The main problems of everyday implementation of blockchain technology. Blockchain - what is it in simple words

Report by Christoph van de Reck (Head of the European Region, NEM Foundation) on the implementation of blockchain technologies. How is the integration process going today and what are the features relative to other infrastructure platforms.

My name is Christoph van der Reck, I represent the NEM fund in Europe and today I want to talk about the application of blockchain technology using the example of NEM.

I'll assume that most of you here have an understanding of blockchain, so I'll focus on why we need blockchain. Cryptography was already used before him, and as a result, security increased.

Level Up security is the first of the most important reasons for implementing blockchain.
Second - traceability. . It is also possible to use your own auditable registries for individuals, identified participants or users.
Third - trusting technology, not people. By trusting technology and identifying participants, we create a system that does not require trust.
Fourth and last - in distributed network naturally costs are reduced, not only in the financial sector, but also in many other sectors of the economy.

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Disadvantages of Blockchain

Let's look at those areas where the use of blockchain is unjustified. Strengths blockchain are at the same time its own disadvantages.

Immutability. I think this is the main disadvantage of blockchain because it makes it difficult to set long-term goals. It is difficult to implement new features in applications.
Distribution blockchain can also be a disadvantage. There is a problem with the scalability of blockchains, especially public ones. How more network, the slower the growth and the longer it takes to confirm the signature.
Transparency. Most important characteristic blockchain raises privacy concerns.

Blockchain implementation

We all understand the potential of blockchain, but what is its actual value and use cases?

This is truly a breakthrough technology, but at the same time, it is difficult for existing companies to switch to using blockchain. They will have to change key business processes. Startups operating with new business models should not underestimate how difficult it is to create a decentralized application.

The technology has not yet reached the maturity stage and is quite complex. I think that before we will see the technology develop steadily, we will need to ensure better interoperability and make Blockchain 2.0, just like we did with the Internet.

Look at the tracking of the blockchain implementation process. First, we research the technology, looking for problems that can be solved using blockchain. Then comes the experimentation stage. There are not many examples of blockchain being used in the corporate world today. We are at the beginning of the journey.

Standard results of using blockchain

Between the second and third stages, the actual implementation, we are more often faced with questions than answers regarding the advisability of using blockchain. We need to carefully evaluate what we would like to achieve, because the line between the benefits of blockchain and the problems with immutability and scalability is very thin indeed.

There is a problem with the complexity of integration already existing systems, the relationship between justifiable risk and benefit. Simplification of administration will certainly lead to greater adoption of blockchain in the corporate world, but now large corporations are looking and thinking: “We have systems that work, why do we need to go through complex process re-engineering and integration if everything is already working?”

In general there are two approaches:

let's wait and see what happens
The sooner you fail, the faster you learn. Let's conduct an experiment - proof-of-concept or pilot project.

Both approaches can harbor serious ambitions. Now it is important to outline the range of use cases and begin to apply the technology to achieve the greatest flexibility.

Blockchain Challenges:

transparency
adaptation to immutability
scaling

What about security?

One of the difficulties with using blockchain, again due to the immaturity of the technology, is security. We must admit that during this year we have already seen a couple of situations where security was not always the result of using blockchain.

If smart contracts become truly complex, it will become nearly impossible for developers to secure the end result.

NEM approach

NEM has a slightly different approach: in particular, we always consider whether the use of blockchain in a project is logically justified. To do this, we examine the logic of blockchain applications.

So why do you need blockchain?

There are 4 main scenarios:

transfer of value in the form of cryptocurrency
authorization
traceability
identification of users or data.

We do not have a smart contract system, but we do have a smart asset system. Look at this example: Here we have two main assets.

This is a standard block: two green cells are associated with two namespaces, and on the right is a multi-signature function. At the right approach Using this block architecture, most applications can benefit from this approach.

Let's take a closer look at the NEM application and its three main components:

Management model. Here we manage authorization.
Application logic or applied logic.

Management model, where you can manage the authorization model (distribute rights). Before you can manage authorization, you need to identify participants. Between the physical and digital world there is a significant difference. Once we have made the identification, we can distribute rights to manage assets.

On this slide on the left you see a user account that has already been identified, that is, associated with an individual. On the opposite side we see an account that is associated with a corresponding signature vested with the right and responsibility to use the account.

We are talking about two assets, two tokens. The first token is the authorization token, the second is the revocation token. If we want to revoke authorization, we send a revocation token to the user. In this way, authorization control can be achieved.

