Blockchain - Understanding The Technology and The Revolution

What is blockchain?
Understanding the technology

and the revolution
Copyright ©2017 CBS Interactive Inc. All rights reserved.

2 WHAT IS BLOCKCHAIN? UNDERSTANDING THE TECHNOLOGY AND THE REVOLUTION
Contents
03 Blockchain: The smart person’s guide
06 Why blockchain could be your next form of ID as a world citizen
08 Beyond Bitcoin: How blockchains could revolutionize business
10 Top 5 business uses for blockchain
11 How blockchain technology can transform the security industry
13 Could blockchain run a city state? Inside Dubai’s blockchain-
powered future
17 Blockchain explained in plain English
19 Mastercard opens access to its blockchain tech
21 IBM Blockchain to help prevent contamination in global food
supply chain
23 Blockchain is spreading beyond finance: Now it’s killing off fake
QA certificates
25 Why the blockchain belongs on the CXO roadmap

Blockchain: The smart person’s guide

By Dan Patterson
The blockchain is powerful technology that enables Bitcoin, Litecoin, Dogecoin, and other virtual currencies to
be open, anonymous, and secure.
The code also empowers countless innovations beyond cryptocurrency. The blockchain is a database of
details about every Bitcoin transaction. Often referred to as a “public ledger,” the log contains metadata about
when and how each transaction occurred. The ledger is publicly accessible through APIs and torrent sites. To
prevent tampering with current and past transactions, the database is cryptographically secured. Encryption
allows developers to trust the transaction history and build applications from and around transaction
information.
Because the blockchain can be confusing, TechRepublic has compiled this article and related resources to
help business technology professionals get up to speed quickly.
Executive summary
• What it is: The blockchain is a cryptographically secure index of every Bitcoin transaction. Blockchain
technology is also used to enable a number of public and private virtual currencies, such as Litecoin and
Ethereum.
• Why it matters: Over time, cryptocurrencies like Bitcoin may fade in and out of fashion. The blockchain is
intended to provide a tamperproof record of transaction metadata, regardless of transaction type.
• Who it affects: Everyone who spends money. Bitcoin evangelists argue that because blockchain-based
currencies are based on code, not governments, the code is more reliable and fair than traditional monetary
systems.
• When it’s happening: The blockchain and Bitcoin were coded and released to the public in a white paper
by mysterious developer Satoshi Nakamoto in 2008. The currency hit the mainstream in 2012 and peaked
in value in 2013.
• How to access it: The blockchain API is available at blockchain.info and can be downloaded using
Bittorrent (a similarly named but unrelated technology) on most major torrent sites.
What it is
The blockchain is a record of every Bitcoin transaction. The name comes from the method by which Bitcoin
is unlocked and available to be mined by the public. The code releases nodes in 1 MB chunks, or “blocks,”
approximately every 10 minutes. Every coin, and every transaction related to it, is logged. Because the
blockchain is available to anyone and contains metadata similar to a bank statement, the code is often referred
to as a “public ledger.” The database is cryptographically secure, and the chain is reliable and can be used to

develop applications and protocols that require transparency and complete security. The primary advantage of
money—like dollars, euros, and Bitcoin—is that the currency is understood by everyone, yet can be controlled
by individuals or institutions. The blockchain, and Bitcoin, offers the additional benefit of transparency. Code,
rather than a government, dictates the supply of Bitcoin. In the summary for his white paper Nakamoto
explained:
[Bitcoin is] an ongoing chain of hash-based proof-of-work, forming a record that cannot be
changed without redoing the proof-of-work. The longest chain not only serves as proof of the
sequence of events witnessed, but proof that it came from the largest pool of CPU power. As
long as a majority of CPU power is controlled by nodes that are not cooperating to attack the
network, they’ll generate the longest chain and outpace attackers.
Additional resources
• Five big myths about the Bitcoin blockchain (TechRepublic)
• 6 reasons to love blockchain technology (ZDNet)
• Bitcoin’s mysterious creator, revealed (ZDNet)
Why it matters
Virtual currencies offer an alternative to government-issued money. They’re exchanged like cash for goods
and services. They can also be converted easily by a number of services for traditional currency like dollars,
pounds, and euros. Because transaction information is obfuscated, cryptocurrency enables legal, extralegal,
and illegal behavior. Using Bitcoin, it’s easy to buy pizza, train tickets, stolen data, drugs, and weapons.
The blockchain is, in theory, future-proof and can be used by private companies and individuals to build
private financial networks. This means that a large enterprise could build a financial system internally for use
by employees or external vendors. Though most countries require tax to be collected from income, taxing
company-to-company virtual currency transactions is tricky.
The blockchain can also be used as an identity system. Onename and Keybase use the blockchain to
generate verifiable identification, like a national ID or driver’s license.
• Bitcoin & Blockchain, Attorneys at Law: One firm’s big switch (TechRepublic)
• Chronicled releases open registry for IoT built on blockchain (TechRepublic)
• Bitcoin’s technology has a surprising fan: IBM (CNET)
Who it affects
Corporations, small businesses, and individuals all need to be aware of the blockchain. Because the
blockchain allows financial transactions to occur anonymously, the technology has empowered the growth

of questionable, sometimes illegal, behavior. In recent years ransomware has become a popular method
of extorting consumers. Black markets have exploded in popularity. These markets exist on the Dark Web
and allow hackers to buy and sell stolen data, zero-day exploits, drugs, weapons, and humans. The United
Nations, the FBI, and other law enforcement agencies attempt to track illicit Dark Web transactions, but
Bitcoin-based markets continue to flourish.
Well-funded startups also use the blockchain. Because the blockchain is data-rich, secure, and offers
unprecedented transparency the code can be used as the building block (pun intended) for numerous
modern, and future, technologies and startup companies. Etherium, for example, is a blockchain startup that
helps enterprise companies develop private chains and private currencies. Mycelium builds physical point-of-
sale systems and debit cards for cryptocurrency.
• Poll: Should businesses buy Bitcoin? (TechRepublic)

