Blockchain

A blockchain constitutes a distributed ledger comprising an expanding sequence of records, known as blocks, which are cryptographically interconnected. Each block incorporates a cryptographic hash of its predecessor, a timestamp, and transactional data, typically structured as a Merkle tree where data nodes function as leaves. The inherent linkage of each block to the preceding one establishes a chain, conceptually akin to a linked list data structure, where new blocks extend the existing sequence. This architectural design renders blockchain transactions highly resistant to modification; once data is recorded within a block, any retroactive alteration would necessitate modifying all subsequent blocks and achieving network consensus for such changes.

A blockchain is a distributed ledger with growing lists of records (blocks) that are securely linked together via cryptographic hashes. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree, where data nodes are represented by leaves). Since each block contains information about the previous block, they effectively form a chain (viz. linked list data structure), with each additional block linking to the ones before it. Consequently, blockchain transactions are resistant to alteration because, once recorded, the data in any given block cannot be changed retroactively without altering all subsequent blocks and obtaining network consensus to accept these changes.

Typically, peer-to-peer (P2P) computer networks govern blockchains, utilizing them as public distributed ledgers. Within these networks, nodes collectively follow a consensus algorithm protocol to append and validate new transaction blocks. While blockchain records are not entirely immutable due to the potential for blockchain forks, their design inherently promotes security, illustrating a distributed computing system characterized by substantial Byzantine fault tolerance.

In 2008, an individual or collective operating under the pseudonym Satoshi Nakamoto developed a blockchain to function as the public distributed ledger for bitcoin cryptocurrency transactions. This innovation built upon prior research by Stuart Haber, W. Scott Stornetta, and Dave Bayer. The integration of the blockchain into bitcoin marked the first instance of a digital currency successfully addressing the double-spending problem without relying on a centralized authority or trusted server. The architectural principles of bitcoin have subsequently influenced the development of numerous other publicly accessible applications and blockchains, which are extensively employed by various cryptocurrencies. Conceptually, the blockchain can be categorized as a form of payment rail.

Proposals have emerged for the application of private blockchains within business contexts. Computerworld critically characterized the promotion of these privatized blockchains, particularly those lacking a robust security framework, as deceptive. Conversely, some proponents contend that permissioned blockchains, when meticulously engineered, possess the potential to achieve greater decentralization and, consequently, enhanced practical security compared to their permissionless counterparts.

Historical Context

The conceptual precursor to the blockchain emerged in 1982, when cryptographer David Chaum presented a blockchain-like protocol in his dissertation, "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups." Subsequent advancements in cryptographically secured block chains were detailed in 1991 by Stuart Haber and W. Scott Stornetta, who sought to devise a system preventing the alteration of document timestamps. By 1992, Haber, Stornetta, and Dave Bayer integrated Merkle trees into this design, significantly enhancing efficiency by enabling the aggregation of multiple document certificates into a single block. Through their enterprise, Surety, the hashes of these document certificates have been consistently published in The New York Times on a weekly basis since 1995.

In 2008, the initial decentralized blockchain was conceptualized by an individual or entity identified as Satoshi Nakamoto. Nakamoto significantly refined the design by employing a Hashcash-like mechanism for timestamping blocks, thereby eliminating the need for endorsement by a trusted third party, and by introducing a difficulty parameter to regulate the rate at which blocks are appended to the chain. This design was subsequently implemented by Nakamoto in the following year as a foundational element of the bitcoin cryptocurrency, functioning as the public ledger for all network transactions.

By August 2014, the bitcoin blockchain file, which archives all network transactions, had expanded to 20 gigabytes (GB). This size further increased, surpassing 600 GB by 2024.

Initially, Satoshi Nakamoto's seminal paper employed the terms block and chain distinctly; however, by 2016, they had become widely recognized and popularized as the single compound term, blockchain.

Accenture's analysis, applying the diffusion of innovations theory, indicates that blockchains achieved a 13.5% adoption rate within financial services by 2016, thereby entering the early adopters' phase. Concurrently in 2016, various industry trade groups collaborated to establish the Global Blockchain Forum, an initiative spearheaded by the Chamber of Digital Commerce.

In May 2018, Gartner reported that only 1% of Chief Information Officers (CIOs) had implemented blockchain technology within their organizations, with an additional 8% either planning or actively experimenting with it in the short term. By 2019, Gartner's findings indicated that 5% of CIOs considered blockchain technology to be a transformative factor for their businesses.

