River Publishers Series in Security and Digital Forensics

BLOCKCHAIN TECHNOLOGY AND APPLICATIONS

BLOCKCHAIN TECHNOLOGY
AND APPLICATIONS

Ahmed Banafa
BLOCKCHAIN TECHNOLOGY
Blockchain is a disruptive technology that can radically improve security in
transaction networks, it provides the basis for a dynamic distributed ledger AND APPLICATIONS
that can be applied to save time when recording transactions between parties,
remove costs associated with intermediaries, and reduce risks of fraud and
tampering. This book explores the fundamentals and applications of Blockchain
technology; the transparent, secure, immutable and distributed ledger used
currently as the underlying technology for Cryptocurrency. Decentralized
peer-to-peer network, distributed ledger and the trust model that defines
Blockchain technology will be explained. Components of Blockchain, its
operations, underlying algorithms, and essentials of trust will be defined. Types
of Blockchain networks including private and public Blockchain networks
will be introduced. Concepts of smart contracts, proof of work and proof
of stack will be clarified. The relationship between Blockchain technology,
Internet of Things (IoT), Artificial Intelligence (AI), Cybersecurity, Quantum
Computing, and Digital Transformation will be explored in this book. Myths
about Blockchain will be exposed and a look at the future of Blockchain will
be presented. Special section will discuss Blockchain and COVID-19.
Topics will be covered in this book: Blockchain technology, Smart
Contracts, Hashing, SHA-256 Hash, Verification, Validation, Consensus

Ahmed Banafa
models, Digital Mining, Hard fork, Soft fork, Bitcoin, Ethereum, Proof
of Work (PoW), Proof of Stake (PoS), Zero Knowledge Proof (ZKP), Myths
about Blockchain, Decentralized peer-to-peer network, Types of Blockchain
networks, Hot and Cold Wallets, Double Spend, Decentralized Applications
(DApps), Transaction networks, Sidechains, 51% attack, Cryptocurrency,
Digital transformation, Internet of Things (IoT), Artificial Intelligence (AI),
Cybersecurity, Quantum Computing, and the Future of Blockchain.

River Publishers River Ahmed Banafa River Publishers

Blockchain Technology
and Applications
RIVER PUBLISHERS SERIES IN SECURITY AND
DIGITAL FORENSICS
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 Blockchain
SecureTechnology
and Smart
and
Internet of Applications
Things (IoT)
Using Blockchain and AI

Ahmed Banafa
Professor of Engineering at San Jose State University (USA)
Ahmed Banafa
and
Professor of Engineering at San Jose State University
Instructor of Continuing Studies at Stanford University (USA)
USA
and
Instructor of Continuing Studies at Stanford University
USA

River Publishers
Published, sold and distributed by:
River Publishers
Alsbjergvej 10
9260 Gistrup - Denmark
www.riverpublishers.com

ISBN: 9788770221061
e-ISBN: 9788770221054

Copyright © 2020 River Publischers

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system, or transmitted in any form or by any means, mechanical,
photocopying, recording or otherwise, without prior written permission of the
publishers.
 “If you can’t explain it simply,
you don’t understand it well enough.”
Albert Einstein
 Contents

Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . x

List of Figures and Tables . . . . . . . . . . . . . . . . . . . . xi

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

Part 1: Blockchain Technology

Chapter 1 Introduction to Blockchain . . . . . . . . . . . . . . 3

Chapter 2 Consensus Protocols . . . . . . . . . . . . . . . . 15
Chapter 3 Key Blockchain Use Cases . . . . . . . . . . . . . . 23
Chapter 4 Important Topics in Blockchain . . . . . . . . . . . . 33
Chapter 5 Decentralized Applications – DApps . . . . . . . . . . 43

Part 2: Blockchain Applications

Chapter 6 Using Blockchain to Secure IoT . . . . . . . . . . . . 51

Chapter 7 IoT and Blockchain: Challenges and Risks . . . . . . . . 59
Chapter 8 IoT, AI and Blockchain: Catalysts for Digital Transformation . . 67
Chapter 9 Myths about Blockchain Technology . . . . . . . . . . 73
Chapter 10 Cybersecurity & Blockchain . . . . . . . . . . . . . 81
Chapter 11 Blockchain and AI: A Perfect Match? . . . . . . . . . . 89
Chapter 12 Quantum Computing and Blockchain: Facts and Myths . . . . 95
Chapter 13 Cryptocurrency: To Libra or not To Libra . . . . . . . . 103
Chapter 14 Future Trends of Blockchain . . . . . . . . . . . . . 121
 Special Topic in Blockchain

Chapter 15 Blockchain Technology and COVID-19 . . . . . . . . . 137

References . . . . . . . . . . . . . . . . . . . . . . . . . 143

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

About the Author . . . . . . . . . . . . . . . . . . . . . . . 153

Content is king. We are the product offering at Facebook,
Twitter, LinkedIn, Instagram, Yelp, YouTube and so on.
When serving-up our conversations, photos, memories,
and perspectives we are each providing the reason to visit
these platforms. Yet, very little time is taken to consider data
ownership, privacy, or our individual economic incentives.
Instead, our valuable data is taken, our attention heavily
shifted to the screen and we’re targeted with adds ever so
precisely. Blockchain provides alternative solutions to ap-
proaching the world as we know it today. And, like most
products and platforms, what its creators intended may not
be what it becomes. It’s for the adopters to decide what to do
with it. Whether its used for enterprise consortiums to im-
prove communication in supply chains, decoupling currency
from country, or finding a simpler way to transfer rewards
and tokens amongst platforms – blockchain is still looking
for its unicorn. We are getting closer, though. As PayPal now
offers the ability to buy and sell crypto, Reddit is testing re-
wards on Ethereum, or JP Morgan directly servicing crypto
customers Coinbase and Gemini. As you dive into the world
of blockchain and crypto currency, my friend and colleague
Prof. Ahmed Banafa will be the most excellent tour guide –
you’re going to enjoy the read!

Elizabeth “Liz” Kukka

Executive Director,
Ethereum Classic Labs | Principal Investor,
Digital Finance Group
Advisor, Matrix Exchange

ix
 Abbreviations

AI Artificial Intelligence IDC International Data

API Application Programming Corporation
Interface IEEE Institute of Electrical and
ATTP Advanced Track and Trace Electronics Engineering
for Pharmaceuticals IoT Internet of Things
BCH Bitcoin Cash IPFS InterPlanetary File System
BFT Byzantine Fault Tolerance IT Information Technology
BTC Bitcoin LPoS Leased Proof of Stake
CDC Center of Disease Control LTE Long-Term Evolution
COVID19 Corona Virus Disease 2019 M2M Machine to Machine
CSS Cascading Style Sheets MIT Massachusetts Institute of
DAO Decentralized Autonomous Technology
Organization NASDAQ National Association
DApps Decentralized Applications of Securities Dealers
DDoS Distributed Denial of Automated Quotations
Service exchange
DLT Distributed Ledger P2P Peer-To-Peer
Technology PoA Proof of Authority
DoS Denial of Service PoA Proof of Assignment
DPoS Delegated Proof of Stake PoA Proof of Activity
DX Digital Transformation PoB Proof of Burn
ECDSA Elliptic Curve Digital PoC Proof of Capacity or Proof-
Signature Algorithm of Concept
EM Electromagnetic PoET Proof of Elapsed Time
ETC Ethereum Classic PoI Proof of Importance
ETH Ethereum PoS Proof of Stake
EU European Union PoV Proof of View
FDA Food and Drug PoW Proof of Work
Administration Qubit Quantum Bit
HTML Hypertext Markup Language SSD Solid State Drive
IBAC Internet of Things, UI User Interface
Blockchain, Artificial UX User Experience
Intelligence, Cybersecurity WHO World Health Organization
IBM International Business ZKP Zero-Knowledge Proof or
Machines Protocol

x
 List of Figures and Tables

Figure 1.2 Simplified form of IBAC . . . . . . . . . . . . . . . . 4

Figure 1.1 Hot Trends of Technology in 2020 and Beyond . . . . . . . . . . 5
Figure 1.3 Best Definition of Blockchain . . . . . . . . . . . . . . . 6
Figure 1.4 Five Components of a Blockchain . . . . . . . . . . . . . . 7
Figure 1.5 Example of a “block” programming . . . . . . . . . . . . . 8
Figure 1.6 Example of Blocks of Blockchain in one node . . . . . . . . . . 9
Figure 1.7 Blockchain Stack . . . . . . . . . . . . . . . . . . . 10
Figure 1.8 Tracks of Blockchain Technology . . . . . . . . . . . . . 11
Figure 1.9 Challenges Facing Blockchain . . . . . . . . . . . . . . 13
Figure 1.10 Types of Blockchain Networks . . . . . . . . . . . . . . 13
Figure 2.1 Example of Mathematical puzzle in Proof of Work (PoW) Protocol . . . 17
Figure 3.1: Blockchain and Crowdfunding . . . . . . . . . . . . . . 28
Figure 3.2: Blockchain and Supply Chain Management . . . . . . . . . . 31
Figure 4.1 Cave example of ZKP . . . . . . . . . . . . . . . . . 37
Figure 4.2 Example of Smart Contract Code using Solidity (storage contract) . . . 42
Figure 5.1 Traditional Website Process . . . . . . . . . . . . . . . 44
Figure 5.2 DApp enabled website . . . . . . . . . . . . . . . . . 44
Figure 6.1 Advantages of Blockchain . . . . . . . . . . . . . . . . 56
Figure 7.1 Challenges of Blockchain In IoT . . . . . . . . . . . . . . 62
Figure 7.2 Risks of Using Blockchain in IoT . . . . . . . . . . . . . 63
Figure 8.1 Digital Transformation Areas . . . . . . . . . . . . . . . 69
Figure 10.1 Advantages of Using Blockchain in Cybersecurity . . . . . . . . 84
Figure 10.2 Disadvantages of Using Blockchain in Cybersecurity . . . . . . . 87
Figure 11.1 Applications of AI and Blockchain . . . . . . . . . . . . . 90
Figure 12.1 The principles of superposition and entanglement . . . . . . . . 98
Figure 13.1 Facebook’s Libra . . . . . . . . . . . . . . . . . . 105
Figure 13.2 How Libra works . . . . . . . . . . . . . . . . . . 107
Figure 13.3 Libra and Blockchain . . . . . . . . . . . . . . . . . 109

xi
xii Blockchain Technology and Applications

Figure 13.4 Libra Business Reach . . . . . . . . . . . . . . . . . 110

Figure 14.1 IoT Security Flaws . . . . . . . . . . . . . . . . . . 126
Figure 15.1 COVID-19 Naming . . . . . . . . . . . . . . . . . . 138
Figure 15.2 Blockchain Applications in fighting COVID-19 . . . . . . . . . 140

Table 1.1 Blockchain vs. Traditional Database . . . . . . . . . . . . . 9

Table 4.1 Bitcoin vs. Bitcoin Cash . . . . . . . . . . . . . . . . 36
 Preface

Blockchain is an emerging technology that can radically improve

transaction security at banking, supply chain, and other transaction
networks. It’s estimated that Blockchain will generate $3.1 trillion
in new business value by 2030. Essentially, it provides the basis for
a dynamic distributed ledger that can be applied to save time when
recording transactions between parties, remove costs associated with
intermediaries and reduce risks of fraud and tampering. This book ex-
plores the fundamentals and applications of Blockchain technology.
Readers will learn about the decentralized peer-to-peer network, dis-
tributed ledger, and the trust model that defines Blockchain technol-
ogy. They will also be introduced to the basic components of Block-
chain (transaction, block, block header, and the chain), its operations
(hashing, verification, validation, and consensus model), underlying
algorithms, and essentials of trust (hard fork and soft fork). Private
and public Blockchain networks similar to Bitcoin and Ethereum will
be introduced, as will concepts of Smart Contracts, Proof of Work
and Proof of Stack, and cryptocurrency including Facebook’s Libra
will be elucidated. Also, the book will address the relationship be-
tween Blockchain technology, the Internet of Things (IoT), Artificial
Intelligence (AI), Cybersecurity, Digital Transformation, and Quan-
tum Computing.

Readers will understand the inner workings and applications of

this disruptive technology and its potential impact on all aspects of the
business world and society. A look at the future trends of Blockchain
Technology will be presented in the book.

xiii
xiv Blockchain Technology and Applications

The book can be divided into 3 parts:

Blockchain Technology
Chapter 1 Introduction to Blockchain
Chapter 2 Consensus Protocols
Chapter 3 Key Blockchain Use Cases
Chapter 4 Important Topics in Blockchain
Chapter 5 Decentralized Applications – DApps

Blockchain Applications
Chapter 6: Using Blockchain to Secure IoT
Chapter 7: IoT and Blockchain: Challenges and Risks
Chapter 8: IoT, AI and Blockchain: Catalysts for Digital Transformation
Chapter 9: Myths about Blockchain Technology
Chapter 10: Cybersecurity & Blockchain
Chapter 11: Blockchain and AI: A Perfect Match?
Chapter 12: Quantum Computing and Blockchain: Facts and Myths
Chapter 13: Cryptocurrency: To Libra or not To Libra
Chapter 14: Future Trends of Blockchain

Special Topic in Blockchain

Chapter 15: Blockchain Technology and COVID-19

Audience

This is book is for everyone who would like to have a good under-
standing of Blockchain Technology and its applications and its re-
lationship with business operations including C-Suite executives,
IT managers, marketing & salespeople, lawyers, product & project
managers, business specialists, students. It is not for programmers
who are looking for codes or exercises on the different platforms of
Blockchain.
 Acknowledgment

I am grateful for all the support I received

from my mother, my wife, and my children
while writing this book.

I dedicate this book to my late father.

 Part 1

Blockchain Technology
 1
Introduction to Blockchain

Blockchain Technology is one of the four hot technologies shaping

the future of the tech world in the coming decades, these four technol-
ogies (IBAC) are: Internet of Things (IoT), Blockchain, Artificial In-
telligence (AI), and Cybersecurity (Figure 1.1). All four technologies
are interconnected and impact each other in many ways. As Figure 1.2
shows that you can explain each technology with an analogy to human
acts: IoT: Feels, Blockchain: Remembers, AI: Thinks, and Cybersecu-
rity: Protects.

3
4 Blockchain Technology and Applications

Figure 1.1: Simplified form of IBAC

Recently, “Quantum Computing” presented itself as a new player impact-

ing IBAC in many ways, for example, Quantum Computing will make
IoT faster in processing data and extracting insights, Quantum Comput-
ing will force Blockchain to invent new encryption techniques and will
make processing data faster solving one of the main issues of Blockchain
Technology, in the case of AI Quantum Computing will make analysis
extremely faster which will, in turn, makes decisions done real-time in
many cases not possible with current computing tools, in Cybersecu-
rity, Quantum Computing will help in detection and prevention of cy-
ber-attacks and open the doors for new Quantum Encryptions algorithms
which will make it very hard for hackers to access systems and data.
 Introduction to Blockchain 5

Figure 1.2: Hot Trends of Technology in 2020 and Beyond

1.1 What is Blockchain?

Blockchain is simply a software to start with the classical definition

of Blockchain is “a distributed database existing on multiple comput-
ers at the same time. It is constantly growing as new sets of record-
ings, or ‘blocks’, are added to it. Each block contains a timestamp
and a link to the previous block, so they actually form a chain”, but
the best definition of Blockchain according to MIT is: Cryptography
+Human Logic.
If the internet is all about providing connectivity, Blockchain is
all about enabling trust. For example, imagine there are 30 people in
a classroom or an office building, with one main door and a security
6 Blockchain Technology and Applications

guard holding a list of authorized students/employees who can get into

the building, you will show your card to him/her to check the list and
if you are on the list you are in. This is the current centralized system.
With the use of Blockchain, each one of the 30 people will have a
list with pictures of people who are authorized to be in the room so if
somebody came in, and that person was not on the list, they would start
talking to each other, asking “Hey, can you please check if this person
belongs here?” That is a synchronization and referred to as gossip pro-
tocol within the Blockchain. Human logic is the list you have, and the
motion of everybody starting to talk to each other. On the top of the
current system using encryption (user name and password), we added
the human logic, consensus protocols and algorithms.

Figure 1.3: Best Definition of Blockchain

1.2 The Five Components of a Blockchain

1. Cryptography
2. P2P Network
3. Consensus Mechanism
4. Ledger
5. Validity Rules

All listed in Figure 1.4.

 Introduction to Blockchain 7

Figure 1.4: Five Components of a Blockchain

1.3 Blockchain Programming Languages

Any of the following programming languages can be used to create

Blockchain platforms:

• C++ (Bitcoin)
• Python
• JavaScript
• Solidity (Smart Contract)
• Java
• Go

Figure 1.5 shows example of a “block” programming.

8 Blockchain Technology and Applications

Figure 1.5: Example of a “block” programming

1.4 Mechanism of Blockchain Technology

First block called Genesis Block, created by the miner or validator

based on consensuses protocol, each block have five elements (Index,
Time-Stamp, Previous Hash, Hash, and Data), a Blockchain is initial-
ized with the genesis block which is the foundation of the trading sys-
tem and the prototype for the other blocks in the Blockchain. When
you change any of these data’s you will change the whole block and
the following blocks will see that something has changed, in addition
to the other nodes with copies of the blocks and the altered node will
be rejected, all nodes sync using a gossip protocol, Figure 1.6 shows
this type of mechanism.
A gossip protocol is a procedure or process of computer peer-to-peer
communication that is based on the way epidemics spread. Some distrib-
uted systems including Blockchain use peer-to-peer gossip to ensure that
data is disseminated to all members of a group. Some ad-hoc networks
have no central registry and the only way to spread common data is to
rely on each member to pass it along to their neighbors. [1]
 Introduction to Blockchain 9

Figure 1.6: Example of Blocks of Blockchain in one node

1.5 Blockchain vs. Traditional Database

There are many differences between Blockchain and Traditional Data-

base and Table 1.1 summarizes them:

Blockchain vs. Traditional Database

Characteristics Blockchain Database

Authority Decentralized Centralized and controlled by the admin

Architecture Distributed Client-server

Data Handling Read and Write CRUD (Create, Read, Update, Delete)

Integrity High Can be altered by hackers

Transparency High Controlled by the admin

Cost High Low

Performance Slow Very fast

Table 1.1: Blockchain vs. Traditional Database

10 Blockchain Technology and Applications

1.6 The Stack of Blockchain

Like any other technology, Blockchain can be defined by its stack, the
following diagram explains it and it is worth mentioning to emphasize
the importance of each layer as an opportunity for improvement and new
business (startups), for example, UI/UX for different devices including
smartphones, tablets, desktops, and laptops, in addition to the wide field
of new consensus protocols for specific applications and industries, the
introduction of smart contracts in the design process to avoid any sur-
prises, and secure ways to connect the stack to the internet.

Figure 1.7: Blockchain Stack

1.7 Blockchain Tracks

To understand the future direction of Blockchain technology, we need to

recognize the three tracks (Figure 1.8) of Blockchain technology:

• Pure R&D Track: This track is focused on understanding

what it means to develop a Blockchain-based system. Ideal-
ly, working on real use-cases, the ultimate goal is investiga-
 Introduction to Blockchain 11

tion and learning, and not necessarily delivery of a working

system.
• Immediate Business Benefit Track: This track covers two bas-
es: (1) learning how to work with this promising technology
and (2) delivering an actual system that can be deployed in a
real business context. Many of these projects are intra-com-
pany.
• Long-Term Transformational Potential Track: This is the track
of the visionaries, who recognize that to realize the true value
of Blockchain-based networks means reinventing entire pro-
cesses and industries as well as how public-sector organiza-
tions function.

Figure 1.8: Tracks of Blockchain Technology

12 Blockchain Technology and Applications

1.8 Challenges facing Blockchain Technology

Every new technology face challenge and Blockchain is not an excep-

tion, the following is a list of both technical and non-technical chal-
lenges (Figure 1.9):

Technical Challenges

• Scalability
• Processing Time
• Processing Power
• 51% Attack
• Double Spending
• Bad Smart Contracts
• Storage
• First Mile and Last Mile problem (Data before and after going
through the Blockchain)

Non-Technical Challenges

• Regulations
• Public perception (Blockchain is Bitcoin)
• Lack of skilled staff

1.9 Types of Blockchain Networks

There are three types of Blockchain Networks (Figure 1.10) :

• Public: a public Blockchain is the one where everyone can

see all the transactions, anyone can expect their transaction to
appear on the ledger and finally anyone can participate in the
consensus process.
 Introduction to Blockchain 13

Figure 1.9: Challenges Facing Blockchain

Figure 1.10: Types of Blockchain Networks

• Federated/Hybrid: federated/hybrid Blockchain does not al-
low everyone to participate in the consensus process. Indeed,
only a limited number of nodes are given permission to do so.
For instance, in a group of 20 pharmaceutical companies, we
could imagine that for a block to be valid, 15 of them have to
agree. The access to the Blockchain, however, can be public or
restricted to the participants.
• Private: private Blockchains are generally used inside a com-
pany. Only specific members are allowed to access it and carry
out transactions.
 2
Consensus Protocols

A consensus protocol may be defined as the mechanism through

which a Blockchain network reaches consensus. Blockchains are
built as distributed systems and, since they do not rely on a central
authority, the distributed nodes need to agree on the validity of trans-
actions.
This is where consensus protocols come into play. They assure that
the protocol rules are being followed and guarantee that all transactions
occur in a trustless way.

