Blockchain overview

Blockchain defined: Blockchain is a shared, immutable ledger that facilitates the process
of recording transactions and tracking assets in a business network. An asset can be tangible (a
house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).
Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and
cutting costs for all involved.

Why blockchain is important: Business runs on information. The faster it’s received
and the more accurate it is, the better. Blockchain is ideal for delivering that information because
it provides immediate, shared and completely transparent information stored on an immutable
ledger that can be accessed only by permissioned network members. A blockchain network can
track orders, payments, accounts, production and much more. And because members share a
single view of the truth, you can see all details of a transaction end to end, giving you greater
confidence, as well as new efficiencies and opportunities.

Key elements of a blockchain

Distributed ledger technology

All network participants have access to the distributed ledger and its immutable record of
transactions. With this shared ledger, transactions are recorded only once, eliminating the
duplication of effort that’s typical of traditional business networks.

Immutable records
No participant can change or tamper with a transaction after it’s been recorded to the shared
ledger. If a transaction record includes an error, a new transaction must be added to reverse the
error, and both transactions are then visible.

Smart contracts
To speed transactions, a set of rules — called a smart contract — is stored on the blockchain and
executed automatically. A smart contract can define conditions for corporate bond transfers,
include terms for travel insurance to be paid and much more.

How blockchain works

As each transaction occurs, it is recorded as a “block” of data

Those transactions show the movement of an asset that can be tangible (a product) or intangible
(intellectual). The data block can record the information of your choice: who, what, when,
where, how much and even the condition — such as the temperature of a food shipment.
Each block is connected to the ones before and after it
These blocks form a chain of data as an asset moves from place to place or ownership changes
hands. The blocks confirm the exact time and sequence of transactions, and the blocks link
securely together to prevent any block from being altered or a block being inserted between two
existing blocks.
Transactions are blocked together in an irreversible chain: a blockchain
Each additional block strengthens the verification of the previous block and hence the entire
blockchain. This renders the blockchain tamper-evident, delivering the key strength of
immutability. This removes the possibility of tampering by a malicious actor — and builds a
ledger of transactions you and other network members can trust.

Benefits of blockchain
What needs to change: Operations often waste effort on duplicate record keeping and
third-party validations. Record-keeping systems can be vulnerable to fraud and cyberattacks.
Limited transparency can slow data verification. And with the arrival of IoT, transaction volumes
have exploded. All of this slows business, drains the bottom line — and means we need a better
way. Enter blockchain.
Greater trust
With blockchain, as a member of a members-only network, you can rest assured that you are
receiving accurate and timely data, and that your confidential blockchain records will be shared
only with network members to whom you have specifically granted access.
Greater security
Consensus on data accuracy is required from all network members, and all validated transactions
are immutable because they are recorded permanently. No one, not even a system administrator,
can delete a transaction.
More efficiencies
With a distributed ledger that is shared among members of a network, time-wasting record
reconciliations are eliminated. And to speed transactions, a set of rules — called a smart contract
— can be stored on the blockchain and executed automatically.

Types of blockchain networks

There are several ways to build a blockchain network. They can be public, private,
permissioned or built by a consortium.

Public blockchain networks

A public blockchain is one that anyone can join and participate in, such as Bitcoin. Drawbacks
might include substantial computational power required, little or no privacy for transactions, and
weak security. These are important considerations for enterprise use cases of blockchain.
Private blockchain networks
A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-
peer network. However, one organization governs the network, controlling who is allowed to
participate, execute a consensus protocol and maintain the shared ledger. Depending on the use
case, this can significantly boost trust and confidence between participants. A private blockchain
can be run behind a corporate firewall and even be hosted on premises.
Permissioned blockchain networks
Businesses who set up a private blockchain will generally set up a permissioned blockchain
network. It is important to note that public blockchain networks can also be permissioned. This
places restrictions on who is allowed to participate in the network and in what transactions.
Participants need to obtain an invitation or permission to join.
Consortium blockchains
Multiple organizations can share the responsibilities of maintaining a blockchain. These pre-
selected organizations determine who may submit transactions or access the data. A consortium
blockchain is ideal for business when all participants need to be permissioned and have a shared
responsibility for the blockchain.

