Communications of the ACM

practice

IT IS DIFFICULT these days to avoid hearing about blockchain. Blockchain is going to be the foundation of a new business world based on smart contracts.

It is going to allow everyone to trace the provenance of their food, the parts in the items they buy, or the ideas they hear. It will change the way we work, the way the economy runs, and the way we live in general.

Despite the significant potential of blockchain, it is also difficult to find a consistent description of what it really is. A recent Google search for “blockchain technical papers” returned nothing but white papers for the first three screens; not a single paper is peer-reviewed. One of the best discussions of the technology itself is from the National Institute of Standards and Technology, but at 50-plus pages, it is a bit much for a quick read. 9

The purpose of this article is to look at the basics of blockchain: the individual components, how those components fit together, and what changes might be made to solve some of the problems with blockchain technology. This technology is far from monolithic; some of the techniques can be used (at surprising savings of resources and effort) if other parts are cut away.

Because there is no single set of technical specifications, some systems that claim to be blockchain instances will differ from the system described here. Much of this description is taken from the original blockchain paper. 6 While details may differ, the main ideas stay the same.

Goals of Blockchain

The original objective of the blockchain system was to support “an electronic payment system based on cryptographic proof instead of trust …” 6 While the scope of use has grown considerably, the basic goals and requirements have remained consistent.

The first of these goals is to ensure the anonymity of blockchain’s users. This is accomplished by use of a pub-lic/private key pair, in a fashion that is reasonably well known and not reinvented by the blockchain technology. Each participant is identified by the public key, and authentication is accomplished through signing with the private key. Since this is not specific to blockchain, it is not considered further here.

The second goal is to provide a public record or ledger of a set of transactions that cannot be altered once verified and agreed to. This was originally designed to keep users of electronic currency from double-spending and to allow public audit of all transactions. The ledger is a record of what transactions have taken place, and the order of those transactions. The use of this ledger for verification of transactions other than the exchange of electronic cash has been the main extension of the blockchain technology.