Blockchain challenges and opportunities

  1. INTRODUCTION

Blockchain has numerous benefits such as decentralisation, persistency, anonymity and audibility. There is a wide range spectrum of blockchain applications ranging from cryptocurrency, financial services, risk management, internet of things (IOT) to public and social services. Block chain was first proposed in 2008 and implemented in 2009 (Nakamoto, 2008). It can be regarded as a public ledger, in which all the transactions are stored in the chain of blocks. The chain continuously grow when new blocks are appended to it. Blockchain technology is becoming one of the most promising technologies for the generation of internet interaction systems such as smart contracts, public services, Internet of things (IOT), reputation systems and security services. Considering the fact that blockchain technology has utterly great potential for the basis of future internet systems yet it is facing number of technical obstacles.

2. ARCHITECTURE

The blockchain is a sequence of blocks, which holds a complete list of transactions records. Each block points to the immediately previous block via a reference that is essentially a hash value of the previous block called parent block. The first block of a blockchain is called genesis block which has no parent block.

2.1 Block

A block consists of the block header and the block body. Block version indicates which set of block validation rules to follow. Merkle tree root hash is the hash value of all the transactions in the block.

The block body is composed of a transaction counter and transactions. It depends on the block size and the size of each transactions the number of transactions that a block can contain.

2.2 Digital signature

Every individual is provide with a pair of private and public key. Where the private key is used to sign the transactions, the digital signed transactions are spread throughout the whole network and then accessed by public keys, which is the made visible to everyone in the network.

2.3 Taxonomy of blockchain systems

Blockchain system is categorised into three types: public blockchain, private blockchain and consortium blockchain. Comparing these three types in the basis of different characteristics.

  • Consensus assurance — In open blockchain, every hub could partake in the agreement cycle. Also, just a chose set of hubs are liable for approving the square in consortium blockchain. Concerning private chain, it is completely constrained by one association who could decide the last agreement.
  • Read authorisation — Exchanges in a public blockchain are obvious to people in general while the read consent relies upon a private blockchain or a consortium blockchain. The consortium or the association could choose whether the put away data is public or confined.
  • Immutability — Since exchanges are put away in various hubs in the conveyed network, so it is almost difficult to alter the public blockchain. In any case, if most of the consortium or the predominant association needs to alter the blockchain, the consortium blockchain or private blockchain could be turned around or altered.
  • Efficiency — It requires some investment to engender exchanges and squares as there are countless hubs on open blockchain network. Mulling over organisation security, limitations on open blockchain would be substantially more severe. Thus, exchange throughput is restricted and the inactivity is high. With less validators, consortium blockchain and private blockchain could be more effective.
  • Centralised — The primary distinction among the three sorts of blockchains is that public blockchain is decentralised, consortium blockchain is somewhat unified and private blockchain is completely brought together as it is constrained by a solitary gathering.
  • Consensus measure — Everybody on the planet could join the agreement cycle of the public blockchain. Not quite the same as open blockchain, both consortium blockchain and private blockchain are permissioned. One hub should be certificated to join the agreement cycle in consortium or private blockchain.

3. Applications of blockchain

There is a wide range of applications of blockchain technology. If we overall categorises the applications they are as follows -

  • Finance
  • IoT
  • Public and social service
  • Reputation system
  • Security and privacy

3.1 Finance

Financial services — there’s a huge impact of blockchain system like Bitcoin which has brought a huge change on traditional financial and business services, bitcoin holds the potential to disrupt the world of banking. From clearing and settlement of financial assets it can be applied to all the fields. Not only this but blockchain has also caught tremendous attention in the eyes of large software companies like IBM, Microsoft etc.

Risk management — risk management framework plays a significant role in financial technology which is now combined with block chain to perform better. Pilkington in 2016 provided a novel risk-management framework, in which blockchain technology is used to to analyse investment risk. Investors who hold securities through chain of custodians tend to face the risk of any failing. With the help of blockchain, investments and collaterals can be decided quickly instead of going through long-term consideration.

3.1 Internet of things (IoT)

IoT is one of the most affirmative information and communication technologies which is ramping up recently. IoT is proposed to integrate the things into the internet and provide users with various services. The main applications of IoT include the logistic management with Radio-Frequency Identification technology, smart homes, e-health, smart grids, Maritime Industry, E-business, Safety and privacy, etc.

3.2 Public and social services

Blockchain can also be widely used in public and social services.

  • Land registration — one of the application in public services is land registration, in which the land information such as the physical status and related rights can be registered and publicised on blockchain.
  • Energy saving — blockchain can be used in green energy as in to encourage the usage of renewable energies. In particular, solar coin is a kind of digital currency rewarding solar energy producers.
  • Education — if we regard learning and teaching process as the currency, blockchain technology can be applied to online educational market so to say blocks could be packed and placed into blockchain by teachers and the learning achievements could be thought as coins.

