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Blockchain and the Internet of the future
Kathy Gibson reports from CeBit in Hannover – Blockchain technology is relatively new, but it is already taking the IT world by storm. However, the current use cases are just the tip of the iceberg compared to what could be possible in the future.
Fabian Vogelsteller, a Web2.js and Mist developer at Ethereum, points out that most of the technology that goes into blockchain has been around for 20 years.
Blockchain runs on a peer-to-peer network, where the ledger or transaction history is shared among all the nodes. Digital signatures are another key component of the blockchain, ensuring that every transaction is signed.
What is new, and makes the blockchain what it is, is the consensus algorithm, which is a rule on how to add new things to the network.
“These three components are the blockchain,” Vogelsteller says. “Together they let us create a decentralised network that is immutable and verified.”
Although it is new and still little understood, the future for blockchain is bright, he adds. Everyone knows about bitcoin, but there are already about 1 000 other crypto-currencies as well.
“It’s a fragmented space, which is good. It means there is a lot of innovation.”
The future of blockchain, Vogelsteller believes, will be like an Internet of ownership. “It will look like the Internet, with many intranets.”
Ethereum is currently looking to decentralise serverless applications with the Mist browser.
“This is the idea of Web 3.0,” Vogelsteller says. “It is where all the components of the apps are decentralised. So the logic is on the server, but everything else is decentralised.”
This will result in apps that are censorship-resistant, he says. They will outlive the development team because just about anyone can simply pick up on development of any of the components.
“The app will really be a protocol with interfaces that can be replaced,” Vogelsteller explains.
“In the Internet now, you have a lot of data silos and the user has to decide where to put their data. In the future, users will have a blockchain infrastructure in the middle, with everything else around it.”
The Mist browser in development now functions just like a normal web browser, says Vogelsteller. The difference is that files come from decentralised storage sources, and the user can verify that they are correct and haven’t been manipulated.
“The future is a web where you don’t have to trust the middleman,” he says. “And you will be successful if you provide a service on the blockchain infrastructure.”
Ethereum is best known for enabling smart contracts, and is currently the standard for blockchain contracts.
Vogelsteller explains that smart contracts are simply code running on the blockchain.
“In the traditional world, you have to trust people – or have some way of being able to trust them. With blockchain you can automate trust by creating a smart contract.
“When you run the code on a blockchain, it has the properties of the blockchain – so the code will always do what it has to do and is immutable.”
In the Ethereum network, a token is needed for the network to run. Vogelsteller describes this as being like a credit that can be used to execute a contract.
The ether is the token that secures the network and also the fuel that enables it to run, he says.
If anyone makes a transaction on a smart contract, it will be on the blockchain; and the state of the contract is stored on the blockchain, technically forever.
But smart contracts are just the tip of the iceberg, Vogelsteller believes. “What we can build is still not clear to us.”
However, possible use cases include Industry 4.0. Vogelsteller envisages the automation of production processes, where manufacturers could interface directly with production machines, with no need for a middle man. Or they could eliminate the need for every manufacturer to have their own factory. Instead, thousands of companies could share a single production space, with machine time negotiated on the blockchain and payments taking place automatically, while a full audit trail is maintained.
Digital identification could also be moved on to the blockchain. “This would allow me to control my identity myself,” Vogelsteller says. Users would never have to share their passwords again. “I can verify my data without having to share it, and have it in a place where I can control it. This could be used for know your customer (KYC) in banks; and could make form-filling obsolete.”
Other use cases include supply chain, micropayments, nano paywalls and machines, like self-driving cars or autonomous drones, that could own money .
“There are other things that we cannot think about today. There could be millions of use cases.”
Ethereum is currently a global Commodore computer, Vogelsteller says. Adding nodes doesn’t cause the computer to scale, though – but it does increase security. And, by creating an uncheatable platform, it solves trust issues between parties. “No-one has to trust another party, they only have to trust the platform.”
The scalability issue is a concern, though, and Vogelsteller says there are a number of initiatives underway to improve the current performance of around 20 transaction per second.
Consensus sharding is one method under development. Instead of every node verifying every transaction, this will split it up with different nodes verifying different pieces of the transaction, which will then be combined together again.
Vogelsteller believes this technology will be available soon. “It is more a question of architecture than whether it’s possible or not.”
Another way to scale could be with state channels, where some transactions could be moved off the blockchain, which would then act as a settlement layer. This would speed computation but still eliminate the possibility of cheating.
Privacy could be an issue on blockchain as well. “Currently the system is completely transparent, all transactions are fully transparent and readable. This could be an issue for some business segments,” Vogelsteller says.
“This is a tougher issue but it is solvable.”
One of the more recent approaches is zero-knowledge proofs, where data is in function containers and only the verified inputs and outputs are visible.
Another way could be the consortium chain, a private blockchain that is visible only to trusted parties. A gateway would ensure that outside users would only be able to retrieve what the consortium decides they can see.
Putting just metadata on the blockchain would also limit the amount of information that it available and visible.