transaction history.

In other words, the crucial difference is that blockchain reaches

total decentralization.
The principle of blockchain functions involves the network of computers to
determine the authenticity of a transaction via computer algorithms. Although the
network of computers calculates the consensus algorithm, the nodes that vote do not
belong to a blockchain. Once the transaction is signed, it is linked with the previous
transactions forming a chain of transactions. This chain is called the blockchain.
Blockchain[8] works on the concept of a decentralized database where the copies of
the database exist on multiple computers and are identical. These features ensure
consistency, aliveness, and fault-tolerance.
A transaction in a blockchain consists of metadata on the transaction, inputs, and
outputs[12].
Metadata

Metadata includes housekeeping information such as the size of a transaction, the number
of inputs, lock time, and the number of outputs. The transaction's hash is present, serving
as a unique identifier. That allows us to use hash pointers to reference a particular
transaction. The lock time tells miners not to publish the transaction before the specified
time is up. So, that acts as a safety valve to reassure the sender will be able to refund
tokens if something goes wrong.
Inputs

First, all input fields have the same form. An input specifies the hash of a previous
transaction and the index of the previous transaction's outputs that are being claimed.
Outputs

Each output has only two fields: value which the sum of all the output values must be less
than or equal to the sum of all the input values. If there is a difference between these two
sums, a transaction fee goes to the miner who publishes the transaction. Plus, a script
represents a hash encoded by the recipient's public key and the sender's public key.

Blockchain's architecture is split into three layers: application, decentralized ledger,

and Peer-to-Peer Network (See Figure 1).
The application layer consists of a user interface and other application software,
such as a wallet. The wallet software creates and stores both public and private keys
enabling users to access their tokens.
A decentralized ledger represents a middle layer that confirms a consistent and
tamper-proof global ledger. Here, transactions are grouped into blocks that are

9
 cryptographically linked.
To group blocks, each
transaction must be
signed by miners. The
process of mining
cryptocurrency
corresponds to grouping
transactions into a block
added to the end of the
current blockchain.
Peer-to-Peer network
layer includes
information on the node
type, which plays
different roles. Also,
various massages are
exchanged with the
Decentralized Ledger.

Figure 1, Three layers in Blockchain

Figure 2 demonstrates the inside of a block[12]. Each transaction has its identifier
and a reference to a previous transaction. Hash chain of blocks allows linking
different blocks to one another. The hash tree is internal to each block and is a tree
of transactions in the block.

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 Figure 2, Blockchain, structure of blocks
We need to keep the transaction description in mind to understand the transaction
verification process. So, the script mentioned in the output section is to be executed
by miners. The script contains a public key of the referenced output transaction
appended to the transaction's signature. The scripting language is stack-based. Thus,
every instruction is executed only once, in a linear manner.
Furthermore, there are no loops. That makes it possible to define the upper bound
for each transaction and how long it might take to run. Miners run these scripts,
which arbitrary participants in the network submit. After the script is run, it might be
successfully executed if there are no errors, or the whole transaction is invalid if
there is an error.
However, blockchain is not an ideal solution. It is expensive to maintain and
resource-sensitive since every node repeats a task to reach a consensus. The
verification process heavily relies on the mining nodes; therefore, it might be a slow
process because the inserted block requires all the nodes' responses.
Next, there are critics related to the environmental effect of the use of blockchain.
Recent studies[13] estimated Bitcoin's electricity consumption, which correlates to
the verification of transactions by the mining pool, to be between 20 and 80 TWh
(terawatt/hour) annually. This was claimed to be 20 000 times more energy-
intensive than the Visa's system. On the other hand, blockchain contributes to
sustainability by offering opportunities to make existing consumption and

11
production processes more transparent. For example, all paperwork might get
digitalized through blockchain, or the risk of fraud and errors could reduce.
Nevertheless, Bitcoin is only one of many applications of blockchain. Thus, the
green footstep might be mitigated by swapping the original consensus algorithm to a
less resource-intensive mechanism r switching to clean energy.
Furthermore, blockchain is prone to several attacks[14] that are less likely to happen
if a blockchain has a vast number of pools of mining nodes that are not representing
a considerable proportion of the entire mining pool (total hash rate).
In summarizing, blockchain mechanisms achieve decentralized security and trust.
Avoiding the human factor in the transaction verification process improves data
accuracy and integrity. The information that gets in a decent blockchain cannot be
modified or updated but is available to everyone – transparent technology. On the
other hand, maintaining a blockchain is costly for the environment.