Data model: maintaining the integrity of information

Price. It must be kept in mind that storing data on the blockchain is currently more expensive than traditional data storage technologies. We need to calculate how we will carry out transactions and how much it will cost.
Confidentiality. Ensuring data privacy must be done in such a way as to eliminate the risk that this information will be used anywhere. In Europe, there are GDPR (General Data Protection Regulation) requirements, which will come into force in May 2018; accordingly, there will be high fines for non-compliance with confidentiality.
Security of encrypted data storage. So where do we store the data? We can store them both on the blockchain and off-blockchain in centralized databases. The big question remains, which is better? Data can be obtained in a way that takes full advantage of the blockchain, but it is not necessary to completely decentralize all data.

Routes

At the top are assets that can be used on an “and-or” basis, and we can accompany them with messages, encrypted or not.
Below are large documents that are stored in traditional databases.
Interaction between data in the blockchain and a traditional database.

Application logic

When we use the blockchain governance model, some of the logic is already contained in the protocol. After that, we develop an application on the blockchain, then the smart asset system helps us develop applications that combine blockchain logic with centralized server logic.

Companies using blockchain for their work processes have begun to appear more and more often on the market for goods and services. Resumes of IT developers that mention the word “blockchain” are in high demand, and available vacancies do not last long. Blockchain technology is becoming more popular day by day, and its application in a specific industry entails an increase in demand for the company's performance.

Blockchain implementation

After the appearance of Bitcoin in 2008, which was created using blockchain technology, analysts noted the great potential of this innovation in the market information technology. It is predicted that in the near future, blockchain will replace outdated schemes for working with data that do not provide the necessary processing speed and storage security.

Blockchain is used in banks and other financial institutions that work with cash flows. Large foreign and Russian ones to solve pressing problems:

Gradually, this technology is being introduced into work by government services: Rosreestr has launched a pilot project for registering land plots and real estate using blockchain. In the housing and communal services sector, it is planned to replace simple system processing applications for current and major repairs. This platform is currently being tested, but the ministry plans to introduce official use of this system at the state level.

Foreign countries use blockchain as an alternative to classical methods of working with information in the following areas:

system for recording the migration of persons (European countries with an increased influx of migrants);
healthcare system (Latvia);
notarization of information (Estonia);
Postal Service (USA), etc.

Commercial organizations are switching to blockchain for various reasons. Decentralization of data, encryption, minimal risk of hacking are some of the advantages of this technology. But at the same time, not every company can afford to implement blockchain into its work process.

Most often, this entails large financial investments that are not available to average-income organizations. The need to train employees, purchase new equipment, advertising costs - all these points affect the final cost of blockchain implementation. It may turn out that for a particular company at the moment classic working schemes are more profitable than using new technologies. Therefore, the first thing you need to do before using the blockchain is to calculate all possible costs and planned profits, and then compare the data obtained.

Development of blockchain systems

To develop blockchain systems, as well as analyze the company’s activities and calculate the need to implement this technology, a team of specialists professionally involved in these issues is invited: business analysts, crypto bankers, IT specialists and managers.

The process of developing blockchain systems includes 2 stages:

creation and configuration of software,
selection and installation of equipment.

Each stage is important in its own way to obtain an effective result.

Usage open source in creating blockchain projects provides a unique opportunity for developers. The most commonly chosen platform, or design basis, for creating smart contracts based on the blockchain - Ethereum (Ethereum). Applications built with Ethereum have a number of attractive characteristics. They cannot be censored, rolled back, or data changed from the outside. These properties make blockchain projects stand out from others.

In addition to applications and smart contracts, the blockchain requires additional software components: cryptocurrency wallets for storage and exchange digital money, web consoles for viewing mining results, online editors for debugging and testing.

Equipment for blockchain systems

Blockchain, as a technology, is implemented on computing devices with access to the Internet. Blockchain costs consist of 3 points:

Purchase of equipment that meets quality characteristics for mining.
Payment for electricity consumed by equipment.
Payment for access to global network for devices.

Computing devices used for blockchain mining must have powerful video cards. They are used to maximize quick solution mathematical problems, for which the user receives a reward in the form of cryptocurrency (bitcoin, ether, zicash, etc.). Processors, unlike video cards, work more slowly with repetitive operations, and therefore their use in the blockchain does not lead to the desired result.

Interesting! For professional mining, the most popular are ASIC chips, which are configured to solve the same type of mathematical problems. Thanks to this, their performance is an order of magnitude higher than video cards and processors.

Blockchain solutions for business

The use of blockchain in the business industry has a positive effect. Various companies are gradually joining new technology, creating interesting blockchain-based solutions to existing problems.

