2 Blockchain (r)Evolution

 

This chapter covers:

  • Public blockchains, and the problem they solve
  • Shortcomings of public blockchains addressed by permissioned blockchains
  • Components of a typical blockchain

“One cannot and must not try to erase the past merely because it does not fit the present.”

— Golda Meir

If it was Vegas, we would put all our chips on the fact that you have heard about Bitcoin way before blockchain and distributed ledger technologies (DLTs). At least we did. (A blockchain tracks all the exchanges and movements of assets on the network.) Bitcoin, a decentralized cryptocurrency with no central bank, promised a revolution in payment systems: no need for a central bank, complete independence from governments, high privacy protection. In essence, Bitcoin sounded like an anarchist’s dream.

The pseudonym Satoshi Nakomoto opposed the traditional banking system and introduced Bitcoin in 2008: a decentralized and distributed currency system. Since Bitcoin did not rely on banks, you could only trust the algorithms underpinning the system. How were decentralization and distribution achieved? By using a permissionless public peer to peer network. Whoa, that’s a mouthful! Let’s dissect it.

2.1   Trusted Third Parties

2.1.1   How Blockchain Works

2.1.2   Working for Trust

2.2   So, What Exactly Is a Blockchain?

2.2.1   What Is In the Block?

2.3   Where Public Blockchains Fall Short

2.3.1   Expensive consensus mechanisms

2.3.2   Low Throughput and High Latency

2.3.3   No Access Control

2.3.4   Lack of Data Privacy

2.4   Enterprise Enlightenment

2.4.1   More than Cryptocurrency

2.4.2   Flavors of DLT

2.4.3   Differentiating DLTs

2.5   DLT in Action

2.5.1   Why Distribute the Blockchain?

2.5.2   Why Not a DLT?

2.6   Summary

2.7   References and Further Reading