2.2 Project roots

2.2.1 Related projects
There are several blockchain-based systems for storing production and supply chain data.
Norway in a Box [15] – is a company that exports Norwegian marine products abroad. The
essential philosophy of the company is to make sure that its customers know what they are
purchasing. Thus, Norway in a Box utilized blockchain to keep track of each step in the
supply chain and make this data transparent and available for the customers. The facts find
their way onto NiBchain[16] – a blockchain technology based on VeChain and developed
by Norway in a Box. In other words, it is an elaborated blockchain for commercial
purposes specifically.
The team contacted Norway in a Box to get hold of some insights on the pros and cons of
operating a blockchain (Project Handbook, meeting 14). It turned out that the customers
were interested in the authentic production information. Thus, the customer attitude
towards the products improves. The utilization and development of such a system are
costly and require quality human resources. Moreover, it is expensive to maintain a
blockchain.
Next, Det Norske Veritas [17] offers the My Story product. My Story is a BaaS providing
a product for data management of packaged goods. My Story Veritas uses VeChain as
their Blockchain.
Amazon Managed Blockchain [18] is a service used to set up and manage scalable
blockchain networks. Scalable blockchain networks allow the creation of private
blockchains that are easily managed and highly scalable. Companies can use this service to
build supply chain solutions. However, using a private blockchain results in a more
centralized solution than a public blockchain.

2.2.2 Initial requirements

Ørn Software's perspective consists of the clue that this project will be a foundation for
their continuing developments within the blockchain industry and a master project in the

12
future. The company counts on us to bring a thorough analysis of possible alternatives to
tracking production and logistic data, ensuring security and integrity. Ørn Software wants
the entire fish production cycle to be quickly and securely shared between agencies that
need the information. The idea is to develop a web service that runs independently where
the data can be uploaded or retrieved via an API.
The project includes the estimation of approximate expenditures the implementation
mentioned above may cost based on the data samples we receive from the firm, ensuring
the average data flow frequency is known.

2.2.3 Initial solution - idea

The initial idea is based on the properties of a blockchain. A client can insert and read data
via higher-level software. The software will include an underlying API, which is the
essence of the project and responsible for the system to blockchain communication.
Nevertheless, unlike a typical database, it is impossible to delete or modify data on the
ledger. Thus, the solution mainly covers the pros and cons of utilizing the blockchain
technologies brought further by Ørn Software into a complete system distributed to fish
farms.

2.3 Limitations
The project is scaled down to focus on the research. The research will help the company
decide whether such a system is worth implementing in real life. The blockchain sphere
consists of several variants and technologies corresponding to different needs and
standards. The potential time used for research is vast. The research in our project will be
scaled down to blockchains that are widely used today and how we may mitigate fraud in
the fish production process and enable end-to-end transparency.
The formulated research question "To what extent can the challenges in the current fish
farm supply chain be mitigated by using blockchain?" allows keeping the scope on the
main aspects of the investigation: problems in the current farm fish supply chain and to
what extent the utilization of blockchain may mitigate them.
Although, there are limiting factors that affect us. Most importantly, time that we do not
have. Thus, a decent version of a functional API may not be accomplished. Moreover, we
cannot trust every source of information. Thus, we used to check the article's origin and
alternative or contrast opinions to form a complete overview.

2.4 Resources
The project primarily relies on sources of information. Therefore, the leading resource we
can use is reliable data. Nevertheless, the group members invest their efforts in forming the
report and investigating the clause.

Communication with the Ørn Software's representative and University supervisor is

persistent. They help us stay motivated and focused throughout the project. Weekly
meetings keep us updated and let us perceive insider knowledge. Actual data samples and

13
statistics we receive and discuss with the company's coordinator assist in writing a relevant
and constructive report.

For the project's final phase, when a beta version of functional code is developed, capital is
required for the testing period. Each transaction in a blockchain requires some tokens that
have value in the fiat money.

Overall, we depend on all the resources mentioned above to help us get the report done.

