In today’s world every business one way or another has used computing technology. Even farmers who sell their produce on the side of the road end up putting that cash into the bank. The bank uses computer technology to keep track and protect individuals’ private information. Blockchain will allow for the protection of information being forged while on the same token tracking any and all data with the use of open ledgers. Blockchain allows information to be agreed among peers to validate all of the data through a consensus. Even allowing data to be replicated in a trusted manner because all participants in the blockchain can validate others data. The data and records stored in these blocks are immutable because the data can not be changed. While most people may not give blockchain a second thought it will, without a doubt, have an impact on every business around the world. Most people have not even heard the phrase “blockchain”, and generally when the term pops up it is synonyms with Bitcoin and other cryptocurrencies. Although Bitcoin is what jump started the popularity of blockchain it was only the first major step in the very long journey that blockchain has in store. Blockchain is still well within its early stages of its exponential growth. Markets and Markets predicts that, “The global blockchain market size is expected to grow from USD 3.0 billion in 2020 to USD 39.7 billion by 2025, at an impressive Compound Annual Growth Rate (CAGR) of 67.3% during 2020–2025.” With more and more of the titans of industry slowly starting to implement blockchain technology it is safe to say that blockchain is not going anywhere any time soon.
What is Blockchain and how does it work?
Founded in 1991, the blockchain’s original creation was for timestamping documents, so it would not be possible for employees to forged their hours. In this way Blockchain is like an automatic notary. Although blockchain was created in 1991, it went largely unused until Satoshi Nakamoto, the supposed creator of Bitcoin, created the most famous cryptocurrency to date in 2009. A blockchain is a distributed ledger open to the public to view. Once the information is entered into the blockchain it is virtually impossible to alter.
Before understanding blockchain as a whole, it is important to understand the different functions that go into a blockchain. First, is the block. Each block contains data, hash, and the hash of the block before in the chain. The data is just the information that is being stored and is dependent on the type of blockchain. For example, if the blockchain was being used by a bank it would store information like transaction details, and a blockchain being used to track a production cycle would list locations of the factories. A hash code is made up of about 40 bytes of 0s and 1s. To put this into perspective one bytes contains 8 bits. Eight bits have 2^8 different combinations, so 40 bytes would have 256^40 different combinations. The hash is typically thought of as the fingerprint of the data being stored in the block. The hash identifies the block, so if a hacker attempts to change the information in a block then the hash will change for that block. So, if the hash changes, it will set off a red flag for the nodes because it will not be the original hash making that block and the following blocks invalid. The third element in every block is that the block also contains the hash from the previous block then if one block is changed it’s very easy to tell which block has been altered. This feature alone adds so much value to the security of the blockchain. The only block that does not have this feature is the first block in a chain, and that is known as a “Genesis” block. The Genesis block is the only block that has one hash within because it has no previous block to point to.
Computers nowadays are powerful enough to calculate thousands of hashes per second, so a computer could change every hash in a chain to make the chain valid again. Enter “Proof of Work”, in Bitcoins case the Proof of Work slows down the creations of new blocks similar to DoS. So if a hacker tampers with one block they will have to calculate the proof of work for the rest of the blocks as well. The security of a blockchain comes from the combination of both hashing and the use of proof of work.
There is also one more way that blockchains secure themselves and that is by using a Peer to Peer (P2P) network instead of one centralized network. These networks are open to the public and whenever a new person joins the network they receive a copy of the blockchain. Whenever anyone creates a new block then everyone receives that block to their chain. The node then verifies each block was added to the chains. So if one chain becomes invalid the node will compare it to the other chains in the network. This way there is a consensus between all the chains on the network.
To successfully change any data stored within a block would require every block across 50% of chains to be changed and the calculation of the proof of work for every block. Blockchains are always evolving to have many more features such as smart contracts. Smart contracts follow a set of rules, and once those rules have been met then a transaction can accrue fast.
“Smart Contract” is a new feature in the structure of blocks which allows a transaction to automatically happen when set conditions have been met. One instance of this being used is in the transfer of ownership in real estate. If a will is created with a smart contract then the condition would be when said person passes their property would automatically go to their child because of the condition of them passing.
