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  • user 7:40 am on October 20, 2016 Permalink | Reply
    Tags: , , , Consensus, , ,   

    How to know which Blockchain you should use. 

    Why Consensus Mechanisms Matter

    The world of and underlying technologies of distributed ledger, and the are experiencing rapid change and growth.

    As low-trust digital-based systems gain adherents and differing use cases, developers are creating new variant blockchains to deal with the inevitable fragmentation between public, consortium, and private blockchain technologies.

    First, let’s note the differences between public, consortium, and private blockchains.

    Public — Fully decentralized and uncontrolled networks with no access permission required — anyone can participate in the process to determine which transaction blocks are added. There is usually little or no pre-existing trust between participants in a Public blockchain.

    Consortium — The consensus process for new transaction blocks is controlled by a fixed set of nodes, such as a group of financial institutions where pre-existing trust is high.

    Private — Access permissions are tightly controlled, with rights to read or modify the blockchain restricted to certain users. Permissions to read the blockchain may be restricted or public. [1]

    There is usually some degree of pre-existing trust between at least some of Private blockchain participants.

    The degree of pre-existing trust that an organization requires, as well as necessary control over participant permissions, will determine what type of blockchain to use.

    Different blockchain solutions have advantages and disadvantages. Take for example, the difference between how transactions are validated within each type of blockchain:

    of Work (PoW): About “mining” transactions utilizing a resource-intensive hashing process, which (a) confirms transactions between network participants and (b) writes the confirmed transactions into the blockchain ledger as a new block.

    The accepted new block is proof that the work was done, so the miner may receive a 25 BTC (Bitcoins) payment for successfully completing the work. The problem with PoW is that it is resource-intensive and creates a centralizing tendency among miners based on computer resource capability.

    Proof of Stake (PoS): About “validating” blocks created by miners and requires users to prove ownership of their “stake”[2]. Validation introduces a randomness into the process, making the establishment of a validation monopoly more difficult, thereby enhancing network security.

    One problem with PoS is the “nothing at stake” issue, where miners have nothing to lose in voting for different blockchain histories, preventing a consensus from being created. There are several attempts to solve this problem underway.

    Additional developments in this area hope to combine PoW with PoS to create hybrid blockchains with the highest security and lowest resource requirements.

    To that end, some developers are focused on enhancing network security through ‘consensus without mining.’ [3]

    Tendermint co-founder Jae Kwon has published a paper describing his firm’s concept and approach in this regard.

    Existing Proof of Work and Proof of Stake protocols have various problems, such as requiring huge outlays of energy usage and increasing centralization (PoW) or participants having nothing at stake (PoS) possibly contributing to consensus disruption on mined blocks.

    Kwon’s solution is twofold and does not require Proof of Work mining:

    (a) A ⅔ majority of validators is required to sign off on block submission, with no more than ⅓ able to sign duplicate blocks without penalty

    (b) The protocol raises the penalty of double-spend attacks to unacceptably high levels by destroying the malicious actor’s Bitcoin account values.

    The algorithm is “based on a modified version of the DLS protocol and is resilient up to ⅓ of Byzantine participants.”

    Kwon and his team at Tendermint hope to bring speed, simplicity and security to blockchain app development.

    So, how does one decide on what type of blockchain to use and their relevancy for your company use case? [4]

    Below are a few examples of different types of blockchains, depending on the organization’s greatest prioritized need:

    One consideration is confidentiality. For example, in the case of a public financial blockchain, all the transactions appear on the ledgers of each participant. So while the identities of the transacting parties are not known, the transactions themselves are public.

    Some companies are developing ‘supporting’ blockchains to avoid this problem, by “storing or notarizing the contracts in encrypted form, and performing some basic duplicate detection.” Each company would store the transaction data in their own database, but use the blockchain for limited memorialization purposes.

    A second consideration is whether you need provenance tracking. Existing supply chains are rife with counterfeit and theft problems. A blockchain that collectively belongs to the supply chain participants can reduce or eliminate breaks in the chain as well as secure the integrity of the database tracking the supply chain.