Structure and Design

A blockchain functions as a decentralized, distributed, and frequently public digital ledger, comprising records known as blocks. These blocks are utilized to record transactions across numerous computers, ensuring that no block can be retroactively altered without concurrently modifying all subsequent blocks. This architectural feature enables participants to independently and cost-effectively verify and audit transactions. A blockchain database operates autonomously through a peer-to-peer network and a distributed timestamping server. Authentication is achieved via mass collaboration driven by collective self-interests. This design promotes a robust workflow, significantly reducing participants' concerns about data security. Furthermore, blockchain technology eliminates the infinite reproducibility inherent in digital assets, confirming that each unit of value is transferred only once, thereby resolving the persistent issue of double-spending. Consequently, a blockchain has been characterized as a value-exchange protocol.

Conceptually, a blockchain can be understood as comprising several distinct layers:

• Infrastructure (hardware)
• Networking (encompassing node discovery, information propagation, and verification)
• Consensus (mechanisms such as proof of work and proof of stake)
• Data (including blocks and transactions)
• Application (e.g., smart contracts and decentralized applications, where relevant)

Blocks

Blocks contain batches of validated transactions, which are then hashed and encoded into a Merkle tree. Each block incorporates the cryptographic hash of its preceding block within the blockchain, thereby establishing a link between them. These interconnected blocks collectively form a chain. This iterative linking process ensures the integrity of each preceding block, tracing back to the initial block, designated as the genesis block (Block 0). To guarantee the integrity of a block and its encapsulated data, the block is typically digitally signed.

Occasionally, distinct blocks may be generated simultaneously, resulting in a temporary fork in the blockchain. Beyond maintaining a secure hash-based history, every blockchain employs a specific algorithm to assign scores to different historical versions, enabling the selection of the highest-scoring version. Blocks that are not incorporated into the main chain are referred to as orphan blocks. Participants maintaining the database may possess varying historical versions at different times. They consistently retain only the highest-scoring version known to them. Upon receiving a higher-scoring version (typically an older version augmented with a new block), a participant will either extend or overwrite their existing database and propagate this improvement to other participants. It is important to note that there is no absolute assurance that any specific entry will perpetually remain within the definitive historical version. Blockchains are generally designed to accumulate the score of new blocks upon existing ones, providing incentives to extend the chain with new blocks rather than overwriting older ones. Consequently, the likelihood of an entry being superseded diminishes exponentially as additional blocks are appended, eventually becoming exceedingly low. For instance, Bitcoin utilizes a proof-of-work system, wherein the network deems the chain with the greatest cumulative proof-of-work as the valid one. Various methodologies exist to demonstrate an adequate level of computational effort. Within a blockchain, computation is performed redundantly, contrasting with traditional segregated and parallel processing approaches.

Block Time

The block time represents the average duration required for a blockchain network to generate an additional block. Upon the completion of a block, the data it contains becomes verifiable. In the context of cryptocurrency, this effectively marks the point at which a transaction is finalized; thus, a shorter block time facilitates quicker transaction processing. For Ethereum, the block time is configured to be between 14 and 15 seconds, whereas for Bitcoin, it averages 10 minutes.

Hard Forks

Decentralization

By distributing data across its peer-to-peer network, blockchain technology mitigates certain risks associated with centralized data storage. A decentralized blockchain typically employs ad hoc message passing and distributed networking protocols.

A "51% attack" occurs when a single entity acquires control of over half of a blockchain network's computational power, enabling the manipulation of transaction records and facilitating illicit double-spending.

Blockchain security protocols frequently incorporate public-key cryptography. A public key, characterized as an extensive, pseudorandom alphanumeric sequence, functions as a unique blockchain address to which value tokens are assigned and recorded. Conversely, a private key serves as a cryptographic credential, granting its holder exclusive access to their digital assets and enabling interaction with the diverse functionalities supported by contemporary blockchains. Data immutability on the blockchain is widely acknowledged.

In a decentralized system, each node maintains a complete replica of the blockchain. Data integrity is ensured through extensive database replication and a framework of computational trust, eliminating any singular "official" copy or preferential user status. Transactions are disseminated across the network via specialized software, with message delivery operating on a best-effort principle. Initial blockchain implementations depended on energy-intensive mining nodes to validate transactions, integrate them into new blocks, and subsequently broadcast these completed blocks to other network participants. Blockchains employ diverse time-stamping mechanisms, such as proof-of-work, to order changes sequentially. Subsequent consensus methodologies encompass proof of stake. However, the expansion of decentralized blockchains introduces a risk of centralization, as the computational resources necessary for processing increasing data volumes become progressively costly.

Finality

Finality refers to the degree of assurance that a recently appended, valid block within a blockchain will remain immutable and trustworthy, thereby achieving a "finalized" state. The majority of distributed blockchain protocols, irrespective of whether they utilize proof of work or proof of stake, are unable to guarantee the immediate finality of a newly committed block. Instead, they operate on "probabilistic finality," where the likelihood of a block being altered or reverted by a new consensus diminishes significantly as it becomes more deeply embedded within the blockchain's history.

