Blockchain for Business E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Wissenschaft und neue Technologien
• Sprache: Englisch

Seitenzahl: 593

Veröffentlichungsjahr: 2021

Beschreibung

The book focuses on the power of business blockchain. It gives an overview of blockchain in traditional business, marketing, accounting and business intelligence. The book provides a detailed working knowedge of blockchain, user cases of blockchain in business, cryptocurrency and Initial Coin Offering(ICO) along with the risks associated with them. The book also covers the detailed study of decentralization, mining, consensus, smart contracts, concepts and working of distributed ledgers and hyper ledgers as well as many other important concepts. It also details the security and privacy aspects of blockchain. The book is beneficial for readers who are preparing for their business careers, those who are working with small scale businesses and startups, and helpful for business executives, managers, entrepreneurs, bankers, government officials and legal professionals who are looking to blockchain for secure financial transactions. The book will also be beneficial for researchers and students who want to study the latest developments of blockchain.

Leseprobe

Table of Contents

Cover

Title Page

Copyright

Preface

1 Introduction to Blockchain

1.1 Introduction

1.2 The Privacy Challenges of Blockchain

1.3 De-Anonymization

1.4 Transaction Pattern Exposure

1.5 Methodology: Identity Privacy Preservation

1.6 Decentralization Challenges Exist in Blockchain

1.7 Conclusion

1.8 Regulatory Challenges

1.9 Obstacles to Blockchain Regulation

1.10 The Current Regulatory Landscape

1.11 The Future of Blockchain Regulation

1.12 Business Model Challenges

1.13 Utility Token Model

1.14 Blockchain as a Service

1.15 Securities

1.16 Development Platforms

1.17 Scandals and Public Perceptions

References

2 The Scope for Blockchain Ecosystem

2.1 Introduction

2.2 Blockchain as Game Changer for Environment

2.3 Blockchain in Business Ecosystem

2.4 Is Blockchain Business Ecosystem Profitable?

2.5 How Do You “Design” a Business Ecosystem?

2.6 Redesigning Future With Blockchain

2.7 Challenges and Opportunities

References

3 Business Use Cases of Blockchain Technology

3.1 Introduction to Cryptocurrency

3.2 What is a Bitcoin?

3.3 Bitcoin ICO

3.4 Advantages and Disadvantages of ICO

3.5 Merchant Acceptance of Bitcoin

References

4 Ethereum

4.1 Introduction

4.2 Basic Features of Ethereum

4.3 Difference between Bitcoin and Ethereum

4.4 EVM (Ethereum Virtual Machine)

4.5 Gas

4.6 Applications Built on the Basis of Ethereum

4.7 ETH

4.8 Smart Contracts

4.9 DApp (Decentralized Application or Smart Contract)

4.10 Conclusion

References

5 E-Wallet

5.1 Overview of Wallet Technology

5.2 Types of Wallet

5.3 Security of Bitcoin Wallets

5.4 Workings of Wallet Technology

5.5 Create HD Wallet From Seed

5.6 Navigating HD Wallet

5.7 Conclusion

References

6 Blockchain and Governance: Theory, Applications and Challenges

6.1 Introduction

6.2 Governance: Centralized vs Decentralized

6.3 Blockchain’s Features Supportive of Decentralization

6.4 Noteworthy Application Areas for Blockchain-Based Governance

6.5 Scopes and Challenges

6.6 Conclusion

References

7 Blockchain-Based Identity Management

7.1 Introduction

7.2 Existing Identity Management Systems and Their Challenges

7.3 Concept of Decentralized Identifiers

7.4 The Workflow of Blockchain Identity Management Systems

7.5 How Does it Contribute to Data Security?

7.6 Trending Blockchain Identity Management Projects

7.7 Why and How of Revocation

7.8 Points to Ponder

7.9 Conclusion

References

8 Blockchain & IoT: A Paradigm Shift for Supply Chain Management

8.1 Introduction

8.2 Supply Chain Management

8.3 Blockchain and IoT

8.4 Blockchain Technology and IoT Use Cases in Supply Chain Management

8.5 Benefits and Challenges in Blockchain-Based Supply Chain Management

8.6 Conclusion

References

9 Blockchain-Enabled Supply Chain Management System

9.1 Introduction

9.2 Blockchain Technology

9.3 Blockchain Technology in Supply Chain Management

9.4 Elements of Blockchain That Affects Supply Chain

9.5 Challenges in Implementation of Blockchain-Enabled Supply Chain

9.6 Conclusion

References

10 Security Concerns of Blockchain

10.1 Introduction: Security Concerns of Blockchain

10.2 Cryptocurrencies Scenarios

10.3 Privacy Challenges of Blockchain

10.4 Decentralization in Blockchain

10.5 Legal and Regulatory Issues in Blockchain

10.6 Smart Contracts

10.7 Scandals of Blockchain

10.8 Is Blockchain the Rise of Trustless Trust?

10.9 Blockchain Model Challenges

References

11 Acceptance and Adoption of Blockchain Technology: An Examination of the Security & Privacy Challenges

11.1 Introduction

11.2 Security Issues of Blockchain

11.3 Privacy Challenges of Bitcoin

11.4 Blockchain Application-Based Solutions

11.5 Conclusion and Future Work

References

12 Deficiencies in Blockchain Technology and Potential Augmentation in Cyber Security

12.1 Introduction

12.2 Security Issues in Blockchain Technology

12.3 Privacy Challenges

12.4 Decentralization Challenges

12.5 Regulatory Challenges

12.6 Business Model Challenges

12.7 Scandals and Public Perception

12.8 Why Blockchain is Trustless

12.9 Use of Blockchain in Cybersecurity

References

13 Internet of Things and Blockchain

13.1 History of ‘Internet of Things’

13.2 IoT Devices

13.3 Sensors and Actuators

13.4 Cloud and Haze-Based Engineering

13.5 Blockchain and IoT

13.6 Edge Computing

13.7 Contextual Analyses

13.8 Fate of Blockchain and IoT

References

14 Blockchain Applications

14.1 Introduction to Blockchain

14.2 Blockchain in Big Data Predictive Task Automation

14.3 Digital Identity Verification

14.4 Blockchain Government

14.5 Blockchain Science

14.6 Blockchain Health

14.7 Blockchain Learning

References

15 Advance Concepts of Blockchain

15.1 Community Supercomputing

15.2 Blockchain Genomics

15.3 Blockchain Learning

15.4 Community Coin

15.5 Demurrage Currencies

Reading List

Index

End User License Agreement

List of Table

Chapter 1

Table 1.1 A novel comparison among public, consortium, private blockchain.

