Anytime something incredible comes around, the band-wagon fires up and people start jumping on board. With blockchain things are no different albeit becoming an increasingly diluted term that confuses people. Many have attempted to clarify things while others have tried to intentionally cloud them.
The "clouders" merely want to sell software and/or cloud subscriptions to their offerings, so naturally they denounce others and this is why things further necessitate clarity that explains the division between a networks like bitcoin's blockchain or Ethereum and database software that companies are trying to sell using the word "blockchain" without using a global network. There's a danger when companies new (Chain, Ripple, Bloq, etc...) and old (Microsoft, Deloitte, IBM, etc...) begin offering software and/or tools to promote "blockchain" without necessarily using a global blockchain.
It's much like saying you want a "coke"when you mean a "soda" because Coca-Cola (Coke) became the industry standard long ago and now all soda's are often called "coke" when in fact the requesting party may mean a Pepsi. Which is humorous when considering the one thing both entities share is the "Cola" part yet everyone latched on to "coke" instead of "cola". Point being, if someone asks for a Coke and you give them a glass of Milk, they are going to be rather disappointed in the end.
With blockchain this is worse when promoters of commercial software pitch to those familiar enough with bitcoin, the blockchain, and it's unmatched security but lack the technical depth of understanding to realize that with a global blockchain comes that security, immutability, and absolute, however, with cloudware and private block-things it's nowhere close to the same.
It is important to note that many are using global blockchain networks. For example, most of Microsoft's work and offerings are around Ethereum which is most certainly a global network.
With blockchain this is worse when promoters of commercial software pitch to those familiar enough with bitcoin, the blockchain, and it's unmatched security but lack the technical depth of understanding to realize that with a global blockchain comes that security, immutability, and absolute, however, with cloudware and private block-things it's nowhere close to the same.
It is important to note that many are using global blockchain networks. For example, most of Microsoft's work and offerings are around Ethereum which is most certainly a global network.
The Blockchain Verses Blockchain
Two levels of identity have evolved over time. One, "The Blockchain" still and has always meant the bitcoin network and two, "blockchain" also identifies networks such as the litecoin blockchain which is also identified as an altchain.
Both are blockchains from a technical perspective. A blockchain simply means a network (not necessarily a database) that provides a trust using nothing more than itself as that trust. This trust does not have to be provided by consensus, however, its just the only way it has currently been implemented on a global scale successfully. In addition to consensus, bitcoin, litecoin. and others also use ledgers (again, not really a database) and cryptography for recording and security purposes.
Let look at those words for a minute. "Consensus" is best viewed as a "vote", however it's not a vote , it's an agreement with other programs running the same software that everything is accurate according to their shared informational knowledge and that the result of a required task has been satisfactorily presented as such.
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| Figure A: blockchain transaction broadcast |
Figure A (above) shows a broadcast transaction with other nodes in agreement that the transaction is valid that be done in numerous ways but in the case of bitcoin and litecoin, the networks use cryptography and a ledger to secure and validate the transaction. When the initial transaction is broadcast, it is received immediately, however, is not confirmed until reported back as "in agreement" as shown above. However this is not just back to the node broadcasting the transaction, it is to the entire network of programs talk to each other as shown below in Figure B (below).
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| Figure B: network communication |
When the network doe not agree with a transaction for whatever reason it may be the process looks more like what is shown in Figure C (below).
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| Figure C: over 51% reject transaction |
Which results in a failed transaction as the one and only acceptance is in agreement that there are too many discrepancies and the transaction is invalid.
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| Figure D: blockchain transaction failure |
How does something like this happen anyway? It's rather simple, the transaction may have been broadcast earlier incorrectly or even maliciously with a secondary transaction broadcast to rebroadcast, mimic, or replace it. This is exactly how a successful double spend would theoretically work if it could be accomplished with 51% of the network required to make it even feasible, much less unnoticeable.
That's why it works and establishes a trust using nothing more than itself as that trust by participation in it's network by mining companies and hobbyists who are paid for their contributions in bitcoin, litecoin, other compensation, or comparable token. This is not to be confused with tokenization technology which does occur on the bitcoin blockchain as well whereas bitcoin is both the token and the tokenization, however, not necessarily what node participants have to be compensated in. It's also important to point out that tokenization can occur on the bitcoin blockchain without bitcoin being the token and bitcoin is merely the compensation.
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| Figure E: blockchain tokenization |
In tokenization as shown in Figure E (above), bitcoin can be the incentive, the compensation for the network participants, while the tokenization is something else such as another digital currency or asset or a data or transaction key to another network, sidechain, or database. This of course would then rely on the power and strength of security of the sidechain or subsystem being the key to that token but the actual transaction record itself as entered n the blockchain is absolute thus if the token identifier and blockchain transaction identifier are both used in the subsystem it can be definitive. However the data tied to that combined identifier in the subsystem is only as absolute as designed and maintained by the subsystem and if that subsystem is not a global blockchain, such as an enterprise or private system, then the data itself is still subject to security concerns and manipulation which is a vulnerability with these types of systems when used in this fashion including private blockchains or sidechains and permissioned based applications such as internal database or ERP software.
That's where the danger of private systems is currently present and why when used correctly with recording on global implementations such as bitcoins or Ethereum, the risk is mitigated somewhat but still exists on the subsystem. Regardless, there are advance techniques that can be used to further reduce risk on the subsystem and when used with a global chain make it less subject to manipulation since the global chain record is absolute.
Public Verses Private, Universal Verses Enterprise
Public blockchains don't really exist per say. They are open to participation by, and contributions from, anyone on earth, however, they are not truly open where anyone can simply write or read anything they want to out of the system or edit ledger data. Theses systems are generally very secure and all anyone can do is participate by contributing to the network or source code (which usually required consensus).