A brief overview of well-known companies involved in blockchain solutions:

IBM and Maersk. They proposed a project for implementation that would reduce the number of documents required to process deliveries of perishable goods. Accelerating the delivery process will reduce costs and increase trade turnover on a global scale.
Microsoft. Develops the ID2020 program, which will allow identifying a person using one global document. This project is of greatest interest in countries with a high level of refugees from disadvantaged regions.
Qiwi. Explores technology applications distributed registry in your payment system. He is an investor in a project for unmanned delivery of goods.
Megaphone. Issued shares using blockchain. Transactions took place using smart contracts on the Ethereum platform, which reduced payment processing time.
Blockchain Solutions Group. This company creates and maintains web resources that process cryptocurrency transactions. The Solutions Systems group is also an investment bank offering great deals in the digital technology market.

To find out full information about a company offering services for implementing blockchain into an existing business project, it is most convenient to use an INN. Using this 10-character code, the Federal Tax Service website at www.nalog.ru opens a list of information entered into the Unified State Register of Legal Entities: date of creation, form of ownership (IP, LLC, PJSC), size of the authorized capital, list of types of activities and other characteristics.

Five best blockchain companies according to vc.ru

r3.com
Develops a platform that allows financial institutions and businesses to transact directly with each other.
Digital Asset Holdings LLC
An American company is creating a blockchain system for conducting instant transactions between banking organizations.
Brave Software Inc.
Brave Software Inc. in the recent past, she created her own browser, which offered rewards in bitcoins for viewing advertising materials.
Abra-Plutus Financial Inc.
Abra-Plutus Financial Inc. developed a popular mobile application For quick investment funds in cryptocurrencies and fiat.
Blockstream
The company develops Bitcoin payment systems and sidechain technology - third-party Bitcoin block chains.

Video: Abra launches world's first global cryptocurrency exchange platform and crypto wallet

Conclusion

The emergence of new information technologies has caused a stir among firms wishing to work with blockchain. Companies planning to implement this platform into their workflow must carefully consider the process of selecting a contractor to ensure that the investment is not in vain. Blockchain is one of the ways to develop an enterprise, and its use will not always be economically justified.

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.

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 exchange now takes place on its principles, including those with copyright violations)? 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:

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).
Each user will have full copy 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).
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.

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 cloud storage available to everyone in full indiscriminately (or its outdated analogue - FTP server with files in public access), where there are thousands of folders with files. On it you can view everything that is currently uploaded there and know where each file is, 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 system electronic money 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:

“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).
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 bittorrent - technically there is no way to prevent downloading).

That's why they're 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.

Also this technology It can be remarkably 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 travel 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

For example, to maintain high level 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 assigned a commission to those who provide their resources ( computing power computers or specially assembled systems- mining farms) for this purpose (based on this principle, the main method of earning bitcoins is built - mining).
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.
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:

Transactions in this system are signed (considered reliable) in batches (i.e. blocks).
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).
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.
Clients of the system can generate at least a million transactions (transfers) per second, but the network of nodes will accept them only from the moment the next block is signed (the next unit is mined).
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 local network, but then rejected by the main block chain).
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 more or less in 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

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Difficulties with updates

If some users refuse to accept the new operating rules, a fork may appear. This happened, for example, with Bitcoin. When some users made a proposal to increase the block size, some users accepted it, while others refused. Those who agreed to increase the block created a fork BitcoinCash.

A similar situation occurred with the Ethereum blockchain, when attackers hacked the exchange and stole $70 million. In order to return the money to the owner, it was proposed to roll back the blockchain a few days ago: and again, some users abandoned this idea, which gave rise to Ethereum Classic.

Expert opinions

Quite an interesting idea expressed German Gref, head of Sberbank. In his opinion, blockchain can turn everything upside down, from agriculture to banking. And the state apparatus too. Sberbank itself has already been shown to be interested in blockchain - journalists found the purchase of a huge number of video cards for mining, and the bank itself quite openly hires blockchain experts and programmers to develop the appropriate software. According to Gref, the main thing is not to miss the moment.

But not only Sberbank is working in this direction: the world’s largest banks have begun to unite in alliances to jointly analyze the blockchain and look for opportunities to introduce technology into the work of banks.

Indeed, they are practically limitless, with their help you can adapt almost any type of human activity, so why not take advantage of it? Contracts ensure safe, precise and reliable compliance with all rules, while guaranteeing the mathematical accuracy of the terms laid down in it.

Blockchain development occurs constantly, each blockchain created is created more advanced. The TON blockchain will soon be created, the creators of which promise throughput up to 1 million transactions, which will solve one of the key problems of the entire technology.

In any case, we can already say with confidence that over time the blockchain will correct its main shortcomings and will become the same familiar technology as, for example, electricity or the Internet - after all, once upon a time they were not wanted to be taken seriously either.