Byzantine fault tolerance-based proof-of-stake protocols claim to offer "absolute finality." In this model, a randomly selected validator proposes a block, which is then subjected to a vote by the remaining validators. Should a supermajority approve the proposal, the block is irreversibly integrated into the blockchain. A variant of this approach, termed "economic finality," is implemented in practical protocols such as Ethereum's Casper protocol. Under this system, validators who sign two distinct blocks at the same blockchain position incur "slashing," resulting in the forfeiture of their staked assets.

Openness

Open blockchains offer enhanced accessibility compared to certain traditional ownership records, which, despite being publicly available, often necessitate physical access for viewing. The initial prevalence of permissionless blockchains has led to an ongoing definitional controversy regarding the term "blockchain." A central point of contention in this debate is whether a private system, where verifiers are specifically tasked and authorized (permissioned) by a central authority, qualifies as a blockchain. Advocates for permissioned or private chains contend that "blockchain" can appropriately describe any data structure that aggregates data into time-stamped blocks. These systems function as a distributed implementation of multiversion concurrency control (MVCC) found in databases. Analogous to how MVCC prevents simultaneous modification of a single database object by two transactions, blockchains preclude two transactions from expending the same single output. Conversely, opponents argue that permissioned systems closely resemble conventional corporate databases, lacking decentralized data verification and exhibiting insufficient resilience against operator manipulation and revision. Nikolai Hampton of Computerworld asserted that "many in-house blockchain solutions will be nothing more than cumbersome databases," further cautioning that "without a clear security model, proprietary blockchains should be eyed with suspicion."

Permissionless (Public) Blockchain

A significant benefit of an open, permissionless, or public blockchain network is the elimination of the necessity for safeguards against malicious entities and the absence of access control mechanisms. Consequently, applications can be integrated into the network without requiring external approval or trust, leveraging the blockchain as a fundamental transport layer.

The security of blockchains in Bitcoin and other cryptocurrencies relies on a proof-of-work mechanism, which mandates that new entries incorporate computational evidence. Specifically, Bitcoin employs Hashcash puzzles to extend its blockchain. Although Adam Back developed Hashcash in 1997, the foundational concept originated from Cynthia Dwork, Moni Naor, and Eli Ponyatovski's 1992 publication, "Pricing via Processing or Combatting Junk Mail."

During 2016, venture capital investments in blockchain-related initiatives demonstrated a decline in the United States while simultaneously experiencing growth in China. Bitcoin and numerous other cryptocurrencies operate on open, public blockchain architectures. By April 2018, Bitcoin had achieved the largest market capitalization among cryptocurrencies.

Permissioned (Private) Blockchains

Permissioned blockchains incorporate an access control layer that regulates network participation. Proponents contend that, with meticulous design, permissioned blockchains can ensure a degree of decentralization, contrasting with permissionless counterparts that frequently exhibit practical centralization.

Disadvantages of Permissioned Blockchains

Nikolai Hampton contended in Computerworld that a "51 percent" attack is unnecessary on a private blockchain, given that such a system "most likely already controls 100 percent of all block creation resources." He elaborated that compromising or damaging the blockchain creation tools on a private corporate server would grant an attacker "effective control [over] 100 percent of their network and alter transactions however you wished." Such vulnerabilities carry significant adverse implications, particularly during periods of financial instability, like the 2008 crisis, where influential political entities might make decisions favoring specific groups. Hampton further noted that while "the bitcoin blockchain is protected by the massive group mining effort," it is improbable that "any private blockchain will try to protect records using gigawatts of computing power — it's time-consuming and expensive." He concluded by stating that "Within a private blockchain there is also no 'race'; there's no incentive to use more power or discover blocks faster than competitors," implying that "many in-house blockchain solutions will be nothing more than cumbersome databases."

Blockchain Analysis

The growing prominence of Bitcoin, Ethereum, Litecoin, and other cryptocurrencies has significantly elevated the importance of public blockchain analysis. Public blockchains inherently offer open access to their transactional data for observation and analysis, provided the requisite technical expertise. However, comprehending and tracing the movement of cryptocurrency has posed challenges for numerous cryptocurrency platforms, exchanges, and financial institutions. This difficulty stems from allegations that blockchain-enabled cryptocurrencies facilitate illicit activities, including dark market transactions for drugs and weapons, as well as money laundering. Historically, a prevalent misconception held that cryptocurrencies offered complete privacy and untraceability, thereby attracting their use for unlawful objectives. This perception is evolving as specialized technology firms now offer blockchain tracking services, enhancing the awareness of cryptocurrency exchanges, law enforcement agencies, and banks regarding the flow of crypto funds and fiat-to-crypto conversions. Consequently, some observers suggest that this increased traceability has prompted criminals to favor newer cryptocurrencies like Monero.

