[SOLVED] choose a security threat from Chapter 11. Then describe the impact of the chosen threat if it would be realized in a blockchain environment, and what you can do to mitigate the threat. – Computer Science

1. This week’s reading introduced an overview of blockchain security. Choose a security threat from Chapter 11. Then describe the impact of the chosen threat if it would be realized in a blockchain environment, and what you can do to mitigate the threat. Then think of three questions you’d like to ask other students and add these to the end of your thread. The questions should be taken from Chapter 11. You’re not trying to test each other, but you are trying to start a discussion.Word limit : 500 word. APA Format and include references, in-text citations.2) Select AT LEAST 3 other students’ threads and post substantive comments on those threads. Your comments should answer AT LEAST one of the questions posed in the thread and extend the conversation started with that thread. Make sure that you include the question in your comment so I can see what question you’re answering.I will provide the details on these peer posts contents from 3 students to which you need to write reply once the initial post is completed. Each reply should be of about 150 words each. The time limit two days is for initial post I will extend the time after the initial post is completedBLCN 532
Blockchain development
Chapter 11
Professor Michael Solomon
Chapter 11
• Hyperledger Fabric Security
• Security design goals
• Hyperledger Fabric
architecture
• Network bootstrap and
governance
• Strong identities
• Chaincode security
• Quantum computing
• General Data Protection
Regulation (GDPR)
considerations
Key
Security
Design
Goals
• Existing members
• Determine how to add new
members
• Determine how to update
config/smart contracts
• Ledger and chaincode can be scoped
• General purpose language used for
chaincode
• Guaranteed transaction integrity
• Align with industry standards
• Consensus separate from transaction
validation
• Universal pluggability
Hyperledger
Fabric
Architecture
FABRIC CA OR
MEMBERSHIP
PROVIDER
PEER
SMART
CONTRACT /
CHAINCODE
LEDGER
PRIVATE DATA
ORDERING
SERVICE
Hyperledger Fabric Architecture
The first step toward security
Network
Bootstrap
and
Governance
Creating the network
Adding new members
Deploying and updating
chaincode
Data model
Bootstrapping Fabric CA
Register
Default
Fabric
roles
Enroll
Revoking
identities
Strong Identities
Practical considerations
in managing users
Sharing chaincode
with other peers
Chaincode
Security
Installing chaincode
Encrypting chaincode
Attribute-based access
control
•
•
•
•
Spoofing
Tampering
Repudiation
Replay attacks
Common Security
Threats
•
•
•
•
Information disclosure
Denial of Service
Elevation of privileges
Ransomware
Channels
Transaction
Privacy
Private data
Encrypting
transaction data
Quantum Computing
Hyperledger Fabric
cryptography
Quantum computing
Elliptic curve cryptography
Digitally signs transactions
Options to plug in alternate provider
Emerging technology
Possibly may break existing cryptography
15-30 years away from maturity
European
Union’s General
Data Protection
Regulation (EU
GDPR)
GDPR
Considerations
Hyperledger
Fabric can
provide for
private data
Comprehensive
regulations to
protect personal
data privacy
However,
immutability
can cause issues
• GDPR requires
support to delete
data
Summary
• Hyperledger Fabric Security
• Security design goals
• Hyperledger Fabric
architecture
• Network bootstrap and
governance
• Strong identities
• Chaincode security
• Quantum computing
• General Data Protection
Regulation (GDPR)
considerations
Hands-On Blockchain with Hyperledger
Building decentralized applications with Hyperledger Fabric and Composer
Nitin Gaur
Luc Desrosiers
Venkatraman Ramakrishna
Petr Novotny
Dr. Salman A. Baset
Anthony O’Dowd
BIRMINGHAM – MUMBAI
Hands-On Blockchain with
Hyperledger
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Foreword
In my role as the chair of the Hyperledger Technical Steering Committee, I’ve
come to realize the great divide between the enormous hype surrounding
blockchain and the depth of understanding of how blockchain technology works,
where the technology is on the maturity curve, and how it might be leveraged in
the context of the enterprise.
Most of the hype relates to the cryptocurrency aspects of public, permission-less
blockchain—ICOs as a substitute for more traditional IPOs, and the potential for
disrupting traditional systems of banking, insurance, securities, and so on. It is
the potential for disruption and the asymmetric profits that disruption might
yield that have driven many to explore how blockchain might be used to one
company’s advantage over the rest of a given domain. However, what many are
discovering is that blockchain is a team sport, and for blockchain to be
successful in an enterprise, it demands a degree of industry collaboration not
seen before.
The authors of this book take you beyond the hype. They lay a solid foundation
for understanding the state of the technology landscape—including active and
incubating projects under development at Hyperledger. They provide you with a
framework for choosing the right technology platform, designing your solution,
and integration with existing systems. And they explain the various governance
models for establishing and operating a blockchain business network.
If you are an enterprise architect or developer tasked with developing a
blockchain solution for your enterprise or industry, this book is a must-read.
Cheers,
Christopher Ferris
IBM Distinguished Engineer, CTO Open Technology
IBM Digital Business Group, Open Technologies
Contributors
About the authors
Nitin Gaur, as the director of IBM’s Blockchain Labs, is responsible for
instituting a body of knowledge and organizational understanding around
blockchain technology and industry-specific applications. Tenacious and
customer focused, he is known for his ability to analyze opportunities and create
technologies that align with operational needs, catapult profitability, and
dramatically improve customer experience. He is also an IBM Distinguished
Engineer.
