
Blockchain for Real World Applications
Description
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A comprehensive examination of blockchain architecture and its key characteristics
Blockchain architecture is a way of recording data such that it cannot be altered or falsified. Data is recorded in a kind of digital ledger called a blockchain, copies of which are distributed and stored across a network of participating computer systems. With the advent of cryptocurrencies and NFTs, which are entirely predicated on blockchain technology, and the integration of blockchain architecture into online and high-security networked spaces more broadly, there has never been a greater need for software, network, and financial professionals to be familiar with this technology.
Blockchain for Real World Applications provides a practical discussion of this subject and the key characteristics of blockchain architecture. It describes how blockchain technology gains its essential irreversibility and persistency and discusses how this technology can be applied to the information and security needs of different kinds of businesses. It offers a comprehensive overview of the ever-growing blockchain ecosystem and its burgeoning role in a connected world.
Blockchain for Real World Applications readers will also find:
* Treatment of real-world applications such as ID management, encryption, network security, and more
* Discussion of the UID (Unique Identifier) and its benefits and drawbacks
* Detailed analysis of privacy issues such as unauthorized access and their possible blockchain-based solutions
Blockchain for Real World Applications is a must for professionals in high-security industries, as well as for researchers in blockchain technologies and related areas.
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Person
Rishabh Garg, Birla Institute of Technology and Science - Pilani, India. He has authored two books and has extensive professional experience in blockchain architecture and related technologies.
Content
Illustrations xix
Foreword xxv
Preface xxvii
1 Introduction 1
2 Distributed Ledger Technology 11
2.1 Different Types of Distributed Ledger Technology 11
2.2 Chronological Evolution 13
2.3 Blockchain Architecture 15
3 Blockchain Ecosystem 23
3.1 Working of Blockchain 24
3.2 Key Characteristics 29
3.3 Unspent Transaction Output 30
3.4 Classification of Blockchain on Access Management 30
3.5 Consensus 32
3.6 Payment Verification in Blockchain 37
3.7 Hashgraph 39
3.8 Scalability 40
4 Transactions in Bitcoin Blockchain 43
4.1 Coinbase Transactions 43
4.2 Transactions Involving Fiat Currency 47
4.3 Top Fiat Currencies for Bitcoin Transactions 50
4.4 Price Determination for Bitcoin in Transactions 51
4.5 Controlling Transaction Costs in Bitcoin 57
5 Ethereum and Hyperledger Fabric 67
5.1 Early Attempts to Program Cryptocurrencies 68
5.2 Smart Contracts 69
5.3 Working of Ethereum 72
5.4 Hyperledger 74
5.5 Working of Hyperledger 74
5.6 Ethereum Versus Hyperledger 79
5.7 Decentralized Applications 81
5.8 Tokens 84
6 Identity as a Panacea for the Real World 87
6.1 Identity Systems 87
6.2 Centralized Model 92
6.3 Cost and Benefits 100
6.4 Quest for One World - One Identity 108
7 Decentralized Identities 115
7.1 Identity Models 115
7.2 Block chain-based Solutions 117
7.3 Identity Management 119
7.4 Identity Storage | Interplanetary File System 121
7.5 Biometric Solutions 130
7.6 Identity Access 139
7.7 Merits of a Proposed System 141
7.8 Disadvantages of the Proposed System 144
7.9 Challenges 145
7.10 Solutions with Hyperledger Fabric 146
8 Encryption and Cybersecurity 151
8.1 Cryptography 151
8.2 Playfair Cipher 153
8.3 Hill Cipher 167
8.4 RSA Algorithm in Cryptography 171
8.5 Multiple Precision Arithmetic Library 175
8.6 SHA-512 Hash in Java 180
8.7 Cybersecurity 183
9 Data Management 193
9.1 Data Science 193
9.2 Education and Employment Verification 194
9.3 Health Care 204
9.4 Genomics 210
9.5 Food Supply Chain 211
9.6 Real Estate 213
9.7 Crowd Operations 216
10 Banking and Finance 227
10.1 Banking and Investment 227
10.2 Trade Finance 236
10.3 Auction Process 248
10.4 Decentralized Finance 263
10.5 Prediction Markets 286
11 Growing Landscape of Blockchain 297
11.1 Blockchain Applications in Real World: An Overview 297
11.2 e-Governance 297
11.3 Supply Chain Management 305
11.4 e-Commerce 310
11.5 Distributed Resources and Internet of Things 317
11.6 Decentralized Streaming 320
12 Functional Mechanism 329
12.1 Software Requirements 329
12.2 Installing a Mobile Application 330
12.3 Fetching or Uploading the Documents 331
12.4 Government or Third-party Access 335
12.5 Credibility Through Smart Contracts 336
12.6 User-Optimized Features 337
Appendices 339
Glossary 347
Index 371
1
Introduction
Dating back to Babylonian era, the ledger appears to be a bedrock of civilization as the exchange of value always required two unknown people to trust each other's claims. Even today, we need a common system, which can provide order to the society, keep track of our transactions, establish public trust in it, and maintain it forever.