Chapter 6

Table 6.1 Some Blockchain solutions for managing governance.

Chapter 8

Table 8.1 Supply Chain actors, current limitations faced and blockchain impact.

Chapter 9

Table 9.1 Supply Chain actors, current limitations faced and blockchain impact.

Chapter 13

Table 13.1 Difference between blockchain and IoT.

Chapter 15

Table 15.1 Comparison of Monetary assets and Non-Monetary assets.

List of Illustrations

Chapter 1

Figure 1.1 Demonstrating the pictorial impression of blockchain [2].

Figure 1.2 The diagrammatic representation of the types of blockchain architectu...

Figure 1.3 Figure states the types of blockchains in trend.

Figure 1.4 The figure states the internal working paradigm of a blockchain.

Figure 1.5 Basic architecture of mixing services [1].

Figure 1.6 Different types of Networks in blockchain [5]. (a) Centralized. (b) D...

Figure 1.7 Demonstrating the properties of the model [23].

Chapter 3

Figure 3.1 A chain of bitcoin transactions.

Figure 3.2 Validating transactions [1].

Figure 3.3 Timestamping block of transactions using hash.

Figure 3.4 ICO process.

Figure 3.5 Best performing currency of 2015 [9].

Chapter 4

Figure 4.1 Transaction of block [Ref:https://masterthecrypto.com].

Figure 4.2 Transaction for buying Ethernet [Ref:https://www.coingecko.com/en/coi...

Chapter 7

Figure 7.1 Identity controlling factors, authentication, and authorization, dire...

Figure 7.2 Pictorial representation of centralized, decentralized and distribute...

Figure 7.3 Pictorial presentation of ‘key-data’ concept.

Figure 7.4 Analytical view of blockchain identity management system. Ref: Self-S...

Figure 7.5 Process of authorization in blockchain systems.

Figure 7.6 Features of self-sovereign systems. Ref: consensys.net.

Figure 7.7 Advantages of using blockchain systems. Ref: Blockchain Council.

Figure 7.8 Process flow of blockchain identity management systems.

Figure 7.9 Process of revocation in blockchain identity management systems. Ref:...

Figure 7.10 Statistics of people lacking ID by region. Ref: ourworldindata.org.

Figure 7.11 Advantages of blockchain identity management systems. Ref: nec.com.

Figure 7.12 Traditional versus blockchain identity management systems. Ref: food...

Chapter 8

Figure 8.1 The parties in a Supply Chain.

Figure 8.2 The five drivers of a supply chain.

Figure 8.3 Different network structures.

Figure 8.4 The four key concepts of blockchain.

Chapter 9

Figure 9.1 Sustainable supply chain management.

Figure 9.2 Example of Applications of Blockchain.

Figure 9.3 Transaction management in blockchain enabled supply chain.

Chapter 12

Figure 12.1 Types of privacy protection.

Figure 12.2 (a) Centralized and (b) decentralized systems represented by nodes a...

Figure 12.3 The three aspects of decentralization.

Figure 12.4 Steps of wait-and-see approach.

Figure 12.5 Different features of sandboxing.

Figure 12.6 Scandals related to Blockchain.

Figure 12.7 The two different public perception on Blockchain.

Figure 12.8 The different uses of Blockchain in Cybersecurity.

Chapter 13

Figure 13.1 Hype cycle for emerging technologies, 2019.

Figure 13.2 Market of IoT by 2025.

Figure 13.3 Futuristic IoT devices.

Figure 13.4 Examples where sensors and actuators are used (source: https://s3.am...

Figure 13.5 Ways of connecting through web for data sharing.

Figure 13.6 People and processes.

Figure 13.7 Sensor to actuator flow.

Figure 13.8 Architecture of IoT systems.

Figure 13.9 Haze architecture for smart IoT gateway.

Figure 13.10 Smart watches and fitness trackers (source: https://www.pebble.com/...

Figure 13.11 Embedded skin patches (source: MC10 electronics).

Figure 13.12 Brain sensing headband with embedded neuro sensors (source: http://...

Figure 13.13 Relationship of cloud computing and IoT (source: https://innovation...

Figure 13.14 Three tier edge computing model.

Figure 13.15 Golden state food disrupting supply chain and logistics.

Figure 13.16 Smartlog.

Figure 13.17 Reshaping of the automotive industry using NetObjex.

Figure 13.18 Transformation of Sharing Economy business-slock it.

Figure 13.19 Game changer of pharmacy industry—Mediledger.

Figure 13.20 Transformation of agriculture—Pavo.

Chapter 14

Figure 14.1 Diagram of Blockchain.

Chapter 15

Figure 15.1 Community Super Computing (Courtesy of Getty Images).

Figure 15.2 Contagious disease and humans.

Figure 15.3 Block chain provides a seamless secured information exchange between...

Figure 15.4 Genome sequencing.

Figure 15.5 Smart Learning (Courtesy: Manav Rachna).

Figure 15.6 Blockchain-based Bitcoin.

Figure 15.7 Gold.

Figure 15.8 Company Shares.

Figure 15.9 Indian Currency and US Currency.

Guide

Cover

Table of Contents

Title Page

Copyright

Preface

Begin Reading

Index

End User License Agreement

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Scrivener Publishing

100 Cummings Center, Suite 541J

Beverly, MA 01915-6106

Publishers at Scrivener

Martin Scrivener ([email protected])

Phillip Carmical ([email protected])

Blockchain for Business

How It Works and Creates Value

Edited by

S.S. Tyagi

and

Shaveta Bhatia

This edition first published 2021 by John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, USA and Scrivener Publishing LLC, 100 Cummings Center, Suite 541J, Beverly, MA 01915, USA

© 2021 Scrivener Publishing LLC

For more information about Scrivener publications please visit www.scrivenerpublishing.com.

