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Community Blog Alibaba Cloud BaaS - Part I: What is Blockchain?

Alibaba Cloud BaaS - Part I: What is Blockchain?

In this article series, we will discuss the concept of blockchain as well as introduce the Alibaba Cloud Blockchain as a Service (BaaS) offering.

By Sai Sarath Chandra, Alibaba Cloud Tech Share Author. Tech Share is Alibaba Cloud's incentive program to encourage the sharing of technical knowledge and best practices within the cloud community.

This series of articles focuses on explaining the concept of blockchain as well as introducing the Alibaba Cloud Blockchain as a Service (BaaS) offering. Before we move any further, let us discuss what blockchain really is.

What Is Blockchain?

The blockchain that we know today is an invention by a person, or a group of people, known by the name or pseudonym Satoshi Nakamoto. Since its inception, it has constantly been evolving, potentially into something great. Blockchain has revolutionized the world by introducing the core principle of the distributing digital information but not to be copying. Although the main idea of the blockchain is for digital currency, but there have been numerous use cases for blockchain, such as for healthcare and IoT.

In simple terms, blockchain technology is nothing but records of data that is managed by different nodes (computers) and not owned by any single entity. The entire records of data are again divided into blocks, and they are bound to each other by some rules thereby forming a chain thereby blockchain — the rules and usually the cryptographic principles.

When we say different nodes manage records of data, the blockchain network has no central authority it helps us to achieve a decentralized system. The data in the blocks is immutable; we can call it as an immutable ledger. So we can call blockchain is nothing but shared and immutable ledger.

The concept of "shared information" may be of concern for businesses as it implies data is always publicly visible, but this term can be misleading. It means that anything that is built on the blockchain is transparent and everyone involved is accountable for their actions. Moreover, you might have a private network to make sure the information is only visible to those who are willing to participate in the network. This type of network can also be achieved.

Blockchain for Businesses

Before we talk about how exactly the blockchain works, let's see whether it is essential for businesses to adopt it or not.

So, should businesses adopt it?

You can see that many companies are willing or eager to incorporate the blockchain into their systems. Although most of the systems that we might be talking are already almost perfect, correctly working for the customers, but a company should always think about the future.

There are different implementations of a blockchain:

  • Public blockchain: A public network where anyone can join and be part of the network.
  • Permission blockchain: A private network where the existing participants should before making when you want to be the part of the network.

Public blockchains have excellent use cases and many useful qualities, but it is not ready to handle massive amounts of transactions and data which is the requirement for the companies to replace the existing systems with blockchains.

In contrast, we have permission/private blockchains, which are owned and controlled by one single entity or a group of people. These blockchains are already a great interest implementation in various industries like finance. However, if you look at this implementation, it is nothing but a shared database. As you know, shared database implementation is much easier than to waste your time and effort in making and integrating private blockchain.

To decide whether or not to implement the blockchain in your system, you can ask yourself these questions:

  • Is there any need for the company or product to have an audit trail to make sure everything is in place?
  • Are you dependent on third-party services for all the operations?
  • Are those that third-party services are charging a lot for the number of transactions?

If the answers for all the questions are yes, then investing your time, effort and money in blockchain is a good idea for you.

However, if your company deal with vast amounts of info where time and speed is paramount importance for you, then the blockchain may not be the best fit for now.

Considerations for Blockchain

Cost

Reasons that Enterprises is much more interested in blockchain is that it will be able to reduce a lot of operational costs because of blockchain integration. Big financial institutions like banks run on mainframes. Mainframes are known for their tremendous processing power and practically zero downtime. Instead of removing the entire mentioned systems, we can reuse the existing systems for running the blockchain technology. There is a fitment analysis which is yet to be done to check whether mainframe-centric blockchain is going to be extremely cost effective or not. However, we are sure that mainframes solve the problem of blockchain scalability.

Power Consumption

If you are an IT administrator, you might not think about this as a priority but if you want to implement blockchain. But remember, this takes up a lot of power (electricity). Blockchain requires a lot of computation and power resources, so implementing a blockchain may increase electrical costs.

Storage

Let's not allow the term "distributed" fool you in terms of storage. Blockchain database is ever growing, and it becomes massive overtime. Every participant in the blockchain network maintain a copy of the entire data and synchronize regularly. It's ok in the beginning, but over time the cost increases exponentially.

With these disadvantages in mind, why do we still want the blockchain to be implemented? As mentioned before, blockchain technology is both transparent and immutable. Organizations who still follow a paper trail for auditing purposes can implement blockchain because of the immutability the data accuracy is guaranteed.

Quality Assurance is a crucial area with blockchain is implemented because of its transparent and every part of the change can be carefully scrutinized and investigated.

Deep Dive into Blockchain

Blockchain provides a fully automated and safe way of passing information from one user to another. One user creates a transaction that initiates the process of creating a block. Different participants verify this blog (were usually in millions of nodes distributed across the network). Once verified, this is added to the chain which is stored in the network, creating a unique record with a unique history.

Manipulating a single record is equivalent to manipulating the entire line in millions of instances of participants. This is virtually impossible with other technologies. Bitcoin and other cryptocurrencies primarily use this blockchain network for monetary purposes, but this can also be used for any digital asset in the network. For instance, you could be tracking every medicine in the medical industry, thereby eliminating the fake medicine in the entire supply chain.

Another important note here is that blockchain transactions do not have any transaction cost. There might be cause related to the underlying infrastructure, but there is no transaction charge. This replaces many traditional businesses who charge a cut of the payment for the services provided.

We can say that blockchain is nothing but a shared and continuously reconciled database. Destroyed selfie the several benefits of data being decentralized, truly public and easily verifiable. Since it is decentralized, no hacker can corrupt information, and the data is also accessible to anyone across the internet simultaneously.

Blockchain provides us with the decentralized, transparent and immutable transactions.

Hyperledger

There are several projects which are created to simplify the implementation of blockchain. One of the popular options in that project is the Hyperledger. Remember Hyperledger is not a company/blockchain/IBM Blockchain Coin. It is like a common place for industrial blockchain development. This is what Hyperledger is according to their website

"Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration, hosted by The Linux Foundation, including leaders in finance, banking, Internet of Things, supply chains, manufacturing, and Technology."

Since we know what blockchain and how it is implemented using a Hyperledger, now we will discuss about differences having the traditional blockchain wholly developed in house and using blockchain as a service.

Cloud and Blockchain

Cloud has revolutionized the infrastructure using the infrastructure as a service model. It is nothing but renting a server whenever it is needed. Operating blockchain on the cloud is a great combination as we know that blockchain requires a lot of storage and computing power as we go ahead. Renting blockchain infrastructure in the form of blockchain as a service helsp organization to reduce the IT spending for operation for maintaining the blockchain this will also reduce the current investment need to get started with a blockchain in your product. This paves the way for the industries to test the blockchain without any upfront commitment within the product to see what exactly the market need.

In the next article, we will see what exactly Alibaba Cloud Blockchain as a Service offering is, and we will also see the benefits of the blockchain service on Alibaba Cloud as well as work with proof of concept with BaaS.

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