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- Herausgeber: Packt Publishing
- Kategorie: Wissenschaft und neue Technologien
- Sprache: Englisch
Get up and running with Oracle's premium cloud blockchain services and build distributed blockchain apps with ease
Key Features
- Discover Hyperledger Fabric and its components, features, qualifiers, and architecture
- Get familiar with the Oracle Blockchain Platform and its unique features
- Build Hyperledger Fabric-based business networks with Oracle's premium blockchain cloud service
Book Description
Hyperledger Fabric empowers enterprises to scale out in an unprecedented way, allowing organizations to build and manage blockchain business networks. This quick start guide systematically takes you through distributed ledger technology, blockchain, and Hyperledger Fabric while also helping you understand the significance of Blockchain-as-a-Service (BaaS).
The book starts by explaining the blockchain and Hyperledger Fabric architectures. You'll then get to grips with the comprehensive five-step design strategy - explore, engage, experiment, experience, and in?uence. Next, you'll cover permissioned distributed autonomous organizations (pDAOs), along with the equation to quantify a blockchain solution for a given use case. As you progress, you'll learn how to model your blockchain business network by defining its assets, participants, transactions, and permissions with the help of examples. In the concluding chapters, you'll build on your knowledge as you explore Oracle Blockchain Platform (OBP) in depth and learn how to translate network topology on OBP.
By the end of this book, you will be well-versed with OBP and have developed the skills required for infrastructure setup, access control, adding chaincode to a business network, and exposing chaincode to a DApp using REST configuration.
What you will learn
- Model your blockchain-based business network by defining its components, transactions, integrations, and infrastructure through use cases
- Develop, deploy, and test chaincode using shim and REST, and integrate it with client apps using SDK, REST, and events
- Explore accounting, blockchain, hyperledger fabric, and its components, features, qualifiers, architecture and structure
- Understand the importance of Blockchain-as-a-Service (BaaS)
- Experiment Hyperledger Fabric and delve into the underlying technology
- Set up a consortium network, nodes, channels, and privacy, and learn how to translate network topology on OBP
Who this book is for
If you are a blockchain developer, blockchain architect or just a cloud developer looking to get hands-on with Oracle Blockchain Cloud Service, then this book is for you. Some familiarity with the basic concepts of blockchain will be helpful to get the most out of this book
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Seitenzahl: 433
Veröffentlichungsjahr: 2019
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Oracle Blockchain Quick Start Guide
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Packt Publishing has endeavored to provide trademark information about all of the companies and products mentioned in this book by the appropriate use of capitals. However, Packt Publishing cannot guarantee the accuracy of this information.
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First published: September 2019
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ISBN 978-1-78980-416-4
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Foreword
Many of us who enjoy the benefits of internet technologies today don't possess a technical understanding of the software infrastructure layers of the internet. Indeed, understanding the architecture and technical layers of software has, until recently, been confined to software architects and engineers. This is partly due to the way the internet itself developed, in a patchy and almost "messy" manner. Ubiquitous interoperability was an afterthought. After all, there were no precedents to the internet and the technology hasn't proven its worth. Fast-forward to 2019 and we live in a very different era. Within the past 3 decades, the internet has transformed every conceivable industry in the world and human life, while accelerating the pace of growth and transformation of the global economy into something that would be unrecognizable – let alone imaginable – back in the 90s, when internet technologies were still in their infancy.
One more time, the new wave of emerging technologies, such as blockchain, artificial intelligence, big data, cloud computing, Internet of Things, 3D printing, augmented reality/virtual reality, and so on is going to transform human life and change the face of the global economy. Only this time, the internet infrastructure already exists for the new technologies to piggyback on. The future of technological growth and technology-led global economic transformation is abundant with opportunities. Five key pillars mark the characteristic features of the technologies of the future: decentralization, speed, scale, security, and usability. In this second inning, we have the opportunity to build a technology stack that is inherently interoperable from scratch. The timing couldn't be better as professionals from all fields are keen to understand and help build the infrastructure technologies of the future. The demand to understand the building blocks of technologies such as blockchain and the functional knowledge to work with them for future buildout is increasing at an accelerated rate. Vivek Acharya's Oracle Blockchain Quick Start Guide is a step forward in that direction, and is particularly focused on enterprise blockchain solutions. At the same time, the business models that emerged from the growth of the internet are also being replaced as emerging technologies transform business as we know it, bringing seamless interoperability, unprecedented speed, and breathtaking user experience to everyday life. However, Platform-as-a-Service continues to grow as the dominant business model, as businesses rush to deploy cutting edge technology to gain a first-mover advantage in their respective industries. This applies equally to large enterprises and start-ups. Oracle Blockchain Quick Start Guide marries this dominant business model with the most promising infrastructure technology of the future, blockchain, in the pages that follow.