• Blockchain could bring electronic voting to Australia by 2017 (TechRepublic)
• Why your next storage solution may depend on blockchain (TechRepublic)
When it’s happening

The blockchain has been available since 2008 and is employed now by millions of users. The great irony of
the blockchain is that while Bitcoin transactions can be anonymous, every transaction is logged and can
be viewed in a simple web browser. Blockchain.info streams real-time transaction information and contains
copious information about personal coin exchanges, Dark Web uses, real-estate firms, and even music
streaming services that rely on the blockchain to verify media ownership rights.
• Visa to test blockchain system for international money transfers (ZDNet)

• Let’s quit the blockchain magic talk (ZDNet)
• Is blockchain revolutionary, or just another infrastructure support technology? (ZDNet)
How to access it
The most common method of accessing the blockchain is by using the API, located at https://blockchain.
info/api. The API defines several types of calls, including transaction details, wallet creation, storage methods,
and current Bitcoin market and trading data.
The chain is a multi-gigabyte (and growing) file and can be downloaded locally, using BitTorrent. It’s updated
daily and can be downloaded as a torrent or magnet file.

Why blockchain could be your next

form of ID as a world citizen
By Alison DeNisco Rayome
Blockchain is moving from banking to the refugee

crisis. In June, Microsoft and Accenture announced a “This is a great example
partnership to use the technology to provide a legal form of design and technology
of identification for 1.1 billion people worldwide as part of coming together to
the global public-private partnership ID2020. address the challenges
facing so many vulnerable
The two tech giants developed a prototype that taps
individuals in our society
Accenture’s blockchain capabilities and runs on Microsoft
today. We hope that this
Azure. The tech tool uses a person’s biometric data, such
work will galvanize efforts
as a fingerprint or iris scan, to unlock the recordkeeping
globally towards a solution
blockchain technology and create a legal ID. This will
that guarantees the right to
allow refugees to have a personal identity record they
an identity for the invisible
can access from an app on a smartphone to receive
everywhere.”
assistance at border crossings or to access basic
— Lorna Ross
services, such as healthcare, a press release said.
As ZDNet noted, the prototype is designed so that

personally identifiable information (PII) always exists “off chain” and is not stored in a centralized system.
Citizens use their biometric data to access their information and choose when to share it—preventing the
system from being accessed by tyrannical governments that refugees are fleeing from.
Accenture’s platform is currently used in the Biometric Identity Management System operated by the United
Nations High Commissioner for Refugees, which has enrolled more than 1.3 million refugees in 29 nations
across Asia, Africa, and the Caribbean. According to the press release, the system is predicted to support
more than 7 million refugees from 75 countries by 2020.
David Treat, a managing director in Accenture’s global blockchain business, said in the press release, “People
without a documented identity suffer by being excluded from modern society. Our prototype is personal,
private and portable, empowering individuals to access and share appropriate information when convenient
and without the worry of using or losing paper documentation.”
ID is key for accessing education, healthcare, voting, banking, housing, and other family benefits, the press
release said. ID2020’s goal is to create a secure, established digital ID system for all citizens worldwide.
Lorna Ross, group director, Accenture’s Fjord Design Studio at The Dock, said in the press release, “This is a
great example of design and technology coming together to address the challenges facing so many vulnerable
individuals in our society today. We hope that this work will galvanize efforts globally towards a solution that
guarantees the right to an identity for the invisible everywhere.”

This is not Microsoft’s first foray into blockchain: In April 2016, it announced a partnership with R3 banking
consortium to enhance its Blockchain as a Service offerings, announced the year before. And in May 2016,
the company partnered with ConsenSys and Blockstack Labs to create an open source, blockchain-based
identity system to provide legal identification for people around the world in efforts to combat human trafficking
and child abuse.
Blockchain will likely play an increasing role in both identification and security moving forward, especially as
it relates to the Internet of Things (IoT). For example, Telstra, an Australian telecommunications company, is
currently experimenting with a combination of blockchain and biometric security for its smart home products,
ZDNet reported.
Three big takeaways

• Microsoft and Accenture announced a partnership to use blockchain technology to provide legal identifica-
tion for 1.1 billion people worldwide, as part of the global public-private partnership ID2020.
• An individual’s personally identifiable information exists “off chain,” and only they can access it using a
fingerprint or retina scan.
• The prototype is another step forward for blockchain, which will likely increasingly be used for identification
and security.

