Blockchain for dummies. Blockchain technology in simple words. Blockchain - what is it in clear language

It is called a breakthrough of the 21st century: it is transparent, immutable and independent of governments and corporations. Blockchain can be used in many areas: finance, logistics, management and even medicine.

The Moscow City Hall also decided to introduce technology into its projects in order to make them transparent for city residents. The head of blockchain projects of the Department of Information Technologies of the Moscow Government, Kirill Polyakov, tells what the results are today and whether it is planned to introduce its own cryptocurrency in Moscow.

In this project, we are faced with an important task - to duplicate all application records, record the timestamp (time of submission) of each application in the blockchain, since it is this indicator that greatly influences the admission of a participant (all other things being equal, the one who submitted the application earlier wins).

How does this work?

What is blockchain for an ordinary Muscovite?

The presence of a blockchain in a city service provides a guarantee that there is no interference in the process and results. A special method of storing data provides a guarantee of data immutability. It provides that if information is replaced or deleted, then the remaining records in the block chain will also need to be changed, since each subsequent block refers to the previous one.

The task of DIT Moscow is to popularize blockchain among Muscovites and transfer the maximum number of city services to the technology.

Will Moscow have its own cryptocurrency?

Some cities and countries take cryptocurrency more than seriously. Belarus has legalized cryptocurrency mining and token exchange, Malta seriously intends to become the cryptocurrency center of the world (and large Asian crypto exchanges are seriously planning to move to the island), Venezuela is releasing its El Petro crypt, London has its own Colu cryptocurrency. But Japan has gone the furthest - there a bank account can be opened in both yen and bitcoin, since cryptocurrency has been legalized in the country as a means of payment.

We understand that blockchain and cryptocurrency are inseparable, but we cannot implement this now due to the lack of regulation. But like all other states, we are studying this issue and keeping up with the times.

The question of “how is life in Russia?” blockchain? literally excites the minds of all those interested in this technology for several years now. All known cryptocurrencies are built on its basis, the number of which is measured in thousands. The use of blockchain technology in finance has already proven its worth. In Russia, development is also taking place in the field of blockchain technologies, despite apparent difficulties. Not long ago, technology was involved in practice between a Russian and a foreign company blockchain a transaction was carried out between Alfa-Bank and S7. We can say that this is a small revolution for our country. But now the most proactive entrepreneurs are asking the question: “How to implement blockchain technology and do it on a regular basis? And so that there are no problems with the law.” This is where the main difficulties begin. To understand them, let us remind you how blockchain works, and then we will figure out why blockchain has not yet turned the world upside down.

What is stopping blockchain from revolutionizing the world?

Blockchain adoption is being slowed by many factors. Among them are significant energy costs, the wait-and-see attitude of market players, the lack of legislative framework, protection of the FSB and the difficulty in achieving consensus on the creation of new systems between a large number interested parties.

Power and electricity

Blockchain systems require more and more as they develop computing power and huge energy costs.

The development of new technology inevitably entails a large-scale restructuring of the entire system, affecting the interests of many parties, each of which will have to assume certain risks and costs. A number of stakeholders already see themselves as more of a threat to their business than an opportunity for development. Other participants are in no hurry to take active steps and take a wait-and-see attitude in order to avoid uncertainties, risks and costs of creating something new.

Legislative regulation

Blockchain – unique phenomenon for history, without traditional economic restrictions. That is why, until now, no one has been able to fully describe the areas and methods of application of blockchain and cryptocurrencies.

The lack of a legislative framework also entails many doubts among market participants, since in order for new technologies to gain trust, they must meet standards, at least state ones. No standards - nothing to live up to. In fact, blockchain can be called a currency, a commodity, a security, and even a store of value, so it is important to determine its classification and legal aspects.

For some EU countries, cryptocurrencies are already on a par with “means of payment”, as a result of which they are not subject to VAT. The positive side of this comparison is that the legal and economic aspects of the interpretation become clear, and new opportunities arise for countries to develop national cryptocurrencies by creating their own issuance rules. But, as everyone knows, when creating national currencies, countries must set a certain exchange rate; cryptocurrency is no exception in this matter, and this entails the destruction of one of the important advantages of cryptocurrency - its decentralization.

