Blockchain Basics

Block & Chain

Headlines about Blockchain ushering in a revolution and becoming the internet of value is quite common. So much so, that none of us realize that it’s creators Satoshi Nakamoto in their 2008 whitepaper introducing this concept to the world had not named it Blockchain! They had used the words ‘Block’ and ‘Chain’ separately. To the creators, Block and Chain were concepts rather than a name. They believed that the process of verifying and recording transactions into a block and linking them together as a chain, would make this whole approach of peer to peer interactions secure, visible to all parties and be hard to hack into or be modified without detection. Thereby eliminating the need for middlemen or authorities.

Blocks by themselves are an interesting concept. Does it remind you of a family!

A ‘block’ very simply, verifies and records any new transactions. Thereby creating a permanent record. Roughly every ten minutes a new Block is created and added to the blockchain. Once created a ‘Block’ steps away from the spotlight and ushers in the next block. Yet, even as it steps away from the spotlight. It holds hands with the next block and lends it credibility. Much like a family giving its surname to the next generation. Its Hash is imprinted and carried by the next block. Thus forming a chain of blocks

Here is a live sample of a chain being formed of Blocks and a pictorial representation follows.

Why would ‘Block & Chain’ offer unparalleled security?

Think of a notebook with page numbers to indicate the linkage or chain. It is possible that someone could replace the contents of the page without having to alter the page number. Well, we may never notice something amiss since the page numbers continue to tally.

In the ‘block and chain’ concept, each block in the chain carries the digital signature of the previous block. Even if a single alphabet in the transactions is changed, the digital signature is significantly altered. It will not tally with the next block as seen in the image below.

Let’s dive deeper into this image. This digital signature or Proof of Work you notice in the header of a block is a cryptographically generated key. Any change in the transactions listed in the block will substantially alter the Hash/Proof of work/signature of the block. You also see that the next block carries the signature of the previous block. This is the chain linking them. So the minute any transaction in the previous block is altered. Its hash will change. It won’t tally with the one already imprinted on the next block! This makes it very evident that the details have been tampered with in a Blockchain.

Thereby giving this framework of peer to peer interactions the security & immutability features. The block and chain are the foundational elements, the very molecules, upon which the premise of Blockchain is built.

Leaving you with an idea of how a real Block looks like. The blocks are not without their own quirks and sense of humour. There are Orphan blocks, uncle blocks, Stale blocks, Genesis blocks and many more funny blocks out there. Go on read about them here and pass on the chuckle:).

Blockchain and Electricity

Visa, the worlds leading payment processing firm, processes 1700 transactions in a second. They do it in a matter-of-fact manner, within a blink of an eye. Blockchain, through the Bitcoin network, process SEVEN transactions in a second, yes seven. Which is why, the protests and US Congressional hearing even, sounded like an overreaction from an already paranoid world. A world, according to Gartner, is in the trough of disillusionment with Blockchain. Blockchain and electricity, need closer examination and greater understanding.

How much electricity does Blockchains consume?

Was it disillusionment or does Blockchain consume unwarranted amounts of electricity?

A cursory search on Google. 6.5 million U.S. households could be powered by the energy consumed operating Blockchain (2017). A more recent study puts it closer to the electric power consumed by Ireland or New Zealand. It got worse, pundits predict this figure could rise to 7.7GW before the end of 2018. That is 0.5% of the electricity consumed by the entire world!!

In a world strained of natural resources, this is a fair lot.

Why would Blockchain need this enormous supply of electricity? This question sent us on the road of conversations and exploration. The creators of Blockchain, Satoshi Nakamoto, introduced a framework which uses proof of work or solving puzzles to confirm transactions. This type of validation prevented malicious attacks and double counting. Critical to establishing trust in the network without the need for a middleman or authority.

Blockchain’s need for electricity

Why would solving puzzles on the computer, or in Blockchain terms ‘Proof of work’ need enormous amounts of electricity? Here is an analogy for the processing transactions on a Blockchain.

