A Comprehensive Analysis: Blockchain Beyond Bitcoin

Disclaimer: This post is a combination of original content and facts gathered from reputable sources sited below. I've been compelled to write these posts due so many tech writers putting out articles that are not technically sound, these posts are meant to be factoid for a "one-stop" reference. Also please keep in mind many of these topics are so new they are evolving as I type this post, so your inputs are greatly appreciated & welcomed.

By now many of you have heard of Bitcoin, but most still have not heard of blockchain, the technology behind it. So for this post, I wanted to examine further blockchain technology and why so many feel it will be very disruptive, going beyond cryto-currency into many other sectors that require validation of trust.

One of the fundamental characteristics of blockchain is it's ability to govern itself and creating a verifiable log of transactions that is recorded on blocks in a ledger format. In order for us to understand this, let's take a look at the basic functionality behind blockchain.

Blockchain by definition is a distributed system in which all parties involved with a type of transaction have agreed upfront on what information needs to be shared for the transaction to be considered valid. Blockchain automatically generates a public ledger of all transactions as they are executed. When one party initiates a transaction, the other parties’ portions of the system interrogate the transaction, screen it for validity, accept or reject it, and record the activity. Legacy transactions tend to be much more serial in nature – one party starts a transaction and then hands it to a second party, which uses its own system, and so on. Often there’s an intermediary, such as an exchange, in the middle. The new players looking to use blockchain beyond virtual currency are looking for efficiency gains in addition to increased data integrity.  Before we get too far ahead on the technology behind blockchain, let's take a quick peek at the history and recent controversy around blockchain technology.

History

While we may not know who he (or she) was, we know what he did. Satoshi Nakamoto was the inventor of the bitcoin protocol, publishing a paper via the Cryptography Mailing List in November 2008.

He (She) then released the first version of the bitcoin software client in 2009, and participated with others on the project via mailing lists, until he finally began to fade from the community toward the end of 2010.

Nakamoto worked with people on the open-source team, but took extra caution to never reveal anything personal about (herself) himself, and the last anyone heard from him was in the spring of 2011, when (she)he said that he had “moved on to other things”.

“Satoshi” means "clear thinking, quick witted; wise". “Naka” can mean “medium, inside, or relationship”. “Moto” can mean “origin”, or “foundation”. Those things would all apply to the person who founded a movement by designing a clever and revolutionary algorithm. 

Just a few months ago a gentleman by the name of Dr. Craig Wright, a 45-year-old computer scientist from Australia, announced that he is Satoshi Nakamoto.

He provides a signed evidence, signed with a private key associated with Satoshi Nakamoto (the key for the sacred block 9).

Wright knew such announcement would not go about without a hail of bullets, so he had three high-profile magazines – The Economist, The BBC and GQ Magazine – present his claim/evidence so they can back-up his post with their own coverage. You can read their reviews here:

The Economist: Craig Steven Wright claims to be Satoshi Nakamoto. Is he?

The BBC: Australian Craig Wright claims to be Bitcoin creator

GQ Magazine: Dr Craig Wright Outs Himself As Bitcoin Creator Satoshi Nakamoto

After a firestorm of requests to prove the authenticity of his claim Dr. Craig Wright finally, gave up by publishing an apology on his website:

Now that we have a little bit of history on blockchain, let's look under the hood.

The Mechanics of Blockchain

In order to start the discussion we have to look at the building block or first block of block chain. The first block in the blockchain is called the "genesis block" and was created in 2009. It's the common ancestor of all the blocks in the blockchain, meaning that if you start at any block and follow the chain backward in time, you will eventually arrive at the genesis block. 

Every node always starts with a blockchain of at least one block because the genesis block is statically encoded within the bitcoin client software, such that it cannot be altered. Every node always "knows" the genesis block’s hash and structure, the fixed time it was created, and even the single transaction within. Thus, every node has the starting point for the blockchain, a secure "root" from which to build a trusted blockchain.

A blockchain is simply an ordered, back-linked list (or chain) of blocks of transactions. 

The blockchain can be stored as a flat file, or in a simple database. DeOS stores the blockchain metadata using Basho's optimized LevelDB database. Blocks are linked "back," each referring to the previous block in the chain.

