Why should we trust blockchain technology

Blockchain

What is a blockchain?

A blockchain enables information to be transmitted in a forgery-proof manner with the help of a decentralized database shared by many participants, so that copies are excluded. The database is also known as the distributed ledger. It is stored on many computers in a peer-to-peer network, with each new node taking on a complete copy of the blockchain when it joins and is now responsible for checking and documenting transactions.

How does that work in practice? Someone initiates a process by generating a data set (block) which is then verified and stored by thousands or even millions of computers on the network. The verified block is cryptographically encrypted and attached to a chain of data records (blockchain), so that a large number of unique data records are created, each with its own, traceable history.

Blockchains are therefore secure, always up-to-date directories in which digital transactions can be documented reliably and in a way that is understandable for the participants. They are constantly being expanded chronologically and linearly, comparable to a chain in which all participating computers are integrated as links and which are constantly being expanded to include new links (hence the term blockchain).

The technical model of the blockchain was developed within the framework of the cryptocurrency Bitcoin - as a web-based, decentralized, public accounting system for all Bitcoin transactions that have ever been made. The Bitcoin blockchain is growing steadily as new blocks with newly completed Bitcoin transactions are constantly being added. Every computer that is connected to the Bitcoin network and generates new Bitcoins or manages the previously generated ones has a 1: 1 copy of the complete blockchain, which is currently around 284 gigabytes in size (June 2020; click here for the current status) .

  1. Ethereum
    Another cryptocurrency based on the blockchain principle. Provides a platform for programmable smart contracts. The "ethers" are seen by fans as the legitimate successors of the Bitcoins (see also the picture above).
  2. Cryptlet
    Service developed by Microsoft for the Azure cloud, with the help of which users can enter external data into a blockchain without destroying its security and integrity. As individualized middleware, cryptlets can also be developed by Azure users themselves - in any programming language - and are intended to bridge the gap from the blockchain to new business services in the cloud.
  3. Cryptocurrency
    Digital money, without coins and bills. With the help of cryptography, a distributed, secure and decentralized payment system is built. Does not require banks, but computing power and technical aids such as the blockchain.
  4. Blockchain
    A blockchain is a decentralized database that keeps a constantly growing list of transaction data records. The database is expanded linearly in chronological order, comparable to a chain, to which new elements are constantly being added at the lower end (hence the term "blockchain"). When a block is complete, the next is created. Each block contains a checksum of the previous block.

    The technical model of the blockchain was developed in the context of the cryptocurrency Bitcoin - as a web-based, decentralized, public accounting system for all Bitcoin transactions that have ever been made.
  5. Bitcoin Core
    The open source software validates the entire blockchain and was approved at the beginning of 2009 by a certain " Satoshi Nakamoto " published under the name" Bitcoin ". Bitcoin Core was initially programmed in C ++ primarily for Windows systems. Porting to GNU / Linux followed a little later. Because the developers fell out, there are now some derivatives of Bitcoin software, including Bitcoin XT, Bitcoin Unlimited or Bitcoin Classic.
  6. BigchainDB
    The "scalable blockchain database" can manage up to a million write operations per second, store petabytes of data and still have a latency of less than a second - all of this managed in a decentralized manner and with the highest data integrity. The technical basis is blockchain technology.
  7. Distributed ledger
    Financial term for "distributed account management". Bitcoin is a completely new technical approach to distribute information about certain mappings. There is no longer a classic account that is managed centrally at a bank, but "account management" is based on a network of communicating systems.
  8. Smart contract
    A computer protocol that can map or check contracts or provide technical support for the negotiation of a contract. Could replace the written contract in the future.
  9. R3CEV
    The startup R3 CEV is building the blockchain-based "Global Fabric for Finance". The largest blockchain in the world is to be developed with around 50 financial partners - a first test run with eleven major banks, including Barclays, Credit Suisse, HSBC, UBS and UniCredit, has already been successfully completed. R3CEV has entered into a strategic partnership with Microsoft to develop blockchain infrastructure and technology in the Azure cloud.
  10. Ripple
    An open source protocol for a payment network - currently still in development. P2P payment method and foreign exchange market in one, based on the crypto currency "XRP". However, Ripple users are not limited to this one currency, but can use any currency - for example, euros, dollars or yen.

