BlockChains

BlockChain Technology was pioneered and invented by a person or people using the name of Satoshi Nakamoto, as part of the Bitcoin system, in its original reference implementation, Bitcoin Core (formerly known as Bitcoin-Qt). BlockChain Technology underpins Bitcoin.

Some businesses now show signs like the one below:

There is a very ingenious system of trust-logic embedded in BlockChain Technologies. The following references explain the process of “Bitcoin Mining”, and how it ensures trust is maintained despite anonymity being inherent in Bitcoin’s design (so for us the question is how can trust be maintained, if we want to develop a Secure, Private, Scalable & Auditable Enterprise-Strength BlockChain?)

The answers found more recently (best example being Ethereum tokens and smart contracts) have limited scalability. Our preferred choice (Elastos) provides scalability, as well as much increased security, and fundamentally delivers to enterprises an immutable audit trail for all enterprise transactions, as well as providing smart contract capability. Rather than reinventing the wheel, Elastos actually allows us to use Ethereum, and some other Smart Contract systems, as Sidechains off the Elastos Mainchain. The Mainchain uses the Bitcoin miners to guarantee Trust via “merged mining” for all Sidechains, at consumers’ (such as our) expense. In this fashion, Elastos allows indefinite scalability, something unattainable in Ethereum’s traditional Single-Mainchain Design (now slowly choking with the volume of data).

Blockchain Miners, Bitcoins and Trust

Bitcoin Ultimate Guide

Although at the absolute beginning (2008), one Bitcoin had zero value, “the first real price increase occurred in July 2010 when the valuation of a bitcoin went from around (USD) $0.0008 to $0.08 for a single coin.¹“

Try googling

“what is a bitcoin worth”!

by Joseph Pham, A blockchain enthusiast

Written Jun 23

Blockchains as a technological innovation, provide a novel solution to a number of complex computational and cryptographic problems.

Chief amongst them is the Byzantine General’s Problem – basically, answering the question, how do I ensure the data consistency and integrity across a computer network? This relates to the corruptability of the data (data being manipulated by outsiders or untrustworthy insiders) in existing computer systems.

Other big issues that the blockchain was designed to solve include double spending – where you could pretend to spend money / tokens you have across multiple transactions (this is due to the ability to copy data) – and counter party risk – basically a social risk that someone does not fulfill their end of an agreement (or contract).

To understand the current limitations of blockchain technology, you need to understand how the technology solves some complex computation and cryptographic problems, and the limitations imposed by the design of these blockchain systems.

To simplify the discussion, we can limit the focus to the bitcoin blockchain, the first operational blockchain system.

Limitations of Proof of Work

One of the most innovative and often discussed aspects of the bitcoin blockchain is the Proof of Work protocol – a computational function, that requires computational resources to solve a complex mathematical puzzle by hashing (solving a cryptographic hash value) to verify that a series of data records have been correctly identified and added / recorded on a distributed ledger. This process produces a new “block” to a sequence of connected blocks, giving the blockchain it’s name.

The difficulty of the puzzle is automatically set by the system (complex maths formula), based on the available computing power across to produce an answer about once every 10 minutes.

This is probably one of the most complex aspects of the blockchain, and as such one of the most limiting. Depending on the parameters set within the blockchain protocol, there are various constraints that limit the usefulness of such a system.

In the case of the bitcoin blockchain, the speed of processing transactions – how many transactions the system can process & add to the blockchain – is limited. This means you cannot efficiently use blockchain technology for high volume transactions (ie requiring thousands or millions of transactions per second).

Similarly, due to the computational resourcing requirements of the network as a whole, to solve these mathematical problems, blockchains are designed to work best across a large pool of users that contribute their resources towards the goal of securing the network.

There are several economic and real world resourcing constraints that limit the commercial application of blockchain systems to current production environments, and limit the exposure blockchain systems have when interacting with other mature applications or systems on a network.

Due to the potential weakness and risk of external interference / attack (and hence potential influence, even control of the whole network) and subsequent distortion of a blockchain, the system is designed to be used at scale across a large number of distributed actors and devices constantly connected and participating in the process.

If there were only a few participants, and one or more bad actors in the network had a majority proportion of computing power (over 51%), there is greater opportunity for the bad actors to take over the network. That is why smaller and private blockchains are not seen as securely immutable (unchangeable), and thus have less perceived value than a well established and long time running publicly distributed blockchain like Bitcoin.

What this means is there’s more risk to a blockchain in it’s early stages, greater vulnerability to attacks / external manipulation and less certainty when there are only a few active people or machines (nodes) that participate in the network.

Furthermore, while there is an inverse relationship between cost and network processing power, the overall cost of running, growing and sustaining a blockchain system can grow to be quite large over time – mainly due to the large storage space required for each copy of the blockchain, the greater energy consumption and uptime costs of maintaining online computing systems, and the overall processing power needed to process new transactions / blocks.

While bitcoin has been proposed as digital money, the key design strengths of blockchain technology does not make it an effective digital money (because blockchain works like a vault locked with a key – if you lose your private key or someone discovers it, you will no longer have access to your money).