Blockchain security

Risk management systems for blockchain networks

When building an enterprise blockchain application, it’s important to have a comprehensive
security strategy that uses cybersecurity frameworks, assurance services and best practices to
reduce risks against attacks and fraud.

Blockchain FAQ
What’s the difference between blockchain and Bitcoin?

Bitcoin is an unregulated, digital currency. Bitcoin uses blockchain technology as its transaction
ledger.

This video illustrates the distinction between the two.

How are the IBM Blockchain Platform and Hyperledger related?

The IBM Blockchain Platform is powered by Hyperledger technology.

This blockchain solution can help turn any developer into a blockchain developer.

Visit the Hyperledger website for details.

Can I deploy on any cloud I want?

IBM Blockchain Platform Software is optimized to deploy on Red Hat® OpenShift®, Red Hat’s
state-of-the-art enterprise Kubernetes platform.
This means you have more flexibility when choosing where to deploy your blockchain network
components, whether on-premises, in public clouds, or in hybrid cloud architectures.

Smart contracts defined

Smart contracts are simply programs stored on a blockchain that run when predetermined
conditions are met. They typically are used to automate the execution of an agreement so that all
participants can be immediately certain of the outcome, without any intermediary’s involvement
or time loss. They can also automate a workflow, triggering the next action when conditions are
met.

How smart contracts work

Smart contracts work by following simple “if/when…then…” statements that are written into
code on a blockchain. A network of computers executes the actions when predetermined
conditions have been met and verified. These actions could include releasing funds to the
appropriate parties, registering a vehicle, sending notifications, or issuing a ticket. The
blockchain is then updated when the transaction is completed. That means the transaction cannot
be changed, and only parties who have been granted permission can see the results.

Within a smart contract, there can be as many stipulations as needed to satisfy the participants
that the task will be completed satisfactorily. To establish the terms, participants must determine
how transactions and their data are represented on the blockchain, agree on the
“if/when...then…” rules that govern those transactions, explore all possible exceptions, and
define a framework for resolving disputes.

Then the smart contract can be programmed by a developer – although increasingly,

organizations that use blockchain for business provide templates, web interfaces, and other
online tools to simplify structuring smart contracts.

Benefits of smart contracts

Speed, efficiency and accuracy
Once a condition is met, the contract is executed immediately. Because smart contracts are
digital and automated, there’s no paperwork to process and no time spent reconciling errors that
often result from manually filling in documents.
Trust and transparency
Because there’s no third party involved, and because encrypted records of transactions are shared
across participants, there’s no need to question whether information has been altered for personal
benefit.
Security
Blockchain transaction records are encrypted, which makes them very hard to hack. Moreover,
because each record is connected to the previous and subsequent records on a distributed ledger,
hackers would have to alter the entire chain to change a single record.
Savings
Smart contracts remove the need for intermediaries to handle transactions and, by extension,
their associated time delays and fees.
Applications of smart contracts
Explore how businesses benefit from smart contracts in active blockchain solutions

Safeguarding the efficacy of medications

Sonoco and IBM are working to reduce issues in the transport of lifesaving medications by
increasing supply chain transparency. Powered by IBM Blockchain Transparent Supply, Pharma
Portal is a blockchain-based platform that tracks temperature-controlled pharmaceuticals through
the supply chain to provide trusted, reliable and accurate data across multiple parties.

Increasing trust in retailer-supplier relationships

The Home Depot uses smart contracts on blockchain to quickly resolve disputes with vendors.
Through real-time communication and increased visibility into the supply chain, they are
building stronger relationships with suppliers, resulting in more time for critical work and
innovation.

Making international trade faster and more efficient

By joining we.trade, the trade finance network convened by IBM Blockchain, businesses are
creating an ecosystem of trust for global trade. As a blockchain-based platform, we.trade uses
standardized rules and simplified trading options to reduce friction and risk while easing the
trading process and expanding trade opportunities for participating companies and banks.

Book: https://www.ibm.com/downloads/cas/OK5M0E49

Solana, a blockchain network that launched in 2020, is being seen by many as a

competitor to Ethereum. The cryptocurrency has grown about 16,000 percent since
January. At the start of this year, one SOL cost $1.51 (roughly ₹ 112) and Solana's
market cap was around $86 million (roughly ₹ 639 crores).