If you compare a cryptocurrency with a security, then you can hypothetically begin to perceive it as a certain commodity (thing), while securities that have become uncertificated have, in principle, already lost their physical form, characteristic of things. However, a security differs from a thing in that its value is determined not by its properties, but by the obligations that the issuer of the security guarantees to fulfill. There is a danger that by equating cryptocurrency with a thing, one can end up subject to VAT, which, however, did not happen with securities.

Some have expressed the opinion that it is necessary to qualify cryptocurrencies as financial instruments. Modern legislation uses financial instruments as a continuation of the concept of securities. However, one of the features of cryptocurrency is the absence of a single issuer, which makes it by its nature far from a security and, as a consequence, from a financial instrument.

FSB restrictions

Now let’s ask ourselves the question: “What information do many people propose to protect using blockchain?”

First of all, various types of documents are meant (for example, a credit/mortgage agreement or a purchase and sale agreement, or a document confirming the activities of a company, etc.), followed by confirmation of the direct transfer of funds (transfer from account to account, purchase in a store with a card , check cashing, etc.). In both options, it turns out that everything goes along the path of providing security for confidential data, and the blockchain, in turn, is a guarantor, or otherwise, means cryptographic protection information (CIPF).

Today, CIPF includes: encryption means, imitation protection means, electronic means digital signature, coding tools, tools for creating key documents, as well as the key documents themselves.

CIPF implemented in the personal information protection system requires the following mandatory parameters to be applied:

* Cryptographic tools must work together with technical and software having the opportunity to influence the fulfillment of the demands put forward to him.

* To fulfill obligations to protect personal data when working with it, it is necessary to use crypto tools officially registered in the certification system of the FSB of Russia.

Cryptographic means, based on the level of security they provide, are correlated with the following classes (KS1, KS2, KS3, KB1, KB2, KA1). The introduction of crypto-assets of any class into the security system is determined by the category of the intruder (the subject of the attack), which in turn is determined by the operator in the threat model. All these criteria and safety classes are described in detail by order of the FSB of Russia dated July 10, 2014 No. 378.

The examples of cryptocurrencies have already indicated the encryption methods currently used, but none of them are recommended for use by the Federal Security Service- this is the first thing. Secondly, it is not yet entirely clear how the implementation of the general blockchain concept will be interpreted. As you know, each of the cryptocurrencies is a modified Bitcoin; the changes concerned only the protocol and hashing algorithm. The protocol, in turn, can be absolutely free to implement—hence the question of which data will be encrypted and which will not. Also, what data will be hashed. Any software that encrypts information (especially user information) undergoes mandatory FSB certification. Certification is not a complicated process - in fact, it is no more difficult than writing full-life cycle software: from scratch to commercial release. Main criterion certification is that all encryption algorithms (one-way, two-way symmetric or asymmetric) must comply with GOST and there is no escape from this.

Of all that GOST provides us with, there are standards 34.11-2012 and 34.11-94, which describe the data hashing algorithm. 34.11-2012 is a modern version of the standard 34.11-94 - let’s focus on it. It was developed by the Center for Information Protection and Special Communications of the FSB of Russia with the participation of InfoTeKS OJSC. It is a fairly crypto-resistant algorithm, which allows it to be used in the implementation of blockchain technology, instead of the same SHA-256 or Ethash. If you are interested in the mathematical side of implementing the hashing method, then please go here - eprint.iacr.org.

It is worth expecting that the implementation of blockchain using GOST 34.11-2012 may appear on the implementation market in the near future. The only question is: “When?” If we consider that even the Central Bank of the Russian Federation is quite seriously looking towards using blockchain for data protection, then we can say that it will happen soon. In the meantime, we are in our present, where such a realization does not yet exist.

In general, Russia is still taking a wait-and-see approach to blockchain and cryptocurrencies in order to see foreign experience and best practices, and we can only wait and take our first steps.

Pavel Umnikov, Head of the control systems development department of InfoTeKS OJSC

If you want to get an answer to a question that concerns you on the topic corporate governance or tell us about interesting projects, cases and materials, write to us at boss@site

Hello, dear readers of the blog site. What is blockchain? Many people (including me at first) immediately experience association with bitcoins(or cryptocurrency in its general sense). On the one hand, these associations are true, but on the other hand, they are not. Why is this so? Let's figure it out.

This is partly due to the fact that the world's most popular service designed for is where tens of millions of users store bitcoins, only strengthens this connection.