15
16 Blockchain Technology and Applications

2.1 Types of Consensus Algorithms [2]

Below is a list of consensus algorithms, there are many other algo-

rithms or protocols beside the ones listed here depending on the specif-
ic application and use case of Blockchain. Proof of X, where “X” can
be any requirements, is the most exciting field of research for students
and researches where creativity plays a major part in creating new con-
sensus algorithms.

2.1.1 Proof of Work

Most cryptocurrencies including Bitcoin run on “proof of work”. Proof

of work as a process has the following steps to it:

• The miners solve cryptographic puzzles to “mine” a block to

add to the Blockchain.
• This process requires an immense amount of energy and com-
putational usage.
• The puzzles have been designed in a way that makes it hard
and taxing on the system.
• When a miner solves the puzzle, they present their block to the
network for verification.

Mining serves as two purposes:

1. To verify the legitimacy of a transaction, or avoiding the so-

called double-spending;
2. To create new digital currencies by rewarding miners for per-
forming the previous task.

The miner must find a result starting with a number of zeroes.

The greater the number of zeroes, the more difficult it is for the
miner to find the result and the more it will have to try his luck before
finding it.
 Consensus Protocols 17

Yet the number of zeroes (and therefore the difficulty) is adjusted

to the number of miners on the network (and their computer capacity
or hashing power) to be sure that it will take an average of 10 minutes
to find the solution. Once it has found this figure, the other members of
the network can instantly check the solution.
Since the miner may not find the Input data (“input”) from the re-
sult (“output”), he/she is going to try his/her luck until he located the
Input data enabling him/her to obtain the output data corresponding to
the objective of difficulty required, which is the number starting with a
number of zeroes sufficient to be validated by the Protocol Bitcoin and
thus be added to the Blockchain.
Figure 2.1 is an example of the mathematical puzzle, the goal is to
have 3 leading zeroes:

This city is amazing1= 0ndldeouklewnlf88980378008mmkjj…

This city is amazing2= 0ljljfdijirejopnjojnojre9980089knlkd9…

This city is amazing3= 0uuuiiasmlmnp122339u0unnklmnkj…

This city is amazing409876345921 = 000jukutyghi7j6544ghjjj239…

Figure 2.1: Example of Mathematical puzzle in Proof of Work (PoW) Protocol

2.1.2 Proof of Stake

Proof of stake will make the entire mining process virtual and replace
miners with validators.
18 Blockchain Technology and Applications

This is how the process will work:

1. The validators will have to lock up some of their coins as stake.

2. After that, they will start validating the blocks. Meaning, when
they discover a block that they think can be added to the chain,
they will validate it by placing a bet on it.
3. If the block gets appended, then the validators will get a re-
ward proportionate to their bets.

Proof of stake is a different way to validate transactions to achieve

the distributed consensus. It is still an algorithm, and the purpose is the
same as the proof of work, but the process to reach the goal is quite
different.
Unlike the proof of work, where the algorithm rewards miners who
solve mathematical problems with the goal of validating transactions
and creating new blocks, with the proof of stake, the creator of a new
block is chosen in a deterministic way, depending on its wealth, also
defined as stake. No block rewards.
Also, all the digital currencies are previously created in the begin-
ning, and their number never changes. This means that in the PoS sys-
tem there is no block reward, so, the miners take the transaction fees.

2.1.3 Delegated Proof of Stake (DPoS)

DPoS is similar to PoS in regard to staking but has a different and more
democratic system that is said to be fair. Like PoS, token holders stake
their tokens in this consensus protocol.
Instead of the probabilistic algorithm in PoS, token holders within
a DPoS network are able to cast votes proportional to their stake to
appoint delegates to serve on a panel of witnesses — these witnesses
secure the Blockchain network. In DPoS, delegates do not need to have
a large stake, but they must compete to gain the most votes from users.
It provides better scalability compared to PoW and PoS as there are
fully dedicated nodes who are voted to power the Blockchain. Block
 Consensus Protocols 19

producers can be voted in or out at any time, and hence the threat of tar-
nishing their reputation and loss of income plays a major role against
bad actors.
It’s clear, DPoS seem to result in a semi-centralized network, but it
is traded off for scalability.

2.1.4 Proof of Authority (PoA)

PoA is known to bear many similarities to PoS and DPoS, where only
a group of pre-selected authorities (called validators) secure the Block-
chain and are able to produce new blocks.
New blocks on the Blockchain are created only when a superma-
jority is reached by the validators. The identities of all validators are
public and verifiable by any third party—resulting in the validator’s
public identity performing the role of proof of stake.
As these validators’ identities are at stake, the threat of their iden-
tity being ruined incentivizes them to act in the best interest of the
network. Due to the fact that PoA’s trust system is predetermined, con-
cerns have been raised that there might be a centralized element with
this consensus algorithm.
However, it can be argued that semi-centralization could actually
be appropriate within private/consortium Blockchains.

2.1.5 Proof of Assignment (PoA)

Similarly, to DPoS, the proof of assignment model establishes several

trusted nodes within the network, but only those nodes store the entire
ledger. By allowing other network contributors to participate without
ledger storage.

2.1.6 Byzantine Fault Tolerance (BFT)

BFT is the most popular permissioned (private) Blockchain platform

protocol and is currently used by Hyperledger Fabric.
20 Blockchain Technology and Applications

To understand the Byzantine Fault Tolerance algorithm, you need

to understand the Byzantine generals’ problem. Imagine a group of
Byzantine generals and their armies have surrounded a castle and pre-
paring to attack.
To win, they must attack simultaneously. But they know that there
is at least one traitor among them. So, how do they launch a successful
attack with at least one, unknown, bad actor in their midst?
The analogy is clear: In any distributed computing environ-
ment—Blockchain—there is a risk that rogue actors could wreak
havoc. So, its reliance on community consensus makes Byzantine
faults an especially thorny problem for Blockchain. PoW generally
provides a solution: “Byzantine fault tolerance.” But the drawbacks
may not be worth it.
That is where the Byzantine Fault Tolerance algorithm comes into
play. It is considered the first practical solution to achieving consensus
that overcomes Byzantine failure.
A consensus decision is determined based on the total decisions
submitted by all the generals.
It addresses the challenges without the expenditure of energy re-
quired by proof of work. But it works only on a permissioned Block-
chain because there is no anonymity.

2.1.7 Leased Proof of Stake (LPoS)

Leased Proof of Stake is an advanced version of the Proof of Stake

(PoS) algorithm. Generally, in the Proof of Stake algorithm, every node
holds a certain amount of cryptocurrency and is suitable to add the next
block into the Blockchain.
However, with Leased Proof of Stake, users are able to lease their
balance to full nodes. The higher the amount that is leased, the better
the chances are that the full node will be selected to produce the next
block. If the node is selected, the user will receive some part of the
transaction fees that are collected by the node.
 Consensus Protocols 21

2.1.8 Proof of Elapsed Time (PoET)

PoET is a consensus mechanism algorithm that is often used on the

permissioned (private) Blockchain networks to determine the mining
rights or the block winners on the network. Based on the basis of a fair
lottery system where every single node is equally likely to be a winner,
the PoET mechanism is based on spreading the chances of winning
fairly across the largest possible number of network users.
The timer is different for every node. Every user in the network is
assigned a random amount of time to wait, and the first user to finish
waiting gets to commit the next block to the blockchain. Compare to
pulling straws, but this time, the shortest stem in the stack wins the
lottery.

2.1.9 Proof of Activity (PoA)

Proof of activity is one of the many Blockchain consensus algorithms

used to assure that all the transactions following on the Blockchain are
genuine and all users arrive at a consensus on the precise status of the
public ledger.
Proof of activity is a mixed approach that conjoins the other two
commonly used algorithms—proof of work (POW) and proof of stake
(POS).

2.1.10 Proof of Importance (PoI)

Proof of Importance is a consensus algorithm similar to PoS. Nodes

“vest” currency to participate in the creation of blocks. Unlike PoS,
Proof of Importance quantifies a user’s support of the network.

2.1.11 Proof of Capacity (PoC)

Proof of capacity (POC) is a consensus mechanism algorithm used in

Blockchains that allows the mining devices in the network to use their
22 Blockchain Technology and Applications

usable hard drive space to decide the mining rights, instead of using the
mining device’s computing power (as in the proof of work algorithm)
or the miner’s stake in the crypto coins (as in the proof of stake algo-
rithm).

2.1.12 Proof of Burn (PoB)

Unlike PoW, Proof of Burn (PoB) is a consensus mechanism that does

not waste energy.
The real computing power is not critical to avoid manipulation. In
this case, the nodes destroy or burn their tokens if they want to create
the next blocks and receive a reward.
With PoB, every time a user decides to destroy a part of their to-
kens, they buy a part of the virtual computing power that gives them the
ability to validate the blocks. The more tokens they burn, the higher the
possibility of receiving the reward.
 3
Key Blockchain Use Cases

Blockchain use cases fall into two fundamental categories: record keep-
ing, static registries of data about highly valuable assets, and transac-
tions, dynamic registries of the exchange of tradeable assets:

• Record keeping use cases include the long-term safeguarding

of data on valuable physical and digital assets, keeping track of
identity-related information about individuals and executable
smart contracts based on pre-defined conditions.

23
24 Blockchain Technology and Applications

• Transaction use cases include keeping track of data about fre-

quently exchanged assets, near-real-time digital payments, and
emerging digital assets.

Here are four ways that Blockchain is actually useful to avoid pilot
to production failure.

• The first use case is for guaranteed and verified data dissemi-
nation.
• The second use case is an asset and product tracking.
• The third use case is asset transfer.
• The fourth use case is certified claims.

Next is a comprehensive list of Blockchain applications in differ-

ent industries. [3]

3.1 How Blockchain Can Help Advertising

For buy-side transparency: Blockchain for auditing

For sell-side transparency: Proof of View (PoV) to fight fraud

• PoV only records views from signed-in users, since the view-
er’s unique ID is part of the information required for a view to
be considered valid.
• Since most people are only able to watch one video at a time,
the PoV will invalidate views from a user who is streaming
multiple videos simultaneously.
• The PoV technology confirms that a video is actually being
streamed by capturing information about the current frame at
random times.
• Using smart contracts to document views and who gets paid
 Key Blockchain Use Cases 25

3.2 Verifying the Authenticity of Returned Drugs

In the Pharma industry, drugs are frequently returned to the pharma-

ceutical manufacturers.
While the proportion of the returned drugs is small compared to
the sales (about 2–3% of sales), the per year volume is in the range of
$7–10 billion.
Currently, big pharma working with tech companies to develop
Pharma Blockchain Proof of Concept (POC) app for this use case:

The system generates unique identifiers for a drug package. When

a manufacturer ships a package, they register the item on the Pharma
POC Blockchain, with the four pieces of information generated by the
ATTP; the item number (based on GS1 standard), a serial number, a
batch number, and expiration date. Using this PoC tracking will be
easy, efficient and fast.

3.3 Transparency and traceability of consent in

Clinical Trials

Informed patient consent involves making the patient aware of each

step in the Clinical Trial process including any possible risks posed by
the study. Clinical trial consent for protocols and their revisions need to
be transparent for patients and traceable for stakeholders.
However, in practice, the informed consent process is difficult to
handle in a rigorous and satisfactory way. The FDA reports that almost
10% of the trials they monitor feature some issues related to consent
collection.
These include: failure to obtain written informed consent, unap-
proved forms, invalid consent document, failure to re-consent to a re-
vised protocol and missing Institutional Review Board approval to pro-
tocol changes, amongst others. Frequently also there are reported cases
of document fraud such as issues of backdating consent documents.
26 Blockchain Technology and Applications

Blockchain technology provides a mechanism for unfalsifiable

time-stamping of consent forms, storing and tracking the consent in
a secure and publicly verifiable way, and enabling the sharing of this
information in real-time.
Additionally, smart contracts can be bound to protocol revisions,
such that any change in the clinical trial protocol requires the patient
consent needing renewal.

3.4 Insurance

Arguably, the greatest Blockchain application for insurance is through

smart contracts. Such contracts powered by Blockchain could allow
customers and insurers to manage claims in a truly transparent and
secure manner, according to Deloitte.
All contracts and claims could be recorded on the Blockchain and
validated by the network, which would eliminate invalid claims.
For example, the Blockchain would reject multiple claims on the
same accident.

3.5 Real Estate

The average homeowner sells his or her home every 5 to 7 years, and
the average person will move nearly 12 times during his or her lifetime.
With such movement, Blockchain could certainly be of use in the real
estate market.
It would expedite home sales by quickly verifying finances, would
reduce fraud thanks to its encryption, and would offer transparency
throughout the entire selling and purchasing process.
 Key Blockchain Use Cases 27

3.6 Energy

Blockchain technology could be used to execute energy supply trans-

actions, but it could further provide the basis for metering, billing, and
clearing processes, according to PWC.
Other potential applications include documenting ownership, asset
management, origin guarantees, emission allowances, and renewable
energy certificates.

3.7 Record Management

National, state, and local governments are responsible for maintaining

individuals’ records such as birth and death dates, marital status, or
property transfers.
Yet managing this data can be difficult, and to this day some of
these records only exist in paper form and sometimes, citizens have to
physically go to their local government offices to make changes, which
are time-consuming, unnecessary, and frustrating. Blockchain technol-
ogy can simplify this record-keeping.

3.8 Crowdfunding

Blockchain technology, among all its benefits, can be best put to use
by providing provable milestones as contingencies for giving, with
smart contracts releasing funds only once milestones establish that the
money is being used the way that it is said to be. By providing greater
oversight into individual campaigns and reducing the amount of trust
required to donate in good conscience, crowdfunding can become an
even more legitimate means of funding a vast spectrum of projects and
causes, Figure 3.1 shows How Blockchain Is Revolutionizing Crowd-
funding. [4]
28 Blockchain Technology and Applications

Figure 3.1: Blockchain and Crowdfunding

How Blockchain helps Crowdfunding

1. The Magic of Decentralization: Startups are not going to rely

on any platform or combination of platforms to enable creators
to raise funds. Startups no longer be beholden to the rules, reg-
ulations, and whims of the most popular crowdfunding plat-
forms on the internet. Literally, any project has a chance of
getting visibility and getting funded. It also eliminates the
problem of fees. While blockchain upkeep does cost a bit of
money, it will cut back drastically on transaction fees. This
makes crowdfunding less expensive for creators and investors.
[5]

2. Tokenization: Instead of using crowdfunding to enable pre-

orders of upcoming tangible products, blockchain could rely
on asset tokenization to provide investors with equity or some
similar concept of ownership, for example Initial Coin Offer-
ing (ICO). That way, investors will see success proportional
to the eventual success of the company. This could potentially
 Key Blockchain Use Cases 29

open whole new worlds of investment opportunity. Startups

could save money on hiring employees by compensating them
partially in fractional ownership of the business, converting it
into an employee-owned enterprise. Asset tokens become their
own form of currency in this model, enabling organizations to
do more like hire professionals like marketers and advertisers.
[5]

3. High availability and Immediate provision: Any project us-

ing a blockchain-based crowdfunding model can potentially
get funded. Also, any person with an internet connection can
contribute to those projects. Blockchain-based crowdfunders
wouldn’t have to worry about the “fraud” that have plagued
modern-day crowdfunding projects. Instead contributors will
immediately receive fractional enterprise or product owner-
ship. [5]

4. Smart Contracts to Enforce Funding Terms: There are several

ways in which blockchain-enabled smart contracts could pro-
vide greater accountability in crowdfunding. Primarily, these
contracts would provide built-in milestones that would prevent
funds from being released without provenance as to a project
or campaign’s legitimacy. This would prevent large sums of
money from being squandered by those who are either ill-in-
tended or not qualified to be running a crowdfunding campaign
in the first place. [4]

3.9 Blockchain Technology and Supply Chain

Management

Managing today’s supply chains is extremely complex. For many

products, the supply chain can span over hundreds of stages, multiple
30 Blockchain Technology and Applications

geographical (international) locations, a multitude of invoices and pay-

ments, have several individuals and entities involved, and extend over
months of time. Due to the complexity and lack of transparency of the
current supply chains, there is high interest in how Blockchains might
transform the supply chain and logistics industry. [6]
This interest rose from the long list of issues with current Supply
Chain Management (SCM) including [7]:

• Difficulty of Tracking
• Lack of Trust
• High Costs: procurement costs, transportation costs, inventory
costs and quality costs
• Globalization Barriers

3.9.1 Blockchain and SCM

Blockchain technology and supply chain management systems were

built for each other in many ways. In fact, several of the flaws of the
current supply chains can be easily relieved by using Blockchain
technology. Supply Chain Management (SCM) is one of the fore-
most industries that Blockchain can disrupts and changes for the
better. [7]
With Blockchain technology properties of decentralization, trans-
parency, and immutability, it is the perfect tool to save the supply chain
management industry. Subsequently, Blockchain can increases the ef-
ficiency and transparency of supply chains and positively impact ev-
erything from warehousing to delivery to payment. Most importantly,
Blockchain provides consensus—there is no dispute in the chain re-
garding transactions because all entities on the chain have the same
version of the ledger [8].
Blockchain can have a big impact on SCM in two dimensions
Traceability, and Transparency (Figure 3.2):
 Key Blockchain Use Cases 31

Figure 3.2: Blockchain and Supply Chain Management

Traceability Blockchain improves operational efficiency by mapping

and visualizing enterprise supply chains. A growing number of con-
sumers demand sourcing information about the products they buy.
Blockchain helps organizations understand their supply chain and en-
gage consumers with real, verifiable, and immutable data [9].

Transparency Blockchain builds trust by capturing key data points,

such as certifications and claims, and then provides open access to this
data publicly. Once registered on the Blockchain, its authenticity can
be verified by a third-party. The information can be updated and vali-
dated in real-time. Plus, the strong security from its innate cryptogra-
phy will eliminate unnecessary audits, saving copious amounts of time
and money [9].
Applying Blockchain technology to SCM can results in tremen-
dous benefits, including [9]:
32 Blockchain Technology and Applications

• Less Time Delays

• Less Human Error
• Less Costs
 4
Important Topics in Blockchain

There are many topics related to Blockchain are equally important as the
technology itself, because they solve specific problems and challenges fac-
ing Blockchain, including Forks, Sharding, ZKP, and Smart Contracts.

4.1 Soft Fork vs. Hard Fork

A fork is a change to the protocol or a divergence from the previous ver-

sion of the Blockchain. When a new, alternative, block is generated by

33
34 Blockchain Technology and Applications

a rogue miner, the system reaches consensus that this block is not valid,
and this ‘orphan block’ is very soon abandoned by the other miners.
Forks in Blockchain are of two types: Soft Fork and Hard Fork.

4.1.1 Soft Fork

A soft fork is a software upgrade that is backward compatible with

older versions.
This means that participants that did not upgrade to the new soft-
ware will still be able to participate in validating and verifying trans-
actions.
It is much easier to implement a soft fork as only a majority of par-
ticipants need to upgrade the software. All participants, whether they
have updated or not will continue to recognize new blocks and main-
tain compatibility with the network.
A point to take note, however, is that the functionality of a non-up-
graded participant is affected. An example of a soft fork is when the
new rule states that the block size will be changed from the current
1MB (1,000KB) to 800KB.
Non-upgraded participants will still continue to see that the incom-
ing new transactions are valid. The issue is when non-upgraded miners
try to mine new blocks, their blocks (and thus, efforts) will be rejected
by the network.
Hence, soft forks represent a gradual upgrading mechanism as
those who have yet to upgrade their software is incentivized to do so,
or risk having reduced functionalities.

