Blockchain




Blockchain











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Blockchain

by Geoff Keston

Copyright 2022, Faulkner Information Services. All
Rights Reserved.

Docid: 00021090

Publication Date: 2211

Report Type: TUTORIAL

Preview

A blockchain is a group of computers that, working together, verify the
integrity of data and transactions. Each block represents a piece of data,
such as the record of a transaction, and the blocks are linked in a
sequential chain. This sequential record, called a ledger, is stored by –
and visible to – all of the members of a particular blockchain. Such
transparency is a key feature of blockchain’s security.

Report Contents:

Executive Summary

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Blockchain is a method for ensuring the integrity of online data and
transactions.

Cryptocurrency Tutorial
Non-Fungible Tokens (NFTs)
Tutorial
The Internet of Things Tutorial
The Internet of Things
Market Trends Market

A blockchain is a group of computers that, working together, verify the
integrity of data and transactions. Each block represents a piece of data,
such as the record of a transaction, and the blocks are linked in a
sequential chain. This sequential record, called a ledger, is stored
by – and visible to – all of the members of a particular blockchain. Such
transparency is a key feature of blockchain’s security.

In the estimation of the US National Institute of Standards and
Technology (NIST), “Blockchain represents a new paradigm for digital
interactions,” adding that it “has the potential to be implemented in many
different systems, to include manufacturing supply chains, data
registries, digital identification, and records management.”1

Although best known for validating Bitcoin transactions, blockchain is
generating much broader interest, a fact underscored in 2018 and 2019 as
AT&T, Amazon Web Services, Microsoft, Oracle, and SAP all released
blockchain-as-a-service offerings. IBM was already heavily invested
in the technology.

In terms of the present day, as forecast by Grand View Research, the
blockchain market, valued at $5.92 billion in 2021, should expand at a
remarkable compound annual growth rate (CAGR) of 85.9 percent between 2022
and 2030.2

While slightly less optimistic, ResearchAndMarkets, which valued the 2021
market at $4.56 billion, predicts blockchain revenue of $117.77 billion by
2028, reflecting a CAGR of 59.12 percent.3

Technology

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A blockchain is a group of computers that, working together, verify the
integrity of data and transactions. Each block represents a piece of data,
such as the record of a transaction, and the blocks are linked in a
sequential chain. This sequential record, called a ledger, is stored
by – and visible to – all of the members of a particular blockchain. Such
transparency is a key feature of blockchain’s security. (Blockchain is a
concept, not a proprietary technology, so there are multiple blockchains
operating independently. The Bitcoin blockchain is just one example.)

Data in a blockchain is stored in the form of a “hash”, which is a long
string of characters. Each hash is unique, and a particular piece of
information can only be represented by one hash.

Chaining Blocks

As described by NIST, “Blocks are chained together through each block
containing the hash digest of the previous block’s header, thus forming
the blockchain. If a previously published block were changed, it would
have a different hash. This in turn would cause all subsequent blocks to
also have different hashes since they include the hash of the previous
block. This makes it possible to easily detect and reject altered blocks.”4
To illustrate, Figure 1 shows a generic chain of blocks.

Figure 1. Generic Chain of Blocks

Figure 1. Generic Chain of Blocks

Source: NIST5

Five Blockchain Elements

According to Gartner, a complete blockchain incorporates five key
elements:

“Distribution – Blockchain
participants, connected on a distributed network, operate nodes
(computers) that run a program to enforce the business rules of the
blockchain. Nodes also keep a full copy of the ledger, which updates
independently when new transactions occur.

“Encryption – Blockchain uses
technologies such as public and private keys to record data securely and
semi-anonymously.

“Immutability – Completed
transactions are cryptographically signed, time-stamped, and sequentially
added to the ledger. Records can’t be changed unless all participants
agree to do so. Such an agreement is known as a fork.

“Tokenization – Value is
exchanged in the form of tokens, which can represent a wide variety of
asset types, including monetary assets, units of data, or user identities.

“Decentralization – No single
entity controls a majority of the nodes or dictates the rules. A consensus
mechanism verifies and approves transactions, eliminating the need for a
central intermediary to govern the network.”6

Blockchain Security Concerns

Although the essence of blockchain is security, some analysts have
challenged that assumption. For example, popular security expert Bruce
Schneier has observed that blockchains don’t offer users a way to recover
or mitigate damage in the event of a problem:

  • “If your bitcoin exchange gets hacked, you lose all of your money.
  • “If your bitcoin wallet gets hacked, you lose all of your money.
  • “If you forget your login credentials, you lose all of your money.
  • “If there’s a bug in the code of your smart contract, you lose all of
    your money.
  • “If someone successfully hacks the blockchain security, you lose all
    of your money.”

