Navigation
Blockchain Scalability: When, Where, How?
It is a flat topology. All decentralized blockchain are structured like this because of a simple reason, to stay true to their philosophy. The idea is to have a currency system, where everyone is treated as an equal and there is no governing body, which can determine the value of the currency based on a whim. The problem is, that unlike other pieces of technology, the more the number of nodes increases in a cryptocurrency network, the slower the whole process becomes.
Consensus happens in a linear manner, meaning, suppose there are 3 nodes A, B and C. For consensus to occur, first A would do the calculations and verify and then B will do the same and then C. As cryptocurrencies has become more popular, the transaction times have gotten slower. It was envisioned that the signature data would be arranged in the form of a Merkle tree in the side chain. The Merkle root of the transactions was placed in the block along with the coinbase transaction the first transaction in each block which basically signifies the block reward.
However, on doing this, the developers stumbled upon something unexpected. They discovered that by putting the merkle root in that particular place they somehow increased the overall block size limit WITHOUT increasing the block size limit! While this might sound like a good idea in practice, the implementation of this has been encountered with lots of challenges. In fact, this has given birth to a lot of debate in the Blockchain community with sides passionately arguing both for and against the block size increase.
Anyway, on May 21 , the New York Agreement took place where it was decided that Segwit will be activated and the block sizes will increase to 2 mb. Blockchain can potentially solve this problem. Reputation is important to academics. Sharples and Domingue proposed a blockchain-based distributed system for educational record and reputation. At the beginning, each institution and intellectual worker would be given an initial award of educational reputation currency.
An institution could award a staff by transferring some reputation records to the staff. Since transactions are stored on blockchain, all the reputation change could be detected easily. The ability to assess the reputation of a member in a web community is very important. Carboni proposed a reputation model based on blockchain, in which a voucher will be signed if customer is satisfied with the service and would like to give a good feedback.
A service provider's reputation is calculated based on the amount of the voting fee. Dennis and Owen proposed a new reputation system that is practically applicable to multiple networks. In particular, they created a new blockchain to store single dimension reputation value i. Take the file sharing as an example. Entity A sends a file to entity B. Upon receiving the file, B sends a transaction consists of the score, the hash of file and private key of B to verify the identity.
Then, the miners contact A and B to confirm that the transaction happens with no suspicion. Since transactions are stored on blockchain, reputation records are nearly impossible to tamper. We have seen the proliferation of various mobile devices and various mobile services, which are also exhibiting their vulnerability to malicious nodes.
There are a number of anti-malware filters proposed to detect the suspected files through pattern matching schemes, which a central server to store and update the virus patterns. However, these centralised countermeasures are also vulnerable to malicious attackers. Blockchain can potentially help to improve the security of distributed networks. In particular, Charles Noyes, a proposed a novel anti-malware environment named BitAV, in which users can distribute the virus patterns on blockchain.
In this way, BitAV can enhance the fault tolerance. It is shown in Noyes a that BitAV can improve the scanning speed and enhance the fault reliability i. Blockchain technologies can also be used to improve the reliability of security infrastructure. For example, conventional public key infrastructures PKIs are often susceptible to single point of failure due to the hardware and software flaws or malicious attacks.
As shown in Axon , blockchain can be used to construct a privacy-aware PKI while simultaneously improving the reliability of conventional PKIs.
In addition to the increasing risk of the exposure of our private data to malwares, various mobile services and social network providers are collecting our sensitive data. For example, Facebook has collected more than petabytes of personal data since its inception Vagata and Wilfong, Usually, the collected data are stored on central servers of service providers, which are susceptible to malicious attacks.
Blockchain has the potential to improve the security of privacy sensitive data. This system is implemented on the blockchain. A similar system based on blockchain technology was also proposed to securely distribute sensitive data in a decentralised manner in ethos Challenges and recent advancesAs an emerging technology, blockchain is facing multiple challenges and problems.
We summarise three typical challenges: scalability in Section 5. ScalabilityWith the amount of transactions increasing day by day, the blockchain becomes heavy. Currently, Bitcoin blockchain has exceeded GB storage. All transactions have to be stored for validating the transaction. Besides, due to the original restriction of block size and the time interval used to generate a new block, the Bitcoin blockchain can only process nearly 7 transactions per second, which cannot fulfil the requirement of processing millions of transactions in a real-time fashion.
Meanwhile, as the capacity of blocks is very small, many small transactions might be delayed since miners prefer those transactions with a high transaction fee. However, large block size would slow down the propagation speed and lead to blockchain branches. So scalability problem is quite tough. To solve the bulky blockchain problem, a novel cryptocurrency scheme was proposed in Bruce, In the new scheme, old transaction records are removed by the network and a database named account tree is used to hold the balance of all non-empty addresses.
In this way, nodes do not need to store all transactions to check whether a transaction is valid or not. Besides lightweight client could also help fix this problem. A novel schem named VerSum van den Hooff et al.
VerSum allows lightweight clients to outsource expensive computations over large inputs. It ensures that the computation result is correct by comparing results from multiple servers.
The main idea of Bitcoin-NG is to decouple conventional block into two parts: key block for leader election and microblock to store transactions. Miners are competing to become a leader. The leader would be responsible for microblock generation until a new leader appears. Bitcoin-NG also extended the heaviest longest chain strategy where only key blocks count and microblocks carry no weight. In this way, blockchain is redesigned and the tradeoff between block size and network security has been addressed.
Privacy leakageThe blockchain is believed to be very safe as users only make transactions with generated addresses rather than real identity. Users also could generate many addresses in case of information leakage. However, it is shown in Meiklejohn et al. Besides, the recent study Barcelo, has shown that a user's Bitcoin transactions can be linked to reveal user's information. Moreover, Biryukov et al. However, this set can be learned and used to find the origin of a transaction. In blockchain, users addresses are pseudonymous.
But it is still possible to link addresses to user real identity as many users make transactions with the same address frequently. Mixing service is a kind of service which provides anonymity by transferring funds from multiple input addresses to multiple output addresses. For example, user Alice with address A wants to send some funds to Bob with address B.
If Alice directly makes a transaction with input address A and output address B, the relationship between Alice and Bob might be revealed. So Alice could send funds to a trusted intermediary Carol. Then Carol transfer funds to Bob with multiple inputs c1, c2, c3, etc. Bob's address B is also contained in the output addresses. So it becomes harder to reveal the relationship between Alice and Bob. However, the intermediary could be dishonest and reveal Alice and Bob's private information on purpose.
It is also possible that Carol transfers Alice's funds to her own address instead of Bob's address. Mixcoin Bonneau et al.
The intermediary encrypts users' requirements including funds amount and transfer date with its private key. Then if the intermediary did not transfer the money, anybody could verify that the intermediary cheated. However, theft is detected but still not prevented. Coinjoin Maxwell, depends on a central mixing server to shuffle output addresses to prevent theft.