Luc Desrosiers is an IBM-certified IT architect with 20+ years of experience.
Throughout his career, he has taken on different roles: developer, consultant, and
pre-sales architect. He recently moved from Canada to the UK to work in a great
lab: IBM Hursley. This is where he had the opportunity to join the IBM
Blockchain team. He is now working with clients across multiple industries to
help them explore how blockchain technologies can enable transformative uses
and solutions.
Venkatraman Ramakrishna is an IBM researcher with 10 years of experience.
Following a BTech from IIT Kharagpur and PhD from UCLA, he worked in the
Bing infrastructure team in Microsoft, building reliable application deployment
software. At IBM Research, he worked in mobile computing and security before
joining the Blockchain team. He has developed applications for trade and
regulation, and is now working on improving the performance and privacypreserving characteristics of the Hyperledger platform.
Petr Novotny is a research scientist at IBM Research, with 15+ years of
experience in engineering and research of software systems. He received an MSc
from University College London and PhD from Imperial College London, where
he was also a post-doctoral research associate. He was a visiting scientist at the
U.S. Army Research Lab. At IBM, he works on innovations of blockchain
technologies and leads the development of blockchain solutions and analytical
tools.
Dr. Salman A. Baset is the CTO of security in IBM Blockchain Solutions. He
oversees the security and compliance of blockchain solutions being built by IBM
in collaboration with partners such as Walmart and Maersk, and interfaces with
clients on blockchain solutions and their security. He drives the implementation
of the General Data Protection Regulation for blockchain-based solutions. He
has also built the identity management system, used by Fortune 500 companies
involved in global trade digitization, and IBM Food Trust blockchain solutions.
Anthony O’Dowd works in IBM’s Blockchain team. He is based in Europe as
part of a worldwide team that helps users build solutions that benefit from
blockchain tech. Anthony has a background in middle and back office systems,
and has led the development of key IBM middleware in enterprise messaging
and integration. He likes to work in different industries to understand how they
can exploit middleware to build more efficient, integrated business systems.
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Table of Contents
Title Page
Copyright and Credits
Hands-On Blockchain with Hyperledger
Packt Upsell
Why subscribe?
PacktPub.com
Foreword
Contributors
About the authors
Packt is searching for authors like you
Preface
Who this book is for
What this book covers
To get the most out of this book
Download the example code files
Conventions used
Get in touch
Reviews
1.
Blockchain – Enterprise and Industry Perspective
Defining the terms – what is a blockchain?
Four core building blocks of blockchain framworks
Additional capabilities to consider
Fundamentals of the secure transaction processing protocol
Where blockchain technology has been and where it’s going
The great divide
An economic model for blockchain delivery
Learning as we go
The promise of trust and accountability
Industries putting blockchain technology to work
Blockchain in the enterprise
What applications are a good fit?
How does the enterprise view blockchain?
Litmus testing to justify the application of blockchain technology
Integrating a blockchain infrastructure for the whole enterprise
Enterprise design principles
Business drivers and evolution
Ensuring sustainability
The principles that drive blockchain adoption
Business considerations for choosing a blockchain framework
Technology considerations for choosing a blockchain framework
Identity management
Scalability
Enterprise security
Development tooling
Crypto-economic models
Decentralization with systemic governance
Enterprise support
Use case-driven pluggability choices
Shared ledger technology
Consensus
Crypto algorithms and encryption technology
Use case-driven pluggable choices
Enterprise integration and designing for extensibility
Other considerations
Consensus, ACID property, and CAP
CAP
ACID
Attestation – SSCs are signed and encrypted
Use of HSMs
Summary
2.
Exploring Hyperledger Fabric
Building on the foundations of open computing
Fundamentals of the Hyperledger project
The Linux Foundation 
Hyperledger
Open source and open standards
Hyperledger frameworks, tools, and building blocks
Hyperledger frameworks
Hyperledger tools
The building blocks of blockchain solutions
Hyperledger Fabric component design
Principles of Hyperledger design
CAP Theorem
Hyperledger Fabric reference architecture
Hyperledger Fabric runtime architecture
Strengths and advantages of componentized design
Hyperledger Fabric – the journey of a sample transaction
Hyperledger Fabric explored
Components in a blockchain network
Developer interaction
Understanding governance in business networks powered by blockchain
Governance structure and landscape
Information technology governance
Blockchain network governance
Business network governance
Summary
3.
Setting the Stage with a Business Scenario
Trading and letter of credit
The importance of trust in facilitating trade
The letter of credit process today
Business scenario and use case
Overview
Real-world processes
Simplified and modified processes
Terms used in trade finance and logistics
Shared process workflow
Shared assets and data
Participants’ roles and capabilities
Benefits of blockchain applications over current real-world processes
Setting up the development environment
Designing a network
Installing prerequisites
Forking and cloning the trade-finance-logistics repository
Creating and running a network configuration 
Preparing the network
Generating network cryptographic material
Generating channel artifacts
Generating the configuration in one operation
Composing a sample trade network
Network components’ configuration files
Launching a sample trade network
Summary
4.