    A third example is the need for recordkeeping between organizations, such as legal or accounting communications. A blockchain that timestamps and provides proof of origin for information submitted to a case archive would provide a way for multiple organizations to jointly manage the archive while keeping it secure from individual attempts to corrupt it.

    Blockchains fundamentally operate on the basis of how consensus is agreed upon for each transaction added to the ledger.

    What are the benefits of each type of consensus mechanism and in which situation are they best utilized?

    Proof of Work — Miners have a financial incentive to process as many transactions as quickly as possible. PoW is best utilized by high-throughput requirement systems.

    Proof of Stake — Transaction Validators receive rewards in proportion to the amount of their “stake” in the network. This arguably improves network security by discouraging duplicitous attacks. PoS is best used by computing power constrained organizations.

    Delegated Proof of Stake [5] — Network parameters are decided upon by elected delegates or representatives. If you value a “democratized” blockchain with reduced regulatory interference, this version is for you.

    PAXOS — An academic and complicated protocol centered around multiple distributed machines reaching agreement on a single value. This protocol has been difficult to implement in real-world conditions.

    RAFT — Similar to PAXOS in performance and fault tolerance except that it is “decomposed into relatively independent subproblems”, making it easier to understand and utilize.

    Round Robin — Utilizing a randomized approach, the round robin protocol requires each block to be digitally signed by the block-adder, which may be a defined set of participants. This is more suited to a private blockchain network where participants are known to each other.

    Federated Consensus — Federated consensus is where each participant knows all of the other participants, and where small sets of parties who trust each other agree on each transaction and over time the transaction is deemed valid. Suitable for systems where decentralized control is not an imperative.

    Proprietary Distributed Ledger — A PDL is one where the ledger is controlled, or proprietary, to one central entity or consortium. The benefits of this protocol is that there is already a high degree of pre-existing trust between the network participants and agreed-upon security measures. Suitable for a consortium or group of trading partners, such as supply chains.

    PBFT — In a PBFT system, each node publishes a public key and messages are signed by each node, and after enough identical responses the transaction is deemed valid. PBFT is better suited for digital assets which require low latency due to high transaction volume but do not need large throughput.

    N2N — Node to node (N2N) systems are characterized by encrypted transactions where only the parties involved in a transaction have access to the data. Third parties such as regulators may have opt-in privileges. Suitable for use cases where a high degree of transaction confidentiality is required.

    The above list represents the current major consensus mechanisms in operation or from research.

    Due to the initial visibility of Bitcoin, the financial services industry has been early in researching the possible uses of consensus mechanisms to streamline operations, reduce costs and eliminate fraudulent activity.

    The multi-trillion dollar global financial services industry is really composed of many different sectors, from lending to smart contracts, trading execution, letters of credit, insurance, payments, asset registration, regulatory reporting and more.

    For example, the process of securing a letter of credit, which is an important import/export trading service, would likely utilize a ‘consortium’ approach to achieving transaction consensus.

    In August, 2016 a banking consortium, R3CEV, successfully designed and executed trading smart contracts. These types of contracts could then be applicable to accounts receivable invoice factoring and letter of credit transactions.

    For the use case example of cross-border remittances, which would involve many individuals on both sides of the transaction, a ‘public’ consensus mechanism would likely be a relevant .

    Since remittances would need to have a relatively short time latency for transaction completion, a solution involving a Proof of Stake approach with its low resource requirement to validate transactions along with potentially higher security, would be compelling.

    In sum, the state of blockchain development is rapidly gaining speed worldwide, yet there is much work to be done.

    Numerous Global 2000 companies led by their executives and consultants are beginning to participate in development and testing of this revolutionary technology sector.

    Organizations that begin first-hand learning about the power of blockchain technologies will have increased opportunity to lead their industry.


    Originally published at intrepidreview.com on October 5, 2016.