2.5 Literature associated with a similar problem

Designing supply chain models with blockchain technology in the fishing industry in
Indonesia[19] is an open-access article published in 2021 by the Department of Industrial
Engineering, University of Surabaya, Raya Kalirungkut, Indonesia. Designing supply
chain models with blockchain technology in the fishing industry in Indonesia[19] is an
open-access article published in 2021 by the Department of Industrial Engineering,
University of Surabaya, Raya Kalirungkut, Indonesia. The article's problem is highly
relevant to our case: "There are several challenges in the fishery supply chain, including
non-transparent file recording, limited production infrastructure, and supporting facilities,
high logistics costs, and long shipping time that leads to low product quality. The lack of
an open supply chain allows many fishery business players to access and manipulate data;
this is undoubtedly a violation of recognized legal and ethical standards. Illegal,
unreported, and unregulated (IUU) activities, such as overfishing, human rights
violations, and fraud, often occur in the fishing industry" (first page, 1st-2nd paragraphs).
Moreover, the article brings up an analysis of how can blockchain mitigates the current
problems. Relevant diagrams and references to figures plus other documents make the
article legitimate and give us an insight into how other researchers approach a similar
problem.

Using blockchain to implement traceability in Fishery Value Chain[20] is an article that

covers the theoretical part of the supply chain model implemented in real-life using
blockchain technologies and the technical aspect of applying a blockchain solution. Using
blockchain to implement traceability in Fishery Value Chain[20] is an article that covers
the theoretical part of the supply chain model implemented in real-life using blockchain
technologies and the technical aspect of applying a blockchain solution. This document is
valuable because it reveals the legal side of the problem and mentions ISO (International
Standards Organization), responsible for setting up rules for the food traceability system.
Yet, a class diagram and code fragments are present, which, combined with the
description, may give us a hint during the development of a beta version of the project
idea.

BlockDiploma – Decentralizing the Norwegian Diploma Registry using Blockchain

Technology [21] is a bachelor's thesis written by Thomas Reite. The stated problem covers
current problems with falsified diplomas and how blockchain may mitigate them. This
thesis is relevant because it is a bachelor's project based on an investigation of how

14
blockchain technologies may ensure data integrity. Thus, it suggests the narration style and
initial thoughts.

15
3 Introduction to prospective solutions
3.1 Alternative solutions
There are quite a lot of prospective solutions on the market. The solutions differ based on
the approach, philosophy, governance, and mechanisms. First, it is desired to outline the
requirements to select a relevant solution. Referencing the research question, the defined
challenges in the farm fish production industry are fraud and uncertain customer attitudes.
Therefore, the chosen mitigation strategy must provide a large extent of data integrity, data
trustworthiness, and transparency.
Next, the regular data handling routines should be commented on before diving into
blockchain solutions.
Centralized database
A centralized database is a type of database that is stored, located, and maintained at a
single location only.
The database management system provides various optimization, integration, and security
tools. On the other hand, it is costly to maintain and is a centralized system. No matter how
secure the database is, there is a possibility that a single individual that knows how to
avoid the hindrances may retrieve or update database content. Thus, such information
cannot be considered trustworthy and be used for transparency purposes.
Such an approach does not provide absolute data integrity and cannot be used as a
comprehensive solution.
Distributed (Decentralized) database management system
Distributed database [22] is also a type of database that consists of multiple databases
spread across different physical locations and connected via a computer network. This type
of database is more expensive than the centralized one but helps increase availability and
concurrency.
Databases share the same concepts – the human factor may breach the data integrity
needed to be achieved. Therefore, a regular data handling routine cannot be used to
mitigate to a large extent the challenges in the supply chain of the farm fish production
industry.
The following discussion will switch the focus to alternative blockchain solutions.
A massive industry of blockchain solutions mitigates many potential issues for various
production spheres. First, the more general types of prospective solutions will be
discussed.
Private VS Public blockchain
There are two alternatives: Public blockchain and Private blockchain. The overall result is
the same: data we parse gets saved in a blockchain, ensuring data integrity and
authenticity. On the other hand, the way the data find its way to a blockchain is different.
A private blockchain (permissioned blockchain) allows entry only for verified participants.
The undergoing processes are pretty much the same as in a public blockchain. However,

16
with one requirement: verification is also necessary either by the network (nodes that
verify a transaction) or by a clearly defined set protocol implemented by the network.
Overall, the significant distinction is that private blockchains control who can participate
and who is allowed to execute the consensus and maintain the shared ledger[23]. Private
blockchains are prone to some attacks too.
In the case of a farm fish production company, the data frequency needed to be stored in a
blockchain is relatively small, and the speed of data processing/uploading is not crucial.
Thus, data integrity and server stability take the first place. The essential property of a
private blockchain is that all the nodes in a network are selected. Therefore, there is a
confidentiality issue: blockchain might be attacked from the inside by the predefined
players so that data can be corrupted. Furthermore, due to synthetical centralization (only
one organization can write or read on a ledger), blocks can be deleted in some cases.
Although it is expected to be secure and fast, there are no hidden costs, and it turns out
cheaper. However, public blockchains are nearly immutable since their mining pools
account for more nodes compared to private blockchains.
After selecting a blockchain type, two public blockchain alternatives that satisfy the given
requirements and provide production-relevant features, such as smart contract, test net, and
others, are considered.