3.4 Security and privacy

There are number of anti-malware filters proposed to detect the suspected files through pattern matching schemes, which uses a central server to store and update virus patterns. However, these centralised measures are also vulnerable to malicious attackers. Blockchain can potentially help improve the security of distributed networks. Blockchain technology can also be used to improve the reliability of security infrastructure are often susceptible to single point of failure due to the hardware and software flaws or malicious attacks.

In addition to the increasing risk of the exposure of our private data to malwares, various mobile services and social network provider are collecting our sensitive data. Blockchain has potential to improve the security of privacy sensitive data. The system can protect the data against these privacy issues:

  • Data ownership
  • Data transparency and audibility
  • Dine-grained access control.

4. Challenges and recent advancements

There are roughly around three types of challenges blockchain technology faces. Such as scalability, privacy leakage, and selfish mining.

With the measure of exchanges expanding step by step, the blockchain turns out to be substantial. At present, Bitcoin blockchain has surpassed 100 GB stockpiling. All exchanges must be put away for approving the exchange. Furthermore, because of the first limitation of square size and the time stretch used to produce another square, the Bitcoin blockchain can just handle almost 7 exchanges for every second, which can’t satisfy the necessity of preparing a huge number of exchanges in a constant manner. In the interim, as the limit of squares is exceptionally little, numerous little exchanges may be postponed since diggers favor those exchanges with a high exchange charge. Notwithstanding, enormous square size would hinder the spread speed and lead to blockchain branches. So versatility issue is very intense.

The blockchain is accepted to be protected as clients just make exchanges with created addresses as opposed to genuine personality. Clients additionally could produce numerous locations if there should be an occurrence of data spillage. Nonetheless, it is demonstrated that blockchain can’t ensure the value-based protection since the estimations, all things considered, and balances for every open key are freely noticeable. Plus, the ongoing examination has demonstrated that a client’s Bitcoin exchanges can be connected to uncover client’s data. Various strategies have been proposed to improve namelessness of blockchain, which could be generally classified into two kinds mixing and anonymous.

The blockchain is susceptible to attacks of colluding selfish miners. Generally, it is convinced that nodes with over 51% computing power could reverse the blockchain and reverse the happened transaction. However, recent research shows that even nodes with less 51% power are still dangerous. In selfish mining strategy, selfish miners keep their mined blocks without broadcasting and the private branch would be revealed to the public only if some requirements are satisfied. As the private branch is longer than the current public chain, it would be admitted by all miners. Before the private blockchain publication, honest miners are wasting their resources on a useless branch while selfish miners are mining their private chain without competitors. So selfish miners tend to get more revenue. Rational miners would be attracted to join the selfish pool and the selfish could exceed 51% power quickly. Based on selfish mining, many other attacks have been proposed to show that blockchain is not so secure. ‘

5. Future directions

The block chain has shown its potential in each and every branch existing whether its an industry or academia.

5.1 Blockchain testing

Some developers might falsify their blockchain performance to attract investors driving by huge profits. Besides when user want to combine blockchain into business, they have to know which blockchain fits their requirements. So blockchain testing mechanism needs to be in place to test different blockchains. It could be separated into two phases: standardisation phase and testing phase. In the standardisation phase, all criteria to valid if the blockchain works fine as developers claim. As about the testing phase, its testing needs to be performed with different criteria.

5.2 Big data analytics

Block chain can be well combined with big data roughly categorising them into data management and data analytics. As for data management, blockchain could be used to store important data as it is distributed and secure while also ensuring that the data is original.

5.3 Smart contract

A smart contract is a computerised transaction protocol that executes the terms of a contract. Its been long time that It has been proposed and now this concept can be implemented with blockchain. Nowadays, more and more smart contract develop platforms are emerging and smart contract could achieve more and more functionalities.

Smart contracts are categorised into two types the development and the evaluation. The development could be smart contract development or smart contract platform development. With blockchain technology developing quickly more and more smart contract based applications would be out in use. Companies need to take the application performance into consideration.

5.4 Artificial intelligence

The near time developments are creating a new platform of opportunities for artificial intelligence applications. Matter of fact AI technology can help solve many blockchain challenges. On the other hand, AI is penetrating into our lives now. Blockchain and smart contract could help restrict misbehaviours done by AI products. For instance, law written in smart contract could help to restrict misbehaviours done by driverless cars.

6. Conclusion

The blockchain is highly endorsed for its decentralised infrastructure and peer to peer nature. Though many researches about blockchain are shielded by bitcoin. But blockchain could be applied in variety of fields far beyond bitcoin. Blockchain has proved its potential for transforming its traditional industry with its characteristics. Going through massive amount of research work published, I have tried to give and overview of the blockchain including the architecture and key characteristics. Also mentioned typical blockchain applications. Furthermore, I list some challenges and problems that would hinder blockchain development and summarise some existing approaches for solving these problems.