What Vivek will show you in those pages will help you gain knowledge about blockchain technologies; key challenges and use cases; and Oracle blockchain platform's integrations into Hyperledger Fabric. In 2017, I had the opportunity to coauthor Hyperledger's Massive Open Online Course called Blockchain for Business: An Introduction to Hyperledger Technologies. 2 years on, Oracle's blockchain platform is an important step forward in making Hyperledger's open source technology infrastructure highly accessible to individuals and businesses.
Navroop Sahdev
CEO, Rethink Markets & Fellow, MIT Connection Science
Distributed ledger technologies (DLTs) such as Hyperledger are slowly taking over the world by offering solutions and applications that would otherwise not be possible with traditional enterprise IT systems. Hyperledger allows enterprises to reap the benefits of DLT in an unprecedented way that it is resulting in a different kind of marketplace. Blockchain-as-a-Service (BaaS) is slowly catalyzing the marketplace and this is evident with the existence of many big players in BaaS, such as Oracle, IBM, Microsoft, and so on. If you are a DLT, Hyperledger, and blockchain enthusiast who is exploring an effective BaaS option, then this book is for you.
David's involvement in the Blockchain ecosystem started in November 2017 when he was introduced to the technology and realized that its integration with existing systems and emerging technologies such as AI, IoT, and machine learning would change the way the general public, industries, and third parties do business going forward.
I was delighted when Vivek approached me. Vivek Acharya has experience in business process management, analytics, B2B, blockchain, and Hyperledger. In addition, he is the author of many technical and non-technical books. This allows him to effectively justify his Hyperledger prowess.
I am excited to write the foreword for this book on blockchain, which also covers Hyperledger and BaaS in depth. It will help readers design and build a solution on a BaaS platform. There are not many books on Hyperledger that emphasize its concepts, evolution, qualifiers, and approaches, and offer a sample, which users can build. Vivek Acharya and his contributor team have met that need, representing many disciplines that Hyperledger and BaaS have contributed to in the rapid adoption of enterprise solutions such as Hyperledger on a cloud platform.
The book is designed to start with accounting concepts, blockchain fundamentals, and its challenges and opportunities. It then navigates to adoption, use cases, and a detailed analysis of the Hyperledger platform with sample. It ends with approaches, qualifiers, and topologies. It offers an excellent kickstart for anyone to read though blockchain, Hyperledger, and BaaS, and then quickly practice it using Oracle Blockchain Platform. It serves as a one-stop shop to learn the various "nuts and bolts" of a DLT such as Hyperledger. This book will create a foundation for designers, developers, and architects to learn and build enterprise-grade solutions. The challenges in enterprises are both difficult and interesting. Enterprises are working on them with enthusiasm, tenacity, and dedication to design and develop new methods of analysis and provide new solutions to keep up with the ever-changing needs. In this new world, knowledge on the frontiers of DLT, blockchain, Hyperledger, and BaaS is paramount. This book is a good step in that direction and offers readers a chance to gain blockchain prowess.
All the best to Vivek Acharya and it is my hope and expectation that this book will provide an effective learning experience and reference resource for all Hyperledger and BaaS professionals.
David Gadd
Blockchain & Emerging Technologies Director, Consultancy Service & Talent Acquisition UK & Canada
Blockchain technology offers greater transparency and a single source of truth for participants doing business together and sharing selected data. With blockchain, a list of unalterable records (called blocks) are linked together to form a chain that is securely distributed among participants. This allows organizations that might not fully trust each other to agree on a single, distributed source of truth without any centralized authority. Blockchains can be public (open to all) or permissioned (only open to those parties granted access privileges).
Today's business transactions produce multiple data points, typically resulting in millions of daily transactions that need to be validated and confirmed. While all this "big data" presents opportunities, it can also be incredibly difficult to manage, especially if that data isn't properly validated by all parties. A lack of validation can expose organizations to risk, especially if they are trying to track supply chain goods, insurance claims, or financial transactions that are regulated by law. The promise of blockchain technology is the secure sharing of data that is tamper-evident, meaning if any party in the chain alters the data, the other parties in the chain will know who took that action and who the bad actor is.