Designing a Data and Transaction Model with Golang
Starting the chaincode development
Compiling and running chaincode
Installing and instantiating chaincode
Invoking chaincode
Creating a chaincode
The chaincode interface
Setting up the chaincode file
The Invoke method
Access control
ABAC
Registering a user
Enrolling a user
Retrieving user identities and attributes in chaincode
Implementing chaincode functions
Defining chaincode assets
Coding chaincode functions
Creating an asset
Reading and modifying an asset
Main function
Testing chaincode
SHIM mocking
Testing the Init method
Testing the Invoke method
Running tests
Chaincode design topics
Composite keys
Range queries
State queries and CouchDB
Indexes
ReadSet and WriteSet
Multiversion concurrency control
Logging output
Configuration
Logging API
SHIM logging levels
Stdout and stderr
Additional SHIM API functions
Summary
5.
Exposing Network Assets and Transactions
Building a complete application
The nature of a Hyperledger Fabric application
Application and transaction stages
Application model and architecture
Building the application
Middleware – wrapping and driving the chaincode
Installation of tools and dependencies
Prerequisites for creating and running the middleware
Installation of dependencies
Creating and running the middleware
Network configuration
Endorsement policy
User records
Client registration and enrollment
Creating a channel
Joining a channel
Installation of chaincode
Instantiation of chaincode
Invoking the chaincode
Querying the chaincode
Completing the loop – subscribing to blockchain ev
ents
Putting it all together
User application – exporting the service and API
Applications
User and session management
Designing an API
Creating and launching a service
User and session management
Network administration
Exercising the application
User/client interaction modes
Testing the Middleware and Application
Integration with existing systems and processes
Design considerations
Decentralization
Process alignment
Message affinity
Service discovery
Identity mapping
Integration design pattern
Enterprise system integration
Integrating with an existing system of record
Integrating with an operational data store
Microservice and event-driven architecture
Considering reliability, availability, and serviceability
Reliability
Availability
Serviceability
Summary
6.
Business Networks
A busy world of purposeful activity
Why a language for business networks?
Defining business networks
A deeper idea
Introducing participants
Types of participant
Individual participants
Organizational participants
System or device participants
Participants are agents
Participants and identity
Introducing assets
Assets flow between participants
Tangible and intangible assets
The structure of assets
Ownership is a special relationship
Asset life cycles
Describing asset’s life cycles in detail with transactions
Introducing transactions
Change as a fundamental concept
Transaction definition and instance
Implicit and explicit transactions
The importance of contracts
Signatures
Smart contracts for multi-party transaction processing
Digital transaction processing
Initiating transactions
Transaction history
Transaction streams
Separating transactions into different business networks
Transaction history and asset states
A business network as a history of transactions
Regulators and business networks
Discussing events from the perspective of designing a business network using Co
mposer
A universal concept
Messages carry event notifications
An example to illustrate event structure
Events and transactions
External versus explicit events
Events cause participants to act
Loosely coupled design
The utility of events
Implementing a business network
The importance of de-materialization
Blockchain benefits for B2B and EDI
Participants that interact with the blockchain
Accessing the business network with APIs
A 3-tier systems architecture
Hyperledger Fabric and Hyperledger Composer
Summary
7.
A Business Network Example
The letter of credit sample
Installing the sample
Running the sample
Step 1 – preparing to request a letter of credit
Step 2 – requesting a letter of credit
Step 3 – importing bank approval
Step 4 – exporting bank approval
Step 5 – letter received by exporter
Step 6 – shipment
Step 7 – goods received
Step 8 – payment
Step 9 – closing the letter
Step 10 – Bob receives payment
Recapping the process
Analyzing the letter of credit process
The Playground
Viewing the business network
A description of the business network
The participant descriptions
The asset descriptions
The transaction descriptions
The event descriptions
A model of the business network
Namespaces
Enumerations
Asset definitions
Participant definitions
Concept definitions
Transaction definitions
Event definitions
Examining the live network
Examining a letter of credit instance
Examining participant instances
Examining transaction instances
Submitting a new transaction to the network
Understanding how transactions are implemented
Creating business network APIs
SWAGGER API definitions
Querying the network using SWAGGER
Testing the network from the command line
Creating a new letter using SWAGGER
Network cards and wallets
Access-control lists
Summary
8.
Agility in a Blockchain Network
Defining the promotion process
Smart contract considerations
Integration layer considerations
Promotion process overview
Configuring a continuous integration pipeline
Customizing the pipeline process
Local build
Configuring Travis CI
Customizing the pipeline using .travis.yml
Publishing our smart contract package
Configuring your Git repository
Setting the code owners of our smart contract
Sample content of the CODEOWNERS
Protecting the master branch
Configuring Git for commit signing and validation
Configuring GPG on your local workstation
Testing the end-to-end process
Creating a new transaction
Pushing a commit to the master branch directly
Submitting a pull request with an unsigned commit
Adding test cases
Submitting a pull request with a signed commit
Adding the mergeAssets unit test
Releasing the new version
Updating the network
Notifying the consortium
Upgrading the business network
Downloading a new version
Updating the business network
Summary
9.
