Blockchain Gaps: From Myth to Real Life (Future of Business and Finance)

This book analyzes the fundamental issues faced when blockchain technology is applied to real-life applications. These concerns, not only in the realm of computer science, are caused by the nature of technological design. Blockchain is considered the foundation of a wide range of flexible ecosystems; its technology is an excellent mixture of mathematics, cryptography, incentive mechanisms, economics, and pertinent regulations. The book provides an essential understanding of why such fundamental issues arise, by revising the underlying theories. Blockchain theory is thus presented in an easy-to-understand, useful manner. Also explained is the reason why blockchain is hard to adopt for real-life problems but is valuable as a foundation for flexible ecosystems. Included are directions for solving those problems and finding suitable areas for blockchain applications in the future. The authors of this work are experts from a wide range of backgrounds such as cryptography, distributed computing, computer science, trust, identity, regulation, and standardization. Their contributions collected here will appeal to all who are interested in blockchain and the elements surrounding it. Preface Scope of Blockchain Technology is Not Limited to Finance Like the “Internet Bubble” in the Early 2000s Revisit the History of the Internet Construction of this Book Contents Editors and Contributors 1 Fundamentals of Blockchains 1 Blockchain Types 2 Data Structure of Blockchains 3 Characteristics of Blockchains 4 Elements that Make the Operation of Blockchains Possible 5 The Power Relationship Among Network Participants 6 Issues to Overcome 2 Proof-of-Work: A Consensus Mechanism to Achieve Consistency 1 Three Requirements for Archiving Systems 2 Preventing Unwanted Consequences 3 Crypto-Puzzles in Detail 4 Smart Contracts in Ethereum 5 Fairness and Transparency in Blockchain 3 Misunderstandings and Expectations of the Blockchain Created by Bitcoin 1 A Beautiful Misunderstanding of the Blockchain 2 Is It Possible to Allow Privacy? 3 The Difficulty of Building Safe Mechanisms Using Computing Power 4 Understanding the Weaknesses and Considering Where to Apply Blockchain 4 Challenges Blockchain Technology Faces 1 Characteristics of Blockchain 2 Requirements Imply Issues 5 Are Blockchains Trustless? 1 The Essence of “Trust” 2 The Conditions for a System to Be Trusted 3 “Trust Framework” as the Mechanism to Create “Trust” for SMEs 4 There is no Mention of “Trustless” in Satoshi Nakamoto’s Paper 5 The Illusion of Being “Trustless” 6 Reject False Expectations and use Blockchain with a Realistic Perspective References 6 The Bitcoin “Consensus” Problems 1 What Bitcoin is Intended to Accomplish 2 What Does This Term “Consensus” Refer To? 3 What is Consensus in a Distributed System? 4 Bitcoin Consensus Has Always Been Ambiguous 5 The Consensus Problem and the Byzantine Generals’ Problem 6 Byzantine Faults Largely Ignored 7 P2P Systems and Byzantine Faults 8 Bitcoin and the Byzantine Generals’ Problem 9 Humans Consent is a Must for the System’s Administrative Policy 10 We Need to Clearly Specify Who is Agreeing With Whom About What References 7 The Myth of “Blockchain is Scalable” and Real Challenges 8 Unexpected Pitfalls of Bitcoin References 9 The Biggest Problem of Blockchains: Key Management 1 Forms of Blockchain Key Management 2 Issues Regarding Key Management by Software 3 Issues Regarding Key Management by a Device 4 Issues Concerning Online Wallets, Crypto-Asset Exchanges, and Other Services 5 Main Methods of Key Management in Blockchains 10 The Cryptographic Technology of Bitcoin Will Eventually Be Broken 1 Long-Term Signature Technology, a Possible Cure for Hash Function Migration References 11 How We Can Secure Blockchain-Based Systems 1 Lessons Learned from the DAO Attack 2 Another Aspect: Availability 3 Five Layers Ensuring a Secure System Based on Cryptographic Technology 4 Assumptions Between Layers Produce Pitfalls 5 Utilize Knowledge from Existing Systems and Standards References 12 The Current State of the Global Movement 1 The Maturity of Blockchain Technology 2 Facilitating Collaboration Between Engineers and Academia 3 Academic Activities on the Blockchain 4 International Standardization and Issues 5 Beginning of Multi-Stakeholder Collaboration Preface -- Fundamentals of Blockchains -- Proof-of-work: A Consensus Mechanism to Achieve Consistency -- Misunderstandings and Expectations of the Blockchain created by Bitcoin -- Misunderstandings and Expectations of the Blockchain created by Bitcoin -- Challenges blockchain technology faces -- Are Blockchains Trustless? -- The Bitcoin "Consensus” Problems -- The Myth of "Blockchain is Scalable" and Real Challenges -- Unexpected Pitfalls of Bitcoin -- The Biggest Problem of Blockchains: Key Management -- The Cryptographic Technology of Bitcoin will Eventually be Broken -- How We Can Secure Blockchain-based Systems -- The current state of the global movement