The Blockchain and Data Sharing Frontiers
According to Statista, there will be 80 billion connected devices by 2020. However, there is currently no universal data sharing mechanism. At the same time, user-generated health data from mobile devices and wearables grew 300% from 2015 to 2020.
To appropriate the greatest value from the rise in the creation of user-generated data. Secure and convenient sharing of personal health data will be a prerequisite for improving collaboration across a plethora of industries.
As the idea of self-sovereign data ownership, by consumers becomes accepted across a plethora of industries. And the recognition of shared responsibility relating to privacy, transparency and the security of data flowing between consumers and the institutions authorised to access their data.
Sovereign data ownership enables consumers or businesses to control their own digital identity. They can store their own identity data on their own devices and provide information to 3rd parties to validate their information. Without relying on a central repository of identity data.
The information is independent of any individual silo. Hence, consumers and businesses can gain full control, security and portability of their data. The Sovrin Foundation describes self-sovereign identity as an Internet for identity, where no one owns it, everyone can use it, and anyone can improve it.
We will draw your attention to how blockchain's decentralised and permissioned based technologies may be deployed to facilitate. The secure sharing of user-generated content, user-centric consumer data, and enhance identity management. Within the financial services, healthcare, and travel industries. In our next series of blog posts. But first what is the blockchain?
The blockchain is a distributed database of records or public ledger of digital events or transactions of virtual currencies. That is executed and shared across a large network of untrusted participants.
In other words, it is a continuously updated record of who holds what. The records are split into linked blocks and secured using cryptography through maths and code. Automated trust is achieved via smart contracts, that are held on a distributed ledger.
This creates an immutable and unforgeable record of all transactions across the network. This record is replicated on every computer in the network, therefore hard to tamper with.
Characteristics of the Blockchain
It stores a history of custodianship
Ownership and location
Creates a shared reality for non-trusting entities on a single database
Smart contracts enable the automatic update of records
Transfer value through updates to the records
Create indelible records
Cryptography enables military-grade security, across three key areas
Asset tracking this includes both digital and physical assets
Protection from one party reneging on deals
Interoperability is built from the ground up.
The blockchain is trustless in the sense that a user does not need to trust the other party in the transaction, or the central intermediary. However, the blockchain protocol software system must be beyond reproach.
To ensure the sanctity of the blockchain, for cryptocurrencies such as bitcoin, the computational power devoted to the decentralised blockchains must satisfy two conditions in equilibrium:
(1) A zero-profit condition among the miners, who engage in a rent-seeking competition for the prize associated with adding the next block to the chain;
(2) An incentive compatibility condition on the system’s vulnerability to a “majority attack”. That is the computational costs of such an attack must exceed the benefits.
(3) The recurring flow of payments to the miners running the blockchain must be large relative to the one-off stock benefits of attacking it.
In other words’ the barriers to entry (cost) to participate as a miner in a decentralised blockchain must equate to zero or very low in terms of cost.
Conversely the barrier for an attack on the blockchain protocol software system. Must be sufficiently, high enough to disincentivise participants from attempting to game the system. Eric Budish - the economic limits of Bitcoin and the blockchain
The blocks connect all transactions on a blockchain together. Single blocks are verified every 10 minutes through mining. Each subsequent block verifies the previous block hence making it impossible to double-spend Bitcoin transactions.
Every transaction contains a #tag from the previous block. This has the effect of creating a chain of blocks from the genesis block to the current block.
Each block is guaranteed to follow the previous block to ensure that the #tag of the previous block is known.
Modification of the chain is computationally impractical and very difficult. This is what mitigates the multiple spending of Bitcoins and neutralises the double-spending problem.
The broadcasting of a transaction to all members of the network to determine the validity of the transaction also significantly reduces the chance of double spending occurring.
It is a key feature of the blockchain and, plays a significant role in encoding trust between actors engaging in transactions with unknown entities.
If we were to use a bank as an analogy for a blockchain. The blocks would essentially be a record of all the transactions that have occurred within the bank.