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Library of Congress Cataloging-in-Publication Data

ISBN 978-1-119-71104-9

Cover image: Pixabay.Com

Cover design by: Russell Richardson

Set in size of 11pt and Minion Pro by Manila Typesetting Company, Makati, Philippines

Printed in the USA

10 9 8 7 6 5 4 3 2 1

Preface

The motivation behind this book was the desire to impart succinct knowledge in the field of blockchain technology—a technology that has been singled out as a pillar of the Fourth Industrial Revolution by World Bank. However, it was written not only to fulfill the desire of the editors and contributing authors but also to address the desire for such a book expressed by all the technical students, researchers, academicians, and professionals who we interact with on a daily basis. We understood the need for this book after observing numerous sessions and independent lectures on the subject of blockchain technology. It was evident that blockchain technology is currently one of the most important futuristic technologies, and that researchers and professionals all across the world are beginning to show tremendous interest in learning about this piece of technology.

The world essentially became aware of blockchain technology way back in 2008 with its first ever massive-scale implementation in the form of a digital currency called Bitcoin, introduced in Satoshi Nakamoto’s whitepaper. However, a lesser known fact is that the first occurrence of blockchain technology and its associated concepts was observed in papers published from 1991 to 1997 titled “How to Time-Stamp a Digital Document,” “Improving the Efficiency and Reliability of Digital Time-Stamping,” and “Secure Names for Bit-Strings” authored by W. Scott Stornetta et al.—also known as the founding fathers of blockchain technology—the mention of which can be found in the “references” of Satoshi Nakamoto’s bitcoin whitepaper.

When LinkedIn ranked blockchain technology as the number-one “hard skill” for 2020, we could sense the sudden influx of further interest in the technology, which cemented the idea of this book in our minds. This book has taken the shape of a reference as well as a textbook that can help academics, researchers, professionals, and experts alike. The approach followed in the book is that of a reference manual, starting with certain very important blockchain technology-related topics, including an introduction to the technology, a discussion of the ecosystem that people have started building around it and other topics (i.e., Ethereum, Wallets, Governance, Bitcoin), its challenges, and many more.

Furthermore, this book takes a deep dive into the inclusion of additional technologies, such as the Internet of Things, to discuss the changes rendered in the areas of supply chain management, identity management, etc. Blockchain applications are focused on in order to provide viable references to the readers and help them imagine real-world implementations across other sectors.

Another benefit of the book is the inclusion of business use cases that give a new dimension to the knowledge imparted. Practical concepts are discussed beyond the expected theory, which should help the readers obtain an added advantage as they go through the chapters discussed below.

In Chapter 1, “Introduction to Blockchain,” after blockchain is defined, its importance is discussed in the current scenario. Here the author explains the concepts of de-anonymization, identity privacy preservation, and the future of blockchain regulation with business model challenges.

In Chapter 2, “The Scope of Blockchain Ecosystem,” the delineation of the foundation of the blockchain ecosystem in businesses is dealt with, explaining how blockchain acts as a game changer and drilling down to a level of detail about the effect that energy production from business ecosystem has on the planet.

In Chapter 3, “Business Use Cases of Blockchain Technology,” a detailed discussion is presented of bitcoin as a cryptocurrency that uses blockchain as its transactions medium. The author also discusses the double-spending problem, bitcoin mining, bitcoin ICO, and ICO token.

In Chapter 4, “Ethereum,” the aim is to bring together the concepts of Ethereum and smart contractors along with the creation of virtual machine in easy steps. The chapter also explains Ethereum installation, its workings, the concept of Ethereum gas, ways to buy ETH, and the workings of Smart contracts and DApps along with their decentralized application areas.

In Chapter 5, “E-Wallet,” an overview of wallet technology is presented, and the steps for creating and navigating an HD wallet are explained.

In Chapter 6, “Blockchain and Governance: Theory, Applications, and Challenges,” the advantages reaped by using blockchain infrastructure are highlighted along with ventures wherein blockchains have been utilized to bring about improvements from the current centralized implementations, and finally the challenges that need to be addressed before moving to a decentralized model of governance.

In Chapter 7, “Blockchain-Based Identity Management,” the instant verification of identities is discussed, which is very important for today’s systems and processes to be functional. Blockchain-based identity mechanisms are presented that can help with identity verifications without the involvement of intermediaries.

In Chapter 8, “Blockchain and IoT: A Paradigm Shift for Supply Chain Management,” blockchain- and IoT-based supply chain practices are delved into that can enable instant tracking even up to the level of a consumer. It provides a view of how blockchain can be useful in devising and facilitating a framework for path tracing and quality management in supply chains.

In Chapter 9, “Blockchain-Enabled Supply Chain Management,” the application of blockchain and digital currencies for better outcomes in a supply chain is discussed. This chapter also focuses on the applicability of blockchains along with how smart contracts and ledgers can help in managing the overpriced gaps starting from procure-to-play.

In Chapter 10, “Security Concerns of Blockchain,” the author discusses the security threats posed by blockchain, the different types of security attacks, and their prevention when developing advanced blockchain systems.

In Chapter 11, “Acceptance and Adoption of Blockchain Technology: An Examination of the Security and Privacy Challenges,” the prevalent security and privacy challenges associated with blockchain are explored along with the negative implications of these challenges. The author also details certain blockchain applications that reflect the acceptance and adoption of blockchain technology.

In Chapter 12, “Deficiencies in Blockchain Technology and Potential Augmentation in Cyber Security,” the major security concerns related to blockchain are discussed as well as issues and facts that reveal that blockchain invites new challenges or edging off risk of security. The author also discusses privacy as well as decentralization challenges related to blockchain technology.

In Chapter 13, “Internet of Things and Blockchain,” the historical background of the IoT is discussed along with the IoT gadgets currently being used and those being proposed for the future, different kinds of sensors and actuators, and a mix of blockchain and IoT.

In Chapter 14, “Blockchain Applications,” the author discusses the specific qualities every particular application possesses such as blockchain in big data predictive task automation along with digital identity verification, decentralized government services, and global public health.

In Chapter 15, “Advanced Concepts of Blockchain,” the future applications of blockchain technology are discussed. The author also discusses community supercomputing, blockchain geonomics, blockchain learning, community coin, monetary and nonmonetary currencies, some prominent alternate coins, and demurrage currencies in detail.

In conclusion, we would like to thank all the authors for their contributions to this book.