The blockchain is often visualized as a vertical stack, with blocks layered on top of each other and the first block serving as the foundation of the stack. The visualization of blocks stacked on top of each other results in the use of terms such as "height" to refer to the distance from the first block, and "top" or "tip" to refer to the most recently added block. 

Each block within the blockchain is identified by a hash, generated using the SHA256 cryptographic hash algorithm on the header of the block. Each block also references a previous block, known as the parent block, through the "previous block hash" field in the block header. In other words, each block contains the hash of its parent inside its own header. 

Source: Bitcoin Developer Guide

Although a block has just one parent, it can temporarily have multiple children. Each of the children refers to the same block as its parent and contains the same (parent) hash in the "previous block hash" field. Multiple children arise during a blockchain "fork," a temporary situation that occurs when different blocks are discovered almost simultaneously by different miners. Eventually, only one child block becomes part of the blockchain and the "fork" is resolved. Even though a block may have more than one child, each block can have only one parent. This is because a block has one single "previous block hash" field referencing its single parent.

......the existence of a long chain of blocks makes the blockchain’s deep history immutable, which is a key feature of it's security.

The "previous block hash" field is inside the block header and thereby affects the current block’s hash. The child’s own identity changes if the parent’s identity changes. When the parent is modified in any way, the parent’s hash changes. The parent’s changed hash necessitates a change in the "previous block hash" pointer of the child. This in turn causes the child’s hash to change, which requires a change in the pointer of the grandchild, which in turn changes the grandchild, and so on. This cascade effect ensures that once a block has many generations following it, it cannot be changed without forcing a recalculation of all subsequent blocks. Because such a recalculation would require enormous computation, the existence of a long chain of blocks makes the blockchain’s deep history immutable, which is a key feature of it's security.

Does Blockchain Go Beyond (Bitcoin) Cryto-currency?

I think by now it should be pretty clear having a system, where a transparent ledger essentially governing itself, could be applied to many scenarios beyond cryto-currency. In the diagram below some examples are list but the possibilities are endless.

Even the current systems in use to verify the authenticity of someone's academic accomplishments or the way we identify each other across national borders, can and has been "hacked." Blockchain hypothetically could eliminate much of the document fraud that's occurred in the past. In a "blockchain era" the mortgage crisis that we just endured would have been much tougher to occur, at least from a mortgage origination standpoint.

Such a technology sounds bulletproof, but it goes without saying there are privacy and regulatory/compliance hurdles when applying blockchain to any current legacy system.  Blockchain's anonymity characteristics and early association with criminal activity has not helped it's image or adoption into the mainstream. When applying blockchain to any current system the fundamental premise behind it does not change which as stated earlier is "Blockchain is a distributed system in which all parties involved with a type of transaction have agreed upfront on what information needs to be shared for the transaction to be considered valid." 

If you would like to find out more about blockchain, the bitcoin developer guide has great information.

 Feel free to post your comments below, these posts are meant to be as much collaborative as informative, would love to hear from everyone.Rassul Fazelat (follow me here @BigDataVision), is Managing Partner - Founder of Data Talent Advisors, a boutique Data & Analytics Talent Advisory & Headhunting firm, Organizer of NYC Big Data Visionaries Meetup, Co-Organizer of NYC Marketing Analytics Forum & Co-Organizer of NYC Advanced Analytics Meetup.

Other posts in the Comprehensive Analysis (Big Data) series:

• Deconstructing AI - A Closer Look
• 3 Reason Why Hadoop as a Service Is Making Sense For Business Analytics
• A Comprehensive Analysis: Blockchain Technology Beyond Bitcoin
• A Comprehensive Analysis: Big Data Security
• A Comprehensive Analysis: Dataflow Technology
• A Comprehensive Analysis: Data Processing Part Deux: Apache Spark vs Apache Storm
• A Comprehensive Analysis - NoSQL vs RDBMS
• A Comprehensive Analysis: Apache Kafka 
• A Comprehensive Analysis: Java vs Scala
• A Comprehensive Analysis: Apache Flink and How it compares to Apache Spark
• A Comprehensive Analysis: Apache Spark vs MapReduce

 Big Data Career series:

• Why are Enterprise Big Data Architects not Data Scientists?
• Why Data Engineers are not Data Scientists?
• Top 5 Majors for a Data Science Career