers use "blockchain technology" more like a synonym for "something with computers", if you are lucky "something with more than one computer" or "something that uses a hash function somewhere". Or not even that - think Long Island Iced Tea Blockchain. Normatively, the blockchain hype must not be seen as a negative thing - it catalyzed many projects that might otherwise have been too unsexy to receive resources - but it could still be mentioned.