The Editors December 2020

1Introduction to Blockchain

Akshay Mudgal

GD Goenka University, Sohna, Gurugram, India

Abstract

Since its origin, the blockchain innovation has demonstrated promising application possibilities. From the initial crypto-currency to the current shrewd agreement, blockchain has been applied to numerous fields. In spite of the fact that there are a few investigations on the security and protection issues of blockchain, there comes up short on an efficient assessment on the security of blockchain system. Blockchain, as a decentralized and distributed open record technology in distributed system, has gotten significant consideration recently. It applies a connected square structure to check and store information, and applies the believed agreement instrument to synchronize changes in information, which makes it conceivable to make a sealed advanced stage for putting and sharing information. It is accepted that blockchain can be applied to differing Internet intelligent frameworks (e.g., Internet of Things, flexibly chain frameworks, human identity management and so on). In any case, there are some security challenges that may obstruct the wide utilization of blockchain. For all such in this chapter the broader aspects of privacy issues, decentralisation and regulatory challenges will be parleyed, whereas business models in association with blockchain will also be taken care off with a keen focus on security and privacy aspects of the blockchain.

Keywords: Blockchain, security, privacy, de-centralized, crypto-currency, data theft

1.1 Introduction

Since the presentation of Bitcoin in 2009, its fundamental strategy, blockchain, has indicated promising application prospects and pulled in heaps of considerations from the scholarly community and industry [4]. Being the first digital money, Bitcoin was appraised as the top performing cash in 2015 and the best performing product in 2016, also, has more than 300K affirmed exchanges day by day in May, 2017. Simultaneously, the blockchain system has been applied to numerous fields, including medication, financial matters, Web of things, programming designing, etc. [4]. The presentation of Turing-complete programming dialects to empower clients to create brilliant agreements running on the blockchain marks the beginning of blockchain 2.0 time. With the decentralized accord component of blockchain, keen agreements permit commonly doubted clients to finish information trade or exchange without the need of any outsider confided in power [4]. Ethereum is presently (May of 2017) the most broadly utilized blockchain supporting keen agreements, where there are now 317,506 savvy contracts and in excess of 75,000 exchanges happened day by day [4].

Security comes on the top priority or the at most concern for any piece of action that is needed to be done or auctioned, hence the blockchain comes in a role play (Figure 1.1). Blockchain was basically developed by a group of researchers in the year 1991 to impart or emboss a time stamp on the digital documents but that didn’t work well and the experiment was the failure, due to which today’s psychedelic technology was garbaged [2]. In the year 2004 a computer scientist named Hal Finuey again reintroduced the blockchain with an alteration which was RPOW (Reusable Proof of Work).

A blockchain is a collection of four major components which collectively forms a block [2]. A blockchain is a decentralized, distributed, public ledger. It (blockchain) is a place to keep the record (transactional) which is decentralized as it can be created anywhere, whereas it is accessible anywhere, hence it is distributed, but what about the security aspect? as it can be accessed and created by anywhere and by anyone, which means there is a need to make the concept more feasible and secure.

Figure 1.1 Demonstrating the pictorial impression of blockchain [2].

When it is about privacy and security of any element/product/or a system, then it should have the basic working and the architectural knowledge of it. So, that the level of the security which are already existing can be updated or replaced for the better future [2].

In reference to the second chapter of this book, it explains to us about the working of the Blockchain. In this section of this chapter the basic architecture of the blockchain will be discussed, but moving ahead towards the architecture one should discuss few of the important terms which will be majorly used in the security and privacy aspects of the blockchain.

Immutable—Making the ledge secures with the digital signature or hash function.

POW—Proof of work, which is a protocol which has the main goal to deterring the cyber attacks.

Hash—It is unique value being assigned by the set of rules/algorithms/functions or the combination of all to make the ledger unique and separated from other blocks.

Digital Signature—It is another means of securing measure of the ledge, so that the data must be verified and treated as authentic.

Mining—Mining in general an activity to collect the useful out of whole.

These are the major terms which we may encounter in this chapter commonly. You will get to know more about these terms in the coming sections of this chapter, but before that the different types of blockchain architectures will be discussed below.

Logically, a blockchain is a chain of blocks which contain specific information (database), but in a secure and genuine way that is grouped together in a network (peer-to-peer) as shown in Figure 1.2. In other words, blockchain is a combination of computers linked to each other instead of a central server, meaning that the whole network is decentralized (Figure 1.3) [3].

Understanding it with the help of a relevant example like work on the Google docs and wait for others to make the necessary changes if required the same scenario is in the decentralized architecture of the blockchain. Blockchain allows and permit us to make the relevant docs shared rather copied [2, 3]. This distributed piece of information (ledger) provides the trust factor and the security of data.

Figure 1.2 The diagrammatic representation of the types of blockchain architecture [3].

Figure 1.3 Figure states the types of blockchains in trend.

Whereas the exact different case is there in the centralized architecture, the information or ledger which was shared is now kept private and shared with the authentic and with those who have required and necessary authority to access the data, which means now the data/ledger is kept private and not shared globally.

Now what left the distributed architecture, in this type a local copy of the ledger is given to all the parties/entities, so that the major alterations are done by the high officials or the major party whereas the information of the ledger is being distributed within the complete locality.

Table 1.1 will make the concept more clear and transparent to understand.

Table 1.1 A novel comparison among public, consortium, private blockchain.

Property

Public blockchain

Consortium blockchain

Private blockchain

Consensus determination

All miners

Selected set of nodes

Within one organization

Read permission

Public

Public or restricted

Public or restricted

Immutability level

Almost impossible to tamper

Could be tampered

Could be tampered

Efficiency (use of resources)

Low

High

High

Centralization

No

Partial

Yes

Consensus process

Permission less

Needs permission

Needs permission

1.1.1 Public Blockchain Architecture

A public blockchain architecture states that the data or the ledger and access to the system is available to anyone who is willing to participate for instance Bitcoin, Ethereum, and Litecoin blockchain systems are public and can be accessed by anyone globally [2, 3].

1.1.2 Private Blockchain Architecture

An opposite situation to the public blockchain architecture, the private system is highly controlled and managed only by users from a specific organization or institution or the company or authorized users who have an invitation for participation.