    I’m always interested in meeting blockchain startups, and Chief innovation officers who are creating transformational products, so please feel free to contact me by email at [email protected]

    Collin Thompson is the Co-founder, and Managing Director of Intrepid Ventures, a blockchain startup and innovation studio that invests, builds, and accelerates Blockchain and companies solving the world’s most difficult problems. Collin focuses on early stage investments, innovation and business design for corporations, governments and entrepreneurs working with blockchain technology.

     
  • user 3:40 am on October 20, 2016 Permalink | Reply
    Tags: , , Consensus, , , , , Title   

    Deloitte Returns as Title Sponsor for Consensus 2017 

    CoinDesk is thrilled to welcome back as a for , our third annual summit.

    Source


    CoinDesk

     
  • user 6:43 pm on September 10, 2016 Permalink | Reply
    Tags: , Consensus, Cooler, Debates, , Protocol,   

    It Isn’t ‘Consensus’: Toward Cooler Protocol Debates 

    The idea that and blockchains run on “” among their users is counterproductive, argues Jim harper.
    CoinDesk

     
  • user 3:38 pm on July 27, 2016 Permalink | Reply
    Tags: , Consensus, , , , ,   

    Blockchain Researchers Debate Future of Consensus Tech at IBM Event 

    Forty met in Chicago this week to hash out mechanisms that might be employed by distributed ledgers.
    CoinDesk

     
  • user 2:49 pm on May 10, 2016 Permalink | Reply
    Tags: , , Consensus, Defined, , Quotes   

    10 Quotes That Defined Consensus 2016 

    Speakers from all over the world stole the show at the conference last week. Here are 10 that the show.
    fintech techcrunch

     
  • user 2:38 am on May 10, 2016 Permalink | Reply
    Tags: , , Consensus, , , , , ,   

    Consensus Blockchain Standards Panel: Industry Should Take Action 

    The last day of 2016 featured a workshop discussion on for development.
    fintech techcrunch

     
  • user 10:54 pm on May 9, 2016 Permalink | Reply
    Tags: , , Consensus, , , , ,   

    Open Letter: Open Standards & Consensus Ledgers 

    The history of how have developed in the Western World is a valuable source of information for the future of Ledger ( tech for most everyone else, I know I am stubborn and contrarian). I have previously written on my blog about the necessity of open standards in the crypto space and am doubling down with this open which is a cry to arms.

    Engineers of all stripes &; mechanical, electrical, chemical&; &8211; got together in the United States and the UK to create open standards in the 19th century. They tinkered, tested different paths and settled on a consensus method out of which the current organizations in charge of creating and managing standards emerged.

    There are roughly four methods to create open standards. Two of them are hierarchical and fiat driven, one is market driven and the last one is a hybrid.

    The first two methods are a) legislative and b) regulatory driven. These bodies are administrative and bureaucratic, highly hierarchical and deliver mandates for the creating of open standards. The results are usually poor and sub-optimal. The third method is purely market driven &8211; let the best market participant win, develop its IP and create standards &8211; and produces equally non-optimal results. One of the best examples of a market driven approach is the market dominance Western Union reached in the 19th century around the intellectual property it built and managed in early telecommunications and finance. The result limited competition and innovation until new organizations took wrestled the mantle of open standards for themselves and cooperated to create a more level playing field.

    The fourth method is a hybrid method that incorporates market and hierarchical vectors. This hybrid method is governed by a neutral body that drives towards consensus by involving all market participants while developing clear rules that all abide by.

    The key to success for a hybrid method are:

    1) Involve as large a network of stakeholders as possible

    2) Create a set of transparent rules and a framework to develop, manage and govern open standards so that no one party can distort and control the process

    3) Ensure that open standards are grounded, leverage the new technology, and deliver value to all professionals in a given field.

    4) Sustain involvement from industry participants through open collaboration going forward so that open standards and the body that manages and governs them is a living entity.

