blockchain
September 2023
Introduction to Blockchain
Blockchain is a globally recognized term among the IT community; however, it's not a globally understood technology. Many people think of blockchain and Bitcoin as synonymous. Blockchain, however, is much more than a cryptocurrency platform. Blockchain is a decentralized database that keeps a permanent record of all transactions. Once a record is written to a blockchain, it is unable to be altered.
What are some other use cases that might benefit from blockchain?
Shipping
Major international shippers are starting to use blockchain technology to monitor shipments. Blockchain provides shippers with several valuable tools to maintain control of their customer’s property. Every touch-point or interaction can be tracked and logged. Blockchain’s consensus mechanisms ensure that all the data included is the data that was entered—nobody has manipulated the data after the fact. And finally, the record contains the entire history of a shipped item, from entering the shipping system through delivery.
Supply Chain Tracking
Grocers are starting to recognize that blockchain enables origin-to-destination tracking with detailed information every step of the journey. They can see the information at harvest, such as date, temperature, location, method, and so on. They can track the items from harvest all the way to checkout. They can monitor how long the item sat in a warehouse, how long it spent on a train or truck, and how long it’s been sitting on their shelves. In the case of a foodborne illness, they can quickly isolate all the inventory from a specific plant and immediately know which of their customers purchased that inventory.
Benefits of Blockchain
Increased trust, data security, and data integrity are some of the key benefits you can gain with blockchain. Decentralization, transparency, immutability, and auditability all support these benefits.
Decentralization means that each member of a blockchain has a complete copy of the data. Each member having a copy of the data protects against bad actors, improves disaster recovery, and promotes high availability.
When each member has a complete copy of the data, and updates to the data must be approved by the members, bad actors are stopped. If a illegitimate member or user attempts to delete the entire blockchain from a member, the other members retain the information, so no data is lost. If a bad actor tries to edit the historical data of one member, the other members will refuse to authenticate it. This denial prevents the false information from entering the blockchain.
Additionally, modern application development recognizes that monolithic architectures aren’t always efficient. Putting all your trust in a large, single bucket increases the risk profile if anything happens to that bucket. In the same way, keeping all your data in a central, large, authoritative database or ledger increases risk of compromise or loss.
Each member has a complete copy of the data set. If a portion of the network goes down and takes down a member with it, the remaining members are able to validate and accept updates to the data structure. When the network is back up, that isolated member will be updated with the newest data set.
Another piece of blockchain that increases trust is transparency. Transparency means that the information stored in the blockchain is visible to the members of the blockchain. Blockchain maintains a complete record of all transactions, and that record is available to every member, making blockchain a very transparent technology.
If we think of an agricultural example, at every step of the way, the people involved can see the whole path to date. So, the shipping company can see all the information about when and where the blueberries were harvested.
The distributor can see all of that, plus information on the shipping company:
Which truck transported the blueberries
Who the driver was
How long the trip took
What the truck temperature was
Additionally, the grocery store gets to see all that information as well, all the way back to when and where the berries were initially harvested. And because all the members have all the data, the farmer who initially grew the berries can see when they arrived at their destination and how they got there.
That level of transparency helps build trust, because everyone is able to see what is going on with their product.
Some blockchain technologies, such as Hyperledger Fabric, provide data privacy as a native mechanism within the blockchain. With channels, you can create separate channels of the blockchain to share the data that makes sense to share, without losing any of the previous information. For example, if the distributor had contracts with multiple restaurants, grocery stores, and wholesalers, they could branch the data off to each group. Each customer would be able to track all the way back to the harvest, but the purchase price and volume could stay between the distributor and the buyer.
When you think of all the data available, and the fact that everyone can see what’s in the block on a public blockchain, transparency really helps increase trust in the data. However, that trust in the data is only really possible because of immutability.
Immutability simply means something cannot be edited or changed. You can update the information in a blockchain by adding data, which will be added in a new block. However, once a block is part of the chain, the information in that block can’t be changed.
The immutability of blockchain is directly tied to its decentralization. Even if someone were able to edit the information in an already written block and try to push that information into the blockchain, it wouldn’t work. As soon as the change was made on one member, and an attempt made to synchronize back up with the rest of the chain, the rest of the members would recognize a problem. Once the problem was recognized, the update would be blocked.
This immutability builds trust by letting everyone viewing the information on a blockchain know that the information hasn’t been tampered with. With traditional databases, if the master database gets compromised, it can be difficult to prove that the data was tampered with and also to know, with certainty, what the correct data is. With blockchain, you can be sure that the data you’re viewing was the originally written data and that nobody went in after the fact and modified it.
Auditability is another benefit of using blockchain. Auditability speaks to how readily available and accessible something is to audit. Blockchain, relying on the other benefits already discussed, is a very auditable platform.
With blockchain’s transparency, the auditor can investigate the blockchain and see all the transactions across time. They’re able to know exactly what happened, when it happened, where it happened, and how it happened.
With blockchain’s immutability, a complete audit log for every interaction is created. This can be shared with an auditor, who knows the data hasn’t been compromised. Auditors can also compare the data between two members to validate the authenticity of the data.
Blocks
Blocks are the basic unit of information in blockchain. Recall that a set of transactions results in a new block being created and added into the blockchain after the previous block.
A block itself has three primary components. The block is made up of the information for the current transaction, a cryptographic hash of the previous block, and a time stamp.
The transaction data is the actual information relevant to the blockchain. The information contained will be largely dependent on the purpose of the transaction and the blockchain. Financial blockchains may see an addition of funds. Supply-chain blockchains may see an item change custody at a shipping point. Health information blockchains may see information related to a doctor visit. Regardless of the type of blockchain, all the blocks will also contain metadata about the transaction as well.
A block also contains a cryptographic hash of the previous block in the blockchain. A cryptographic hash is a unique string of characters that can only be created using the information in the block and the cypher key. The hash is unique such that no other block, combined with the key, would produce the same hash. Additionally, if any of the data were changed in the block, the hash would also change. This process of creating a cryptographic hash of the previous block relates to blockchain’s immutability.
Because the cryptographic hash is unique to the exact information that was in the previous block when the hash was created, any attempt to modify the information in the previous block would cause the hash to change. This reaction happens for every block in the blockchain.
For example, suppose that someone tries to modify the first block in a four-block blockchain. The fourth block has a cryptographic hash of the third block’s data. The third block has a hash for the second. And the second block has a hash for the first. By modifying the data in the first block, the cryptographic hash in the second block would change. That data change in the second block would cause a change in the cryptographic hash in the third block. The data change in the third bock would alter the hash contained in the fourth block.
By using cryptographic hashes for the previous block as part of the dataset for a new block, blockchain makes it nearly impossible to make an undetectable change to data that’s already written to the chain.
The third piece of information in a block on a blockchain is a timestamp. Timestamps serve two purposes. The obvious purpose of a timestamp is to know when a block was added to the blockchain. Due to the timestamp being part of a block, the cryptographic hash already discussed will vary based on the timestamp. This means that attempting to submit an edited block with a modified timestamp will run into the same problem with changing hashes, and will ultimately be rejected by the blockchain.
A second purpose of the timestamp is to show that the blocks are in chronological order of creation. This is important for auditability of the blockchain, because it ensures that any audit can validate the order information as attached to the blockchain.
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