1.1.3 Consortium Blockchain Architecture

This blockchain structure can consist of a few organizations [3]. In a consortium, procedures are set up and controlled by the preliminary assigned users. It a system that is ‘semi-private’ and has a group which controls it, but works across different organizations. In simple terms it can be said as a distributed blockchain architecture.

The following table provides a detailed comparison among these three blockchain systems [3]:

1.2 The Privacy Challenges of Blockchain

In the previous section, the basic introductory part of blockchain is discussed. In this part the requirement of privacy including different tools and techniques are going to be discussed.

As shown in Figure 1.4 in this section, a blockchain is a highly secure mechanism or technology which allows the user to make secure and safe transactions [1, 3]. It is a statement said by many engineers, scientist and researchers but how......?

To know about this said statement in detail, one should back track a blockchain and need to collect the required information about how this technique is too strong and safe for transactions. Here we also need to know if this technology is too tremendous then why was it being garbaged in 1991 and then again re-launched in 2004 [1].

The working paradigm of a blockchain:

Let’s have a closer and a deeper look at Figure 1.4 that illustrates what a block is in a blockchain.

Each block in a blockchain consists of:

certain data

the hash of the block

the hash from the previous block (HOPB).

The data stored in each block completely depends on the type of blockchain. For instance, in the Bitcoin blockchain structure, the block maintains data about the receiver, sender, and the amount of coins.

A hash is a unique set of alphanumeric codes which is auto generated by the algorithms and the functions of the blockchain (in general terms it can be treated as the fingerprint, long record consisting of some digits and letters). Each block hash is generated with the help of a cryptographic hash algorithm (SHA 256) [1]. As a result, this helps to identify each and every block in a blockchain structure easily. The moment a block (of blockchain) is created, it automatically gets connected or attaches a hash, while any changes made in a block either in the ledger field or anywhere it straightened affects the change of a hash too which makes the technology precisely highly safe and secure. In simple terms, the hashes help to detect any changes in blocks of a blockchain.

Figure 1.4 The figure states the internal working paradigm of a blockchain.

The final element within the block is the hash which is from a previous block (refer to Figure 1.4). This creates a chain of blocks and is the main element behind blockchain architecture’s security [4]. As an example, assume a bock range from 1 till 46; block 45 points to block 46. The very first block in a chain is a bit special—all confirmed and validated blocks are derived from the genesis/creator block.

Any corrupt attempt provokes/results the blocks to change [4, 5]. All the assumed block’s hashes get changed resulting to the mismatch of hashes which then carry incorrect or invalid information and render the whole blockchain system invalid.

On the other hand, in theory, it could be possible enough to adjust or alter all the blocks with the help of strong computer processors (processors here means highly configured computers). However, there is a solution that eliminates this possibility called proof-of-work [1]. This allows a user to slow down the process of creation of new blocks. In the architecture of Bitcoin blockchain, it majorly takes around 10 min to determine or collects the necessary information of proof-of-work and adds a new block to the chain, but as it was discussed the block can only be added by the person which have the best computational system, here logical ability works rare rather than the system power, hence this work is done by miners—special nodes within the Bitcoin blockchain structure. The miners who win in the race get to keep the transaction fees from the block that they verified as a reward [1, 4].

Each new user (node) joining the peer-to-peer network (a network which have internet connection to share files and folders) of blockchain receives a full copy of the system. Once a new block is created, the detail of it is sent to each node within the blockchain system [4]. Then, each node verifies the information of the block and checks whether the information/data stated there in the block is correct. If everything is alright, the block is added to the local blockchain in each node.

All the nodes inside blockchain architecture create a consensus protocol. A consensus system is a set of network rules, and if everyone abides by them, they become self-enforced inside the blockchain.

To manage and protect the term privacy under blockchain technology, one must satisfy the subsequent requirements:

The links between the transactions must not be visible or discoverable.

The data of the transactions is merely and only known to their members.

The private or open blockchain must have an entrance control strategy or approval plan to fulfil the security prerequisites of blockchain, which fulfils the total straightforwardness of the blockchain information. Be that as it may, if the case is of an open setting, everybody can have an access to the blockchain with no limitations, the protection issues must be handled on the following factors:

Identity Privacy: Which alludes the intractability and unmanageability in the middle of the transaction contents and thus the original identities of their partakers stay sheltered, safe and secure about.

Transaction Privacy: In the following the transactional contents (e.g., amount or transacting patterns) can only be accessed and captured by the specified user(s), and kept secret, unknown and safe to the common or general public blockchain network [1, 4].

As it is referenced over, a transaction or a block of a blockchain contains the identity of the previous transaction, the addresses of its members or participants, values (trade), timestamp and unique mark of its sender. Due to its natural behavior or characteristic, it is possible to trace back and follow the flow of transactions to extract and collect the users’ physical identities or other common and additional private information through the tools techniques and also of data mining. In this section, it is referred towards the Bitcoin system as a typical instance to analyze the privacy threats for the blockchain network.

1.3 De-Anonymization

Users majorly/always create an alias when they hook up with the Bitcoin system. However, thanks to the general public and openness of blockchain, it’s possible to run a static analysis of the blockchain which allow us to track and unhide the masked users, that’s what de-anonymization is. Here, we have list out many attacks which will work under to de-anonymize the users’ real identities.

1.3.1 Analysis of Network

The blockchain majorly performs its work on the P2P network, which suggests that a node will share public its IP address when broadcasting the transactions. Researchers and scientist have identified three abnormal relay patterns for analyzing the network which could be mapped to Bitcoin addresses to IP addresses (i.e., multi-relayer & non-rerelayed transaction, single-relayer transactions and multi-relayer & rerelayed transactions).

1.3.2 Transaction Fingerprinting

Another major issue or threat that can cause problem to the data of transaction and for which the anonymity becomes problem is a transaction’s user-related features. Androulaki et al. have explained six characteristics that may portray a few highlights of transaction conduct, i.e., Random time-interval (RTI), hour of day (HOD), time of hour (TOH), time of day (TOD), coin flow (CF) and input and output balance (IOB). Abundance consideration on these characteristics may expand the odds to de-anonymize an individual client [1].