Life in a Blockchain Network
Modifying or upgrading a Hyperledger Fabric application
Fabric blockchain and application life cycle
Channel configuration updates
Prerequisites for adding a new organization to the network
Generating network cryptographic material
Generating channel artifacts
Generating the configuration and network components in one operation
Launching the network components for the new organization
Updating the channel configuration
Adding the new organization to the network
Smart contract and policy updates
Modification in chaincode logic
Dependency upgrades in chaincode
Ledger resetting
Endorsement policy update
Upgrading chaincode and endorsement policy on the trade channel
Platform upgrades
System monitoring and performance
Measurement and analytics
What should we measure or understand in a Fabric application
Blockchain applications vis-à-vis traditional transaction proce
ssing applications
Metrics for performance analysis
Measurement and data collection in a Fabric application
Collecting health and capacity information
Profiling containers and applications
Measuring application performance
Fabric engineering guidelines for performance
Platform performance characteristics
System bottlenecks
Configuration and tuning
Ledger data availability and caching
Redundant committing peer
Data caching
Fabric performance measurement and benchmarking
Summary
10.
Governance, Necessary Evil of Regulated Industries
Decentralization and governance
Exploring the business models
Blockchain benefits
Supply chain management
Healthcare
Finance – letter of credit
From benefits to profits
Network business model
Founder-led network
Consortium-based network
Community-based network
Hybrid models
Joint venture
New corporation
Role of governance in a business network
Business domains and processes
Membership life cycle
Funding and fees
Regulation
Education
Service life cycle
Disputes
Governance structure
Centralized governance
Strategic governance
Operational governance
Tactical governance
Decentralized governance
Governance and the IT solution
Managed on-boarding
Summary
11.
Hyperledger Fabric Security
Hyperledger Fabric design goals impacting security
Hyperledger Fabric architecture 
Fabric CA or membership service provider
Peer
Smart contract or chaincode
Ledger
Private data
Ordering service
Network bootstrap and governance – the first step towards security
Creating the network
Adding new members
Deploying and updating chaincode 
Data model
Strong identities – the key to the security of the Hyperledger Fabr
ic network
Bootstrapping Fabric CA
Register
Default Fabric roles 
Enroll
Which crypto protocols are allowed in certificate signing requ
ests?
Revoking identities 
Practical considerations in managing users in Fabric CA
Chaincode security
How is chaincode shared with other endorsing peers?
Who can install chaincode?
Chaincode encryption
Attribute-based access control
Pros and cons of attribute-based access control
Common threats and how Hyperledger Fabric mitigates them 
Transaction privacy in Hyperledger Fabric
Channels
Private data
Encrypting transaction data
Hyperledger Fabric and Quantum Computing
General data protection regulation (GDPR) considerations
Summary
12.
The Future of Blockchain and the Challenges Ahead
Summary of key Hyperledger projects
Hyperledger framework – business blockchain technology
Hyperledger tools
Hyperledger Composer
The road ahead for Blockchain
Addressing the divide – the enterprise blockchain and crypto asset
-driven ecosystem
Interoperability – understanding business service integration
Scalability and economic viability of the blockchain solution 
Staying engaged with the Hyperledger blockchain 
Summary
Other Books You May Enjoy
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Preface
We would like to thank our readers in taking time to consume our collective
body of work that is representative of our practice, experience, and knowledge
gained along the way. This book was motivated by the desire that we and others
have had to contribute to the evolution of blockchain technologies. We were also
challenged by a lack of a comprehensive guide that addresses myriad
considerations, including but not limited to technology design choices,
architecture choice, business consideration, and governance models. The authors
of this book represent a unique and diverse set of skills, which should be evident
in addressing the depth of the content with ease and simplicity. We have
collectively focused on organization and flow to ensure not only an easy-tofollow and natural flow but also topical modularity.
The contents of this book are aimed to address a diverse audience, from business
leaders to blockchain developers and anyone who would like to learn from
practitioners’ experience expressed in this book. We believe that not only will the
audience enjoy and benefit personally and professionally from the book, but also
this book will be used as reference material, a handbook of sorts, and aid in
making informed design decisions. We encountered various challenges while
writing this book, including our own demanding schedule, but ensured that we
deliver up-to date information at the time of release of this content. Blockchain
technology landscape is in flux and keeping up with evolution and innovation is
a challenge. We have attempted to distill a model that will benefit the reader to
create a framework to methodically consume blockchain-related update and
build upon the foundation laid out in this book. We have also expended a lot of
energy in addressing business design and resulting technology design choices,
because unlike other pure technology platforms Blockchain (powered business
network), is a very business-specific and technology-centric discipline. We hope
the findings and documented considerations from practitioners will arm business
leaders and technology managers in making informed decisions and minimizing
the failures experienced by the authors.
The technical content covered in this book, aims to provide a solid foundation to
a diverse set of skills, including IT professionals, blockchain novices, and
advanced blockchain developers. Modeled after a real-world use case, the
application development story weaves in various steps from infrastructure
creation to Dev-Ops models and model-driven development, covering various
enterprise technology management challenges with a focus on the blockchain
network-centric impact of application deployment. We have provided a
framework for security and performance design, which we hope the technical
audience find particularly helpful and establish a solid foundation as a
technology design consideration.