Schneier continues: “In many ways, trusting technology is harder than
trusting people. Would you rather trust a human legal system or the
details of some computer code you don’t have the expertise to audit?”
(Schneier’s comments pertain to public blockchains.)7

Public or Permissioned

Blockchains can be either public (open to anyone) or permissioned
(accessible only by authorized people and organizations). The transactions
on permissioned blockchains require fewer participants to validate them so
they have less overhead and need less computing power. The authentication
method that restricts access to the network is also a security device,
keeping out people who might launch an attack. But permissioned
blockchains may pose the risk of being controlled by a small group rather
than providing verification of data by a large, dispersed array of
participants.

Market

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While relatively slow to materialize, today’s global blockchain market is
both robust and rapidly rising.

Market Growth

As forecast by Grand View Research, the
blockchain market, valued at $5.92 billion in 2021, should expand at a
remarkable compound annual growth rate (CAGR) of 85.9 percent between 2022
and 2030.8

While slightly less optimistic,
ResearchAndMarkets, which valued the 2021 market at $4.56 billion,
predicts blockchain revenue of $117.77 billion by 2028, reflecting a CAGR
of 59.12 percent.9

Market Drivers

The factors propelling the blockchain market are both many and varied,
and include:

Increased Venture Capital Funding

For example, Grand View Research reports that
“in May 2021, Circle Internet Financial Ltd., a blockchain technology
provider, announced that it raised $440 million in funding from strategic
and institutional investors. The company used this funding for
organizational development and market expansion.”10

The Legalization of Cryptocurrency

In the view of Grand View, “The acceptance of
cryptocurrency as a payment by companies such as PayPal and Xbox is
expected to drive market growth. Various restaurants are entering into
partnerships with cryptocurrency solution providers to provide
cryptocurrency-based payments to their customers. For instance, in August
2021, Bakkt Holdings, LLC, a digital asset marketplace, announced its
partnership with Quiznos, a quick-service restaurant (QSR), to launch its
physical location pilot. This pilot enabled the customers of Quiznos to
pay with bitcoin at select locations.”11

An Artificial Intelligence Infusion

As with other information technologies, the
proponents of blockchain believe that incorporating artificial
intelligence (AI) will lead to better apps. As revealed, for example, by
Grand View, “in September 2019, Signzy Technologies Private Ltd., a
[regulatory technology] startup, announced its partnership with Primechain
Technologies, a blockchain technology provider. The partnership was aimed
toward developing AI-enabled smart banking solutions for financial
institutions and banks. This smart banking solution integrated AI and
blockchain technologies to digitalize and automate back-office
operations.”12

The Rise of Startups

As catalogued by ResearchAndMarkets,
blockchain has “gained in popularity for a variety of commercial
applications, including payments, exchanges, documentation, and many
others. Many startups such as Blockpoint, Auxesis Group, Symbiont,
SpinSys, Bitfury, Neufund, Fetch.AI, Confirm, Genomes, QubiTech, and CiveQ
among others have entered the market and begun developing blockchain-based
solutions.”13

The Digital Transformation Movement

The Digital Transformation movement is
carrying blockchain along with it, with significant adoption in the
banking, finance, healthcare, and media & entertainment industries.

Although the regulatory and compliance environments are still evolving,
blockchain advocates seem undeterred in their enthusiasm for this
revolutionary digital ledger technology.

Recommendations

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Don’t Be a Pioneer (But Don’t Miss Out)

For most organizations, pushing to make significant use of blockchain at
this point would be too much of a risk. There isn’t yet a clear business
need and there is considerable uncertainty. Yet if some of the more
aggressive predictions are true, blockchain could soon have a dramatic
impact. Organizations must therefore prepare to move quickly, even if they
don’t take action now.

To gauge when and in what ways to respond to blockchain’s development,
organizations can use the following guidelines:

Focus on Your Industry – The
effects of blockchain are likely to vary across industries, so it is best
for an organization to focus on what is happening with similar companies
rather than to focus on broader developments.

Identify Real Business Needs
– Identifying other companies that are using blockchain successfully for
key business needs will help organizations to focus on how the technology
can be employed for competitive advantage. Customer interest is another
good barometer of a real need.

Follow the Activities of Major Vendors
– Small, specialty companies are more likely to push hyperbolic
assessments of blockchain’s potential. But large, well-established vendors
will not want to hurt their shareholders or damage the reputation of their
other lines of business. These larger vendors, who are starting to enter
the market, are therefore better guides to how and when to use blockchain.

Sort Through the Hype

Describing what he calls the “snake oil” being offered by some people in the
field, technology analyst Jamie Bartlett says that “I received an email from
a blockchain start-up saying they were using a blockchain to beat
obesity. I have no idea how. But that is a good example of the way in which
there’s an awful lot of snake oil salespeople out there, an awful lot.”14
But a challenge to knowing how to respond to blockchain’s evolution is that
some of the most hyperbolic predictions might be true. Even though there are
many people making unreliable, even false claims about the technology’s
potential, there are also good reasons to think that blockchain’s impact
will be profound and far-reaching. Organizations would thus be wise to not
ignore the hype but to sort through it.

