Blockchain

Technology and Applications for Industry 4.0, Smart Energy, and Smart Cities

Matevž Pustišek, Nataša Živić, Andrej Kos

• Editorial: De Gruyter
• Año: 2021
• ISBN:
  9783110681208
• Edición: 1
• Categoría: Computer Science
• Categoría: Cyber Security

Blockchains are seen as a technology for the future, which reduce the cost of trust and revolutionize transactions between individuals, companies and governments. The sense of using blockchains is to minimize the probability of errors, successful frauds and paper-intensive processes. For these reasons, blockchains already have and will have a significant impact to the society and every day's life, especially in field of Machine to Machine (M2M) communications, which are one of the basic technologies for Internet of Things (IoT). Therefore, blockchains with their inherent property to provide security, privacy and decentralized operation are engine for todays and future reliable, autonomous and trusted IoT platforms. Specially, a disruptive role of ledger technologies in future smart personal mobility systems, which combine smart car industry, smart energy/smart cities will be explained in the book, considering its importance for development of new industrial and business models.

1 Distributed ledger technologies

Distributed Ledger Technologies (DLTs) enable an innovative special form of electronic data processing and its memorizing. As the main part, a distributed ledger is a decentralized database that allows all the members of a concerned network to read and write data in it. Unlike centralized databases, no central instance allowing data writing and reading is needed here. Instead of having a centralized control, any network member can add data anytime, after which a process of data actualization follows. Each network member is provided with the newest up-to-date state of a database.

As DLTs reduce the cost of trust and revolutionize transactions between individuals, companies, and governments and minimize successful frauds, error possibility, and paper-intensive processes, they are considered a progressive technology of the future. They can have a crucial impact on society in every respect, especially in machine-to-machine (M2M) communications, one of the basic technologies for the Internet of Things (IoT). Besides providing security, privacy, and decentralized operation, DLTs stand for reliable, autonomous, and trusted IoT platforms now and in the future.

DLT follows a new data recording, sharing, and synchronizing method across multiple ledgers (data stores). A distributed ledger (DL) is a database that is independently created, maintained, and updated by each node (or participant) in a large network. All the records of a distributed ledger are shared and synchronized by consensus between nodes across the network. This happens without the help of any central authority. Consequently, each network node has its ledger copy, identical to others. Every time the ledger has to be updated with the new record(s), reaching a consensus results in getting identical copies on all nodes. This synchronization process is very fast, so that changes in a node’s ledger are copied into the ledgers on other nodes in just a few seconds (or perhaps minutes).

Cryptographic signatures are used to secure access to the ledger’s content, so that all DL data is accurate and safe. In many cases, to succeed in a cyberattack, an attacker has to target most DL copies simultaneously. Besides, if one or few copies are corrupted, the system as a whole will not be compromised.

Any node may create a data block with which the actual will be updated. Then, the information (created block) is broadcast across the network, after which other nodes check its validity through a consensus mechanism, that is, pre-defined validation method. After the community (i.e., a valid majority of network nodes) has validated a new block, each node, that is, participant, adds it to its copy of the ledger.

As for consensus mechanisms, there are several of them, such as a Proof of Work (PoW), Proof of Stake (PoS), Proof of Space (PoSpace), and so on. PoW can be the solution to a mathematical problem or puzzle or a suitable hash value found through the iterative execution of the appropriate hash function.

A consensus accomplished by PoS is a process in which a new block is validated only by the participants having enough high stakes, that is, by the rich members. They have many native tokens (cryptocurrency) of a concrete DL on their accounts. The PoS concept is based on the idea that the trustworthiness in the network (and in the value of token) decreases if everyone could perform block validations, which consequently increases the possibility of validation of illegitimate blocks. Hence, the only way of keeping the system’s trust is by leaving the block validation to in the members who might lose much money if acting in irresponsible ways. Regarding energy consumption, PoS is faster and more efficient than PoW (but less proven).

In the PoSpace concept, the available space (memory) on hard discs of the miners’ computers is the resource used for mining (instead of computational power used with PoW). It is also called Proof of Capacity (PoC). Compared to PoW, this concept also saves time and energy. PoSpace is a good solution for anti-spam measures and the prevention of DoS attacks. It could also be useful in preventing the centralization of mining power in mining pools.

There are two types of DLs: public and private, depending on the peer-to-peer (P2P) network they rely on. Based on control by certain entities, there are also two types of DLs: permissionless and permissioned. In a permissionless DL, each node of the network hosts the full and freshest copy of the complete ledger. Every ledger update (addition of a new block) is communicated to all nodes in the network, which then collectively validate the new block by obeying a consensus mechanism. Having accepted the validation, a new block is added to each node’s copy of the ledger. Data consistency across the network is assured in that way. This means that a permissionless DL is fully democratic and with no central control, provided each participant follows the predefined rules. In a permissioned DL, however, a central entity grants the permissions to nodes for accessing the network and making changes to the ledger. At the same time, the central entity can also verify the identity of the participants who try to access the network.

As there are a number of DLT applications that boost autonomous driving, this chapter will consider basic DLT architectures and their properties and several use cases of these technologies in the concept of autonomous vehicles.

