A SEMINAR REPORT

ON

TOPIC : BLOCKCHAIN

Submitted in partial

fulfilment or the

award of the degree

Of Bachelor of Technology
In

Computer Science &Engineering

(Bikaner Technical University, Bikaner)

SESSION (2022-2023)

SUBMITTEDTO: SUBMITTED BY:

DR.PRAKRITI TRIVEDI GOURAV SHARMA
DEPT.OFCSE/IT 19EEACS033

DEPARTMENT OF COMPUTER SCIENCE AND ENGINEERING

ENGINEERING COLLEGE, AJMER
 ACKNOWLEDGEMENT

This is opportunity to express my heartfelt words for the people who were part of this seminar in numerous

ways, people who gave me unending support right from beginning of the seminar.

I want to give sincere thanks to the principal Dr. RekhaMehra for her valuable support.

I extend my thanks to Dr. JyotiGajrani Head of the Department for her constant support.

I express my deep sense of gratitude for continuous cooperation encouragement towards my guide Mr.
Atul Choudhary.
 Table of Content

1. ABSTRACT....................................................................................................... 6
2. INTRODUCTION................................................................................................................................. 7
2.1 Overview of blockchain history...................................................................................................... 9
2.2 NEED OF BLOCKCHAIN........................................................................................................... 10
2.4 Blockchain Working..................................................................................................................... 13
2.5 Types of Blockchain...................................................................................................................... 14
2.7 Advantages and Disadvantages of Blockchain............................................................................18
3. LITERATURE REVIEW........................................................................20
3.1 BLOCKCHAIN ARCHITECTURE............................................................................................ 21
3.2 CONSENSUS ALGORITHMS.................................................................................................... 24
4.CONCLUSION..........................................................................28
4.2 Summing Up................................................................................................................................... 29
4.3 The future of blockchain and market disruptors........................................................................30
4.4 Who are the players in this new ecosystem?..............................................................................30
4.5 Blockchain use cases...................................................................................................................... 31
5. Refernces................................................................................................................ 35
 CERTIFICATE

This is to certify that the Seminar Report titled “BLOCKCHAIN” has been submitted by “GOURAV
SHARMA” in partial in fullfillment for the requirement of the degree of B.Tech in Computer Science
&Engineering for the academic Session2022–2023.

He/ She has been undergone the requisite work as prescribed by Bikaner Technical University, Bikaner
(Rajasthan).

Seminar Coordinator: Dr. Prakriti Trivedi

Seminar Guide: Mr. Atul Choudhary
Department of CSE
Date:- 25-11-2022
 1. ABSTRACT

Blockchain is a technology that has desirable features of decentralization, autonomy, integrity, immutability,
verification, fault-tolerance, anonymity, auditability, and transparency. In this paper, we first carry out a
deeper survey about blockchain technology, especially its history, consensus algorithms’ quantitative
comparisons, details of cryptography in terms of public key cryptography, Zero-Knowledge Proofs, and hash
functions used in the blockchain, and the comprehensive list of blockchain applications. Further, the security
of blockchain itself is a focus in this paper. In particular, we assess the blockchain security from risk analysis
to derive comprehensive blockchain security risk categories, analyze the real attacks and bugs against
blockchain, and summarize the recently developed security measures on blockchain. Finally, the challenges
and research trends are presented to achieve more scalable and securer blockchain systems for the massive
deployments.
The revolution of blockchain technology started in the form of a cryptocurrency called Bitcoin. In recent
years, this decentralized technology has attained worldwide adoption and growth in multiple sectors,
including e-governance, paper, an attempt is made to analyze blockchain’s ability to improve the standards
of supply chain management. This paper includes a methodology to implement the suggested idea using a
permissioned blockchain platform—Hyperledger Fabric. For the paper’s scope, the existing supply chain
problems, such as data integrity, provenance transparency, privacy, and security, are given emphasis more
specifically in the context of the coffee supply chain industry, while also concurrently attempting to
generalize the solution to manage other supply chain activities effectively. Thus, the final objective of this
research is to identify whether permissioned blockchain platforms could help stakeholders in the supply
chain industry engage in a less-corruptible alternative to traditional web technology and whether they could
enable a more positively nuanced blockchain system that draws the best balance between traditional web
technology and a public blockchain, including privacy protection and security.

A software pattern is a reusable solution to address a commonly occurring problem within a given context
when designing software. Using patterns is a common practice for software architects to ensure software
quality. Many pattern collections have been proposed for a large number of application domains. However,
because of the technology’s recentness, there are only a few available collections with a lack of extensive
testing in industrial blockchain applications. It is also difficult for software architects to adequately apply
blockchain patterns in their applications, as it requires deep knowledge of blockchain technology. Through a
systematic literature review, this paper has identified 120 unique blockchain-related patterns and proposes a
pattern taxonomy composed of multiple categories, built from the extracted pattern collection. The purpose
of this collection is to map, classify, and describe all the available patterns across the literature to help
readers make adequate decisions regarding blockchain pattern selection. This study also shows potential
applications of those patterns and identifies the relationships between blockchain patterns and other non-
blockchain software patterns.
Blockchain technology has been described as the biggest technical revolution since the Internet. The
technology – which is the basis for the crypto currency Bitcoin, but which can be used for much more –
enables digital transactions without the use of intermediaries, which are much faster and also more secure than
has previously been possible. Blockchain technology is expected to change a wide range of business sectors
fundamentally, such as banks and finance, consumer goods, supply chain, automotive, energy, legal services,
etc. With Block chain technology in financial sector, the participants can interact directly and can make
transactions across the internet without the interference of a third party. Such transactions through Blockchain
will not share any personal information regarding the participants and it creates a transaction record by
encrypting the identifying information.
 2. INTRODUCTION

Nowadays cryptocurrency has become a buzzword in both industry and academia. As one of the most
successful cryptocurrency, Bitcoin has enjoyed a huge success with its capital market reaching 10
billion dollars in 2016 .
With a specially designed data storage structure, transactions in Bitcoin network could happen
without any third party and the core technology to build Bitcoin is blockchain, which was first
proposed in 2008 and implemented in 2009.
Blockchain could be regarded as a public ledger and all committed transactions are stored in a list of
blocks. This chain grows as new blocks are appended to it continuously.
Asymmetric cryptography and distributed consensus algorithms have been implemented for user
security and ledger consistency.
The blockchain technology generally has key characteristics of decentralization, persistency,
anonymity and auditability. With these traits, blockchain can greatly save the cost and improve the
efficiency.
At present, the application of blockchain technology is very extensive.
The earliest application of blockchain technology is to create digital currency and private
transactions.
Zhang et al used smart contracts in the blockchain to reduce ballot tampering. Xu et al proposed a
random predictive blockchain model with RSA encryption.
Li et al proposed an anonymous data transmission signature scheme based on the selective
disclosure mechanism of the elliptic curve digital signature algorithm (ECDSA)
Lin et al implemented an access control scheme on the blockchain to prevent unauthorized
requests.
Khoury et al proposed a distributed trustless voting platform based on the Ethernet blockchain
technology to solve the trust problem.