1.3.3 DoS Attacks

A denial-of-service assault might be a cyber assault and the most known and basic issue, where the noxious assailant attempts to look for or hack a machine or system asset being inaccessible to its customers by disturbing or ending web/network services of the host associated with the web or neighborhood server. The most well-known way or method to deal and handle with, be covered up by IP addresses or to hide the IP in P2P network is utilizing anonymity network systems (e.g., TOR).

1.3.4 Sybil Attacks

A Sybil attack is another digital attack where the pernicious attacker and programmers destabilize the stature or notoriety system of a P2P network by making an outsized number of nom de plume or phony characters, utilizing them to understand a disadvantageous impact. Concerning the de-anonymization inside the blockchain, Bissias et al. broke down and judge that Sybil attacks could stop and break the decentralized anonymity protocol and can expand the likelihood to search out the clients’ genuine identities.

1.4 Transaction Pattern Exposure

Except some personal information, majorly all transactional information goes to the public network which can be used to get the statistical distribution, which may help to get some guidelines and regulations for the blockchain applications.

1.4.1 Transaction Graph Analysis

Under this the major focus is on discovering and analyzing some overall transaction features (e.g., daily turnover, exchange rate or transaction pattern) over time.

1.4.2 AS-Level Deployment Analysis

This technique aims to get the bitcoin network by recursively connecting to clients, requesting and collecting their lists of other connected or peer IP addresses. In this flow, one can obtain concrete and correct information and data on size, structure and distribution of the bitcoin’s core network.

1.5 Methodology: Identity Privacy Preservation

This part of the chapter presents a summarized overview of solutions that have been recently proposed by researchers aimed at maintaining and preserving privacy of the blockchain [1]. In a public blockchain, for example, in the digital currency or crypto currency Decreed, it is adviced and proposed that the clients’ address should have been adjusted and altered by creating another key pair for every session. Except that, there are three frequently-used systems and methods for safety and security and protecting anonymity in the blockchain and they summarized by: mixing services, ring signature, and non-interactive zero-knowledge proof.

1.5.1 Mixing Services

As per the structure discussed in previous few sections the blockchains are linked with each other like sender or receiver of a transaction, therefore, by calculating and analyzing the public content (i.e., analytical attack), an individual can deduce some secret or privacy information or data to eliminate such attacks. One of the solutions is to confuse or blur the transaction’s relationships with the help of mixer (aka tumbler or laundry) as shown in Figure 1.5. The first mixing service introduced by Chaum [1], allows the user to hide his content of communication as well as the participants of the communication. The same concept is shown below in pictorial manner.

Figure 1.5 Basic architecture of mixing services [1].

Assume that one element prepares a message M for delivery to another substance at address R by encrypting it with the receiver’s open key KR, appending and attaching the address R, and afterward encrypting the result with the intermediary’s open key KI. The left-hand of the accompanying expression means the cipher content, which is transferred to an intermediary:

KI (r0, KR (r1, M), R) → KR (r1, M), R [1].

The symbol indicates the transformation of the cipher message by the intermediary into another cipher content appeared on the right-hand side. These transformations perform a decryption on the original cipher message by the intermediary with its private key. At that point the intermediary delivers the sub-cipher content to R who at that point decrypts it with his/her own private key. It is important to take note that r1 and r0 are random numbers which ensure that no message is transferred more than once [1].

At the point when the intermediary gets much information on input and output, this mechanism will shroud the correspondences between each message’s origin and destination. The order of arrival is covered up by yielding the uniformly estimated items in random patterns. Moreover, to minimize the danger of the single intermediary being the attacker, multiple intermediaries can be connected together thereby creating a mix cascade [1, 2].

Over the most recent couple of years, the services have been applied to the blockchain network to obfuscate the transaction history and reduce the risk of de-anonymization. These research efforts center around two main methods: (I) centralized mixing and (ii) decentralized mixing.

a. Centralized mixing is to mix transactions anonymously at the cost of some service fees. There are plenty of websites which work or behave like online mixers and swap the transactions among different users so as to shroud the relationship between their incoming and active transactions [1]. Likewise, most of them are reachable or contactable just through the TOR network which empowers anonymous communications through a free, worldwide, volunteer overlay network.

b. Decentralized mixing Decentralized mixing is to moderate the denial of services (DOS) danger caused or raised by the centralized services; a decentralized mixing design is proposed to empower a lot of commonly entrusted companions to distribute their messages at the same time and anonymously without the need of an outsider anonymity proxy [1, 4]. Another significant advantage of this methodology is the end of the requirement for mixing expenses. Moreover, it is nearer and progressively perfect to the decentralized structure of blockchain contrasted with the incorporated mixing design. Up until this point, there are for the most part two strategies to accomplish the decentralized mixing process, i.e., Coin Join and multi-party calculation (MPC).

1.5.2 Ring Signature

Although the decentralized mixing techniques gives an “excellent” mixing in the blockchain, but they still need a delay till the time participants discover or find their partners for their transactions to be mixed. The ring signature enables a user (also a member of a set) to sign a message on behalf of the “ring” of members but there is no way to say that which one is real and who have signed. The core idea and methodology of this technology is the choice of a set without any central manager, which will significantly improve privacy in blockchain [1].

Brief of mixing services in blockchain [1].

Protocol

Anonymity

Centralized Party

Mix Cost

Sybil Strength

Dos Strength

Mixing Scale

Theft Strength

Waiting Time

Mixing website

Linkable at mixer

Required

Yes

Good

Poor

L/A

High

Long

CoinSwap

Linkable at mixer

Required

Yes

Good

Poor

N/A

Safe

Long

Mixcoin

Linkable at mixer

Required

Yes

Good

Poor

N/A

Accountable

Long

Blindcoin

Unlinkable

Required

Yes

Good

Poor

N/A

Accountable

Long

Blindly Signed Contracts

Unlinkable

Required

Yes

Good

Poor

N/A

Safe

Long

TumbleBit

Unlinkable

Required

Yes

Good

Good

L/T

Safe

Long

Dash

Unlinkable

Required Many

Yes

Good

Good

Less

P/D

Normal

Coinjoin

Internal Unlinkable

Decentralized

No

Poor

Poor

Less

High

Long

CoinShuffle

Unlinkable

Decentralized

No

Good

Moderate

Less

High

Long

XIM

Unlinkable

Decentralized

No

Moderate with fees

Moderate with fees

Large

Low

Long

Abbreviations:

L/A—Limited to access

N/A—No Limitation

L/T—Limited by transaction

P/D—Prevented with deposit

1.6 Decentralization Challenges Exist in Blockchain

The very basic definition of Blockchain states and implies that, in relation to Figure 1.6, it is a decentralized ledger that can store information quite securely and immutably, utilizing cryptographic encryption and hashing techniques. But it seems in reality, that the word ‘decentralized’ is somehow stuck only to the definition [5]. A number of Blockchains out there in the market make use of centralized mechanisms.