First, let's go through the etymology of this word. It is derived from the English BlockChain, which means “chain of blocks”. But this doesn’t tell us much - just the name of the technology. However, we used the same keyword, which should explain everything.

What is BlockChain and what is the essence of this technology?

But virtual money is only one of many use cases, although it very successfully demonstrates the capabilities of this technology (there have not yet been cases of hacking or theft of bitcoins). Thanks to such an infallible reputation, blockchain is predicted to have a great future in other areas of human life that are just as critical in security matters as money circulation (information storage, transparent elections, etc.).

You probably already have some confusion in your head - how can you connect electronic money and elections? But here everything is easily explained. Blockchain is essentially just distributed and perfectly protected from hacking database. The whole point is how this whole thing is organized.

True, if you go into details, it will turn out tedious, and therefore I will try to convey the essence in simple words and concepts. By the way, the girl from the following video will help me with this, who clearly illustrates the process using blockchain to create cryptocurrency and not only:

Are you probably familiar with such technology as BitTorrent (at least indirectly)? What is remarkable about it (besides the fact that most of the exchanges now take place on its principles, including those involving copyright infringement)? And the fact that the data in it is stored distributedly - there is no central server, but at the same time everything works great (fast and reliable).

Advantages of blockchain

So, block chain is somewhat similar to it (distributed structure and popularity), but also has a number of other advantages:

1. There is also no central server here - the entire database is distributed among the participants, which means it is almost impossible to hack it (other copies will immediately reject unauthorized changes made in one or a number of copies - more than half of all users of this system need to be broken).
2. Each user will have a complete copy of the database (containing the entire chain of transactions) in encrypted form. Copies are synchronized (this is an algorithm for making decisions on conflicting versions of the blockchain).
3. Anyone can track any transaction (operation with data) - the system is completely transparent (how do you think the media knew the exact amounts of bitcoins transferred to the owners of the recently sensational viruses?). This alone is worth it!

Information is added to the database built using blockchain technology in the form of new blocks. Moreover, the addition is coordinated with other network users. If we take Bitcoin, then a new unit is created through resource-intensive calculations (essentially enumerating numbers and calculating a hash for them in order to fit into a predetermined pattern).

So, the mined new unit of Bitcoin (essentially new block information) checked by other system participants(the hash is recalculated) and only after that the new block is added to all databases of all users of the system.

4. All illegal attempts to make changes to the database based on blockchain technology (add new blocks, assign them to yourself, etc.) are stopped by comparing them with copies of databases stored by other users of the system. It is very difficult to hack the system due to decentralization and repeated copying of stored information. This is similar to the DNA in human cells - there are many of them, they carry all the information and can easily cope with failures in individual copies.

Analogies and example of using Block Chain to create cryptocurrency

If the above description hasn't cleared your mind about what BlockChain is, then I’ll try to explain using an example with simple associations.

Imagine a cloud storage available to everyone in full indiscriminately (or its outdated analogue - an FTP server with files in public access), where there are thousands of folders with files. On it you can view everything that is there at the moment uploaded and know where which file is located, who uploaded it and who downloaded it. But... You yourself cannot download everything, but only what you have the right to. Also, you can upload files only after fulfilling the conditions specified by the system.

Another an example from the field of money that will be closer to Bitcoin. Imagine that in the electronic money system there are no individual wallets (the data of which is available only to the wallet owner and system employees), but there is only one wallet, but with statistics completely open to everyone. You can see that Vasya transferred so much money to Petya, and he transferred so much money to him. But you won’t be able to interfere with the exchange process or steal anything.

You can only receive money that is intended exclusively for you. They are tied to special addresses, between which the transaction (transfer) occurs. The transfer is confirmed by a secret key (signed by it) compatible with this address (in fact, this is an analogue of a login and password). Data that you transferred money is sent to all copies of the database. Money is considered transferred when the records of its sending and receipt are reconciled.

The process is described in more detail at the end of this article, but for now I’ll give the floor to a young man who tells a very in simple words about a complex blockchain and implementation of cryptocurrency based on it.

Looks very easy, doesn't it?

Is BlockChain our future?

Currently, a technology called blockchain is undergoing quite a successful trial as a tool. virtual money, such as Bitcoin and other cryptocurrencies. Actually, this is where her triumphant march began, but it is unlikely to end this way.

