What is Blockchain?

The Blockchain technology provides a conversation piece across industry boundaries. Especially in the financial sector, it takes place more frequently, even the IT industry discovers them. IT managers should take a closer look at Blockchain to understand its utility.

What is a blockchain ?

A blockchain is a distributed database that maintains an ever-growing list of transaction records. The database is extended chronologically linearly, similar to a chain, at the lower end constantly new elements are added (hence the term “block chain” = “block chain”). If one block is complete, the next one is created. Each block contains a checksum of the previous block.

The blockchain technical model was developed as part of the cryptocurrency Bitcoin – a web-based, decentralized, public accounting system for all Bitcoin transactions ever made. The Bitcoin blockchain is growing steadily as new blocks of newly completed Bitcoin transactions are added. Each computer connected to the Bitcoin network, generating new bitcoins, and / or managing the previously generated ones manages a 1: 1 copy of the complete blockchain, which was already around 50 gigabytes in size by the end of 2015. More detailed technical information about the Bitcoin blockchain is available at Wikipedia .

What’s up with Blockchain, Bitcoin and Co.?

1.Ethereum

Another cryptocurrency based on the blockchain principle. Provides a platform for programmable smart contracts. The “ethers” are regarded by fans as a legitimate successor to the Bitcoins (see also above picture).
Ethereum.org 

2.Cryptlet

Microsoft Azure cloud-built service that allows users to put external data into a blockchain without destroying their security and integrity. As an individualized middleware, cryptlets can also be developed by Azure users themselves – in any programming language – and build the bridge from the blockchain to new business services in the cloud.

Azure Blog: Introducing Project Bletchley 

3.cryptocurrency

Digital money, without coins and bills. Cryptography builds a distributed, secure and decentralized payment system. Does not require banks, but computing power and technical aids such as the blockchain.

4.block Chain

A blockchain is a distributed database that maintains an ever-growing list of transaction records. The database is extended chronologically linearly, similar to a chain, at the lower end constantly new elements are added (hence the term “block chain” = “block chain”). If one block is complete, the next one is created. Each block contains a checksum of the previous block.

The blockchain technical model was developed as part of the cryptocurrency Bitcoin – a web-based, decentralized, public accounting system for all Bitcoin transactions ever made.

5.Bitcoin

A globally available decentralized payment system and the name of a digital monetary unit. You do not need a bank to handle Bitcoin payments – everything is done through a peer-to-peer network of computers and the blockchain as the central database.
Bitcoin.de 

6.Bitcoin Core

The open source software validates the entire blockchain and was released in early 2009 by a certain “Satoshi Nakamoto” under the name “Bitcoin”. Bitcoin Core was in C ++ soon to be programmed especially for Windows systems. A little later the porting to GNU / Linux followed. Because the developers are divided, there are now some derivatives of Bitcoin software, including Bitcoin XT, Bitcoin Unlimited or Bitcoin Classic.
Bitcoin Core 

7.BigchainDB

The “scalable blockchain database” can manage up to one million writes per second, store petabytes of data, and still have a latency of less than a second – all managed in a decentralized manner and with the highest data integrity. The technical basis is blockchain technology.

BigchainDB

8.Distributed Ledger

Financial term for “distributed account management”. Bitcoin is a completely new technical approach to distributing information about specific assignments. There is no longer a classic account managed centrally at a bank, but “account management” is based on a network of communicating systems.

9.Smart contract

A computer log that can depict or review contracts or provide technical support for negotiating a contract. Could in future replace the written contract.

10.R3CEV

The startup R3 CEV builds the blockchain-based “Global Fabric for Finance”. With around 50 financial partners, the largest block chain in the world to be developed – a first test run with eleven banks, including Barclays, Credit Suisse, HSBC, UBS and UniCredit has already been successfully completed. R3CEV has entered into a strategic partnership with Microsoft to develop blockchain infrastructure and technology in the Azure Cloud.
R3CEV 

11.ERIS

A free software with which every user can develop their own blockchain application.
eris Industries 

12.ripple

An open source protocol for a payment network – currently under development. P2P payment method and foreign exchange market in one, based on the cryptocurrency “XRP”. However, ripple users are not set to this one currency, but can use any currency – including euros, dollars or yen, for example.
Ripple Labs 

What is Bitcoin anyway?

Bitcoin is a purely digital currency – founded in 2009 – which is based on a decentralized payment network and which requires a blockchain as its backbone. Those who pay with bitcoins on the web pay lower transaction fees than traditional online payment providers. Another possible advantage of Bitcoin is that the currency is not controlled by a central state bank or similar entity. Disadvantages are the manageable number of acceptance points and the now very high cost to calculate new bitcoins – their value increases correspondingly strong.