Imagine a teacher who gives a puzzle to a class of 5th graders (50 kids in her class). She promises them a coin as a reward for solving the puzzle. Each of them is hard at work, pen and paper in hand, trying to crack the puzzle and win the coin. The child who solves the puzzle first, jumps up and down, raising his/her hand. The teacher examines it for accuracy, certifies it as CORRECT. She rewards the child with the promised coin! Think of all the other kids in the class who also worked on the same puzzle but were not the first to solve it. The amount of energy spent on solving one puzzle thus is: 50*effort to solve the puzzle. 50 times the effort!

This is how Blockchain works as well. A transaction occurs. All the miners across the world are trying to solve the puzzle and generate the hash. While the kids worked with pen and paper, the miners work with powerful machines. The reward for solving the puzzle currently is 25 Bitcoins + costs involved. The first miner who gets the puzzle right and forms the block wins the coins. The electricity consumed by the other miners is unfortunately superfluous. This manner of creating blocks is the Proof of Work, method.

Proof of Work gives Blockchain the enhanced security feature. Proof of Work also gives Blockchain the ability to remove middleman. Yet it results in Blockchain being accused of consuming enormous electricity. Processing one transaction can instead power an American household for an entire week!

Blockchain and electricity. When it started..

Did the creators of Blockchain foresee the enormous waste of natural resources? Satoshi Nakamoto has a robin hood feel to them in Blockchain folklore. One(s) who were tired of being at the mercy of big corporations being hand in glove with governments. Anecdotes say that blockchain resulted from the disillusionment of the Lehman Brothers crash in 2009. An alternative for us. Did they disregard nature?

Apparently not. Satoshi insisted and urged the initial users of Blockchain to stay away from powerful computing machines. The potential damage was known. Therefore a wider adoption of Blockchain to enhance security was sought. The initial bitcoins were mined on good old Pentium 4 processors or home computers. This Gentleman’s agreement, to not use powerful equipment to mine, held firm till 2013. The soaring price of a bitcoin and greed got the better of us. GPU’s entered the game. Now we have moved to fancy mining rigs.

Some loyalists say the energy estimation of Blockchain is overstated. Maybe. This technology has the power to usher in change and a new way of working for the world. Technology and change carry the responsibility of ensuring sustainability. As Blockchain moves into the spotlight, it must deliver at the intersection of people, change and technology to be relevant, sustainable and to make change meaningful. If that means adopting the Proof of Stake method, which is being experimented with, so be it. If it means waiting to see what the silicon valley firm Splend seems to have solved in stealth mode, so be it. Stay tuned.

The Blockchain journey has just begun.

Earlier attempts on understanding Blockchain are below.

a. Blockchain Law and Education

b. Transparency and privacy

c. Blockchain possibilities

Blockchain News – Education and Law

Heres a roundup of interesting stories on Blockchain that got discussed, debated or worked on. Blockchain news and views that caught the eye.

#1. The Law joins Blockchain!

China’s Supreme Court Rules that Blockchain Can Legally authenticate evidence which is legally binding, as part of newly clarified litigation procedures in the country’s internet courts. The state of Vermont in the USA passed a law that made Blockchain records admissible in court as well.

#2. The education sector is collaborating to bridge the huge gap in supply for Blockchain skills. With a whopping 151% increase in the number of jobs asking for Blockchain/Cryptocurrency skills in the last one year alone, no one is surprised.

Wharton offered its first full-time course on Blockchain for both undergrad and postgraduate students and guess what, it is already booked in full. Wharton also joins 17 other universities around the world in a $50 million, multi-year research and development initiative backed by Ripple (a cryptocurrency payment network).

The Ripple Project” a University Blockchain Research initiative will be an avenue for academic research, technical development, and innovation in Blockchain, cryptocurrency and distributed ledger technology.

Coursera And ConsenSys Partner To Offer A Free Blockchain Course starting September 2018!

