Blockchain has since its beginnings been presented as a very innovative and very promising technology in terms of trust. What is it really? Some recent events raise doubts.
Understand the technology
The blockchain can be classically assimilated to a “big” book of accessible and auditable accounts, which is deployed on the Internet. It is based on a very large number of computing resources distributed around the world, called “nodes”, which participate in the operation of the Blockchain. In the case of the public Blockchain, everyone can contribute; it suffices to have a computer of sufficient power and to execute the associated code.
The execution of the code is valid for acceptance of the governance rules of the Blockchain. These contributors have the task of collecting the transactions issued by its customers, aggregating transactions in a structure called “block” (transactions) and validate the blocks before entering them in the Blockchain. The resulting block chain can reach hundreds of gigabytes and is duplicated a very large number of times over the Internet, which ensures a very high availability of the Blockchain.
Elements of trust
The Blockchain is based on the following strong conceptual principles that naturally position it as the trusted technology par excellence:
- Decentralized architecture and governance neutrality based on the principle of consensus
It relies on a very large number of independent contributors and is therefore decentralized in nature. This means, unlike a centralized architecture where decisions can be made unilaterally, that it is necessary to reach a consensus or succeed in controlling more than 50% of the computational power of the Blockchain (computing resources), to have an effect on the system. Thus, any change in governance rules must first be approved by consensus by the contributors, who must then update the software code executed.
- Transparency of algorithms offering better auditability
Any transaction, any block, any rule of governance is freely accessible and readable by everyone; as such, anyone can audit the system to ensure the proper operation of the Blockchain and the legitimacy of transactions. The advantage is to allow experts from the user community to scan the code and alert if there is suspicion. So trust is based on whistleblowers.
- Secure underlying technologies
Cryptographic techniques and usage patterns ensure that the Blockchain cannot be tampered with; that the transactions entered are authentic even if they are issued under the guise of a pseudonym, and finally that the security of the Blockchain is able to keep up with technological developments thanks to an adaptive security level.
Now let’s look at Blockchains in practice and look back at some of the events that have led to suspicion of technology:
- Attack of the 51%
Several organizations contributing significantly to the operation of the Blockchain can ally themselves and hold alone at least 51% of the computing power of the Blockchain. For example, China is known for concentrating a large part of the computational power for the bitcoin Blockchain, more precisely more than two thirds in 2017. This calls into question the distributed nature of the Blockchain and the neutrality of governance since the decision-making power is at that moment totally unbalanced. Indeed, the majority organizations can censor transactions, which have an impact on the history of the Blockchain, but even worse, they have a significant power to approve the governance rules they have decided.
- Hard fork
When new governance rules are pushed in the Blockchain and they are incompatible with the previous rules, we see a “hard fork”, that is to say a definitive modification of the Blockchain, which requires that a broad consensus is reached among the contributors of the Blockchain to see the new rules of the Blockchain accepted. Otherwise, the Blockchain splits up with the simultaneous existence of two Blockchains, one operating on the old rules and another on the news. This doubling of the chain has the effect of discrediting the two resulting Blockchains and causing the devaluation of the associated crypto currency. It should also be noted that a hard fork ordered as part of a 51% attack will be more likely to lead to the adoption of the new rules because the consensus will be more easily achieved.
- Money laundering
The Blockchain is transparent in nature, but the traceability of transactions can be made very complex thus facilitating money laundering operations. Indeed, it is possible to open a very large number of accounts, to use single-use accounts, for example, and to carry out transactions under cover of pseudonymity. This questions all the contributors without whom the Blockchain could not work on their moral values and damages the image of technology.
- Programming errors
Such errors can be made in smart contracts, programs running automatically within the Blockchain and can have dramatic consequences for manufacturers. The organization’s DAO has seen the $50 million diversion in 2016. Organizations guilty of such bugs may want to invalidate transactions that harm them – The DAO has managed to trigger a hard fork for this purpose – which is in question the very principle of the inalterability of the Blockchain. Indeed, blocks registered as valid in the Blockchain at a given time are then rendered invalid, which questions the reliability of the Blockchain.
The Conversation In conclusion, the Blockchain is a very promising technology offering many properties of interest to guarantee confidence, but the problem lies in the gap that exists between the promises of technology and the use made of it, which introduces a lot of confusion and bad understandings, which we tried to raise in this article.