The main contributions of our work are the following:

i) We recap the features and qualities of blockchain-based systems, based on both public and so-
called “permissioned” or “consortium” blockchains. We select criteria from existing frameworks
for choosing the blockchain architecture most suited to a specific application.

ii) We use this framework to justify and propose an architecture for managing consortium
blockchains, which retains all the positive characteristics of public blockchains but largely
reduces their drawbacks regarding scalability, privacy, cost, and efficiency.

iii) We collect together, for the first time in a structured way, many ideas already present in the blockchain
realm. The result is an architecture that is easily applicable to most consortium blockchains, being
efficient, highly configurable and scalable. This architecture makes use of the Ethereum technology but
can be easily changed to support other blockchains, such as Hyperledge.

iv) We better formalize the typical permissioned architecture, explaining the characteristics it must
have to have transparency and strength almost equal to that of a public blockchain. Precisely, the
permissioned blockchain must be periodically anchored to a public blockchain (a tool which is
already used, especially in distributed data storage solutions), and at the same time, an explorer
able to explore the blockchain independently from the provided apps must be provided.

v) For blockchains based on the gas mechanism, a further contribution is to use gas (Ether or other
cryptocurrencies of that specific blockchain) to enable writing only for authorized actors. The
idea is that instead of giving permissions depending on your login authorization, you are enabled
because you have available gas.This is useful because since gas is limited, it also allows for
dynamically managing the write permissions.

vi) We present a real case study to show how the evaluation framework was used and how the
system was implemented.
Although the blockchain technology has great potential for the construction of the future Internet
systems, it is facing a number of technical challenges.

Firstly, scalability is a huge concern. Bitcoin block size is limited to 1 MB now while a block is
mined about every ten minutes. Subsequently, the Bitcoin network is restricted to a rate of 7
transactions per second, which is incapable of dealing with high frequency trading.
However, larger blocks means larger storage space and slower propagation in the network. This will
lead to centralization gradually as less users would like to maintain such a large blockchain. Therefore
the tradeoff between block size and security has been a tough challenge.

Secondly, it has been proved that miners could achieve larger revenue than their fair share through
selfish mining strategy. Miners hide their mined blocks for more revenue in the future. In that way,
branches could take place frequently, which hinders blockchain development.
Hence some solutions need to be forward to fix this problem. Moreover, it has been shown that
privacy leakage could also happen in blockchain even users only make transactions with their public
key and private key.
Furthermore, current consensus algorithms like proof of work or proof of stake are facing some
serious problems.

For example, 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.
There is a lot of literature on blockchain from various sources, such as blogs, wikis, forum posts,
codes, conference proceedings and journal articles.

Blockchain is the backbone Technology of Digital CryptoCurrency BitCoin.

The blockchain is a distributed database of records of all transactions or digital event that have been executed
and shared among participating parties. Each transaction verified by the majority of participants of the system.
It contains every single record of each transaction.
BitCoin is the most popular cryptocurrency an example of the blockchain.
Blockchain Technology first came to light when a person or Group of individuals name ‘Satoshi Nakamoto’
published a white paper on “BitCoin: A peer to peer electronic cash system” in 2008.
Blockchain Technology Records Transaction in Digital Ledger which is distributed over the Network thus
making it incorruptible. Anything of value like Land Assets, Cars, etc. Can be recorded on Blockchain as a
Transaction.
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack,
or cheat the system.
A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire
network of computer systems on the blockchain. Blockchain has the potential to grow to be a bedrock of the
worldwide recordkeeping systems, but was launched just 10 years ago. It was created by the unknown persons
behind the online cash currency.
Presently, countries like Japan and the United States are topping the rankings for accepting and implementing
cryptocurrencies. Despite the several infrastructure issues, many of the African countries also reached the top
at the list of blockchain leading countries. Even Asian countries are running in this race, and most of them are
already enlisted as the top 20 countries for cryptocurrency implementation. Due to the increasing user-base of
cryptocurrency and blockchain, online blockchain education courses are also getting traction. 

A blockchain is defined as a peer to peer distributed ledger forged by consensus, combined with a
system for smart contracts.
-Hyperledger, Linux Foundation
2.1 Overview of blockchain history

In 1982, Chaum was the first known person to propose a blockchain-like protocol in his Ph.D. thesis
[4].
In 1991, Haber and Stornetta described a secured chain of blocks cryptographically [5].
In 1993, Bayer et al. Incorporated Merkle trees into the design [6].
In 1998, ‘‘bit gold’’—a decentralized digital currency mechanism was designed by Szabo [7].
In 2008, Nakamoto introduced Bitcoin, electronic cash with a purely peer-to-peer network [8].
It was also in 2008 that the term blockchain was first introduced as the distributed ledger behind
Bitcoin transactions [9].
In 2013, Buterin proposed Ethereum in his whitepaper [10].
In 2014, the development of Ethereum was crowdfunded, and on July 30, 2015, the Ethereum network
went live. The emerging of Ethereum implied that blockchain 2.0 was born because different from all
the various blockchain projects that focused on developing altcoins (other coins which are similar to
Bitcoin), Ethereum enables people to connect through trustless distributed applications on its own
blockchain. In other words, while Bitcoin is developed for distributed ledger, Ethereum is developed
for a distributed data storage plus smart contracts, which are small computer programs. Ethereum 2.0
upgrades the Ethereum network which aims to boost the speed, scalability, efficiency, and security of
the network. The upgrades have 3 phases crossing from 2020 to 2022.
In 2015, the Linux Foundation announced the Hyperledger project, which is open-source software for
blockchains. With the aim of building enterprise blockchain, Hyperledger blockchain frameworks are
different from Bitcoin and Ethereum. Under Hyperledger, there are eight blockchain frameworks,
including Hyperledger Besu, Hyperledger Fabric, Hyperledger Indy, Hyperledger Sawtooth,
Hyperledger Burrow, Hyperledger Iroha, Hyperledger Grid, and Hyperledger Labs, five Hyperledger
tools, including Hyperledger Avalon, Hyperledger Cactus, Heperledger Caliper, Hyperledger Cello,
and Hyperledger Explorer, and four libraries, including Hyperledger Aries, Hyperledger Quilt,
Hyperledger Transact, and Hyperledger URSA [11].
Bitcoin and Ethereum are public blockchains since anyone can participate in their blockchain
networks, which are also called permissionless blockchains. The various Hyperledger blockchain
networks are private blockchains since the participants are needed to be verified first before joining the
network, which are also called permissioned blockchain. A blockchain is a constantly growing ledger
which keeps a permanent record of all the transaction.
Let’s breakdown the definition,
Permanent: It means once the transaction goes inside a blockchain, you can put up it permanently in
the ledger.

Secure: Blockchain placed information in a secure way. It uses very advanced cryptography to make
sure that the information is locked inside the blockchain.

Chronological: Chronological means every transaction happens after the previous one.

Immutable: It means as you build all the transaction onto the blockchain, this ledger can never be
changed.