And inspired by Coinjoin, CoinShuffle Ruffing et al. In Zerocoin Miers et al. Miners do not have to validate a transaction with digital signature but to validate coins belong to a list of valid coins. Payment's origin is unlinked from transactions to prevent transaction graph analyses. But it still reveals payments' destination and amounts.
Zerocash Sasson et al. Transaction amounts and the values of coins held by users are hidden. Selfish miningThe blockchain is susceptible to attacks of colluding selfish miners.
In particular, Eyal and Sirer showed that the network is vulnerable even if only a small portion of the hashing power is used to cheat. In selfish mining strategy, selfish miners keep their mined blocks without broadcasting and the private branch would be revealed to the public only if some requirements are satisfied.
As the private branch is longer than the current public chain, it would be admitted by all miners. Before the private blockchain publication, honest miners are wasting their resources on a useless branch while selfish miners are mining their private chain without competitors. So selfish miners tend to get more revenue. Based on selfish mining, many other attacks have been proposed to show that blockchain is not so secure.
In stubborn mining Nayak et al. The trailstubbornness is one of the stubborn strategies that miners still mine the blocks even if the private chain is left behind. Sapirshtein et al. But the gains are relatively small. To help fix the selfish mining problem, Heilman Billah, presented a novel approach for honest miners to choose which branch to follow. With random beacons and timestamps, honest miners would select more fresh blocks. However, Billah, is vulnerable to forgeable timestamps.
ZeroBlock Solat and Potop-Butucaru, builds on the simple scheme: Each block must be generated and accepted by the network within a maximum time interval. Within ZeroBlock, selfish miners cannot achieve more than its expected reward. Possible future directionsThe blockchain has shown its potential in industry and academia. We discuss possible future directions with respect to five areas: blockchain testing, stop the tendency to centralisation, big data analytics, smart contract and artificial intelligence.
Blockchain testingRecently different kinds of blockchains appear and over cryptocurrencies are listed in coindesk up to now. However, some developers might falsify their blockchain performance to attract investors driven by the huge profit. Besides, when users want to combine blockchain into business, they have to know which blockchain fits their requirements. So blockchain testing mechanism needs to be in place to test different blockchains.
Blockchain testing could be separated into two phases: standardisation phase and testing phase. In standardisation phase, all criteria have to be made and agreed.
When a blockchain is born, it could be tested with the agreed criteria to valid if the blockchain works fine as developers claim. As for testing phase, blockchain testing needs to be performed with different criteria. For example, a user who is in charge of online retail business cares about the throughput of the blockchain, so the examination needs to test the average time from a user sending a transaction to the transaction being packed into the blockchain, capacity for a blockchain block and etc.
Stop the tendency to centralisationBlockchain is designed as a decentralised system. However, there is a trend that miners are centralised in the mining pool. As the blockchain is not intended to serve a few organisations, some methods should be proposed to solve this problem. Big data analyticsBlockchain could be well combined with big data. Here we roughly categorised the combination into two types: data management and data analytics. As for data management, blockchain could be used to store important data as it is distributed and secure.
Blockchain could also ensure the data is original. For example, if blockchain is used to store patients health information, the information could not be tampered and it is hard to steal those private information. When it comes to data analytics, transactions on blockchain could be used for big data analytics.
For example, user trading patterns might be extracted. Users can predict their potential partners' trading behaviours with the analysis. Smart contractA smart contract is a computerised transaction protocol that executes the terms of a contract Szabo, It has been proposed for a long time and now this concept can be implemented with blockchain.
In blockchain, the smart contract is a code fragment that could be executed by miners automatically. Nowadays, more and more smart contract develop platforms are emerging and smart contract could achieve more and more functionalities. Blockchain could be used in many areas, such as IoT Christidis and Devetsikiotis, and banking services. We categorise smart contract researches into two types: development and evaluation. The development could be smart contract development or smart contract platform development.
Now many smart contracts are deployed on Ethereum Wood, blockchain. As for platform development, many smart contract develop platforms like Ethereum Wood, and Hawk Kosba et al.
Evaluation means code analysis and performance evaluation. Bugs in smart contract could bring disastrous damages. For instance, owing to the recursive call bug, over 60 million dollars are stolen from a smart contract-the DAO Jentzsch, So smart contract attack analysis is very important. On the other hand, smart contract performance is also of vital importance to smart contract. With blockchain technology developing quickly, more and more smart contract based applications would be put into use.
Companies need to take the application performance into consideration. Artificial intelligenceRecent developments in blockchain technology are creating new opportunities for artificial intelligence AI applications Omohundro, AI technologies could help solve many blockchain challenges.
For instance, there is always an oracle who is responsible for determining whether the contract condition is satisfied. Generally, this oracle is a trusted third party. AI technique may help build an intelligent oracle. It is not controlled by any party, it just learns from the outside and train itself. In that way, there would be no argues in he smart contract and the smart contract can become smarter.
On the other hand, AI is penetrating into our lives now. Blockchain and smart contract could help to restrict misbehaviours done by AI products. For instance, laws written in smart contract could help to restrict misbehaviours done by driverless cars.
ConclusionThe blockchain is highly appraised and endorsed for its decentralised infrastructure and peer-to-peer nature. However, many researches about the blockchain are shielded by Bitcoin. They discovered that on putting the merkle root in that particular place they somehow increased the overall block size limit WITHOUT increasing the block size limit! As of August 24, segwit was activated on bitcoin.
Basically, doubling the amount of transactions in a block will double a number of transactions and that in turn will double the amount of signature data that will be inside each of those transactions. This would make the transactions even more bulky and increase the transaction time by a huge amount. This opens the gates for malicious parties who may want to spam the blockchain. Segwit resolves this by changing the calculation of the signature hash and make the whole process more efficient as a result.
While this might sound like a good idea in practice, the implementation of this has been anything but. In fact, this has given birth to a lot of debate in the Bitcoin community with sides passionately arguing both for and against the block size increase. Anyway, on May 21 , the New York Agreement took place where it was decided that Segwit will be activated and the block sizes will increase to 2 mb. People who were not happy with the idea of Segwit activating forked away from the main chain and made Bitcoin Cash which has a block size limit of 8 mb.
A block size increase was also suggested for ethereum but because of a lot of reasons people are not really keen on doing that in Ethereum as of writing:. In the beginning it is going to be a hybrid style system where majority of the transactions will still be done the proof of work style while every th transaction is going to be proof of stake.
But what does that mean for ethereum and what are the advantages of this protocol? Introducing proof-of-stake is going to make the blockchain a lot faster because it is much more simple to check who has the most stake then to see who has the most hashing power. This makes coming to a consensus much more simple. At the same time proof-of-stake makes the implementation of sharding easier. In a proof-of-work system it will be easier for an attacker to attack individual shards which may not have high hashrate.