    Not developing open standards or developing sub-standard open standards has its downside. the absence of widely approved and appropriate system architectures means lack of interoperability, waste and duplicative efforts and eventually material delays in the widespread acceptance and use of a new technology.

    I posit that consensus ledger tech is at an inflection point. Get open standards right and this new technology will see accelerated adoption sooner than most thought leaders predicted. Miss the opportunity and we may experience disappointment for a while. This is especially important as consensus tech can and will be applied and used by more than one industry and for many use cases, and because each industry is the sum total of specific properties such as regulation, legal frameworks and business processes that have evolved specialized work flows and processes over time &8211; none more so than the financial services industry.

    To be more specific, any industry or business models that incorporates use cases that can benefit from peer to peer platforms, disintermediation, some level of de-centralization, transactional and data transparency, is poised to benefit from consensus ledgers. This means the capital markets, insurance and payments sectors within the financial services, marketplaces within the retail industry, social networks, media &8211; social and traditional &8211; higher education, data management in general &8211; data monetization and identity management &8211; to name but a few, are poised to benefit from consensus ledgers.

    Therefore, the wide adoption of consensus ledger tech is a function triangulating between and optimizing for regulatory concerns, existing legal frameworks, existing standards &8211; as developed for data, data handling, data messaging, data taxonomy &8211; and existing software and hardware engineering practices/standards, existing operating systems and existing industry needs ACROSS heterogenous industries. (One also needs to take into account existing payments systems and practices given and how these may interact with consensus ledgers.) Further, the development of open standards will invariably have an impact, through feedback loop mechanisms, on current and accepted ways of doing business as well as how these accepted ways are regulated and legally bounded.

    Additionally, and to add complexity to the mix, we are dealing with three competing stacks already and the inevitable interoperability issues that raises: a) ethereum, b) and c) ripple/stellar. This makes it even more crucial to arrive at agreeable top level open standards and avoid balkanization to the extent these stacks will co-exist, users may favor one or the other for specific use cases or more than one in other use cases.

    For these reasons, I strongly believe the hybrid path outlined above is the only optimal path. This path ensures a neutral body is empowered to develop and govern standards applicable to meta issues around consensus ledger tech stacks and interoperability. This does not mean such a body would rule over business logic, i.e. smart contracts, which industry incumbents and service providers would be free to collaborate or compete on depending on appropriateness and strategic goals.

    I note various entities have already raised their hands to tackle open standards &8211; for-profit organizations as well as not-for-profit organizations &8211; none of which, to my knowledge, have deep knowledge with managing open standards. I am outlining below who should, in my opinion, be asked to help with open standards for consensus ledgers as well as various paths to the creation of a new standards body.

    I see three options for the hybrid path. Either through the creation of a new ad hoc body or via an existing organization.

    As for the first option, we can use the example of the Internet Engineering Task Force, IETF, see here which was created in 1986 for the sole purpose of promoting voluntary internet standards. One could envisage a new task force, a truly independent one, without any ulterior commercial motives, to be created  with the participating of various stakeholders across industries and manned by professionals hired out of existing standards bodies. A very viable option in my opinion.

    As for the second option, it would be a derivative of the first one. The only difference being that a for profit organization would volunteer to seed such a body and allow itself to remain neutral and promote a truly open governance framework.

    As for the third option, I see only a handful of candidates that would be truly neutral, global and bring a breadth and depth of expertise in the field of standards creation, management and governance that all industry stakeholders would have no material objections. These are a) the Institute of Electrical and Electronics Engineers, IEEE, see here, which is a neutral and global body and has in its midst many software engineers and computer scientists; b) the International Organization for Standardization, ISO, see here, and the International Electrotechnical Commission, IEC, see here, which both have joined forces and created a joint commission, the ISO/IEC JTC 1 tasked with developing and managing standards in Information Technology, see here.