Not to be left behind start-ups in Blockchain are climbing the ranks in the Best places to work Survey by LinkedIn this year.

And for all you Blockchain enthusiasts here is a useful link which has collected information on all the Blockchain conferences, meetups and Summit’s across the globe in September 2018. If there are other events that you are looking forward to, leave a comment here or give us a shout @flyntrok on twitter and we will help and spread the word.

Did you read about the Blockchain District? That sighting evoked quite some chatter. Happy to keep the conversation going. So, whats the latest Blockchain News you have heard?

Blockchain District

Will Telangana, the youngest of Indian states, lead the way for the Blockchain adoption and innovation in India? If the MOU signed by the State of Telangana “to create the first Blockchain District in the country”, is any sign, it is off to a head start. The 50 MOU’s signed at the recently concluded International Blockchain Congress held in Hyderabad and Goa stand as testimony to the progress the domain is making.

Blockchain District

The Blockchain district will aim to be a centre of excellence for Blockchain.  It will serve as an incubator for developing the processes and technology associated with Blockchain. The creation of a seamless ecosystem is to enable stakeholders to learn and support each other. Plus, the government plans to have a ringside view of the workings of the industry thus helping it envisage the big picture needed to frame appropriate regulatory and policies.  A framework that will enable and promote Blockchain growth both in India and the world. At least that’s how it reads on paper.  Even whilst it remains to be seen as to how it will pan out in the real world, this progress is a harbinger of good times for the Blockchain ecosystem.

The Core Idea

Tech Mahindra has signed up as the Technology Partner for the Blockchain district. The firm will provide platform and technology support to all the incubators.  The idea is to make it easier for the Blockchain start-ups to focus on Blockchain solutions. Exploration of solutions in the field of healthcare, land records, hospitality and scholarships all point to interesting times ahead.

Other Snippets

Snippets which caught the eye included examples and ideas that are gaining traction. Allocation of scholarships, for instance, attempted through the Blockchain framework is exciting. The credentials of the prospective scholars are verified through smart contracts on Blockchain. A scholarship awarded to those meeting the criteria.  Making the process easier and foolproof.

Solving real problems

We have never been limited by tools but only by our imagination to use them well. That Blockchain is getting deployed to solve real problems in the not so privileged parts of the world offers a peek into its prowess. Congnito Technologies has signed an MOU with the Telangana state to help deliver low-cost credit to the self-help groups using Blockchain.  Micro-finance going further than what it does today holds the potential for firing up several other parts of the ecosystem.

More and more of similar stories will emerge as the technology gains mainstay. The entire meet seems to have been abuzz with possibilities. From workshops for students to imagine and learn about the world of Blockchain, to start-ups who presented their solutions to the 3000+ participants, the conference seems to have panned the spectrum. 80+ speakers ranging from CEO’s of various firms, including Niti Aayog, the IT ministers from Telangana and Goa who shared perspectives and keynotes, all seem to be have hit the right notes.

The International Blockchain Congress,  the first of its kind in India and lauded as the largest in Asia, hosted by the states of Telangana and Goa, trended for two full days on Twitter. Providing much fodder for this post, not to mention all the animated conversation over the possibilities the technology holds for the future.

These still are early days for Blockchain. Time will tell where we choose to take it to and how we use our imagination well.

The attempt to further understanding

Fledgling attempts to build an understanding through conversation and contribution are listed below.

  1. Blockchain Basics
  2. Possibilities
  3. Cryptography
  4. Transparency & Privacy

Leveraging the power of blockchain – Transparency & Privacy

The essential dilemma about the internet the way it is this: We have had to give up privacy in order to get productivity. The volume of conversations that stem from privacy concerns and the lack of credible alternatives to remain private yet to be able to connect seems increasing. So much so, that the whole surge towards Blockchain based technology is often touted to hinge on its ability to solve that challenge. That for another day.