Standardization

In April 2016, Standards Australia initiated a proposal to the International Organization for Standardization (ISO), advocating for the development of standards to underpin blockchain technology. This initiative led to the establishment of ISO Technical Committee 307, dedicated to Blockchain and Distributed Ledger Technologies. This technical committee comprises working groups focused on various aspects, including blockchain terminology, reference architectures, security and privacy, identity management, smart contracts, governance, and interoperability for both blockchain and DLT, alongside developing standards tailored for specific industry sectors and general governmental needs. Over 50 nations are actively engaged in this standardization effort, collaborating with external liaison organizations such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the European Commission, the International Federation of Surveyors, the International Telecommunication Union (ITU), and the United Nations Economic Commission for Europe (UNECE).

Numerous national and open standards organizations are actively engaged in the development of blockchain standards, including the National Institute of Standards and Technology (NIST), the European Committee for Electrotechnical Standardization (CENELEC), the Institute of Electrical and Electronics Engineers (IEEE), the Organization for the Advancement of Structured Information Standards (OASIS), and individual participants within the Internet Engineering Task Force (IETF).

Centralized Blockchain

While most blockchain implementations are decentralized and distributed, Oracle introduced a centralized blockchain table feature in its Oracle 21c database. The Blockchain Table in Oracle 21c operates as a centralized blockchain, providing an immutable data storage capability. Compared to decentralized blockchains, centralized blockchains generally offer higher transaction throughput and lower latency than consensus-based distributed blockchains.

Types

Presently, blockchain networks are categorized into at least four primary types: public blockchains, private blockchains, consortium blockchains, and hybrid blockchains.

Public Blockchains

Public blockchains are characterized by unrestricted access, enabling any internet-connected individual to submit transactions and participate as a validator in the consensus protocol. Such networks typically offer economic incentives to those who secure them, often utilizing either a proof-of-stake or proof-of-work algorithm.

Prominent examples of widely recognized public blockchains include the Bitcoin blockchain and the Ethereum blockchain.

Private Blockchains

Private blockchains are permissioned, meaning participation requires an invitation from network administrators, thus restricting both participant and validator access. To distinguish these from open blockchains and other peer-to-peer decentralized database applications that are not open ad-hoc compute clusters, the terminology Distributed Ledger Technology (DLT) is typically employed for private blockchains.

Hybrid Blockchains

Hybrid blockchains integrate both centralized and decentralized features. The specific operational mechanisms of such a chain can vary significantly depending on the particular combination of centralized and decentralized components employed.

Sidechains

A sidechain designates a blockchain ledger that operates in parallel to a primary blockchain. Entries from the primary blockchain, typically representing digital assets, can be linked to and from the sidechain. This design allows the sidechain to function independently of the primary blockchain, for instance, by utilizing alternative record-keeping mechanisms or consensus algorithms.

Consortium Blockchains

A consortium blockchain is a hybrid model that integrates elements of both public and private blockchains. In this setup, a group of organizations collaborates to create and operate the blockchain, rather than a single entity. The consortium members jointly manage the network and are responsible for validating transactions. Consortium blockchains are permissioned, meaning that only specific individuals or organizations are authorized to participate. This design provides enhanced control over network access and helps ensure the confidentiality of sensitive information.

Consortium blockchains are frequently deployed in industries where multiple organizations must collaborate on shared objectives, such as supply chain management or financial services. A key advantage of these blockchains is their potential for greater efficiency and scalability compared to public blockchains, primarily because fewer nodes are typically required for transaction validation. Moreover, consortium blockchains can offer enhanced security and reliability over private blockchains, as network maintenance is a collaborative effort among the consortium members. Notable examples include Quorum and Hyperledger.

Uses

The primary application of blockchains is as a distributed ledger for cryptocurrencies, such as Bitcoin. By late 2016, several other operational products had also matured beyond the proof-of-concept phase. As of 2016, some businesses were actively testing the technology and conducting low-level implementations to evaluate blockchain's effects on organizational efficiency within their back-office operations.

In 2019, investments in blockchain technology reached approximately $2.9 billion, marking an 89% increase compared to the preceding year. A 2021 report by PricewaterhouseCoopers (PwC) projected that blockchain technology could generate an annual business value exceeding $3 trillion by 2030. PwC's survey of 600 business executives revealed that 84% possessed at least some familiarity with or involvement in blockchain technology.

In 2019, the BBC World Service radio and podcast series 50 Things That Made the Modern Economy recognized blockchain as a technology poised to exert profound consequences for economics and society. Economist, journalist, and broadcaster Tim Harford, writing for the Financial Times, explored the potential for broader applications of this underlying technology and the requisite challenges for its implementation. His initial broadcast on this topic aired on June 29, 2019.