A blockchain is fundamentally a digital ledger that carries a list of transactions, that could, in principle, represent almost anything - money, digital stocks, cryptocurrencies, or any other asset. Blockchain can follow instructions to buy or sell these assets and implement inclusive set of terms and conditions through so-called smart contracts.
Blockchain differs from a simple ledger in that all transactions are stored in multiple copies on independent computers, individually within a decentralized network, rather than managed by a centralized institution, such as a bank or government agency. Once a consensus is reached, all computers on the network update their copies of the ledger simultaneously. If a node attempts to retroactively add or subtract an entry without consensus, the rest of the network automatically invalidates the entry.
Unlike a traditional ledger, it is governed by complex mathematical algorithms and impregnable cryptography that adds a layer of integrity to the ledger, what Ian Grigg (2005) referred to as triple-entry accounting - one entry on the debit side, another on the credit side, and a third on an immutable, undisputed, shared ledger.
Thus, Distributed Ledger Technology (DLT) is a technical infrastructure and protocol that allows simultaneous access, verification and updating of records in an irreversible manner over a network spanning multiple entities or locations. Blockchain is one of its many forms - Directed Acyclic Graph (DAG), Hashgraph, Holochain, or Tempo (Radix). It is a sequence of blocks containing a complete list of transactions in the form of a digital public ledger that is replicated and distributed throughout the network. The blockchain ecosystem includes blocks - the data structure used to keep records of transactions, which are distributed among all nodes in the network, and nodes - a user or computer that holds a complete copy of the record or ledger.
The blockchain technology was first mentioned by Stuart Haber and W. Scott Stornetta in 1991. However, Satoshi Nakamoto, a person who goes by the alias, popularized it in 2008 to operate as the public transaction ledger of Bitcoin. Over the past one decade and a half, there have been innovations around blockchain consensus mechanisms, constitutional design, programmable smart contracts, and tokens. Blockchain 1.0 applications were mainly limited to digital currencies, which were used in commercial transactions, foreign exchange, gambling, and money laundering. The expansion of Blockchain 2.0 applications enabled smart-contracts, decentralized applications (dApps), and Decentralized Autonomous Organizations (DAO). Blockchain 3.0 was able to register its presence in areas, such as education, health, science, transportation, and logistics in addition to currency and finance, and now Blockchain 4.0 is evolving as a business-friendly ecosystem for the world of commons. The integration of blockchain with emerging technologies like Internet of Things, cloud, artificial intelligence, and robotics is one of the biggest promises of the times to come.
Blockchain is typically classified into public, private, and consortium blockchain. A public blockchain is a permissionless blockchain in which any user, whosoever wishes to transact with the network, can participate and write on the blockchain. A private blockchain only allows nodes coming from a specific organization to participate in the consensus process. That's why it is also called permissioned blockchain. A consortium blockchain is a semi-private system in which a group of like-minded companies leverage cross-company solutions to improve workflow, accountability, and transparency.
