Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach?

The slides I used for my presentation at ITBC (IEEE Taiwan Blockchain) 2023 Forum that took place on November 11, 2023. (Some of the details that were supplemented in the talk have been added.)

Transcript

1. Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? Kenji Saito Professor, Graduate School of Business and Finance, Waseda University, Japan Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.1/7
2. Abstract Blockchain was originally envisioned as a free monetary transfer system, designed to be uncensorable in every sense To achieve and maintain this purpose, it was designed as a public ledger with user sovereignty, and with resistance to censorship in a narrow sense, faults, and tampering Yet, are today’s business blockchains truly designed to harness these inherent advantages of blockchain? In this presentation, we will re-examine the core intent of blockchain, highlight challenges in applying it to business scenarios, and discuss what considered appropriate design approaches are Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.2/7
3. Blockchain: Properties to be fulfilled Originally invented to make Bitcoin possible, it is necessary to make sure that only you can spend your coins in possession and no one else can stop you from spending them, and therefore . . . Self-sovereignty : users can execute their own decisions (ex. they can create accounts at will) Censorship resistance (narrow sense) : records are not to be prevented by the will of others Fault tolerance : records are not to be prevented by failures or faults either Tamper resistance : past records cannot be erased, altered, or fabricated ⇒ Censorship resistance in the broadest sense as above must be satisfied Records or recording cannot be denied by any means It is a technology and has operating conditions Operating condition specific to blockchain is “sufficiently high market price for native cryptocurrency”, Because records are protected by the cost of (re)recording whose upper limit is the price of the native cryptocurrency Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.3/7
4. Blockchain for Business In business applications, censorship resistance in the broadest sense is a hindrance Because service providers want to have control and must have a reason to be rewarded for being one among the few who can provide that service But if we created just a permissioned system (private or consortium ledger), it would be no different from what it has always been Because that would mean records or recording can be denied by some means If we have to trust that it won’t happen, we are going backwards But then again, if we control recording but keep recorded materials protected from any denial, that would benefit many types of businesses We can provide services that make use of undeniable evidences (of any sensed data) For this, we need a gatekeeper (business entity) and a public ledger (that provides censorship resistance in the broadest sense) Use of smart contracts is a special case of this, since smart contracts can implement gatekeepers But in any case a public ledger must be used, because . . . Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.4/7
5. We Cannot Do Like This (abstracted private or consortium ledger) server 1 server 2 server 3 server 4 client machine client request (TX) TX TX TX peer group response The state of the server group is perfectly consistent It can only operate correctly under the assumption that no one is left out of the group (n > 3f condition vs. intention) SMRP (State Machine Replication Problem) — yes, this is SMR technique for fault tolerance that has existed since 1980s SMRP-1 : Do all parties (including customers) have replicas (or portions thereof) for verification? SMRP-2 : Is there any way to verify that a replica in the possession of a certain party is genuine? Newspaper model vs. in-house magazine model : “please show me proof that this in-house magazine is genuine” If “no proof required = believe in them (believe that the premise is true)”, then conventional databases suffice Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.5/7
6. Design Patterns for Ledgers ʜ ʜ Blockchain has digest of the most costly history does not provide proof replicate service call has root digest of has root digest of SMR State Machine Replication BCML Blockchain-centric Multi-ledgers ʜ ʜ DML Decentralized Multi-ledgers SMR is out of question Blockchain is dependent on the market price of its native currency, and therefore not sustainable Blockchain is a special case of DAG (Directed Acyclic Graph) — they fall into the same category if they are dependent on native currencies It looks like DML is a better, future choice Each ledger in multi-ledgers can be private, but records are verifiable publicly Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.6/7
7. Conclusions In this presentation, we re-examined the core intent of blockchain, highlighted challenges in applying it to business scenarios, and discussed what considered appropriate design approaches are Core intent : censorship resistance in the broadest sense = records or recording cannot be denied by any means Challenge : to find business sense in it — we cannot accept the whole censorship resistance in the broadest sense, but we should at least be able to extract the commercially useful parts We can provide services that make use of undeniable evidences (of any sensed data) This should have numerous applications Appropriate design approach : starts as gatekeeper + public ledger ⇒ in future, towards decentralized multi-ledgers Blockchain for Business : What is it for, what are the challenges, what is the appropriate design approach? — ITBC 2023 — 2023-11-11 – p.7/7