A blockchain is a chain of blocks which contain information. Each block records all of the recent
transactions, and once completed goes into the blockchain as a permanent database. Each time a block
gets completed, a new block is generated.
 figure 1 : Blockchain

2.2 NEED OF BLOCKCHAIN

Figure 2: Need of blockchain

Time reduction: In the financial industry, blockchain can allow the quicker settlement of trades. It does
not take a lengthy process for verification, settlement, and clearance. It is because of a single version of
agreed-upon data available between all stakeholders.

Unchangeable transactions: Blockchain register transactions in a chronological order which certifies

the unalterability of all operations, means when a new block is added to the chain of ledgers, it cannot
be removed or modified.

Reliability: Blockchain certifies and verifies the identities of each interested parties. This removes
double records, reducing rates and accelerates transactions.

Security: Blockchain uses very advanced cryptography to make sure that the information is locked
inside the blockchain. It uses Distributed Ledger Technology where each party holds a copy of the
original chain, so the system remains operative, even the large number of other nodes fall.

Collaboration: It allows each party to transact directly with each other without requiring a third- party
intermediary.

Decentralized: It is decentralized because there is no central authority supervising anything. There are
standards rules on how every node exchanges the blockchain information. This method ensures that all
transactions are validated, and all valid transactions are added one by one.

2.3 How Does the Blockchain Work?

A blockchain is a distributed database that stores information electronically in a digital format and is shared
among the nodes of a computer network. A typical difference between a blockchain and a database is how
data is structured.
A blockchain is a shared, immutable ledger as the name suggests structures data into chunks or blocks, and a
database structures data into tables. A blockchain is a chain of blocks. Once a block is filled with data and it
is chained to the previous blocks.
Different types of information can be stored on the blockchain network but the most important is
transactions.
How Does a Blockchain Work?

The transaction process in a blockchain can be summarized as follows:

1) Facilitating a transaction: A new transaction enters the blockchain network. All the information that
needs to be transmitted is doubly encrypted using public and private keys
.
2) Verification of transaction: The transaction is then transmitted to the network of peer-to-peer computers
distributed across the world. All the nodes on the network will check for the validity of the transaction
like if a sufficient balance is available for carrying out the transaction.

3) Formation of a new block: In a typical blockchain network there are many nodes and many transactions
get verified at a time. Once the transaction is verified and declared a legitimate transaction, it will be
added to the mem pool. All the verified transactions at a particular node form a mem pool and such
multiple mem pools form a block.
1. Consensus Algorithm: The nodes that form a block will try to add the block to the blockchain network to
make it permanent. But if every node is allowed to add blocks in this manner then it will disrupt the
working of the blockchain network. To solve this problem, the nodes use a consensus mechanism to
ensure that every new block that is added to the Blockchain is the one and only version of the truth that is
agreed upon by all the nodes in the Blockchain, and only a valid block is securely attached to the
blockchain. The node that is selected to add a block to the blockchain will get a reward and hence we
call them “miners”. The consensus algorithm creates a hash code for that block which is required to add
the block to the blockchain.
2. Addition of the new block to the blockchain: After the newly created block has got its hash value and is
authenticated, now it is ready to be added to the blockchain. In every block, there is a hash value of the
previous block and that is how the blocks are cryptographically linked to each other to form a
blockchain. A new block gets added to the open end of the blockchain.
3. Transaction complete: As soon as the block is added to the blockchain the transaction is completed and
the details of this transaction are permanently stored in the blockchain. Anyone can fetch the details of
the transaction and confirm the transaction.

Figure 3: Working Of Blockchain

1.
2.4 Blockchain Working

Let’s understand this working of blockchain with the help of an example:

Let’s say Jack and Phil are two nodes on the bitcoin blockchain network who wants to carry out a transaction
between them.

Step 1: Facilitating the transaction: Jack wants to send 20 BTC to Phil via the Blockchain network.
Step 2: Verification of transaction: The message for verification will be sent to all the nodes on the network.
All the nodes will check the important parameters related to the transaction like Does Jack has sufficient
balance i.e. at least 20BTC to perform the transaction. Is Jack a registered node? Is Phil a registered node?
After checking the parameters the transaction is verified.
Step 3: Formation of a new block: A number of verified transactions stack up in mem pools and get stored in
a block. This verified transaction will also get stored in a block.Also known as the genesis block, which is
hardcoded into the blockchain. In the blockchain, each block contains the hash of the previous block’s
header and a hash of the transactions in the Merkle tree of the current block. In this way, each block is
cryptographically chained to the previous block. Let’s understand with an example what happens when
someone attempts to change a transaction or block data in a blockchain network.
Suppose, there is a chain of 10 blocks, where the 10th block depends on the 9th block, the 9th block depends on
the 8th block, and so on.In this way, the 10th block depends on all the previous blocks and the genesis block as
well.If someone tries to change data on the 2nd block, then the attacker will have to change data on all the
later blocks as well, otherwise, the blockchain will become invalid since the later blocks depend on the hash
value present in the 2nd block and the 2nd block has changed, but not the later blocks.

Thus, as the blocks are added, immutability increases as changing the block is an expensive operation.Also, to
add/change a block in a blockchain, a consensus algorithm is used by nodes in the blockchain network. In
order to compensate for the change in one block, one must have to recalculate the hash of every block to
update the hash value of the block header in the next block. This will involve a lot of time and computational
resources.

In order to succeed with such kind of attack, the hacker has to simultaneously control and change 51% or
more copies of the blockchain so that their new copy becomes the majority copy and thus the agreed- upon
chain.Thus, requiring an immense amount of time, money, and computational resources.

In the most basic way, one can think of a blockchain as a linked list. Each of the next items in the list is
dependent on the previous item, except for the first block, also known as the genesis block, which is
hardcoded into the blockchain. blockchain, each block contains the hash of the previous block’s header and a
hash of the transactions in the Merkle tree of the current block. In this way, each block is cryptographically
chained to the previous block. Let’s understand with an example what happens when someone attempts to
change a transaction or block data in a blockchain network.


2.5 Types of Blockchain

The basic application of the blockchain is to perform transactions in a secure network. That’s why people use
blockchain and ledger technology in different scenarios. One can set up multichain to prevent unauthorized
access to sensitive data. It is not available to the public, and can only be available to authorized entities in the
organization. It depends on the organization which type it requires to choose for their work.
By using blockchain we can track orders and payments from end

Advantage using blockchain :

 It provides greater trust among users.

 It provides greater security among data.

 Reduce the cost of production.

 Improve Speed.

 Invocation and tokenization.

 It provides immutable records.

 Smart contract

Disadvantages using blockchain :

 Data modification is not possible.

 It requires large storage for a large database.

 The owner cannot access the private key again if they forget or lose

2.6 Real life application of blockchain

Here is a list of real world problem where we can use blockchain :

In a secure and full-proof voting management system.

1. Asset Management
2. Cross-Border Payments
3. Healthcare
4. Cryptocurrency
5. Birth and Death Certificates
6. Online Identity Verification
7. Internet of Things
8. Copyright and Royalties
 Permissionless Blockchain
It is also known as trustless or public blockchains, are available to everyone to participate in the
blockchains process that use to validate transactions and data. These are used in the network where
high transparency is required.