We’ll conclude the book with a pragmatic view of various challenges and related
opportunities, and call for the community of readers to rise up to the challenges
and reap the rewards of the resulting opportunities. While this book focuses on
and targets Hyperledger projects, we expect the core topics covered in this book
to be universally applicable to the blockchain technology discipline. We
sincerely hope that our effort in time and acumen is well received by our readers
and arm them with a strong foundation to make impactful contributions to
progressing the blockchain innovation agenda.
Who this book is for
The book benefits business leaders as it provides a comprehensive view on
blockchain business models, governance structure, and business design
considerations of blockchain solutions. Technology leaders stand to gain a lot
from the detailed discussion around the technology landscape, technology
design, and architecture considerations in the book. With model-driven
application development, this guide will speed up understanding and concept
development for blockchain application developers. The simple and well
organized content will put novices at ease with blockchain concepts and
constructs.
What this book covers
, Blockchain – Enterprise and Industry Perspective, you’ve heard about
blockchain and you are wondering, What is all the fuss about? In this chapter, we
explore why blockchain is a game changer, what innovation it brings, and what
the technology landscape is.
Chapter 1
, Exploring Hyperledger Fabric, with an understanding of the
blockchain landscape, we turn our attention to Hyperledger Fabric. The aim of
this chapter is to walk you through the deployment of each component of
Hyperledger Fabric while unveiling/building the architecture.
Chapter 2
, Setting the Stage with a Business Scenario, describes a business use
case and then focuses on understanding the process of creating a good business
network using blockchain from requirements to design.
Chapter 3
, Designing a Data and Transaction Model with Golang, aims to define
what makes up a smart contract in Hyperledger Fabric. It will also introduce you
to some terms regarding smart contracts and get you to experience the
development of a chaincode using the Go language.
Chapter 4
, Exposing Network Assets and Transactions, leveraging the smart
contract written in the previous chapter, this chapter looks at the required
integration of application to the network. It takes the readers through the process
of configuring a channel, and installing and invoking chaincode, from a client
application and considers the various integration patterns that might be used.
Chapter 5
, Business Networks, has an objective to introduce and uncover the skills
and tools needed to model a business network. Working at a higher level of
abstraction, the foundation, tools, and framework will provide the reader with a
way to quickly model, design, and deploy a complete end-to-end business
network.
Chapter 6
, A Business Network Example, putting the concepts of Chapter 6 into
practice, this chapter walks through the steps to deploy a full business network
from end user application to smart contracts.
Chapter 7
, Agility in a Blockchain Network, focuses on the aspects required to
maintain agility in a blockchain network. Applying DevOps concepts, the reader
is presented with a continuous integration / continuous delivery pipeline.
Chapter 8
, Life in a Blockchain Network, aims to raise the reader’s awareness on
the key activities and challenges that organizations and consortium may face
when adopting a distributed ledger solution, ranging from management of
application changes to maintenance of adequate performance levels. A
successful network deployment will hopefully see many organizations join it and
the number of transactions increase.
Chapter 9
, Governance –The Necessary Evil of Regulated Industries, governance
is a necessary evil for regulated industries, but governance is not required
only for business network that deal with use cases for regulated industries. It is
also a good practice to ensure longevity and scalability of a business network.
This chapter explores vital considerations for production readiness for any
founder-led blockchain network.
Chapter 10
, Hyperledger Fabric Security, lays the foundation for security design
of blockchain networks. Various security constructs are discussed and
Hyperledger Fabric security is explained in detail. An essential chapter to
understand security design considerations.
Chapter 11
, The Future of Blockchain and the Challenges Ahead, looks ahead and
discusses the challenges and opportunities that lie ahead. Through the use of
open technologies, it invites readers to engage in and promote the blockchain
innovation agenda.
Chapter 12
To get the most out of this book
1. We’ve focused on organization and flow. The content is made to ensure not
only an easy-to-follow and natural flow but also topical modularity.
2. Each chapter explores a facet of blockchain. While Hyperledger projects
are specifically discussed, the core areas of focus are universal to
blockchain technology discipline.
3. Explore the summary and tips in each chapter to get an essence of topics
covered.
4. There are chapters that provide general blockchain business and technology
landscape discussions, and there are chapters that go into specific technical
how-to. Both are important topics to broaden your knowledge base.
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WinRAR/7-Zip for Windows
Zipeg/iZip/UnRarX for Mac
7-Zip/PeaZip for Linux
The code bundle for the book is also hosted on GitHub at https://github.com/PacktPu
blishing/Handson-Blockchain-Development-with-Hyperledger. We also have other code
bundles from our rich catalog of books and videos available at https://github.com/P
acktPublishing/. Check them out!
Conventions used
There are a number of text conventions used throughout this book.
: Indicates code words in text, database table names, folder names,
filenames, file extensions, path names, dummy URLs, user input, and Twitter
handles. Here is an example: “The orderer belongs to its own organization
called TradeOrdererOrg.”