The most popular enterprise blockchain is Hyperledger Fabric, a Linux Foundation-sponsored open source project. Hyperledger Fabric empowers organizations to build and manage permissioned, consortium-based blockchain business networks using a plug and play infrastructure. Because it is highly performant, secure and open sourced, Blockchain use cases built with Hyperledger Fabric are leading examples of the benefits of using Blockchain to accelerate the speed of business transactions.
Oracle Blockchain Platform is built with Hyperledger Fabric and offers users the ability to easily set up and manage a permissioned blockchain hosted in the cloud with preassembled components and enterprise-grade security and performance.
I've had the pleasure of being involved with blockchain technology for the past 3 years at both IBM and Oracle and have seen firsthand how this technology can transform the pace of a business, from verifying goods to ensure food safety freshness to preventing fraud, tracing complex supply chains and ensuring digital identity; the possibilities are literally endless.
If you're interested in blockchain technology, this book explains the technology, Hyperledger Fabric, and explores the benefits of BaaS (such as Oracle Blockchain Platform), with concrete use cases and samples for Hyperledger Fabric and Oracle Blockchain Platform. After establishing a theoretical foundation for blockchain and Hyperledger Fabric, readers are given a deep dive into various use cases, design strategies, and Hyperledger Fabric's architecture. This book can be used as a quick start guide, allowing you to delve into Oracle Blockchain Platform and experience the ease of building blockchain solutions with it.
Mary Hall
Blockchain Product Marketing, Oracle
Contributors
About the authors
Vivek Acharya is an IT professional and has been in the world of design, consulting, and architecture for approximately 12 years. He is a certified expert on blockchain, Hyperledger Fabric, Software as a service (SaaS), and analytics. He loves all things associated with the cloud, permissioned decentralized autonomous organization (pDAO), blockchain, predictive analytics, and social business process management (BPM).
Anand Eswararao Yerrapati is an IT professional with about 12 years of experience in design, development, and the delivery of solutions for the various use cases of many customers. He works on Platform-as-a-Service (PaaS) primarily with mobile, chatbots, blockchain cloud service offerings, and their integrations. He loves to develop end-to-end solutions with the integration of multiple products and shares knowledge through blogs and sessions.
Nimesh Prakash is an IT solutions consultant with 13 years of experience. He has been part of multiple facets of enterprise IT solutions including development, design, solution consulting, and architecture. He works and evangelizes on PaaS cloud computing, involving blockchain, chatbots, cloud-native, and container technologies. He has been a regular at public technology events and likes to speak and to demonstrate his areas of interest.
About the reviewers
Srihari Rayavarapu (Sri) is a solution engineering manager at Oracle (Cloud Solution Engineering Hub), supporting customers across EMEA and JAPAC. He is currently leading a team of passionate solution engineers in modern application development. For the past 18 months, Srihari and his team have built expertise on Hyperledger Fabric and Oracle Blockchain Platform to deliver MVPs. He is passionate about emerging technologies (AI/ML, IoT, RPA, and AR/VR) and cloud-native/DevOps areas. He has over 18 years of industry experience in software development, presales, solution engineering, and technical leadership from various positions in IBM and Oracle. He holds a master's degree in software engineering from Dublin City University, Ireland.
Ankur Daharwal started his journey into blockchain with IBM Blockchain Garage in 2016. As a technology enthusiast and expert in both public and enterprise blockchains, he has been part of the decentralized world for around 3 years now. He has successfully developed and delivered numerous blockchain projects. He has devoted his career to devising real-life solutions for asset management and value exchange in a plethora of industry use cases worldwide. As an advisor to many blockchain start-ups, he focuses on providing expert guidance and solutions. Ankur strongly believes in fulfilling social responsibilities and supporting humanitarian causes with the use of his skills in technology.
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Table of Contents
Title Page
Copyright and Credits
Oracle Blockchain Quick Start Guide
Dedication
About Packt
Why subscribe?