In this post, at the center of it all is this question. Is it possible for a technology to promise both transparency and privacy? What is the optimal amount of transparency that’s required that is ‘just required’ for a transaction, without compromising privacy?

Transparency and Privacy in tandem, increase likely solutions to many of the challenges we face today. Especially in the food industry.

Have you looked at the label ‘organic’ on food items and ever wondered if it indeed was organic? Worse even, is it safe? The WHO estimates that 1 in 10 people become ill every year from eating contaminated food. With 4.2 lacs dying each year, as a result.

Case in point: A nationwide outbreak of E coli in the USA (2006) was caused by bagged spinach. It took regulators two weeks to conduct the traceback and determine the exact source of the outbreak, as spinach. During those two weeks, many people got sick and one person died. Another Result: Tons of good spinach was wasted because we couldn’t tell the good from the bad.  Fast forward to 2018 and nothing much has changed, except it’s gotten worse.

Contamination from food has caused more people to get sick and heaps of good food to be wasted, in the effort to ensure more don’t get affected by the contamination.  Product recalls are not very effective- they take time. And a ton of the good food along with the bad gets wasted because we are unable to tell the difference between the good and the bad.

Leveraging the power of blockchain:

Walmart, Unilever, Nestle, etc are collaborating through the IBM Blockchain Food Trust Network. A TRANSPARENT system with supply chain visibility across these members and their ecosystems.  The intent is zeroing down and localising a food contamination.

The network is already showing results. Reducing the impact of food recalls. Limiting the number of people who get sick or die from foodborne illnesses.

Walmart wanted to isolate a batch of mangoes. Trace them from their retail outlet to the farm. Leveraging blockchain it took them 2.2 seconds to do so. Without blockchain, this would take them 6 days, 18 hours and 26 minutes to identify the farm.

Competitors coming together on a common platform to collaborate has always had hesitancy written all over it.  ? After all competing with each other in the marketplace. Dilemmas range from sharing information and practices to exposing their key people to ‘outsiders’.

Blockchain has a snug fit of providing the best of both worlds. Of exposing just enough and not anymore. That means, no compromising of trade secrets of companies while making information transparent.  Blockchain ensures the ‘privacy’ of knowledge / know how/ process.  Competitive advantages of organisations remain well within organisations and are not revealed on the network. This makes collaboration a lot less risky and more inviting.

How can such a transparent system, open and accessible to all, ever be private? The clue lies in an interesting concept called Cryptography. Cryptography gives Blockchain the ability to share relevant inputs without revealing all.

This works across industries and assets. Think of high-value assets, art or diamonds. Owners will go to any lengths to conceal their identity. Yet insurance companies struggle with Insurance fraud of such high-value items. These high-value assets are at times, fraudulently registered as stolen. The insurance companies pay out. The asset resurfaces at a different place. Registered with a new insurer and the same process of fraud repeated.

Tired and at a loss, the Insurance companies have turned to Blockchain! They are leveraging the Privacy feature to conceal the identity of the asset owner. Sharing details of the payout with members of the Blockchain network makes it easy to detect fraud. Each asset is laser-inscribed with a digital ID making it easy to detect. Firms like Everledger have been working on this.

 

The benefits of Blockchain for end users and companies specifically through the twin lenses of Transparency and Privacy are as follows. 

For end users: It gives control of all our information and transactions to us. Who can access our details/what did they access/etc. There is one version of the truth. Which is visible and consistent with all the users.

For companies: Apart from the benefits listed above, it allows them to include the end user in their entire sourcing and manufacturing process. This inclusion builds trust and an unparalleled brand value. Firms which already have a culture of transparency and trust and see the customer as an extension of their internal teams, Blockchain will be a lot natural. If not, there may be a distance to go.

Cryptography in Blockchain

There is much in the airwaves about the loss of privacy in the internet-enabled world? Have you wondered about it yourself? Of course, there is much truth in it all.