Blockchain is not the same as Bitcoin

According to the idea, cryptocurrency is not even money, but complete analogue gold in virtual world- their number is limited (calculated for many years in advance and the amount of “mined” is regulated by increasing/decreasing the complexity of the mining process), and they can be obtained (for example, in) or, or by mining (in a mine, which can be your computer or specially assembled powerful system).

But Bitcoin itself is a rather controversial thing. It appeared in 2009 and since then has grown a thousandfold and continues to grow to this day (even at a rapid pace).

Doesn't it really look like a bubble? Will it burst? Very likely. In addition, there is an ambiguous attitude towards the state’s cryptocurrency.

But Bitcoin is only a product created on the principles of BlockChain, and all its shortcomings have nothing to do with the technology itself. Cryptocurrency is essentially a testing ground for blockchain and from a technical point of view everything is going just fine. And here the future fate of Bitcoin is not at all important, because it is just a “trial balloon”.

Based on BlockChain, you can easily create another cryptocurrency, for example, fully backed and legalized at the state level. Will it happen? We'll see, but it's very likely. The thing is convenient and not only due to the technical features described above.

Why is everyone talking about this technology now?

Let's take a look at the benefits that the introduction of blockchain technology will bring to our lives:

1. “You don’t need a violinist” - remember this phrase from the legendary film? So, it is very applicable here. When using this technology, there will be no need to involve a “third party” when making a transaction, because the system, as I already said, is completely transparent to everyone. This can significantly reduce overhead costs and the timing of transactions (transactions, i.e. operations with data).
2. Blockchain is suitable for those systems where there is a risk of fraud and information security. Everything that huge amounts of money are now being spent on. Indeed, in addition to transparency, the technology has incomparable security and safety of use by all parties. Moreover, there is protection from fraud (and “keeping in check”) on the part of the system organizer due to decentralization (as in bittorent - technically there is no way to prevent downloading).

That's why they are active now experiments on implementing BlockChain, for example, in the election process. Transparency, security and safety are very important. Including from fraud on the part of those in power, spiteful people and other plotters. And no further talk about interference in elections (a priori). Beauty.

This technology can also be perfectly adapted for maintaining various cadastres, medical databases, legal databases, any logistics, as well as for conducting banking operations (this is certainly “the doctor ordered” - costs and processing time will be reduced significantly).

The whole question is that a strong-willed decision be made (many are not satisfied with the inability to “imperceptibly” interfere with the operation of the system after its implementation), and implementing all this and applying the blockchain in practice will be a secondary matter (fortunately, Bitcoin has provided an excellent established base).

Problems of implementing BlockChain in life

1. For example, to maintain a high level of security, the system needs constant complex calculations, which can only be done with a very large resource base. In Bitcoin, this problem was solved simply - they appointed a commission to those who provide their resources (computing power of computers or specially assembled systems- mining farms) for this purpose (based on this principle, the main method of earning bitcoins is built - mining).
2. It is also extremely important for the security of the entire system that these resources are distributed and not under the control of some group (for example, united by conspiracy), which can use the power concentrated in their hands for various bad manipulations.
3. All this may deprive someone of work or profit (various intermediaries), and therefore they put a spoke in the wheels at the initial (most difficult) stage of introducing technology into life.

Blockchain using Bitcoin as an example

BlockChain is just a regular singly linked list of blocks with transaction information. Each new block changes the state of the entire distributed database. This means that if you replace something (with intent), then the hashes of the next blocks will change and the replaced piece will not take the place of the old one.

A generally accepted measure of integrity. The hash of any number can be calculated (using a certain formula), but it is impossible to restore the number from the hash, which means that counterfeiting in such a database becomes impossible.