4.1.2 Hard Fork

Hard forks refer to a software upgrade that is not compatible with older
versions.
All participants must upgrade to the new software to continue
participating and validating new transactions. Those who did not up-
grade would be separated from the network and cannot validate the
 Important Topics in Blockchain 35

new transactions. This separation results in a permanent divergence

of the Blockchain.
As long as there is support in the minority chain – in the form of
participants mining in the chain – the two chains will concurrently ex-
ist. Example: Ethereum Classic and Bitcoin Cash.

4.1.3 Ethereum Classic

Ethereum had a hard fork to reverse the effects of a hack that occurred
in one of their applications (called the Decentralized Autonomous Or-
ganization or simply, DAO).
However, a minority portion of the community was philosophi-
cally opposed to changing the Blockchain at any costs, to preserve its
nature of immutability.
As Ethereum’s core developers and the majority of its community
went ahead with the hard fork, the minority that stayed behind and did
not upgrade their software continued to mine what is now known as
Ethereum Classic (ETC).
It is important to note that since the majority transited to the new
chain, they still retained the original ETH symbol, while the minority
supporting the old chain were given the term Ethereum Classic or ETC.

4.1.4 Bitcoin Cash

Bitcoin Cash is a cryptocurrency that is a fork of Bitcoin. Bitcoin Cash

is a spin-off or altcoin that was created in 2017. In 2018, Bitcoin Cash
subsequently split into two cryptocurrencies: Bitcoin Cash, and Bit-
coin. Bitcoin Cash is sometimes also referred to as Bcash. [10]
Bitcoin was forked to create Bitcoin Cash because the developers
of Bitcoin wanted to make some important changes to Bitcoin. The
developers of the Bitcoin community could not come to an agreement
concerning some of the changes that they wanted to make. So, a small
group of these developers forked Bitcoin to create a new version of the
same code with a few modifications. [11]
36 Blockchain Technology and Applications

The changes that make all the difference between Bitcoin Cash vs
Bitcoin are these (Table 4.1):

• Bitcoin Cash has cheaper transfer fees, so making transactions

in BCH will save you more money than using BTC.
• BCH has faster transfer times. So, you do not have to wait for
10 minutes it takes to verify a Bitcoin transaction!
• BCH can handle more transactions per second. This means
that more people can use BCH at the same time than they can
with BTC.

Table 4.1 compared both cryptocurrencies. [12]

Bitcoin Bitcoin Cash

Standard Block Size: 1MB Max PowerBlocks: 8 MB Max

All transactions signatures must

Transactions Signatures can be dis-
be validated and secured on the
carded from the Blockchain
Blockchain

Single Centralized Development Team Multiple Independent Development

and Client Implementation Teams and client implementations

Table 4.1: Bitcoin vs. Bitcoin Cash

4.2 Zero-Knowledge Proof (ZKP)

In cryptography, a zero-knowledge proof or zero-knowledge protocol

is a method by which one party (the prover) can prove to another party
(the verifier) that they know a value x, without conveying any informa-
tion apart from the fact that they know the value x.
 Important Topics in Blockchain 37

Zero-knowledge proof is the ability to prove a secret without re-

vealing what the secret is.

4.2.1 How does zero-knowledge proof work?

The best way to explain the process of zero-knowledge proofs is with

a non-digital example which is, of course, far from the complexity of
zero-knowledge proofs but very well explains how they work.

• Scenario 1
Let us assume there is a blind person and two balls, one black and one
white. You then would like to prove to the blind person that these balls
are indeed of different colors without revealing the individual colors of
each ball.
For this, you ask the blind person to hide both balls under the table
and bring one ball back up for you to see.
After that, he should hide the ball back under the table and then
either show the same ball or the other one. As a result, you can prove
to the blind person that the colors are different by saying whether he
changed the balls under the table or not.

Figure 4.1: Cave example of ZKP

38 Blockchain Technology and Applications

• Scenario 2
Pretend that there’s a circular cave, with only one entrance or exit and
at the back of this circular cave there’s a door that can be unlocked us-
ing a secret code entered onto a keypad (Figure 4.1).
If I want to prove to you that I know the unlock code without re-
vealing that unlock code to you, all I need to show is that I can walk
into one end of the cave, open the door, and come out the other end.
If I have successfully demonstrated that, then you know without a
doubt I have been able to unlock that door, but yet I have not revealed
that unlock code to you.

4.2.2 Zero-knowledge proofs in Blockchain

Zero-knowledge protocols enable the transfer of assets across a dis-

tributed, peer-to-peer Blockchain network with complete privacy. In
regular Blockchain transactions, when an asset is sent from one party
to another, the details of that transaction are visible to every other party
in the network.
By contrast, in a zero-knowledge transaction, the others only know
that a valid transaction has taken place, but nothing about the sender,
recipient, asset class and quantity. The identity and amount being spent
can remain hidden. For example, a user may make a request to send
another user some money.
The Blockchain naturally wants to make sure, before it commits
this transaction, that the user who sends the money has enough money
to send.
However, the Blockchain doesn’t really need to know or care who
is spending the money, or how much total money they have. Hyper-
ledger Fabric and Ethereum have the implementation of Zero-Knowl-
edge Proofs under development.

4.2.3 ZKP advantages

1. Zero-knowledge transfer as the name suggests

 Important Topics in Blockchain 39

2. Computational efficiency- No Encryption

3. No degradation of the protocol

4.3 Sharding

Sharding: a solution to the scalability, latency and transaction through-

put issues in Blockchain Sharding is a concept that is widely used in
databases, to make them more efficient.
A shard is a horizontal portion of a database, with each shard
stored in a separate server instance. This spreads the load and makes
the database more efficient. In the case of the Blockchain, each node
will have only a part of the data on the Blockchain, and not the entire
information, when sharding is implemented.
Nodes that maintain a shard maintain information only on that
shard in a shared manner, so within a shard, the decentralization is still
maintained. However, each node does not load the information on the
entire Blockchain, thus helping in scalability.
Blockchains that implement sharding use proof of stake (PoS) con-
sensus algorithm.

4.3.1 What is Sharding in Blockchain?

In order to tackle the currently persisting issues with the validation

mechanisms, a new kind of validation protocol has been created, i. e.,
Sharding. As part of Sharding only a small subset of nodes (called a
Shard), out of the entire network nodes that will carry out validation of
every single transaction. Sharding schema that is comprised of a cluster
isolated Shards.
How a country gets divided into multiple states, in order to have a
better governance system, the same way the Ethereum network will be
logically divided into multiple Shards.
Transactions created by users or a particular Shard will be validat-
ed by miner’s percent in that Shard alone.
40 Blockchain Technology and Applications

4.3.2 Drawbacks of Sharding

If you think Sharding is the holy grail of all the scaling and performance
issues, then you are mistaken. Sharding does come with its share of is-
sues. The biggest flaw with Sharding is that inter Shard communication
is not very easy.
What it basically means is that, as long as communication occurs
with a Shard, the picture remains rosy and nice. But if a user (for e.g.
Bob) who belongs to Shard-1 wants to transact with another user (say
John) from Shard-2, the transaction would require some special proto-
cols to complete the transaction.
The developer community would be the most affected lot, as they
will have to program their codes to handle this.

4.5 What Is a 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. The code and the agreements contained therein exist across
a distributed, decentralized Blockchain network. The code controls
the execution, and transactions are trackable and irreversible. Smart
contracts permit trusted transactions and agreements to be carried
out among disparate, anonymous parties without the need for a cen-
tral authority, legal system, or external enforcement mechanism.
[13]
Smart contracts can be termed as the most utilized application
of Blockchain technology in current times. The concept of smart
contracts was introduced by Nick Szabo, a legal scholar, and cryp-
tographer in the year 1994. He came to the conclusion that any de-
centralized ledger can be used as self-executable contracts which,
later on, were termed as Smart Contracts. These digital contracts
could be converted into codes and allowed to be run on a Block-
chain.
 Important Topics in Blockchain 41

Smart contracts are one of the most successful applications of the

Blockchain technology. Using smart contracts in place of traditional
ones can reduce the transaction costs significantly. Ethereum is the
most popular Blockchain platform for creating smart contracts. It sup-
ports a feature called Turing-completeness that allows the creation of
more customized smart contracts. Smart contracts can be applied in
different industries and fields such as smart homes, e-commerce, real
estate, and asset management, etc. [14]
Smart contracts are automatically executable lines of code that
are stored on a Blockchain which contain predetermined rules (Figure
4.2). When these rules are met, these codes execute by themselves and
provide the output. In the simplest form, smart contracts are programs
that run according to the format that they’ve been set up by their cre-
ator. Smart contracts are most beneficial in business collaborations in
which they are used to agree upon the decided terms set up by the
consent of both the parties. This reduces the risk of fraud and as there
is no third-party involved, the costs are reduced too. To summarize,
smart contracts usually work on a mechanism that involves digital as-
sets along with multiple parties where the involved participants can
automatically govern their assets. These assets and be deposited and
redistributed among the participants according to the rules of the con-
tract. Smart contracts have the potential to track real-time performance
and save costs.
Smart Contracts Properties:

• Self-verifiable
• Self-executable
• Tamper Proof
42 Blockchain Technology and Applications

Example of Smart Contracts Code [15]

pragma solidity >=0.4.0 <0.7.0;

contract SimpleStorage {

unit storedData;

function set(unit x) public {

storedData = x;

function get() public view returns (unit) {

return storedData;

Figure 4.2: Example of Smart Contract Code using Solidity (storage contract)
 5
Decentralized Applications – DApps

Decentralized applications (DApps) are applications that run on a P2P

(Peer-to-Peer) network of computers rather than a single computer.
DApps, have existed since the advent of P2P networks. They are a type
of software program designed to exist on the Internet in a way that is
not controlled by any single entity. As opposed to simple smart con-
tracts, in the classic sense of Bitcoin, which sends money from A to
B, DApps have an unlimited number of participants on all sides of the
market.

43
44 Blockchain Technology and Applications

5.1 Difference between DApps & Smart Contracts

DApps are a ‘Blockchain-enabled’ website, where the Smart Contract

is what allows it to connect to the Blockchain.
The easiest way to understand this is to understand how traditional
websites operate. The traditional web application uses HTML, CSS,
and JavaScript to render a page. It will also need to grab details from a
database utilizing an API. When you go onto websites like Facebook,
the page will call an API to grab your personal data and display them
on the page (Figure 5.1).

Backend
Front End API
Database

Figure 5.1: Traditional Website Process

DApps are similar to a conventional web application. The front

end uses the exact same technology to render the page. The one critical
difference is that instead of an API connecting to a Database, you have
a Smart Contract connecting to a Blockchain (Figure 5.2).

Smart
Front End Blockchain
Contract

Figure 5.2: DApp enabled website

 Decentralized Applications – DApps 45

As opposed to traditional, centralized applications, where the back-

end code is running on centralized servers, DApps have their backend
code running on a decentralized P2P network.
Decentralized applications consist of the whole package, from
backend to frontend.
But the smart contract is only one part of the DApp:

• Frontend (what you can see) and Backend (the logic on the
background).
• A smart contract, on the other hand, consists only of the back-
end, and often only a small part of the whole DApp.

That means if you want to create a decentralized application on

a smart contract system, you have to combine several smart contracts
and rely on 3rd party systems for the front-end.
DApps can have frontend code and user interfaces written in any
language (just like an App) that can make calls to its backend. Further-
more, its frontend can be hosted on decentralized storage.

5.2 Blockchain DApps

For an application to be considered a DApp in the context of Block-

chain, it must meet the following criteria:

1. Application must be completely open-source

It must operate autonomously, and with no entity controlling the
majority of its tokens. The application may adapt its protocol in
response to proposed improvements and market feedback, but the
consensus of its users must decide all changes.
46 Blockchain Technology and Applications

2. Application’s data and records of operation must be

cryptographically stored
Must be cryptographically stored in a public, decentralized Block-
chain in order to avoid any central points of failure.

3. Application must use a cryptographic token

(Bitcoin or a token native to its system) which is necessary for ac-
cess to the application and any contribution of value from (miners)
should be rewarded with the application’s tokens.

4. Application must generate tokens

According to a standard cryptographic algorithm acting as a proof
of the value, nodes are contributing to the application (e.g.: Bitcoin
uses the Proof of Work Algorithm).

6.3 Example: Ethereum DApps

Ethereum provides developers with a foundational layer: a Blockchain

with a built-in Turing-complete programming language, allowing any-
one to write smart contracts and decentralized applications where they
can create their own arbitrary rules for ownership, transaction formats,
and state transition functions.
In general, there are three types of applications on top of Ethereum.

1. Financial applications
Providing users with more powerful ways of managing and enter-
ing into contracts using their money.

2. Semi-financial applications
Where money is involved, but there is also a heavy non-monetary
side to what is being done
 Decentralized Applications – DApps 47

3. Governance Applications
Such as online voting & decentralized governance that are not fi-
nancial at all.
 Part 2

Blockchain Applications
 6
Using Blockchain to Secure IoT

In an IoT world, information is the “fuel” that is used to change the

physical state of environments through devices that are not general-pur-
pose computers but, instead, devices and services that are designed for
specific purposes. As such, the IoT is at a conspicuous inflection point
for IT security. [16]

51
52 Blockchain Technology and Applications

6.1 Challenges to Secure IoT Deployments

Regardless of the role, your business has within the Internet of Things
ecosystem – device manufacturer, solution provider, cloud provider,
systems integrator or service provider – you need to know how to get
the greatest benefit from this new technology that offers such highly
diverse and rapidly changing opportunities.
Handling the enormous volume of existing and projected data
is daunting. Managing the inevitable complexities of connecting to
a seemingly unlimited list of devices is complicated. And the goal
of turning the deluge of data into valuable actions seems impossi-
ble due to the many challenges. The existing security technologies
will play a role in mitigating IoT risks, but they are not enough.
The goal is to get data securely at the right place, at the right time
and in the right format, and it is easier said than done for many
reasons.

6.2 Dealing with the Challenges and Threats

Gartner reported that more than 20% of businesses need to deploy se-
curity solutions for protecting their IoT devices and services. IoT de-
vices and services will expand the surface area for cyber-attacks on
businesses, by turning physical objects that used to be offline into on-
line assets communicating with enterprise networks. Businesses will
have to respond by broadening the scope of their security strategy to
include these new online devices.
Businesses will have to tailor security to each IoT deployment ac-
cording to the unique capabilities of the devices involved and the risks
associated with the networks connected to those devices. BI Intelli-
gence expects spending on solutions to secure IoT devices and systems
to increase 5-fold over the next 4 years.
 Using Blockchain to Secure IoT 53

6.3 The Optimum Platform

Developing solutions for the Internet of Things requires unprecedented

collaboration, coordination and connectivity for each piece in the system,
and throughout the system as a whole. All devices must work together
and be integrated with all other devices, and all devices must communi-
cate and interact seamlessly with connected systems and infrastructures
in a secure way. It is possible, but it can be expensive, time-consuming,
and difficult unless the new line of thinking and a new approach to IoT
security emerged away from the current centralized model.
The current IoT ecosystems rely on centralized, brokered commu-
nication models, otherwise known as the server/client paradigm. All
devices are identified, authenticated and connected through cloud serv-
ers that sport huge processing and storage capacities. The connection
between devices will have to exclusively go through the Internet, even
if they happen to be a few feet apart.
While this model has connected generic computing devices for de-
cades and will continue to support small-scale IoT networks as we see
them today, it will not be able to respond to the growing needs of the
huge IoT ecosystems of tomorrow.
Existing IoT solutions are expensive because of the high infra-
structure and maintenance cost associated with centralized clouds,
large server farms and networking equipment. The sheer amount of
communications that will have to be handled when IoT devices grow
to tens of billions will increase those costs substantially.
Even if the unprecedented economical and engineering challenges
are overcome, cloud servers will remain a bottleneck and point of fail-
ure that can disrupt the entire network. This is especially important as
more critical tasks.
Moreover, the diversity of ownership of devices and their support-
ing cloud infrastructure makes machine-to-machine (M2M) communi-
cations difficult. There is no single platform that connects all devices
and no guarantee that cloud services offered by different manufacturers
are interoperable and compatible. [17]
54 Blockchain Technology and Applications

6.4 Decentralizing IoT Networks

A decentralized approach to IoT networking would solve many of the

questions above. Adopting a standardized peer-to-peer communication
model to process the hundreds of billions of transactions between de-
vices will significantly reduce the costs associated with installing and
maintaining large centralized data centers and will distribute computa-
tion and storage needs across the billions of devices that form IoT net-
works. This will prevent failure in any single node in a network from
bringing the entire network to a halting collapse. [18]
However, establishing peer-to-peer communications will present
its own set of challenges, chief among them the issue of security. And
as we all know, IoT security is much more than just about protecting
sensitive data. The proposed solution will have to maintain privacy and
security in huge IoT networks and offer some form of validation and
consensus for transactions to prevent spoofing and theft.
To perform the functions of traditional IoT solutions without a cen-
tralized control, any decentralized approach must support three funda-
mental functions:

• Peer-to-peer messaging
• Distributed file sharing
• Autonomous device coordination

6.5 The Blockchain Approach

Blockchain, the “distributed ledger” technology that underpins bit-

coin, has emerged as an object of intense interest in the tech industry
and beyond. Blockchain technology offers a way of recording trans-
actions or any digital interaction in a way that is designed to be se-
cure, transparent, highly resistant to outages, auditable and efficient;
as such, it carries the possibility of disrupting industries and enabling
new business models. The technology is young and changing very
 Using Blockchain to Secure IoT 55

rapidly; widespread commercialization is still a few years off. None-

theless, to avoid disruptive surprises or missed opportunities, strat-
egists, planners and decision-makers across industries and business
functions should pay heed now and begin to investigate applications
of the technology. [19]

6.5.1 What is Blockchain?

Blockchain is a database that maintains a continuously growing set of

data records. It is distributed in nature, meaning that there is no master
computer holding the entire chain. Rather, the participating nodes have
a copy of the chain. It is also ever-growing – data records are only add-
ed to the chain. [20]
A Blockchain consists of two types of elements:

• Transactions are the actions created by the participants in the

system.
• Blocks record these transactions and ensure that they are in
the correct sequence and have not been tampered with. Blocks
also record a timestamp when the transactions were added.

6.5.2 What are Some Advantages of Blockchain?

There are three main advantages of Blockchain (Figure 6.1):

The big advantage of Blockchain is that it is public. Everyone par-
ticipating can see the blocks and the transactions stored in them. This
does not mean that everyone can see the actual content of your transac-
tion; however, that is protected by your private key.
A Blockchain is decentralized, so there is no single authority that
can approve the transactions or set specific rules to have transactions
accepted. That means there is a huge amount of trust involved since
all the participants in the network have to reach a consensus to accept
transactions.
56 Blockchain Technology and Applications

Figure 6.1: Advantages of Blockchain

Most importantly, it is secure. The database can only be extended

and previous records cannot be changed (at least, there is a very high
cost if someone wants to alter previous records).