Features:

 Since Permissionless blockchain does not have any kind of restrictions for the user to join through an open
network, there is complete transparency of transactions to the users. 
 The platform is a completely open-source development as the users can easily access it and make the
necessary changes to it.
 The clause of anonymity did not exist in permissioned blockchain, but here it does. However, it does not
mean that it provides complete anonymity, it does have some exceptions while making the changes. 
 Permissionless blockchain lacks central authority since it is open to any user.
 It also offers heavy use of the tokens and digital assets as an incentive to participate. Therefore, it leads to
more efficient and effective working.

Characteristics:

 Permissionless blockchain has no central authority.

 The platform is completely open-source.

 Full transparency of the transaction.

 Heavy use of tokens.

Advantages:

 Everyone can participate only requirement is good hardware and internet.

 Bring trust among users or entities.

 It has a high level of transparency as it’s a larger network.

 Broader decentralization of access to more participants.

Disadvantages:

 Poor energy efficiency due to large network.

 Lower performance scalability.

 Less privacy as many of the things is visible.

Permissioned Blockchain
When it comes to security operations on a blockchain ledger, which can only be done by a few people
authorized to do so, we use a permission ledger. In simple terms, the distributed ledger in this can only be
accessed by a few people who have been allowed to do so by the administrator. These users are provided
different types of privileges which allows them to do certain actions. However, it must be noted that anyone
who is not allowed by the administrator, will not be allowed to access it publically. The major benefit of this
model is that since the people accessing the ledger are limited, any kind of changes made in the ledger can be
easily tracked and the user can be identified. 

Characteristics:

 A major feature is a transparency based on the objective of the organization.

 Another feature is the lack of anatomy as only a limited number of users are allowed.

 It does not have a central authority.

 Developed by private authority.

Advantages:

 Transaction:The transaction is high, due to its small size. Verification of each node is less time-

consuming.

 Scalability: We can modify the scalability. The size of the network can be decided manually.

 Privacy: It has increased the Level of privacy for confidentiality reasons as the businesses

required.

 Balanced: It is more balanced as only some user has the access to the transaction which

improves the performance of the network.

Disadvantages:

 Security- The number of nodes in this type is limited so chances of manipulation are there. These
blockchains are more vulnerable.

 Centralized- Trust building is one of the main disadvantages due to its central nature.
Organizations can use this for malpractices.

 Count- Since there are few nodes if nodes go offline the entire system of blockchain can be
endangered.

 Use Cases: With proper security and maintenance, this blockchain is a great asset to secure
information without exposing it to the public eye. Therefore companies use them for internal
auditing, voting, and asset management. An example of private blockchains is Hyperledger, Corda.
1.Hybrid Blockchain
It is the mixed content of the private and public blockchain, where some part is controlled by some
organization and other makes are made visible as a public blockchain.It is a combination of both public and
privateblockchain. Permission-based and permissionless systems are used. User access information via smart
contracts.Even a primary entity owns a hybrid blockchain it cannot alter the transaction.
The best use case of hybrid blockchain is scalability and decentralization. Check out the table below
to learn more about hybrid blockchain vs consortium blockchain.

Advantages:

 Ecosystem: Most advantageous thing about this blockchain is its hybrid nature. It cannot be hacked
as 51% of users don’t have access to the network

 Cost: Transactions are cheap as only a few nodes verify the transaction. All the nodes don’t carry
the verification hence less computational cost.

 Architecture: It is highly customizable and still maintains integrity, security, and transparency.

 Operations: It can choose the participants in the blockchain and decide which transaction can be
made public.

Disadvantages:

 Efficiency: Not everyone is in the position to implement a hybrid Blockchain. The organization
also faces some difficulty in terms of efficiency in maintenance.

 Transparency: There is a possibility that someone can hide information from the user. If someone
wants to get access through a hybrid blockchain it depends on the organization whether they will
give or not.

 Ecosystem: Due to its closed ecosystem this blockchain lacks the incentives for network
participation.

 Use Case: It provides a greater solution to the health care industry, government, real estate, and
financial companies. It provides a remedy where data is to be accessed publicly but needs to be
shielded privately. Examples of Hybrid Blockchain are Ripple network.

2. Consortium Blockchain
It is a creative approach that solves the needs of the organization. This blockchain validates the transaction
and also initiates or receives transactions.
Also known as Federated Blockchain.This is an innovative method to solve the organization’s needs. Some
part is public and some part is private.
In this type, more than one organization manages the blockchain.

Advantages:
 Speed: A limited number of users make verification fast. The high speed makes this more usable
for organizations.
 Authority: Multiple organizations can take part and make it decentralized at every level.
Decentralized authority, makes it more secure.
 Privacy: The information of the checked blocks is unknown to the public view. But any member
belonging to the blockchain can access it.
 Flexible: There is much divergence in the flexibility of the blockchain.

Disadvantages:

 Approval: All the members approve the protocol making it less flexible. Since one or more
organizations are involved there can be differences in the vision of interest.
 Transparency: It can be hacked if the organization becomes corrupt. Organizations may hide
information from the users.
 Vulnerability: If few nodes are getting compromised there is a greater chance of
vulnerability in this blockchain
 Use Cases: It has high potential in businesses, banks, and other payment processors. Food tracking
of the organizations frequently collaborates with their sectors making it a federated solution ideal
for their use.
 Examples of consortium Blockchain are Tendermint and Multichain.

2.7 Advantages and Disadvantages of Blockchain

Blockchain can be defined as a distributed ledger technology for storing information in such a manner that
makes it tamper-proof.
It works on protocols designed to make an agreement among different parties who do not trust each other so
that they can work together to achieve different purposes which benefit the whole group.
Blockchain technology first got its recognition when Satoshi Nakamoto published a research paper in 2008.
The title of the research paper was ” A peer- to-peer electronic cash system”.
This article focuses on discussing the advantages and disadvantages of Blockchain Technology.

Advantages of Blockchain Technology:

This section discusses the advantages of blockchain technology.

 Open: One of the major advantages of blockchain technology is that it is accessible to all means
anyone can become a participant in the contribution to blockchain technology, one does not require
any permission from anybody to join the distributed network.

 Verifiable: Blockchain technology is used to store information in a decentralized manner so

everyone can verify the correctness of the information by using zero-knowledge proof through
which one party proves the correctness of data to another party without revealing anything about
data.

 Permanent: Records or information which is stored using blockchain technology is permanent

means one needs not worry about losing the data because duplicate copies are stored at each local
node as it is a decentralized network that has a number of trustworthy nodes.

 Free from Censorship: Blockchain technology is considered free from censorship as it does not
have control of any single party rather it has the concept of trustworthy nodes for validation and
consensus protocols that approve transactions by using smart contracts.

 Tighter Security: Blockchain uses hashing techniques to store each transaction on a block that is
connected to each other so it has tighter security. It uses SHA 256 hashing technique for storing
transactions.
 Immutability: Data cannot be tampered with in blockchain technology due to its decentralized
structure so any change will be reflected in all the nodes so one cannot do fraud here, hence it can
be claimed that transactions are tamper-proof.