How is Blockchain being Implemented in Businesses?
There will be endless opportunities for companies to implement blockchains into their business. One idea that is believed to become common practice in the future of the product supply chain is using a blockchain for transparency. The transparency in a supply chain can prevent piracy and establish an ethical high ground. For example, Nestlé is using a blockchain to show where their coffee beans come from in their new project “Chain of Origin”. Nestlé is one of many large corporations that has been accused of not having an ethical supply chain so this level of transparency could bring ethical credibility back to their brand. Nestlé plans to add a QR code on their product showing the world where each bag of coffee was farmed, where it was a package, and where it has been shipped. Another purpose for this transparency would be for luxury clothing brands like Gucci to help their customers distinguish between real Gucci apparel and the fakes.
BMW, the luxury automobile titan, has a pilot program in place introducing blockchain into their company. The primary use would be to track parts for manufacturers, but the more interesting use would give each automobile their own “digital identity”. Not only would this “digital identity” store information such as serial numbers, but it tracks the entire life cycle of the car. This includes statistics of speed, braking, location, accidents, and much more. De Beers is another company that wants to add a digital identity to an object.
De Beers Group is an international corporation that specializes in diamond mining, diamond exploitation, diamond retail, diamond trading, and industrial diamond manufacturing sectors. De Beers has a new software, Tracr, that 3D scans a diamond to record the history of the diamond. Big-name jewelry stores like Zales and Jared have already signed up for this new software.
Cryptocurrency is what popularized blockchain and is what is currently using blockchains the most. Coinbase is a crypto wallet that services cryptocurrency users in the same way that a bank would traditional cash. Coinbase was even just approved by Visa to have a card soon.
Blockchain Managed Services?
Companies have to have ways to use blockchains without building a chain from the ground up. The way to do this is through Blockchain Managed Services. One of the first companies to offer blockchain services was Microsoft in 2015 with Azure Blockchain Services. Microsoft serves companies such as; GE, J.P. Morgan, Starbucks, and Singapore Airlines. Azure Blockchain Services pushes features such as data security, data management, and governance. According to Microsoft’s website, “Microsoft invests over USD 1 billion annually on cybersecurity research and development, and employs more than 3,500 security experts focused strictly on securing data and privacy.” This information shows how confident Microsoft is in the future of blockchain.
Amazon Web Services (AWS) started offering blockchain and released in April of 2019. Some of Amazon’s big blockchains clients include; Sony music, BMW, and Nestlé. Amazon claims by using their services instead of using the direct resources (in this case it is Hyperledger Fabric) they can cut the setup time by 60%. Although with their Managed Blockchain Service, which has decentralized ownership, Amazon also offers a Quantum Ledger Database if their client wants a centralized database.
Manage Services for blockchains are priced off of storage, nodes, transactions, and computing power. Here is the price structure of Microsoft Azure’s Module.
|Microsoft Azure’s Module|
|Environment for dev test||Run production workloads|
|Compute||1 vCore||2 vCores|
|Transaction Node price (per hour)||$0.0996/hour||$0.318/hour|
|Validator Node price (per hour)||$0.0996/hour||$0.318/hour|
|Blockchain Storage price GB per month||$0.05/month||$0.05/month|
|Blockchain data manager||$0.0001/transactionIncluded transactions — 50/day||$0.0001/transactionIncluded transactions — 50/day|
What is HyperLedger?
To put it simply, Hyperledger is an umbrella project of open-source blockchains and related tools, that started in December 2015. HyperLedger incumbases the tools and resources that allow companies like Amazon and Microsoft to provide these managed services to their clients. One of the most popular tools is Hyperledger Fabric which was created by Digital Asset and IBM and has now emerged as a collaborative cross-industry venture, which is currently being hosted by the Linux Foundation. An example that puts all together is as follows, Nestle hired Amazon to create a blockchain system that works best for their needs. Amazon uses Hyperledger Fabric, which is under the umbrella of Hyperledger, to create Nestles’ customized blockchain.
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