But what exactly does this word “decentralization” means? Does it only refer to data being processed “not at the same place (distributed)?”

As explained by Vitalik Buterin in his blog, the decentralization can be categorized or viewed into three perspectives—first is “Architectural”. This states the number of physical computers attached or is in the network? Second comes “Political”—How many entities control these computers? And the last “Logical”—that derives that does the data structure and interfaces of the computers or systems act like a single structure or a swarm [5]?

No one controls Blockchains and they don’t have the infrastructural central or head point of failure. Hence, they are politically and architecturally decentralized. However, they are or can be said logically centralized since they act and behave like a single entity/computer.

But even if the above definition is correct and acceptable, then are blockchains as they are today decentralized?

Figure 1.6 Different types of Networks in blockchain [5]. (a) Centralized. (b) Decentralized. (c) Distributed networks.

The answer majorly comes is NO, because of these possible reasons:

Having four computers instead of having one is always better. But what if all the computers get infected with same issue or defect?

All the nodes in a Blockchain run the same client software, and if they get some issues or turns out to be buggy, reason may be any or then the whole system can come to a pause/standstill. This can put a question mark on the architectural decentralization of the Blockchains [5, 6].

In a Blockchain which uses the proof-of-work consensus mechanism and majority of the miners are from the same country, the government of that country can choose or decide to seize and control or stop all the mining farms on the account of national security [7]. This scenario or case is a major threat to the political decentralization of Blockchain.

Similarly, in a proof of stake Blockchain, if more than 70% of the coins at stake are held at one exchange, can put the political decentralization of the Blockchain at risk.

Moreover, if the majority of mining hardware (infrastructure) is built by the same company, it can also compromise the political decentralization of the Blockchain [8].

So, that means centralized Blockchains are not that good or of no use?

Not majorly, and this is because Blockchains serve various purposes, and these may require them to be centralized.

According to the report of Crytpo asset Taxonomy, about 16% of crypto currencies are said to be fully decentralized. The other crypto currencies reviewed are either centralized, or only semi-decentralized. Only 9% of all utility tokens were found to be sufficiently decentralized and only 7% of financial assets such as those born from initial coin offerings are decentralized [9, 10]. Crypto currencies such as Bitcoin, Stellar, Litecoin that work primarily as a payment method are among the most decentralized types of crypto assets, as per the report.

While the original crypto currency—Bitcoin, was designed and developed to be decentralized and removing the control of governments or any central organization, some experts claim and suggest that even Bitcoin can’t be termed as fully decentralized since a majority of the Bitcoin miners are from China.

1.7 Conclusion

Decentralization is a process that is beyond and above the computers and networks. It involves organizations and individuals in plural. Partial decentralization can be achieved at present [8]. However, the complete decentralization is very difficult to accomplish and it would take time for the Blockchains to become truly decentralized, if they intend to do so. It will not only involve Blockchain Technology but also artificial intelligence algorithms that would replace humans to eliminate biases.

1.8 Regulatory Challenges

A blockchain is a type of distributed ledger technology can be termed as DLT, consisting of a decentralised network of fixed or unchangeable databases, shared equally across the system. In the very beginning age of development of blockchain technology, blockchain has shown great potential in different areas from crypto currencies to smart contracts and so on [10, 11].

During the opening of the European Blockchain Partnership, Mariya Gabriel, EU Commissioner for Digital Economy and Society, clearly and boldly mentioned that “in the future, all public services will use blockchain technology”. As this tending technology continues to develop and attract keen attention and consciousness, regulation of blockchain is becoming an important and needful discussion.

In the fourth section of our Blockchain series, the regulatory measures and challenges associated with blockchain management are going to be discussed.

1.9 Obstacles to Blockchain Regulation

Being a decentralized system of network, blockchains are treated as the most strenuous technology and that’s the considerable reason to manacle it into strict regulations. Due to the innovative and dispensed nature, blockchains create numerous problems for regulators [12]. As it is already defined and know that Blockchains are distributed and decentralized. As a result, the nodes or sub systems within a network can be placed all around the world, without a definite ‘home-base’, making the question of legal jurisdiction complex.

The structure of blockchains creates issues concerning liability and accountability as un-authorized public blockchains have no form of a central authority or decision-maker that can be held responsible for the actions carried out within the network [12].

Apart from this, within a blockchain, data is shared across every node or participants of the network, each maintaining a full replica of the database. This case makes the situation more difficult as the real owner of the blockchain couldn’t be determined or is quite difficult to be judge it for the already created blockchain [12−14]. This scenario presents a challenge where intellectual property is concerned, making it strenuous to determine the author or owner of the data.

Privacy is another great challenge for regulators of blockchain. Transactions are linked completely and solely to a network account address rather than a personal identification (PI number), apparently ensuring privacy. However, if a connection between the two node are made and on the same side it revealed, the protection of an individual(s) privacy is no longer exists [16].

1.10 The Current Regulatory Landscape

Blockchain regulation, like the technology itself, remains very much in its starting phase. Initiatives above the national level, such as the EU’s Blockchain Observatory and Forum, the European Blockchain Partnership and the Mediterranean Seven, focus on supporting its use and development, largely avoiding regulatory issues. This is because of a lack of consensus and harmony on blockchain and its applications; while some nations have treated it with suspicious eye, including China, although other countries such as Malta and Estonia have passionately and embraced it. This has made a regulatory landscape which differs from nation to nation [17].

Italian and Swiss agencies are among those that have chosen it to observe and check, for the time being, rather than embarking on the time-consuming process of developing and managing new legislation and policies that may soon be outdated given the early stages of blockchain technology development. “Switzerland doesn’t need new special regulations for blockchain”, asserted Ueli Maurer, the country’s Finance Minister [18]. The agencies of government have started opting to update and apply some new chances in their existing rules and laws to account for this novel technology.