Cryptocurrencies

The design of most cryptocurrencies incorporates a mechanism to progressively reduce their issuance, thereby establishing a finite limit on the total supply that will ever circulate. In contrast to conventional currencies managed by financial institutions or held physically, cryptocurrencies present greater challenges for seizure by law enforcement agencies.

The integrity of individual cryptocurrency units is substantiated by a blockchain. A blockchain constitutes an ever-expanding sequence of records, termed blocks, interconnected and safeguarded through cryptographic principles. Typically, each block comprises a hash pointer linking to the preceding block, a timestamp, and transactional information. Inherently, blockchains are engineered to resist data alteration. It functions as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way". When employed as a distributed ledger, a blockchain is generally maintained by a peer-to-peer network, which collectively adheres to a predefined protocol for validating new blocks. Subsequent to its recording, data within any block cannot be retrospectively modified without concurrently altering all succeeding blocks, an action necessitating the consensus of the network's majority.

Blockchains are intrinsically secure by design, exemplifying a distributed computing system characterized by robust Byzantine fault tolerance. Consequently, decentralized consensus is attainable through blockchain technology.

Within the domain of cryptocurrencies, the blockchain functions as a public ledger for all recorded transactions. Cryptocurrencies employ diverse timestamping methodologies to "prove the validity of transactions added to the blockchain ledger without the need for a trusted third party".

Bitcoin, the inaugural cryptocurrency, was initially launched as open-source software in 2009.

With the increasing prominence of cryptocurrencies, numerous jurisdictions have advanced their private and commercial legal frameworks to mitigate associated legal ambiguities. For instance, in the United States, the 2022 revisions to the Uniform Commercial Code (UCC) incorporated Article 12, which designates "controllable electronic records" (CERs) as a distinct class of personal property. This regulatory structure offers legal precision regarding the ownership, transfer, and utilization of cryptocurrencies as CERs, wherein the notion of "control" functions as the operational equivalent of possession for digital assets. These legislative adjustments endeavor to harmonize legal norms with prevailing market practices, thereby diminishing title conflicts and facilitating the incorporation of cryptocurrencies into commercial exchanges.

Smart contracts

Smart contracts, leveraging blockchain technology, represent agreements capable of partial or complete execution and enforcement without requiring human intervention. A primary objective of smart contracts involves automated escrow services. A defining characteristic of smart contracts is their independence from a trusted third party (e.g., a trustee) to mediate between contracting parties, as the blockchain network autonomously executes the agreement. This mechanism has the potential to mitigate transactional friction between entities during value transfer and could consequently enable enhanced levels of transaction automation. A 2018 International Monetary Fund (IMF) staff discussion indicated that blockchain-based smart contracts could potentially diminish moral hazards and optimize contractual applications broadly, though it noted that "no viable smart contract systems have yet emerged." Given their limited widespread adoption, their legal standing remained ambiguous.

Financial services

In 2016, numerous financial institutions, as reported by Reason, demonstrated interest in integrating distributed ledger technology (DLT) into their banking operations and are collaborating with firms developing private blockchain solutions. A study conducted by IBM in September 2016 indicated that this adoption was progressing more rapidly than anticipated.

Blockchain technology has been posited as a potential solution to enhance the efficiency of back-office settlement systems.

In 2017, UBS established a dedicated laboratory to investigate the potential applications of blockchain technology within the financial services sector.

In 2017, the German financial institution Berenberg characterized blockchain as an "overhyped technology," noting its numerous "proofs of concept" but highlighting persistent significant challenges and a scarcity of demonstrable successful implementations.

Blockchain technology has facilitated the emergence of novel fundraising mechanisms, including initial coin offerings (ICOs) and security token offerings (STOs), which are also occasionally termed digital security offerings (DSOs). These STO/DSOs can be executed either privately or through public, regulated stock exchanges, serving to tokenize various assets such as corporate shares, intellectual property, and real estate.

Gaming Applications

Blockchain technology, encompassing cryptocurrencies and non-fungible tokens (NFTs), has been integrated into video games primarily for monetization purposes. Traditional live-service games frequently provide in-game customization elements, such as character skins or other virtual items, which players can acquire and exchange among themselves using in-game currencies. While some games permit the trading of virtual items for real-world currency, this practice can be legally problematic in jurisdictions where video games are equated with gambling, leading to gray market concerns like skin gambling. Consequently, publishers have generally avoided enabling players to generate real-world income directly from games. In contrast, blockchain-based games typically facilitate the exchange of these in-game items for cryptocurrency, which can subsequently be converted into fiat currency.

