Welcome!

FinTech Journal Authors: Liz McMillan, Zakia Bouachraoui, Carmen Gonzalez, Yeshim Deniz, Elizabeth White

Related Topics: FinTech Journal, @CloudExpo, @ThingsExpo

FinTech Journal: Blog Post

Blockchain: Byzantine Generals and Achieving Consensus | @CloudExpo #Cloud #FinTech #Blockchain

One interesting feature about blockchain technology is that there’s no central authority or single source of the ledger

When discussing disruptive technologies, the topic of blockchain inevitably enters the conversation. Gartner recently listed blockchain as one of the ‘Key platform-enabling technologies to track.' Approximately $1.4B has been invested in blockchain just this year, according to PwC executive Seamus Cushley. IBM announced this week a Blockchain-as-a-Service Enterprise offering at their Interconnect Conference. While there is a lot of ‘hype vs reality' discussions going on, there is no arguing that blockchain is being taken very seriously across industries and cannot be ignored.

In simple terms, blockchain is a digital ledger. You can think of it as a spreadsheet. The blockchain ledger comprises a constantly growing list of transactions called "blocks" - all of which are sequentially connected. Each block has a link to the previous one in the list. Once a block is in the chain it can't be removed, so it becomes part of a permanent database containing all the transactions that have occurred since its inception.

One of the more interesting features about blockchain technology is that there's no central authority or single source of the ledger. Which means it exists on every node that's associated with it. Yes, every node has its own complete copy of the blockchain. As new blocks are added, they're also received by every node that participates. For this to work, it requires distributed consensus and trust to ensure the integrity of the system. Achieving this consensus is one of the challenges and complexities in such a distributed system.

The Byzantine Generals Problem
The consensus challenge is frequently described by a logic problem referred to as The Byzantine Generals Problem. Imagine a group of generals, encircling a city with their armies. They want to coordinate an attack. Their only method of communication is through messengers. Now, add into this mix that some of the generals may be traitors with their own agenda. Those traitors may intercept or modify the messages being sent in the hope of causing the attack to fail. How do the generals know they are receiving information? Solving that conundrum is a frequent challenge in distributed systems. How to ensure the orders are valid and trusted.

As with any challenge, there is always more than one way to address that challenge. I frequently describe my perspective as ‘There is no perfect solution, everything is a tradeoff.' What tradeoffs you are willing to accept determine the appropriate solution for your needs'. There are many techniques that have been developed in the blockchain space to address the consensus challenge, each with their own set of tradeoffs. Three popular ones are:

  • Proof of Work
  • Proof of Stake
  • Byzantine Fault Tolerance

Proof of Work
Proof of Work is the one most people are familiar with, as it is at the core of the biggest use of a blockchain ecosystem today, bitcoin. The basic concept is providing a mechanism that requires effort to add a block, but minimal effort to validate that work was done. In this consensus solution there are ‘miners.' Miners look for the next proposed block to add to the chain. To add the block, the miners are challenged with a mathematical problem to solve. Solving this puzzle requires significant resources, including time, computing power and electricity. Once a miner solves the puzzle, they can add the next block to the chain, with the appropriate hashing information for other participants to easily validate the work was done and that the block belongs. The miner is rewarded for their effort, which is the incentive to expend their resources. In the bitcoin world, they are rewarded with bitcoin, for example.

This has proven to be a very successful technique for gaining consensus and trust in a blockchain ecosystem. The tradeoff is processing time. Solving the puzzle can take up to 10 minutes, obviously having a direct impact on throughput. The time window can be reduced by reducing the complexity of the puzzle. The tradeoff then becomes the risk that it is easier to insert/produce invalid transactions to the chain.

Proof of Stake
In Proof of Stake solutions, mining is done by participants who have a stake in the blockchain ecosystem they belong to. This is unlike proof of work, where the miners can be anyone. Who can insert the next block is done based on a cost associated with the block, the total value(stake) the participant has in the ecosystem, and usually some pseudo-random selection process to avoid risk of only the largest stakeholders having control of block insertions. There are still hashing techniques involved, like proof of work, but not at the resource consuming levels of that solution. This technique is used by the Ethereum blockchain ecosystem.

This solution has become more attractive than proof of work, as it doesn't suffer from the latency issues of proof of work. As everything is a tradeoff, the risk with proof of stake is referred to as the ‘nothing at stake' scenario. This is the fact there is nothing to lose by voting for multiple blockchain histories, creating a problem with reaching consensus. Several alternatives to address this situation exist, including ‘punishment' for bad behavior, as well as reconciliation problems. The other risk, as previously mentioned, is large stakeholders dominating the blockchain.