The Double Spend Challenge
Double spending is when an actor tries to game the system by engaging in multiple transactions with single or multiple actors with the same digital coin. For argument sake, the digital coin could be a bitcoin, dash or litecoin. However, because all transactions on a blockchain must be validated, and then recorded across a distributed network of computers.
This eliminates the possibility of double-spending. It normally takes six confirmations before a transaction is validated.
Provides Proof of Work (PoW)
Proof of work, based consensus mechanism, requires nodes, (computers) to solve hard cryptographic puzzles with the validated transaction added to the block.
It, however, has a few drawbacks such as high latencies, low transaction rates and significant energy expenditure. This makes it less than a perfect fit for many applications. The (PoW) consensus mechanism is deployed in permissionless open-ended systems to ensure the sanctity of the consensus process. Blockchains with variants of the Bitcoin consensus platform include NameCoin, LiteCoin, DogeCoin and Monero.
The consensus process ensures that all members of the blockchain agree on the current state of the blockchain. When a block within the blockchain is updated, all members of the block agree on the inviolability of the information.
Proof of work ensures that actors on the network are discouraged from using separate identities to validate their transactions. This is another method of eliminating the prospect of the double-spend problem. The blockchain technology was designed to;
Artificially make it computationally costly to validate transactions, as this ensures that the total computational resources required to cheat are prohibitively expensive.
Reward miners for helping to validate a transaction. This ensures the success of the validation process and thus the mitigation of the double-spend problem.
Permissionless verses Permissioned Transactions
Blockchain platforms can be classified as two types; permissionless and permissioned. Open-ended systems such as Bitcoin and Ethereum are permissionless. They are publicly available for use. Any node i.e. a computer can participate in the consensus process to advance the blockchain and conduct transactions.
Have semi-trusted members, where only known participating nodes are part of the consortium. Such as the Hyperledger, Fabric and Multichain are aimed at consortiums where participation is close-ended. In this instance, whilst actors can submit transactions, advancing the blockchain is restricted to a fixed set of peering nodes, computers that are run by consortium members. In permission blockchain platforms, consensus algorithms such as Paxos, RAFT and various Byzantine fault tolerance are deployed to achieve consensus.
This is achieved through collaboration, cryptography and clever code
Is a form of encryption where keys come in pairs. Frequently but not necessarily the keys are interchangeable, in the sense that if Key A encrypts a message then Key B can decrepit it. And if Key B encrypts a message then Key A can decrepit it.
Also known as public-key cryptography, uses public and private keys to encrypt and decrypt data.
The keys are simply large numbers that have been paired together but are not identical i.e. they are asymmetric. One key is the public key and can be shared with everyone. The other key is a private key and is kept secret. Either key can be used to encrypt a message.
The idea of “smart contracts” appeared in 1994 when Nick Szabo described a computer programme with if-then structure interacting with the real world. On the 30th of July 2015 the Ethereum project was launched through the creation of an independent platform.
Where deploying a programming language, users could create a virtual contract between them for any purpose. There are two types of transactions that can be supported by smart contracts;
A transaction where a cryptocurrency moves from one person to another
A transaction which deploys or interacts with a smart contract
A smart contract is a piece of code that is stored and executed across all nodes in the peer-to-peer network, the blockchain.
The application of smart contract includes simple money transactions between private actors, selling intangible and tangible goods in the financial and commercial sector. It may also be deployed to confirm real estate transfers.
Digital Signatures: Are used to authenticate that the documents or message delivered is from the authorised person and not a nefarious actor.
Consensus informally refers to an agreement among a group of nodes. In which each node proposes a value and the goal is to agree exactly on what that value is. The consensus algorithms deployed on blockchains cross-reference data components to check whether what is encoded has been modified since the onset of the transmission.
Distributed ledger technologies (DLT) ensure that the data delivered from one source to another is not altered from its original state.
Hence blockchain technologies may be essential in maintaining the veracity of identity and access management systems. Particularly in a world migrating to a data-sharing paradigm. Identity and access management systems (IAM) are utilised by organisations to identify, authenticate and authorise an individual or 3rd party’s access to services or systems associated to an organisation or individual.