Foreword
Contributors
About the authors
About the reviewers
Packt is searching for authors like you
Preface
Who this book is for
What this book covers
To get the most out of this book
Download the example code files
Download the color images
Conventions used
Get in touch
Reviews
Exploring Blockchain and BaaS
Accounting system – single and double–entry
Accounting system – single–entry
Accounting system – double–entry
Centralized versus distributed ledgers
Centralized ledgers
Distributed ledgers
DLT and blockchain
Comparing blockchain and DAG:
Accounting system – triple–entry or distributed double–entry
Blockchain definition and analogy
Analogy
Blockchain components
P2P network
Network of equity or the peer-to-peer network
Layered structure of the blockchain architecture
Hardware and infrastructure layer
Ethereum - Infrastructure layer
Hyperledger Fabric – Infrastructure Layer
Data layer
Network layer
Transaction flow
Consensus layer
Application layer
Structure of the blockchain
Transaction state machine
Types of accounts
Delving into Block Structure
Transactions
Adding transactions to a block
Appending blocks to blockchain
Consensus algorithm
Types of blockchain networks
Blockchain platform
Blockchain actors
BaaS 
BaaS qualifiers
BaaS use cases
Key advantages of BaaS
Oracle's BaaS – OBP
Pre–built blockchain applications
Summary
Construing Distributed Ledger Tech and Blockchain
Challenges and opportunities of DLT
Challenges associated with DLT
Perception
Consensus
Facts
The unknowns 
Opportunities offered by DLT and blockchain
Gain in efficiency and novel revenue streams
Business models and enhanced resilience 
Inheritance of trust
Immutability and a smarter world
Challenges of traditional technologies and solutions
Design strategy
Explore
Identifying and justifying use cases
What is the algorithm to quantify the need for blockchain?
Building the equation
Types of blockchain
Structure of the business network
pDAOs
Business network goals and governance
Dispute resolution and arbitrators
Engage, experiment, experience, and influence
Blockchain properties and use cases
Blockchain properties
Properties and use cases
Types of use cases
Digital assets
Digital analytics
Digital platform
Exploring use cases
Government – real property registry and transfer of ownership
Challenges with the current process
Blockchain, the savior
Advantages of blockchain solutions
Social factor
Crowd funding of real estate properties
FinTech – know your customer
Present
Future
KYC/on–boarding processes on blockchain
Process on the blockchain
FinTech – invoice factoring
Consortium–based solutions
Marketplace solution
Tokenized marketplace
Engaging with a use case
Defining the flow
As-is flow
To-be flow
Identifying and defining business network components
Defining assets
Defining participants
Detailed flow with transactions and events
Integration architecture
Infrastructure of the business network
Summary
Delving into Hyperledger Fabric
A glance at the Hyperledger project
Frameworks hosted by Hyperledger
Tools hosted by Hyperledger
HLF – features and qualifiers
Why Hyperledger?
Go/No–Go for a blockchain solution
Architecture – conceptual view
Building the blockchain network
Chaincode and its stages
Types of peers
Evolving the network
Physical realization of network configuration and channel configuration
Ordering service
Ordering nodes maintaining a consistent copy of network configuration
A node's behavior when part of multiple channels
Hyperledger architecture (layered view) and components
Identity, security, and privacy
Public key infrastructure
Digital certificate
Keys
CAs
CRL
The membership service
MSP
Types of MSP
Channel (privacy provider)
PDC
PDC – more privacy in channels
Distributed ledger
Nodes
Peers
Orderers and transaction process flow
Ledger
The world state database
Chaincode
Consensus everywhere
Transaction flow
Large object storage – on-chain or off-chain
Rationale for on-chain/off-chain architecture
Key design principles
Integrated blockchain – an anchored document storage solution
Storage option selection for blockchain applications
Summary
Engage in Business Case on Blockchain Platform
Understanding the business scenario
Introduction to the use case
Criteria for use case qualification
Blockchain solution benefits
Designing the solution
Business network topology
Channel association
Network artifacts
Asset model
Chaincode transactions
Solution operational flow
Solution architecture
High–level architecture
Deployment architecture
Document storage – recommended approach with OBP
Exploring OBP
Overview of OBP's architecture
Blockchain instance
Setting up the OBP SDK
Prerequisites
Prepare the Docker environment
Provisioning 
Creating blockchain instance using the SDK
Creating a founder instance in the OBP SDK
Creating a participant instance in the OBP SDK
Provisioning OBP on Oracle Cloud
Creating a founder instance on Oracle Cloud
Creating a participant instance on Oracle Cloud
Features and components of OBP
Dashboard
Network topology
Nodes topology
Channels
Chaincodes
Developer tools
Rich history database with OBP
Create the ODCS connection string
Fetching ODCS information
Enabling port 1521 to access the database
Creating a connection string
Configuring the rich history database in OBP
Enabling channels that write data to the rich history database
Rich history database tables and columns
History table
State table
Latest height table
Summary
Managing Solutions on Oracle Blockchain Platform
Translating the network topology onto OBP 
Creating network stakeholders with OBP instances
Configuring the OBP network infrastructure
Exporting/importing participant certificates
Orderer configuration
Configuring the OBP transaction infrastructure