Byzantine Fault Tolerance
Byzantine Fault Tolerance takes a different perspective. All participants in the blockchain ecosystem are known and each possesses a public key. As a block passes through their node, it is validated, and the message is signed with that public key. Once a predefined number of participants sign the block, it is considered valid and added to the chain. This is the technique used by the Hyperledger blockchain solution that is the underpinning of IBM's solution. This has significant benefits. Unlike proof of work, large amounts of resources are not required to participate. Additionally, it is a much more ‘democratized' solution, as the largest stakeholders don't have any unfair leverage such as can occur in proof of stake solutions.

There are two key tradeoffs with this solution. First, it requires all participants to agree on who belongs in the blockchain. Additionally some method of confirming membership, some level of central authority or agreement is needed, which tends to bounce up against the philosophy of blockchain.

We have miles to go and promises to keep
As with any technology, blockchain is a tool, not a destination. Ultimately, as technologists, our job is to help the business achieve its goals - and reach its destination - by leveraging tools that provide business value. The potential use case scenarios cross multiple industries, from changing the way financial transactions are conducted, into healthcare and the maintaining of Electronic Health Records, over into supply chain as well as the explosively growing Internet of Things.

I count having blockchain in our toolbox as a net positive, and look forward to how this tool can help us provide value back to the business.

More Stories By Ed Featherston

Ed Featherston is VP, Principal Architect at Cloud Technology Partners. He brings 35 years of technology experience in designing, building, and implementing large complex solutions. He has significant expertise in systems integration, Internet/intranet, and cloud technologies. He has delivered projects in various industries, including financial services, pharmacy, government and retail.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


IoT & Smart Cities Stories
The platform combines the strengths of Singtel's extensive, intelligent network capabilities with Microsoft's cloud expertise to create a unique solution that sets new standards for IoT applications," said Mr Diomedes Kastanis, Head of IoT at Singtel. "Our solution provides speed, transparency and flexibility, paving the way for a more pervasive use of IoT to accelerate enterprises' digitalisation efforts. AI-powered intelligent connectivity over Microsoft Azure will be the fastest connected pat...
There are many examples of disruption in consumer space – Uber disrupting the cab industry, Airbnb disrupting the hospitality industry and so on; but have you wondered who is disrupting support and operations? AISERA helps make businesses and customers successful by offering consumer-like user experience for support and operations. We have built the world’s first AI-driven IT / HR / Cloud / Customer Support and Operations solution.
Codete accelerates their clients growth through technological expertise and experience. Codite team works with organizations to meet the challenges that digitalization presents. Their clients include digital start-ups as well as established enterprises in the IT industry. To stay competitive in a highly innovative IT industry, strong R&D departments and bold spin-off initiatives is a must. Codete Data Science and Software Architects teams help corporate clients to stay up to date with the mod...
At CloudEXPO Silicon Valley, June 24-26, 2019, Digital Transformation (DX) is a major focus with expanded DevOpsSUMMIT and FinTechEXPO programs within the DXWorldEXPO agenda. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of business. Only 12% still survive. Similar percentages are found throug...
Druva is the global leader in Cloud Data Protection and Management, delivering the industry's first data management-as-a-service solution that aggregates data from endpoints, servers and cloud applications and leverages the public cloud to offer a single pane of glass to enable data protection, governance and intelligence-dramatically increasing the availability and visibility of business critical information, while reducing the risk, cost and complexity of managing and protecting it. Druva's...
BMC has unmatched experience in IT management, supporting 92 of the Forbes Global 100, and earning recognition as an ITSM Gartner Magic Quadrant Leader for five years running. Our solutions offer speed, agility, and efficiency to tackle business challenges in the areas of service management, automation, operations, and the mainframe.
The Jevons Paradox suggests that when technological advances increase efficiency of a resource, it results in an overall increase in consumption. Writing on the increased use of coal as a result of technological improvements, 19th-century economist William Stanley Jevons found that these improvements led to the development of new ways to utilize coal. In his session at 19th Cloud Expo, Mark Thiele, Chief Strategy Officer for Apcera, compared the Jevons Paradox to modern-day enterprise IT, examin...
With 10 simultaneous tracks, keynotes, general sessions and targeted breakout classes, @CloudEXPO and DXWorldEXPO are two of the most important technology events of the year. Since its launch over eight years ago, @CloudEXPO and DXWorldEXPO have presented a rock star faculty as well as showcased hundreds of sponsors and exhibitors! In this blog post, we provide 7 tips on how, as part of our world-class faculty, you can deliver one of the most popular sessions at our events. But before reading...
DSR is a supplier of project management, consultancy services and IT solutions that increase effectiveness of a company's operations in the production sector. The company combines in-depth knowledge of international companies with expert knowledge utilising IT tools that support manufacturing and distribution processes. DSR ensures optimization and integration of internal processes which is necessary for companies to grow rapidly. The rapid growth is possible thanks, to specialized services an...
At CloudEXPO Silicon Valley, June 24-26, 2019, Digital Transformation (DX) is a major focus with expanded DevOpsSUMMIT and FinTechEXPO programs within the DXWorldEXPO agenda. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of business. Only 12% still survive. Similar percentages are found throug...