The global blockchain market is growing rapid: it is predicted to be worth US$20 billion by 2024 compared to US$ 315.9 million te 2015 but just what is it and how does it work? Here Rene Bader, Manager of Critical Business Applications &, Big Gegevens and Thorsten Deckers, Senior IT Security Consultant at NTT Security provide some explanation.
Blockchain enables transactions te a peer-to-peer network to be validated without the need for an intermediary, thus ensuring traceability and transparency. One of the driving coerces of this technology is the “cryptocurrency” Bitcoin. However, beyond this, there are numerous application possibilities for blockchain technology spil wij will explain zometeen.
Let’s take Bitcoin spil an example, Bitcoin is a system that permits value transfers inbetween unknown parties without a financial service provider spil a central smeris. The technical challenge is to secure the transactions seamlessly, verifiably and transparently and this is achieved using the peer-to-peer architecture of the blockchain technology which is described te more detail below.
The blockchain acts spil a public ledger for Bitcoin or all network participants, and while it is not an absolute account it does record all transactions that have everzwijn bot executed and validated which can be used to calculate the current account balance. Albeit the information on the transactions is public, the addresses of the transactions only vertoning spil anonymous codes, so the parties involved are also anonymous.
While traditional payment systems such spil banks are typically responsible for checking incoming and outgoing transactions, controlling the account balance and storing them centrally ter their systems, the Bitcoin treatment is different and documents transactions solely ter the blockchain. It is known spil a decentralised database because the information on the transactions is distributed and stored fully on all computers that are participating te Bitcoin. Therefore the finish blockchain is possessed by no one and thus is public. Presently the blockchain of the Bitcoin network is around 80 gigabytes te size and it is permanently growing with the formation of fresh blocks.
The transactions for the blockchain are collected and stored te consecutive blocks about every ten minutes – hence the name “blockchain”. A typical block has a maximum size of 1 megabyte and contains several hundred transactions. Each fresh block is joined to the previous block te chronological order and thus builds a fresh chain listig ter the blockchain. Overheen the course of time the blocks form a chain which proceeds to expand, the very very first block is aptly called the genesis block.
Te addition to a time stamp and the actual transaction gegevens, a block also contains two hash values based on the cryptographic hash function SHA-256:
- a hash value overheen all the transactions collected te the fresh block,
- the hash value of the previous block.
Before a block is formed and integrated into the blockchain, private and public keys vereiste be created, thesis are generated by the wallet software spil a key pair on the client rekentuig, which is a participant of the Bitcoin network and based on asymmetric encryption. The public key is used to create a 34-character string, visible to everyone, which then acts spil a Bitcoin destination address for the further transactions. This is significant for the anonymity of the transaction spil it is not possible to come back the address to the public key.
The private key is used to sign a transaction without which this transaction would be deemed invalid. With the help of the public key affixed to the transaction, it shows that the sender of a transaction is te possession of the adequate private key and is thus actually the originator. The signed transaction is distributed to all knots ter the Bitcoin network after sending and confirmed spil “shipped” spil soon spil a certain number of knots confirm the receipt.
Ter the next phase of the processing of a transaction, its validity is checked before blocking, which prevents tampering with the transaction and ensures that the amount is credited to the recipient and debited from the sender. Otherwise an amount could be sent several times or Bitcoins could be output which are not present at all.
Ter blockchain technology there is no central example for the validation of the transactions. To make a overeenstemming, there is the “Miner” te the Bitcoin blockchain which are computers or pools of computers that provide their computing capacity to the system for the validation of transactions and the formation of the blocks.
To qualify for the task of mining, the “proof-of-work” process is used, te which miners prove their trustworthiness through their work. For this purpose, the miners vereiste solve a computer-intensive cryptographic task – the creation of the hash value – which can only be processed by trial and error. Due to the difficulty of the tasks, the frequency of the block formation is managed and held for about ten minutes. The calculation effort is to ensure that subsequent modifications of the block chain are excluded, this also means that the blockchain cannot be scaled at will.
Mining is necessarily a elaborate proces and consumes considerable resource. By way of motivation miners receive a certain number of Bitcoins spil a “reward” when the cryptographic task has bot solved. Conversely the computation attempts of the slower miners, which processed the same transaction at the same time, are thus automatically invalid and are cancelled. Once a miner has built a valid block, he sends it to the network where each participant can control the block’s validity and link the block to the local copy of the blockchain. Te this way, the miner validates block-by-block the blockchain, which is deemed trustworthy te the peer-to-peer architecture without a central control example. Thus, the transaction is ready and irrevocably documented for all blockchain participants.
Mining is the validation and the “money creation” ter the Bitcoin system. Originally, 50 Bitcoins could be recreated vanaf block but this figure has now bot halved to every 210,000 blocks meaning it is now only 12.Five Bitcoins vanaf block. The maximum number of Bitcoins that can everzwijn be generated is consequently limited to 21 million. If the limit is reached, which will toebijten ter around 2140, no fresh hashes can be generated and thus no fresh Bitcoins can be generated.
Bitcoin is very likely the most widely known application area of blockchain technology because it ensures secure traceability and transparency without the involvement of a central authority but there are many other areas that the same fundamental requirements te which blockchain could be used spil a key technology including:
Blockchain is presently under careful consideration for adoption ter the banking sector where it could be used for billing and transferring assets by documenting transactions without the need for validation from a central office which will reduce costs and speed up processes.
The more ingewikkeld contracts can be processed using blockchain technology. For example, it’s possible to schrijfmap the conditions of a contract te the form of an executable program code ensuring automated compliance with the contract determining which condition leads to which decision. Ownership transfers or leasing can be carried out swifter and can be carried out without value. Spil soon spil the buyer or tenant has paid the price for the contract to the seller or landlord, it is transferred to him or access is given to the digital key.
It’s possible to dynamically adapt insurance conditions ter the blockchain based on the habits of the policyholder and to adjust the premium payment accordingly, For example, ter motor insurance this could be depending on the driving voorstelling.
Te the music industry, many artists want ongezouten responsibility for their music sales, music rights and the conditions of use. For this purpose, blockchain offers the ideal solution spil it can directly linking the use and payment to algorithms embedded ter a blockchain.
For digital voting systems, blockchain can ensure the anonymity of the voter spil well spil protection against tampering.
Patents for the relevant administrative offices along with the documents for proof of intellectual property could be filed de-centrally, permanently and without the need for an intermediary te the blockchain. Certificates assured by mathematical encryption would regulate the possession, existence, and integrity of thesis documents on a global scale.
To recap blockchain is a technology which acts spil a ‘trust machine’ for validating the exchange of information without a validation example. Application examples including Bitcoin itself, voorstelling that the solution of the task is not just about the technology but that it has legal and economic implications too and ter some cases may need the involvement of third party such spil a patent lawyer. Examples such spil the conclusion of a blockchain are therefore misleading, since the corresponding administrative act is not tired te the secure registration.
Blockchain is a fresh and innovative technology for which many questions, such spil the inheritance of keys te the event of death, remain unanswered, and many of the answers presently available will not be final. However, the fact that it enables traceability and transparency for any transactions is an significant very first step and means that it could be used ter numerous innovative screenplays.