It is a fact that modern-day digital technology, with facial recognition and the likes of it, poses a grave question on privacy. Organisations (& hackers) have been able to link pool all data about an individual and use it chilling effects. Many business models today rely on the collection, organization, and resale of ‘your and my’ personal data.

And as the world wrestles with this, there are people who are working on reclaiming the potential of the ‘original’ internet. Their answer: Blockchain! For all the noise surrounding it, Satoshi Nakamoto brought Blockchain alive in 2008. But since then, it has made rapid strides.

Blockchain technology holds the promise of offering the best of both worlds. That it would offer personal information just as much as its needed and yet protect privacy. Blockchain has proven that Transparency and Privacy can co-exist in a peer to peer decentralized network through ‘Cryptography’. The blocks in the blockchain are linked using Cryptography. In more ways than one, ‘cryptography’ is at the very core of Blockchain and developing an understanding of this is fundamental.

Cryptography is not new or unique to Blockchain. Whatsapp announces it proudly letting you know that no one else can see those messages but for the sender and the receiver. So do several other apps. In fact, people around the world, over time have worked with their own ‘encrypted’ messages through the ages! From the Pharos of Egypt to Julius Caesar! Modern-day cryptography, by extension, has different forms.

Cryptography or encryption on the Blockchain is the means to ensure that ‘only’ the intended recipients have access to the contents of the message. Blockchain uses a combination of ‘public key’ and ‘private key’. Let’s try and keep it simple.  Think of your safe where anyone can ‘deposit’ documents but only you have the key to open it, retrieve it and access it.

Let’s assume that you need certain important documents from your colleague. You give him the ID and location of your safe for him to deposit the documents. Once he does so, only you can open the door now, with the key you have. This is how Blockchain combines both public and private in cryptography to make it doubly secure.

While a lock and key in our physical world take the form of metal. In the world of Blockchain, the public and a private keys take the form of an alphanumeric string.

 

Lock and Key in the physical world Public and Private Key in the Blockchain world.  Now assume you maintain a notepad. A notepad where you make a note of all the documents and valuables that have been given to you. You also initial your name after it along with the date, to prevent confusion later on. Won’t you be better off?

Blockchain does exactly that to keep a record too. The combination of the transaction (colleague giving you documents on a particular date) and your signature/initials (private key) create a unique entry in the notepad called Digital signature which looks like the one below.

 

Well, physical theft is a possibility in our worlds, why can’t the same happen in a Blockchain? In the physical world, someone will need to use brute force to break open the lock/door and get access to the documents or valuables in the safe/room. The ease of breaking open depends on the strength of the door, the sturdiness of the lock. In a Blockchain world, someone will need to guess the string of numbers and alphabets or Digital signature correctly.

To have a 1% chance of guessing a digital signature the entire Bitcoin network would have to work together for 5,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 years. Thats a tall order, I would think!

Blockchain Possibilities

A permanent secure digital distributed ledger was the simplest definition of Blockchain that emerged in the previous post from this series. A long conversation on the possibilities with blockchain resulted. As the ideas were wrestled with, the contours for further conversation needed to be sealed. And this post is just that. The contours for further conversation.

Truth be told, none of these above terms are missing in the world of technology today. We have secure databases, digital databases, distributed ledgers even. Why then, is Blockchain considered as the messiah of the internet? Why is it said that the ‘world wide web’ is about the exchange of information and Blockchain will be about an exchange of value?

The industry is expecting Blockchain to be able to resolve world hunger, serious! Proponents claim Blockchain will make it easier to trace ‘blood diamonds’, something that has plagued us for decades. Be able to reduce and even eliminate accounting fraud. Think Enron! Voting in the elections. Moscow and NASDAQ are in the process of deploying Blockchain for electoral and shareholder voting to prevent fraud.

Now take a giant leap across and Blockchain supporters believe that it will make it possible for you and me to borrow from peers and not just depend on a bank. A completely new fundraising mechanism. The currency exchange guys believe that Blockchain will reduce their transfer transaction times from days to seconds. Tough to imagine that level of improvement in productivity and efficiency. Days to seconds! Wow. Artists are singing praises because they believe Blockchain will deliver them from the clutches of record labels who corner more profits than the artists for their work.