Since long and complex sequences of numbers and letters are not easy to remember, people have trusted external parties (online wallet services and exchanges) with their private keys (the keys to their bitcoin tokens), which is why they have been hacked and stolen or lost (when no one can access the tokens).

Another important limitation is the fact that the data on the blockchain is not editable. It is a write once, read only computer system by design (in order to be immutable). This means that there is no way to clear faulty, or incorrect / corrupt entries from the system.

There’s a lot more to discuss on this topic. I hope this gives enough of an insight to answer the question about the limitations of blockchain technology.

Overall, blockchain systems are best as a final, archive and store of data that is designed to be irreversible and useful referenced over time. Something like a big encyclopaedia or log book of data transactions.

In my opinion, the best future use cases for blockchain will capitalise on its strengths, and use it’s weaknesses / limitations as opportunities to explore development opportunities with complementary technologies.
Quora

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@IT/OT Chain & CloudAustralia Pty Ltd…

We are now developing Enterprise Accounting Systems on a new Blockchain System. Enterprise-Strength, Blockchain-based Technology.
Examples will be: Secure Financial Transaction Ledgers, Land Title Registers, Rental Bond Transactions, etc.
There would be possibilities for Blockchain Systems to centralise and guarantee other (often Multi-Party) validation processes external &/or internal to single- or multi-department/branch Organisations.
There is an Open Source Project; Elastos ELA (currently v1.0).
As secure and fast Blockchain Networks are developed that allow communication with existing external Databases, Blockchains will replace current means (less convenient, and more susceptible to fraud as they are) of recording and reporting in central Registries and Transaction Journals, both Public and Private.
Conditional Validation of transactions, where Multiple Parties are required to participate, is happening. These are the so-called “smart contracts”.
The uniqueness of each Block Address, guaranteed by a single-threaded “timestamp server”, enables unique Public/Private Key pairs to be generated as each block is recorded. Addresses and Keys are highly encrypted.

Transaction records on SideChains can not be changed (edited) by anyone at all, without exception, after completion of original transactions. This is the real Anti-Fraud value of Blockchains.
Your own Accounting procedures are triggered automatically.
With the Elastos System, subscribers to a DApp (Distributed Application) may only connect securely through the Elastos P2P Carrier Network to other DApp users in their Business Network, and to permitted websites and services. Less secure email and website activity can be minimised as the Elastos System works like a “closed-circuit” internet, with “distibuted web pages”
“Distributed” also refers to the fact that “servers” for storage of Documents, Images, Audio and Video files are distributed InterPlanetary File System (IPFS) devices within the Elastos Network. Other than this most things happen on your or your network neighbours’ devices. However, we still need to store most actual bulk transaction data records on a traditional Relational Database (also connected via Elastos P2P Carrier system)
The Blockchain itself is “Merge-Mined” by existing BitCoin miners as the means of guaranteeing trust and validating each transaction

There is alarming discussion about several areas of operation of Blockchains.

Firstly, the financial angst continually expressed about current and future prices of the virtual coins or tokens associated with blockchain-brands in existence at any time. This, to us, as developers, is merely a distraction, since the tokens will look after themselves in existing and well-established markets. We are interested in the economies, security advantages and fraud-countering possible with Blockchains and associated systems, not in investing in the tokens, and not in using the tokens to pay for pizza and coffee with our phones (even though we may soon be doing just that). ITOTCCA is purchasing Trust when it pays a transaction fee for a transaction.

ITOTCCA will have to “hedge” our Bitcoin/ELA/Hedera funds against market fluctuations, however this is a duty we bear. Although they are a side-game in the system to us, the long term value of a BitCoin does determine the ongoing viability of BitCoin Mining Enterprise, upon which the Elastos system, together with many other chains, is currently dependent. However the recent developments in Crypto-Currency Trading, where banks like Goldman Sachs are now open to BitCoin et al Trading, and PayPal is accepting payment in BitCoin, are demonstrating the confidence of the financial community in the future of Crypto-Currencies. This is partly due to their requirement in DApps as a means of automated bartering, but mainly due to the way the coins are created by the mining of transactions, as demanded by DApps to guarantee trust, and paid to the miners, to then be in circulation. Owing to the nature of the design for releasing the coins, and the pricing of the level of “mining reward”, the value of a BitCoin is expected to continue to increase overall, with a limited number of BitCoins in existence, and a cap on the total number possible (at this stage, due to cut-off supply around 2040). BitCoins are designed to imitate the limited supply of Gold in the Earth, and to increase in value due to their scarcity, as DApps continue to proliferate, demanding trust for their transactions, and as trading in tokens strengthens. Note that, as with Gold or any commodity, market behaviour, which is essentially beyond control, will always pass through successive ‘Boom’ followed by ‘Bust’ periods.