6.5.3 How Does It Work?

When someone wants to add a transaction to the chain, all the par-
ticipants in the network will validate it. They do this by applying an
algorithm to the transaction to verify its validity. What exactly is un-
derstood by “valid” is defined by the Blockchain system and can differ
between the systems. Then, it is up to the majority of the participants
to agree that the transaction is valid.
A set of approved transactions is then bundled in a block, which
is then sent to all the nodes in the network. They, in turn, validate the
 Using Blockchain to Secure IoT 57

new block. Each successive block contains a hash, which is a unique

fingerprint, of the previous block. [13]

6.6 The Blockchain and IoT

Blockchain technology is the missing link to settle scalability, privacy

and reliability concerns in the Internet of Things. Blockchain technol-
ogies could perhaps be the silver bullet needed by the IoT industry.
Blockchain technology can be used in tracking billions of connected
devices, enable the processing of transactions and coordination be-
tween devices and allow for significant savings to IoT industry manu-
facturers. This decentralized approach would eliminate single points of
failure, creating a more resilient ecosystem for devices to run on. The
cryptographic algorithms used by Blockchains would make consumer
data more private.
The ledger is tamper-proof and cannot be manipulated by mali-
cious actors because it does not exist in any single location, and man-
in-the-middle attacks cannot be staged because there is no single thread
of communication that can be intercepted. Blockchain makes trustless,
peer-to-peer messaging possible and has already proven its worth in the
world of financial services through cryptocurrencies such as Bitcoin,
providing guaranteed peer-to-peer payment services without the need
for third-party brokers.
The decentralized, autonomous and trustless capabilities of the
Blockchain make it an ideal component to become a fundamental el-
ement of IoT solutions. It is not a surprise that enterprise IoT technol-
ogies have quickly become one of the early adopters of Blockchain
technologies.
In an IoT network, the Blockchain can keep an immutable record of
the history of smart devices. This feature enables the autonomous func-
tioning of smart devices without the need for centralized authority. As
a result, the Blockchain opens the door to a series of IoT scenarios that
were remarkably difficult, or even impossible to implement without it.
58 Blockchain Technology and Applications

By leveraging the Blockchain, IoT solutions can enable secure,

trustless messaging between devices in an IoT network. In this model,
the Blockchain will treat message exchanges between devices similar
to financial transactions in a bitcoin network. To enable message ex-
changes, devices will leverage smart contracts, which then model the
agreement between the two parties.
In this scenario, we can sensor from afar, communicating directly
with the irrigation system in order to control the flow of water-based
on conditions detected on the crops. Similarly, smart devices in an oil
platform can exchange data to adjust functioning based on weather
conditions.
Using the Blockchain will enable true autonomous smart devices
that can exchange data, or even execute financial transactions, without
the need of a centralized broker. This type of autonomy is possible
because the nodes in the Blockchain network will verify the validity of
the transaction without relying on a centralized authority.
In this scenario, we can envision smart devices in a manufacturing
plant that can place orders for repairing some of its parts without the
need for human or centralized intervention. Similarly, smart vehicles
in a truck fleet will be able to provide a complete report of the most
important parts needing replacement after arriving at a workshop.
One of the most exciting capabilities of the Blockchain is the abil-
ity to maintain a duly decentralized, trusted ledger of all transactions
occurring in a network. This capability is essential to enable the many
compliances and regulatory requirements of industrial IoT applications
without the need to rely on a centralized model. [15] [21]
 7
IoT and Blockchain: Challenges and Risks

The Internet of Things (IoT) is an ecosystem of ever-increasing com-

plexity; it is the next wave of innovation that will humanize every ob-
ject in our life, and it is the next level of automation for every object
we use. IoT is bringing more and more things into the digital fold every
day, which will likely make IoT a multi-trillion-dollar industry in the
near future. To understand the scale of interest in the Internet of Things
(IoT), just check how many conferences, articles, and studies have
been conducted about IoT recently. This interest has hit fever pitch
point in 2016, as many companies see big opportunity and believe that
IoT holds the promise to expand and improve business processes and

59
60 Blockchain Technology and Applications

accelerate growth. However, the rapid evolution of the IoT market has
caused an explosion in the number and variety of IoT solutions, which
created real challenges as the industry evolves, mainly the urgent need
for a secure IoT model to perform common tasks such as sensing, pro-
cessing, storage and communicating. Developing that model will never
be an easy task by any stretch of the imagination, and there are many
hurdles and challenges facing a real secure IoT model. [13]
The biggest challenge facing IoT security is coming from the
very architecture of the current IoT ecosystem; it is all based on a
centralized model known as the server/client model. All devices are
identified, authenticated and connected through cloud servers that
support huge processing and storage capacities. The connection be-
tween devices will have to go through the cloud, even if they happen
to be a few feet apart. While this model has connected computing de-
vices for decades and will continue to support today’s IoT networks,
it will not be able to respond to the growing needs of the huge IoT
ecosystems of tomorrow.

7.1 The Blockchain Model

The Blockchain is a database that maintains a continuously growing set

of data records. It is distributed in nature, meaning that there is no mas-
ter computer holding the entire chain. Rather, the participating nodes
have a copy of the chain. It is also ever-growing – data records are only
added to the chain.
When someone wants to add a transaction to the chain, all the par-
ticipants in the network will validate it. They do this by applying an
algorithm to the transaction to verify its validity. What exactly is un-
derstood by “valid” is defined by the Blockchain system and can differ
between the systems. Then, it is up to the majority of the participants
to agree that the transaction is valid.
A set of approved transactions is then bundled in a block, which
is sent to all the nodes in the network. They, in turn, validate the new
 IoT and Blockchain: Challenges and Risks 61

block. Each successive block contains a hash, which is a unique finger-

print, of the previous block. [22]

7.2 Principles of Blockchain Technology

Here are five basic principles underlying the technology. [23]

1. Distributed Database
Each party on a Blockchain has access to the entire database and its
complete history. No single party controls the data or the informa-
tion. Every party can verify the records of its transaction partners
directly, without an intermediary.

2. Peer-to-Peer Transmission
Communication occurs directly between peers instead of through a
central node. Each node stores and transfers pieces of information
to all other nodes.

3. Transparency
Every transaction and its associated value are visible to anyone
with access to the system. Each node, or user, on a Blockchain,
has a unique 30-plus-character alphanumeric address that identi-
fies it. Users can choose to remain anonymous or provide proof
of their identity to others. Transactions occur between Blockchain
addresses.

4. Irreversibility of Records
Once a transaction is entered in the database and the accounts are
updated, the records cannot be altered, because they are linked to
every transaction record that came before them (hence the term
“chain”). Various computational algorithms and approaches are
deployed to ensure that the recording on the database is permanent,
chronologically ordered and available to all others on the network.
62 Blockchain Technology and Applications

5. Computational Logic
The digital nature of the ledger means that Blockchain transactions
can be tied to computational logic and in essence programmed.
Therefore, users can set up algorithms and rules that automatically
trigger transactions between nodes.

7.3 Challenges of Blockchain in IoT

In spite of all its benefits, the Blockchain model is not without flaws
and shortcomings, (Figure 7.1) which are presented below: [19]

Scalability issues related to the size of Blockchain ledger that might

lead to centralization as it is grown over time and require some kind of

Figure 7.1: Challenges of Blockchain In IoT

 IoT and Blockchain: Challenges and Risks 63

record management, which is casting a shadow over the future of the

Blockchain technology.

Processing power and time required to perform encryption algorithms

for all the objects involved in Blockchain-based IoT ecosystem given the
fact that IoT ecosystems are very diverse and composed of devices that
have very different computing capabilities, and not all of them will be
capable of running the same encryption algorithms at the desired speed.

Storage will be a hurdle: Blockchain eliminates the need for a central

server to store transactions and device IDs, but the ledger has to be stored
on the nodes themselves, and the ledger will increase in size as time
passes. That is beyond the capabilities of a wide range of smart devices
such as sensors, which have very low storage capacity.

Figure 7.2: Risks of Using Blockchain in IoT

64 Blockchain Technology and Applications

7.4 Risks of Using Blockchain in IoT

It goes without saying that any new technology comes with new risks.
An organization’s risk management team should analyze, assess and
design mitigation plans for risks expected to emerge from the imple-
mentation of Blockchain-based frameworks (Figure 7.2).

Vendor Risks: Practically speaking, most present organizations, look-

ing to deploy Blockchain-based applications, lack the required techni-
cal skills and expertise to design and deploy a Blockchain-based sys-
tem and implement smart contracts completely in-house, i.e. without
reaching out for vendors of Blockchain applications. The value of these
applications is only as strong as the credibility of the vendors providing
them. Given the fact that the Blockchain-as-a-Service (BaaS) market is
still a developing market, a business should meticulously select a ven-
dor that can perfectly sculpture applications that appropriately address
the risks associated with the Blockchain.

Credential Security: Even though the Blockchain is known for its

high-security levels, a Blockchain-based system is only as secure as the
system’s access point. When considering a public Blockchain-based
system, any individual who has access to the private key of a given
user, which enables him/her to “sign” transactions on the public ledger,
will effectively become that user, because most current systems do not
provide multi-factor authentication. Also, loss of an account’s private
keys can lead to complete loss of funds, or data, controlled by this ac-
count; this risk should be thoroughly assessed.

Legal and Compliance: It is a new territory in all aspects without any

legal or compliance precedents to follow, which poses a serious prob-
lem for IoT manufacturers and service providers. This challenge alone
will scare off many businesses from using Blockchain technology.
 IoT and Blockchain: Challenges and Risks 65

7.5 The Optimum Secure IoT Model

In order for us to achieve that optimal secure model of IoT, security

needs to be built in as the foundation of IoT ecosystem, with rigorous
validity checks, authentication, data verification, and all the data need
to be encrypted at all levels, without a solid bottom-top structure, and
we will create more threats with every device added to the IoT. What
we need is a secure and safe IoT with privacy protected. That is a tough
trade-off, but possible with Blockchain technology if we can overcome
its drawbacks. [24]
 8
IoT, AI, and Blockchain:
Catalysts for Digital Transformation

The digital revolution has brought with it a new way of thinking about
manufacturing and operations. Emerging challenges associated with
logistics and energy costs are influencing global production and as-
sociated distribution decisions. Significant advances in technology,
including Big Data analytics, AI, Internet of Things, robotics and addi-
tive manufacturing, are shifting the capabilities and value proposition
of global manufacturing. In response, manufacturing and operations
require a digital renovation: the value chain must be redesigned and
retooled and the workforce retrained. Total delivered cost must be an-

67
68 Blockchain Technology and Applications

alyzed to determine the best places to locate sources of supply, man-

ufacturing and assembly operations around the world. In other words,
we need a digital transformation.

8.1 Digital Transformation

Digital transformation (DX) is the profound transformation of business

and organizational activities, processes, competencies, and models to
fully leverage the changes and opportunities of a mix of digital tech-
nologies and their accelerating impact across society in a strategic and
prioritized way, with present and future shifts in mind (Figure 8.1).
A digital transformation strategy aims to create the capabilities of
fully leveraging the possibilities and opportunities of new technologies
and their impact faster, better and in more innovative ways in the future.
A digital transformation journey needs a staged approach with a
clear road-map, involving a variety of stakeholders, beyond silos and
internal/external limitations. This road-map takes into account that end
goals will continue to move as digital transformation de facto is an on-
going journey, as is change and digital innovation. [25]

8.2 Internet of Things (IoT)

IoT is defined as a system of interrelated physical objects, sensors, ac-

tuators, virtual objects, people, services, platforms and networks that
have separate identifiers and an ability to transfer data independently.
Practical examples of IoT applications today include precision agricul-
ture, remote patient monitoring, and driverless cars. Simply put, IoT is
the network of “things” that collects and exchanges information from
the environment.
IoT and digital transformation are closely related to the following
reasons: [26] [27]
 8
IoT, AI, and Blockchain:
Catalysts for Digital Transformation

The digital revolution has brought with it a new way of thinking about
manufacturing and operations. Emerging challenges associated with
logistics and energy costs are influencing global production and as-
sociated distribution decisions. Significant advances in technology,
including Big Data analytics, AI, Internet of Things, robotics and addi-
tive manufacturing, are shifting the capabilities and value proposition
of global manufacturing. In response, manufacturing and operations
require a digital renovation: the value chain must be redesigned and
retooled and the workforce retrained. Total delivered cost must be an-

67
68 Blockchain Technology and Applications

alyzed to determine the best places to locate sources of supply, man-

ufacturing and assembly operations around the world. In other words,
we need a digital transformation.

8.1 Digital Transformation

Digital transformation (DX) is the profound transformation of business

and organizational activities, processes, competencies, and models to
fully leverage the changes and opportunities of a mix of digital tech-
nologies and their accelerating impact across society in a strategic and
prioritized way, with present and future shifts in mind (Figure 8.1).
A digital transformation strategy aims to create the capabilities of
fully leveraging the possibilities and opportunities of new technologies
and their impact faster, better and in more innovative ways in the future.
A digital transformation journey needs a staged approach with a
clear road-map, involving a variety of stakeholders, beyond silos and
internal/external limitations. This road-map takes into account that end
goals will continue to move as digital transformation de facto is an on-
going journey, as is change and digital innovation. [25]

8.2 Internet of Things (IoT)

IoT is defined as a system of interrelated physical objects, sensors, ac-

tuators, virtual objects, people, services, platforms and networks that
have separate identifiers and an ability to transfer data independently.
Practical examples of IoT applications today include precision agricul-
ture, remote patient monitoring, and driverless cars. Simply put, IoT is
the network of “things” that collects and exchanges information from
the environment.
IoT and digital transformation are closely related to the following
reasons: [26] [27]
 IoT, AI, and Blockchain: Catalysts for Digital Transformation 69

Figure 8.1: Digital Transformation Areas

1. More than 50% of companies think IoT is strategic, and one in

four believes it is transformational.
2. Both increase company longevity. The average life span of a
company has decreased from 67 years in the 1920s to 15 years
today.
3. One in three industry leaders will be digitally disrupted.
4. Both enable businesses to connect with customers and partners
in open digital ecosystems, share digital insights, collaborate
on solutions and share in the value created.
5. Competitors are doing it. According to IDC, 70% of global
discrete manufacturers will offer connected products by 2020.
70 Blockchain Technology and Applications

6. It is where the money is. Digital product and service sales are
growing and will represent more than US $1 of every US $3
spent by 2021.
7. Enterprises are overwhelmed by data and digital assets. They
already struggle to manage the data and digital assets they
have, and IoT will expand them exponentially. They need help
finding insights into the vast stream of data and manage digital
assets.
8. Both drive consumption. Digital services easily prove their
own worth. Bundle products with digital services and content
make it easy for customers to consume them.
9. Both make companies understand customers better. Use inte-
grated channels, Big Data, predictive analytics, and machine
learning to uncover, predict and meet customer needs, increas-
ing loyalty and revenues, IoT and AI are at the heart of this.
10. Using both is future-proof for the business. Make the right stra-
tegic bets for the company, product and service portfolio and fu-
ture investments using IoT data analytics, visualization, and AI.

8.3 Digital Transformation, Blockchain, and AI

Digital transformation is a complicated challenge, but the integration

of Blockchain and AI makes it much easier. Considering the number of
partners (internal, external or both) involved in any given business pro-
cess, a system in which a multitude of electronic parties can securely
communicate, collaborate and transact without human intervention is
highly agile and efficient.
Enterprises that embrace this transformation will be able to provide
a better user experience, a more consistent workflow, more streamlined
operations, and value-added services, as well as gain competitive ad-
vantage and differentiation.
Blockchain can holistically manage steps and relationships where
participants will share the same data source, such as financial relation-
 IoT, AI, and Blockchain: Catalysts for Digital Transformation 71

ships and transactions connected to each step, security and accountabili-

ty factored in, as well as compliance with government regulations along
with internal rules and processes. The result is consistency, reductions in
costs and time delays, improved quality and reduced risks. [28]
AI can help companies learn in ways that accelerate innovation and
assist companies in getting closer to customers and improve employ-
ee’s productivity and engagement. Digital transformation efforts can
be improved with that information.

8.4 Conclusion

The building blocks of digital transformation are mindset, people, pro-

cess and tools. IoT covers all the blocks since IoT does not just connect
devices, it connects people too. Blockchain will ensure end-to-end se-
curity, and by using AI, you will move IoT beyond connections to in-
telligence. One important step is to team up with the best partners and
invest in education, training and certifying your teams. This magical
mix of IoT, AI, and Blockchain will help make transformation digital
and easy. [29]
 9
Myths about Blockchain Technology

Blockchain, the “distributed ledger” technology, has emerged as an

object of intense interest in the tech industry and beyond. Blockchain
technology offers a way of recording transactions or any digital interac-
tion in a way that is designed to be secure, transparent, highly resistant
to outages, auditable and efficient; as such, it carries the possibility of
disrupting industries and enabling new business models. The technolo-
gy is young and changing very rapidly; widespread commercialization
is still a few years off. Nonetheless, to avoid disruptive surprises or
missed opportunities, strategists, planners and decision-makers across

73
74 Blockchain Technology and Applications

industries and business functions should pay heed now and begin to
investigate applications of the technology.
Blockchain is a database that maintains a continuously growing set
of data records. It is distributed in nature, meaning that there is no mas-
ter computer holding the entire chain. Rather, the participating nodes
have a copy of the chain. It is also ever-growing – data records are only
added to the chain.
A Blockchain consists of two types of elements: [30]

• Transactions are the actions created by the participants in the

system.
• Blocks record these transactions and make sure they are in the
correct sequence and have not been tampered with.

The big advantage of Blockchain is that it is public. Everyone par-

ticipating can see the blocks and the transactions stored in them. This
does not mean everyone can see the actual content of your transaction,
however; that is protected by your private key.
A Blockchain is decentralized, so there is no single authority that
can approve the transactions or set specific rules to have transactions
accepted. This means that there is a huge amount of trust involved since
all the participants in the network have to reach a consensus to accept
transactions.
Most importantly, it is secure. The database can only be extended
and previous records cannot be changed (at least, there is a very high
cost if someone wants to alter previous records).
When someone wants to add a transaction to the chain, all the par-
ticipants in the network will validate it. They do this by applying an
algorithm to the transaction to verify its validity. What exactly is un-
derstood by “valid” is defined by the Blockchain system and can differ
between the systems. Then, it is up to the majority of the participants
to agree that the transaction is valid.
A set of approved transactions is then bundled in a block, which
is then sent to all the nodes in the network. They, in turn, validate the
 Myths about Blockchain Technology 75

new block. Each successive block contains a hash, which is a unique

fingerprint, of the previous block.
Blockchain ensures that data has not been tampered with, offering
a layer of time-stamping that removes multiple levels of human check-
ing and makes transactions immutable. However, it is not yet the cure-
all that some believe it to be. [97]
Blockchain technology certainly has many positive aspects, but
there is also much misunderstanding and confusion regarding its
nature.

9.1 Myth 1: The Blockchain Is a Magical Database in

the Cloud [31]

The Blockchain is conceptually a flat-file – a linear list of simple trans-

action records. “This list is appended only so entries are never deleted,
but instead, the file grows indefinitely and must be replicated in every
node in the peer-to-peer network.”
Blockchain does not allow you to store any type of physical in-
formation like a Word document or a pdf file. It can only provide a
“proof of existence”, and the distributed ledger can only contain a code
that certifies the existence of a certain document but not the document
itself. The file, however, can be stored in “data lakes”, the access to
which is controlled by the owner of the information.

9.2 Myth 2: Blockchain Is Going to Change the World [32]

We can use Blockchain for complex and technical transactions such as veri-
fying the authenticity of a diamond or the identity of a person. There is also
talk of a Blockchain application for the bill of lading in trade finance, which
would be revolutionary in terms of cost reduction and transaction speed.
While Blockchain can support these cases and mitigate the risk of
a fraudster tampering with the ledger, it does not eradicate the threat of
76 Blockchain Technology and Applications

fraud online and it still raises questions over confidentiality. Addition-

ally, the use of Blockchain technology will still be inefficient for many
of these cases when compared to maintaining a traditional ledger.

9.3 Myth 3: Blockchain Is Free [28]

Despite the commonly held belief, Blockchain is neither cheap nor ef-
ficient to run. However, it involves multiple computers solving mathe-
matical algorithms to agree on a final immutable result, which becomes
the so-called single version of truth (SVT). Each “block” in the Block-
chain typically uses a large amount of computing power to solve. And
someone needs to pay for all this computer power that supports the
Blockchain service.

9.4 Myth 4: There Is Only One Blockchain [28]

There are many different technologies that go by the name Blockchain.

They come in public and private versions, open and closed source, gen-
eral-purpose and tailored to specific solutions.
The common denominator is that they are sheared up by crypto, are
distributed and have some form of consensus mechanism. Bitcoin’s Block-
chain, Ethereum, Hyperledger, Corda, and IBM and Microsoft’s Block-
chain-as-a-Service can all be classified as distributed ledger technologies.

9.5 Myth 5: The Blockchain Can Be Used for Anything

and Everything [33]

Although the code is powerful, it is not magical. Bitcoin and Blockchain

developers can be evangelical, and it is easy to understand why. For many,
the Blockchain is an authority tied to mathematics, not the government
or lawyers. In the minds of some developers, the Blockchain and smart
 Myths about Blockchain Technology 77

contracts will one day replace money, lawyers and other arbitration bod-
ies. Yet the code is limited to the number of cryptocurrency transactions
in the chain itself, and cryptocurrency is still far from mainstream.

9.6 Myth 6: The Blockchain Can Be the Backbone of a

Global Economy [29]

No national or corporate entity owns or controls the Blockchain. For

this reason, evangelists hope that private Blockchains can provide
foundational support for dozens of encrypted and trusted cryptocur-
rencies. Superficially, the Bitcoin Blockchain appears massive. Yet a
Gartner report has recently claimed that the size of the Blockchain
is similar in scale to the NASDAQ network. If cryptocurrency takes
off, and records are generated larger, this may change. For now, the
Blockchain network is roughly analogous to contemporary financial
networks.