Beyond Bitcoin: How blockchains

could revolutionize business
By Nick Heath
Blockchains don’t only underpin novel digital currencies that threaten to change the face of finance; they
could also transform how businesses operate. The technology has many potential applications that go
beyond supporting cryptocurrencies like Bitcoin, says the analyst in charge of the European Union-backed
Blockchain4EU project.
Blockchain4EU will spend this year mapping the myriad ways that firms could use blockchains and other
distributed ledger technology (DLT) to improve how they operate.
Blockchain and other DLTs promise to provide a near-tamperproof, decentralized method for recording and
carrying out transactions. These transactions could be financial, as in the case of Bitcoin, but could also
include a wide range of other interactions, such as the loading of goods onto a lorry or the use of a raw
material when manufacturing a product.
“We’re looking at how blockchain and other DLTs can potentially change how organizations operate in a digital
world, and in particular how they can change how we produce and deliver goods and services,” says policy
analyst Susana Nascimento, who is leading the project.
“Across different use cases there is a series of benefits, in terms of communication, efficiency, security,
transparency.”
For example, she said blockchains could help track and monitor raw materials as they pass through supply
chains, adding transparency and the ability to trace materials to source. In logistics it could help keep track
of each stage of a transport container’s journey from a-to-b, creating a clear record of who authorized its
movement, who moved it and when.
According to Nascimento, potential benefits include “reducing fraud” and “lowering operational costs”,
improving “safety and security of transactions”, “optimizing many manufacturing operations”, and better
managing data inside and outside companies.
How blockchains work and what comes next

The technology that makes blockchains so useful for securing transactions was summed up by blockchain
entrepreneur and researcher Bettina Warburg in her recent TED talk.
“Blockchain technology is a decentralized database that stores a registry of assets and transactions across
a peer-to-peer network,” she said. “A public registry of who owns what and who transacts what. Those
transactions are secured through cryptography, and over time that transaction history gets locked in blocks of
data that are then cryptographically linked together and secured.

“This creates an immutable, unforgeable record of all the transactions across this network.”
Blockchains have been around for years, with the ideas behind its core tech stretching back decades, so why
does the EU feel now is the right time to investigate its uses?
“In the past three years the landscape has accelerated,” Nascimento said.
“The FinTech, the financial applications, blew up a little bit, with private consortia of banks and insurers
launching pilots.
“And in the last year we have seen more and more initiatives coming up beyond the financial world.
“There has been a surge of startups in the blockchain space and growing interest from many different players
in the industrial sector, big and small.
“The potential to reshape business models and how revolutionary it could be has started creeping up in
discussions. Many of these potential blockchain applications are at a very early stage. It’s the perfect time to
understand what’s happening.”
The project will produce a report detailing the non-financial uses of DLT, which it expects to be used by EU
policy makers and businesses.
As well as reporting on opportunities, it will delve into the challenges and potential drawbacks of DLTs, which
Nascimento says include scalability, power consumption, environmental footprint, interoperability of systems,
and the need for common standards.
Power consumption is a particularly common concern raised about blockchain, due to the heavy computation
needed to add new blocks to the chain, as evidenced by the energy-hungry arrays of GPUs and ASICs
(application-specific integrated circuits) used in Bitcoin mining.
As for the future of blockchains, Nascimento is of two minds, saying that while there is a chance the
technology could underpin online transactions, it’s not guaranteed.
“Some say that it is foundational technology,” she said. “People even use the metaphor of the internet, where
blockchain would be a basic protocol and then you build on top of it. There are others who say it’s just one
more technology that can be combined with others.
“Some say it’s revolutionary, that it’s fundamental; others say it’s more incremental. This is the question that will
take time to resolve.”
Nascimento said that one possible “killer app” for blockchains getting a lot of attention is initial coin offering
(ICO) tokens, where blockchain tokens are used to crowdfund new ideas. However, she added that the fast-
moving nature of the field makes it impossible to predict exactly which uses will rise to the top.
“There’s always some unexpected things that pop up because the field is very rapidly evolving. What you see
now is maybe a surge in momentum, in companies and investment coming up.”

Top 5 business uses for blockchain

By Tom Merritt
The blockchain. Let’s pretend you understand it. You know it’s the thing that Bitcoin uses and it’s some kind of
ledger. But what’s fascinating is it’s a public ledger that’s difficult to falsify. So it’s great for accountability of all
kinds, not just cryptocurrency.
Here are five business uses for blockchain.
1. Stocks
Initial coin offerings are huge, in part because they’re not yet regulated but also because they take away the
friction in funding a company. In fact, ICOs are quite different from stock in being more flexible about what they
enable the holder to do.
2. Shipping
Anybody who’s driven past a port knows the name Maersk. The gargantuan shipping company and some
partners, like Dutch and US customs, has been testing the use of the blockchain to track cargo. This can
reduce tampering with labels and speed up shipping times.
3. Diamonds
You’ve got a friend in the diamond business: Cryptography! A company called Everledger has been recording
tons of identifying features to make it clear which stones are owned by whom. Possibly not as impressive as
the sheaf of certificates that accompany an engagement ring, but efficient for other purposes.
4. Livestock
Walmart has been using the blockchain to track pork. Well pigs. Lots of other farmers have been trying out the
idea to reduce food spoilage and fight disease.
5. Law
A public ledger that records things that can’t be faked sounds like a lawyer’s dream. However, a blockchain
can create a smart contract that executes itself, no lawyer needed. Sounds like a lawyer’s nightmare. Unleash
the lobbyists!
For the record…

And the hits just keep on coming. Any business that finds it hard to fight fraud but desperately needs accurate
recordkeeping is going to be toying with blockchains to see if it can help. I can publicly verify that!