Three basic DLT architectures will be considered for comparing DLT characteristics in the remaining part of the paper: chain or list, Directed Acyclic Graph (DAG) as a tangle, and DAG as a tree. A typical representative of the chain or list is a blockchain, which is the basis for the oldest and most widely used cryptocurrency – the Bitcoin (BTC), invented in 2008 by Satoshi Nakamoto [1]. DAG is a finite directed graph with no directed cycles and consists of many finite vertices and edges. Each edge is directed from one vertex to another but with no back loops. Tangle is a basis for IOTA, a cryptocurrency that is one of the main concurrences of the BTC, especially in the field of M2M communications. IOTA was founded in 2015 by David Sonstebo, Sergey Ivancheglo, Dominik Schiener, and Serguei Popov [2] and has worked formally as IOTA Foundation since 2017. DAG as a tree is the newest DLT architecture, which is the basis for the so-called hashgraph. Hashgraph is a data structure that records the data about who gossiped with whom and in which order. US professor Leemon Baird invented hashgraph in 2016 [3].

1.1 Digital money – cryptocurrencies

DLTs are widely used in the financial sector as cryptocurrencies or crypto money. These days, the world is witnessing the true gold rush for cryptocurrencies. Many of those involved in the so-called easy money business related to DLTs understand how cryptocurrencies work. Still, others ask a simple question: “How is it possible to make real money from nothing?” Jokes are made comparing cryptocurrencies with some modern physicists’ hypothesis that the whole universe came from nothing. So, if this applies to the universe, why could it not be applied to cryptocurrencies, too?

These are other most often asked questions: “How come the whole system is still functioning?,” “Is it a kind of fraud?,” “How long will it last?,” “Why do people believe in digital money when there is no supreme authority to guarantee it?,” “Is the whole thing and the euphoria related to this only one of the numerous economic bubbles with the growing mechanism based on human greed, with the inevitable final collapse?,” and so on.

And yet, many financial experts foresee a bright future of cryptocurrencies and a further evolution of DLTs. They say that they will enable numerous services such as absolute trust, security, and transparency, showing the way to the societies that have a high level of justice, without criminal and corruption, that is, to the societies that many utopists had only been dreaming of.

Let us remember some of the facts about money: the first forms of human transactions were in pieces of a material (e.g., copper, silver, or gold) which had a value by itself. For example, gold was (and still is) a precious metal due to its characteristics that make it suitable for various applications. For this reason, people believed (and they still do) that the value of gold can be exchanged for other goods, that is, used for trading, while being aware that it could be turned into a useful or a beautiful and valuable object. The keyword here is trust, that is, the faith in the value of the objects named coins or money.

This faith in coins can be (and many times in history was) jeopardized by making coins with a certain (often unknown) percentage of other materials of lesser worth, making unfair trade and fraudulent behavior quite possible in that manner. The natural evolutionary step was to ensure a community where each used coin is worth the labeled value. Only a few powerful central authorities could have obtained such an assurance (e.g., emperors, kings, governments, and other community rulers). The guarantee mechanism was based on the monopoly of money production, the power and reputation of the authority, and the insurance measures (using advanced technology of the time) taken to make money difficult to forge by common people. Suppose the aforementioned conditions are fulfilled to some extent, it can be said that there is an informal agreement in the community that a given currency can be used for trading. The key terms related to real money that should be remembered, here, are central authority and its reputation.

Money is a dynamic category whose value can vary very much, depending on many factors (e.g., inflation). All conditions are not always needed for general consent on the money value. There were some specific circumstances (in history) in some places where central authority had not guaranteed the value of money. Still, the trust in the means of payment had been achieved due to the peculiarities or rareness of the things and objects found in nature, which had been used then for trading, for example, bear claws or shells.

An interesting example is the use of huge and immovable sacred stones as money in a few isolated Pacific islands. The stones had been changing hands after each transaction between tribe members. The ownership of each stone was carved on it as in a ledger (wordings show similarity with today’s ledgers).

It is useful to draw a parallel and note a distinction between cryptocurrency and paper money. Taken by itself, a piece of paper almost has no value. Yet, banknotes, pieces of paper have definite values as the central bank of a country, the authority which issued them, guarantees (by its assets or by the reserves in gold, or even by the reputation of their country), that each banknote can be changed for a piece of gold or another thing of a certain value. Each banknote should represent a certain amount of gold that the bank has saved in its vaults, and it was the case from the very beginning. But it is known that for a long time, many currencies (including the US Dollar, the British Pound, and the Euro) have no gold coverage – they are called fiat currencies. Despite this fact, these currencies are (more or less) concurrent and worthy at their markets. The trust in a currency generally depends on the strength of the country’s economy, reputation, and many other factors. The similarity between a cryptocurrency and a fiat currency is that their value is based on the trust in the system, while the mechanisms which keep that trust differ.

Another new phenomenon has emerged in recent years: paper money and coins are not being used in many countries. Plastic or virtual money (through debit/credit cards and gadgets) is broadly adopted instead, now, and real money has its material representative, no more. Still, it is stored as information in the computer systems of banks holding the customers’ accounts. From their side, banks guarantee (with their reputation, as the recognized authorities) that the stored information on the account states of their customers are true.

Taking into consideration all the above-exposed facts, we could think of cryptocurrencies as not so strange. Even more – they may look like the next natural evolutionary step in the story of money.

1.2 Blockchain

Blockchain is a reliable transaction register (or ledger) containing all transactions up to this very moment. It is a big and continuously growing file comprising a list of records called blocks (or blocks of transactions) where each block in the list is linked (i.e., chained) with the previous and the next block, using cryptography (see Fig. 1.1). The key conditions are ...

Índice

• Title Page
• Copyright
• Contents
• List of acronyms and abbreviations
• 1 Distributed ledger technologies
• 2 Decentralized applications
• 3 Distributed ledgers and internet of things
• 4 Selected use cases
• Index