What is the blockchain? At a very simplified, high level it can be thought of as a distributed database that maintains a list of records in blocks that are chained together in a specific order. Each block links to the history of the block that came before it, stamped with the time that it was created. The linking of these blocks to form this continual record is called “Blockchain”.
There are specific characteristics required to have a blockchain. It must be open and transparent. That is, all who participate on the blockchain need to be able to see the full history of the records that are stored there. For a public blockchain, it must be decentralized and distributed so that each participant in the process is able to see all of the records that are part of the blockchain. This creates trust among the participants without having to have a central intermediary as exists in many of today’s structures. It also allows for the storage of the same copy of all the records in multiple locations, so there is no single point of failure. There needs to be a consensus mechanism (or a validation process) to validate the records that are added to the chain. This allows for immutability of the transactions. Additionally, it needs to be totally secure.
Part 2 examines the current landscape at a deeper level, to provide a better context for understanding Blockchain.
Part 3 discusses permissioned (private) vs. permissionless (public) blockchains
As mentioned previously, blockchain has no single point of failure. Additionally, it offers a user the following: immutability, security, redundancy, cost reduction and accountability.
Blockchain can also provide a user with a digital identity. This is portable on a global scale. It would allow identification without the need for a passport, or in the US, for a social security number. This capability would help to prevent tampering or document forgery and would help prevent identity theft.
There are significant use cases for it. One primary one is the use of it in the food supply chain as demonstrated by the project undertaken by Walmart and IBM. They used Blockchain’s distributed ledger system to track food from the farm to the store in order to have full traceability.
Public blockchains do not require central authorities. They are decentralized and don’t require a central authority or centralized servers.
Any industry that requires the verification of records and transparency would benefit from the use of blockchain.
If some measure of privacy is required, then the use of permissioned blockchains would provide that benefit. Additionally, if an enterprise requires specific point in time storage of data, then blockchains are useful for that purpose.
Another key use of blockchain is for those companies needing to have an audit trail. Though this can also be accomplished through the use of a distributed ledger database.
Enterprises need to be aware of the costs of a blockchain. In particular, they need to factor in the costs of storage over an indefinite period of time.
Companies such as IBM have been involved with blockchain for a number of years. IBM made significant contributions to Hyperledger Fabric and Hyperledger Composer. In March 2017, IBM launched its Blockchain-as-a-Service (BaaS) solution.
At the 2018 Re:Invent, AWS announced a new offering called Managed Blockchain. It created this to simplify the set up and management of a blockchain application. Managed Blockchain supports the open source project called Hyperledger Fabric. And, it will soon provide support for Ethereum contracts. Additionally, AWS also introduced the Quantum Ledger Database (QLDB) which is a fully managed ledger database. QLDB provides transparent, immutable and cryptographically verifiable transaction logs. Additionally, it is owned by a central trusted authority.
This helps those who want to use blockchain, but who were not willing to set up and maintain the complex environment previously required. To create a blockchain network, each network member needs to manually provision hardware and software. They also need to create and manage certificates for access control, as well as to configure the networking components.
Once the blockchain network is up and running, the members need to continuously monitor the infrastructure and adapt to any changes that occur. Some examples of these changes are an increase in transaction requests or the addition of new members or removing members who are leaving the network. Amazon created a wizard-like experience to allow for configuration and provisioning requirements. With this capability, organizations can provision a managed blockchain service with only a few clicks. In addition, there is a voting API which simplifies the onboarding of new members.
The current network participants can vote to add or remove members. AWS’ Managed Blockchain configured the process to allow a new member to launch and configure multiple blockchain peer nodes. They can also process transaction requests and store a copy of the ledger. This helps solve many of the issues involved in setting up a blockchain, but there is also a need to store a complete history of all of the transactions that occur. Hyperledger Fabric does not do this today. To address this issue, AWS announced another new service called Amazon Quantum Ledger Database (QLDB). QLDB can replicate and store an immutable copy of the blockchain network. This permits the companies involved to have a full picture of the network activity. QLDB tracks each data change through the use of an immutable journal. QLDB generates a cryptographic function to create a secure output file of the data change history. Because QLDB is serverless, it is able to scale without the customers’ requirement to manage it.
IBM (IBM) has more than 500 blockchain projects in industries like shipping, banking, healthcare and food safety. It also has forged partnerships with Columbia University to develop still more uses for the blockchain.
Other companies, including Microsoft (MSFT), JPMorgan Chase (JPM), and American Express (AXP), are exploring blockchain’s use.
For example, Microsoft is working with the decentralized Identity Foundation (DIF) and the World Wide Web Consortium Credentials Community Group (W3C) to provide a Decentralized Identity (DID) solution, standards and an interoperable ecosystem. Microsoft has been working on this solution for the past 18 months, using technologies like blockchain and distributed ledgers. This solution will allow users to own and control their digital identity.
Going forward, KPMG expects that there will be new use cases and adoption in areas such as tokenization and the Internet of Things (IoT) integrations.