This incentivizes them to increase the block size to get in more transactions via gas management. As of right now, Casper stage one is going to be implemented on the blockchain, wherein every th block will be checked via proof-of-stake. Yoichi Hirai from ethereum foundations has been running casper scripts through mathematical bug detectors to make sure that it is completely bug free. Eventually, the plan is to move majority of the block creation through proof-of-stake and the way they are planning to do that is….
Having an impossibly high difficulty will greatly reduce the hash rate which in turn will reduce the speed of the entire blockchain and the DAPPS running on it. This will force everyone involved in ethereum to move on to proof-of-stake. However, this entire transition is not without its obstacles. One of the biggest fears that people have is that miners may forced a hardfork in the chain at a point before the ice age begins and then continue mining in that chain.
This could be potentially disastrous because that would mean there could be 3 different chains of ethereum running at the same time: Ethereum classic , ethereum proof of work and Ethereum proof of stake. This is currently all speculation. For now, the fact is that, for a scalable model, it is critical for ethereum to use proof of stake to get the speed and the flexibility it requires.
The biggest problem that ethereum is facing is the s peed of transaction verificatio n. Each and every full node in the network has to download and save the entire blockchain.
What sharding does is that it breaks down a transaction into shards and spreads it among the network. The nodes work on individual shards side-by-side. This in turn decreases the overall time taken. Imagine that ethereum has been split into thousands of islands. Each island can do its own thing. Each of the island has its own unique features and everyone belonging on that island i. If they want to contact with other islands, they will have to use some sort of protocol. What does a normal block in bitcoin or ethereum pre-sharding look like?
So, there is a block header and the body which contains all the transactions in the block. The Merkle root of all the transactions will be in the block header. The reason why they arrange these transactions in a block is to create one level of interaction and make the whole process more scalable. What ethereum suggests is that they change this into two levels of interaction. The transaction group is divided into the transaction group header and the transaction group body.
The state root represents the entire state, and as we have seen before, the state is broken down into shards, which contain their own substates. The shards are basically like islands. So how do these islands communicate with each other?
Remember, the purpose of shards is to make lots of parallel transactions happen at the same time to increase performance. If ethereum allows random cross shard communication, then that defeats the entire purpose of sharding. Check this out:. As you can see here, each individual receipt of any transaction can be easily accessed via multiple Merkle trees from the transaction group Merkle root. Every transaction in a shard will do two things:. Here is another interesting piece of information.
The receipts are stored in a distributed shared memory, which can be seen by other shards but not modified. Hence, the cross-shard communication can happen via the receipts like this:. A state channel is a two-way communication channel between participants which enable them to conduct interactions, which would normally occur on the blockchain, off the blockchain.
What this will do is that it will decrease transaction time exponentially since you are no longer dependent on a third party like a miner to valid your transaction. The state channels can be closed at a point which is predetermined by the participants according to Slock.
It is worth noting that uncle blocks children of the block's ancestors hashes would also be stored in ethereum blockchain Buterin, The first block of a blockchain is called genesis block which has no parent block.
We then introduce the block structure in Section 2. We also summarise blockchain key characteristics in Section 2. Blockchain taxonomy is showed in Section 2. BlockA block consists of the block header and the block body as shown in Figure 2. The block body is composed of a transaction counter and transactions.
The maximum number of transactions that a block can contain depends on the block size and the size of each transaction. Blockchain uses an asymmetric cryptography mechanism to validate the authentication of transactions NRI, A digital signature based on asymmetric cryptography is used in an untrustworthy environment. We next briefly illustrate digital signature.
Digital signatureEach user owns a pair of private key and public key. The private key is used to sign the transactions. The digital signed transactions are spread throughout the whole network and then are accessed by public keys, which are visible to everyone in the network. Figure 3 shows an example of digital signature used in blockchain.
The typical digital signature is involved with two phases: the signing phase and the verification phase. Take Figure 3 as an example again. When a user Alice wants to sign a transaction, she first generates a hash value derived from the transaction. She then encrypts this hash value by using her private key and sends to another user Bob the encrypted hash with the original data. Bob verifies the received transaction through the comparison between the decrypted hash by using Alice's public key and the hash value derived from the received data by the same hash function as Alice's.
The typical digital signature algorithms used in blockchains include elliptic curve digital signature algorithm ECDSA Johnson et al. Key characteristics of blockchainIn summary, blockchain has following key characteristics. In conventional centralised transaction systems, each transaction needs to be validated through the central trusted agency e. Differently, a transaction in the blockchain network can be conducted between any two peers P2P without the authentication by the central agency.
In this manner, blockchain can significantly reduce the server costs including the development cost and the operation cost and mitigate the performance bottlenecks at the central server. Since each of the transactions spreading across the network needs to be confirmed and recorded in blocks distributed in the whole network, it is nearly impossible to tamper. Additionally, each broadcasted block would be validated by other nodes and transactions would be checked.
So any falsification could be detected easily. Each user can interact with the blockchain network with a generated address. Further, a user could generate many addresses to avoid identity exposure. There is no longer any central party keeping users' private information. This mechanism preserves a certain amount of privacy on the transactions included in the blockchain. Note that blockchain cannot guarantee the perfect privacy preservation due to the intrinsic constraint details refer to Section 5.
Since each of the transactions on the blockchain is validated and recorded with a timestamp, users can easily verify and trace the previous records through accessing any node in the distributed network. In Bitcoin blockchain, each transaction could be traced to previous transactions iteratively.
It improves the traceability and the transparency of the data stored in the blockchain. Taxonomy of blockchain systemsCurrent blockchain systems can be roughly categorised into three types: public blockchain, private blockchain and consortium blockchain Buterin, We compare these three types of blockchain from different perspectives. The comparison is listed in Table 1.
In public blockchain, each node could take part in the consensus process. And only a selected set of nodes are responsible for validating the block in consortium blockchain. As for private chain, it is fully controlled by one organisation who could determine the final consensus. Transactions in a public blockchain are visible to the public while the read permission depends on a private blockchain or a consortium blockchain.
The consortium or the organisation could decide whether the stored information is public or restricted. Since transactions are stored in different nodes in the distributed network, so it is nearly impossible to tamper the public blockchain.
However, if the majority of the consortium or the dominant organisation wants to tamper the blockchain, the consortium blockchain or private blockchain could be reversed or tampered. It takes plenty of time to propagate transactions and blocks as there are a large number of nodes on public blockchain network.
Taking network safety into consideration, restrictions on public blockchain would be much more strict. As a result, transaction throughput is limited and the latency is high. With fewer validators, consortium blockchain and private blockchain could be more efficient. The main difference among the three types of blockchains is that public blockchain is decentralised, consortium blockchain is partially centralised and private blockchain is fully centralised as it is controlled by a single group.