How blockchain technology can

transform the security industry
By Charlie Osborne
The blockchain not only has a place in cryptocurrency exchanges but could also be used to improve security
solutions, experts claim.
According to Travis Biehn, technical strategist at enterprise software and solutions firm Synopsys, the
blockchain is “no silver bullet” for security, but the technology holds promise as a way to record financial
transactions and as a means to control network communication, Internet of Things (IoT) devices, and supply
chains.
Originally designed to facilitate the exchange of virtual currency

When human error such as Bitcoin, the blockchain is an electronic ledger system
comes into play or an that is decentralized by nature.
insider manipulates
There is no central holding system that stores data relating to
information or systems
transactions, trades, sources, and activity. Rather, information is
in the supply chain,
distributed throughout the world by computers, also known as
the blockchain could
nodes, which carry the record of the chain with them.
resolve issues by
automatically sharing “The decentralized systems that can be built with blockchain
any suspicious activity are exciting and applicable across cybersecurity topics—with
down the line. promising areas like addressing hardware sourcing supply-chain
problems, and software supply-chain problems,” Biehn told
ZDNet. “The increased transparency afforded by blockchain technology definitely lends itself to solving a lot of
tricky cybersecurity problems.”
It is not always software vulnerabilities that can lead to a security problem such as a data breach or a network
compromise—the supply chain can also be at fault.
When human error comes into play or an insider manipulates information or systems in the supply chain, the
blockchain could resolve issues by automatically sharing any suspicious activity down the line.
When everyone participating knows who is doing what, lax security, errors, and insider threats can be tracked
and hopefully dealt with before serious damage is caused.
“If you look at other ways of doing this, if a single database were shared for example, or a traditional leader-
election protocol were used, any one of the members can change the data-store at any time,” the executive
explained. “In applications like identity or supply-chain tracking, you obviously don’t want a consumer of the
data, or someone who has compromised a participant, to be able to change all the information in that ledger.”

Smart Contracts can also come into play. These small pieces of code are stored on each node throughout the
blockchain network and enforce what actions can be executed.
These actions must achieve the same result when executed by computers connected to the blockchain. As
participants can be sure of events, who enacted them, and the logic connected to them, this inspires greater
trust in the ‘contract’ and systems, as well as that an outcome is correct.
“For supply chain issues of both hardware and software components, and identity solutions, blockchain
platforms look promising,” Biehn said.
The blockchain itself provides little in terms of threat detection or defense in the manner of traditional cyber-
security solutions, but it does offer an infrastructure of transparency, event tracking, cryptography and the
chance to improve security sensor and data sharing—which some security solutions and implementations on
enterprise networks lack.
It is important not to jump head-first into implementing technology still at a stage of infancy—we learned such
with the constant security issues that the wholesale adoption of IoT devices without acceptable security has
shown.
However, in an age when trust in systems is critical, we may yet see the blockchain integrated into systems
that handle sensitive data and financial transactions or that control IoT and mobile devices. The technology
may also provide a trustworthy infrastructure for vendors to better retain control of enterprise networks, who
does what on them, and as a means to tackle weak spots in security protocols.

Could blockchain run a city state?

Inside Dubai’s blockchain-powered
future
By Damian Radcliffe
Dubai is home to some of the most advanced technological infrastructure in the world. (Image: iStock/beatrice preve)
Earlier this year, Dubai announced its intention to turn itself into the first blockchain-powered government in
the world by 2020. These ambitions are part of the emirate’s goal of becoming a global business hub, with
next-generation technology playing a key role in delivering this vision.
Although most blockchain initiatives are still in their early phases, Gartner’s annual Hype Cycle for Emerg-
ing Technologies report predicts that in the “long-term... this technology will lead to a reformation of whole
industries”.
It’s an optimism that has spread to multiple businesses, governments, and entrepreneurs in Dubai.
In 2016, more than 30 government entities and international companies came together to launch the Global
Blockchain Council.
Its members later announced various proof-of-concept projects, covering everything from health records
and shipping to business registrations and efforts to use blockchain technology to try to reduce the spread of
conflict diamonds.

Smart secure government

“In the next few years,
A key reason for adopting blockchain, said Ahmed Adly,
we’ll see blockchain
senior cloud computing director at Oracle, is the technol-
reform areas of business
ogy’s ability to keep data secure and optimize business
such as transactions,
decisions.
value storing, contracting,
“By securing data, blockchain can reduce costs data management,
associated with fraud, compliance and financial reporting. security, communications
It also adds an extra level of security for banking, medical and more.”
records, ownership records, invoices, and other assets —Ahmed Adly
that contain sensitive information,” he told ZDNet.
Based on distributed ledger technology, blockchain is a framework for sharing, replicating, and updating data
on a network that comprises thousands of devices, he said.
“It can keep data secure, visible, trackable, and tamper-proof, and enables real-time transactions across
multiple parties.”
Security aside, other benefits potentially unlocked by this platform include speed and various efficiencies.
According to Smart Dubai, a government entity charged with exploiting smart technologies to “empower,
deliver, and promote an efficient, seamless, safe and impactful city experience for residents and visitors”,
Dubai’s blockchain strategy could save 25.1 million man hours, akin to 5.5bn dirhams, or $1.5bn, in savings
per year.
Much of this enhanced productivity will stem from moving to paperless government, with electronic document
processing removing around 100 million paper transactions a year.
“In the next few years, we’ll see blockchain reform areas of business such as transactions, value storing,
contracting, data management, security, communications and more,” Adly predicts.
Blockchain opportunities
ArabianChain Technology CEO Mohammed Alsehli said the blockchain strategy fits with the emirate’s goal of
becoming a global leader in the smart economy, fueling entrepreneurship and competitiveness.
Founded by Alsehli and Walid Messaoudi in February 2016, ArabianChain aims “to revolutionize how
governments, businesses and people perceive and deal with economy, e-services and digital transformation
by leading the way in entrepreneurial thinking and innovation in blockchain technology.”
Alsehli’s company, which has operations in UAE, Saudi Arabia, and Kuwait, recently raised 3m dirhams
($820,000) in capital to support its expansion.