Other nations have taken the some different kind of approach and have chosen to adopt and absorb some new national legislation, solely addressing and pointing sole aspects or specific applications of blockchain [17, 18]. Keen attention has been drawn up to the application of blockchain in the sector of finance and crypto tools and assets like Bitcoin. Countries such as Poland, France and Luxembourg have chosen to absorb some specific guidelines tailored to these issues.

Meanwhile, a few countries such as Liechtenstein have taken a more advanced and progressive and forward approach as the government has approved The ‘Blockchain Act’, which marks a milestone not just for Liechtenstein but for the international community which look at blockchain as a malicious and untrustworthy technology [19]. It provides the first holistic regulatory framework to govern the underlying concepts of blockchain.

1.11 The Future of Blockchain Regulation

Moving forward, regulators and policy makers will need to strike a fine balance when drafting blockchain legislation; overregulation will restrain development and also creates legal instability and uncertainty, which ultimately harms and affects the ultimate progress [19].

Blockchain must be regulated in such a way that accounts and support for the associated risks it produces while simultaneously encourages development of the technology. As such, legislation cannot simply consider current technologies but must seek and understand to be applicable to the generations of technology to follow.

Furthermore, while crypto and money explicit guideline is without a doubt fundamental, controllers should likewise embrace comprehensive structures equipped for directing the huge number of blockchain innovation applications, both now and to return. Non-money related applications are probably going to accomplish more footing and impact over the moving toward years, in this way requiring more noteworthy core interest.

Gauges will assume a vital job inside the route forward for blockchain, controlling its improvement and moving take-up by guaranteeing that the innovation supposedly is secure and solid [19, 20]. This pattern is starting to show up the same number of standard-setting bodies are connecting with the issues identified with blockchain and DLT. The International Telecommunication Union (ITU) has made a spotlight Group on Application of Distributed Ledger Technology devoted to the occasion of DLT principles [21]. The Institute of Electrical and Electronics Engineers (IEEE) has built up a Blockchain Initiative to work together with its Standards Association on blockchain institutionalization endeavours. The alliance for Standards (ISO) includes a devoted Blockchain and DLTs Technical Committee as of now performing on a progression of blockchain and DLT rules, covering everything from wording to security to keen agreements, on account of be discharged in 2021 [22].

While organizations and organizations working with blockchain presently work in a moderately guideline free space, this can probably adjust inside the not so distant future. It’s significant that they follow of improvements and effectively look for cooperation inside the administrative procedure, to shape strategy results and guarantee an administrative structure that keeps on supporting development.

1.12 Business Model Challenges

Since the time Satoshi Nakamoto discharged the Bitcoin whitepaper and acquainted everybody with the blockchain innovation, the blockchain innovation appears to have increased its very own existence and has gotten a subject of enthusiasm over a wide assortment of organizations. A few organizations have begun working with another plan of action that is based around the blockchain. Right now, they are discussing fruitful usage of blockchain plans of action.

1.12.1 Traditional Business Models

A plan of action is an extravagant term used to clarify the arrangement/procedure that the organization needs to create benefit by selling an item or administration. The plan of action gives a diagram of the plans of the organization to create an item or administration and to showcase it. Various organizations will utilize a plan of action which best suits their necessities. There are four conventional plans of action:

Manufacturer

Distributor

Retailer

Franchise.

1.12.2 Manufacturer

This plan of action rotates around the formation of the item. The item could either be made without any preparation from normal assets or the maker can collect pre-assembled segments to make another item, for example, vehicles. An assembling business can follow two sub-models. It could either be “business-to-shopper” where they can sell their items straightforwardly to the buyers. Another choice includes re-appropriating the business part of the procedure to another organization, which is known as the business-to-business or B2B model. Right now, makers offer their item to the retailers who deal with the deals.

1.12.3 Distributor

The Distributor plan of action purchases the item from the maker and afterward they either offer it to the end clients or a retailer. In a common inventory network, makers are the purpose of root while wholesalers are the go betweens who associate the producers to their end-clients or the retail location.

1.12.4 Retailer

Retailers are physical shops or web based business sites which collect items from maker either straight forwardly or by means of a wholesaler. Retailers may be across the nation chains, or they could be free shops worked by a solitary substance. Retailers make it amazingly simple and clear for clients to purchase whatever items they need.

1.12.5 Franchise

An establishment plan of action may include any of the previously mentioned plans of action, i.e., producing, circulating, or retailing. Anybody can buy an establishment which can have the two focal points and disservices. The primary bit of leeway is that an establishment as of now has all the business procedures and conventions coordinated inside it. On the other side, the principle impediment is the absence of adaptability. This should give you a thought of the conventional plans of action that have existed up until now. Be that as it may, since the time the approach of blockchain innovation, it has seen a large group of new plans of action. Thus, before going further, let us comprehend what blockchain models are.

1.13 Utility Token Model

What is the meaning of Utility? Utility methods are the absolute fulfilment that is gotten by the utilization of the products or administrations. The utility token model drives the usefulness in their business by means of the utilization of the tokens. Wave and Stellar are incredible instances of these sorts of models. The banks that are a piece of their system can encourage support movement through the utilization of the XRP or XLM tokens. According to William Mougayar, token utility has three significant properties (Figure 1.7):

Role

Features

Purpose

Figure 1.7 Demonstrating the properties of the model [23].

1.13.1 Right

By claiming a specific token, the holder gets a specific measure of rights inside the biological system e.g. by having DAO coins in your ownership, you could have casting a ballot rights inside the DAO to choose which activities get subsidizing and which don’t.

1.13.2 Value Exchange

The tokens make an inward monetary framework inside the limits of the venture itself. The tokens can support the purchasers and merchants exchange incentive inside the biological system. This permits clients to pick up endless supply of specific assignments. This creation and upkeep of individual, interior economies is one of the most basic elements of tokens.

1.13.3 Toll

It can likewise go about as a cost passage for you to utilize explicit functionalities of a specific framework e.g. In Golem, you have to have GNT (golem tokens) to access the advantages of the Golem supercomputer.

1.13.4 Function

The token can likewise empower the holders to advance the client experience inside the bounds of the specific condition. e.g. In Brave (an internet browser), holders of BAT (tokens utilized in Brave) will get the rights to