 Transparency: It makes histories of transactions transparent everywhere all the nodes in the
network have a copy of the transaction in the network. If any changes occur in the transaction it is
visible to the other nodes.

 Efficiency: Blockchain removes any third-party intervention between transactions and removes the
mistake making the system efficient and faster. Settlement is made easier and smooth.

 Cost Reduction: As blockchain needs no third man it reduces the cost for the businesses and gives
trust to the other partner.

Disadvantages of Blockchain Technology:i

This section discusses the disadvantages of blockchain technology.

 Scalability: It is one of the biggest drawbacks of blockchain technology as it cannot be scaled due
to the fixed size of the block for storing information. The block size is 1 MB due to which it can
hold only a couple of transactions on a single block.

 Immaturity: Blockchain is only a couple-year-old technology so people do not have much

confidence in it, they are not ready to invest in it yet several applications of blockchain are doing
great in different industries but still it needs to win the confidence of even more people to be
recognized for its complete utilization.

 Energy Consuming: For verifying any transaction a lot of energy is used so it becomes a problem
according to the survey it is considered that 0.3 percent of the world’s electricity had been used by
2018 in the verification of transactions done using blockchain technology.

 Time-Consuming: To add the next block in the chain miners need to compute nonce values many
times so this is a time-consuming process and needs to be speed up to be used for industrial
purposes.

 Legal Formalities: In some countries, the use of blockchain technology applications is banned like
cryptocurrency due to some environmental issues they are not promoting to use blockchain
technology in the commercial sector.

 Storage: Blockchain databases are stored on all the nodes of the network creates an issue with the
storage, increasing number of transactions will require more storage.

 Regulations: Blockchain faces challenges with some financial institution. Other aspects of
technology will be required in order to adopt blockchain in wider aspect.
 3. LITERATURE REVIEW

Basics Blockchain is a growing list of records, called blocks that are linked using cryptography.Each block in
the sequence points to the immediately previous block via a reference that is essentially a cryptographic hash
value of the previous block called parent block. The first block of a blockchain is called genesis block which
has no parent block.Design structure of blockchain is mainly composed of block header and block body which
contains a list of transactions. the block header contains various fields including version number, previous
block hash, Merkle root, timestamp, difficulty target and nonce.Moreover, a single digest generated by Merkle
tree using secure hash algorithms, for instance SHA-256 hash algorithm, is uploaded.

This digest is to cover the integrity of the origin evidence.Once recorded, the data in any given block cannot
be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network
majority.In other words, blockchain is resistant to modification of data structure. The consensus mechanism of
blockchain is guaranteed by the algorithms, for instance PoW used in bitcoin.It guarantees that a new block
can be verified by all nodes within the network.Based on the nature of data accessibility, we categorize
blockchain into four types: public, private, hybrid blockchain, and consortium blockchain. In a public
blockchain, everything recorded in the chain.

Table 1. Classification and main characteristics of blockchain networks.

Property Public Private Federated

Consensus • Costly PoW • Light PoW • Light PoW

Mechanism • All miners • Centralised organisation • Leader node set

Identity • (Pseudo) Anonymous • Identified users • Identified users

Anonymity • Malicious? • Trusted • Trusted

Protocol Efficiency & • Low efficiency • High efficiency • High efficiency

Consumption • High energy • Low energy • Low energy

Immutability • Almost impossible • Collusion attacks • Collusion attacks

Ownership & • Public • Centralised • Semi-Centralised

Management • Permissionless • Permissioned whitelist • Permissioned nodes

Transaction Approval • Order of minutes • Order of milliseconds • Order of milliseconds

3.1 BLOCKCHAIN ARCHITECTURE

Blockchain is a sequence of blocks, which holds a complete list of transaction records like
conventional public ledger.
With a previous block hash contained in the block header, a block has only one parent block. It is
worth noting that uncle blocks (children of the block’s ancestors) hashes would also be stored in
etherenum blockchain.
The first block of a blockchain is called genesis block which has no parent block.
We then explain the internals of blockchain in details.

Figure 4: An example of blockchain which consists of a continuous sequence of blocks.

A. BLOCK
In particular, the block header includes:

i) Block version: indicates which set of block validation rules to follow.

ii) Merkle tree root hash: the hash value of all the transactions in the block.
iii) Timestamp: current time as seconds in universal time since January 1, 1970.
iv) nBits: target threshold of a valid block hash.
v) Nonce:an 4-byte field, which usually starts with 0 and increases for every hash calculation.

vi) Parent block hash: a 256-bit hash value that points to the previous block.

The block body is composed of a transaction counter and transactions.

The maximum number of transactions that a block can contain depends on the block size and the size
of each transaction. Blockchain uses an asymmetric cryptography mechanism to validate the
authentication of transactions.
Digital signature based on asymmetric cryptography is used in an untrustworthy environment. We
next briefly illustrate digital signature.
B. Digital Signature

Each user owns a pair of private key and public key.

The private key that shall be kept in confidentiality is used to sign the transactions. The digital signed
transactions are broadcasted throughout the whole network.
The typical digital signature is involved with two phases: signing phase and verification phase. For
instance, an user Alice wants to send another user Bob a message.
(1) In the signing phase, Alice encrypts her data with her private key and sends Bob the encrypted
result and original data.
(2) In the verification phase,Bob validates the value with Alice’s public key. In that way, Bob could
easily check if the data has been tampered or not.
The typical digital signature algorithm used in blockchains is the elliptic curve digital signature
algorithm (ECDSA) .

C. Key Characteristics of Blockchain

In summary, blockchain has following key characteristics.

 Decentralization. In conventional centralized transaction systems, each transaction needs to be

validated through the central trusted agency (e.g., the central bank), inevitably resulting to the cost
and the performance bottlenecks at the central servers. Contrast to the centralized mode, third party
is no longer needed in blockchain.
Consensus algorithms in blockchain are used to maintain data consistency in distributed network.

 Persistency. Transactions can be validated quickly and invalid transactions would not be admitted
by honest miners. It is nearly impossible to delete or rollback transactions once they are included
in the blockchain.
Blocks that contain invalid transactions could be discovered immediately.

 Auditability. Bitcoin blockchain stores data about uses balances based on the Unspent
Transaction Output (UTXO) model: Any transaction has to refer to some previous unspent
transactions. Once the current transaction is recorded into the blockchain, the state of those
referred unspent transactions switch from unspent to spent. So transactions could be easily
verified and tracked.

Figure 5: Comparisons among public blockchain, consortium blockchain and

private blockchain
D. Taxonomy of blockchain systems

Current blockchain systems are categorized roughly into three types: public blockchain, private
blockchain and consortium blockchain.

In public blockchain all records are visible to the public and everyone could take part in the
consensus process.

Differently, only a group of pre-selected nodes would participate in the consensus process of a
consortium blockchain.

As for private blockchain, only those nodes that come from one specific organization would be
allowed to join the consensus process.