Everyone in the world could join the consensus process of the public blockchain. Different from public blockchain, both consortium blockchain and private blockchain are permissioned.
One node needs to be certificated to join the consensus process in consortium or private blockchain. Since public blockchain is open to the world, it can attract many users. Communities are also very active.
Many public blockchains emerge day by day. As for consortium blockchain, it could be applied to many business applications. Currently, Hyperledger hyperledger, is developing business consortium blockchain frameworks. Ethereum also has provided tools for building consortium blockchains ethereum, n. As for private blockchain, there are still many companies implementing it for efficiency and auditability. Consensus algorithmsIn blockchain, how to reach consensus among the untrustworthy nodes is a transformation of the Byzantine Generals BG Problem Lamport et al.
In BG problem, a group of generals who command a portion of Byzantine army circle the city. The attack would fail if only part of the generals attack the city. Generals need to communicate to reach an agreement on whether attack or not. However, there might be traitors in generals.
The traitor could send different decisions to different generals. This is a trustless environment. How to reach a consensus in such an environment is a challenge. It is also a challenge for blockchain as the blockchain network is distributed.
In blockchain, there is no central node that ensures ledgers on distributed nodes are all the same. Nodes need not trust other nodes. Thus, some protocols are needed to ensure that ledgers in different nodes are consistent.
We next present several common approaches to reach consensus in the blockchain. Approaches to consensusProof of work PoW is a consensus strategy used in Bitcoin network Nakamoto, POW requires a complicated computational process in the authentication.
In POW, each node of the network is calculating a hash value of the constantly changing block header. The consensus requires that the calculated value must be equal to or smaller than a certain given value. In the decentralised network, all participants have to calculate the hash value continuously by using different nonces until the target is reached. When one node obtains the relevant value, all other nodes must mutually confirm the correctness of the value.
After that, transactions in the new block would be validated in case of frauds. Then, the collection of transactions used for the calculations is approved to be the authenticated result, which is denoted by a new block in the blockchain.
The nodes that calculate the hashes are called miners and the POW procedure is called mining. Since the calculation of the authentication is a time-consuming process, an incentive mechanism e.
In the decentralised network, valid blocks might be generated simultaneously when multiple nodes find the suitable nonce nearly at the same time. As a result, branches or forks may be generated as shown in Figure 4. However, it is unlikely that two competing forks will generate next block simultaneously. In POW protocol, a chain that becomes longer thereafter is judged as the authentic one.
Take Figure 4 as an example again. Consider two forks created by simultaneously validated blocks B11 and G Miners work on both the forks and add the newly generated block to one of them. When a new block say B12 is added to block B11, the miners working on fork GG12 will switch to B Block G12 in the fork GG12 becomes an orphan block since it is no longer increased. Generally, after a certain number of new blocks are appended to the blockchain, it is nearly impossible to reverse the blockchain to tamper the transactions.
In Bitcoin blockchain, when approximately six blocks are generated, the relevant blockchain is considered to be the authentic one e. Block interval depends on different parameter setting. Bitcoin block is generated about every 10 min while Ethereum block is generated about every 17 s.
Miners have to do a lot of computer calculations in PoW, yet these works waste too much resources. To mitigate the loss, some PoW protocols in which works could have some sideapplications have been designed. For example, Primecoin King, searches for special prime number chains which can be used for mathematical research.
Instead of burning electricity for mining the POW block, proof of burn P4Titan, asks miners to send their coins to addresses where they cannot be redeemed. By burning coins, miners get chances for mining blocks and they do not need powerful hardwares as POW. Instead of demanding users to find a nonce in an unlimited space, POS requires people to prove the ownership of the amount of currency because it is believed that people with more currencies would be less likely to attack the network.
Since the selection based on account balance is quite unfair because the single richest person is bound to be dominant in the network. As a result, many solutions are proposed with the combination of the stake size to decide which one to forge the next block.
In particular, Blackcoin Vasin, uses randomisation to predict the next generator. It uses a formula that looks for the lowest hash value in combination with the size of the stake. Peercoin King and Nadal, favours coin age-based selection.
In Peercoin, older and larger sets of coins have a greater probability of mining the next block. Compared with PoW, PoS saves more energy and is more effective.
Unfortunately, as the mining cost is nearly zero, attacks might come as a consequence. Many blockchains adopt PoW at the beginning and transform to PoS gradually.
In proof of activity, a mined block needs to be signed by N miners to be valid. Sometimes stake could be other things, for example, in proof of capacity burstcoin, , miners have to allocate large hard drive space to mine the block. Practical byzantine fault tolerance PBFT is a replication algorithm to tolerate byzantine faults Miguel and Barbara, A new block is determined in a round. In each round, a primary would be selected according to some rules.
And it is responsible for ordering the transaction. The whole process could be divided into three phase: pre-prepared, prepared and commit. So PBFT requires that every node is known to the network. There is no hashing procedure in PBFT. In PBFT, each node has to query other nodes while SCP gives participants the right to choose which set of other participants to believe. In dBFT, some professional nodes are voted to record the transactions instead of all nodes.
Delegated proof of stake DPOS. Similar to POS, miners get their priority to generate the blocks according to their stake. Stakeholders elect their delegates to generate and validate a block. With significantly fewer nodes to validate the block, the block could be confirmed quickly, making the transactions confirmed quickly. Meanwhile, the parameters of the network such as block size and block intervals could be tuned.
Additionally, users do not need to worry about the dishonest delegates because the delegates could be voted out easily. DPOS has already been implemented, and is the backbone of Bitshares bitshares, n.
Ripple Schwartz et al. In the network, nodes are divided into two types: a server for participating consensus process and client for only transferring funds. UNL is important to the server. When determining whether to put a transaction into the ledger, the server would query the nodes in UNL. Tendermint Kwon, is a byzantine consensus algorithm.
A proposer would be selected to broadcast an unconfirmed block in this round. So all nodes need to be known for proposer selection. Validators choose whether to broadcast a prevote for the proposed block. The node validates the block and broadcasts a commit for that block. The process is quite similar to PBFT, but Tendermint nodes have to lock their coins to become validators.
Once a validator is found to be dishonest, it would be punished. Consensus algorithms comparisonDifferent consensus algorithms have different advantages and disadvantages. PBFT needs to know the identity of each miner in order to select a primary in every round while Tendermint needs to know the validators in order to select a proposer in each round.
In PoW, miners hash the block header continuously to reach the target value. As a result, the amount of electricity required to process has reached an immense scale. As for PoS and DPOS, miners still have to hash the block header to search the target value but the work has been largely reduced as the search space is designed to be limited. So it saves energy greatly. Bitshares, a smart contract platform, adopts DPOS as their consensus algorithm.