The inaugural known game to leverage blockchain technologies was CryptoKitties, introduced in November 2017. In this game, players acquired NFTs using Ethereum cryptocurrency, with each NFT representing a virtual pet that could be bred with others to produce offspring possessing combined traits, manifesting as new NFTs. The game garnered significant attention in December 2017 when a single virtual pet was sold for over US$100,000. Furthermore, CryptoKitties underscored scalability challenges inherent in blockchain-based gaming on Ethereum, causing substantial network congestion in early 2018, with approximately 30% of all Ethereum transactions attributed to the game.

By the early 2020s, blockchain-integrated video games had not achieved widespread breakthrough success, primarily because their design often prioritized blockchain-driven speculation over conventional gameplay mechanics, thereby limiting their appeal to a broad player base. These games also presented considerable investment risks due to the unpredictable nature of their revenue streams. Nevertheless, the modest achievements of certain titles, such as Axie Infinity during the COVID-19 pandemic, coupled with corporate strategies for metaverse development, revitalized interest in GameFi during the latter half of 2021. GameFi is a concept delineating the convergence of video games and finance, typically underpinned by blockchain currencies. Prominent publishers, including Ubisoft, Electronic Arts, and Take Two Interactive, have indicated that blockchain and NFT-based games are undergoing serious evaluation for future integration into their portfolios.

In October 2021, Valve Corporation prohibited blockchain games, encompassing those utilizing cryptocurrency and NFTs, from its Steam digital storefront, a prominent platform for personal computer gaming. The company asserted this prohibition was an extension of its existing policy against games offering in-game items with real-world monetary value. Speculation suggested that Valve's historical involvement with gambling, particularly skin gambling, influenced this decision. The ban was met with positive reception from journalists and players, largely due to the prevalent perception of blockchain and NFT games as susceptible to scams and fraud within the PC gaming community. Conversely, Epic Games, operator of the competing Epic Games Store, expressed openness to hosting blockchain games following Valve's stance.

Supply Chain Management

Numerous initiatives have explored the application of blockchain technology within supply chain management.

• Precious commodities mining — Blockchain technology facilitates the tracking of origins for gemstones and other valuable commodities. In 2016, The Wall Street Journal documented that Everledger, a blockchain technology firm, collaborated with IBM's blockchain-based tracking service to ascertain the ethical sourcing of diamonds by tracing their origins. As of 2019, the Diamond Trading Company (DTC) has developed Tracer, a product designed for diamond trading supply chain management.
• Food supply — As of 2018, Walmart and IBM conducted a pilot program utilizing a blockchain-enabled system for monitoring the supply chain of lettuce and spinach. This system's blockchain nodes were managed by Walmart and hosted on the IBM cloud infrastructure.
• Fashion industry — The fashion industry is characterized by an opaque relationship among brands, distributors, and customers, hindering its sustainable and stable development. Blockchain technology offers a solution by enhancing information transparency, thereby fostering sustainable industry growth.
• Motor vehicles — Mercedes-Benz and its partner Icertis developed a blockchain prototype to ensure consistent contractual documentation throughout the supply chain. This initiative aims to extend ethical standards and contractual obligations from direct suppliers to second-tier suppliers and subsequent tiers. Additionally, the company employs blockchain to monitor climate-relevant gas emissions and the volume of secondary materials within the supply chain for its battery cell production.

Blockchain-based Domain Name Systems

Multiple initiatives are exploring the provision of domain name services through blockchain technology. These domain names are managed via a private key, purportedly enabling uncensorable websites. However, this mechanism also circumvents a registrar's capacity to suspend domains associated with fraud, abuse, or illicit content.

Namecoin functions as a cryptocurrency supporting the ".bit" top-level domain (TLD) and originated as a fork of Bitcoin in 2011. The .bit TLD lacks ICANN sanction and necessitates an alternative DNS root. By 2015, only 28 websites utilized the .bit TLD, despite 120,000 registered names. Namecoin was discontinued by OpenNIC in 2019, citing concerns over malware and potential legal complications. Additional blockchain-based alternatives to ICANN-managed systems comprise The Handshake Network, EmerDNS, and Unstoppable Domains.

Notable TLDs include ".eth", ".luxe", and ".kred". These are linked to the Ethereum blockchain via the Ethereum Name Service (ENS). Furthermore, the .kred TLD offers a simplified alternative to traditional cryptocurrency wallet addresses for facilitating transfers.

Diverse applications of blockchain technology

Blockchain technology enables the creation of a permanent, public, transparent ledger system for aggregating sales data, monitoring digital usage, and processing payments to content creators, including wireless users and musicians. The Gartner 2019 CIO Survey indicated that 2% of higher education institutions had initiated blockchain projects, with an additional 18% planning academic implementations within the subsequent 24 months. In 2017, IBM collaborated with ASCAP and PRS for Music to integrate blockchain technology into music distribution. Imogen Heap's Mycelia service has been proposed as a blockchain-powered alternative, aiming to grant artists greater autonomy over the dissemination of their music and associated data among fans and fellow musicians.