9.7 Myth 7: The Blockchain Ledger Is Locked and

Irrevocable

Analogous large-scale transaction databases like bank records are,

by their nature, private and tied to specific financial institutions. The
power of Blockchain, of course, is that the code is public, transactions
are verifiable and the network is cryptographically secure. Fraudulent
transactions – double spends, in industry parlance – are rejected by
the network, preventing fraud. Because mining the chain provides
financial incentives in the form of Bitcoin, it is largely believed that
rewriting historic transactions is not in the financial interest of partic-
ipants. For now, however, as computational resources improve with
time, so too does the potential for deception. The impact of future
processing power on the integrity of the contemporary Blockchain
remains unclear.
78 Blockchain Technology and Applications

9.8 Myth 8: Blockchain Records Can Never Be Hacked

or Altered [34]

One of the main selling points about Blockchains is their inherent per-
manence and transparency. When people hear that, they often think that
Blockchains are invulnerable to outside attacks. No system or database
will ever be completely secure, but the larger and more distributed the
network, the more secure it is believed to be. What Blockchains can
provide to applications that are developed on top of them is a way of
catching unauthorized changes to records.

9.9 Myth 9: Blockchain Can Only Be Used in the

Financial Sector [35]

Blockchain started to create waves in the financial sector because of

its first application, the bitcoin cryptocurrency, which directly impact-
ed this field. Although Blockchain has numerous areas of application,
finance is undeniably one of them. The important challenges that this
technology brings to the financial world pushed international banks
such as Goldman Sachs or Barclays to heavily invest in it. Outside
the financial sector, Blockchain can and will be used in real estate,
healthcare or even at a personal scale to create a digital identity. Indi-
viduals could potentially store proof of the existence of medical data
on the Blockchain and provide access to pharmaceutical companies in
exchange for money.

9.10 Myth 10: Blockchain is Bitcoin [31]

Since Bitcoin is more famous than the underlying technology, Block-

chain, many people get confused between the two.
Blockchain is a technology that allows peer-to-peer transactions to
be recorded on a distributed ledger across the network. These transac-
 Myths about Blockchain Technology 79

tions are stored in blocks and each block is linked to the previous one,
therefore creating a chain. Thus, each block contains a complete and
time-stamped record of all the transactions that occurred in the net-
work. On the Blockchain, everything is transparent and permanent. No
one can change or remove a transaction from the ledger.
Bitcoin is a cryptocurrency that makes electronic payments possible
directly between two people without going through a third party like a
bank. Bitcoins are created and stored in a virtual wallet. Since there are
no intermediaries between the two parties, no one can control the cryp-
tocurrency. Hence, the number of bitcoins that will ever be released is
limited and defined by a mathematical algorithm.

9.11 Myth 11: Blockchain Is Designed for Business

Interactions Only [31]

Experts in Blockchain are convinced that this technology will change

the world and the global economy just like dot-coms did in the early
1990s. Hence, it is not only open to big corporations but is also acces-
sible to everyone everywhere. If all it takes is an Internet connection to
use the Blockchain, one can easily imagine how many people world-
wide will be able to interact with each other.

9.12 Myth 12: Smart Contracts Have the Same Legal

Value as Regular Contracts

For now, smart contracts are just pieces of code that execute actions
automatically when certain conditions are met. Therefore, they are
not considered as regular contracts from a legal perspective. Howev-
er, they can be used as proof of whether or not a certain task has been
accomplished. Despite their uncertain legal value, smart contracts are
very powerful tools, especially when combined with the Internet of
Things (IoT).
 10
Cybersecurity & Blockchain

With the fact that cybercrime and cybersecurity attacks hardly seem to
be out of the news these days and the threat is growing globally, no-
body would appear immune to malicious and offensive acts targeting
computer networks, infrastructures, and personal computer devices.
Firms must clearly invest to stay resilient. Gauging the exact size of
cybercrime and putting a precise US dollar value on it is nonetheless
tricky. But one thing we can be sure about is that the number is big and
probably larger than the statistics reveal.

81
82 Blockchain Technology and Applications

The global figure for cyber breaches had been put at around US $200
billion annually [36]. Malicious cyber activity cost the U.S. economy be-
tween $57 billion and $109 billion in 2016, the White House Council of
Economic Advisers estimated in a report released in February of 2018. [37]
New Blockchain platforms are stepping up to address security con-
cerns in the face of recent breaches. Since these platforms are not con-
trolled by a singular entity, they can help ease the concerns created by a
spree of recent breach disclosures. Services built on top of Blockchain
have the potential to inspire renewed trust due to the transparency built
into the technology.
Developments in Blockchain have expanded beyond recordkeep-
ing and cryptocurrencies. The integration of smart contract develop-
ment in Blockchain platforms has ushered in a wider set of applica-
tions, including cybersecurity.
By using Blockchain, transaction details are kept both transparent
and secure. Blockchain’s decentralized and distributed network also
helps businesses to avoid a single point of failure, making it difficult for
malicious parties to steal or tamper with business data.
Transactions in the Blockchain can be audited and traced. In addi-
tion, public Blockchains rely on distributed network to run, thus elimi-
nating a single point of control. For attackers, it is much more difficult
to attack a large number of peers distributed globally as opposed to a
centralized data center.

10.1 Implementing Blockchain in Cybersecurity

Since a Blockchain system is protected with the help of ledgers and

cryptographic keys, attacking and manipulating it becomes extremely
difficult. Blockchain decentralizes the systems by distributing ledger
data on several systems rather than storing them on one single network.
This allows the technology to focus on gathering data rather than wor-
rying about any data being stolen. Thus, decentralization has led to an
improved efficiency in Blockchain-operated systems.
 Cybersecurity & Blockchain 83

For a Blockchain system to be penetrated, the attacker must intrude

into every system on the network to manipulate the data that is stored
on the network. The number of systems stored on every network can
be in millions. Since domain editing rights are only given to those who
require them, the hacker will not get the right to edit and manipulate
the data even after hacking a million systems. Since such manipulation
of data on the network has never taken place on the Blockchain, it is not
an easy task for any attacker.
While we store our data on a Blockchain system, the threat of a
possible hack gets eliminated. Every time our data is stored or insert-
ed into Blockchain ledgers; a new block is created. This block further
stores a key that is cryptographically created. This key becomes the
unlocking key for the next record that is to be stored onto the ledger. In
this manner, the data is extremely secure.
Furthermore, the hashing feature of Blockchain technology [38] is
one of its underlying qualities that makes it such a prominent technolo-
gy. Using cryptography and the hashing algorithm, Blockchain technol-
ogy converts the data stored in our ledgers. This hash encrypts the data
and stores it in such a language that the data can only be decrypted using
keys stored in the systems. Other than cybersecurity, Blockchain has many
applications in several fields that help in maintaining and securing data.
The fields where this technology is already showing its ability are finance,
supply chain management and Blockchain-enabled smart contracts. [39]

10.2 Advantages of Using Blockchain in Cybersecurity

The main advantages of Blockchain technology in cybersecurity (Figure

10.1) are the following: [40] [41] [42] [43]

10.2.1 Decentralization

Thanks to the peer-to-peer network, there is no need for third-party

verification, as any user can see network transactions.
84 Blockchain Technology and Applications

Figure 10.1: Advantages of Using Blockchain in Cybersecurity

10.2.2 Tracking and Tracing

All transactions in Blockchains are digitally signed and time-

stamped, so network users can easily trace the history of transac-
tions and track accounts at any historical moment. This feature also
allows a company to have valid information about assets or product
distribution.

11.2.3 Confidentiality

The confidentiality of network members is high due to the pub-

lic-key cryptography that authenticates users and encrypts their
transactions.
 Cybersecurity & Blockchain 85

10.2.4 Fraud Security

In the event of a hack, it is easy to define malicious behavior due to

the peer-to-peer connections and distributed consensus. As of today,
Blockchains are considered technically “unhackable”, as attackers
can impact a network only by getting control of 51% of the network
nodes.

11.2.5 Sustainability

Blockchain technology has no single point of failure, which means that

even in the case of DDoS attacks, the system will operate as normal,
thanks to multiple copies of the ledger.

10.2.6 Integrity

The distributed ledger ensures the protection of data against modifi-

cation or destruction. Besides, the technology ensures the authenticity
and irreversibility of completed transactions. Encrypted blocks contain
immutable data that is resistant to hacking.

10.2.7 Resilience

The peer-to-peer nature of the technology ensures that the network will
operate round-the-clock even if some nodes are offline or under attack.
In the event of an attack, a company can make certain nodes redundant
and operate as usual.

10.2.8 Data Quality

Blockchain technology cannot improve the quality of your data, but it

can guarantee the accuracy and quality of data after it is encrypted in
the Blockchain.
86 Blockchain Technology and Applications

10.2.9 Smart Contracts

These are software programs that are based on the ledger. These pro-
grams ensure the execution of contract terms and verify parties. Block-
chain technology can significantly increase the security standards for
smart contracts, as it minimizes the risks of cyber-attacks and bugs.

10.2.10 Availability

There is no need to store your sensitive data in one place, as Block-

chain technology allows you to have multiple copies of your data that
are always available to network users.

10.2.11 Increase Customer Trust

Your clients will trust you more if you can ensure a high level of data
security. Moreover, Blockchain technology allows you to provide your
clients with information about your products and services instantly.

10.3 Disadvantages of Using Blockchain in

Cybersecurity (Figure 10.2): [36] [37] [39]

10.3.1 Irreversibility

There is a risk that encrypted data may be unrecoverable in case a user

loses or forgets the private key necessary to decrypt it.

10.3.2 Storage Limits

Each block can contain no more than 1 Mb of data, and a Blockchain

can handle only seven transactions per second on average.
 Cybersecurity & Blockchain 87

Figure 10.2: Disadvantages of Using Blockchain in Cybersecurity

10.3.3 Risk of Cyberattacks

Although the technology greatly reduces the risk of malicious inter-

vention, it is still not a panacea to all cyber-threats. If attackers manage
to exploit the majority of your network, you may lose your entire da-
tabase.

10.3.4 Adaptability Challenges

Although Blockchain technology can be applied to almost any business,

companies may face difficulties integrating it. Blockchain applications
can also require complete replacement of existing systems, so companies
should consider this before implementing the Blockchain technology.

10.3.5 High Operation Costs

Running Blockchain technology requires substantial computing pow-

er, which may lead to high marginal costs in comparison to existing
systems.

10.3.6 Blockchain Literacy

There are still not enough developers with experience in Blockchain

technology and with deep knowledge of cryptography.
88 Blockchain Technology and Applications

10.4 Conclusion

Blockchain’s decentralized approach to cybersecurity can be seen as a

fresh take on the issues that the industry faces today. The market could
only use more solutions to combat the threats of cyberattacks. And the
use of Blockchain may yet address the vulnerabilities and limitations
of current security approaches and solutions.
Throwing constant pots of money at the problem and knee-jerk
reactions is not the answer. Firms need to sort out their governance,
awareness and organizational culture and critically look at the business
purpose and processes before they invest in systems to combat cyber-
crime.
The roster of these new services provided by Blockchain may be
limited for now and of course, they face incumbent players in the cy-
bersecurity space. But this only offers further opportunities for oth-
er ventures to cover other key areas of cybersecurity. Blockchain also
transcends borders and nationalities, which should inspire trust in us-
ers. And, with the growth of these new solutions, the industry may yet
restore some of the public’s trust they may have lost in the midst of all
these issues.
Overall, Blockchain technology is a breakthrough in cybersecurity,
as it can ensure the highest level of data confidentiality, availability and
security. However, the complexity of the technology may cause diffi-
culties with development and real-world use.
Implementation of Blockchain applications requires comprehen-
sive, enterprise- and risk-based approaches that capitalize on cyber-
security risk frameworks, best practices, and cybersecurity assurance
services to mitigate risks. In addition, cyber intelligence capabilities,
such as cognitive security, threat modeling, and artificial intelligence,
can help to proactively predict cyber threats to create countermeasures.
That is why AI is considered as the first line of defense while Block-
chain is the second line. [44]
 11
Blockchain and AI: A Perfect Match?

Blockchain and Artificial Intelligence are two of the hottest technology

trends right now. Even though the two technologies have highly differ-
ent developing parties and applications, researchers have been discuss-
ing and exploring their combination. [45]
PwC predicts that by 2030 AI will add up to $15.7 trillion to the
world economy, and as a result, global GDP will rise by 14%. Accord-
ing to Gartner’s prediction, the business value added by blockchain
technology will increase to $3.1 trillion by the same year.
By definition, a blockchain is a distributed, decentralized, im-
mutable ledger used to store encrypted data. On the other hand, AI is
the engine or the “brain” that will enable analytics and decision mak-
ing from the data collected. [46]

89
90 Blockchain Technology and Applications

It goes without saying that each technology has its own individu-
al degree of complexity, but both AI and blockchain are in situations
where they can benefit from each other, and help one another. [47]
With both these technologies able to effect and enact upon data
in different ways, their coming together makes sense, and it can
take the exploitation of data to new levels. At the same time, the in-
tegration of machine learning and AI into the blockchain, and vice
versa, can enhance blockchain’s underlying architecture and boost
AI’s potential.
Additionally, blockchain can also make AI more coherent and un-
derstandable, and we can trace and determine why decisions are made
in machine learning. Blockchain and its ledger can record all data and
variables that go through a decision made under machine learning.
Moreover, AI can boost blockchain efficiency far better than hu-
mans, or even standard computing can. A look at the way in which
blockchains are currently run on standard computers proves this with
a lot of processing power needed to perform even basic tasks (Figure
11.1). [43]

Figure 11.1: Applications of AI and Blockchain

 Blockchain and AI: A Perfect Match? 91

Smart Computing Power

If you were to operate a blockchain, with all its encrypted data,
on a computer you’d need large amounts of processing power. The
hashing algorithms used to mine Bitcoin blocks, for example, take
a “brute force” approach, which consists of systematically enumer-
ating all possible candidates for the solution and checking whether
each candidate satisfies the problem’s statement before verifying a
transaction. [43]
AI affords us the opportunity to move away from this and tackle
tasks in a more intelligent and efficient way. Imagine a machine learn-
ing-based algorithm, which could practically polish its skills in ‘re-
al-time’ if it were fed the appropriate training data. [43]

Creating Diverse Data Sets

Unlike artificial intelligence based-projects, blockchain technology
creates decentralized, transparent networks that can be accessed by
anyone, around the world in public blockchain networks situation.
While blockchain technology is the ledger that powers cryptocurren-
cies, blockchain networks are now being applied to a number of indus-
tries to create decentralization. [48]

Data Protection
The progress of AI is completely dependent on the input of data — our
data. Through data, AI receives information about the world and things
happening on it. Basically, data feeds AI, and through it, AI will be able
to continuously improve itself.
On the other side, blockchain is essentially a technology that al-
lows for the encrypted storage of data on a distributed ledger. It allows
for the creation of fully secured databases that can be looked into by
parties who have been approved to do so. When combining blockchains
with AI, we have a backup system for the sensitive and highly valuable
personal data of individuals.
Medical or financial data are too sensitive to hand over to a single
company and its algorithms. Storing this data on a blockchain, which
92 Blockchain Technology and Applications

can be accessed by an AI, but only with permission and once it has
gone through the proper procedures, could give us the enormous ad-
vantages of personalized recommendations while safely storing our
sensitive data. [44]

Data Monetization
Another disruptive innovation that could be possible by combining the
two technologies is the monetization of data. Monetizing collected data
is a huge revenue source for large companies, such as Facebook and
Google.
Having others decide how data is being sold in order to create prof-
its for businesses demonstrates that data is being weaponized against
us. Blockchain allows us to cryptographically protect our data and have
it used in the ways we see fit. This also lets us monetize data person-
ally if we choose to, without having our personal information com-
promised. This is important to understand in order to combat biased
algorithms and create diverse data sets in the future.
The same goes for AI programs that need our data. In order for AI
algorithms to learn and develop, AI networks will be required to buy
data directly from its creators, through data marketplaces. This will
make the entire process a far fairer process than it currently is, without
tech giants exploiting its users. [44]
Such a data marketplace will also open up AI for smaller compa-
nies. Developing and feeding AI is incredibly costly for companies that
do not generate their own data. Through decentralized data marketplac-
es, they will be able to access otherwise too expensive and privately
kept data.

11.2 Trusting AI Decision Making

As AI algorithms become smarter through learning, it will become

increasingly difficult for data scientists to understand how these pro-
grams came to specific conclusions and decisions. This is because AI
 Blockchain and AI: A Perfect Match? 93

algorithms will be able to process incredibly large amounts of data and

variables. However, we must continue to audit conclusions made by AI
because we want to make sure they’re still reflecting reality.
Through the use of Blockchain technology, there are immutable
records of all the data, variables, and processes used by AIs for their
decision-making processes. This makes it far easier to audit the entire
process.
With the appropriate Blockchain programming, all steps from data
entry to conclusions can be observed, and the observing party will be
sure that this data has not been tampered with. It creates trust in the
conclusions drawn by AI programs. This is a necessary step, as indi-
viduals and companies will not start using AI applications if they do
not understand how they function, and on what information they base
their decisions.

11.3 Conclusion

The combination of Blockchain technology and Artificial Intelligence

is still a largely undiscovered area. Even though the convergence of
the two technologies has received its fair share of scholarly attention,
projects devoted to this groundbreaking combination are still scarce.
Putting the two technologies together has the potential to use data
in ways never before thought possible. Data is the key ingredient for
the development and enhancement of AI algorithms, and blockchain
secures this data, allows us to audit all intermediary steps AI takes to
draw conclusions from the data and allows individuals to monetize
their produced data.
AI can be incredibly revolutionary, but it must be designed with
utmost precautions — Blockchain can greatly assist in this. How the
interplay between the two technologies will progress is anyone’s guess.
However, its potential for true disruption is clearly there and rapidly
developing. [41]
 12
Quantum Computing and Blockchain:
Facts and Myths

The biggest danger to Blockchain networks from quantum computing

is its ability to break traditional encryption. [49]
Google sent shock waves around the internet when it was claimed,
had built a quantum computer able to solve formerly impossible math-
ematical calculations–with some fearing crypto industry could be at
risk [50]. Google states that its experiment is the first experimental

95
96 Blockchain Technology and Applications

challenge against the extended Church-Turing thesis — also known as

computability thesis — which claims that traditional computers can
effectively carry out any “reasonable” model of computation.

12.1 What is Quantum Computing?

Quantum computing is the area of study focused on developing com-

puter technology based on the principles of quantum theory. The quan-
tum computer, following the laws of quantum physics, would gain
enormous processing power through the ability to be in multiple states,
and to perform tasks using all possible permutations simultaneously.
[51]

12.2 A Comparison of Classical and Quantum

Computing

Classical computing relies, at its ultimate level, on principles ex-

pressed by Boolean algebra. Data must be processed in an exclusive
binary state at any point in time or bits. While the time that each
transistor or capacitor need be either in 0 or 1 before switching states
is now measurable in billionths of a second, there is still a limit as
to how quickly these devices can be made to switch state. As we
progress to smaller and faster circuits, we begin to reach the physical
limits of materials and the threshold for classical laws of physics to
apply. Beyond this, the quantum world takes over. In a quantum com-
puter, a number of elemental particles such as electrons or photons
can be used with either their charge or polarization acting as a repre-
sentation of 0 and/or 1. Each of these particles is known as a quantum
bit, or qubit, the nature and behavior of these particles form the basis
of quantum computing. [47]
 Quantum Computing and Blockchain: Facts and Myths 97

12.3 Quantum Superposition and Entanglement

The two most relevant aspects of quantum physics are the principles of
superposition and entanglement (Figure 12.1).

Superposition: Think of a qubit as an electron in a magnetic field.

The electron’s spin may be either in alignment with the field, which
is known as a spin-up state or opposite to the field, which is known
as a spin-down state. According to quantum law, the particle enters a
superposition of states, in which it behaves as if it were in both states
simultaneously. Each qubit utilized could take a superposition of both
0 and 1.

Entanglement: Particles that have interacted at some point retain a type

of connection and can be entangled with each other in pairs, in a pro-
cess known as correlation. Knowing the spin state of one entangled
particle - up or down - allows one to know that the spin of its mate is
in the opposite direction. Quantum entanglement allows qubits that are
separated by incredible distances to interact with each other instanta-
neously (not limited to the speed of light). No matter how great the
distance between the correlated particles, they will remain entangled
as long as they are isolated. Taken together, quantum superposition
and entanglement create an enormously enhanced computing power.
Where a 2-bit register in an ordinary computer can store only one of
four binary configurations (00, 01, 10, or 11) at any given time, a 2-qu-
bit register in a quantum computer can store all four numbers simulta-
neously, because each qubit represents two values. If more qubits are
added, the increased capacity is expanded exponentially. [47]

12.4 Difficulties with Quantum Computers

• Interference - During the computation phase of a quantum

calculation, the slightest disturbance in a quantum system (say
98 Blockchain Technology and Applications

Figure 12.1: The principles of superposition and entanglement

a stray photon or wave of EM radiation) causes the quantum

computation to collapse, a process known as decoherence. A
quantum computer must be totally isolated from all external
interference during the computation phase.
• Error correction - Given the nature of quantum computing,
error correction is ultra-critical - even a single error in a cal-
culation can cause the validity of the entire computation to
collapse.
• Output observance - Closely related to the above two, retriev-
ing output data after a quantum calculation is complete risks
corrupting the data.