According to coinmarketcap.com, the market cap for all the cryptocurrencies and digital assets in 2013 was
$1bn, where today it stands at about $94bn, he told ZDNet.
“That’s a tremendous increase in a four-year span. This gives you a glimpse of the rate of adoption and how
soon the technology will become commonplace.”
Big companies are well aware of its capabilities, and many governments already have a roadmap to meet
their objectives through blockchain, according to Alsehli.
Blockchain challenges
But this phenomenal growth presents challenges. Adly said that because the region has only recently adopted
blockchain, it still lacks infrastructure to support all the technology’s functions.
“Applications such as Internet of Things (IoT) and financial transactions need faster transaction rates that the
current infrastructure cannot completely provide.”
Blockchain also needs to grow in terms of scalability, privacy, and confidentiality.
“We’re working toward addressing these challenges to accelerate blockchain’s enterprise adoption,” he said.
With Dubai home to some of the most advanced technological infrastructure in the world, these concerns are
less an issue for Alsehli, who said, “from an infrastructure point of view, organizations in the MENA region will
not require a huge difference in the current infrastructure for blockchain.”
What’s more pressing, from Alsehli’s perspective, is that with blockchain in its early stages of adoption, there’s
a lack of technical skills.
“It will surely take time to build up that knowledge and this will happen when we experiment with the
technology.”
Moving forward
Adoption of blockchain technology by multiple sectors is essential if it’s to be a success. Adly says it’s
imperative that private and public sectors work together to make blockchain the norm.
Alsehli urges both sectors to “prioritize the services that can be enhanced by the application of this
technology.”
One reason why this type of partnership is potentially well placed to succeed, Adly said, can be found in the
way “blockchain can streamline transactions, supply-chain management, and manufacturing. Its distributed
network would allow real-time transactions between the two sectors.”

The future
For Alsehli, the nascent nature of this technology presents an opportunity. “ArabianChain is the first company
in the region to develop a public and decentralized platform for smart contracts on Blockchain.”
Its next step is launching a digital-asset trading platform in the coming months. It’s called Thuraya and is
probably the first smart contracts program to harness Arabic.
“By launching this platform, we aim to offer users a reliable experience and eliminate the monopoly in the
market, increasing competition and supporting innovation,” he said. “For the long term, our goal is to ensure
a smooth transition of Islamic banking solutions and government services to blockchain, in addition to
maintaining an impressive list of clients.”
Much of Oracle’s focus, Adly said, involves using blockchain technology to help underpin the continued growth
of the Internet of Things.
“Blockchain as a platform could safeguard against one of IoT’s biggest threats—security. It would also allow
IoT devices to participate in business transactions and interconnect in a reliable manner.”
The company is in talks to join Hyperledger, an industry-wide open source initiative to advance blockchain
technology, governed by The Linux Foundation.
“As blockchain adoption increases, we hope to make it a cloud service to benefit businesses in the Middle
East,” Adly said.
With native platforms, bold government targets, and major multinationals all actively working in this space, it’s
clear that Dubai’s blockchain aspirations are being taken seriously. As a result, Dubai’s blockchain plans, while
still embryonic, may well come to fruition sooner than you might think.

Blockchain explained in plain English

By Steve Wilson
After spending two years researching blockchain and the evolution of advanced ledger technologies, I still find
a great spectrum of understanding across my clients and business at large about blockchain. While ledger
superpowers like Hyperledger, IBM, Microsoft, and R3 are emerging, there remains a long tail of startups
trying to innovate on the first-generation public blockchains. Most of the best-selling blockchain books confine
themselves to Bitcoin and extrapolate its apparent magic into a dizzying array of imagined use cases. And I’m
continuously surprised to find people who are only just hearing about blockchain now.
It may seem that everyone is talking about blockchain and ledger technologies, but the truth is most people
are not yet up to speed. No one should be shy to ask what blockchain is really all about.
Many blockchain primers and infographics dive into the cryptography, trying to explain to lay people how
“consensus algorithms,” “hash functions,” and digital signatures all work. In their enthusiasm, they can speed
past the fundamental question of what blockchain was really designed to do. I’ve long been worried about
a lack of critical thinking around blockchain and the activity it’s inspired. If you want to develop blockchain
applications you only need to know what blockchain does, and not how it does it.
So I’ve written a report that explains how the blockchain works. It examines the founding principles of
blockchain, describes its properties, and dispels common myths about its powers. The explanation below is
an abridged excerpt from the report.
Image: iStock/ Zapp2Photo

What is blockchain?
Blockchain is an algorithm and distributed data structure for managing electronic cash without a central
administrator among people who know nothing about one another. Originally designed for the cryptocurrency
Bitcoin, the blockchain architecture was driven by a radical rejection of (government-guaranteed) money and
bank-controlled payments.
Blockchain is a special instance of distributed ledger technologies (DLTs), almost all of which have emerged in
Bitcoin’s wake.
How does blockchain work?