    As an aside, I believe bodies such as the International Organization of Securities Commissions, IOSO, see here, FpML see here, the Financial Industry Business Ontology, FIBO, created by the Enterprise Data Management Council, see here, have a role to play. I am sure other similar bodies in the payments or insurance sectors and outside of the financial services industry would be appropriate value add actors.

    My wish is for at least one of either IEEE, ISO or IEC to get involved with consensus ledger technology, or for a for-profit organization to create ad hoc framework with a neutral governance process to step forward. The latter would only be effective at a sector level, i.e. insurance or capital markets for example, thusly we may miss the opportunity to unify standards pan industry which may have negative implications from an interoperability point of view. Would the latter be such a suboptimal path I wonder? Practicality needs to be taken into account obviously and aspirations to boil oceans from the onset usually amount to little in the long run.

    Finally, the creation of open standards will also usher the material benefit of allowing the emergence of new tech stacks and/or facilitate the strengthening of existing ones (ethereum, ripple/stellar, bitcoin).

    Have I missed anything?

    FiniCulture

     
  • user 4:54 pm on May 9, 2016 Permalink | Reply
    Tags: Applicability, Consensus, , Universal   

    On the Universal Applicability of Consensus Ledgers 

    I was inspired to write this post while reading and listening to the multiple conversations and narratives addressing use cases and for &; aka blockchains. The space is generating much hype, lots of noise, confusion as well as some excellent work from sharp entrepreneurs and startups and forward thinking corporations.

    Here are the four META use cases where consensus ledgers will shine IMHO. All meta use cases share one characteristic: the ability to derive the &;state&; of someone or something via a decentralized consensus.

    1) Proof of PROVENANCE for THINGS: I use provenance loosely and include authenticity, integrity, transparency over chain of ownership. Where did that &8220;thing&8221; come from, who built or created it, for what purpose, is there still integrity associated with its purpose, can we trust that &8220;thing&8221;, the data it generates and the entity/person that manages, handles or otherwise owns is currently.

    2) Proof of IDENTITY for PEOPLE: In as much as Google built the search graph and Facebook the social graph, think of a consensus ledger powered entity &8211; or entities &8211; that will build a trust graph &8211; not own it mind you &8211; and deliver a very effective tool for individuals to manage their identity and decide what they want to share with whom for how long and for what purpose. Very powerful.

    3) Proof of TRANSFER of VALUE: Mechanisms that will deliver in full or semi dis-intermediated states, in full or semi decentralized states, a consensus over the transfer of any value. One example is any application that addresses post trading activities such as clearing and settlement in capital markets (trading being understood in the capital markets contexts as part of the transfer mechanism). Another example may be any application that facilitates claims management processes in the insurance industry. Proof of transfer can apply to payment or value, or both.

    4) Proof of OWNERSHIP: Mechanisms that will deliver in full or semi dis-intermediated states, in full or semi decentralized states, a consensus over the ownership of anything &8211; tangible or intangible, and that also includes data. One example is any application that ports ownership of privately held companies from traditional share registries to a consensus ledger. Another example would be any application that facilitates fluctuating ownership states for real assets used in the sharing economy.

    A few additional and non-trivial musings:

    a) Consensus ledgers applications may mix and match from the above four meta use cases

    b) The number of applications supported by any of the above four meta use cases is limitless.  Vey simply put, any work flow that is currently supported by a siloed approach to managing data and where there is n+1 actors involved in the completion of said work flow, can be delivered with consensus ledger tech.

    c) Every industry will be impacted, every business will be impacted. Take Auditors as an example and assume proof of transfer of value is powered by consensus ledgers. The first order of change applies to how reconciliation is handled within a firm by internal audit/reconciliation teams. No more data silos, no more manual reconciliation at end of day, end of week, end of month. The second order of change applies to Audit firms performing audits come end of year with drastically different work load, and sometimes much reduced work loads. No need to verify accounts the old way, to do sample testing, to call trading partners, to verify accounts receivables or accounts payables, to scrutinize transactions off of a RDBMS, off of paper records.

    FiniCulture

     
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