12.5 What is Quantum Supremacy?

According to the Financial Times, Google claims to have successful-

ly built the world’s most powerful quantum computer [46]. What that
 Quantum Computing and Blockchain: Facts and Myths 99

means, according to Google’s researchers, is that calculations that nor-

mally take more than 10,000 years to perform, its computer was able
to do in about 200 seconds, and potentially mean Blockchain, and the
encryption that underpins it could be broken.
Asymmetric cryptography used in crypto relies on key pairs,
namely a private and public key. Public keys can be calculated from
their private counterpart, but not the other way around. This is due to
the impossibility of certain mathematical problems. Quantum comput-
ers are more efficient in accomplishing this by magnitudes, and if the
calculation is done the other way then the whole scheme breaks. [45]
In order to have any effect on bitcoin or most other financial sys-
tems it would take at least about 1500 qubits and the system must allow
for the entanglement of all of them.
Blockchain networks including Bitcoin’s architecture relies on two
algorithms: Elliptic Curve Digital Signature Algorithm (ECDSA) for
digital signatures and SHA-256 as a hash function. A quantum comput-
er could use Shor’s algorithm [52] to get your private from your public
key, but the most optimistic scientific estimates say that even if this
were possible, it won’t happen during this decade.
But that is not to say that there is no cause for alarm. While the na-
tive encryption algorithms used by Blockchain’s applications are safe
for now, the fact is that the rate of advancements in quantum technolo-
gy is increasing, and that could, in time, pose a threat. “We expect their
computational power will continue to grow at a double exponential
rate,” Google researchers.

12.6 Quantum Cryptography?

Quantum cryptography uses physics to develop a cryptosystem com-

pletely secure against being compromised without the knowledge of
the sender or the receiver of the messages. The word quantum itself
refers to the most fundamental behavior of the smallest particles of
matter and energy.
100 Blockchain Technology and Applications

Quantum cryptography is different from traditional cryptographic

systems in that it relies more on physics, rather than mathematics, as a
key aspect of its security model.
Essentially, quantum cryptography is based on the usage of individ-
ual particles/waves of light (photon) and their intrinsic quantum proper-
ties to develop an unbreakable cryptosystem (because it is impossible to
measure the quantum state of any system without disturbing that system).
Quantum cryptography uses photons to transmit a key. Once the
key is transmitted, coding and encoding using the normal secret-key
method can take place. But how does a photon become a key? How do
you attach information to a photon’s spin?
This is where binary code comes into play. Each type of a photon’s
spin represents one piece of information — usually a 1 or a 0, for bina-
ry code. This code uses strings of 1s and 0s to create a coherent mes-
sage. For example, 11100100110 could correspond with h-e-l-l-o. So a
binary code can be assigned to each photon — for example, a photon
that has a vertical spin ( | ) can be assigned a 1.
Regular, non-quantum encryption can work in a variety of ways
but generally, a message is scrambled and can only be unscrambled
using a secret key. The trick is to make sure that whomever you are try-
ing to hide your communication from doesn’t get their hands on your
secret key. Cracking the private key in a modern cryptosystem would
generally require figuring out the factors of a number that is the product
of two insanely huge prime numbers.
The numbers are chosen to be so large that, with the given process-
ing power of computers, it would take longer than the lifetime of the
universe for an algorithm to factor their product.
Encryption techniques have their vulnerabilities. Certain products
— called weak keys — happen to be easier to factor than others. Also,
Moore’s Law continually ups the processing power of our computers.
Even more importantly, mathematicians are constantly developing new
algorithms that allow for easier factorization.
Quantum cryptography avoids all these issues. Here, the key is en-
crypted into a series of photons that get passed between two parties
 Quantum Computing and Blockchain: Facts and Myths 101

trying to share secret information. The Heisenberg Uncertainty Prin-

ciple dictates that an adversary cannot look at these photons without
changing or destroying them.
 13
Cryptocurrency: To Libra or not To Libra

An interesting fact about Libra Facebook’s native currency which was

announced June 18th, 2019, it’s inspired by three distinct elements:
The Roman weight measurement system, the astrological sign for jus-
tice, and the French term for freedom. The culmination of these three
elements embodies the essence of Libra, which aims to be a global
cryptocurrency for everyone. The focus of Libra is to create a curren-
cy that empowers billions of people, allowing them to engage in fric-
tion-less financial transactions in a simple, secure, and cost-effective
manner. [53]
But Facebook is launching two cryptocurrencies, not just Libra.

103
104 Blockchain Technology and Applications

As part of June 18th big reveal of the social network’s ambi-

tious plan to create a global fiat-backed Blockchain currency, (Fiat
currency is a government-issued currency like the dollar). Facebook
said that in addition to Libra, the project will also issue a “Libra
investment token.” Unlike Libra – a currency that will be broadly
available to the public – the investment token is a security, accord-
ing to Facebook. As such, the token will be sold to a much more
exclusive audience: the founding corporate members of the proj-
ect’s governing consortium, known as the Libra Association, and
accredited investors.
And while Libra will be backed by a basket of fiat currencies and
government securities, interest earned on that collateral will go to hold-
ers of the investment tokens. Each of the 28 companies that Facebook
recruited to run validating nodes as founding members of the consor-
tium invested at least $10 million for the privilege. The investment to-
ken is what they received as a financial reward.
“Because the assets in the reserve are low risk and low yield, returns
for early investors will only materialize if the network is successful and
the reserve grows substantially in size,” Facebook said in one of a series
of documents that supplement the long-awaited Libra white paper. Fur-
ther, the tokens will give holders proportional clout in the early gover-
nance of Libra. An investor who buys the tokens doesn’t have to run a
node, but unless they do, they don’t get to vote as members. [54]
But every new trend, idea or concept in order to become main-
stream must clear three obstacles namely: Technology, Business, and
Society (Government and Customers).
The same applies to Libra, where, essentially, Facebook wants to
make it as easy to move money around the world as it is to send a
text message with lower fees, more accessibility, and close-to-instanta-
neous transfers worldwide. [49]
The company released a White Paper to explain the details. It doesn’t
see the cryptocurrency as an attempt to replace the current financial sys-
tem, as is Bitcoin’s aim. Rather, it’s intended to extend a digital payment
method to under-served populations that don’t currently have easy ac-
 Cryptocurrency: To Libra or not To Libra 105

cess to traditional financial institutions. Worldwide, almost two billion

adults “remain outside of the financial system with no access to a tradi-
tional bank, even though one billion have a mobile phone and nearly half
a billion have internet access,” reads the paper. Libra aims to fill the gap.

13.1 How will Libra work?

Libra will be managed by a Swiss-based nonprofit. It is currently

backed by Facebook and less than two dozen Founding Member com-
panies, including eBay, Uber, Lyft, Coinbase and venture capital firm
Andreessen Horowitz. Unlike other cryptocurrencies, Libra will be
backed by “real” government-backed assets from central banks to give
it stability (Figure 13.1).
Facebook says Libra will be made available to Messenger and
WhatsApp users, who can cash in their local currency to buy Libra.
The currency will be held in a digital wallet called Novi and can be
spent on products and services at participating merchants, just like any
other currency.
To withdraw funds, users will be able to convert their digital cur-
rency into legal tender based on an exchange rate. It won’t be so dis-

Figure 13.1: Facebook’s Libra

106 Blockchain Technology and Applications

similar to when you exchange U.S. dollars for euros during a Euro-
pean vacation, for example. For those worried about security, Libra
payments will not be connected to a user’s Facebook data and won’t be
used for ad targeting.
Libra will not be available until the end of 2020, so you cannot buy
the currency today. Once it does become available, there should be sev-
eral ways consumers can buy the currency, and you won’t necessarily
need to go through Facebook.
Transaction fees will likely be lower than those currently charged by
traditional finance companies, which will primarily benefit merchants,
but also people who, for example, routinely send money to family mem-
bers abroad and are forced to rely on expensive wire transfer services.

13.2 How is this different from a credit card?

One of the purposes of Libra is to serve people who do not currently

have access to traditional banking and financial tools. Currently, cryp-
tocurrencies can be used like a credit card to buy goods online. But
Libra will theoretically go beyond that. Consumers will be able to pur-
chase the currency and use it at participating merchants (Figure 13.2).
“You have a balance of, say, $100, you go to a merchant, you scan
your smartphone for a $10 purchase, the Libras are taken out of your
account and held by the merchant,” Transaction fees will also be lower
than they are for traditional forms of payment. Novi is similar, then, to
a payment network like PayPal, but uses the cryptocurrency Libra rath-
er than a fiat currency, like the U.S. dollar for transactions. [55] Libra
will be a stable digital currency, which will be fully backed by real
assets stored in the Libra reserve. Stablecoins are cryptocurrency that
is stable in value, usually pegged from a real-world currency (such as
US$) or a commodity (such as gold) that are stable in nature.
The Libra reserve is created through funds originating from both
investors in the separate Investment Token, and users of Libra. This
means that you can invest in the project through an Investment Token
 Cryptocurrency: To Libra or not To Libra 107

Figure 13.2: How Libra works

that could potentially pay out dividends in the future or if you are keen
on getting your hands-on Libra coin itself, you have to convert your
local currency into Libra.
Essentially, Libra is only created when there is more fiat with
which it is either exchanged or backed up. The Libra reserve will then
be invested in low-risk assets that will yield interest over time, which
will then be used to cover operational costs, support low transaction
fees, and pay dividends to Investment Token investors who helped
jump-start the ecosystem. The stability of Libra will, therefore, be
supported by a global basket of fiat currencies and low-risk assets;
likewise, you can convert your Libra at any time according to the
prevailing exchange rate to your local currency.
Facebook will relinquish control over Libra, instead of conferring
control to Libra Association, a Geneva-based non-profit organization
with a long list of prominent founding members, including, Lyft, Spotify,
Uber, and Coinbase. Currently, there are 21 members, each of whom are
required to invest $10 million into the development of Libra. The Libra
foundation aims to accumulate a total of 100 partners with a reserve fund
of $1 billion, which is going to be used to manage Libra’s price stability.
All members will also be granted a single vote for the governance of Li-
bra, with each entity serving as nodes in the Libra network.
108 Blockchain Technology and Applications

The association will also spearhead Libra’s native open-source

technology, by promoting its developer platform, which is fueled by its
own programming language. Given the wide reach of the cumulative
networks of all members in the association, it is not hard to imagine
that there will be a colossal base of ready users for Libra, something
which would have been incomprehensible with any other past crypto-
currency projects, particularly on this scale.

13.3 Technology

Libra will be built on the Libra Blockchain, a natively developed open-

sourced Blockchain that uses a Byzantine Fault Tolerant (BFT) con-
sensus approach called LibraBFT Consensus Protocol (voting based
protocol used in Hyperledger networks). However, the Libra Block-
chain will initially be a permissioned (closed) Blockchain. This means
that access to the network is limited to a handful of selected and pre-ap-
proved entities who will become nodes in the system.
Libra will gradually transit into a permissionless (public) network
(similar to Bitcoin and Ethereum networks) within five years of the
public launch of Libra blockchain and ecosystem. The rationale behind
this is that a permissionless network has limitations in terms of speed
and scalability, and in order to deliver a scalable, secure, and stable
solution globally across billions of people and transactions, it needs
to be a permissioned system at first. That said, Libra Blockchain will
be open in the sense that anyone can use the network and even build
applications on top of the Blockchain. [56]

13.4 The Libra Blockchain

With 5KB transactions, 1000 verifications per second verifications on

commodity CPUs, and up to 4 billion accounts, the Libra Blockchain
should be able to operate at 1000 tps (transactions per second) if nodes
 Cryptocurrency: To Libra or not To Libra 109

used at least 40Mbps connections and 16TB SSD hard drives. Trans-
actions on Libra cannot be reversed. If an attack compromises over
one-third of the validator nodes causing a fork in the Blockchain, the
Libra Association says it will temporarily halt transactions, figure out
the extent of the damage, and recommend software updates to resolve
the fork. [52]
Libra Blockchain will facilitate smart contract functionality, using
a relatively new language called ‘Move’. Smart contracts are pre-pro-
grammed contracts that are self-executable, thereby allowing for the
automation of contracts without the need of any third parties or inter-
mediaries. Move is a simple but powerful language, and is relatively
suitable as a “first programming language”. More importantly, Move
is designed with a key focus on security and safety, since leveraging
a simpler language facilitates easier code writing and execution, and
reduces the risk of unintended bugs or security flaws (Figure 13.3).
The first application to be built to support a cryptocurrency must be
a wallet. This is exactly the case with Libra, in which Novi, a crypto-
currency wallet, will facilitate the storage and exchange of Libra coins.
Novi will be the first application to be built on the Libra Blockchain.
Novi is also the name of the company which will develop the wal-
let and is, in fact, a subsidiary of Facebook, built to ensure separation

Figure 13.3: Libra and Blockchain

110 Blockchain Technology and Applications

between financial and social data and to build and operate services on
its behalf on top of the Libra Blockchain.
Novi will be available as a mobile application and will also be
integrated with Facebook’s Messenger application and WhatsApp, al-
lowing users to convert fiat currency into Libra in their wallets and
thereafter send, receive, and pay for stuff using Libra. [52]

13.5 Business

According to Facebook, almost half of adults in the world do not have

an active bank account, with the figures worse in developing countries
and even worse for women. Approximately 70% of small businesses
in developing countries lack access to credit, and $25 billion is lost by
migrants annually through remittance fees. [57]
Facebook has more than 1.5 billion users on both WhatsApp and
Messenger yet makes almost no money from the messaging services.
When Facebook revealed its Libra plans, the company also said it would
soon put new digital wallets inside these apps so users can easily use
the cryptocurrency to send money to friends and businesses anywhere

Figure 13.4: Libra Business Reach

 Cryptocurrency: To Libra or not To Libra 111

in the world. If the plan works, WhatsApp and Messenger will become
new payments and commerce hubs that take small-but-profitable cuts
from billions of transactions (Figure 13.4).
Facebook has a checkered record in payments. But China’s WeChat
and QQ show what’s possible when messaging apps cleverly fold pay-
ments and other services into the mix. WeChat and QQ make mon-
ey by facilitating payments between users and merchants, distributing
mobile games, and selling digital goods, such as stickers and avatars.
The services have turned owner Tencent Holdings Ltd. into the most
valuable publicly traded company in China.
Facebook’s crypto push could facilitate similar offerings in pay-
ments, shopping, apps, and gaming, while tapping into the company’s
huge user base in Asia, where it has nearly four times as many monthly
active users as it does in North America, according to RBC Capital
Markets.
For now, Facebook and its new subsidiary Novi, which is building
the digital wallets, are framing the new currency as a way for individu-
als to send money to each other across borders. David Marcus, who is
leading Facebook’s Libra efforts, said that the company does not plan
to take a fee when people send money to friends, and will likely charge
“tiny transaction fees” for payments to businesses.
If people do start stuffing their new digital wallets with Libra,
it might not take years for Facebook to turn that activity into reve-
nue. Marcus believes the new wallets could have a more immediate
financial impact on a business line Facebook knows well: Target-
ed advertising. If users have Libra on hand as they scroll through
Facebook’s News Feed, when they click on an ad it will be easier
to buy something. That would make Facebook ads more appealing
to marketers.
“If there is more commerce happening on the platform, then small
businesses will end up spending more and advertising will be more
effective for them,” Marcus said. [58]
To generate higher levels of adoption among users, Libra has de-
veloped an incentive program to encourage more developers to create
112 Blockchain Technology and Applications

applications on Libra Blockchain, and more merchants to accept Libra

as a payment currency. Node operators, who represent the founding
members of the Libra association, will be rewarded with Libra coins
for getting users to sign up and use Libra. Businesses that attract us-
ers towards Novi will also be rewarded with incentives that they can
pass on, in part or in their entirety, to users in the form of discounts
or free Libra tokens for their purchases. Merchants in the network are
also incentivized by receiving a percentage of the transaction value
back for each transaction that is processed on the platform.
The incentive programs are targeted towards the entire Libra net-
work, ensuring that a holistic approach is undertaken to foster adoption
in the usage of Libra.

13.5 Society

13.5.1 Government

The company’s crypto plans are already under fire from regulators in
Washington and Europe who don’t like the idea of Facebook dipping
its toe in yet another aspect of people’s personal lives. And gaining
consumer trust after years of privacy mishaps may be harder than Face-
book expects. A letter from the U.S. House Representatives Committee
on Financial Services to Facebook sent on July 2, Facebook to official-
ly put the project on hold.
Today, cryptocurrencies are backed solely by the willingness of
users to accept them, not because they have any intrinsic value or are
backed by any government. This makes such currencies unstable. Li-
bra, however, will be backed by reserves: If a user buys a dollar of
Libra, that dollar will presumably be held in reserve somewhere, ready
to be honored when someone sells that Libra. Moreover, while most
cryptocurrencies are hard to use, Libra promises to be user-friendly
and embedded into Facebook and WhatsApp.
There are four core problems with Facebook’s new currency. [59]
 Cryptocurrency: To Libra or not To Libra 113

The first, and perhaps the simplest, is that organizing a payments

system is a complicated and difficult task, one that requires an enor-
mous investment in compliance systems. Banks pay attention to details,
complying with regulations to prevent money-laundering, terrorist fi-
nancing, tax avoidance, and counterfeiting. Recreating such a complex
system is not a project that an institution with the level of privacy and
technical problems like Facebook should be leading. [55]
The second problem is that, since the Civil War, the United States
has had a general prohibition on the intersection between banking and
commerce. Such a barrier has been reinforced many times, such as in
1956 with the Bank Holding Company Act and in 1970 with an amend-
ment to that law during the conglomerate craze. Both times, Congress
blocked banks from going into nonbanking businesses through holding
companies, because Americans historically did not want banks com-
peting with their own customers. Banking and payments is a special
business, where a bank gets access to intimate business secrets of its
customers. [55]
Imagine Facebook’s subsidiary Novi knowing your account bal-
ance and your spending, and offering to sell a retailer an algorithm that
will maximize the price for what you can afford to pay for a product.
Imagine this cartel having this kind of financial visibility into not only
many consumers, but into businesses across the economy. Such con-
flicts of interest are why payments and banking are separated from the
rest of the economy in the United States. [55]
It is also possible that insiders belonging to the Libra cartel could
exploit their access to information, business relationships or technolo-
gy to give themselves advantages. There are many ways a new curren-
cy system could advantage large businesses over everyone else, espe-
cially when the large ones are sitting on the board of governors for the
payments system. For instance, one of the incentives is to get people to
use the currency is discounts on Uber rides; if this happens, Facebook
would be giving an advantage to Uber instead of other ride-sharing
businesses. [55]
114 Blockchain Technology and Applications