Now real an example of BlockChain working in the Bitcoin system. Further briefly:

1. Transactions in this system are signed (considered reliable) in batches (i.e. blocks).
2. The frequency of the appearance (adding) of new blocks is built into the distributed algorithm of the system: in order to sign one block (issue a new monetary unit), you need to find the required hash (by brute force, because it is a priori impossible to restore a number from a hash and all that remains is to endlessly calculate the hash for numbers taken at random until you accidentally run into the right option hash).
3. In this case, the complexity of searching for a hash is set algorithmically depending on the tasks of the system (the complexity of the template into which the hash must fit changes). In Bitcoin, the frequency of mining a new unit (the appearance of a new block) is approximately ten minutes. Accordingly, the greater the power of the miner’s system, the higher the likelihood that he will add the next block to the system and receive a reward for it.
4. Clients of the system can generate at least a million transactions (transfers) per second, but the network of nodes will only accept them from the moment the next block is signed (the next unit is mined).
5. Moreover, the transaction will be considered unconfirmed until the appearance of several new blocks (generation of monetary units), to protect against forks (proliferation of cryptocurrency units on “side branches of the block chain”, which appeared, for example, in the local network, but were then rejected by the main block chain ).
6. To avoid its uncontrolled growth, the size of the transaction database is specially compressed (in fact, trimmed) due to “ control points" Consensus algorithms periodically confirm the so-called “pivot” block, before which the chain of blocks need not be stored. Such control blocks are periodically created (marked). Otherwise, the Bitcoin base would be unaffordable.

I want to emphasize that cryptocurrency is not a thing in itself. In any case, bitcoins are quite a freely convertible currency.

For them quick exchange For rubles, dollars or other electronic money, you can use online exchange services, for example, these:

And for a more subtle game on courses and additional income can you advise crypto exchanges:

This is what the great and terrible blockchain looks like, if you try to describe it in more or less simple language. Although you have to use words that are not entirely simple, what can you do - technology :)

Good luck to you! See you soon on the pages of the blog site

You can watch more videos by going to

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A world without banks, notaries, registrars, regulators - blockchain technology forces us to take a fresh look at the exchange of values, documents, and money. It removes middlemen and allows users to directly send important data to each other. Some are already calling it a breakthrough of the 21st century, the greatest invention comparable to the discovery of the Internet, others are looking at it with caution.

Let's look at blockchain for dummies in simple terms.

To put it simply, the blockchain is often compared to a standard diary or file cabinet, where entries are made sequentially in chronological order about what was done - slept, ate, did laundry, took a walk, borrowed money, paid $100 for dinner, etc.

To ensure that no outsider can make changes to the diary at their own discretion, all information is encrypted in a special way, and the cipher is well thought out. If the diary is in one copy, anything can happen to it - the house burned down and he along with it, it was stolen, with the greatest desire they deciphered it and made adjustments.

Therefore, for reliability, the diary has many copies, which are stored in different places. Moreover, when new information is entered into the diary, it is updated on all copies after verification.

That's the end of the lyrics, let's get down to business.

What is blockchain and why is it needed?

Blockchain comes from the English. blockchain (block chain), which literally means “chain of blocks.” In other words, it is a database, which in the truest sense of the word is a continuous chain of blocks and is stored simultaneously on many computers.

New blocks in this database chain are created constantly. Each newly created block contains a group of recently accumulated and ordered records (transactions), as well as a header.

Transactions are any actions that users perform online, be it sending funds, registering property rights, purchasing a game item, etc. When a transaction is formed by the user, it is sent to the so-called mempool, where it waits until it is added to one of the blocks and confirmed.

Once a block is formed, it is verified by other network participants and then, if everyone agrees, it is attached to the end of the chain. Once this has happened, it is no longer possible to make changes to it. In addition to new information, the block also stores data about previous blocks in encrypted form.

The database is updated on all computers connected to the system, and miners (validators) begin to form the next block.


Basic principles of blockchain:

• decentralization and distribution;
• safety and security;
• openness and transparency;
• the immutability of what has already been written down.

Distributed storage

Any significant information related to one or another area of ​​people’s lives is stored somewhere. Buying a house or car, taking out a loan, registering a marriage, transferring money - all data about these transactions is recorded and placed centrally on the servers of government agencies or private companies. This often leads to abuse - if you wish, you can get into any database and make adjustments to it.

Blockchain technology radically changes this approach. Its essence lies in the fact that the database is stored not in one place, but distributed on thousands, or even tens of thousands, and sometimes millions of computers scattered around the world.

The likelihood that all of them will be disabled is negligible and looks fantastic. In the meantime, as long as at least one computer on the network is working, the blockchain-based system exists.

