Technical Characteristics of Blockchain

1 December, 2020 |

In the previous article, “Introduction to Business Blockchain”, we learned about this technology, its main characteristics, and benefits, along with its classification and a few consolidated use cases. On this occasion, we will learn about the technical aspects that define it and briefly introduce five of the main platforms available for the implementation of Enterprise Blockchain solutions.

The name Blockchain stems from the data structure, where a series of transactions are grouped into sequentially chained blocks. Without going into the details of a particular implementation, each block is usually made up of an index (1, 2, 3, n), a timestamp (date and time of creation), data (transactions or small programs called smart contracts), a field called a nonce (number only used once) obtained through consensus, and two hashes (fixed-width alphanumeric representation, obtained by applying a cryptographic function), one from the previous block and one pertaining to the block itself.

The calculation of a hash is a simple mathematical operation that provides an unrepeatable result, from which it is impossible to reconstruct the source information. Thanks to the inclusion of the previous hash in the current block, any modification or elimination of a block automatically invalidates the following ones, hence blocks can only be added.

Peer network and consensus
Blockchain networks are always distributed and peer-to-peer (P2P). Instead of relying on a central server, the computers are directly connected to each other. Each member contributes to the computing power (consumed to create consensus) and storage. This technology is considered more secure than a centralized network, since there is no single point of attack, and it also offers 100% uptime (the network stays up as long as members are connected).

The information sent to be added to the chain is cryptographically signed by a private key and is accompanied by the corresponding public key so that the members of the network can verify its origin. To consolidate as a new block, the parties must agree to use a consensus protocol, which ensures that the chain is the same in each node and that there are no malicious actors manipulating the data.

Consensus protocols are mechanisms used for the members of a blockchain network to come to a consensus. In public and open networks, such as Bitcoin and Ethereum, computationally complex protocols are used, one of the best being Proof-of-work (PoW). Basically, in addition to the chain being extremely difficult to modify (it is necessary to understand in detail how it works and have control of at least 51% of the network), the purpose of the system is that anybody who intends to modify it finds it totally unfeasible to even try (it requires specialized equipment, based on devices such as GPUs or FPGAs, plus the major power use required to recalculate the blocks’ hash).

Smart Contracts
Smart Contracts are if … then style programs that are saved and executed by the blockchain. They get their name from legal principles, and they are intended to secure automated transactions upon meeting certain conditions in a safe way, avoiding possible malicious human actors.

There are specific languages, such as Solidity and Vyper, and more general ones, such as Golang, Node, and Java. Support for these languages varies from platform to platform, and some don’t support them at all, usually the ones made for cryptocurrency.

Main Enterprise Platforms
The implementation of a blockchain at the computer program-level takes considerations regarding the security, performance, and scalability of the system to the extreme. It is highly unlikely, and not recommended if the goal is not to create a new alternative, to encode from scratch. Instead, hundreds of free platforms are available and ready to be implemented, a remarkable feature gave the security and transparency they must provide. While many are intended for cryptocurrencies, enterprise platforms also exist. A brief description of five of the most popular platforms for this purpose is included below.

Ethereum: introduced in late 2013, and deployed for use between 2015 and 2016, it is one of the more mature alternatives. It was one of the first platforms to separate the blockchain concept from the particular case of cryptocurrencies, introducing the concept of Smart Contracts. It has its own currency, ETH, and is ideal for carrying out decentralized applications on public networks; but also, despite its lack of permits, it is widely used in business environments. It is backed by the Ethereum Enterprise Alliance (EEA, created in 2017), a non-profit organization with over 200 members, including companies among the 500 largest in the world, academic institutions, start-ups and Ethereum-based solution providers.

Hyperledger Fabric: Hyperledger is a Linux Foundation project launched in late 2015 that brings together enterprise blockchain developments. Its best-known member is Hyperledger Fabric, initially developed, and later donated, by IBM. It is strongly permissioned and private, to the point of allowing communications between two members of the network. Due to its business focus, it uses lighter consensus protocols, allowing a greater number of operations per second. Its first version for production, 1.0, is from mid-2017, with 2.0 released in early 2020.

Ripple: it is rooted in a pre-Bitcoin project, thus presenting some distinctive technical characteristics. It emerged as a platform in 2012, mainly for financial uses, with the main banks among its users. It is based on the use of a cryptocurrency, XRP, and unlike the main modern platforms, it does not support Smart Contracts (they are being added at the end of 2020).

Corda: launched in 2016 by the R3 consortium, made up mainly of financial institutions. It is permissioned and has no associated currency. Its first stable version is from 2017, and it was strongly focused on banking, although over time other uses emerged.

Quorum: a development of J.P. Morgan, announced in 2016. Basically, it is a variant of Ethereum focused on the business world, where the consensus mechanism was replaced by a faster one, and permissions were added. In the middle of 2020, it was transferred to ConsenSys, a provider of Ethereum-based business technology solutions.

Thanks to its data structure, the type of distributed network, the cryptographic treatment, and the use of consensus, this technology boasts immutability, traceability, and security. As for the development of Smart Contracts, it requires specific knowledge about the platform where it will be executed, knowing how to interact with its API, and getting used to a new programming paradigm. Aside from the different platforms available, the business world seems mainly divided between Ethereum and Hyperledger Fabric, with the former more focused on B2C (Business to Consumer) and the latter on B2B (Business to Business).

The main difference lies in whether the network is public and non-permissioned, or private and permissioned. To decide whether to implement one or the other, the possible need for coin consumption must be taken into account for the first case; for the second case, based on the knowledge about the members that become registered and identified entities in the network, lighter consensus protocols can be used, which increases the possible number of operations per second.