The third problem is that the Libra system introduces systemic risk
to our economy. The Libra currency is backed, presumably, by bonds and
financial assets held in reserve at the Libra Reserve. But what happens
if there is a theft or penetration of the system? What happens if all users
want to sell their Libra currency at once, causing the Libra Reserve to
hold a fire sale of assets? If the Libra system becomes intertwined in our
global economy in the way Facebook hopes, we would need to consider
a public bailout of a privately managed system. We should not be set-
ting up a private international payments network that would need to be
backed by taxpayers because it is too big to fail. [55]
The fourth problem is that of national security and sovereign-
ty. Enabling an open flow of money across all borders is a political
choice best made by governments. And openness is not always good.
For instance, most nations, especially the United States, use economic
sanctions to bar individuals, countries or companies from using our
financial system in ways that harm our interests. Sanctions enforce-
ment flows through the banking system—if you cannot bank in dollars,
you cannot use dollars. With the success of a private parallel currency,
government sanctions could lose their bite. A permissionless (public)
currency system based on a consensus of large private actors across
open protocols sounds nice, but it is not democracy. Today, American
bank regulators and central bankers are hired and fired by publicly
elected leaders. Libra payments regulators would be hired and fired by
a self-selected council of corporations. There are ways to characterize
such a system, but democracy is not one of them. [55]
The social media giant says it will accept the cryptocurrency any-
where where it takes payments and at least for now won’t rule out
allowing it to be used to buy political ads. [60]
The Libra Association, a not-for-profit organization based in Swit-
zerland, will have several layers of governance, the most powerful of
which is a council, on which each member organization will have a
representative.
“The council delegates many of its executive powers to the asso-
ciation’s management but retains authority to override delegated de-
cisions and keep key decisions to itself, with the most important ones
requiring a greater than two-thirds supermajority,” according to anoth-
er supplementary document released by Facebook. As mentioned, to
become a member, the initial investors must put in at least $10 million.
In addition, a business must meet at least one of several elite criteria,
such as being on a list like the Fortune 500.
For every $10 million invested, a member gets one vote, subject to
a cap of 1 percent of total votes, in order to prevent the concentration
of power in any single entity. However, the financial reward remains
proportional to the amount invested no matter how much.
The council will be responsible for standard governance matters,
such as appointing an executive team for the association, led by a man-
aging director, and a board of directors to oversee them; setting the
top executive’s compensation, and managing the currency’s underlying
reserves.
But the body will also have final say over technical questions,
such as activating new features to the protocol and resolving situations
“where compromised validator nodes have resulted in many signed
versions of the Libra Blockchain,” according to the document.
While Facebook’s newly created Novi subsidiary will be a consor-
tium member with a council seat, the social network stressed it won’t
be in charge for long. “Once the Libra network launches, Facebook,
and its affiliates, will have the same commitments, privileges, and fi-
nancial obligations as any other Founding Member,” the company said.
“As one member among many, Facebook’s role in the governance of
the association will be equal to that of its peers.”
The exact components of the basket of assets securing Libra are to
be determined. But broadly, it will be “structured with capital preser-
vation and liquidity in mind,” according to the social media giant. Im-
portantly, while the coin has been described in early press coverage as a
stablecoin, Facebook noted that “from the point of view of any specific
currency, there will be fluctuations in the value of Libra.”
“The makeup of the reserve is designed to mitigate the likelihood
and severity of these fluctuations, particularly in the negative direction

115
116 Blockchain Technology and Applications

(i.e., even in economic crises).” In this way, Libra will function more
like a currency board such as Hong Kong’s rather than a central bank.
The collateral will consist of “bank deposits and government securi-
ties in currencies from stable and reputable central banks,” according
to Facebook. The latter will be limited to “debt from stable govern-
ments that are unlikely to experience high inflation.”
To make sure it can easily raise cash by selling this paper, it will
all be “short-dated securities issued by these governments that are all
traded in liquid markets.” While the composition of the basket may
change over time, Facebook said, the currency will always be fully
backed, discouraging “runs on the bank” that can happen with fraction-
al reserve institutions. [50]
To comply with anti-money-laundering regulations that require
traceability of funds, transactions on the Libra Blockchain will be un-
encrypted, “like many other Blockchain, so it is possible for third par-
ties to do analysis to detect and penalize fraud,” Facebook said. In other
words, it appears that there will be no use of cryptographic mechanisms
such as zero-knowledge proofs, used to obscure transaction details in
privacy-focused coins such as zcash.
If that raises privacy concerns (particularly given Facebook’s
own reputation with user data), the company is offering similar as-
surances to those Satoshi Nakamoto gave in the 2008 bitcoin white
paper. [50]

13.5.2 Customers

It is important to realize that Facebook is actually launching two cryp-

tocurrencies: the one everyone’s talking about (Libra) and the one
available only to Facebook and its corporate partners (the Libra invest-
ment token).
The former will be backed by a basket of fiat currencies and cash
equivalents, which means that for every dollar of Libra in existence,
there will be (in theory) a “dollar” worth of real-world assets which
that token may be exchanged for under certain conditions.
 Cryptocurrency: To Libra or not To Libra 117

As a normal user, you would get $100 worth of Libra by spending

$100. Your Libra can (again, in theory) be used across a variety of plat-
forms or sent to an approved friend.
The Libra Association (a Swiss not-for-profit) puts your $100 into a
variety f low-risk, short-term investments like U.S. Treasury bills. Those
funds are controlled and spent by the Libra Association. According to the
white paper, funds are used first to fund the operation of the network with
the remainder being divided among the Libra Investment Token holders
according to their holdings, with policies determined by the association.
The association itself is made up of holders of the Libra investment
token who invested a minimum of $10 million, as well as “special im-
pact groups” selected by the association to have a vote but who do not
have to buy the investment token.
From the white paper:

“How will the reserve be invested? Users of Libra do not receive

a return from the reserve. The reserve will be invested in low-risk
assets that will yield interest over time. The revenue from this in-
terest will first go to support the operating expenses of the asso-
ciation — to fund investments in the growth and development of
the ecosystem, grants to nonprofit and multilateral organizations,
engineering research, etc. Once that is covered, part of the remain-
ing returns will go to pay dividends to early investors in the Libra
Investment Token for their initial contributions. Because the assets
in the reserve are low risk and low yield, returns for early investors
will only materialize if the network is successful and the reserve
grows substantially in size.” [61]

Early investors are primarily large technology and VC companies, for

whom $10 million is not actually a huge investment. The big numbers
come into play when you look at what success, big or small, would look
like for the investors, at which point suddenly the project makes sense.
[57] Consumers, who will decide ultimately whether or not Libra is
a flop, there was only a slightly underwhelming hint of what it might
118 Blockchain Technology and Applications

actually be used for: A picture of someone sending money to someone

else via a smartphone.
Even setting aside the various risks thrown up by the Libra
white paper (financial stability, user privacy, and whether it could
cope with hundreds of millions of daily transactions), you have to
ask why it might be a compelling product. The service described
by Facebook, namely sending money “as you might send a text
message,” is already offered by plenty of other companies such as
Alphabet Inc.’s Google, Apple pay, PayPal Holdings Inc.’s Venmo
and Circle, a peer-to-peer payments provider that lets you transfer
traditional fiat currencies.
Indeed, Facebook itself lets you send cash through its Messaging
app. The company even had its own virtual currency before, called
Credits, for the purchasing of content from within apps. It did not
take off.
Facebook plans to lead the Libra consortium for the near future,
and it will be at least five years before the Blockchain technology that
supports the tokens is completely decentralized. The ultimate dream
of any crypto project worth its salt is that the digital currency does not
rely on a single point of control. And what about Facebook’s targeting
of the “unbanked,” or those in the developing world struggling with
volatile currencies? Bitcoin and its ilk promised to address the same
problems, and have failed completely to help anyone other than spec-
ulators and criminals.
Facebook’s own patchy record on international payments should
give pause too. WhatsApp Pay has struggled to gain regulatory accep-
tance in India, the world’s top remittance market because its data stor-
age practices did not meet national standards. Libra will have to answer
a lot of similar questions about its financial structure and treatment of
customer information.
Facebook has been on a mission over the past year to recapture the
trust of its users. Libra certainly demands a lot of faith. [62]
Another big question surrounding Libra is what kinds of consumer
protections — if any — Facebook and its partners will build into the
 Cryptocurrency: To Libra or not To Libra 119

system. With bitcoin and other cryptocurrencies, there are often few
protections.
Stories abound of people losing thousands or millions of dollars
or more because they cannot remember the passcode to their crypto-
currency wallet, or a hacker broke into their wallet or into the cryp-
tocurrency exchange where it was stored. And typically, any trans-
actions conducted using such digital currency are final once they
happen.
They cannot be reversed because one party made a mistake or a
customer did not get what he or she ordered. Customers using the tradi-
tional banking system have many more protections. In the US, federal
banking insurance covers deposits. Consumers generally have the right
to contest charges or have transactions reversed if they did not receive
what they have ordered or were defrauded. And they generally would
not be held responsible if someone steals their credit card and uses it to
make a bunch of purchases.
It’s unclear what model Facebook and its partners will follow with
Libra. But it is likely that many customers and, perhaps, regulators are
going to expect the company to offer similar protections that banks and
credit card issuers offer. [63]

13.6 Conclusion

Libra is still in the early stages of development with lots of things left
to do, with a targeted launch by end of 2020. However, Libra is perhaps
the most ambitious and hyped cryptocurrency in existence, drawing
on the stature of Facebook as a unicorn, as well as the partnerships
that have been developed by the Libra association. With plans to cre-
ate a fully-functioning Blockchain that is open-source, and facilitates
smart contract technology using a native programming language, Libra
seems to be moving in fundamentally the right direction.
More importantly, the adoption of cryptocurrency and Blockchain
technology by a giant technology firm has set the tone for mainstream
120 Blockchain Technology and Applications

adoption of this nascent technology, and the fact that a prominent list
of institutions, all of which were previously openly reluctant to em-
brace cryptocurrencies, serve as members of the Libra association, is a
huge testament to the changing tides of acceptance towards distributed
ledger technologies. Saying that this is a huge deal is perhaps an under-
statement, but it is definitely a well-deserved victory for the industry
and technology. [49]
 14
Future Trends of Blockchain

It’s clear that Blockchain will revolutionize operations and processes

in many industries and governments agencies if adopted, but its adop-
tion requires time and efforts, in addition, Blockchain technology will
stimulate people to acquire new skills, and traditional business will
have to completely reconsider their processes to harvest the maximum
benefits from using this promising technology.

121
122 Blockchain Technology and Applications

14.1. A Reality check for Blockchain

Blockchain is suffering from the same type of over-hype that virtual reality
is. For years, people in various sectors have been hearing about Block-
chain. It’s been portrayed as a true game-changer. The problem is that so
many people still aren’t seeing real-world benefits. To them, like virtual
reality, it remains a nifty technology without a practical application they
can really wrap their heads around.
In 2018, we saw an increase in funding for Blockchain startups. How-
ever, like any new technology, Blockchain is still immature in its imple-
mentation; as a result, many Blockchain startups are expected to be just a
waste of time and money. False starts in Blockchain deployment will lead
organizations to failed innovations, rash decisions, and even complete re-
fusal of this innovative technology.
Undoubtedly, Blockchain technology in the future will affect every
aspect of businesses, but this is a gradual process that requires time and
patience. Gartner predicts that most traditional businesses will keep an eye
on Blockchain technology, but won’t plan any actions, waiting for more
examples of the best applications of Blockchain technology.
The reason for this is that traditional enterprises require more trans-
formation for Blockchain deployment than newly-appeared businesses.
According to Gartner, only 10% of traditional companies will achieve any
radical transformation with Blockchain technologies by 2023. [64]
This is not to say that Blockchain doesn’t have amazing potential. It
certainly does prove that the gap between Blockchain hype and application
is a problem. If businesses stop exploring their potential, it won’t matter
how useful the technology is. But this may be changing as well. [65]

14.2. The ‘Emerging Disruptor’ startups fueled by

Blockchain

The Blockchain ‘emerging disruptor’ companies are fast-growth start-

ups that have found themselves in the position to be able to disrupt
 Future Trends of Blockchain 123

other businesses in their sector. They often have the benefit of be-
ing well-funded and headed by executives who are experienced and
well-connected in their industries.
These are the businesses that are often able to apply Blockchain
technologies in ways that are truly a part of their business model, as
opposed to supplementing it. Competing with big names like Amazon,
Google, Facebook, Apple, and Microsoft. [61]
For example, Blockchain could be useful for content streaming
companies like Netflix because it could be used to store data more se-
curely and to pave the way for interoperability. If nothing else, it could
provide something resembling an API, allowing third-parties to read
and write data to the Blockchain.
But there could be a more practical use for Blockchain in the
streaming industry and in other industries that require large amounts
of processing power. In the same way that mining for bitcoin just taps
into dormant computing power from across a network of machines,
streaming companies could witness huge decreases in their operating
costs by spreading the load across unused machines via the Block-
chain. [66]

14.3. Blockchain and Cybersecurity

The global figure for cyber breaches had been put at around $200
billion annually [67]. Because Blockchain was created as a means
to ensure the security of transactions, it shouldn’t come as a big sur-
prise that this is the niche where much of the innovation still occurs.
Blockchain is playing a huge role in cybersecurity especially. [61]
With the growing prevalence of data breaches and the massively in-
terconnected world we live in, new ways to verify identity and pro-
tect privacy will be game-changers. Blockchain is a natural for this
role because the whole point of it is to provide robust, incorruptible
— yet encrypted — record-keeping that anyone can easily verify.
124 Blockchain Technology and Applications

An example of such an application, Blockchain can be used for

shopping security, whether online or in person. Blockchain in this
space can create a “universal shopper profile” that is undergirded by
Blockchain. Unlike most systems these days, in which your purchase
histories are stored and carefully scrutinized and shared by big names
such as Google, Blockchain restricts the information collection and
sharing to only those entities that you (the consumer) grant it to share,
and give consumers incentive to see ads by tokenizing the process and
give rewards. [68]
For a Blockchain system to be penetrated, the attacker must intrude
into every system on the network to manipulate the data that is stored
on the network. The number of systems stored on every network can
be in millions. Since domain editing rights are only given to those who
require them, the hacker won’t get the right to edit and manipulate the
data even after hacking a million systems. Since such manipulation of
data on the network has never taken place on the Blockchain, it is not
an easy task for any attacker.
While we store our data on a Blockchain system, the threat of a
possible hack gets eliminated. Every time our data is stored or insert-
ed into Blockchain ledgers; a new block is created. This block further
stores a key that is cryptographically created. This key becomes the
unlocking key for the next record that is to be stored onto the ledger. In
this manner, the data is extremely secure.
Furthermore, the hashing feature of Blockchain technology is one
of its underlying qualities that makes it such a prominent technolo-
gy. Using cryptography and the hashing algorithm, Blockchain tech-
nology converts the data stored in our ledgers. This hash encrypts the
data and stores it in such a language that the data can only be decrypted
using keys stored in the systems. Other than cybersecurity, Blockchain
has many applications in several fields that help in maintaining and
securing data. The fields where this technology is already showing its
ability are finance, supply chain management, and Blockchain-enabled
smart contracts. [63]
 Future Trends of Blockchain 125

14.4. Internet of Things (IoT) meets Blockchain

It’s no secret that the internet of things is coming to connect our devic-
es and to make it easier than ever for us to create and store data about
ourselves. This applies to everything from wearable devices to home
hubs, connected fridges and any other type of internet-connected de-
vice that you can imagine.
But all of these internet-connected devices will need some sort of
security system that ties them together and that makes their data secure.
That could be where the Blockchain comes in, but only if different
manufacturers can agree to come together and agree on the specifica-
tions of the Blockchain that’s required. [62]
The International Data Corporation (IDC) reports that many
#IoT companies are considering the implementation of Blockchain
technology in their solutions. Therefore, IDC expects that nearly 20
percent of IoT deployments will enable Blockchain services in two
years.
The reason for this is that Blockchain technology can provide a
secure and scalable framework for communication between IoT devic-
es. While modern security protocols already appeared to be vulnerable
when implemented to IoT devices, Blockchain has already approved its
high resistance to cyber-attacks. [60]
Besides, Blockchain will allow smart devices to make automated
micro-transactions. Due to its distributed nature, Blockchain will con-
duct transactions faster and cheaper. To enable transferring money or
data, IoT devices will leverage smart contracts which will be consid-
ered as the agreement between the two parties. [60]
Since the beginning of 2018, analysts have been predicting that
IoT DApps might just become the next key development in Blockchain
application development. In 2019, 20% of all IoT deployments have at
least basic levels of Blockchain services enabled.
126 Blockchain Technology and Applications

Figure 14.1: IoT Security Flaws

IoT security flaws generally revolve around three major events:

authentication, connection, and tractions (Figure 14.1). Thanks to these
vulnerabilities, already hackers have managed to take control of im-
planted cardiac devices, disable cars remotely, and launch the largest
DDos attack to date.
Given that security is one of the main challenges of IoT, as well as,
data integrity, it goes without saying that Blockchain could potentially
revolutionize this sector. Blockchain technology makes it possible to sta-
bilize complex IoT systems. It also eliminates the risk of single points of
failure for an IoT network as a result of malicious attacks. [69]

14.5. Increased use of smart contracts

Smart contracts are one of the most interesting aspects of Blockchain

technology because they have the potential to bypass third parties and
 Future Trends of Blockchain 127

to create airtight agreements that must be honored. This has plenty of

practical applications in all sorts of industries, from finance and real es-
tate to logistics and recruitment. Any industry that relies on agreements
to function can get a lot out of smart contracts.
The idea behind these contracts is that they offer increased trans-
parency and security while simultaneously speeding up the whole pro-
cess. Contracts could be signed and verified in real-time in a secure
environment, and that can make all of the difference when it comes to
getting things done and reacting quickly to changes in the market [62].
You should also keep in mind that smart contracts are decentral-
ized and aren’t regulated by any authority. But what should parties do
in case of any disagreement? Participants of smart contracts usually
agree to be bound by regulations, but what if a dispute appears between
parties from different countries. Now, it remains to be unclear how
contractual disputes should be settled. Thus, the rule of law should be
enforced into smart contracts in the near future for resolving any dis-
putes between the parties. [60]

14.6. Increased regulations

As Blockchain becomes more widely used in all sorts of different in-

dustries, it’ll also start to receive more attention from regulators and
lawmakers, especially if governments can find ways to use Blockchain
technology on a large scale. And let’s not forget that cryptocurrency is
technically classed as a property and not a currency when it comes to
taxation, at least in the United States.
Whenever a new innovation like Blockchain comes along and
starts to create large sums of money for those who are able to take
advantage of it, it tends to receive intense scrutiny from people in
power. But that is not necessarily bad news for Blockchain, because
additional interest in it from powerful organizations may help to in-
crease consumer trust whilst providing the framework needed for fur-
ther growth. [62]
128 Blockchain Technology and Applications

14.7. Financial institutions will lead to Blockchain

evolution and revolution

Unlike other traditional businesses, the banking and finance industries

do not need to introduce radical transformation to their processes for
adopting Blockchain technology. After it was successfully applied for
the cryptocurrency, financial institutions begin seriously considering
Blockchain adoption for traditional banking operations.
In a recent PwC report, 77 percent of financial institutions are ex-
pected to adopt Blockchain technology as part of an in-production sys-
tem or process by end of 2020.
Though the concept of Blockchain is simple, it will bring con-
siderable savings for banks. Blockchain technology will allow banks
to reduce excessive bureaucracy, conduct faster transactions at lower
costs, and improve its secrecy. One of the Blockchain predictions made
by Gartner is that the banking industry will derive 1 billion dollars of
business value from the use of Blockchain-based cryptocurrencies by
end of 2020.
Moreover, Blockchain can be used for launching new cryptocur-
rencies that will be regulated or influenced by monetary policy. In this
way, banks want to reduce the competitive advantage of standalone
cryptocurrencies and achieve greater control over their monetary pol-
icy. [60]

14.8. National cryptocurrencies will appear

It’s inevitable that governments will have to recognize the benefits of

Blockchain-derived currencies. At the rise of Bitcoin, governments ex-
pressed their skepticism regarding the particular application of crypto-
currencies. However, they had to worry when Bitcoin became a trade-
able currency that could not be controlled by any government.
Although some countries like China still ban Bitcoin exchang-
es, we should expect that governments will finally accept the Block-
 Future Trends of Blockchain 129

chain-based currency in 2019 because of its potential advantages for

public and potential services. By end of 2022, Gartner predicts that at
least five countries will issue a national cryptocurrency. [60]

14.9. Blockchain integration into government agencies

The idea of the distributed ledger is also very attractive to government

authorities that have to administrate very large quantities of data. Cur-
rently, each agency has its separate database, so they have to constantly
require information about residents from each other. However, the im-
plementation of Blockchain technologies for effective data manage-
ment will improve the functioning of such agencies.
According to Gartner, by 2022, more than a billion people will
have some data about them stored on a Blockchain, but they may not
be aware of it. [60]

14.10. Blockchain experts will be in high demand

Despite Blockchain is on the top of its popularity, the job market

experiences a lack of Blockchain experts. Upwork, an online freelanc-
ing database, has recently reported a fast-increasing demand in people
with “Blockchain” skills. While the technology is new, there are a lim-
ited number of Blockchain engineers. [60]

14.11. Blockchain and Artificial Intelligence (AI)

One of Blockchain’s most promising use cases lies in the fact that it
has to potential to facilitate certain parts of an AI implementation. In
order for AI to function, machines require access to big data. Up to now
the processing of big data has not been economically viable. However,
with the support of the Blockchain, this may all change.
130 Blockchain Technology and Applications