Safety

As already mentioned, any centralized database can be hacked and changes made to it. Such a number will not work with blockchain. There is no point in hacking one of the blocks and changing the information in it, since all the blocks will have to be broken, and this requires gigantic computing power - as we remember, new blocks contain encrypted data about previous blocks. Therefore, a hacking attempt will definitely be noticed by other network participants.

In addition, a powerful encryption algorithm using hash functions, as well as a digital signature, will also become an obstacle to falsification. The signature uses two keys - public and private. The first is necessary to verify the signature itself, the second is used when creating it and is secret. Keys provide participants with access to certain information.

A hash function looks, at first glance, like a sequence of random numbers and letters. It is this that ensures the immutability of all recorded data.

As we can see, the operation of the network is not based on the mythical trust of users in each other, but on strict mathematical calculations.

Openness

The entire base is located in public access, and therefore anyone can view the data of a particular block. For example, one user transferred 10 thousand dollars to another - anyone can find out about this if they want. The question is, who transferred the money to whom remains a mystery. This information is available to direct participants in the exchange, unless they themselves wish to make it public.

Interaction without intermediaries

An important point is that we constantly need to deal with intermediaries - we carry out financial transactions through the mediation of banks, payment systems, exchangers, and we notarize documents.

There are often situations when money may not reach the addressee, because the bank will not like the transaction and will be interested in it. Forgery of documents is also not uncommon. Thus, although we do not fully trust all kinds of intermediaries, we are forced to use their services, often at our own peril and risk, since there is no alternative.

Blockchain allows for direct exchange of data. The authenticity of transactions in the system is verified directly by its participants.

Network device

The network is formed by users interested in using one or another type of information. Participants are divided into two types:

• ordinary users;
• block builders or, as they are also called, miners, validators.

Ordinary users send new transaction records to the network. For example, user X wants to transfer 100 conventional units to user Y.” And miners are already forming blocks from these transactions. Entries are confirmed and entered into the block only if the majority agrees. The rest are ignored and are not considered valid until they end up in the contents of one of the subsequent blocks. Only the owner of the key that allows access to it can use a particular record in the blockchain.

To become a miner, you just need to allocate the power of your computer to generate new blocks. They connect to the network using special software.

There are also systems in which, instead of traditional mining using the Proof-of-Work algorithm, other protocols are used, for example, Proof-of-Stake, when validators need to reserve a certain amount of crypto coins in the account to confirm transactions.

Types of systems

Are built on blockchain technology different types systems Eat public supranational systems to join and become simple user or anyone can become a miner. The administration of such an association is carried out by the community itself.

There are also private or so-called exclusive blockchain networks, which are maintained and controlled by their creators. To become a participant, you need to fulfill certain conditions established by the organizers. New blocks can be mined in such systems by a clearly established, certified circle of persons.

Areas of application of blockchain

As we can see, the blockchain platform is a distributed database for public use, which mainly lacks centralized oversight of the process. Using blockchain, you can keep records, store data, and make transactions in any area of ​​life:

• financial transactions;
• real estate transactions;
• insurance;
• logistics;
• traffic violations;
• marriage registration and much more.

The first use of blockchain in practice occurred in 2009, when the Bitcoin cryptocurrency was created on its basis. Later, a great variety of such cryptocurrencies appeared for a wide variety of tastes.

Today, states are actively considering ways to introduce blockchain into the voting system in elections. China wants to transfer the work of the National Social Security Fund to blockchain.

This technology will be closely woven into the system of “smart cities”, which are actively being implemented in the PRC.

Blockchain-based startups are already being created in the field of medicine, intellectual property protection, and copyright. Identification systems, web browsers, decentralized cloud storage data, as well as social networks.

Moreover, an entire virtual nation has already been created - BITNATION, which opens embassies in different countries. Anyone can become its citizen.

More and more people are hearing about so-called smart contracts, or in other words, which work on the blockchain and significantly simplify the procedure for signing contracts. They first appeared on the Ethereum network.

In this case, there is no need to involve a third party in the process, which would act as a guarantor of compliance with the conditions. Here program code Based on predetermined conditions, it automatically decides what to do with a particular asset. All interested participants in the process can audit the transaction at any time.

The technology was first tested in international trade in early autumn 2016. Then, on the Wave platform, the British bank Barclays issued a letter of credit for 100 thousand dollars, ensuring the export of a large batch of dairy products by the Irish company Ornua to the Seychelles company. Typically, such a transaction takes at least a week, but here it took about four hours.