CodeInText
A block of code is set as follows:
– &ExporterOrg
Name: ExporterOrgMSP
ID: ExporterOrgMSP
MSPDir: crypto-config/peerOrganizations/exporterorg.trade.com/msp
AnchorPeers:
– Host: peer0.exporterorg.trade.com
Port: 7051
Any command-line input or output is written as follows:
CONTAINER ID
IMAGE
COMMAND
CREATED
STATUS
PORTS
NAMES
4e636f0054fc
hyperledger/fabric-peer:latest
“peer node start”
3 minutes ago
Up 3 minutes
0.0.0.0:9051->7051/tcp, 0.0.0.0:9053->7053/tcp
peer0.carrierorg.trade.com
28c18b76dbe8
hyperledger/fabric-peer:latest
“peer node start”
3 minutes ago
Up 3 minutes
0.0.0.0:8051->7051/tcp, 0.0.0.0:8053->7053/tcp
peer0.importerorg.trade.com
9308ad203362
hyperledger/fabric-ca:latest
“sh -c ‘fabric-ca-se…”
3 minutes
ago
Up 3 minutes
0.0.0.0:7054->7054/tcp
ca_peerExporterOrg
Bold: Indicates a new term, an important word, or words that you see onscreen.
For example, words in menus or dialog boxes appear in the text like this. Here is
an example: “You can apply for a letter of credit by clicking on
the Apply button.”
Warnings or important notes appear like this.
Tips and tricks appear like this.
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Blockchain – Enterprise and Industry
Perspective
Blockchain promises to fundamentally solve the issues of time and trust to
address inefficiencies and costs in industries such as financial services, supply
chains, logistics, and healthcare. Blockchain’s key features include immutability
and a shared ledger where transactional updates are performed by a consensusdriven trust system, which can facilitate a truly digital interaction between
multiple parties.
This digital interaction is not only bound by systemic trust, but ensures that the
provenance of the transactional record maintains an immutable track record of
interaction between parties. This very characteristic lends itself to culpability
and non-repudiation, and incentivizes fair play. With the blockchain system
design, we are attempting to build a system that has implied trust. This trust
system leads to reduced risks, and various applied technology constructs such as
a cryptography, encryption, smart contracts, and consensus essentially create
gates to not only reduce risk but to also infuse added security into the transaction
system.
We will be covering the following aspects of blockchain in our discussion for
this chapter:
Defining a blockchain
Building blocks of blockchain solutions
Fundamentals of the secure transaction processing protocol
Applications of blockchain
Blockchain in an enterprise
Enterprise design principles
Business considerations for choosing a blockchain framework
Considerations for choosing a blockchain framework
Defining the terms – what is a
blockchain?
At a technical level, a blockchain can be defined as an immutable ledger for
recording transactions, maintained within a distributed network of mutually
untrusting peers. Every peer maintains a copy of the ledger. The peers execute a
consensus protocol to validate transactions, group them into blocks, and build a
hash chain over the blocks. This process forms the ledger by ordering the
transactions as is necessary for consistency. Blockchains have emerged with
bitcoin (http:// bitcoin.org/) and are widely regarded as a promising technology
to run trusted exchanges in the digital world.
A blockchain supporting a cryptocurrency is public, or permissionless, in the
sense that anyone can participate without a specific identity. Such blockchains
typically use a consensus protocol based on proof of work (PoW) and economic
incentives. In contrast, permissioned blockchains have evolved as an alternative
way to run a blockchain between a group of known, identified participants. A
permissioned blockchain provides a way to secure interactions between a group
of entities who share a mutual goal but don’t fully trust each other, such as
businesses that exchange funds, goods, or information. A permissioned
blockchain relies on the identities of its peers, and in so doing can use the
traditional Byzantine-fault tolerant (BFT) consensus. BFT is a protocol that
has been widely used in IT solutions to reach a consensus on the state of faulty
nodes of a network. This protocol is based on the Byzantine General’s Problem,
whereby a group of general need to reach a consensus on their strategy but one
of them maybe treacherous.
Blockchains may execute arbitrary, programmable transaction logic in the form
of smart contracts, as exemplified by Ethereum (http://ethereum.org/). The scripts
in bitcoin were predecessors of this concept. A smart contract functions as a
trusted, distributed application and gains its security from the blockchain and
underlying consensus among its peers.
Discerning permissions from a permissionless blockchain is vital for enterprises
looking to utilize the blockchain platform. The use case dictates the choice of
technology, which depends on consensus systems, governance models, data
structure, and so on. With permissioned blockchains, we can do some of the
things we already do but in an incrementally better way, which can be
significant. In the chart that follows, you can see how a consortium of banks
could use Hyperledger, a type of permissioned blockchain, for clearing and
settlement without relying on a central clearing house:
Clearing house have been created because banks do not fully trust each other and
thus as the intermediary between trades, reduces the risk the one party does not
honor his terms leads to a never-ending debate around permissioned versus
permissionless blockchains, and while this chapter will not address the debate,
blockchain can present a way to either transform or disrupt the current business
and business models. Most use cases in regulated industries embark on
permissioned blockchain models.
This is due to regulatory requirements and the economic viability of transaction
processing, and while permissionless blockchains provide a platform for new
business models such as Peer-to-Peer (P2P) transactions and disintermediationled models, by definition permissionless blockchain architecture relies on a very
compute-intensive compute model to ensure transactional integrity. Regardless
of the choice in blockchain models, blockchain provides a lot of possibilities for
transformation and disruption.
