none

A CRASH COURSE ON BLOCKCHAIN TECHNOLOGY

21-11-2017
by 
in 

Blockchain technology was invented to make the world’s first crypto-currency, Bitcoin, possible. Traditional currencies rely on intermediaries like governments, banks and clearing houses to guarantee their value and process transactions. Bitcoin uses digital technologies to cut out these middlemen.

The central technology is a shared, distributed ledger. Instead of relying on third parties such as banks or land titles offices to record and keep a copy of transactions, a Blockchain creates a digital ledger of which each participant has a copy. Participants communicate with each other via a peer-to-peer computing network.

Records are added to the shared ledger one block at a time and are identified by a timestamp and a unique digital identifier, or ‘hash’, produced using a cryptographic algorithm. Each new block also records the hash of the previously added block, and this links them together in a chain. The Blockchain also needs to verify that any new block is valid before it is accepted into the chain - a process known as consensus.

As well as recording transactions, a Blockchain can also contain a set of rules or a ‘smart contract’ that automatically performs certain actions when a block is accepted and added to the chain.

Once a block is accepted, it cannot be deleted; any attempt to insert a new block between two existing blocks would be rejected by the consensus process. Similarly, the contents of the block are tamper proof, because it is impossible to change all the duplicate copies of the Blockchain held by all the different participants.

Although every participant has a copy of the ledger, they cannot necessarily read all the records. Using digital identity and encryption technologies, it is possible to restrict access to records to just the concerned parties and/or auditors, for example.

A Blockchain generally needs a way to identify participants and ensure they are who they say they are (unless, like Bitcoin, the participants are anonymous). Most Blockchains used in business – known as Permissioned Blockchains – identify participants.

Permissioned Blockchains use a certificate authority (CA) that issues a unique cryptographic certificate to each participant so they can be identified. A CA is a sort of middleman, but not one that slows down transactions or adds much expense. In fact, identifying participants makes the process of achieving consensus easier and cheaper.

Consensus can be an expensive process with anonymous Blockchains. In the case of Bitcoin, it is achieved by setting complex problems for groups of computers that hold matching copies of the ledger to solve. The more computers in agreement, the more computing power they have to solve the problem. The first group to come up with a solution prevails, and their version of the ledger is distributed to all the others. While effective, the amount of computing power and energy consumed can be out of proportion with the end result.

Achieving consensus with Permissioned Blockchains is generally less costly and can vary depending on the application. It can be as simple as nominating a certain number of participants as validators, with consensus achieved when a majority of validators are in agreement. More complex methods include the use of Practical Byzantine Fault Tolerance algorithms – perhaps a topic for another crash course!

Related news & editorials

  1. 25.03.2019
    25.03.2019
    by      In
    Following the awarding of the contract to provide the Australian Government’s Short Range Ground Based Air Defence programme, Raytheon Australia is set to build its first Australian production facility in Adelaide.
    The air defence programme, dubbed LAND19 Phase 7B, will see Raytheon Australia and... Read More
  2. 22.03.2019
    22.03.2019
    by      In
    OMAX Corporation, a manufacturer of abrasive waterjet systems, plans to join forces with Hypertherm, a manufacturer of industrial cutting systems and software, following the signing of a definitive merger agreement that establishes OMAX as a wholly owned subsidiary of Hypertherm.
    When the agreement... Read More
  3. 22.03.2019
    22.03.2019
    by      In
    CSIRO research into the Melbourne to Brisbane Inland Rail project has found that shifting horticulture and processed agriculture, such as meat, rice and dairy products, from road to rail could reduce transport costs for the agricultural sector by an estimated $70 million per year.
    Last year,... Read More
  4. 22.03.2019
    22.03.2019
    by      In
    The executive board of German bearings manufacturer Schaeffler AG has made appointments based on decisions by the company’s supervisory board on 1st March 2019. The executive board will continue to consist of eight managing directors and the four regional CEOs, but the new appointees will make the... Read More