Pros and cons of technology

As you can see, blockchain is a universal technology applicable in different areas of life, which is a definite advantage. In addition to the openness, safety and security already discussed above, blockchain also:

• Reduces transaction costs.
• Reduces transaction time from several days, or even weeks, required to verify data and exchange documents, to several hours.
• Allows organizations and institutions to get rid of unnecessary expense items.

The disadvantages include scalability. Today, blockchain is not capable of providing a huge number of transactions within short time. For example, payment systems MasterCard or Visa process about 45 thousand transactions per second, while Bitcoin has only 7. The weight of the database stored on network computers is also growing daily.

Don't forget about the load on electrical networks, when it comes to networks running on the POW algorithm. All these complex calculations force computers to consume large number energy.

Speaking about the invulnerability of the blockchain, experts also point to the likelihood of the so-called “51% attack.” In other words, if a group of network participants concentrates 51% of the computing power in their hands, it can begin to act in its own interests, confirming only transactions that are beneficial to itself. However, this will require such powerful resources that it is extremely difficult to implement this idea in practice.

Blockchain in Russia and Ukraine

In the Russian Federation, they are going to officially legalize the technology and begin to implement it in 2019, having adopted the necessary regulations by that time. So far, the country's large banks, together with the Central Bank, have created the MasterChain platform in order to increase the efficiency of the financial system.

An interesting blockchain project operates in Moscow. The platform is called “Active Citizen”, and with its help they conduct all kinds of voting regarding improving life in the capital.

In Ukraine, the State Land Cadastre has already been partially transferred to blockchain. In particular, the statement verification process works on this technology. At the second and third stages of blockchainization of the cadastre, they will transfer existing base data, and then proceed to hashing all ongoing transactions. Also next in line State Register real rights to real estate.

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Meet this perfect new technology and IBM's contribution to its development. The entire global community is betting on how fundamentally blockchain technology will change the way organizations carry out their business. financial transactions. Let's look at how the blockchain network works, what makes it unique, and how IBM is helping to improve it. First, a little background.

Role of registries

In today's world, interconnected and united global network, economic activity occurs through commercial networks that blur national, geographic, and jurisdictional boundaries. Typically, such networks are intertwined in marketplaces where producers, consumers, suppliers, partners, active market participants or intermediaries, and other stakeholders own, manage, and exercise rights and privileges over values ​​known as assets.

Assets can be tangible and physical, such as cars and houses, or intangible and virtual, such as stock certificates and patents. Taking ownership of assets and transferring them, known as a transaction, creates value for business networks.

As a rule, the participants in transactions are various buyers, sellers and intermediaries (for example, banks, auditors or notaries), commercial agreements and contracts between which are entered into various registers. In commercial activities, as a rule, several registers are used to maintain records of assets owned and assets transferred by participants to each other in various types activities. Registers are systems for recording the economic activities and interests of enterprises.

A typical registry looks like this:

Problems of existing business registers

The registers used today in business activities are largely imperfect. They are ineffective, expensive, and their operation is opaque and susceptible to fraud and abuse. These problems are a consequence of the use of third-party centralized systems based on trust, such as financial, settlement and clearing organizations and other intermediaries of existing organizational structures.

Such centralized registry systems create a kind of interference and obstacles that extend the execution time of transactions. Their lack of transparency, as well as their susceptibility to corruption and fraud, has led to controversy. At the same time, their settlement, execution of reverse transactions and insurance of transactions are quite expensive both in terms of money and time - all these risks and uncertainties lead to missed business opportunities.

In addition, the unordered copies of the registries used in own systems each participant become the reason for making erroneous commercial decisions based on temporary unreliable data. In the best case, making a decision based on current information is postponed while different copies of the registries are brought into conformity.

What is blockchain?

Terms used in blockchain technology and their use cases

A blockchain is a tamper-proof, public-use digital ledger that records transactions on a public or private peer-to-peer network. The registry, distributed among all network nodes, continuously records the history of transactions with assets between peer (same order) network nodes in the form of blocks of information.

All approved transaction blocks are connected into a chain - from the initial block to the last one added, hence the name of the technology - block chain. Thus, the blockchain acts as a single source of reliable data, and participants in the blockchain chain see only those transactions that relate specifically to them.