A private blockchain is regarded as a centralized network since it is fully controlled by one

organization. The consortium blockchain constructed by several organizations is partially
decentralized since only a small portion of nodes would be selected to determine the consensus. The
comparison among the three types of blockchains is listed in Table I.

 Consensus determination. In public blockchain, each node could take part in the consensus
process. And only a selected set of nodes are responsible for validating the block in consortium
blockchain. As for private chain, it is fully controlled by one organization and the organization
could determine the final consensus.

 Read permission. Transactions in a public blockchain are visible to the public while it depends
when it comes to a private blockchain or a consortium blockchain.

 Immutability. Since records are stored on a large number of participants, it is nearly impossible to
tamper transactions in a public blockchain. Differently, transactions in a private blockchain or a
consortium blockchain could be tampered easily as there are only limited number of participants.

 Efficiency. It takes plenty of time to propagate transactions and blocks as there are a large number
of nodes on public blockchain network. As a result, transactio throughput is limited and the
latency is high.

Benefits of Blockchain Architecture

1. Cost-Effective: It
calls for a shedload of money to hold the databases on a centralized platform
(www), it is undoubtedly a secure way of preserving and organizing the current data, but
blockchain serves the same purpose to a larger extent as the information stored in the blocks are
interlinked with each other

2. Secured Data Processing:The

data once entered is hard to tamper with due to blocks linked via
information with each other. Record validation too takes time as the data processes for each
network independently rather than on a centralized server. So one needs to compromise with the
performance speed, it is compensated when it comes to data security and validity.

3. Fetching the previous data:The

blockchain architecture allows you to check the transaction history
anytime. This is a constantly growing list, whereas the centralized database is just the snapshot of
the information in the present.


3.2 CONSENSUS ALGORITHMS

In blockchain, how to reach consensus among the untrustworthy nodes is a transformation of the
Byzantine Generals (BG) Problem, which was raised in.
In BG problem, a group of generals who command a portion of Byzantine army circle the city.
Some generals prefer to attack while other generals prefer to retreat.
However, the attack would fail if only part of the generals attack the city.
Thus, they have to reach an agreement to attack or retreat.
How to reach a consensus in distributed environment is a challenge. It is also a challenge for
blockchain as the blockchain network is distributed. In blockchain, there is no central node that
ensures ledgers on distributed nodes are all the same.
Some protocols are needed to ensure ledgers in different nodes are consistent.We next present several
common approaches to reach a consensus in blockchain.

A. Approaches to consensus
PoW (Proof of work) is a consensus strategy used in the Bitcoin network.
In a decentralized network, someone has to be selected to record the transactions.
The easiest way is random selection. However, random selection is vulnerable to attacks. So if a node
wants to publish a block of transactions, a lot of work has to be done to prove that the node is not
likely to attack the network. Generally the work means computer calculations.

In PoW, each node of the network is calculating a hash value of the block header. The block
header contains a nonce and miners would change the nonce frequently to get different hash
values. The consensus requires that the calculated value must be equal to or smaller than a certain
given value.
When one node reaches the target value, it would broadcast the block to other nodes and all other
nodes must mutually confirm the correctness of the hash value. If the block is validated, other miners
would append this new block to their own blockchains.
Nodes that calculate the hash values are called miners and the PoW procedure is called mining in
Bitcoin.

In the decentralized network, valid blocks might be generated simultaneously when multiple nodes
find the suitable nonce nearly at the same time. However, it is unlikely that two competing forks will
generate next block simultaneously.
In PoW protocol, a chain that becomes longer thereafter is judged as the authentic one. Consider two
forks created by simultaneously validated blocks U4 and B4.
Miners keep mining their blocks until a longer branch is found. B4,B5 forms a longer chain, so the
miners on U4 would switch to the longer branch.
Miners have to do a lot of computer calculations in PoW, yet these works waste too much
resources. To mitigate the loss, some PoW protocols in which works could have some side-
applications have been designed.
For example, Primecoin searches for special prime number chains which can be used for
mathematical research.

PoS (Proof of stake) is an energy-saving alternative to PoW.Miners in PoS have to prove the ownership of the
amount of currency. It isbelieved thatpeople with more currencies would be less likely to attack the network.
The selection based on account balance is quite unfair because the single richest person is bound
to bedominant in the network.
As a result, many solutions are proposed with the combination of the stake size to decide which one to
forge the next block.
In particular, Blackcoin uses randomization to predict the next generator. It uses a formula that looks
for the lowest hash value in combination with the size of the stake.
Peercoin favors coin age based selection. In Peercoin, older and larger sets of coins have a
greater probability of mining the next block.

Compared to PoW, PoS saves more energy and is more effective. Unfortunately, as the mining cost
is nearly zero, attacks might come as a consequence.
Many blockchains adopt PoW at the beginning and transform to PoS gradually.
For instance, ethereum is planing to move from Ethash (a kind of PoW) to Casper (a kind of PoS).

PBFT (Practical byzantine fault tolerance) is a replication algorithm to tolerate byzantine faults.
Hyperledger Fabric utilizes the PBFT as its consensus algorithm since PBFT could handle up to 1/3
malicious byzantine replicas. A new block is determined in a round. In each round, a primary would be
selected according to some rules. And it is responsible for ordering the transaction.
The whole process could be divided into three phase: pre-prepared, prepared and commit.
In each phase, a node would enter next phase if it has received votes from over 2/3 of all nodes. So
PBFT requires that every node is known to the network. Like PBFT, Stellar Consensus Protocol
(SCP) is also a Byzantine agreement protocol.
In PBFT, each node has to query other nodes while SCP gives participants the right to choose
which set of other participants to believe. Based on PBFT, Antshares has implemented their dBFT
(delegated byzantine fault tolerance). In dBFT, some professional nodes are voted to record the
transactions.

DPOS (Delegated proof of stake). The major difference between PoS and DPOS is that PoS is
direct democratic while DPOS is representative democratic. Stakeholders elect their delegates to
generate and validate blocks. With significantly fewer nodes to validate the block, the block could
be confirmed quickly, leading to the quick confirmation of transactions.

Meanwhile, the parameters of the network such as block size and block intervals could be tuned by
delegates. Additionally, users need not to worry about the dishonest delegates as they could be voted
out easily. DPOS is the backbone of Bitshares.

Ripple is a consensus algorithm that utilizes collectively-trusted subnetworks within the larger
network. In the network, nodes are divided into two types: server for participating consensus
process and client for only transferring funds.

Each server has an Unique Node List (UNL). UNL is important to the server. When determining
whether to put a transaction into the ledger, the server would query the nodes in UNL and if the
received agreements have reached 80%, the transaction would be packed into the ledger. For a node,
the ledger will remain correct as long as the percentage of faulty nodes in UNL is less than 20%.

Tendermint is a byzantine consensus algorithm. A new block is determined in a round. A

proposer would be selected to broadcast an unconfirmed block in this round.