Consider the epic showdown shaping up for to create a global digital currency. First are traditional crypto networks like Bitcoin. Second are corporations like Facebook can other digital conglomerates be far behind? Next up are nation-states, with China implementing its digital currency in as a step toward replacing the US dollar as the currency of record. This will no doubt stimulate the US Federal Reserve to push ahead with the digital dollar.
In the coming year, central bankers, policy-makers, and business leaders — all of us — will decide what the future of the digital economy will look like. Western economies have an opportunity to embrace decentralisation and the Internet of Value and, in doing so, maintain their leadership positions in the global economy.
However, leaders will need a level of flexibility and openness that we have not yet seen. As with everything bold, the future is not something to be predicted, but achieved. Now more than ever, the question of who will build that future should be top of mind in The views expressed in this article are those of the author alone and not the World Economic Forum. As digital currencies are poised to have an impact on global financial systems, design, governance and liquidity are among the key principles in focus.
Even while the world has been wrestling with the pandemic, the pace of work in the blockchain ecosystem has been accelerating and promises to continue. Sign In. I accept. Blockchain Davos Tech for Good These are the challenges blockchain faces in Take action on UpLink.
Most Popular. Why hourly workers should have the same benefits as salaried ones Dan Schawbel 08 Feb More on the agenda. Forum in focus. Read more about this project. Explore context. Explore the latest strategic trends, research and analysis. Blockchain is taking off but is still hampered by bad PR and regulatory foot-dragging. The first jurisdiction to embrace blockchain and develop a regulatory model will reap the rewards in jobs and economic growth.
As cryptocurrencies has become more popular, the transaction times have gotten slower. It was envisioned that the signature data would be arranged in the form of a Merkle tree in the side chain. The Merkle root of the transactions was placed in the block along with the coinbase transaction the first transaction in each block which basically signifies the block reward.
However, on doing this, the developers stumbled upon something unexpected. They discovered that by putting the merkle root in that particular place they somehow increased the overall block size limit WITHOUT increasing the block size limit! While this might sound like a good idea in practice, the implementation of this has been encountered with lots of challenges.
In fact, this has given birth to a lot of debate in the Blockchain community with sides passionately arguing both for and against the block size increase. Anyway, on May 21 , the New York Agreement took place where it was decided that Segwit will be activated and the block sizes will increase to 2 mb. A state channel is a two-way communication channel between participants which enable them to conduct interactions, which would normally occur on the blockchain, off the blockchain. What this will do is that it will decrease transaction time exponentially since you are no longer dependent on a third party like a miner to valid your transaction.
The lightning network is an off-chain micropayment system which is designed to make transactions work faster in the blockchain. It was conceptualized by Joseph Poon and Tadge Dryja in their white paper which aimed to solve the block size limit and the transaction delay issues. That is, we have a new check that requires both parties to sign for it to be valid. The check specifies how much is being sent from one party to another.
Blockchain Scalability Problem And Some Promising Solutions
The transaction group is divided into the transaction group header and the transaction group body. In the rest of the post, blockchain discuss challenges is recent done developments can be done to overcome the hindrances and the adoption of blockchain scalability en masse. Blockchain are becoming more and more mainstream. Learn More. Enter the email address you signed up with and we'll email you a reset link.
Blockchain Implementation: Interoperability, Scalability, Latest Developments & Challenges London
When the miner published a block along with the solution, others would verify it. Though verifying the solution is very easy and fast. The solution of the problem is nothing but proof of work — as the miner is proving that he has done the work.
The amount of power need to be expended depends on the total available computational power of the network. Proof of work is an excellent way to keep the blockchain healthy and decentralized. However, that is also an obstacle to process transactions faster. Federal Reserve controls the US dollar. Can you ask anything if they want to print more USD? Nonetheless, the same goes with the clear majority of the central banks all over the globe that control fiat currencies.
Decentralization is distributing control to the people participating in a system rather than having few people control the operations and decision-making process. This is one of the reasons that more and more people are using cryptocurrencies. In the current blockchain ecosystem, if more people join the network, the more bigger the blockchain scalability problem becomes. It has been just ten years since the invention of the blockchain.
And a lot of researchers are working to make blockchain faster. Instead of entering every transaction into the blockchain, a payment channel will be opened between a set of entities.
Any number of channels can be opened between the network entities — users, merchants, and miners. And a channel can be closed at any moment.
Alice and Bob opened a payment channel in between them. Alice has 5 dollars, and Bob has 30 dollars. These 35 dollars are now in a safe. The safe is created when the channel is opened. When Bob wants to send 5 dollars to Alice, instead of directly transferring the money, the ownership of the money changes.
The money just stays in the safe. When the payment channel is closed, the safe is opened. And Bob will get 25 as he had made a 5-dollar transfer. Alice will get 10 dollars. The more payments channels available, the faster the payment network becomes.
And noting transactions on blockchain becomes less frequent. Therefore, less number of transactions on the blockchain. Thus, making the transaction processing lightning fast. In case of Bitcoin, this system is called Lightning Network. And for Ethereum, it is the Raiden network. The core concept is the same in both the implementations.
In sharding, the miners are divided into multiple groups shards , and then each group will be given different transactions to process. Each group works separately to publish one block each simultaneously. Moreover, these shards talk to each other often so that there is no double spend transaction being given a green signal. Alice has 10 dollars. And she sends 10 dollars to Bob. Shard1 receives a message to verify this transaction. Immediately, Alice again sends a forged transaction of 10 dollars to Charlie even though she has no money.
And this is illegal as Alice is spending more than she has, out of thin air. And it violates the rules of the money system.
So, the shards must keep frequently communicating to prevent bad transactions. Now, this may look very impressive, but here is the thing, the initial design of cryptocurrencies was not meant for widespread use and adaptation. While it was manageable when the number of transactions was less, as they have gotten more popular a host of issues have come up.
For bitcoin and ethereum to compete with more mainstream systems like visa and paypal, they need to seriously step up their game when it comes to transaction times. While paypal manages transactions per second and visa manages transactions per second, ethereum does only 20 transactions per second while bitcoin manages a whopping 7 transactions per second!
The only way that these numbers can be improved is if they work on their scalability. In bitcoin and ethereum, a transaction goes through when a miner puts the transaction data in the blocks that they have mined.
So suppose Alice wants to send 4 BTC to Bob, she will send this transaction data to the miners, the miner will then put it in their block and the transaction will be deemed complete. However, as bitcoin becomes more and more popular, this becomes more time-consuming.
Plus, there is also the small matter of transactions fees. You see, when miners mine a block, they become temporary dictators of that block. If you want your transactions to go through, you will have to pay a toll to the miner in charge. The higher the transaction fees, the faster the miners will put them up in their block.