The insurance industry has seen the emergence of novel distribution models, such as peer-to-peer, parametric, and microinsurance, subsequent to blockchain adoption. Both the sharing economy and the Internet of Things (IoT) are poised to benefit from blockchain integration due to their inherent reliance on extensive peer collaboration. Research into blockchain applications within libraries is currently underway, supported by a grant from the U.S. Institute of Museum and Library Services.

Alternative blockchain architectures encompass Hyperledger, a collaborative initiative by the Linux Foundation aimed at advancing blockchain-based distributed ledger technologies. Notable projects within this framework include Hyperledger Burrow (developed by Monax) and Hyperledger Fabric (led by IBM). Additionally, Quorum, a permissioned private blockchain developed by JPMorgan Chase, features private storage and is utilized for contract-based applications.

Oracle integrated a blockchain table feature into its Oracle 21c database.

Blockchain also finds application in peer-to-peer energy trading.

Lightweight blockchains, also known as simplified blockchains, exhibit enhanced suitability for Internet of Things (IoT) applications compared to conventional blockchain systems. Research indicates that a lightweight blockchain-based network could process up to 1.34 million authentication operations per second, a capacity potentially adequate for resource-constrained IoT environments.

Blockchain technology offers potential for counterfeit detection by assigning unique identifiers to products, documents, and shipments, thereby creating immutable transaction records. However, a critical perspective suggests that blockchain systems require augmentation with technologies that establish robust links between physical objects and the digital ledger, alongside mechanisms for content creator verification akin to Know Your Customer (KYC) standards. The EUIPO initiated an Anti-Counterfeiting Blockathon Forum, aiming to "define, pilot, and implement" a European-level anti-counterfeiting infrastructure. Similarly, the Dutch Standardisation organisation NEN employs blockchain in conjunction with QR Codes for certificate authentication.

As of January 30, 2022, Beijing and Shanghai were among the Chinese cities selected for piloting blockchain applications. Within Chinese legal proceedings, the Hangzhou Internet Court initially recognized blockchain technology as a valid method for authenticating internet evidence in 2019, a precedent subsequently adopted by other Chinese courts.

Blockchain Interoperability

The proliferation of blockchain systems, including those supporting cryptocurrencies, has elevated blockchain interoperability to a critical area of focus. The primary goal is to facilitate the seamless transfer of assets between distinct blockchain environments. As defined by Wegner, "interoperability is the ability of two or more software components to cooperate despite differences in language, interface, and execution platform." Consequently, the aim of blockchain interoperability is to enable such cooperation among diverse blockchain systems, notwithstanding their inherent architectural variations.

A range of blockchain interoperability solutions currently exists, typically categorized into three primary types: cryptocurrency interoperability approaches, blockchain engines, and blockchain connectors.

A draft architecture for blockchain interoperability has been developed by several individual participants within the IETF.

Energy Consumption Concerns

Certain cryptocurrencies employ blockchain mining, specifically peer-to-peer computational processes for transaction validation and verification, which is inherently energy-intensive. In June 2018, the Bank for International Settlements issued criticism regarding the substantial energy consumption associated with public proof-of-work blockchains.

Concerns regarding high energy consumption influenced the subsequent adoption of more energy-efficient proof-of-stake models by later blockchain platforms, including Cardano (2017), Solana (2020), and Polkadot (2020). Researchers have estimated that Bitcoin's energy consumption is 100,000 times greater than that of proof-of-stake networks.

A 2021 study by Cambridge University found that Bitcoin's annual electricity consumption (121 terawatt-hours) surpassed that of entire nations such as Argentina (121 TWh) and the Netherlands (109 TWh). Digiconomist reported that a single Bitcoin transaction necessitated 708 kilowatt-hours of electrical energy, equivalent to the average U.S. household's consumption over 24 days.

In February 2021, U.S. Treasury Secretary Janet Yellen characterized Bitcoin as "an extremely inefficient way to conduct transactions," remarking that "the amount of energy consumed in processing those transactions is staggering." Subsequently, in March 2021, Bill Gates asserted that "Bitcoin uses more electricity per transaction than any other method known to mankind," further noting its negative environmental implications.

Nicholas Weaver, affiliated with the International Computer Science Institute at the University of California, Berkeley, conducted an analysis of blockchain's online security and the energy efficiency of public proof-of-work blockchains, concluding that both aspects were significantly deficient. The 31-45 TWh of electricity consumed by Bitcoin in 2018 resulted in the emission of 17–23 million tonnes of CO₂. By 2022, estimates from the University of Cambridge and Digiconomist indicated that Bitcoin and Ethereum, as the two largest proof-of-work blockchains, collectively consumed twice the annual electricity of Sweden, contributing to annual emissions of up to 120 million tonnes of CO₂.

