Blockchains, combine the characteristics of three interesting technologies:
• fault-tolerant systems
• Digital timestamping
• Currency ledgers using cryptography
Each of these technologies on their own was studied well in early 2000’s. Byzantine fault tolerance (i.e., tolerance to arbitrary malicious behavior, including attempts to do away with the system by an active adversary) was defined in the 1980s; the practical Byzantine fault-tolerant (PBFT) the algorithm, which is now used frequently as a building block for private blockchains, goes back to 1999.
Digital timestamping – i.e., associating digital documents with reliable timestamps and establishing ordering with documents. David Chaum’s DigiCash which was an electronic ledger that relied extensively on Cryptography – was founded in 1990 and 8 years later, it went bankrupt. It is the combination of replicated log, timestamping and cryptography that made the blockchain that was designed by Nakamoto’s innovative.
Blockchains timestamping feature is sometimes overlooked in the studies of blockchain in favor of the two aforementioned characteristics above. Unfortunately, this may lead to a lack of understanding of blockchain technology. If a blockchain, is seen only as a distributed business logic that is fault-tolerant, it may look as though all blockchain users are equal; when you switch to the timestamping, it all becomes clear that it is not necessarily true. Some entities determine the state of a blockchain, for instance, the registry agency in a public registry, a bank in a financial ledger and insurance company in an insurance network.
Accountability is one of the core features expected from timestamping services. Accountability refers to a timestamping service which every user reliably verifies that the service is operating correctly. If there is a failure in verification, the user has a proof of service that holds the service accountable. If external parties are excluded from consideration, accountability may be lost during blockchain construction. Feasibility of external audits is one of the attractive characteristics of Bitcoin and other permissionless cryptocurrency blockchains. If each Bitcoin user were to operate a full Bitcoin node to ensure the system operates correctly, Bitcoin would not likely have gained as substantial popularity. Practically, each user in the Bitcoin ecosystem is allowed to choose a fitting trust model to perform transactions: using a lightweight (SPV) node, a full node, a trusted third party or a non-custodial multi-signature wallet.
The automatically enforced properties of a blockchain have the trust of users, instead of the identities of its processors which could be beneficial for both non-permissioned and permissioned blockchains. In other words, increased user trust could create an environment for even more third party service development and integration of blockchain technology.
Another useful feature provided by blockchain technology is non-repudiation, i.e., the ability to definitively verify the authenticity of statements recorded on the blockchain. Non-repudiation could be accomplished with the help of digital signatures combined with public key infrastructure (PKI) and reliable time stamping. The latter is important to prevent anyone (even the colluding blockchain maintainers) from backdating statements and to make retrospective authenticity verification not critically reliant on the security of the utilized public key cryptosystem(s).
Many proposed blockchain applications (currency ledgers, insurance, copyright, public registries, supply chains, etc.) could benefit from built-in external audibility and non-repudiation, as they are legally required or at least expected by application users. External audibility of blockchains could make them a preferable means of computerization of such applications compared to alternatives.
Furthermore, external audibility aligns with “Web 2.0,” i.e., the general shift from service-centric to user-centric applications (cf. The notion of self-sovereign identity. The ability for any client to perform a partial or complete audit of the system could be viewed as a competitive advantage in the emerging user-centric world. Thus, audibility and accountability capabilities of blockchains constitute a promising topic for research.
Previous research. Accountability is one of core topics of the research on digital timestamping. The topic of accountability was brought up in blockchain research with relation to the “nothing at stake” problem encountered by early proof of stake blockchains; in fact, the problem could be viewed as a typical accountability failure. Later research on proof of stake codified the problems with accountability with the notion of weak subjectivity. Security deposits were introduced into proof of stake to provide economic accountability of blockchain participants, Tendermint and Casper consensus algorithms.
Distributed ledger technology provides transparent information to all market participants for historical and real-time transactions. As a result, those that currently, gain competitive advantages via the imbalance of information are likely to be put on an equal footing with the rest of the market.
For example, greater transparency could mean that individuals can understand which organizations have used their data and under what circumstances. Blockchain solutions could allow information to flow both ways; for example, individuals might be able to better understand the provenance of goods and services that they buy. This could allow more informed consumer decision making.
The potential tracking of supply chains via blockchain will also provide greater transparency and simpler processes for businesses. Also, there is likely to be less cost and time involved in tracking
product sources, thus adding more benefits to businesses. From a government perspective, greater
transparency will also enable increased cooperation between regulators and regulated entities. Particularly in the context of financial markets, regulators are likely to be better able to fulfill their
mandates of ensuring legality, security, and stability of financial markets.