The bitcoin network allows anyone to read a transactions existence, time, bitcoin units, and status of that transaction but there's not much else available to the public and certainly nothing that may be linked to it.
The source code is readily available for anyone to use, however upon code changes and implementation it becomes an altchain and not part of the bitcoin network unless it's adopted by nearly all miners which as we know from the 1 MB block-size debate, is a monumental task. This is a positive thing because this should be monumental to make a major change even if it is a bit annoying at times.
Private networks source code can be available (such as Hyperledger) however it's participation is limited to those chosen by the implementation party and/or other participants. Purely private networks provide the little security and are most vulnerable to manipulation which makes them poor choices for assets or other important records according many in the industry, however, they do serve other purposes like inter-office procurement (buying office supplies or furnishings) for example where multiple approvals are required from different departments. This sort of task can also be done with workflow systems.
With blockchain technology, some compare "public" to "enterprise" and "private" to "public". The latter is correct of course, there is either private or public. Public vs. Enterprise really wouldn't be accurate. Enterprise systems can be public as well. Universal might be a better comparison, however, the term global is used in this info-graphic Figure F (below) and an enterprise system is described as a workflow system, sidechain, or distributed ledger.
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| Figure F: blockchain technology |
One thing to be cognizant of is that a global or "universal" chain, such as bitcoin, can be used on any level from small business to international enterprise. In the Figure F diagram the use-case is downward compatible, meaning the global blockchain system can be used on any level below it, however, other systems may not necessarily be compatible with any other grade and none would be comparable to a global system.
Permissioned Verses Permissionless
Bitcoin is considered a permissionless system and that's the core technology of blockchain. In fact it's the abstract as described in the 2008 Satoshi Nakamoto whitepaper "Bitcoin: A Peer-to-Peer Electronic Cash System", widely considered the first and original documented design of a blockchain which states a third-party required to govern a transaction renders the system something other than a blockchain as it loses its benefit.
"...the main benefits are lost if a trusted third party is still required" Satoshi Nakamoto¹
Permission (or permissioned) systems (as currently proposed) require a third party such as a paper agreement or contract, intermediary, or other governance since the network itself cannot provide that trust under which understanding renders a permission based system something other than a blockchain.
We won't go any further into permission based systems since the concept is completely adverse to blockchain technology's core function and purpose. It doesn't appear as if it can even be considered a blockchain at all.
There are permissioned systems promoted as blockchains and there's a small debate (mostly by the promoters of permissioned systems) on the topic, however, until proven otherwise we'll avoid this completely since blockchain technology has been a "permissionless system" technology and an industry standard for 8 years paired with the whitepaper clarity of the technology's core function seems to make this a non-topic.
Token Verses Tokenless, Incentivized Verses No Incentive
Tokens and incentives appear very similar, however they are different. Using tokenization is very common in database design whereas incentives are not. Likewise tokenization in blockchain technology is often the incentive itself and thus commonly referred to as both. However they are two different items. Tokens provide unique transaction identity whereas incentives can be anything including something not produced by the network itself. In other words, an electricity provider may elect to provide a 10% discount to miners who support a specific network. This incentive would be purely off-chain and not related to any specific native asset.
Incentives however are currently core requirements for any kind of blockchain above the enterprise grade. Whereas it is technically possible for non-incentive systems to work on a global scale, currently in 2016, it remains improbable for the networks to actually work.
Even large scale private networks such as the SWIFT, Visa, or Mastercard are incentivized systems whereas all parties involved in a specific transaction are all getting paid a small percent in the way of a credit card or transfer fee. As a consumer, you may not notice, but as a merchant you are fully aware that every credit card charge comes with a 1% to 12% surcharge on top of annual and other fees to process that payment. Along the chain of the organizations involved in that transaction, each gets a small portion of that fee.
We won't go further into incentives until someone actually implements a working model on a global scale.
That said, technically it is possible. It's just improbable.
Internet Verse Intranet, Commercial Verses Making Less Money
Let''s just address the real issue. It's all about making money and as much as that as possible. That's why all of these new offerings keep popping up. There are those wary of using networks like the Blockchain (bitcoin) and Ethereum and for each of them there are 10 more companies ready to sell them anything else tailor made for them and call it a blockchain so long as they are paying. Take a look at R3 CEV, this is a conglomerated effort of a bunch of banks attempting to gain more power and make more money. Just let that sink in, this is coming from ... Banks ... who make millions doing essentially nothing (very little).
Make no mistake, there's nothing R3 or any other commercial interest based organization is doing for the good of the industry or the community. However, don't be too quick to point the finger since after all, it's greed that powers bitcoins blockchain as well.
The lines in the sand seem to be clarifying much like the Internet Vs. Intranet of 20 years ago. There were many that made Intranet attempts at being the Internet but only a few have prevailed, most notably the Internet and a distant second, the Dark Web. The commercial endeavours such as AOL have all but vanished at this point.
The same appears to be going for the blockchain industry whereas there is the bitcoin blockchain (1st) which nothing else on earth is comparable and a few networks like Ethereum (2nd) and Litecoin that are of enough size and power to count. Then there exists the Ripple's, Hyperledger's, and other Altchains of world which are well over 1000 strong, none of which have proven themselves to be anything close to comparable, and some are merely private Intranet type networks more comparable to workflow systems or other database driven technologies.
Terry Roche, a principal over research at TABB Group said that "there won't be one blockchain" according to technologists and he's likely right. Some technologists on earth somewhere likely did say this. Those technologist are also most likely right, there will be a few global blockchains perhaps and around those will be hundreds or thousands of minuscule Intranet type networks.
Most would agree with this and I am no different, however with that said, if you look out the window right now ... there is only one big one out there.
Report by dinbits
Image by dinbits.com staff
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