Certain cryptocurrency developers are contemplating a transition from the proof-of-work consensus mechanism to the proof-of-stake model. Notably, Ethereum successfully migrated from proof-of-work to proof-of-stake in September 2022.

Academic Research

In October 2014, the MIT Bitcoin Club, supported by funding from MIT alumni, distributed $100 worth of Bitcoin to undergraduate students at the Massachusetts Institute of Technology. A study by Catalini and Tucker (2016) on the adoption rates indicated that early technology adopters, when provided with delayed access, often exhibit a tendency to reject the technology. By 2017, numerous universities, including MIT, had established departments dedicated to cryptocurrency and blockchain studies. That same year, Edinburgh was recognized by the Financial Times as "one of the first major European universities to launch a blockchain course."

Adoption Decisions

Researchers have explored the motivations underpinning the adoption of blockchain technology, viewing it as a specific facet of innovation adoption. For instance, Janssen et al. proposed an analytical framework, while Koens and Poll highlighted the significant influence of non-technical factors on adoption. Furthermore, Li, drawing upon behavioral models, has differentiated between individual-level and organizational-level adoption patterns.

Collaboration

Scholars in business and management have initiated studies into the capacity of blockchain technology to facilitate collaboration. It has been posited that blockchains can enhance both cooperation, defined as the prevention of opportunistic behavior, and coordination, encompassing communication and information sharing. Owing to their inherent reliability, transparency, traceability of records, and information immutability, blockchains enable a form of collaboration distinct from both traditional contractual arrangements and relational norms. Unlike contracts, blockchains do not directly depend on the legal system for agreement enforcement. Moreover, in contrast to relational norms, blockchains do not necessitate pre-existing trust or direct interpersonal connections among collaborators.

Blockchain and Internal Audit

The imperative for internal audits to ensure effective oversight of organizational efficiency necessitates an evolution in information access methodologies and formats. The implementation of blockchain technology mandates a framework for identifying the exposure risks associated with blockchain-based transactions. The Institute of Internal Auditors has recognized the critical need for internal auditors to engage with this transformative technology. Consequently, novel methodologies are required for developing audit plans that effectively identify potential threats and risks. These factors are comprehensively assessed in the Internal Audit Foundation's study, Blockchain and Internal Audit. Furthermore, the American Institute of Certified Public Accountants has delineated new responsibilities for auditors stemming from the advent of blockchain.

Testnet

Within blockchain technology, a testnet represents an instance of a blockchain operating on the same or a more recent version of the foundational software, designed for testing and experimentation without jeopardizing actual funds or the primary network. Testnet coins are distinct from official mainnet coins, possess no intrinsic monetary value, and are freely obtainable from faucets.

Testnets facilitate the development of blockchain applications by mitigating the financial risks associated with fund loss.

The utilization of testnets led to the discovery of a critical bug within the Bitcoin Core software, which could have enabled miners to compromise essential components of the Bitcoin infrastructure (nodes) by transmitting a malformed block to the blockchain.

Mainnet

A mainnet, an abbreviation for main network, constitutes the fully operational iteration of a blockchain where genuine transactions are processed, in contrast to a testnet. This network is secured by consensus mechanisms such as Proof of Work or Proof of Stake and facilitates smart contracts, token transfers, and decentralized applications.

The event of a mainnet launch signifies the transition from a testnet environment to a live, operational blockchain, a process that typically encompasses comprehensive security audits, network deployment, and token migration.

Journals

In September 2015, the launch of Ledger was announced, marking the establishment of the first peer-reviewed academic journal specifically dedicated to research in cryptocurrency and blockchain technology. Its inaugural issue was subsequently published in December 2016. The journal encompasses diverse academic disciplines, including mathematics, computer science, engineering, law, economics, and philosophy, all pertaining to cryptocurrencies. Authors are encouraged to digitally sign a file hash of their submitted manuscripts, which are then timestamped onto the Bitcoin blockchain. Furthermore, authors are requested to include a personal Bitcoin address on the initial page of their submissions to facilitate non-repudiation.

A changelog is a comprehensive record documenting all significant modifications implemented within a project.

• Changelog – a record of all notable changes made to a project
• A checklist serves as an informational tool designed to mitigate errors and enhance reliability.
• The economic implications and principles associated with digitization.
• Git is a distributed version control system characterized by commit hash values that are cryptographically linked to preceding commit hash values, incorporating a Merkle tree structure.
• A compilation of various blockchain implementations.
• The intersection of privacy considerations and blockchain technology.
• Tangible or intangible assets existing outside the digital realm.
• Version control involves maintaining a systematic record of all modifications, typically within software development projects, often represented graphically.

References

• Supplementary media content pertaining to Blockchain is available on Wikimedia Commons.