Blockchain can provide the data authentication on which AI mod-

els depend since the data stored on the ledger cannot be changed and
is available publicly. That makes data stored in a Blockchain more rel-
evant than data that is delivered on unproven platforms that have em-
bedded errors. [65]
The quest for artificial intelligence has been a long-standing one.
Ever since the emergence of computers, scientists have been look-
ing for ways to develop thinking machines. AI is basically an algo-
rithm that allows machines to exhibit functions that they were not
programmed for. The most complex devices on the planet still only
work within the limits of their programming algorithms. When suc-
cessfully implemented, AI will birth machines that can quote “learn
how to learn.”
Just like in the case of the IoT, the Blockchain has been identified
as having the potential to facilitate certain aspects of the AI implemen-
tation. In order to function to its fullest capacity, machines capable of
learning require access to “big data.” The majority of the big data avail-
able for mainstream use is reserved for analytics. Exchange of big data
hasn’t been economically feasible but with the aid of the Blockchain,
this could all change.
Blockchains can provide a secure environment for big data owners
to connect with AI developers. By so doing, complex machine learning
algorithms can be developed to help smart devices take advantage of
the data available to them in order to achieve artificial sentience. [70]

14.12. New Blockchain Platforms with Better

Processing Power and UX

Ethereum is a well-known platform for Blockchain technology but it

has a major fundamental flaw; its highly inefficient usage of the Block-
chain’s processing power, other Blockchain platforms are emerging to
fill the gap. Instead of Ethereum, DApp developers are turning to other
Blockchains, such as Hyperledger.
 Future Trends of Blockchain 131

Hyperledger offers a major advantage over Ethereum because it

allows developers to create DApps with private Blockchains, as well
as, permissioned Blockchains. Hyperledger offers low node-scalability
which enables high-performance scalability. With Hyperledger, nodes
can also assume different roles and tasks in order to reach a consensus
that enables fine-grained control over consensus.
While Blockchain projects have mostly been focused on taking ad-
vantage of the versatility of Blockchain technology, usability has been
severely overlooked. In 2019, you can expect to see new projects that
aim to make things easier for everyone, for end-users, as well as, de-
velopers.
New platforms are making things easier for developers with func-
tional programming languages and easy-to-deploy and customizable
Blockchains. On the user end, the end goal is for users to not even
know that they are using Blockchain technology. For example, Block-
chain developers are building on platforms, which don’t require users
to pay fees. [65]

14.13. Blockchain as a Service (BaaS) By Big Tech

Companies

One of the promising blockchain trends in 2020 is BaaS, short for

Blockchain As A Service. It is a new blockchain trend that is currently
integrated with a number of startups as well as enterprises. BaaS is
a cloud-based service that enables users to develop their own digital
products by working with blockchain. These digital products may be
smart contracts, decentralized applications (DApps), or even other ser-
vices that can work without any setup requirements of the complete
blockchain-based infrastructure.
Some of the companies developing a blockchain that provide BaaS
service are Microsoft and Amazon, consequently shaping the future of
blockchain applications.
132 Blockchain Technology and Applications

14.14. Federated Blockchain Moves to The Center

Stage

Blockchain networks can be classified as Private, Public, Federated or

Hybrid. The term Federated Blockchain can be referred to as one of the
best blockchain latest trends in the industry. It is merely an upgraded
form of the basic blockchain model, which makes it more ideal for
many specific use cases.
In this type of blockchain, instead of one organization, multiple
authorities can control the pre-selected nodes of blockchain. Now, this
selected group of various nodes will validate the block so that the trans-
actions can be processed further. In 2020, there will be a rise in the us-
age of federated blockchain as it provides private blockchain networks,
a more customizable outlook.

14.15. Stablecoins Will Be More Visible

Using Bitcoin as an example of cryptocurrencies its highly volatile

in nature. To avoid that volatility stablecoin came to the picture
strongly with stable value associate with each coin. As of now, sta-
blecoins are in their initial phase and it is predicted that 2020 will
be the year when Blockchain stablecoins will achieve their all-time
high.
One driving force for using stablecoin is the introduction of Face-
book’s cryptocurrency “Libra” in 2020 even with all the challenges
facing this new cryptocurrency proposed by Facebook and the shrink-
ing circle of partners in libra.org.

14.16 Final Thoughts

There’s nothing but opportunity ahead for businesses who want to

utilize Blockchain. However, most Blockchain application develop-
 Future Trends of Blockchain 133

ment trends require more than just developers. You’ll also need to
make changes to your workforce, as well as, your overall business
strategy in order to effectively leverage the benefits of Blockchain
technology.
Special Topics in Blockchain
 15
Blockchain Technology and COVID-19

The COVID-19 coronavirus has impacted countries, communities and

individuals in countless ways, from school closures to health-care in-
surance issues not to undermined loss of lives. As governments scram-
ble to address these problems, different solutions based on blockchain
technologies have sprung up to help deal with the worldwide health
crisis. Figure 15.1 explains the source of the name COVID-19. [71]

137
138 Blockchain Technology and Applications

Figure 15.1: COVID-19 Naming

A blockchain is an essential tool for establishing an efficient and trans-

parent healthcare business model based on higher degrees of accuracy
and trust because technology is a tamper-proof public ledger. Block-
chain will surely not prevent the emergence of new viruses itself, but
what it can do is create the first line of rapid protection through a net-
work of connected devices whose primary goal is to remain alert about
disease outbreaks. Therefore, the use of blockchain-enabled platforms
can help prevent these pandemics by enabling early detection of epi-
demics, fast-tracking drug trials, and impact management of outbreaks
and treatment. [72]
But before we explore in details the possible ways of using Block-
chain to help in fighting this invisible enemy, we need to understand
some of the challenges defining this deadly virus.

15.1 Major Challenges of COVID-19

• One major issue is how prepared the world’s health systems

are to respond to this outbreak.
 Blockchain Technology and COVID-19 139

• Tracking a huge population of infectious patients to stop epi-

demics.
• Another is the immediate requirement for developing better
diagnostics, vaccines, and targeted therapeutics.
• Misinformation and conspiracy theories spread through social
media platforms.
• Various limitations while accessing the tools when required.
• No adequate measures to adopt in a crisis situation. [8][73]
[74]

15.2 Can Blockchain help in preventing pandemics?

With Blockchain we can share any transaction / information, real time,

between relevant parties present as nodes in the chain, in a secure and
immutable fashion. In this case, had there been a blockchain where
WHO, Health Ministry of each country and may be even relevant nodal
hospitals of each country, were connected, sharing real time informa-
tion, about any new communicable disease, then the world might have
woken up much earlier. We might have seen travel restrictions given
sooner, quarantining policies set sooner and social distancing imple-
mented faster. And may be fewer countries would have got impacted.
What every country is doing now fighting this pandemic, would
have been restricted to fewer countries and in a much smaller scale.
The usage of a Blockchain to share the information early on, might
have saved the world a lot of pain. [75]
The world had not seen anything like COVID-19 pandemic before
in the recent history. Today we need to take a hard look at the reporting
infrastructure available for communicable diseases, both technology
and regulations and improve upon that, such that we do not need to
face another pandemic like this in the future. Figure 15.2 list the areas
where Blockchain Technology can help in fighting COVID19. [68]
140 Blockchain Technology and Applications

Figure 15.2: Blockchain Applications in fighting COVID-19

15.3 Tracking Infectious Disease Outbreaks

Blockchain can be used for tracking public health data surveillance,

particularly for infectious disease outbreaks such as COVID-19. With
increased blockchain transparency, it will result in more accurate re-
porting and efficient responses. Blockchain can help develop treat-
ments swiftly as they would allow for rapid processing of data, thus
enabling early detection of symptoms before they spread to the level
of epidemics.
Additionally, this will enable government agencies to keep track
of the virus activity, of patients, suspected new cases, and more. [76]
[68]

15.4 Donations Tracking

As trust is one of the major issues in donations, Blockchain has a solu-

tion for this issue.
There has been a concern that the millions of dollars being donated
for the public are not being put to use where needed.
 Blockchain Technology and COVID-19 141

With the help of blockchain capabilities, donors can see where

funds are most urgently required and can track their donations until
they are provided with a verification that their contributions have been
received to the victims. Blockchain would enable transparency for the
general public to understand how their donations have been used and
its progress. [68] [70]

15.5 Crisis Management

Blockchain could also manage crisis situation. It could instantly alert

the public about the Coronavirus by global institutes like the World
Health Organization (WHO) using smart contracts concept.
Not only it can alert, but Blockchain could also enable to provide
governments with recommendations about how to contain the virus. It
could offer a secure platform where all the concerning authorities such
as governments, medical professionals, media, health organizations,
media, and others can update each other about the situation and prevent
it from worsening further. [77] [68]

15.6 Securing Medical Supply Chains

Blockchain has already proven its success stories as a supply chain

management tool in various industries; similarly, Blockchain could
also be beneficial in tracking and tracing medical supply chains.
Blockchain-based platforms can be useful in reviewing, recording,
and tracking of demand, supplies, and logistics of epidemic prevention
materials. As supply chains involve multiple parties, the entire process
of record and verification is tamper-proof by every party, while also
allowing anyone to track the process.
This technology could help streamline medical supply-chains, ensur-
ing that doctors and patients have access to the tools whenever they need
them, and restraining contaminated items from reaching stores.[68] [72]
142 Blockchain Technology and Applications

15.7 WHO and Blockchain Technology

The World Health Organization (WHO) is working with blockchain

and other tech companies on a program to help convey data about the
ongoing COVID-19 pandemic, named MiPasa.
The program is a distributed ledger technology (DLT) that will
hopefully help with early detection of the virus and identifying carriers
and hotspots.
MiPasa is built on top of Hyperledger Fabric in partnership with
IBM, computer firm Oracle, enterprise blockchain platform HACERA
and IT corporation Microsoft. It purports to be “fully private” and share
information between need-to-know organizations like state authorities
and health officials.
Described by creators as “an information highway,” MiPasa
cross-references siloed location data with health information. It prom-
ises to protect patient privacy and to help monitor local and global
trends such as the virus that has now sent the world spiraling into chaos
and uncertainty in recent weeks.
The U.S., European, and Chinese Centers for Disease Control and
Prevention, the Hong Kong Department of Health, the Government of
Canada and China’s National Health Commission have all worked with
the project. [8][68] [69][71]
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[39] https://www.allerin.com/blog/blockchain-enabled-smart-contracts-
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[40] https://www.ibm.com/blogs/insights-on-business/government/con-
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[41] https://www.forbes.com/sites/rogeraitken/2017/11/13/new-block-
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[42] https://blog.capterra.com/benefits-of-blockchain-cybersecurity/
[43] http://www.technologyrecord.com/Article/cybersecurity-via-block-
chain-the-pros-and-cons-62035
146 Blockchain Technology and Applications

[44] https://www.bbntimes.com/en/technology/first-line-of-de-
fense-for-cybersecurity-artificial-intelligence
[45] https://blog.goodaudience.com/blockchain-and-artificial-intelli-
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[46] https://aibusiness.com/ai-brain-iot-body/
[47] https://www.forbes.com/sites/darrynpollock/2018/11/30/the-fourth-
industrial-revolution-built-on-blockchain-and-advanced-with-
ai/#4cb2e5d24242
[48] https://www.forbes.com/sites/rachelwolfson/2018/11/20/diversi-
fying-data-with-artificial-intelligence-and-blockchain-technolo-
gy/#1572eefd4dad
[49] https://www.coindesk.com/how-should-crypto-prepare-for-goo-
gles-quantum-supremacy?
[50] https://ai.googleblog.com/2019/10/quantum-supremacy-using-pro-
grammable.html
[51] https://www.linkedin.com/pulse/20140503185010-246665791-q
uantum-computing/
[52] https://decrypt.co/9642/what-google-quantum-computer-means-
for-bitcoin/
[53] https://www.etorox.com/news/opinions/the-7-key-takeaways-
about-libra/
[54] https://www.coindesk.com/theres-a-second-token-a-breakdown-of-
facebooks-blockchain-economy
[55] h t t p s : / / w w w. c n b c . c o m / 2 0 1 9 / 0 6 / 1 8 / w h a t - i s - l i b r a - f a c e -
books-new-cryptocurrency.html?__source=facebook%7Cmakeit
[56] https://techcrunch.com/2019/06/18/facebook-libra/?tpc-
c=ECFB2019
[57] https://insurtechforum.net/compared-facebook-libra-and-calibra-
vs-apple-pay/?
 References 147

[58] https://www.bloomberg.com/news/articles/2019-06-25/facebook-s-
libra-creates-new-path-to-printing-even-more-money-through-mes-
saging-services?
[59] https://www.nytimes.com/2019/06/19/opinion/facebook-curren-
cy-libra.html?smid=tw-nytopinion&smtyp=cur
[60] https://www.forbes.com/sites/jonathanberr/2019/06/30/will-face-
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dling/#19042b237949
[61] https://www.coindesk.com/billion-dollar-returns-the-up-
side-of-facebooks-libra-cryptocurrency
[62] https://www.bloomberg.com/news/articles/2019-06-23/guardians-
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[63] https://www.theatlantic.com/ideas/archive/2019/06/dont-trust-li-
bra-facebooks-new-cryptocurrency/592450/
[64] https://aithority.com/guest-authors/Blockchain-technolo-
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[65] https://www.forbes.com/sites/andrewarnold/2018/08/13/
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[66] https://www.cio.com/article/3294225/Blockchain/5-top-Block-
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[67] https://www.bbntimes.com/en/technology/second-line-of-de-
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[68] https://www.forbes.com/sites/forbestechcouncil/2018/07/18/
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[69] https://achievion.com/blog/5-trends-Blockchain-application-devel-
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[70] https://hackernoon.com/latest-Blockchain-trends-to-watch-out-for-
in-2018-59b2831ddfb
148 Blockchain Technology and Applications

[71] https://www.govtech.com/products/Blockchain-Emerges-as-Use-
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[73] https://www.ibm.com/blogs/blockchain/2020/03/mipasa-project-
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[76] https://www.ledgerinsights.com/us-homeland-security-lists-block-
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[77] https://www.rollcall.com/2020/03/31/blockchain-could-transform-
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 Index

A C

AI see Artificial Intelligence C++ (Bitcoin) 7

Amazon 123, 131 Canada 142
API x, 44, 123 CDC x
Apple 118, 123 China 111, 128, 142
applications i, iii, vii, x, xi, xii, xiv, 43, compliance 64
47, 49, 90, 140, 154 confidentiality 84
decentralized applications vii, x, xiv, consensus xiii, 6, 10, 12-22, 34, 39, 45,
43 54, 55, 74, 76, 85, 108, 114, 131
artificial intelligence (AI) vii, x, xi, xiii, consensus mechanism 6
xiv, 3, 4, 67, 70, 71, 88-93, 129, consensus model xiii
130, 153, 154 consensus protocols vii, xiv, 15
authentication 64, 65, 126, 130 Corda 76
autonomous x, 35, 54 Coronavirus 141
autonomous device coordination 54 cost 53, 56, 67, 74, 75, 82, 103
COVID19 viii, x, xii, xiv, 137-142
crisis management 141
B crowdfunding xi, 27-29, 31, 143
crypto 22, 76, 95, 99, 111, 112, 118
BCH x, 36 cryptocurrency vii, xiii, xiv, 20, 35, 77,
BFT x, 19, 108 78, 79, 103-110, 114, 119, 127-129,
Bitcoin x, xii, xiii, 7, 12, 16, 17, 35, 36, 132
43, 46, 57, 76-79, 91, 99, 104, 108, cryptography 5, 6, 99
118, 128, 132 CSS x, 44
Bitcoin cash x, xii, 35, 36 cyberattacks 87
BTC x, 36 cybersecurity vii, x, xi, xiii, xiv, 3, 4,
business x, xii, 11, 79, 104, 110 81-87, 123, 153, 154
Byzantine Fault Tolerance (BFT) x,
19, 20

149
150 Blockchain Technology and Applications

D F

DAO x, 35 Facebook xi, xiii, 44, 92, 103-119, 123,

data ix, 4, 8, 9, 12, 17, 23, 24, 27, 31, 132
39, 44, 46, 52-61, 64-68, 70, 74, 75, FDA x, 25
78, 82-93, 96, 98, 106, 110, 116, fraud 85
118, 123-126, 129, 130, 140, 142, front end 44
146, 148, 150
data monetization 92
data protection 91 G
data quality 85
database 5, 39, 44, 55, 56, 60, 61, 74, Gartner 52, 77, 89, 122, 128, 129
78, 87, 129 Go 7
decentralization 30, 39, 82, 91 Google 92, 95, 98, 99, 118, 123, 124
desktops 10
digital transformation vii, x, xi, xiii,
xiv, 67-70, 154 H
DLT x, 142
double-spending 16 hacked 78
DPoS x, 18, 19 hash 57, 61, 75, 83, 99, 124
hashing xiii, 17, 83, 91, 124
Hong Kong 116, 142
E HTML x, 44
human error 32
Elliptic Curve Digital Signature Algori- hyperledger 19, 38, 76, 108, 130-131, 142
thm (ECDSA) x, 99
energy 27
entanglement xi, 97-99 I
error correction 98
ETC x, 35 IBAC x, xi, 3, 4
ETH x, 35 IBM x, 76, 142
Ethereum x, xiii, 35, 38, 39, 41, 46, 76, immutability 30, 35
108, 130, 131 Infectious Disease 140
Ethereum Classic (ETC) x, 35 Initial Coin Offering (ICO) 28
EU x insurance 26
extended Church-Turing thesis 96 integrity 9, 85
interference 97
Internet of Things (IoT) vii, x, xi, xii,
xiii, xiv, 3, 4, 51-71, 79, 125, 126,
130, 153, 154
 Index 151

IPFS x nodes 8, 14, 15, 18, 19, 20, 22, 39, 46,
irreversibility 61, 86 55-63, 74, 85, 104, 107-109, 115,
131, 132, 139

J
O
Java 7
JavaScript 7, 44 open-source 45, 108, 119
Optimum Platform 53
Oracle 142
L

laptops 10 P
Leased Proof of Stake (LPoS) x, 20
ledger x, 6, 77 Peer-to-peer 54
distributed ledger x, xiii, 54, 73, 75, peer-to-peer communication 8, 54
76, 78, 85, 91, 120, 129, 142 photon 98, 100
legal 64, 79 processing 4, 53, 57, 60, 77, 90, 91, 96,
Libra vii, xi, xii, xiii, xiv, 103-120, 132 100, 123, 129, 130, 140
logic processing power 63, 77, 90, 91, 96,
computational logic 62 100, 123, 130
human logic 5 processing time 4, 53, 57, 60, 77, 90,
LPoS x, 20 91, 96, 100, 123, 129, 130, 140
Proof
Zero-Knowledge Proof (ZKP) x, xi,
M 33, 36, 37, 38
Proof of Activity (PoA) x, 19, 21
M2M x, 53 Proof of Capacity (PoC) x, 21, 25
Microsoft 76, 123, 131, 142 Proof of Elapsed Time (PoET) x, 21
MiPasa 142 Proof of Importance (PoI) x, 21
MIT x, 5, 153, 154 Proof-of-View (PoW) x, xi, 17, 18,
20, 22
protocol
N gossip protocol 6, 8
Python 7
Nakamoto, Satoshi 116
NASDAQ x, 77
network xi, 12, 13, 54 Q
permissionless network 108
P2P network 6 quantum
quantum cryptography 99, 100
152 Blockchain Technology and Applications

quantum supremacy 98 T
qubit 96, 97
time delays 32
token 106, 107, 117
R tokenization 28
traceability 30, 31
Real Estate 26 transaction xiii, 12, 16, 18, 20, 36, 38,
resilience 85 39, 40, 41, 46, 55, 56, 58, 60, 61,
risks 74, 75, 77, 79, 82, 91, 107, 111,
vendor risks 64 112, 116, 139
rules transactions 36, 39, 55, 61, 74, 82, 109
validity rules 6 transparency 24, 26, 30, 78, 82, 127,
140, 141, 152
transparency 9, 25, 61
S trust
customer trust 86
scalability 12, 62 Turing-completeness 41
SCM 30, 31
security xii, 64, 85, 126
IT security 51 V
credential security 64
sharding 33, 39, 40 validation xiii, 39, 54
Shor’s algorithm 99 verification xiii, 16, 65, 83, 141
Single Version of Truth (SVT) 76
smart contracts xiii, 12, 33, 40-44, 79,
86 W
smartphones 10
society 104, 112 World Health Organization (WHO) x,
soft fork and hard fork 34 139, 141, 142
solidity xi, 7, 42
startups 28, 29
storage xi, 12, 19, 42, 45, 53, 54, 60, Z
63, 86, 91, 109, 118
superposition xi, 97, 98 zero-knowledge proof see Proof
supply chain xi, xiii, 29-31, 83, 124, zero-knowledge protocol 36
141 ZKP see Proof
sustainability 85