It could be divided into three steps:

A. Prevote step. Validators choosewhether to broadcast a prevote for the proposed block.
B. Precommit step. If the node has received more than 2/3 of prevotes on the proposed block,
it broadcasts a precommit for that block. If the node has received over 2/3 of precommits,
it enters the commit step.
C. Commit step. The node validates the block and broadcasts a commit for that block.if the node has
received 2/3 of the commits, it accepts the block.Contrast to PBFT, nodes have to lock their coins
to become validators. Once a validator is found to be dishonest, it would be punished.

B. Consensus algorithms comparison

Different consensus algorithms have different advantages and disadvantages. Table II gives a
comparison between different consensus algorithms and we use the properties given by.

Node identity management. PBFT needs to know the identity of each miner in order to select a
primary in every round while Tendermint needs to know the validators in order to select a proposer in
each round. For PoW, PoS,DPOS and Ripple, nodes could join the network freely.

Energy saving. In PoW, miners hash the block header continuously to reach the target value. As a
result, the amount of electricity required to process has reach an immense scale. As for PoS and
DPOS, miners still have to hash the block header to search the target value but the work has been
largely reduced as the search space is designed to be limited. As for PBFT, Ripple and Tendermint,
there is no mining in consensus process. So it saves energy greatly.

Tolerated power of adversary. Generally 51% of hash power is regarded as the threshold for one to
gain control of the network. But selfish mining strategy [10] in PoW systems could help miners to
gain more revenue by only
25% of the hashing power. PBFT and Tendermint is designed to handle up to 1/3 faulty nodes.
Ripple is proved to maintain correctness if the faulty nodes in an UNL is less than 20%.
Example. Bitcoin is based on PoW while Peercoin is a new peer-to-peer PoS cryptocurrency.
Further, Hyperledger Fabric utilizes PBFT to reach consensus. Bitshares, a smart contract platform,
adopts DPOS as their consensus algorithm. Ripple implements the Ripple protocol while
Tendermint devises the Tendermint protocol.
PBFT and Tendermint are permissioned protocols. Node identities are expected to be known to the
whole network, so they might be used in commercial mode rather than public.

PoW and PoS are suitable for public blockchain. Consortium or private blockchain might has
preference for PBFT, Tendermint,DPOS and Ripple.

B.Advances on consensus algorithms

A good consensus algorithm means efficiency, safty and convenience. Recently, a number of
endeavors have been made to improve consensus algorithms in blockchain. New consensus
algorithms are devised aiming to solve some specific problems of blockchain. The main idea of
PeerCensus is to decouple block creation and transaction confirmation so that the consensus speed can
be significantly increased. Besides, Kraft proposed a new consensus method to ensure that a block is
generated in a relatively stable speed. It is known that high blocks generation rate compromise
Bitcoin’s security.
So the Greedy Heaviest-Observed Sub-Tree (GHOST) chain selection rule is proposed to solve this
problem. Instead of the longest branch scheme, GHOST weights the branches and miners could
choose the better one to follow. Chepurnoy et al. presented a new consensus algorithm for peer-topeer
blockchain systems where anyone who provides noninteractive proofs of retrievability for the past
state snapshots is agreed to generate the block. In such a protocol, miner only have to store old block
headers instead of full blocks.
2. Hyperledger Fabric architecture
The main types of blockchain can be divided into the public blockchain, consortium blockchain, and
private blockchain.
The public blockchain is open to all the public, the most typical application in the public
blockchain is Bitcoin, which requires “mining” to generate blocks. This pattern greatly limits the
generation of blocks and reduces transaction efficiency.
All the permissions in the private blockchain are entirely owned by the organization, and it is just open
for inner users in the organization.
The consortium blockchain is a kind of blockchain between the public blockchain and the private
blockchain. The security has been strengthened on the consortium blockchain because of its
restrictions and rules.
Hyperledger Fabric is one of the basic frameworks of the consortium blockchain, and it is also one of the
Hyperledger projects . Different from Bitcoin, Hyperledgers enable the separation of code from the distributed
ledger . The logical architecture of the Hyperledger Fabric system is illustrated in From an application
perspective, Hyperledger Fabric consists of four parts:

identitymnagement,
ledgermanagement,
transactionmanagement,
chaincode.

Fabric system includes three major components: Member management,Consensus service, and chaincode
service. Generally, multiple transactions can be packaged into blocks, and multiple blocks form a blockchain,
blockchain provides a distributed ledger platform. The chaincode contains all the processing logic and
provides an interface with the outside. The external method can call the chaincode interface to deploy
(Deploy), invoke (Invoke), and query (Query) according to different instructions, which is also the onlyway to
operate the blockchain interaction.

Through PKI-based (public key infrastructure) member permission management, the platform can
limit the capabilities of the nodes and clients.

Normally, three types of certificates are used, including the Enrollment Certificate (EC), Transaction
Certificate (TC), and TLS Certificates (TLC) to ensure the security of communication links. The default
digital signature algorithm of the certificate is ECDSA, and the hash algorithm is SHA-256.

Figure 6 : Hyperledger fabric architecture

 4.CONCLUSION

Blockchain has shown its potential for transforming traditional

industry with its key characteristics: industry with its key

characteristics:

decentralization, Persistency, anonymity and auditability. In this

paper, we Present a comprehensive overview on blockchain. We first

give An overview of blockchain technologies including blockchain

Architecture and key characteristics of blockchain. We then dis- Cuss

the typical consensus algorithms used in blockchain. We Analyzed

and compared these protocols in different respects. Furthermore, we

listed some challenges and problems than Would hinder blockchain

development and summarized some Existing approaches for solving

these problems. Some possible Future directions are also proposed.

Nowadays blockchain- Based applications are springing up and we

plan to conduct In-depth investigations on blockchain-based

applications in the Future.

Blockchain and its security have aroused more and more concern. In

order to solve the issue that the Hyperledger Fabric does not Currently

support Chinese commercial cryptographic algorithms, the BCCSP

module in the Hyperledger Fabric has been extended, Chinese

Commercial cryptographic algorithms SM2 and SM3 have been added

Into the algorithm library in the original BCCSP module. Furthermore,

As a prototype system, one transaction information query system based

On UBCCSP has been developed. After being tested and analyzed, the

Average time for every query is only 31.162 ms in this blockchain

System.

The Bitcoin is the first successful implementation of blockchain. Today, the world has found
applications of blockchain technology in several industries, where the trust without the involvement of
a centralized authority is desired.
4.1 Opportunities and the future of blockchain technology

In Digital Advertising:

Digital advertising faces many challenges now and then, including bot traffic, opacity, domain fraud,
and insufficiency of payment models. Still, with blockchain technology, one can resolve such issues,
and all the transactions can now be dealt with seamlessly.

Career Paths In Blockchain

Blockchain is in its embryonic stage and has a lot of scope for evolution in the coming future; with the
trend still undiscovered by many, one can find lesser competition in the field in terms of job
opportunities. Take a look at the career opportunities you can consider if you wish to embrace the
blockchain technology at a time when it’s showing exceptional potential:

 Blockchain Developer

 Blockchain Project Manager

 Blockchain UX Designer

 Blockchain Quality Engineer

 Blockchain Legal Consultant

 Blockchain Solutions Architect

Other alternate career options: accountants, public relations, crypto brokers, analysts, and crypto
marketers. Now can be the best time to dive into the depth of blockchain technology and learn as much
as possible before the competition escalates.