Look around you, intermediaries in every industry sector and transaction garner far more value than the buyers and sellers. Think of the farmer getting a pittance for his produce while you pay escalating prices for greens.  With intermediaries a.k.a traders/middlemen earning a significant chunk.

A world without intermediaries. Really?

Summarising the possibilities gets this list below to emerge. A broad cull from all the herd of hype about Blockchain.

• Transparency and Privacy (yup together!)
• Improved Traceability
• Immutability
• Enhanced Security
• Decentralized
• Faster Transactions with reduced costs
• Trust or rather Trustless

The above possibilities emerge in the way many of these existing technologies of Digital databases, distributed ledgers have been intertwined with newer concepts such as Consensus Protocol, Smart contracts, Proof of Work, cryptography to create the Blockchain framework. Thereby unleashing immense possibilities and benefits.

Each of these sits well for deeper conversation and exploration. And will soon come here too.

There are much jargon and ‘big’ words in the post. Thereby straying a distance from a key objective of keeping it simple. That is part of the challenge that is being wrestled with.  With time, practice and deeper conversation and real work, this space will read better.

Jump in. Let’s keep the conversation going. In our own small pockets and larger forums. We’ll get somewhere.

 

Blockchain Basics

Well if you are like me, you have heard this word ‘Blockchain’ bandied about. You have read and heard so much about it in the news yet you wonder if you really do understand it. It can seem that everyone is talking about blockchain and ledger technologies, but the truth is most of us are not yet up to speed, just like me! What Blockchain is and ‘could be’ is fuelling industries the world over. Everyone seems to be seeking possibilities. So, what are some ‘Blockchain Basics’? 

In this space, I along with a colleague, will try and explore an understanding of the technology and possibility called Blockchain. We invite you to join us. We will attempt to understand Blockchain and it’s many terms in as simple a manner as possible, through this series. 

‘What is Blockchain’, is a good place to start.

In a nutshell, Blockchain is; A permanent secure digital distributed ledger.

Am sure that meant nothing! It didn’t when we read it the first time and was trying to understand what Blockchain was about.

Let’s see if an example makes it any better. Something we can relate to, an excel sheet?

Think of Blockchain as an excel sheet which is open on all computers in the network. Any changes being made to the excel will be visible to all in the network as it is being made. It hence always is transparent and in a state of consensus. To be clear, it is not one excel in a central location shared by hundreds of computers. It is hundreds of copies of the same excel stored on hundreds of different computers across the world.

It also makes the data secure. Think of a hacker who has to erase the data from hundreds of systems to alter anything; earlier all he had to do was change it on ‘one’ master system.

Let’s try another example exploring why the world is falling over itself imagining the immense possibilities Blockchain holds.

Blockchain Basics with an example

Let’s assume that ‘you’ have a file of financial transactions on your computer. Three accountants have the same file stored on their computers. As you make another transaction buying something, your computer sends an email to each of them informing them of the transaction.

All three accountants rush to be the first one who will verify if the transaction is correct and you can afford the ‘buy’. The first one who verifies the transaction shares the logic with all the other accountants and gets paid a salary. If the other accountants agree that the transaction is correct and you can afford it, then everyone updates their excel sheet automatically.

This whole concept is nothing but Blockchain Technology.

If you wanted to indulge in tech-geek speak, here is your way to do it. 

And voila you got geeky! Next time let’s explore some of these terms Proof of Work, Distributed ledger, Consensus Protocol, Smart contracts and see what we see…

 

Until then here are some links for you to explore what Blockchain is, one is a video featured on OWL (Our Work is Learning) Newsletter which explains Blockchain to a toddler and professional.

Another one I found useful which explained Blockchain in simple English is here

What do you think? Your comments would be great to help evolve an understanding. Thanks much.