While this is ok for people who have a huge repository of bitcoins, it might not be the most financially viable options. In fact, here is an interesting study for you. This is the amount of time that people had to wait if they paid the lowest possible transaction fee:. If you pay the lowest possible transaction fees, then you will have to wait for a median time of 13 mins for your transaction to go through.
More often than not, the transactions had to wait until a new block was mined which is 10 mins in bitcoin , because the older blocks would fill up with transactions. Bitcoin has a size limit of 1 mb this will be expanded on later which severely limits its transaction carrying capacity. Theoretically speaking, Ethereum is supposed to process transactions per second. However, in practice, ethereum is limited by 6. Alice has issued a smart contract for Bob. Bob sees that the elements in the contract will cost X amount of gas.
Accordingly, he will charge Alice for the amount of Gas he used up. Since each block has a gas limit, the miners can only add transactions whose gas requirements add up to something which is equal to or less than the gas limit of the block. Currently, all blockchain based currencies are structured as a peer-to-peer network. The participants, aka the nodes, are not given any extra special privileges.
The idea is to create an egalitarian network. There is no central authority and nor is there any hierarchy. It is a flat topology. All decentralized cryptocurrencies are structured like this because of a simple reason, to stay true to their philosophy.
The idea is to have a currency system, where everyone is treated as an equal and there is no governing body, which can determine the value of the currency based on a whim. This is true for both bitcoin and ethereum. Now, if there is no central entity, how would everyone in the system get to know that a certain transaction has happened?
The network follows the gossip protocol. Think of how gossip spreads. The nodes nearest to her will get to know of this, and then they will tell the nodes closest to them, and then they will tell their neighbors, and this will keep on spreading out until everyone knows.
Nodes are basically your nosy, annoying relatives. Remember, the nodes follow a trustless system. Node B will do their own set of calculations to see whether the transaction is actually valid or not.
This means, that every node must have their own copy of the blockchain to help them do so. As you can imagine, this makes the whole process very slow. The problem is, that unlike other pieces of technology, the more the number of nodes increases in a cryptocurrency network, the slower the whole process becomes. Consensus happens in a linear manner, meaning, suppose there are 3 nodes A, B and C. For consensus to occur, first A would do the calculations and verify and then B will do the same and then C.
As cryptocurrencies has become more popular, the transaction times have gotten slower. This is especially a problem with ethereum , because it has the most number of nodes among all cryptocurrencies. Thanks to the ICO craze, everyone wants to have a piece of ethereum , which has significantly increased the number of nodes in its network. Both ethereum and Bitcoins have come up with a host of solutions which have either already been or are going to be implemented.
Activating Segwit aka Segregated Witness would mean that all the signature data of each and every transaction will move from the main chain to the side chain. What do we mean by signature data? This is what the transaction looks like in the code form. Suppose Alice wants to send 0.
This is what the transaction detail looks like:. See the input data? The input data is 0. The problem with this signature data is that it is very bulky. And this data is useful only for the initial verification process, it is not needed later on at all. The signature data will move on from the main chain to the extended bloc k in the parallel chain:.
It was envisioned that the signature data would be arranged i n the form of a Merkle tr ee in the side chain. The Merkle root of the transactions was placed in the block along with the coinbase transaction the first transaction in each block which basically signifies the block reward.
However, on doing this, the developers stumbled upon something unexpected. They discovered that on putting the merkle root in that particular place they somehow increased the overall block size limit WITHOUT increasing the block size limit!
As of August 24, segwit was activated on bitcoin. Basically, doubling the amount of transactions in a block will double a number of transactions and that in turn will double the amount of signature data that will be inside each of those transactions. This would make the transactions even more bulky and increase the transaction time by a huge amount. This opens the gates for malicious parties who may want to spam the blockchain.
Segwit resolves this by changing the calculation of the signature hash and make the whole process more efficient as a result. While this might sound like a good idea in practice, the implementation of this has been anything but. In fact, this has given birth to a lot of debate in the Bitcoin community with sides passionately arguing both for and against the block size increase. Anyway, on May 21 , the New York Agreement took place where it was decided that Segwit will be activated and the block sizes will increase to 2 mb.
People who were not happy with the idea of Segwit activating forked away from the main chain and made Bitcoin Cash which has a block size limit of 8 mb. A block size increase was also suggested for ethereum but because of a lot of reasons people are not really keen on doing that in Ethereum as of writing:.
In the beginning it is going to be a hybrid style system where majority of the transactions will still be done the proof of work style while every th transaction is going to be proof of stake. But what does that mean for ethereum and what are the advantages of this protocol? Introducing proof-of-stake is going to make the blockchain a lot faster because it is much more simple to check who has the most stake then to see who has the most hashing power.
This makes coming to a consensus much more simple. At the same time proof-of-stake makes the implementation of sharding easier. In a proof-of-work system it will be easier for an attacker to attack individual shards which may not have high hashrate. This incentivizes them to increase the block size to get in more transactions via gas management.
As of right now, Casper stage one is going to be implemented on the blockchain, wherein every th block will be checked via proof-of-stake.
Yoichi Hirai from ethereum foundations has been running casper scripts through mathematical bug detectors to make sure that it is completely bug free.
Eventually, the plan is to move majority of the block creation through proof-of-stake and the way they are planning to do that is…. Having an impossibly high difficulty will greatly reduce the hash rate which in turn will reduce the speed of the entire blockchain and the DAPPS running on it.
This will force everyone involved in ethereum to move on to proof-of-stake. However, this entire transition is not without its obstacles. One of the biggest fears that people have is that miners may forced a hardfork in the chain at a point before the ice age begins and then continue mining in that chain.
Blockchain Scalability: Hard Forks, Lighting Network, and Plasma Cash
However, on doing this, the developers stumbled upon something unexpected. They discovered that by putting the merkle root in that particular place they somehow increased the overall block size limit WITHOUT increasing the block size limit!
While this might sound like a good idea in practice, the implementation of this has been encountered with lots of challenges. In fact, this has given birth to a lot of debate in the Blockchain community with sides passionately arguing both for and against the block size increase. Anyway, on May 21 , the New York Agreement took place where it was decided that Segwit will be activated and the block sizes will increase to 2 mb.
A state channel is a two-way communication channel between participants which enable them to conduct interactions, which would normally occur on the blockchain, off the blockchain. What this will do is that it will decrease transaction time exponentially since you are no longer dependent on a third party like a miner to valid your transaction.
The lightning network is an off-chain micropayment system which is designed to make transactions work faster in the blockchain. It was conceptualized by Joseph Poon and Tadge Dryja in their white paper which aimed to solve the block size limit and the transaction delay issues.
That is, we have a new check that requires both parties to sign for it to be valid. The check specifies how much is being sent from one party to another. As new micro-payments are made from one party to the other, the amount on the check is changed and both parties sign the result. In order to activate this, the transaction needs to be signed off by both Alice and Bob before it is broadcasted into the network.
