Ripple
is different since it uses trust to find consensus and nodes not behaving well are blacklisted. Ripple can send any currency and can automatically exchange currencies, while each transaction is verified in seconds. Stellar is based on Ripple, but uses its own consensus mechanism. Table 19.5 classifies these blockchains. Table 19.5Classification
Approach
Accessibility
Consensus
Crypto Currency
Bitcoin
Public
PoW/ASIC
CRY‐M/Bitcoins
Ethereum
Public
PoW/MEM‐HARD
CRY‐M/Ethers
Ethereum Casper/Serenity
Public
PoS/PoA
CRY‐M/Ethers
Litecoin
Public
PoW/MEM‐HARD
CRY‐M/Litecoin
Monera
Public
PoW/MEM‐HARD
CRY‐M/XMR
Lisk
Public
PoS/Del
CRY‐M/Lisk
R3 Corda
Private
TE
NRCY
Openchain
Private/sidechain
TE
NRCY/various
IOTA
Public
PoW
CRY‐P/IOTA tokens
Eris:DB
Private
PoS
CRY‐M/Ethers
Chain Core
Private
TE
NRCY/various
Hyper Ledger
Private
TE/PoW/PoS
NRCY
Nxt
Public
PoS
CRY‐P/various
Stratis
Private/sidechain
PoW (PoS in future)
CRY‐M/STRAT token
Multichain
Private
PoW
NRCY/various
BigchainDB
Private
TE
NRCY/various
Rootstock
Public/sidechain
PoW (Bitcoin)
CRY‐M/Bitcoin‐Rootcoin
Counterparty
Public
PoW (embedded Bitcoin consensus)/PoB
CRY‐P/various
Ripple
Public
TE
CRY‐P/Ripple/various
Stellar
Public
TE/PoP
CRY‐P/Lumen/various
19.5 New Applications
Blockchains allow for new distributed applications. The main interest in the financial sector is to digitalize processes with other stakeholders and to eventually save money. In this chapter new types of distributed applications besides those financial ones, such as remittance, crowdfunding, or money transfer, are discussed. An example of such an application is CargoChain, which is a Proof‐of‐Concept (PoC) created at a hackathon to show how to reduce paperwork, such as purchase orders, invoices, bills of lading, customs documentation, and certificates of authenticity.
Other popular non‐financial areas with active blockchain projects are (a) fraud detection with Everledger, Blockverify, Verisart, Ascribe, Provenance, and Chronicled, (b) global rights databases with Mediachain, Monegraph, and Ujo Music, (c) identity management with Blockstack, UniquID, ShoCard, and SolidX, (d) ridesharing with LaZooz and Arcade City, and (e) document verification with Tierion and Factom. Many other types and applications in smaller application areas for the blockchain exist, such as Augur aiming at the prediction of markets with crowd intelligence. Swarm is a distributed storage platform and content distribution service. Dispute resolution systems based on blockchains or Enigma, a decentralized cloud platform with guaranteed privacy. ChromaWay has a first pilot carried out with a private blockchain for land registry. The Blockchain Voting Machine is a digital voting solution using its own VoteUnit blockchain. Temperature monitoring is performed by modum.io to enable cost savings in the pharmaceutical cold chain by combining sensor devices with blockchain technology.
[6] argues that many public, governmental applications can be implemented in form of a permissioned ledger, in which the party of the transaction needs to proof access via a dedicated credential. Transaction parties may be authorized governmental or public offices, for which each beneficiary may access his rights from a centralized authority, controlling the distributed ledger system’s access. Obviously, only to trusted parties and beneficiaries such credentials will be granted. Upon such an approach, participants may – driven by the system‐inherent proof of a transaction – interact reliably and trustworthy without any third party.
Finally, any application, which requires a trusted third party as a mediator between at least two stakeholders being involved in the process to conclude a contractual relationship, potentially can benefit from a blockchain. Besides the roles of banks and their mediation role for financial transactions, notaries as mediators for, e. g., property sellers and buyers – including respective enforcement options on the basis of related smart contracts – and escrow agents with a fulfillment mandate serve as an excellent application domain, largely unexploited as of today.
19.6 Legal and Economic Challenges
Blockchains are termed the “Blockchain revolution” [21] and adoption in domains requiring a very clear, stable, and secured state for all transactions is increasing as outlined above. Although the example of Bitcoins shows that crypto currencies on the basis of blockchains have reached a much wider adoption than any other electronic and fully digital payment system of the past, Bitcoin payments have been made possible by complementing other payment channels, such as restaurant payments [22], governmental transaction fee payments [23], and person‐to‐person payments [24]. Bitcoin has been regulated by national banking authorities, such as the Swiss Financial Market Supervisory Authority (FINMA) [25], and different exchanges for bitcoins are possible into any regularly tradable fiat currency. Thus, a legally acceptable, however not uniform situation has been reached besides from a technical perspective of trading bitcoins and paying with bitcoins.