Blockchain has extraordinary potential as a technology platform. In the
enterprise, blockchain can provide:
A design approach that keeps transaction data, value, and state inherently
close to the business logic
Secure execution of business transactions, validated through a community,
in a secure process that facilities the trust and robust transaction processing
that are foundational to blockchain
An alternative, permissioned technology that conforms to existing
regulations
Blockchain promises to solve longstanding industry concerns—and this is where its potential
can really be seen, with issues such as modernizing financial and trade systems, and speeding
up securities and trade settlements.
Four core building blocks of
blockchain framworks
Blockchain frameworks typically include the following four building blocks:
A shared ledger: The shared ledger appends only the distributed
transaction record. Bitcoin blockchain was designed with the intent to
democratize visibility; however, with blockchain, consumer data
regulations also need to be considered. Using a properly configured SQL or
noSQL distributed database can achieve immutability, or append-only
semantics.
Cryptography: Cryptography in a blockchain ensures authentication and
verifiable transactions. Blockchain design includes this imperative because
of the focus on assuming computational hardness and making encryption
harder for an adversary to break. This is an interesting challenge with
bitcoin blockchain because of the economic incentive and its system design.
When you’re working in a less democratic or permissioned business ledger
network, considerations around cryptography change.
Trust systems or consensus: Trust systems refer to using the power of the
network to verify transactions.
Trust systems are central to blockchain systems in my view; they are at the
heart of blockchain applications, and we believe trust system is the
preferred term over consensus system since not all validation is done
through consensus. This foundational element of trust dictates the overall
design and investment in a blockchain infrastructure. With every new
entrant in the blockchain space, the trust system is modified, forming
variations that are specialized for specific blockchain use cases. Trust,
trade, and ownership are staples of blockchain technology. For intercompany transactions, the trust system governs transactions for trade
between participating companies.
Much work still needs to be done to define the best trust system for specific
use cases, such as P2P and sharing economy models with B2B models.
Business rules or smart contracts: Smart contracts are the business terms
that are embedded in a blockchain transaction database and executed with
transactions. This is also the rules component of a blockchain solution. It is
needed to define the flow of value and state of each transaction.
The following use diagram gives a good idea of these concepts:
The four building blocks are generally accepted and well understood. They have
existed for decades prior to blockchain. Shared ledgers are an evolutionary
change, similar to the move to computer-based spreadsheets, but the underlying
business rules have stayed the same.
Additional capabilities to consider
What else should be included in enterprise blockchain proposals? Here is a nonexhaustive list of other capabilities to consider:
Auditing and logging: Including auditing and logging in a blockchain
solution can help with addressing regulations for the purposes of nonrepudiation, technology root cause analysis, fraud analysis, and other
enterprise needs.
Enterprise integration: It’s also worth considering how the solution will be
integrated into the enterprise:
Integration with the incumbent Systems of Record (SoR): The goal
here is to ensure that the blockchain solution supports your existing
systems such as CRM, business intelligence, reporting and analytics,
and so forth
Integration as a transaction processing system: If you want to
preserve the system of record as an interim approach to adopting
blockchain, integrating it as a transaction processing system makes
sense
Design with the intent to include blockchain: The path of least
disruption to your existing systems will accelerate enterprise adoption
of blockchain
Monitoring: Monitoring is an important capability for addressing
regulations and ensuring high availability, capacity planning, pattern
recognition, and fault identification.
Reporting and regulatory requirements: Being prepared to address
regulatory issues is also very important, even for interim adoption of a
blockchain as a transaction processing system. It’s recommended that you
make connectors to your existing SoR to offload reporting and regulatory
requirements until blockchain is enterprise-aware, or the enterprise software
is blockchain-aware.
Enterprise authentication, authorization, and accounting requirements:
In a permissioned enterprise world (unlike permissionless bitcoin
blockchains), all blockchain network participants should be identified and
tracked. Their roles need to be defined if they are to play a part in the
ecosystem.
Fundamentals of the secure
transaction processing protocol
We mentioned previously that cryptography is one of the core building blocks of
a blockchain solution. The fundamental security of the bitcoin blockchain is the
elegant cryptographical linkage of all major components of the ledger.
Specifically, transactions are linked to each other, mainly through the Merkle
tree. A Merkle tree is based on the concept of a tree data structure where every
leaf node has a hash calculated of its data and where the non-leaf node have a
hash of all of their underlying child. This method provides a way to ensure the
integrity of the data, but also provides privacy characteristics by allowing one to
remove a leaf that is deemed private but leave the hash, thereby preserving the
integrity of the tree. The Merkle tree has its roots incorporated into the block
header. The block header includes a reference to the block headers that precede
it.
That cryptographically enforced interconnectivity fosters the stability and
security of distributed ledgers. At any point, if a link between any of the
components is broken, it leaves them exposed to malicious attacks:
Transactions are also cryptographically connected to the rest of the blockchain
structure, mainly through the Merkle tree. Once a transaction is modified within
a block, with all other parts remaining stable, the link between all transactions of
the block and its header are broken:
The new resulting Merkle tree root does not match the one already in the block
header, hence providing no connectivity to the rest of the blockchain. If we
proceed to change the Merkle tree root in the block’s header, we will in turn
break the chain of headers and thus the security model of the blockchain itself.
Therefore, if we only change the contents of a block, the rest of the blockchain
components remain stable and secure, especially as the block headers provide
the connecting links by including a hash of the previous block header in the
header of the next block.