This double signing is critical in order for the transaction to go through. Global trade finance is moving to blockchain. Everledger has expanded its efforts to eliminate conflict diamonds into China via a WeChat app. Mind-boggling initiatives are also underway related to digital currency and economic inclusion. And how can we harness the potential of this technology in ? The words blockchain or crypto still conjure up images of bad actors, criminals, and get-rich-quick hucksters using a new technology to commit age-old frauds — and there has been plenty of that.
Meanwhile, parochial infighting and juvenile squabbling has reflected poorly on the ecosystem as a whole. But we are witnessing some exciting collaborations. Many industries such as the Blockchain in Transport Alliance have begun intense collaboration to bring about wider change. This sort of interdependence will be the key to moving forward. Also, institutions such as the Chamber of Digital Commerce are proving themselves crucial allies for governments hoping to strike the right regulatory balance.
Momentum is building. Blockchain is running head-on into the system of laws, regulations, and structures that govern society. Freedom of speech and information is protected by the US Constitution to be open. But when it comes to assets, all our systems of laws and governments are designed to keep these closed, proprietary, and owned by the powerful. As a result, the practices that guided the digitisation of information i.
Regulation represents by far the most significant hurdle for blockchain innovators, according to a survey of hundreds of executives and entrepreneurs , co-conducted by the Chamber of Digital Commerce Canada and the Blockchain Research Institute. Existing regulations favor incumbents over disruptors. The regulatory stonewall for blockchain innovators is the norm across major economies.
So the first large jurisdiction to embrace this new technology meaningfully and develop a regulatory model that encourages innovation while protecting consumers will reap the rewards in jobs and economic growth. To borrow from the late Roy Amara of the Institute for the Future, we tend to overestimate the impact of a new technology in the short run, but we underestimate it in the long run.
Blockchain faces implementation challenges beyond regulation and the inertia of incumbents. The consequences of inaction by business and government leaders have never been so stark.
Consider the epic showdown shaping up for to create a global digital currency. First are traditional crypto networks like Bitcoin. Second are corporations like Facebook can other digital conglomerates be far behind? Next up are nation-states, with China implementing its digital currency in as a step toward replacing the US dollar as the currency of record.
With fewer validators, consortium blockchain and private blockchain could be more efficient. The main difference among the three types of blockchains is that public blockchain is decentralised, consortium blockchain is partially centralised and private blockchain is fully centralised as it is controlled by a single group. Everyone in the world could join the consensus process of the public blockchain. Different from public blockchain, both consortium blockchain and private blockchain are permissioned.
One node needs to be certificated to join the consensus process in consortium or private blockchain. Since public blockchain is open to the world, it can attract many users. Communities are also very active. Many public blockchains emerge day by day. As for consortium blockchain, it could be applied to many business applications. Currently, Hyperledger hyperledger, is developing business consortium blockchain frameworks.
Ethereum also has provided tools for building consortium blockchains ethereum, n. As for private blockchain, there are still many companies implementing it for efficiency and auditability. Consensus algorithmsIn blockchain, how to reach consensus among the untrustworthy nodes is a transformation of the Byzantine Generals BG Problem Lamport et al. In BG problem, a group of generals who command a portion of Byzantine army circle the city.
The attack would fail if only part of the generals attack the city. Generals need to communicate to reach an agreement on whether attack or not. However, there might be traitors in generals. The traitor could send different decisions to different generals. This is a trustless environment. How to reach a consensus in such an environment is a challenge.
It is also a challenge for blockchain as the blockchain network is distributed. In blockchain, there is no central node that ensures ledgers on distributed nodes are all the same. Nodes need not trust other nodes. Thus, some protocols are needed to ensure that ledgers in different nodes are consistent. We next present several common approaches to reach consensus in the blockchain.
Approaches to consensusProof of work PoW is a consensus strategy used in Bitcoin network Nakamoto, POW requires a complicated computational process in the authentication. In POW, each node of the network is calculating a hash value of the constantly changing block header. The consensus requires that the calculated value must be equal to or smaller than a certain given value.
In the decentralised network, all participants have to calculate the hash value continuously by using different nonces until the target is reached. When one node obtains the relevant value, all other nodes must mutually confirm the correctness of the value. After that, transactions in the new block would be validated in case of frauds. Then, the collection of transactions used for the calculations is approved to be the authenticated result, which is denoted by a new block in the blockchain.
The nodes that calculate the hashes are called miners and the POW procedure is called mining. Since the calculation of the authentication is a time-consuming process, an incentive mechanism e.
In the decentralised network, valid blocks might be generated simultaneously when multiple nodes find the suitable nonce nearly at the same time. As a result, branches or forks may be generated as shown in Figure 4. However, it is unlikely that two competing forks will generate next block simultaneously. In POW protocol, a chain that becomes longer thereafter is judged as the authentic one. Take Figure 4 as an example again. Consider two forks created by simultaneously validated blocks B11 and G Miners work on both the forks and add the newly generated block to one of them.
When a new block say B12 is added to block B11, the miners working on fork GG12 will switch to B Block G12 in the fork GG12 becomes an orphan block since it is no longer increased. Generally, after a certain number of new blocks are appended to the blockchain, it is nearly impossible to reverse the blockchain to tamper the transactions. In Bitcoin blockchain, when approximately six blocks are generated, the relevant blockchain is considered to be the authentic one e.
Block interval depends on different parameter setting. Bitcoin block is generated about every 10 min while Ethereum block is generated about every 17 s. Miners have to do a lot of computer calculations in PoW, yet these works waste too much resources. To mitigate the loss, some PoW protocols in which works could have some sideapplications have been designed.
For example, Primecoin King, searches for special prime number chains which can be used for mathematical research. Instead of burning electricity for mining the POW block, proof of burn P4Titan, asks miners to send their coins to addresses where they cannot be redeemed. By burning coins, miners get chances for mining blocks and they do not need powerful hardwares as POW. Instead of demanding users to find a nonce in an unlimited space, POS requires people to prove the ownership of the amount of currency because it is believed that people with more currencies would be less likely to attack the network.
Since the selection based on account balance is quite unfair because the single richest person is bound to be dominant in the network. As a result, many solutions are proposed with the combination of the stake size to decide which one to forge the next block.
In particular, Blackcoin Vasin, uses randomisation to predict the next generator. It uses a formula that looks for the lowest hash value in combination with the size of the stake. Peercoin King and Nadal, favours coin age-based selection. In Peercoin, older and larger sets of coins have a greater probability of mining the next block. Compared with PoW, PoS saves more energy and is more effective. Unfortunately, as the mining cost is nearly zero, attacks might come as a consequence.