[Link] Ethereum
Ethereum [24] is a general-purpose public blockchain. Today, it is the second biggest
blockchain, measured by the market cap of its associated coin, Ether (ETH). Such a high
ranking shows a good amount of trust in the blockchain. A general-purpose blockchain is
intended to fulfill any kind of service that can take advantage of smart contracts. As of
now, its consensus mechanism is Proof-of-Work.
Smart Contract
A smart contract is a self-executing contract with the terms of the agreement between
buyer and seller being directly written into lines of code[25]. The contract exists across a
blockchain network. The code controls the execution, and transactions remain trackable
and unreversible. The prominent feature is that a smart contract allows trusted transactions
and agreements to be processed among anonymous parties without needing a central
authority, legal system, or external enforcement mechanism.
Proof of Work (PoW)
PoW is a cryptographic proof where one miner proves to others that a cryptographical
problem is solved by computational effort. The miners compete to append new blocks to
the blockchain to earn cryptocurrency as a reward. The other miners would reject an
altered version of the blockchain, making the altered version worthless. Experts criticize
PoW for being very energy consuming and causing a lot of electricity waste[26].
Proof of Stake (PoS)

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The Ethereum team plans to switch from PoW to the PoS consensus mechanism. This
update goes under the name Ethereum 2.0. Yet, the transformation has been postponed
several times, and it is unknown when the switch will happen.
A PoS-based blockchain does not rely on miners. On the contrary, the validators, called
VeChain stakers, are selected in proportion to their staked holdings. A minimum of 32
ETH is needed to become a staker. The validators are also responsible for checking and
confirming blocks they do not create themselves. A staker can lose a proportion of their
stake according to the seriousness of unwanted behavior to promote good behavior.
Ethereum 2.0 is believed to reduce Ethereum's energy consumption significantly. Coin
market cap estimates a reduction of 99.95% [27].
Transactions

The average time for a new block appended to the blockchain is roughly 13 seconds. This
has been stable for years. In theory, this means that a new transaction and data can be
inserted every 13 seconds. However, the most who pay are chosen to decide which
transaction to put on the block. This results in competition among transaction senders, and
those who pay the highest transaction fees win. On May 04, the average transaction fee
was 1.67 USD [28].
Overall, the Ethereum blockchain is a decent alternative that provides complete data
integrity and service availability due to the substantial entire mining pool. A smart contract
may be implemented the way that data is uploaded or retrieved easily, securely, and fast
enough. The only throwback is the economy factor – each transaction is costly.
[Link] VeChain
VeChain [29] is a project that manages the VeChainThor blockchain. This blockchain
platform is designed to enhance supply chain management and business processes. The
goal is to streamline these processes using distributed ledger technology. Furthermore,
VeChain uses the Proof of Authority consensus mechanism and two tokens: VeChain
token (VET) and VeChain Thor Energy (VTHO), as a smart contract layer. The blockchain
plans to become a leading platform for conducting transactions between the internet of
things (IoT), which is essential when eliminating the human factor and creating a
trustworthy infrastructure around a farm fish production company.
Proof of Authority (PoA)

VeChain's consensus mechanism is called Proof-of-Authority. PoA allows

authorized nodes, called Authority Master nodes (AM), to participate in the
consensus algorithm. The authorization process includes the Know Your Customer
approach [30] - a set of standards used to verify customers, their risk profiles, and
their financial profile. All the AMs are registered in a whitelist, and a smart
contract handles operations on the whitelist. A new AM is added to the whitelist
after the VeChain Steering Committee [31] members approve the new AM through
multi-signature authorization. Nowadays, the blockchain has 101 AMs providing
the consensus mechanism[32]. All mining nodes have an equal chance of
publishing a new block in a blockchain. In comparison to Proof of Stake and Proof

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