Channel setup
Joining participant peers to a channel
Founder node summary
Participant (ors) node summary
Participant (cvs) node summary
Founder network summary
Participant (ors) network summary
Participant (cvs) network summary
Adding smartness to the OBP network
Developing chaincode to add smartness to the OBP network
Exposing chaincode via REST proxy configuration
REST Interface for OBP
Summary
Developing Solutions on Oracle Blockchain Platform
Setting up chaincode development
Choosing the language for development (GO, Node.js, or Java)
Tools for OBP solution development
Development environment
Development tools
Mapping the asset model
Mapping operations
Demystifying the craft of chaincode development
Chaincode interfaces
ChaincodeStubInterface
Chaincode functions
Developing chaincode
Chaincode in Go
Chaincode in Node.js
Adding events to chaincode
Publishing events
Subscribing to events
Unsubscribe from events
Chaincode deployment
Deploying chaincode
Updating chaincode
Endorsement policy
Private data collection
Testing chaincode
Testing chaincode using the shim
Testing chaincode from REST endpoints
Chaincode logs
Channel ledger
Integrating client applications with blockchain
Running an end-to-end flow
Summary
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Leave a review - let other readers know what you think
Preface
This book was created in the belief that, together, we will positively contribute to the evolution of blockchain technologies and continually inspire others to share their experiences and further influence others to do so. In this book, we will do the following:
Explore
distributed ledger technology; blockchain, its components, features, qualifiers, and architecture; and demystify the prominence of
Blockchain-as-a-Service
(
BaaS
)
Engage
in modeling a blockchain-based business network and gain exposure to developing
business networks based on
Hyperledger Fabric
(
HLF
), and appraise blockchain and HLF use cases and their potential effects and integration
Experiment
with
Oracle Blockchain Platform
(
OBP
) to utilize the practicality of translating network topology to OBP
Experience
the ease and richness of assimilating smartness in a business network by learning the full life cycle of chaincode, from development to updates; from installing, initiating, and testing to versioning; and finally, from integration to insight
Who this book is for
This book aims to address a diverse audience, from business stakeholders, to business leaders; from blockchain enthusiast evangelists to designers, architects, and developers; and to anyone and everyone who wants to benefit from the experience offered in this book. This book is intended to become a quick reference guide to learn blockchain, HLF, design strategies, and build chaincode on a blockchain platform. This book adopts a model that will allow readers to refer to this book as a reference for blockchain, its use cases, Hyperledger, design strategy, and quick development on the blockchain platform.
What this book covers
Chapter 1, Exploring Blockchain and BaaS, offers an in-depth exploration of blockchain and distributed ledger technology. It also takes you through blockchain-layered architecture, types of networks, actors, and structure. This chapter offers a prelude to blockchain, shows its relationship with distributed ledger technology, and demonstrates its pertinence to it. This chapter will demystify the prominence of the BaaS platform, its architecture, features, qualifiers, and the ease of use of prebuilt applications while exploring the eminence of OBP.
Chapter 2, Construing Distributed Ledger Tech and Blockchain, demonstrates the world of HLF design and implementation strategy, while diving into the comprehensive five-step design strategy—explore, engage, experiment, experience, and influence. In this chapter, we will build equations, coined by the author, to justify blockchain as the qualified solution for a given use case. We will look at various structures of permissioned business networks, such as joint venture, consortium, and founder initiated, and glance at a permissioned distributed autonomous organization (pDAO). We will also look at different types of use cases, ascertain the properties of blockchain, and witness them as the driving force behind various use cases and their adoption. The book includes a use case on FinTech; helping you to learn the art of modeling a blockchain business network (KonsensusChain) by defining its assets, participants, ledgers, consensus, transactions, events, permissions, and access controls. It also explores how to integrate a permissioned Hyperledger-based business network with BPM, SaaS, and other applications, while creating an infrastructure for the sample business network.
Chapter 3, Delving into Hyperledger Fabric, demonstrates Hyperledger's architecture and allows you to assemble a sample Hyperledger-based business network. You will look at a founder-based and a consortium-based business network. You will learn about business network components, adding peers to channels, working with chaincode, and smart contracts. It will guide you in enabling a dApp or application to transact with the business network. You will also take a deep dive into identity, security, privacy, membership services, and channels, as well as walking through ledger state and transaction flow via a PiggyBank example. These details will allow you to learn transaction flow and its steps, such as proposals, endorsement, packaging responses, verification, ordering, distribution, validation, committing, and notifications. Furthermore you'll see on-chain and off-chain architecture as an extension to a private data collection.
