Blockchaining and Machine Learning

BLOCKCHAIN FOREWORD

In the recent past, everyone everywhere went crazy about cryptocurrencies and in particular, the so-called cryptogold—Bitcoin. However, even though that your (grand) parents have probably have heard about this digital currency, it’s likely that they haven’t got a single clue about the fascinating technology behind it called blockchain.

But what it is that makes blockchain so special that more and more businesses in various industries are now adopting it? That’s what I will try to explain you.

When we think about technology, we assume the constant buzzing notifications from your smartphone and people walking on the streets, while staring at a smartphone screen. However, blockchain is the first technology, which will actually connect us instead of the opposite. It will change the way we make decisions and exchange value [1].

Our ancestors have traded by using violence and social repercussions. With time, society evolved and government institutions and other intermediaries took over the way we trade and exchange value. But in order to understand one of the many ways that blockchain is of advantage to our society, lets take a look at the banking system. If you want to make a transaction, the bank is the institution which sets the rules on how this transaction will be executed—how long will it take, how much will they charge you and so on. If this transaction is made on the blockchain, there are a set of computers which are participating in the network to validate this transaction. Figure 2.1 shows the transaction one-to-one without the bank as an intermediary.

This fancy term blockchain actually means a block of data that has been recorded over a certain amount of time and is grouped and cryptographically linked to a previous set of data forming a chain of events. These computers are agreeing upon what

Transaction one-to-one without the bank as an intermediary. (From S. Voshmgir, Token Economy, 2019, https://blockchainhub.net.)

FIGURE 2.1 Transaction one-to-one without the bank as an intermediary. (From S. Voshmgir, Token Economy, 2019, https://blockchainhub.net.)

happened over a time period and then each of them represents that data instead of having one centralized entity, that is doing so. All of these events which occurred on the blockchain are recorded on a public ledger.

If and when all parties to the smart contract fulfill the predefined arbitrary rules, the smart contract will auto execute the transaction. These smart contracts aim to provide transaction security superior to traditional contract law and reduce transaction costs of coordination and enforcement.

Smart contracts can be used for simple economic transactions like sending money from A to B. They can also be used for registering any kind of ownership and property rights like land registries and intellectual property, or managing smart access control for the sharing economy, just to name a few. Furthermore, smart contracts can be used for more complex transactions like governing a group of people that share the same interests and goals. Decentralized autonomous organizations (DAOs) are such an example for more complex smart contracts.

With blockchains and smart contracts, we can now imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world, every agreement, every process, task, and payment would have a digital record and signature that could be identified, validated, stored, and shared.

Intermediaries like lawyers, brokers, and bankers, and public administrators might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction and a fraction of current transaction costs.

Therefore, blockchains and smart contracts:

  • • Radically reduce transaction costs (bureaucracy) through machine consensus and auto-enforceable code.
  • • Bypass the traditional principal-agent dilemmas of organizations, thus providing an operating system for what some refer to as “trustless trust.”

This means that you don’t have to trust people and organizations, you trust code, which is open source and provides transparent processes.

BLOCKCHAIN AND CRYPTOCURRENCIES

Blockchain is a distributed ledger that is encrypted and immutable. Each new block that is added to the chain needs to be verified by the previous block with a unique identifier. Blockchains are cloud-hosted (hence the term “distributed”). So, while this is obviously useful for transactions and has traditional finance institutes scrambling because blockchain can cut the middle man, blockchain’s native safety features make it a great choice for what’s known as “the single source of truth” as well.

Blockchain technology and cryptopayments are the future of e-commerce. Not only for big web shops but for everyone. Blockchain will solve a lot of e-commerce problems. Such as the following:

  • Smart and honest reviews: Blockchain assures the transparency in terms of honest shopping. Shoppers will be able to leave a review only after receiving ordered goods, it means no fake feedbacks.
  • Affiliate marketing on blockchain: Sellers will be able to cooperate with bloggers and get a free promotion from them. Traffic owners (bloggers) will be able to monetize their reviews through an affiliate program.
  • Fast and cheap transactions: Traditional online global trading implies long and costly transactions. Multicurrency wallet will help shoppers and vendors to interact easily and perform cross-border payments in a convenient way. A fee for transferring cryptocurrency is much lower than for transferring fiat money.
  • Safe shopping: Buyers will be safeguarded due to usage of smart contract system. Smart contract transfers money to a seller’s account only when an ordered item has reached its destination. So, a customer pays only after receiving the product, it increases his or her confidence in a service and makes online shopping more attractive.

Moreover, blockchain brings cryptocurrency to common usage in online trading. It means that selling globally will be easier because it’s more convenient for people.

The Different Types of Blockchains

There are three primary types of blockchains, which do not include traditional databases or distributed ledger technology (DLT) that are often confused with blockchains.

  • 1. Public blockchains like Bitcoin and Ethereum
  • 2. Private blockchains like Hyperledger and R3 Corda
  • 3. Hybrid blockchains like Dragonchain (Figure 2.2)
Different types of blockchain

FIGURE 2.2 Different types of blockchain.

What Is a Public Blockchain?

Let’s explore the different types of chains. And start with public blockchains, which are open source. They allow anyone to participate as users, miners, developers, or community members. All transactions that take place on public blockchains are fully transparent, meaning that anyone can examine the transaction details.

  • 1. Public blockchains are designed to be fully decentralized, with no one individual or entity controlling which transactions are recorded in the block- chain or the order in which they are processed.
  • 2. Public blockchains can be highly censorship-resistant, since anyone is open to join the network, regardless of location, nationality, etc. This makes it extremely hard for authorities to shut them down.
  • 3. Lastly, public blockchains all have a token associated with them that is typically designed to incentivize and reward participants in the network.

What Is a Private Blockchain?

Another type of chains are private blockchains, also known as permissioned block- chains, possess a number of notable differences from public blockchains.

  • 1. Participants need consent to join the networks.
  • 2. Transactions are private and are only available to ecosystem participants that have been given permission to join the network.
  • 3. Private blockchains are more centralized than public blockchains.

Private blockchains are valuable for enterprises who want to collaborate and share data, but don’t want their sensitive business data visible on a public blockchain. These chains, by their nature, are more centralized; the entities running the chain have significant control over participants and governance structures. Private block- chains may or may not have a token involved with the chain.

What Is a Hybrid Blockchain?

Dragonchain occupies a unique place within the blockchain ecosystem in that it’s a hybrid blockchain. This means that it combines the privacy benefits of a permissioned and private blockchain with the security and transparency benefits of a public blockchain. That gives businesses significant flexibility to choose what data they want to make public and transparent and what data they want to keep private.

  • 1. The hybrid nature of Dragonchain blockchain platform is made possible by our patented Interchain capability, which allows us to easily connect with other blockchain protocols allowing for a multi-chain network of blockchains.
  • 2. This functionality makes it simple for businesses to operate with the transparency they are looking for, without having to sacrifice security and privacy.
  • 3. Also, being able to post to multiple public blockchains at once increases the security of transactions, as they benefit from the combined hash power being applied to the public chains [2].
 
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