Therefore, it could be concluded that blockchains – the key underlying distributed technology – have been blooded, since they have been applied in the financial market sector. However, that needs to be considered as a short‐handed argument, since other examples of a blockchain use in the financial markets have shown errors as in The DAO [4], malfunction as with Mt Gox [26], or get‐quick‐rich schemes [27]. Thus, in general it is too early to determine principle legal problems with blockchains, however, as [28] states, “how self‐regulation has failed” and “how Bitcoin has not matched the expectations of some proponents. Various crashes and wave after wave of scandals and allegations of fraud have decidedly dented the perception that Bitcoin is the currency of the future.” Nevertheless, legal frameworks and governmental regulation (for a very recent per‐country regulation on Bitcoin see [29]) may need to adapt to take blockchain developments into account, while assuring at the same time data privacy, security, and other key facets of data handling, maintenance, and storage, many of which are determined and regulated already for other ICT‐related applications and technologies. Thus, the perception of blockchains in society, with governments, and their possibly new reach in respective law and jurisdictions cannot be foreseen, however, the technical potential to offer trusted communications and persisted storage without any central element of control or operations offers opportunities, where especially human‐based counseling of contact negotiations may not be required anymore.
Besides these views, it has to be stated that the economic perspective of blockchains is often broken down to an optimized performance and operation view, especially in comparison to today’s technology in operation. Still, this has to be proven in a l
arger scale, since those approaches, which need to solve crypto puzzles do need a significant amount of electrical energy to perform the computations, determining a very clear factor for operational costs (OPEX). Thus, the PoW approach shows drawbacks compared to the PoS approach and others. It is estimated that mining actions require approximately 370 MW of energy for 2015 [30], the capacity of a smaller nuclear power plant.
As this determines a large amount of energy, optimizations in that dimension are essential. However, a future prediction of the energy consumption of Bitcoin miners in 2020 is difficult as relevant factors for a viable prediction will include at least: (a) the value of 1 Bitcoin in 2020, (b) the development of new hardware to solve crypto puzzles, (c) the reaction of miners to the halving of mining rewards, (d) the costs of energy applicable to which parts of the world, (e) the role will the Bitcoin blockchain may have in 2020, (f) the possibility to reach a practically infeasible blockchain length by or before 2020, (g) the effects of “side‐chains” being developed these days, and (h) if Bitcoin is still using PoW and not, e. g., PoS.
19.7 Summary and Conclusions
A blockchain is a distributed database maintaining securely a continuously growing list of transactional data, which are hardened against tampering and forgery. The discussion of main characteristics as well technical features of blockchains or distributed ledgers above reveals that such technology is in the wings to simplify administrative and transactional procedures and many applications in the future. While the simplification mainly relates to the decentralization and distribution of the data (at the same time assuring a lossless storage), the security and access control of those data is maintained efficiently, though, performance‐wise not fully optimized yet. A unique proof of a transaction – including payments, access right grants, contracts operations, or data entry updates for commercial parties, citizens, companies, and governmental organizations – can be reached today. However, the cost‐benefit ratio of blockchains cannot easily be quantified. Although, costs for, e. g., hardware, virtual machines, the network, and setups, are known, the benefits of less centralized infrastructure including soft factors, such as less trust and more transparency, are difficult to assess.
Specifically in the context of formal procedures, say for (a) commercial orders between a customer and a supplier or for (b) administrative acts between a citizen and a governmental organization, all participating parties will have the chance to check the status of such a procedure, since all parties do have access to all related data in a distributed manner, independent of their current location. Cross‐organizational procedures, such as approvals, clearances, and permits, can relate to the same blockchain maintained for them to ensure an optimized handling. Note that only key information may become part of the blockchain itself, such that related electronic documents can be related via dedicated cryptographic hash values in time to the respective party. Signed time stamps can potentially speed up processes, maximizing the customer‐supplier or citizen‐governmental organization relationships. A public and legal acceptance of such procedures needs to be seen.
Blockchains are considered the “blueprint for a new economy” [31], which suggests that new technology can improve efficiently the existing status‐quo of many application fields for distributed and reliable storage of secured transactions between customers and suppliers as well as citizens and governments. As discussed above, besides these new application domains digital market transactions, the financial industry, and governmental or private smart contracts in a decentralized form can be embedded into today’s IT landscape. And due to the multitude of applications discussed many start‐ups follow the blockchain path today, since an emerging potential and economic benefit is commonly considered to be in place. The survival rate of those start‐ups and the success rate of the blockchain technology in the private and public application domain will tell, if all or only parts of those technically available characteristics and advantages can be practically exploited.
Acknowledgements
This work was partially funded by the FLAMINGO Network‐of‐Excellence (NoE) within the EU FP7 Program under Contract No. FP7‐2012‐ICT‐318488.
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