 Solana is a blockchain platform designed to host decentralized, scalable

applications.
 Solana can process many more transactions per second, and has much lower
transaction fees, than rival blockchains like Ethereum.
 Solana's native cryptocurrency, which has the ticker SOL, has a market
capitalization of over $66 billion, making it the fifth-largest cryptocurrency.
 Solana is a Proof of Stake (PoS) blockchain and also uses a new technology
called Proof of History (PoH).
Solana's Technology

The goal of Solana's architecture is to demonstrate that there exists a set of software
algorithms that, when used in combination to implement a blockchain, eliminates
software as a performance bottleneck, enabling transaction throughput to scale
proportionally with network bandwidth. Solana's architecture satisfies all three
desirable attributes for a blockchain: scalable, secure, and decentralized. Solana's
architecture describes a theoretical upper limit of 710,000 transactions per second
(tps) on a standard Gigabit network and 28.4 million tps on a 40-Gigabit network. 6

Solana's blockchain operates on both a Proof of History (PoH) and Proof of

Stake (PoS) model. PoS permits validators (those who validate transactions added to
the blockchain ledger) to verify transactions based on how many coins or tokens they
hold; PoH allows those transactions to be timestamped and verified very quickly.

Solana versus Ethereum

Solana's rapidly expanding ecosystem and its versatility have inevitably drawn
comparisons to Ethereum, the leading blockchain for decentralized
applications (dApps). Both Solana and Ethereum have smart contract capabilities,
which are crucial for running cutting-edge applications like decentralized
finance (DeFi) and nonfungible tokens (NFTs). But there are some fundamental
differences between the two.

Unlike Solana, Ethereum is a Proof of Work (PoW) blockchain, where miners must
compete to solve complex puzzles in order to validate transactions, making this
technology more energy intensive and hence detrimental to the environment.

Much of the buzz surrounding Solana in 2021 was due to its distinct advantage over
Ethereum in terms of transaction processing speed and transaction costs. Solana can
process as many as 50,000 transactions per second (tps), and its average cost per
transaction is $0.00025. In contrast, Ethereum can only handle less than 15
transactions per second, while transaction fees touched a record of $70 in 2021.

However, Ethereum has first mover advantage, and with its massive ecosystem, it is
second only to Bitcoin in terms of market capitalization. 3 Ethereum's Eth2 upgrade
and its shift to a PoS model are both set for 2022; the upgrade is expected to make
the blockchain more scalable, secure, and sustainable, while dramatically increasing
transaction processing speed.

Solana's status as a newer blockchain company also came under the microscope when
it suffered a network outage for more than 17 hours on Sept. 17, 2021, after a surge
in transaction volume—which peaked at 400,000 transactions per second—and bot
activity led to excessive memory consumption. While its Sol token initially plunged
on the news, it has since erased those losses, reaching a record price of over $250 in
November 2021.

What is Mainnet?

Mainnet is the term used to describe when a blockchain protocol is fully developed
and deployed, meaning that cryptocurrency transactions are being broadcasted,
verified, and recorded on a distributed ledger technology (blockchain).
In contrast to mainnet networks, the term testnet describes when a blockchain
protocol or network is not yet up and running on its full capacity. A testnet is used by
programmers and developers to test and troubleshoot all the aspects and features of
a blockchain network before they are sure the system is secure and ready for the
mainnet launch.

In other words, a testnet only exists as a working prototype for a blockchain project,
while a mainnet is a completely developed blockchain platform for users to send and
receive cryptocurrency transactions (or any other kind of digital data that is recorded
on a distributed ledger).
Usually, before the mainnet of a blockchain project is launched, the team will set up
an Initial Coin Offering (ICO), an Initial Exchange Offering (IEO), or any other means
that can help the project raise funds and grow their community. Typically, the
collected funds are then used to develop the prototypes of the blockchain network,
which is then tested during the testnet phase. After performing bug fixes and
depending on the performance of the testnet, the team will then launch the mainnet
version of the blockchain, which is (ideally) fully deployed and functional.