Blockchain is a distributed ledger technology (DLT) that was invented to support the Bitcoin cryptocurrency.
Bitcoin was motivated by an extreme rejection of government-guaranteed money and bank-controlled
payments. The developer of Bitcoin, Satoshi Nakamoto, envisioned people spending money without friction,
intermediaries, regulation, or the need to know or trust other parties.
Technically, the original blockchain is separable from Bitcoin, but this report will show that the blockchain
design is so specific to Bitcoin that it’s not a good fit for much else.
The central problem in electronic cash is Double Spend. Because pure electronic money is just data, nothing
stops a currency holder from trying to spend it twice. Blockchain solves the Double Spend problem without a
digital reserve fund or similar form of umpire.
Blockchain monitors and verifies Bitcoin transactions by calling upon a decentralized network of volunteer-run
nodes to, in effect, vote on the order in which transactions occur. The network’s algorithm ensures that each
transaction is unique.
Several thousand nodes make up the Bitcoin network. Once a majority of nodes reaches consensus that all
transactions in the recent past are unique (that is, not double spent), they are cryptographically sealed into
a block. Each new block is linked to previously sealed blocks to create a chain of accepted history, thereby
preserving a verified record of every spend.
The Bitcoin blockchain’s functionality and security results from the network of thousands of nodes agreeing on
the order of transactions. The diffuse nature of the network ensures transactions and balances are recorded
without bias and are resistant to attack by even a relatively large number of bad actors. In fact, the record
of transactions and balances remains secure as long as a simple majority (51 percent) of nodes remains
independent. Thus, the integrity of the blockchain requires a great many participants.
One of the Bitcoin blockchain’s most innovative aspects is how it incentivizes nodes to participate in the
intensive consensus-building process by randomly rewarding one node with a fixed bounty (currently 12.5
BTC) every time a new block is settled and committed to the chain. This accumulation of Bitcoin in exchange
for participation is called “mining” and is how new currency is added to keep the total system afloat.

Mastercard opens access to its

blockchain tech
By Asha McLean
Mastercard has opened its blockchain technology up to developers, allowing financial institutions and
merchants on a selective basis to start testing their own blockchain-based solutions.
The payments giant said it

both tested and validated its
blockchain and has prepared
it initially for the business-
to-business (B2B) space to
address challenges of speed,
transparency, and costs in
cross-border payments.
“By combining Mastercard

blockchain technology with
Image: Mastercard
our settlement network and
associated network rules, we
have created a solution that is safe, secure, auditable, and easy to scale,” Mastercard Labs executive vice
president Ken Moore said.
“When it comes to payments, we want to provide choice and flexibility to our partners where they are able
to seamlessly use both our existing and new payment rails based on the needs and requirements of their
customers.”
In a video prepared by Mastercard, Ricardo Sota, manager at Payments Innovation Mastercard Labs, said
the company decided to create its own technology to prove whether blockchain will in fact transform how
organisations transfer and share value between each other.
The Mastercard blockchain is a permissioned blockchain, which will allow participants to maintain the
distributed ledger without sacrificing scalability or performance, Sota explains in the video. He said it is
based on an opaque ledger, which means the details of the transaction can be seen only by those who are
participating on that transaction.
“Our blockchain technology can be used for clearing in near real-time card payment transactions eliminating
consolidation and improving settlement,” he said.
According to Mastercard, its technology boasts four key differentiators to others in the space, spanning
privacy, flexibility, scalability, and the reach of the company’s settlement network.

Mastercard said its blockchain provides privacy by ensuring that transaction details are shared only amongst
the participants of a transaction while maintaining a fully auditable and valid ledger of transactions, but still
allowing partners to use the blockchain application programming interfaces (APIs) alongside other
Mastercard APIs.
As the Mastercard blockchain is designed for commercial processing speed, the company said it can scale
further than many others. And with the blockchain integrated into the company’s 22,000 financial institution-
strong payment network, users can move transactions quite far via the Mastercard network.
Beyond card transactions, the APIs can be used for payments, supply chain, and trade finance operations.
Sota expects developers to also toy with non-payment transactions, like proof-of-purchase and authenticity.
“It should be fairly simple, as they do not have the extra cost of hosting their own ... so they can focus on the
use cases and once it’s a proven solution they can scale it out,” Sota added.
With the Mastercard blockchain, the company is hoping to make the commerce ecosystem easier, faster, and
safer, and the technology is expected to complement the company’s existing offerings, including virtual cards,
Mastercard Send, and Vocalink, to support all types of cross-border, account-based, blockchain-based, or
card-based B2B payments.
In addition to building a new solution, Mastercard said it filed for more than 35 patents in blockchain and
invested in Digital Currency Group, a collective that builds, incubates, and seeds Bitcoin and blockchain
technology-related companies.
Mastercard recently joined the Enterprise Ethereum Alliance to explore the possibilities of the Ethereum
blockchain across a range of potential use cases, many of which sit outside the scope of Mastercard’s
traditional payments environment.
While the Bitcoin blockchain is used to track ownership of digital currency, the Ethereum blockchain—a
custom-built blockchain—focuses on running the programming code of any decentralised application.
Instead of mining for Bitcoin, miners work to earn ether, a type of crypto token that fuels the network.
The EEA initiative is similar to one facilitated by the Linux Foundation that aims to develop an enterprise-
grade, open source distributed ledger framework and to help identify and address important features and
requirements that are missing when it comes to having a cross-industry open standard for distributed ledgers.