4.2 Summing Up

There shouldn’t be any hesitation in accepting that blockchain technology will benefit and attract
several potential businesses and organizations, all of which will inevitably invest in it. While it will act
as a cure to fight several adversities prevalent in the market, the technology has many more miles to
cover.

In the course of time, there will be notable growth in this arena; no matter if you are a tech enthusiast
or not, blockchain technology has new and exciting job and investment opportunities to offer, all of
which are worth exploring.
In the field of blockchain ecosystems there is ongoing transfer of knowledge and supporting
activities for blockchain projects, and various forms of startup engagement have been developed.
While ecosystems must be further strengthened on the European level and globally, there is an
opportunity for cross-border and cross-region cooperation, which can be enabled through
interregional partnerships, such as the EU-Africa partnership on the stakeholder level, and
interoperable infrastructure on the technological level, such as integrated
national blockchain infrastructures and upgrading of European blockchain services infrastructure.
4.3 The future of blockchain and market disruptors

Inspiring an evolution in commerce

Right now, someone, somewhere, is creating a blockchain solution to drive innovation and disruption of
traditional business models.
This is occurring in virtually every industry and in most jurisdictions globally. Indeed, we are now witnessing
an evolution in commerce.

Looking back to understand the future of blockchain

The advent of postal services (circa 400 A.D.) introduced a common intermediary in the collection,
transport, and delivery of goods, and it inspired an evolution in commerce. The reliability and
regulation of a system to move goods across great distances opened lucrative new markets to producers
and distributors.
In the 1990s, a vast interconnected global network called “the internet” and a new application called
“email” enabled global commerce and communications at a velocity previously thought to be
impossible.
Today, the boundaries of commerce are once again being pushed and the role of this intermediary is
changing given blockchain technology. As before, we will all be taking this ride together.
But to understand where it is going, first we must recognize the two types of organizations driving the
innovation.

4.4 Who are the players in this new ecosystem?

In the blockchain ecosystem, looking past all the hype-driven headlines, there is an exciting new cast
of innovators and founders.
Through our surveys and engagements, Deloitte is seeing an increasing number of less-tenured
entrepreneurs frequently pairing up with industry veterans to start new organizations.
These emerging disruptors are approaching blockchain differently from legacy organizations.

Disruptors are not thinking incrementally about change, rather they are fundamentally changing how
business is being conducted across all industry sectors around the world.

Legacy organizations, on the other hand, are evaluating blockchain technology and eager to adapt,
albeit more slowly given the natural constraints of large enterprises.

Figure 7 : Earth
 Figure 8: Two roads diverge: One leads to an evolution of commerce

As expected, many of the emerging disruptors are startups that possess the potential for rapid
experimentation and growth.
Those that are further along in evolving their concepts have recorded demonstrable results disrupting legacy
companies in their markets.
In comparison, many legacy organizations approach blockchain from the opposing direction, trying to
redefine legacy business models by shoehorning new technology into their existing operations.
While these organizations look at operational efficiencies or some revenue-generating use cases, some are
stopping short of grasping blockchain’s broader potential. In either case, these organizations and the
executives behind them share similar traits: The ability to recognize and perhaps willfully ignore—or not—
the longstanding norms of legacy business models.

True, there’s a lot to be said for simply leveraging into existing norms the benefits of blockchain adoption—
the removal of intermediaries, data that’s un-alterable without a passkey, transparency to all parties, and
near-real-time, frictionless transactions.
But the real winners are those who build their solutions around blockchain’s potential.

4.5 Blockchain use cases

Blockchain-enabled business models will present a seismic shift to how business is conducted in the future.
Its impact on commerce will be game-changing, especially given the increasingly digital global economy
and the decentralization of business models and stakeholders enabled by blockchain. In this direction, a new
dimension of innovation awaits. Below are some examples of disrupters ahead of the game.

 Smart contracts at work

 A new token economy
 Digital identity solutions
 Security through verification

Figure 9 : Telescope
Navigating the complexities, regulatory and otherwise With innovative business models comes the need to
thoughtfully consider the regulatory environment, best practices, and strategy. Professional advisors are left
with dated rules and age- old playbooks as they evaluate the applications of this nascent, innovative
commerce.

Tax

Determination of cryptocurrency as a security, commodity, debt, inventory, or cash equivalent bears

significant consequence to income tax, indirect tax, and payroll tax analysis. This varies by state and by
country, with a constantly evolving point of view by regulators and little authoritative guidance. Commerce
enabled by tokens and cryptocurrency brings us into a world of barter transactions requiring determinations
of character (capital vs. Ordinary), and basis tracking of fungible assets.

Audit

In collaboration with regulators and standard-setting bodies, the CPA auditor must embrace the opportunities
and challenges in having clients who have adopted blockchain technology in their operations and financial
reporting processes. There may be increased transparency and the ability to automate routine audit tasks.
However, immutable information can still be inaccurate due to error or fraud.
The CPA auditor can provide both enterprise organizations and the emerging disruptors with new service
offerings such as blockchain platform assurance, digital asset validation services, and smart contract
assurance, as well as the traditional financial statement review and audits.

Controls

One of the most critical internal control areas centers on the granting, reviewing, and removal of access
controls to encryption keys or other system settings. Access controls are also dependent on appropriate
delegation of authority and segregation of incompatible duties. Another important area of internal control to
ensuring the maintenance of adequate books and records is timely reconciliations between transactions
recorded on the blockchain and those recorded in the entity’s financial and tax records.

Technology

Technology consultants are now in the business of debunking blog hype, educating stakeholders, and
debating what blockchain does and doesn’t do. We see new vernacular in the debates as to what is “on-
chain” versus “off-chain,” or how “tokenomics” need to encourage good behavior.

The advent of new protocols and platforms requires re-imagining an appropriate technology stack— which
continues to evolve at both the core and the edge—as innovative solutions emerge across developer
communities to help bridge the technology from its current nascent form to an enterprise- grade future.
While building a scalable blockchain solution is complex, tried-and-true processes deserve ongoing
consideration.
KYC/anti-money laundering (AML)

As an enabler for virtual currencies such as bitcoin, and early associations with illicit actors like Silk Road
and the dark web, blockchain was initially viewed by regulators with considerable skepticism. Among other
things, its inherent qualities of speed, cross-border functionality, irreversibility, and pseudonymity raised
concerns that cryptocurrencies would be attractive to money launderers and sanctions evaders.
Regulatory uncertainty with respect to the applicability of AML requirements such as KYC, have been
blamed for stifling innovation among the players in the ecosystem. Ironically, blockchain may prove to be an
ideal tool for satisfying regulatory requirements as a trusted repository of information, a mechanism for
verification of identity, and a record of transactions. Financial services is among those industries facing the
most significant disruption by blockchain technology.
Figure 10 : Top 5 digital assets roles of organiztion
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