Chapter 4, Engage in Business Case on Blockchain Platform, allows you to engage with OBP. You'll learn how to design a solution inline with the constructs of OBP. You'll also see the sample business network topology, network artifacts, and solution and deployment architecture. Furthermore, you'll explore OBP in detail, its features, and components. You'll also delve into defining and creating an instance of a founder-based business network. In the chapter, you will see a rich history database working with channels.
Chapter 5, Managing Solutions Using Oracle Blockchain Platform, gets you into the practicality of translating network topology on OBP, creating network stakeholders, and configuring OBP instances. This ledger of knowledge illustrates a transaction infrastructure setup, joining participants to a business network, access control, adding smartness (chaincode) to a business network, and REST proxy configuration to expose chaincode to a dApp.
Chapter 6, Developing Solutions on Oracle Blockchain Platform, concludes the book with details on chaincode development, such as the programming languages required, development tools, and a development environment setup. This chapter teaches you about mapping asset models, operations, and developing chaincode functions and interfaces. It highlights the full life cycle of chaincode from development to updates; which includes installing, initiating, testing, and versioning. It demonstrates the full chaincode with a code base built on Go and Node.js. The chapter also illustrates endorsement policies, private data collections, and their functioning in concert with chaincode. It covers chaincode testing via shim and REST endpoints and integrating client apps with business networks using SDK, REST, and events. Finally, it concludes with insights into chaincode, transactions, and channels by experimenting with the monitoring of a business via chaincode logs and channel logs.
To get the most out of this book
The code samples were tested in a cloud environment as well as in a local environment, which can be created using a virtual machine in VirtualBox using an Oracle Linux ISO image. Download Oracle VirtualBox 6.x and install it on a machine (Windows/macOS/Linux) with 16 GB RAM and a minimum of 100 GB HDD. Visit Chapter 4, Engage in Business Case on Blockchain Platform, in the Setting up OBP SDK section, for more details on installation steps.
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Conventions used
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CodeInText: Indicates code words in text, database table names, folder names, filenames, file extensions, pathnames, dummy URLs, user input, and Twitter handles. Here is an example: "Then, from your local web browser, just enter http://localhost:3000 and you should see the console's UI."
A block of code is set as follows:
#Create user Oracle
sudo useradd oracle
sudo passwd oracle
<newPassword>
Bold: Indicates a new term, an important word, or words that you see on screen. For example, words in menus or dialog boxes appear in the text like this. Here is an example: "Click Sign In in the top-right corner."
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Exploring Blockchain and BaaS
Blockchain is perceived to be a disruptive game-changing technology that will have an impact as huge as the internet in the next two decades. This programmable economy has use cases and applications in almost every industry. Blockchain has grown from being a buzzword to something of great interest to enthusiasts and real implementers. Evangelists are not confined to proof of concepts (PoCs), but have started real implementations and have started demonstrating concrete achievements. Although the adoption is slow, Gartner projects (at https://www.gartner.com/ on June 3, 2019) that adoption will be $3.1 trillion by 2030.
Blockchain is a world where users are in full control of transactions and the information around them. The information flowing around is true, trusted, accurate, consistent, accepted, complete, timely available, widely available, transparent, and immutable. Blockchain, a type of distributed ledger technology (DLT), removes the risk of a central point of failure, while the underlying cryptography and algorithms will ensure the security in this immutable world. As the trust is in the blockchain network itself, there is no need for a trusted central third party. Welcome to the blockchain world, a world of distributed double-entry systems.
This chapter starts with accounting systems, centralized and decentralized ledgers, and coins the term distributed double-entry system. This chapter gradually moves toward the definition and analogy of blockchain and demonstrates the power of equity offered by peer-to-peer (P2P) networks. Here, you will also walk through various types of blockchain networks, such as permissioned and permissionless or public and private. This chapter then graduates toward the layered structure of the blockchain architecture and structure of transaction, as well as the blocks and the transaction flow. Finally, it covers how you can approach a blockchain solution and defines the cloud approach to ease blockchain adoption—from PoC to production using a Blockchain-as-a-Service (BaaS) platform such as the Oracle Blockchain Platform (OBP).
Accounting system – single and double–entry
Before we jump into blockchain and delve into Hyperledger Fabric and the Oracle Cloud solution, we need to start with two core principles—ledger and accounting. In an accounting system, business transactions are recorded in journals and ledgers. Fine-grained details of every transaction are entered into various journals. Summarized information from the journals is then transferred (also known as posted) to a ledger. It is the information from the ledger that becomes the source for trail balances and various financial statements. Every transaction is recorded in journals and then posted to a ledger that records this information in various accounts, such as asset accounts, liability accounts, equity accounts, revenue accounts, and expense accounts.