IBM Blockchain to help prevent

contamination in global food
supply chain
By Asha McLean
A group of companies across the global food supply chain will be adopting IBM’s blockchain technology in a
bid to prevent contaminated food from reaching consumers.
Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company, Nestlé, Tyson
Foods, Unilever, and Walmart will work with IBM to identify new areas where the global supply chain can
benefit from blockchain.
Blockchain is a type of distributed ledger technology (DLT) originally conceptualised to facilitate the trading of
the Bitcoin cryptocurrency. In a nutshell, blockchain allows for the tracking of digital assets so that a level of
trust and consensus can be established and previous transactions agreed upon.
According to the World Health Organization, one in 10 people fall ill—and 400,000 die—due to contaminated
food. IBM said that many of the critical issues affecting food safety, such as cross-contamination, the spread
of food-borne illness, unnecessary waste, and the economic burden of recalls, are magnified by lack of access
to information and traceability.
As a result, Big Blue said it can take weeks to identify the precise point of contamination, causing further
illness, lost revenue, and wasted product.
“Blockchain is ideally suited to help address these challenges because it establishes a trusted environment
for all transactions,” IBM said in a statement. “In the case of the global food supply chain, all participants—
growers, suppliers, processors, distributors, retailers, regulators, and consumers—can gain permissioned
access to known and trusted information regarding the origin and state of food for their transactions.”
IBM Blockchain, the tech giant’s enterprise offering, launched in March, will allow the consortium to trace
contaminated product to its source in a short amount of time.
Last July, Australia and New Zealand Banking Group (ANZ), alongside competitor Westpac, announced the
completion of a blockchain-based trial with IBM.
The trial saw the trio digitise the bank guarantee process used for commercial property leasing, using DLT to
replace the paper-based process with a single source of information via an immutable record.
Similarly, Borsa Italiana, the Italian subsidiary of the London Stock Exchange Group, announced it was
using IBM Blockchain to help small-to-medium enterprises in Europe access credit and link into digitising
certificate data.

IBM and shipping giant Maersk also partnered recently to use blockchain technology to conduct, manage, and
track transactions in the shipping supply chain.
The Blockchain in Trucking Alliance (BiTA), a consortium advocating for the adoption, education, and develop-
ment of a standard framework around blockchain in the trucking industry, welcomed its newest member in
Fleet Complete earlier this week.
Fleet Complete is a global telecommunications carrier partner that provides IoT solutions for fleet, asset, and
mobile workforce management. The company has joined the BiTA as a service charter member, echoing
the consortium’s belief that blockchain is one of the biggest technological developments for the future of the
freight transportation industry.
The consortium is working together to establish best practices and protocols around blockchain applications
within the trucking sector and is working toward educating the market and encouraging the adoption of the
technology.
Founding partners of the BiTA include McLeod Software, Triumph Business Capital, US Xpress, Convoy, 10-4
Systems, and TransRisk.

Blockchain is spreading beyond

finance: Now it’s killing off fake QA
certificates
By Stig Øyvann
In what is being described as one of the first blockchain applications outside the finance industry, Norwegian
company DNV GL has begun digitizing its quality assurance services by transferring all the 90,000 certificates
it has issued into a private blockchain.
DNV GL, the company that came out of Det norske Veritas and Germanischer Lloyd, is a big player in the
world of certifications. In its 150-year history, the firm’s core business has always been certifying ships, and
later other maritime and industrial installations, as well as quality-assurance services. In the IT industry, the
company is well known for issuing ISO 9000 and ISO 27000 certifications.
Blockchain technology is a distributed ledger, in which records, or blocks, are linked and secured through
cryptography.
According to DNV GL, the move to blockchain will stop counterfeit certificates and allow companies to
communicate their certifications in a transparent and secure way.
This implementation has been developed by DNV GL in partnership with Deloitte EMEA Blockchain Lab, which
describes it as the first live blockchain solution in the certification industry.
“This is one of the first blockchain applications outside the finance industry,” Deloitte partner Martin Bryn
said in a statement. “It shows the limitless possibilities this technology provides. In not too long there will be
concepts, prototypes and investments emerging in every major industry.”
DNV GL and Deloitte say the move to blockchain will put a stop to counterfeit certificates. (Image:
DNV GL)

When a certificate is issued, it is assigned a digital identity, the data is digitized, and then it’s sent to the
blockchain. All certificates are uniquely tagged and traceable and the original is stored in a network of
computers instead of in a central repository.
The use of blockchain technology makes it possible to uncover fraud. By scanning a QR code on the
certificate, anyone can look through the blockchain to verify that a company is certified.
DNV GL global digital transformation director Renato Grottola said putting certificates in the blockchain is the
first step towards building a new digital-assurance concept.
“Our objective is to use blockchain and other technologies to provide new services and continue to create
value for our customers,” he said.
DNV GL and Deloitte said the move to blockchain will put a stop to counterfeit certificates.