There are no physical bitcoins, only account balances associated with public and private keys. These account balances are deposited in a public accounting system – the blockchain – along with all Bitcoin transactions ever made. The computing power needed to manage this massive amount of data is provided by a large network of computers.

What makes Blockchain so special?

The Blockchain is probably the biggest technological invention of the Bitcoin universe. Without Blockchain, the Bitcoin system would not work, because new Bitcoins can only be calculated on the basis of the previously generated Bitcoins and therefore must be tracked, what has happened in the past. Nevertheless, the blockchain principle must be considered detached from Bitcoin . Imagine the blockchain as a pipeline and Bitcoin as the water flowing through it. Or Blockchain as a street and Bitcoin as a car. The conspicuous thing is that based on the blockchain technology , new applications can be developed and completely new ecosystems can be justified.

What advantages and disadvantages does a decentralized technology such as Blockchain have?

The decentralization of IT in general and Blockchain in particular has some advantages and disadvantages . As advantages can be stated:

  • Protecting large amounts of data through encryption and access management;
  • Ability to collect and analyze large amounts of data across companies;
  • easier verification of data reference points;
  • automatic detection of weak links in the supply chain, payment transactions and other business processes;
  • Reduction or avoidance of unnecessary costs for the IT infrastructure;
  • Reduction of costs for internal and external financial transactions, financial reporting and administration;
  • Creation of a mechanism to improve board reporting and regulatory reporting;
  • Acceleration of the annual financial statements.

As disadvantages can be mentioned:

  • still little individual scalability;
  • low data throughput;
  • Limitations on storage space;
  • hard-to-manage permissions;
  • difficult integration with existing legacy in the enterprise.

How is Blockchain used in the financial industry?

Even today, a lot of IT is decentralized – thank the internet and the cloud. With applications based on the blockchain principle, new developments continue to emerge, which will gradually reduce the listed disadvantages. Thus, the cryptocurrency ethereum is based on the blockchain principle of decentralized computing power and can be seen as a kind of bridge between blockchain and enterprise systems.

The “scalable blockchain database” BigchainDB can manage up to one million writes per second, store petabytes of data, and still have a latency of less than a second – all managed in a decentralized manner and with the highest data integrity.

Blockchain application platforms for the financial industry that are still under development – such as ERIS or R3CEV – are designed to establish the “business rules” of blockchain technology and bring new transparent, secure and verifiable business models to IT, especially the financial sector. For the CIO, such a new decentralized technology stack, along with a growing ecosystem, means that it can better perform its tasks: faster completion for business operations, more secure transaction processing, cost reduction and closer alignment with regulatory requirements.

The integration with already existing systems is still a challenge, but it is not insurmountable and can be justified very well with the advantages to be expected from Blockchain for both IT and business.

Why can other industries benefit from the blockchain?

IT is increasingly developing decentralized structures because users want to keep an eye on their digital data. Decentralized systems can store information in a network of several computers accessible via the Internet. With the Internet, the decentralization of communication began and everyone got more control over the information he consumed. In the next step, in addition to communication, computing power and memory will be decentralized (cloud computing), and the Blockchain will now add another element. The Blockchain fuels ideas not only to control cryptocurrencies like Bitcoin via distributed networks, but also other digital content such as art, music, text or photos.

The first practical examples for the use of blockchains in various industries have been compiled in the article “Blockchain in Action” .

What are the blockchain offers of the big IT companies?

Large IT corporations jump on the Blockchain train and are currently working on software and service ecosystems around the technology. IBM , for example, has been active in the Bitcoin initiative of the Linux Foundation for some time already, and offers its cloud developers the opportunity to set up their own blockchains. For this purpose, Big Blue has made available on its developer platform Bluemix the Bitcoin blockchain underlying Hyperledger code.

By the simultaneous integration of the container service Docker it would be “for developers now in twelve seconds possible to get its own mini Blockchain within a sandbox to run”, how Jerry Cuomo, with IBM for the Blockchain offers responsible , in the context of the Presentation of services in February 2016 underlined. “And just a minute later, the first complete blockchain application will be live.”

Microsoft has also recognized the benefits of Blockchain and launched “Project Bletchley”under the umbrella of “Ethereum Blockchain as a Service” in the Azure Cloud . In the near future, several middleware tools are to be launched that enhance the business value of Blockchain. For example, “Blockchain as a Service” is primarily a developer. As a technical tool of the solutions so-called “cryptlets” are used, with the help of which users can enter external data into a blockchain without destroying their security and integrity.

These cryptlets can be developed in any programming language and run analogous to the IBM offer within a secure container. Microsoft sees the benefits of blockchain technology, especially in security-related issues such as identity management and encryption, and has integrated the corresponding services already in Project Bletchley.

Other major IT players, such as SAP or HPE, have also been monitoring the technology for some time and, according to their own statements, are still evaluating the possibilities of developing offers around Blockchain.