For any organization's accounting system, the ledger is the backbone. Anything that has financial value is posted to the organization's ledger. However, these ledgers are centralized ledgers and the organization has full control over them. We will talk about centralized and decentralized ledgers later in this chapter.
Accounting system – single–entry
Accounting systems address the purpose of producing an operating document to display ownership of assets, to protect assets, and various other tasks. Essentially, an accounting system is a powerful means to check the loss of assets due to malicious human activity, software, and so on, and to keep track of activities and transactions around those assets. Historically, as activities around assets were minimum, single-entry accounting was good enough to prove the ownership of assets. It is a form of accounting system where each transaction is a single-entry in the journal.
A single-entry account system resembles the check register that individuals use to track their checks, deposits, and balances. The information recorded is minimal and is owned by that individual. It's an efficient system for very small businesses that work on a cash basis of accounting, which have fairly low transactions each day. There are no credit-based transactions and the assets that are owned are very few and far between. Most importantly, there is no need to publish income, financial, and balance statements. Historically, it would have worked very well and, even today, it might work fine for very small firms that meet the aforementioned attributes.
There are various challenges with single-entry accounting systems—there are no scientific or systematic rules to record, post, and report on the transactions. It appears as an incomplete system as it does not have both the aspects of the accounts being recorded; hence, it fails to reflect the truth about the profit or loss and will miss reflecting the true financial position of the organization. With all of these shortcomings, a single-entry is vulnerable to frauds and various errors in the ledger. Hence, to check on vulnerability, you need to trust a centralized authority; therefore, historically, there was the need for a king to check for vulnerabilities and maintain trust around the ledger. However, since trade has expanded its boundaries, you need a mechanism to allow one ledger owner to trade with another ledger owner. This immediately led to a double-entry accounting system.
Centralized versus distributed ledgers
This section highlights centralized and decentralized ledgers and distributed ledgers, and outlines the differences between them.
The following diagram shows different types of systems:
Throughout this section, we will refer to the preceding diagram to understand the layout of various types of ledgers. Before we drill into the differences between centralized and distributed ledgers, let's understand the different types of system.
From the perspective of control, there are two types of systems—centralization and decentralization systems:
Centralized system
: One entity controls the entire system, where an entity can be a person or an enterprise.
Decentralized system
: In a decentralized system, there could be multiple entities controlling the system. There is no single point of control, and the control is shared between various independent entities.
From the perspective of location, there are two types of systems—centralized and distributed systems:
Centralized system
: All the constituting parts of the system, such as servers, ledgers, and so on, are co-located and exist at the same location
Distributed system
: All the constituting parts of the system
, such as
servers, ledgers, and so on, are NOT co-located and exist at different locations
These categories of the system lead to the following variants of the system:
Distributed yet centralized system
: Distributed yet centralized system is the category of system wherein the system is distributed, from the location's perspective, yet the system is controlled by a central authority or central entity. For example, cloud service providers offer various services such as compute, storage, SaaS, PaaS, IaaS, and so on. These services are offered via servers and databases that are distributed. However, the entire system is controlled by the cloud service provider. Such a system can be termed a distributed yet centralized system.
Distributed system
: Distributed systems, from the control's perspective, are decentralized, whereas from the location's perspective, they are distributed. This means that no single entity is the owner or authority of the system and the system doesn't have just one location—it is widely distributed. DLT and its type, such as blockchain, are such distributed systems, where control is not with one entity. Hence, no single entity can alter or modify the system (decentralized). Also, DLT and blockchain are based on the P2P network, where nodes (peers or participants) are independent and globally spread (distributed).
Centralized ledgers
The double-entry accounting system we've discussed so far highlights an accounting system that has a centralized ledger. Anything with a financial value is recorded in journals and posted to ledgers. These ledgers are just like the central repository of the posted transactions, and they are the backbone of any organization.
However, centralized ledger systems have various drawbacks as well. For example, banks control the transactions that are posted into the bank's ledgers and they maintain total control over bank statements. In this case, they can penalize you at any given time and can transact money from your account at any given time. If such a centralized institute has malicious intent, then the consequences could be manifold; they could close down their business without prior notification, which prohibits any further transactions. These examples are used mostly by the blockchain evangelists who lean more toward complete decentralization of trust authorities.
Let's look at a more viable challenge, pertaining to banks. Double-entry mandates the need for each bank to maintain its own ledger to reflect their perspective of truth, and as more banks are transacting with each other, they need to reconcile their version of the truth to derive a single version of the truth. Banks today spend time, money, and resources to ensure a consensus over the single truth.