Many blockchains adopt PoW at the beginning and transform to PoS gradually. In proof of activity, a mined block needs to be signed by N miners to be valid. Sometimes stake could be other things, for example, in proof of capacity burstcoin, , miners have to allocate large hard drive space to mine the block. Practical byzantine fault tolerance PBFT is a replication algorithm to tolerate byzantine faults Miguel and Barbara, A new block is determined in a round. In each round, a primary would be selected according to some rules.
And it is responsible for ordering the transaction. The whole process could be divided into three phase: pre-prepared, prepared and commit. So PBFT requires that every node is known to the network. There is no hashing procedure in PBFT. In PBFT, each node has to query other nodes while SCP gives participants the right to choose which set of other participants to believe.
In dBFT, some professional nodes are voted to record the transactions instead of all nodes. Delegated proof of stake DPOS.
Similar to POS, miners get their priority to generate the blocks according to their stake. Stakeholders elect their delegates to generate and validate a block. With significantly fewer nodes to validate the block, the block could be confirmed quickly, making the transactions confirmed quickly. Meanwhile, the parameters of the network such as block size and block intervals could be tuned. Additionally, users do not need to worry about the dishonest delegates because the delegates could be voted out easily.
DPOS has already been implemented, and is the backbone of Bitshares bitshares, n. Ripple Schwartz et al. In the network, nodes are divided into two types: a server for participating consensus process and client for only transferring funds.
UNL is important to the server. When determining whether to put a transaction into the ledger, the server would query the nodes in UNL. Tendermint Kwon, is a byzantine consensus algorithm.
A proposer would be selected to broadcast an unconfirmed block in this round. So all nodes need to be known for proposer selection.
Validators choose whether to broadcast a prevote for the proposed block. The node validates the block and broadcasts a commit for that block. The process is quite similar to PBFT, but Tendermint nodes have to lock their coins to become validators.
Once a validator is found to be dishonest, it would be punished. Consensus algorithms comparisonDifferent consensus algorithms have different advantages and disadvantages. PBFT needs to know the identity of each miner in order to select a primary in every round while Tendermint needs to know the validators in order to select a proposer in each round. In PoW, miners hash the block header continuously to reach the target value. As a result, the amount of electricity required to process has reached an immense scale.
As for PoS and DPOS, miners still have to hash the block header to search the target value but the work has been largely reduced as the search space is designed to be limited. So it saves energy greatly. Bitshares, a smart contract platform, adopts DPOS as their consensus algorithm. Ripple implements the Ripple protocol while Tendermint devises the Tendermint protocol. PBFT and Tendermint are permissioned protocols. Node identities are expected to be known to the whole network, so they might be used in commercial mode rather than public.
PoW and PoS are suitable for public blockchain. Advances on consensus algorithmsA good consensus algorithm means efficiency, safety and convenience. Current common consensus algorithms still have many shortages. New consensus algorithms are devised aiming to solve some specific problems of the blockchain. The main idea of PeerCensus Decker et al.
Besides, Kraft Kraft, proposed a new consensus method to ensure that a block is generated in a relatively stable speed. It is known that high blocks generation rate compromise Bitcoin's security.
Instead of the longest branch scheme, GHOST weights the branches and miners could choose the better one to follow. Chepurnoy et al. In such a protocol, miners only have to store old block headers instead of full blocks. Applications of blockchainThere is a diverse of applications of blockchain technology.
In this section, we summarise several typical applications of blockchain. We roughly categorise the applications of the blockchain into finance in Section 4. Figure 5 illustrates 5 representative application domains of the blockchain. The emergency of blockchain systems such as Bitcoin Nakamoto, and hyperledger, has brought a huge impact on traditional financial and business services.
Peters et al. Blockchain technology could be applied to many areas including clearing and settlement of financial assets etc. Besides, Morini showed that there are real business cases like collateralisation of financial derivatives that could leverage blockchain to reduce costs and risks.
Blockchain has also caught tremendous attention in the eyes of large software companies: Microsoft Azure azure, and IBM ibm, are beginning to offer Blockchain-as-a-Service.
In addition to the evolution of financial and business services, blockchain can help traditional organisations to complete the enterprise transformation smoothly. Consider an example of postal operators POs. Since traditional postal operators POs act as a simple intermediary between merchants and customers, blockchain and cryptocurrency technology can help POs to extend their simple roles with the provision of new financial and un-financial services. In Jaag et al.
Since the POs are viewed as a trusted authority by the public, postcoin could be prevailed quickly with their dense retail network.
In addition, it is also shown in Jaag et al. Blockchain could also help build a P2P financial market in a secure and reliable way. Noyes explored ways of combining peer-to-peer mechanisms and multiparty computation protocols to create a P2P financial MPC Multiparty Computation market Noyes, b.
Blockchain-based MPC market allows offloading computational tasks onto a network of anonymous peer-processors. Risk management framework plays a significant role in financial technology FinTech and now it can be combined with blockchain to perform better. Pilkington Pilkington, provided a novel risk-management framework, in which blockchain technology is used to analyse investment risk in the Luxembourgish scenario.
Investors who nowadays hold securities through chains of custodians tend to face the risk of any of these failings. With the help of blockchain, investments and collaterals can be decided quickly instead of going through long-term consideration. Micheler and Heyde indicated in Micheler and von der Heyde that a new system combined with blockchain can reduce custody risk and achieve the same level of transactional safety.
Besides, blockchain-based smart contract enables the decentralised autonomous organisations DAO to engage in business-work collaborations. IoT is proposed to integrate the things also named smart objects into the internet and provides users with various services Atzori et al.
Blockchain technologies can potentially improve the IoT sector. Zhang and Wen propose a new IoT E-business model and realise the transaction of smart property based on blockchain and smart contract. In this model, distributed autonomous corporations DAC is adopted as a decentralised transaction entity. People trade with DACs to obtain coins and exchange sensor data without any third party. Safety and privacy preservation is another important concern for IoT industry.
Blockchain can also help in improving privacy in IoT applications. In particular, Hardjono and Smith proposed a privacy-preserving method for commissioning an IoT device into a cloud ecosystem.
More specifically, a new architecture was proposed in Hardjono and Smith to help the device to prove its manufacturing provenance without the authentication of the third party and it is allowed to register anonymously. In ADEPT, appliances in the home would be able to identify operational problems and retrieve software updates on their own. Public and social servicesBlockchain can also be widely used in public and social services. One of the typical blockchain applications in public services is the land registration NRI, , in which the land information such as the physical status and related rights can be registered and publicised on blockchains.
Daily EOS transactions since July This is the amount of time that people had to wait if they paid the lowest possible transaction fee:. We summarise three typical challenges: scalability in Section 5. Toggle navigation. Then Carol transfer funds to Bob with multiple inputs c1, c2, c3, etc.