Please see the following reference about the ATO’s Tax Treatment of Cryptocurrencies. As the saying goes: “Cash is King” .. so all our transactions are primarily denominated in Australian Dollars or Pounds Sterling. The Elastos (ELA) Tokens simply exist as a means for the Elastos Developers to make a surplus on their BlockChain and System Investment, by charging a Transaction Fee, to cover the mining rewards and other disbursements incumbent on the Elastos System. Remember, Elastos is guaranteed by a “Merge Mining” agreement with BitCoin Miners, such that Elastos transactions may be validated across a BitCoin/ELA interface. (Tokens also form the currency for all intra-system payments, and ITOTCCA is responsible for the conversions to local fiat currencies and interfacing to real world Bank Accounts). As such, the Transaction Fees (denominated in ELA) are actually a Business Expense of ours, when converted to $AUD.

Secondly, there is a lot of ideology and opinion expressed about the great potential of BlockChains to “cut out the middle men”. I have seen an article in Forbes Magazine (who are not against Blockchains per se), whose author seems to have been drawn in to this argument, taking this “remove middle men” hype of the blockchain ideology-geeks seriously, and reacting by blindly assuming an anti-BlockChain stance, because of the apparent dangers to our economy.

If a world market anywhere needs “middle men” to operate, the existence of Blockchains will not deter them in and of itself – quite the opposite in fact. Take the example of Real Estate Agents, who are found very necessary by so many people daily in the world in order to help with locating and filtering properties, and to connect people to opportunities of many types. The use of Blockchains in Real Estate Enterprises is an activity that will be valued by all Participants, from Customers to Agents, their Employees and Suppliers. And, when it comes to Conveyancing, would the ideologists propose to exclude Solicitors (and Land Title Registries!) on principle, as well? If any middle players are to be removed from some arenas it would simply be a case of an industry restructuring, apparently not prohibited. Even in the case of banking it could be seen as an opportunity rather than as a threat, since the need for credit and investment will not disappear with cash. It appears to us that the benefits of using Elastos BlockChains far outweigh the perceived disadvantages, and that most of the perceived disadvantages are just that .. simply perceived (especially perceived in other, less secure and scalable BlockChain Systems). Reference to the foregoing text and articles on this page, and to our “Security” page should confirm this for you.

Further, we note that the entire global BitCoin database (since inception in 2008) amounts to several hundred GB currently, but now may be ‘pruned’ independently by any participants who require more space on their device(s). (You would begin pruning yearly after seven years on the DApp). The situation with Ethereum, where much more data storage is demanded due to the operation of Smart Contracts (not present with BitCoin, but present with our DApps), is quite different, now, especially with the ability of Ethereum to run on Elastos Sidechains themselves, which are designed to be more scalable. Traditionally, Ethereum had a single mainchain and this restricted its scalability compared to the Elastos system of merge-mined sidechains. Security has not been compromised in Elastos, as it would have been with Ethereum to achieve this degree of scalability, since Elastos offers no IP sockets or ports to the internet it uses. Also, latency of network response is far better than “traditional Ethereum”‘s, as all DApp activity occurs within the DApp sandbox on the user’s device, not on single MainChain Nodes (as with Ethereum). Overall, Rong Chen and the people at Elastos Foundation are developing a system which always has been much more than just a blockchain. The needs of a modern internet including those of Enterprise Distributed Application (Enterprise DApp) Developers and Users have been accounted for. This would indicate to us that there is ample memory and capacity on modern devices to handle our own DApps’ ever-growing needs.

Elon Musk and others have expressed skepticism regarding the “Web3” concept, labelling it as more of a Buzzword than anything real (Web3#Buzzword). While this is strictly true, this skeptical attitude ignores the true value to corporations of the immutable audit trail provided by Blockchains. After its popularisation by Jack Dorsey, now it is “Web5” that offers some further depth to decentralisation concepts. We use Elastos ‘Carrier 2’ for its privacy guarantees and security. It is only when understood in the light of the requirements of Risk Management, that our practical Hybrid Web2/3/5 design can be fully appreciated.

Whilst it is necessary for us to employ a relational database system to store the bulk transaction records off-chain, reference to our Security page will reveal our methods of dealing with this less secure aspect of data storage. In particular see the explanation of our proprietary Database Security System, “ChubbyChecker“. You could also refer to an example of a more complex and general arrangement at Kubernetes Example. Data storage demands will also be managed by utilising the Elastos Hive (InterPlanetary File System – IPFS – servers) for secure file storage, separate from the chains, and separated from the relational databases themselves. For customers who prefer to store flat files in a definite – non-distributed – location, ITOTCCA offers a MongoDb installation in either London or Sydney.

And finally, whilst the Elastos Foundation takes maximum measures to ensure environmental sustainability of blockchains, there is a cost associated with the computational power required by the BitCoin Miners. Elastos relies on BitCoin Miners to validate transactions and guarantee trust. Elastos has a relationship with the largest BitCoin Mining Company. The company, “Bitmain”, actually has an integrated business from real silicon mining for the computer chips, to manufacturing its own specialised devices for crypto coin mining purposes, and now manufacturing solar cells (using the company’s own mined silicon) to power those miner-computers. So there is a lot of “Mining” going on! This is not all bad news, as it does provide sustainable automated trust in an emerging economy.