How does a blockchain network work?

Instead of turning to third parties, such as financial institutions, as intermediaries for transactions, blockchain network nodes use a special consensus protocol to agree on the contents of the registry, as well as cryptographic hashing algorithms and digital signatures to ensure the integrity of the transaction and transfer of its parameters.

The consensus mechanism ensures that distributed ledgers are exact copies, which reduces the risk of fraudulent transactions, since outside interference can occur in many places at the same time. Cryptographic hashing algorithms, such as the SHA256 computational algorithm, ensure that any change in transaction inputs, no matter how small, will result in a different hash value appearing in the calculation results, indicating that the transaction inputs are likely to be compromised. Digital signatures ensure that transactions are carried out by legitimate senders (signed with private keys) and not by attackers.

A decentralized peer-to-peer blockchain network makes it impossible for individual participants or groups of participants to control the underlying infrastructure or destabilize the entire system. All network participants are equal and connect to it using the same protocols. Participants can be individuals, government agencies, organizations or associations of all listed types of participants.

Essentially, the system records the chronological order of transactions with all network nodes that have accepted the validity of transactions through the chosen consensus model. The result is irrevocable transactions agreed upon by all network participants in a decentralized manner.

In traditional commercial networks, all participants maintain their own duplicate ledgers, discrepancies between which lead to disputes, increase settlement times, and also require the involvement of intermediaries with all the associated costs. At the same time, the use of distributed registries based on blockchain technology, in which transactions cannot be changed after consensus is accepted and entered into the registry, can save entrepreneurs time and money, as well as reduce possible risks.

Blockchain technologies promise higher transparency of interaction between interested parties, improved automation, adaptation of registries to individual requirements, as well as more high level trust in record keeping. Blockchain consensus mechanisms have the advantage of a consolidated and organized data set, with less error and quasi-real reference data, and allowing participants to make changes to the descriptions of their assets.

Since no one participant has a central source of the origin of the information contained in distributed registry, blockchain technologies increase the level of trust and ensure integrity information flow between participants.

The immutability of blockchain mechanisms leads to lower audit costs and increased transparency of regulatory compliance. And because contracts entered into on blockchain-based commercial networks are smart, automated, and final, businesses benefit from high speed execution, cost and risk reduction, as well as timely settlement of contracts.

Benefits of blockchain for business

To figure out if blockchain is right for you, ask yourself the following questions:

1. Is a commercial transaction network used?
2. Is participant consensus required to confirm transactions?
3. Are auditing and source tracing mandatory?
4. Should the transaction record be immutable or tamper-proof?
5. Should the dispute resolution procedure be final?

If you answered yes to the first and at least one other of these questions, then in your case the use of blockchain technology will be beneficial. For blockchain to be an effective solution, it requires a network. However, the network can be different types. This may be a network between organizations in the form of a value chain, or a network within one organization. Within an organization, a blockchain network can be used to distribute data between departments or, alternatively, to create an audit or corporate control network. In addition, the network can also exist between individuals who, for example, need to store data, digital assets or contracts on the blockchain.

Introducing the Linux Foundation's Hyperledger Project

Requirements for companies to use blockchain

We believe that blockchain is a truly revolutionary technology that has the potential to transform commercial networks. We also believe that this technology should be developed in open access with the participation of other technology companies and industries. That's why IBM continues to provide Hyperledger Fabric code.

From IBM's point of view, industrial blockchain technologies have the following characteristics:

• The controlled and shared ledger is a strictly applied system of record (SOR) and the only source of true data. It is visible to all participants in the commercial network;
• a consensus protocol agreed upon by all participants in the commercial network ensures that the ledger is updated exclusively through transactions confirmed by the network;
• cryptography provides protection against unauthorized access, authentication and integrity of transactions;
• Smart contracts contain the terms of agreements between participants regarding business activities occurring on the network. They are stored in the matching node of the blockchain and are activated as a result of transactions.

In addition to this, industrial blockchain technology must meet key industry requirements such as performance, person identification, private and confidential transactions. The Hyperledger Fabric architecture was designed to meet these needs. It is also designed using a pluggable consensus model allowing businesses to choose optimal algorithm for your network.

Where to start?

IBM offers flexible platforms and secure infrastructure to help you develop, deploy and manage blockchain networks. Learn more about blockchain solutions