One potentially less risky way to begin using blockchain is by using a
service. Blockchain-as-a-service offerings provide a platform on which to
build a blockchain more quickly than was possible in the early days of the
technology. Another advantage is that many of the leading
blockchain-as-a-service providers are large, well-established companies,
such as the following:15

  • Alibaba
  • Amazon
  • Baidu
  • IBM
  • Oracle
  • Microsoft
  • Salesforce

Amazon’s offering, for example is Amazon Managed Blockchain. According to
the vendor, “Amazon Managed Blockchain is a fully managed service that
allows you to join public networks or set up and manage scalable private
networks with just a few clicks. Amazon Managed Blockchain eliminates the
overhead required to create the network or join a public network, and
automatically scales to meet the demands of thousands of applications
running millions of transactions. Once your network is up and running,
Managed Blockchain makes it easy to manage and maintain your blockchain
network. It manages your certificates and lets you easily invite new
members to join the network.”

Another way for an organization to sort through the hype is to focus on
developments within its industry. For example, some of the research into
the technology’s future has focused on applications in healthcare16
and in accounting.17 Also, organizations may engage a prominent
consulting firm for advice, such as Accenture, Deloitte, or KPMG.18

References

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    1 “Blockchain.” US National Institute of Standards and
    Technology. 2022.

    2 “Blockchain Technology Market Size, Share & Trends
    Analysis Report By Type (Private Cloud, Public Cloud), By Application
    (Digital Identity, Payments), By Enterprise Size, By Component, By End
    Use, And Segment Forecasts, 2022 – 2030.” Grand View Research, Inc.
    2022.

    3 “Global Blockchain Market, By Component, By Type, By
    Application, & By Region – Forecast and Analysis 2022 – 2028.”
    ResearchAndMarkets.com. 2022.

    4 Dylan Yaga, Peter Mell, Nik Roby, and Karen Scarfone.
    NISTIR 8202 “Blockchain Technology Overview.” US National Institute of
    Standards and Technology. October 2018:17.

    5 Ibid.

    6 David Furlonger and Christophe Uzureau. “What Is
    Blockchain?” Gartner, Inc. March 2, 2022.

    7 Bruce Schneier. “There’s No Good Reason to Trust
    Blockchain Technology.” Wired. February 6, 2019.

    8 “Blockchain Technology Market Size, Share & Trends
    Analysis Report By Type (Private Cloud, Public Cloud), By Application
    (Digital Identity, Payments), By Enterprise Size, By Component, By End
    Use, And Segment Forecasts, 2022 – 2030.” Grand View Research, Inc.
    2022.

    9 “Global Blockchain Market, By Component, By Type, By
    Application, & By Region – Forecast and Analysis 2022 – 2028.”
    ResearchAndMarkets.com. 2022.

    10 “Blockchain Technology Market Size, Share & Trends
    Analysis Report By Type (Private Cloud, Public Cloud), By Application
    (Digital Identity, Payments), By Enterprise Size, By Component, By End
    Use, And Segment Forecasts, 2022 – 2030.” Grand View Research, Inc.
    2022.

    11 Ibid.

    12 Ibid.

    13 “Global Blockchain Market, By Component, By Type, By
    Application, & By Region – Forecast and Analysis 2022 – 2028.”
    ResearchAndMarkets.com. 2022.

    14 “Blockchain: Quantum Leap Forward or Digital Snake Oil?”
    intelligence 2. October 24, 2018.

    15 Laurie Clarke. “Best Blockchain-as-a-Service (BaaS)
    Options.” Computerworld. May 30, 2019.

    16 Mohamed Jmaiel et al. “Application of Blockchain
    Technology in Healthcare: A Comprehensive Study.” The Impact of Digital
    Technologies on Public Health in Developed and Developing Countries. May
    2020.

    17 Sebahattin Demirkan, Irem Demirkan, and Andrew McKee.
    “Blockchain Technology in the Future of Business Cyber Security and
    Accounting.” Journal of Management Analytics. Vol. 7. 2020.

    18 “A New IDC MarketScape Assesses Eleven Providers of
    Blockchain Services.” IDC. June 2020.

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About the Author

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Geoff Keston is the author of more than 250 articles
that help organizations find opportunities in business trends and
technology. He also works directly with clients to develop communications
strategies that improve processes and customer relationships. Mr. Keston
has worked as a project manager for a major technology consulting and
services company and is a Microsoft Certified Systems Engineer and a
Certified Novell Administrator.

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