Why the blockchain belongs on the

CXO roadmap
By Mary Shacklett
Most CEOs and CIOs agree that implementing more agile and intelligent business processes is central to a
company’s profitability and its ability to execute daily work effectively. Accordingly, billions of dollars have been
invested into business process reengineering—an effort that has been ongoing in businesses for centuries.
As these businesses transformed themselves, they looked to the technologies of their times to facilitate the
changes they wanted to make in their operations. This brings us to today’s environment, where the latest
technology that could be a real game changer for business processes could be the blockchain—a data
structure that makes it possible to create a digital ledger of transactions, with each participant manipulating
the ledger in a secure way without the need for a central authority.
The blockchain is best known for its role as a digital financial ledger that verifies and captures a series of
transactions at each transactional “block” to facilitate nontraditional but highly secure “value exchanges” for
electronic currencies like Bitcoin.
Beyond currency
The blockchain, with its ability to verify the “truthfulness” of any block entered into its chain and then assemble
the chain of blocks in chronological sequence, can be applied to virtually any business process—not just
currency. For instance, blockchain technology can identify and use existing documents and records stored
in a mortgage company’s multiple systems of record, such as mortgage applications and applicant financial
statements.
Use cases
IBM provides several use cases that demonstrate how early adopters of the blockchain are relying on it to
redefine business processes. Here are two examples.
In June 2016, French bank Credit Mutuel completed its first blockchain project, which focused on improving
the business process of verifying a customer’s identity. In a banking environment, verifying customer identity is
important, whether a customer is opening an account, applying for a loan or a credit card, getting documents
notarized, or signing up for a safe deposit box. Like most banks, Credit Mutuel had an assortment of business
functions and systems that all contained pieces of a customer’s 360-degree identity, but not the total picture.
This stymied internal business units because of the siloed nature of departments and systems that forced
employees to manually assemble a full set of documents from different sources to verify a customer’s identity.
By applying blockchain technology, Credit Mutuel was able to assemble records and documents from
disparate systems and departments into a single chain of total identity documentation for a customer, available

to everyone who was authorized to access the chain. The blockchain application sidestepped what would
have been a lengthy IT integration process. It also sped up the identity verification process and improved
customer satisfaction.
In Japan, Mizuho Financial Group, a bank holding company, is testing the potential of the blockchain
for use in settlements with virtual currency. The goal is to investigate how the blockchain can facilitate the
instantaneous swaps of payments, which could potentially open up new financial offerings that the company
could make available to its customers.
Hyperledger
A major impasse from an enterprise standpoint is that the blockchain is a product of the open source
community. There are few controls over a worldwide blockchain development corps that operates with
fierce independence and is federating its work into a blockchain code base—albeit in a seemingly random
and undisciplined way. In an attempt to bring together all these independent efforts into a coordinated
framework, high profile companies like Accenture, BNY Mellon, Cisco, The Depository Trust & Clearing
Corporation (DTCC), Fujitsu, Hitachi, IBM, Intel, J.P. Morgan, Red Hat, and VMware, among others founded
Hyperledger. The HyperLedger project won’t reach its goal overnight, but major technology companies have
a vested interest in its success. All the more reason why corporate CEOs and CIOs should find a place for the
blockchain in their technology strategies.

CREDITS
Global Editor in Chief

TechRepublic is a digital publication and online Jason Hiner
community that empowers the people of business
Editor in Chief, UK
and technology. It provides analysis, tips, best
Steve Ranger
practices, and case studies aimed at helping leaders
make better decisions about technology. Managing Editor
Bill Detwiler
Copyright ©2017 by CBS Interactive Inc. All rights
Editor, Australia
reserved. TechRepublic and its logo are trademarks Chris Duckett
of CBS Interactive Inc.
Senior Features Editors
All other product names or services identified Jody Gilbert
throughout this article are trademarks or registered Mary Weilage
trademarks of their respective companies. Senior Editor

Conner Forrest
Published by TechRepublic, November 2017
Senior Writers
Dan Patterson
Teena Maddox
Chief Reporter
Nick Heath
Staff Writer
Alison DeNisco Rayome
Associate Editor
Amy Talbott
Multimedia Producer
Derek Poore
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What is blockchain?

Understanding the technology

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Blockchain: The smart person’s guide

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• Poll: Should businesses buy Bitcoin? (TechRepublic)

When it’s happening

• Visa to test blockchain system for international money transfers (ZDNet)

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Why blockchain could be your next

Blockchain is moving from banking to the refugee

As ZDNet noted, the prototype is designed so that

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Three big takeaways

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Beyond Bitcoin: How blockchains

How blockchains work and what comes next

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Top 5 business uses for blockchain

Here are five business uses for blockchain.

For the record…

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How blockchain technology can

Originally designed to facilitate the exchange of virtual currency

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Could blockchain run a city state?

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Smart secure government

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Blockchain also needs to grow in terms of scalability, privacy, and confidentiality.

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Blockchain explained in plain English

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How does blockchain work?

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Mastercard opens access to its

The payments giant said it

“By combining Mastercard

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IBM Blockchain to help prevent

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Blockchain is spreading beyond

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Why the blockchain belongs on the

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Global Editor in Chief

trademarks of their respective companies. Senior Editor

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