Overview of Practical Blockchain Application

The slides I used for Session 5 of APO (Asian Productivity Organization) Training Course on Blockchain Application on April 3, 2024.

Transcript

1. Training Course on Blockchain Application Session 5: Overview of Practical Blockchain Application Kenji Saito, Ph.D. Professor, Graduate School of Business and Finance, Waseda University, Japan Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.1/12
2. In This Session, We will offer a comprehensive understanding of how blockchain technology is utilized across various industries while providing examples of practical applications crucial for understanding its real-world utility The participants will review what blockchain is designed for, learn how it is both beneficial and problematic to businesses, and comprehensively understand all possible application categories, before looking into real-life examples Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.2/12
3. Outline Blockchian: what is it good for? (Review) What not to look for Full-stack model of all blockchain applications Real-life examples Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.3/12
4. Blockchian: What is it Good for? (Review) It provides censorship resistance in the broadest sense Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.4/12
5. 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 act of recording cannot be denied by any means Like any other technology, it 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 Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.5/12
6. 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 act of recording can be denied by some means If we have to trust that denial 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 . . . Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.6/12
7. What Not to Look for In a ledger system with an administrator, a censor can exist In a less extensive ledger system without an administrator, it is possible to deceive participants through collusion, thereby denying some records or act of recording If you do not have to worry about these things, stop pretending that a ledger system will help and use a traditional database instead Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.7/12
8. 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 Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.8/12
9. Full-Stack Model of All Blockchain Applications Let us categorize by functions, not use cases Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.9/12
10. All Potential Applications of Blockchain Token Smart Contract Provenance Fungible Non-redeemable Fungible Redeemable Non-fungible Redeemable Non-fungible Non-redeemable Certifying Identifying payment ID card security token last will logistics insurance claim Tracking Sensing fiat money crypto-pet Proves you are the one since you can handle the private key? Transfers numerical representations of debt / asset? Maintains authenticity of registered code, data and resulted states? (Authority) issues certificates about some content? Updates records about sustained presences? Is data still valid even after the sensor is gone? General Recognition Functional Analysis First App Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.10/12
11. Real-Life Examples Can be found here, for example Beware that some may fall into the category of ‘not to look for’ DeFi applications are mostly practical because events are closed in the blockchain But then again, NFT transactions with lazy minting are not blockchain applications (cf. session 4) However, most real events are so fast and massive, far from the progression of the blockchain, that the 1st layer, where gas is costly and scarce, will not be able to handle them For example, imagine that updating a health-care record costs you 10 USD every time, and the system can only handle about 7,000 patients per hour worldwide Real estates are expensive and scarce, so we may be able to manage to accommodate them even on the 1st layer Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.11/12
12. Conclusions Blockchain provides censorship resistance in the broadest sense With a gatekeeper (business entity) and a public ledger (that provides censorship resistance in the broadest sense), we can provide services that make use of undeniable evidences (of any sensed data) All possible applications are categorized into provenance (certifying, identifying, sensing and tracking), tokens, and smart contracts to control them Since gas is too costly and scarce, real-life examples would need some kind of second-layer technology Session 5: Overview of Practical Blockchain Application — APO Training Course on Blockchain Application — 2024-04-03 – p.12/12