Digital Business Models: Week 10 - reading: 'Blockchain Part I (Roman)'
Digital Business Models: Week 10 - reading: 'Blockchain Part I (Roman)'
: They have developed a "proof of concept prototype that has the potential to replace a trust-based coffee shop payment solution that is based on an analogue, pre-paid punch card solution".
: scalability issues, costs, and volatility in the transaction currency are hindrances.
Energy Saving. Besides, blockchains can be used in green energy. Gogerty and Zitoli proposed the solarcoin (Gogerty and Zitoli, 2011) to encourage the usage of renewable energies. In particular, solarcoin is a kind of digital currency rewarding solar energy producers. In addition to the usual way of getting coins through mining, solarcoins could be granted by the solarcoin foundation as long as you have generated the solar energy.
Blockchain has the potential to improve the security of privacy sensitive data. In (Zyskind et al., 2015), Zyskind et al. propose a decentralized personal data management system that ensures the user ownership of their data.
Bitcoin reached 10 billion dollars in 2016 (coindesk, 2016)
Key characteristics of blockchain technology
: decentralisation, persistency, anonymity and auditability.
Aside from financial transactions
, blockchain technology is becoming one of the most promising technologies for the next generation of Internet interaction systems, such as smart contracts (Kosba et al., 2016), public services (Akins et al., 2013), Internet of Things (IoT) (Zhang and Wen, 2015), reputation systems (Sharples and Domingue, 2015) and security services (Noyes, 2016a).
limitations of Bitcoin
: (1) the Bitcoin network is restricted to a rate of 7 transactions per second, which is incapable of dealing with high frequency trading. (2) Miners hide their mined blocks for more revenue in the future. In that way, branches could take place frequently; this hinders blockchain development. Hence some solutions need to be put forward to fix this problem. (3) User’s real IP address could even be tracked (4) proof of work wastes too much electricity energy while the phenomenon that the rich get richer could appear in the proof of stake consensus process
This paper focuses on blockchain technology instead of digital currencies
What is blockchain?
: Blockchain is a sequence of blocks, which holds a complete list of transaction records like conventional public ledger. Each user owns a pair of private key and public key. The private key is used to sign the transactions. The digital signed transactions are spread throughout the whole network and then are accessed by public keys, which are visible to everyone in the network.
Three main types of blockchain currently in existence
: public blockchain, private blockchain and consortium blockchain (Buterin, 2015)
PoW (Proof of work)
is a consensus strategy used in Bitcoin network (Nakamoto, 2008). POW requires a complicated computational process in the authentication.
PoS (Proof of stake)`
is an energy-saving alternative to POW. Instead of demanding users to find a nonce in an unlimited space, POS requires people to prove the ownership of the amount of currency because it is believed that people with more currencies would be less likely to attack the network.
We discuss possible future directions with respect to five areas: blockchain testing, stop the tendency to centralization, big data analytics, smart contract and artificial intelligence.
Beck et al (2016)
Zheng et al (2016). 'Blockchain Challenges and Opportunities: A Survey'
They attempt to "illustrate how a trust-based centralised system can be replaced by distributed and trust- free transaction systems." using the Ethereum’s blockchain - as an example
What is a cryptographic economic system?
: A cryptographic economic system can be understood as a system that organises transactions completely reliable, without any human interaction, following intractable rules set in the computer protocol.
e.g. inconvertible paper money made legal tender by a government decree.
A smart contract
is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. ... Various cryptocurrencies have implemented types of smart contracts.
of crypto currency: These currencies
do not require any intermediary
such as a central bank to ensure trust and security in transactions (Buterin, 2013, Economist, 2015, Nakamoto, 2008) and are also more
in micro- transactions compared to fiat money (Buterin, 2014b).
? "instead of trusting that a transaction will be conducted as agreed upon, now one can see the status of the transaction and knows what is going on".
Block chain goes beyond financial transactions
: it can also support all digital assets such as shares, contracts, and stock options have been traded as smart contracts on the blockchain as well.
In our case, we have chosen a trust-based punch card solution that is been used in our university’s students cafeteria for self-service transactions.
What is a 'block time'
?: Ethereum has a block time of 12 seconds
How would they re-analyse ITU's coffee system?
: To distribute this smart property, a function called buyClipcard is implemented, which allows for a user to purchase a punch card at a certain price. The price can be adjusted by the issuer of the smart contract to whatever amount through a function called setPrice. When purchasing a punch card, the smart contract will make sure that one has a sufficient balance of ether before being able to commit the transaction
So would you mandate that students have to buy Ether to be able to buy coffee?
Upon the release of Ethereum, ether can be acquired through exchanges or through mining on the network.
Some of the
: (1) One of the downsides of the blockchain implementation is that transactions can take up to 12 seconds, due to the block time of the blockchain.
: does this matter, what implications does this have when you compare to anything else?
Another lesson learnt
from the installation of the prototype is that the nature of smart contracts would make it easy to extend the system with new features, e.g., for automating other processes of the coffee shop.
One server crash can have catastrophic consequences if proper backups are not implemented.
, since you cannot tamper with the data stored on the blockchain, the system is much more resilient to hackers.
One of the main issues of blockchain technology
is scalability. The problem is that for assuring the theoretically achievable security of the blockchain, a large number of full nodes are required (Buterin, 2014b, Buterin, 2014c, Buterin, 2014.)
that is important for the more widespread use of blockchain technology is how the system copes with heavy transaction loads. A payment technology such as VISA handles 4,000 transactions per second on average and has been stress-tested in 2013 to handle 47,000 transactions per second (Manny Trillo, 2013). In comparison, Bitcoin can only handle 7 transactions per second, due to the fact that block sizes are restricted to have a maximum size of 1 MB (Bitcoin, 2015).
, the blockchain use is not free of cost, which is one of the more obvious drawbacks of de- centralization and the blockchain technology.
Main conclusion drawn in paper
: However, we strongly believe that information systems research with its economics and information systems orientation on the one hand and computer science on the other is the discipline that can contribute significant insights by not only studying the acceptance and diffusion of blockchain solutions such as Bitcoin but also construct and design those solutions by applying a DSR approach