What is Bitcoin anyway?

Bitcoin is a digital currency founded in 2009 that uses a blockchain as the technological backbone. Those who pay bills with Bitcoins on the web pay lower transaction fees than with traditional online payment providers because all intermediaries are excluded from the payment process. Another characteristic of Bitcoin is that the currency is not controlled by a central state bank or similar institution. The biggest disadvantage is that the currency is still only accepted by a few places and the effort to charge new bitcoins continues to increase.

There are no physical coins or banknotes, only account balances that are linked to public and private keys. These account balances are stored in a public accounting system - the blockchain - along with all Bitcoin transactions ever made. The computing power required to manage this massive amount of data is provided by a large network of computers.

What makes the blockchain so special?

The blockchain is a technology that enables secure, non-manipulable transactions in the network and is therefore also interesting independently of Bitcoin. An example from Blockgeeks.com makes it clear how much it can change markets: When we buy a train ticket on the web or via an app today, a credit card company is usually involved, and each transaction is reimbursed. A blockchain-based system could handle the ticketing process securely and directly without any transaction costs between the rail company and passengers. Railways and customers would be happy, intermediaries would be left behind.

A frequently cited example is provided by IBM with Food Trust, a blockchain-based platform for tracing food. The aim is to create transparency in the entire food supply chain from the producer to the processor, trader and retailer to the consumer. All participants permanently receive a shared data set with access rights with current information on the food system. This avoids inefficiencies, environmental violations and manipulations in global delivery processes (see also: IBM explains its blockchain strategy). Nestlé, Walmart and Carrefour support the project.

SAP is aiming in the same direction with its "SAP Cloud Platform Blockchain". The Walldorf-based company has won over two dozen companies from industry, pharmaceuticals, technology and logistics to experiment with a blockchain-based supply chain tracing system. It's always about making supply chains more transparent and using simple means to prove the authenticity of products. Like IBM, SAP is also working on Blockchain-as-a-Service offerings and has won the food manufacturers Maple Leaf Foods, Naturipe Farms, Tate & Lyle and Natura as partners.

Like IBM and SAP, Oracle also operates its own blockchain-as-a-service platform. Here a project with the non-profit World Bee Project catches the eye: The database leader is working with the NGO on a system for monitoring supply chains in honey production, as Ledger Insights reported. The aim is to be able to guarantee honey consumers that the sweet spread comes from sustainable, ecologically correct production.

What are the advantages and disadvantages of the blockchain?

The decentralization of IT in general and blockchain in particular has some advantages and disadvantages. As advantages can be cited:

  • On the basis of the distributed ledger (general ledger), every transaction is securely documented and transparent for everyone involved. Updates are only possible if everyone agrees. This means that data is stored in a blockchain accurate, transparent and consistent. They can be reached by all authorized users. Modifying a single transaction record would require the modification of all subsequent records and the approval of the entire network.

  • security is a great asset of the blockchain. All parties involved must agree on transactions before they are recorded. Once the approval process has been completed, the transaction is encrypted and linked to the previous transaction. Because the information for this is not on a single server, but in a network of computers, it is almost impossible for hackers to compromise transaction data. This means that the blockchain is theoretically suitable for all scenarios in which different parties exchange critical information - not just for food producers, but also for banks, logisticians, authorities or even healthcare companies.

  • One argument in favor of the blockchain is that Traceability and thus also the authenticity check of products. Insight into historical transaction data can help verify the authenticity of products and assets and prevent fraud. Companies can therefore not only track down weak points in complex supply chains, but also trace items back to their origin and their producers. This can go so far that consumers can find out which farmer has harvested their mango and when.

  • The blockchain enables more speed