Obviously, they have their ledger and hence their own system, which allows the financial industry to avoid any chance of a single point of control and single point of failure. In addition, it becomes more interesting as a customer opens an account with a bank and puts his/her money with a level of trust in that banking institute. Now, the onus is on the banking institution to safeguard your money and information. On the other hand, the bank will invest a lot of time, money, resources, and effort into building and maintaining a system and then spend even more time, money, resources, and effort on integrating and checking with other banking institutes to ensure that their mastered system is in consensus with the other banking institutes' system to reach a common truth.
If you analyze this closely, you will see that each bank's ledger is actually replicating the functionality of the other banking institutions. Now, what if one of the banking institute's systems fail? Is this going to lead to a situation where reconciliation is not possible? Doesn't this sound more like a single point of failure? The answers lie in the distributed ledger discussed in the following section and throughout the book.
Distributed ledgers
Across the world, in the economical, legal, political, and institutional systems, the key elements are transactions, contracts, and documents. They dictate the relationship between countries, enterprises, organizations, communities, and individuals and, most importantly, they are perceived to offer trust. Interestingly, these have not joined the digital transformation to a greater extent and for the greater cause. So, what is the solution? Distributed ledgers and DLT, along with blockchain, offer the solution to such critical challenges. In this section, we will explore more about distributed ledgers and DLTs.
In a distributed ledger, there is no central authority or a central administrator. It is an asset database that is shared over the network, where each party on the network has an identical copy of the ledger. These assets can be financial, legal, and electronic assets. Changes to the value of these assets are reflected throughout the network, and each copy of the ledger is appended.
Many organizations, governments, and institutes use a central database of the ledger, which we discussed in the Centralized ledgers section. A centralized ledger needs a central authority to be trusted by transacting parties; however, in a distributed ledger, the need for a third party is omitted, which is one of the gravitational forces behind the attraction to DLT. Here, I have quietly used the term DLT because a distributed ledger can be pronounced as a shared ledger or a DLT, and they are one and the same.
What's disruptive about a DLT is that the ledger database is distributed, spread on all of the nodes or computing devices across the network, and each node has an identical copy of the ledger, where nodes update themselves independently. All of the participating nodes reach an agreement to establish a single truth (true copy) for the ledger through a process called consensus. Once a consensus is reached, the distributed ledger is updated automatically and the latest truth (true agreed copy) of the ledger is appended on each node separately. While reading this paragraph, you might think about the reconciliation process of banks to establish trust and an agreement on the ledger. With DLT, trust (reconciliation) and consensus (agreement) happen seamlessly and automatically.
What we just found out is that there is no central authority in the previous story to maintain the distributed ledger. DLT empowers systems to reduce the dependencies on various central authorities such as banks, lawyers, governments, regulatory offices, and third-party authorities. Distributed ledgers omit the need for a central authority to validate, authenticate, and process transactions. Transitions on DLT are timestamped and have a cryptographic unique identity, where all records in question are available for the participants to view, and this ensures that the verifiable and auditable history of the transaction is stored immutably.
In the decentralized distributed ledger, the transaction is replicated to the distributed ledger, which means all the participating nodes' copies of the ledger are appended; however, there is no central single database. It is the network that is decentralized. Such a system needs a decentralized consensus as there is no single point of contract, or single authority or party. Hence, to ensure trustlessness, consensus is a must. In a traditional database system, a single party acts on behalf of the transacting clients to modify the state of the system. However, in a distributed ledger, any party can record, and the protocols and algorithms govern the posting of transactions on the network's ledger.
The following table lists some of the differences between a centralized ledger and a distributed ledger:
Centralized ledger
Distributed ledger
Reconciliation is required (both internal and external).
Reconciliation is not required; however, a consensus is required to reach an agreement.
There's no restriction on DB operations.
It's append-only.
There's a single point of failure.
It's distributed; hence, there's no single point of failure.
There's a single point of contact.
It's decentralized; hence, there's no single authority.
There are third parties, middlemen, and gatekeepers.
It's P2P. There's no central party, and appending to the ledger is governed by the consensus.
Backup and disaster recovery are required.
Resilience and availability increases as more and more participating nodes get to the network.
Actions can be performed on behalf of someone.
There's cryptographic authentication and authorization.
NA
It's immutable as the data added to the ledger stays immutable.
NA
There's direct interaction of the nodes, allowing initiation of direct transactions of assets such as currency, real assets such as land titles or documents, and so on.
