Abstract
Although there are many versions of blockchain technology today, it was first introduced in 2008 as the technology supporting Bitcoin, the first successful virtual currency system. Yet in and of itself, blockchain technology is much more than the underpinning for Bitcoin (and other cryptocurrencies) and has found many applications beyond its initial purpose. The goal of this advanced primer is to review the current state of this technology and to discuss some of its advantages and drawbacks in settings beyond cryptocurrencies.
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Notes
- 1.
Interested readers can find more information on Hedera at https://www.hederahashgraph.com/
- 2.
Interested readers can experiment with hash functions on sites such as FileFormatInfo (https://www.fileformat.info/tool/hash.htm)
- 3.
Merkle trees are created by repeatedly hashing pairs of nodes until there is only one hash left (this hash is called the Root Hash, or the Merkle Root). They are constructed from the bottom up, from hashes of individual transactions (known as Transaction IDs) (see Ray (2017) for more details).
- 4.
Pretty Good Privacy (PGP) is a software that provides cryptographic privacy and authentication for data communication. PGP enables the signature, encryption and decryption of files and messages for a greater level of privacy and security of electronic communications.
- 5.
Interested readers can obtain more information at https://www.pluralsight.com/guides/blockchain-architecture
- 6.
An old CD may have a size of 700 MB.
- 7.
Interested readers can follow the evolution of the blockchain size at https://www.blockchain.com/charts/blocks-size
- 8.
Interested readers can follow the Bitcoin energy consumption at https://digiconomist.net/bitcoin-energy-consumption consulted on June 7, 2020.
- 9.
As of May 2018, the reward is 12.50 bitcoins per block.
- 10.
I discuss forks and Sybil attacks below.
- 11.
See Vermeulen (2016). However, Visa baseline capacity is typically lower.
- 12.
I elaborate on smart contracts below.
- 13.
LiteCoin has been developed through a Bitcoin’s fork. I elaborate below on what forks involve.
- 14.
Smart contracts are called “chaincodes” in the Fabric environment.
- 15.
The concept of smart contract was originally proposed by Nick Szabo.
- 16.
See Valenta and Sandner (2017) for more details on Corda. Interested readers can also find more technical details on Corda at https://docs.corda.net/key-concepts-tradeoffs.html
- 17.
An actuator is a component of a machine that is responsible for moving and controlling a mechanism or system, for example by activating a switch.
- 18.
Interested readers can obtain more details at https://ethereum.stackexchange.com/questions/379/what-is-a-sidechain
- 19.
The numbers were comparable in May 2017 (see https://bitnodes.earn.com/ for the current statistics).
- 20.
The number for Ethereum is close to 7500 (https://www.ethernodes.org/ consulted on June 7, 2020).
- 21.
The number of nodes decreased to seven (see https://neo.org/consensus to see the evolution over time).
- 22.
See https://blockchain.info/pools to follow the hashrate distribution.
- 23.
In this case, network participants receive both sets of crypto-assets.
- 24.
A decentralized autonomous organization (DAO) is a generic term for organizations that operate exclusively through smart contracts. “The DAO” was an example of such an organization that ultimately failed.
- 25.
The required percentage varies and can be more or less than 50%.
- 26.
- 27.
A more formal analysis of zk-SNARKs can be found in Ben-Sasson et al. (2019).
- 28.
Interested readers can find more information at https://en.wikipedia.org/wiki/Zcash
- 29.
The founder of Z-cash executed an elaborate “ceremony” to convince the rest of the world this was not an issue for the cryptocurrency (a video can be found at https://www.youtube.com/watch?v = D6dY-3x3teM).
- 30.
Naturally, no solution is fool-proof (see Tramer, Boneh and Paterson(2020)).
- 31.
The bug called CVE-2010-5139 was a number overflow error that led to the creation of at least 92 million irregular bitcoins. The bug was subsequently corrected.
- 32.
The site was hacked for the first time in 2011 for a smaller amount (see Sharma (2017)).
- 33.
More specifically, the private key allows the verification of ownership for the public key and the assets connected to it. This allows for transfer of ownership to happen without the revelation of the private key to a third party.
- 34.
Ransomware is a form of malicious software that threatens to publish the victim’s data or perpetually block access to it (usually by encrypting it) unless a ransom is paid.
- 35.
James Howells lost £4.2 million when he trashed a hard drive containing the private keys for 7500 bitcoins without realizing what it contained.
- 36.
Naturally, no system is fool-proof (see Steel (2019)).
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Hilary, G. (2022). Blockchain and Other Distributed Ledger Technologies, an Advanced Primer. In: Babich, V., Birge, J.R., Hilary, G. (eds) Innovative Technology at the Interface of Finance and Operations. Springer Series in Supply Chain Management, vol 11. Springer, Cham. https://doi.org/10.1007/978-3-030-75729-8_1
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