Blockchain, irrespective of its type, uses an asymmetric cryptography mechanism to validate the authenticity of transactions. It is basically a network of participants that share nodes for common business purpose and process. Each block of the blockchain contains about 1 MB of data. This block stores the information chronologically until its 1 MB data capacity is occupied, and then the second block repeats the same process. All these blocks join in a sequence, and to do this, each block gets a unique hash that exactly matches the string of data in that block. If anything inside a block changes, even to a little extent, the block gets a new hash.
In a blockchain, this hash is created by a cryptographic hash function. A cryptographic hash function is a complex algorithm that takes any string of input and turns it into a 64-digit string of output. A hash is not always qualified. A block on the blockchain will only be accepted if its hash starts with at least ten consecutive zeros. A small, specific piece of data is added to each block called a nonce. The process of repeatedly altering and hashing a block's data to find a suitable hash is called mining, and this is what miners do. Miners spend a lot of electricity in the form of computational power by constantly changing the block structure (nonce) and hashing it until a qualified signature (output) is found. The more computational power they have, the faster they can hash different block compositions to find a qualified hash.
The process (hash function) used here that converts any information into a string of alphanumeric values (hash), is called encryption. There are mainly two types of encryption - asymmetric encryption and symmetric encryption, depending on whether the same or different keys are used for encryption and decryption. Cryptocurrencies use blockchain to achieve the benefits of a public ledger as well as an advanced cryptographic security system so that online transactions are always chronicled and secure. Transactions are simply data that indicate the flow of cryptocurrency from one wallet to another.
In order to record the flow of currency or data from one wallet to another in an immutable form, nodes communicate with one another to reach consensus on the records of the ledger. However, the transaction is accepted only if majority of the nodes agree on its validity. When all nodes reach a consensus, transactions are recorded on a new block and added to the existing chain. While Bitcoin focused on decentralized payments, Vitalik Buterin and his collaborators introduced arbitrary computer code into the blockchain using transactions. Thus, Ethereum came into being as a peer-to-peer network where each node runs an operating system called the Ethereum Virtual Machine. This securely executes and verifies application code, hitherto called smart contracts, and allows participants on the blockchain to transact with each other without a trusted central authority.
Smart contracts are used for the automation of common centralized processes, such as conditional transfer of digital assets, multisig asset exchange, or waiting for a specific amount of time to execute a transaction. It allows the creation of decentralized applications for B2C trades whereas B2B transactions, which need to keep their data secure and confidential, can adopt Hyperledger. Hyperledger offers a modular architecture that delivers a high degree of privacy, resilience, and scalability. It is an enterprise-level private blockchain network that enables several business entities - such as banks, corporate institutions or trade establishments - to transact with each other.
Thus, digital transactions can be decentralized, encrypted, and held securely on a distributed ledger. It has the potential to cut millions of hours spent on administrative processes every year and bring efficiency through smart contracts in all walks of life. The present book explicates the unrestrained functionality of blockchain and its application in the real world.
It's a well-known fact that identity is the nucleus of all the activities in the world. In a civilized society, identity entitles the individual to discharge his rights and responsibilities. Over the centuries, governments around the world issued a variety of identity documents to enable citizens to make access to education, health care, business activities, pensions, banking, social benefits, and state welfare schemes.
Many countries issued identity numbers for a singular purpose, but in due course of time, they became a de facto national identification number. In order to provide an official identity to every citizen of India, the Department of Information Technology, Government of India, introduced a biometric-enabled, unique identification number (UID). This project has listed over a billion users with an estimated expenditure of 130 billion INR, till date (UIDAI, 2022). India's Unique Identification System, called Aadhaar, has been taken as a case study to deliberate over the advantages and disadvantages of a centralized identity model in light of privacy issues, unconstitutional access, absence of data-protection laws, involvement of private partners, etc.
The UID project was expected to portray a more accurate picture of Indian residents and enable them to have hassle-free access to government schemes and public services, but the ground reality has been far from such claims. First of all, the technological framework for such a large database is not available in the country; and second, the Indian bureaucracy is not technically smart enough to handle such big data with burgeoning privacy and data-security...
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