Where blockchain technology has
been and where it’s going
Blockchain has already been a business disruptor, and I expect it to significantly
transform industries, the government, and our lives in the near future.
The great divide
A significant divided exists between the cryptocurrency and Initial Coin
Offering (ICO) world, and the world of regulated business. The latter consists
of banks and financial institutions working collectively to assess market
potential and operational efficiencies.
Both sides of this division have taken advantage of the momentum around
blockchain to further their interests. The blockchain ecosystem has challenged
the status quo and defied all odds to make a point—often behaving like an
adolescent. It is driven by new business models, promises of disintermediation,
and interesting technological innovations. As blockchain gains momentum, the
value of bitcoin and other cryptoassets is seeing a meteoric rise, and now that
ICO has emerged, it has defied the traditional regulatory framework around
fundraising.
On the enterprise side, there are a growing number of industry initiatives around
clearing and settlement to enable faster settlement and interbank transfers,
transparency through digitization, symmetric dissemination of information in
supply chains, and creating adhoc trust between Internet of Things (IoT)
devices.
There’s a common theme here—that blockchain is here to stay. As it continues to
evolve and generate innovative solutions for industry use cases, it will keep
inching towards maturity and deliver on its promises of efficiency and
significant cost savings built on the foundation of trust.
An economic model for blockchain
delivery
Business networks, underpinned by blockchain technology, may bring
transformation or disruption to industries, but in any case, in order to thrive,
blockchain needs an economic model. If disruption is the aim, investments in
technology, talent, and market synergy can be combined with the lure of
economic incentives. ICOs, for example, typically rely on tokenomics, a term
that describes the economic system of value generation in those networks. The
token is the unit of value created by the system or network, either through
making a platform for providers or consumers, or through co-creating a selfgoverning value network in its business model that various entities can use to
their advantage for creating, distributing, and sharing rewards that benefit all
stakeholders.
The ICO front, largely funded by cryptocurrencies, has defied current
fundraising mechanisms in venture capitalism (led by crowdfunding projects),
and, importantly, the struggle to discern the difference between a security and
utility coin is disruptive in principle.
ICOs are looking to create an economic system built on the principles of
decentralization, open governance (or self-governance), and transparency, a
system that rewards innovation and eradicates disintermediation. ICOs saw some
initial failures and some successes, but they nevertheless provided a preview of
the future, where cryptoassets will become a basic unit of value—with valuation
and fungibility defined by the network they originate from—fueling an economy
built for and around innovation.
On the enterprise front, there’s been more focus on understanding the technology
and reimagining ecosystems, business networks, regulations, confidentiality and
privacy, and the business models that impact blockchain networks in various
industries. Enterprises looking to explore blockchain want to see quick proof
points, use cases that can demonstrate results quickly and help them innovate
with blockchain.
Blockchain is helping industries move to a more symmetric dissemination of
information by providing built-in control of transactional data, provenance, and
historical context. This can lead to more efficient workflows and transformed
business processes. Many early projects, however, didn’t focus on the core tenets
of blockchain, leading to disintermediation, decentralization, and robust selfgovernance models. There’s a good reason for it, though: industries and
conventional businesses tend to be focused on their current business agenda,
models, growth, and preceding all, regulatory compliance and adherence. This
emphasis on current business operations means they’re not naturally inclined
towards disruptive models.
Learning as we go
With any new technology, there is always a learning curve. As blockchain
evolved and we began to work with regulated industries, we quickly recognized
that in such industries, there are important design considerations to address,
things such as confidentiality, privacy, scalability, and performance. These
elements can have significant cost implications when it comes to designing
blockchain networks, as well as the business models that govern these networks.
These challenges have not only been interesting to solve; they’ve had a positive
effect on conventional, regulated industries and businesses by re-energizing
innovation in these organizations and inviting the best talent to join in tackling
these challenges. Businesses are seeing that ecosystems and networks driven by
blockchain technology will contribute to progress and success.
Permissioned networks (regulated, conventional, and enterprise business
networks) may also need to begin uncovering an incentive model to motivate
organizations to join a platform that promotes the idea of creation, distribution,
and sharing of rewards, benefiting all stakeholders. The economic incentives
behind tokenomics can’t be blindly adopted by a lot of conventional businesses
and industries, but that doesn’t mean those industries shouldn’t start the journey
of exploring possible business models that will enable value creation and elevate
some desperately needed modernization efforts.
The promise of trust and
accountability
Blockchain technology promises to be the foundation for a secure transaction
network that can induce trust and security in many industries that are plagued
with systemic issues around trust and accountability. From a technology point of
view, blockchain facilitates a system of processing and recording transactions
that is secure, transparent, auditable, efficient, and immutable. These technology
characteristics lend themselves to addressing the time and trust issues that
current-day distributed transaction systems are plagued with.
Blockchain fundamentally shifts the multi-tier model to a flat-tier transaction
processing model. This carries the promise to fundamentally disrupt industries
by disintermediation, by inducing efficacy in new system design or simply by
creating new business models.
Disintermediation indicates reducing the use of intermediaries between
producers and consumers, such as by investing directly in the securities market
rather than going through a bank. In the financial industry, every transaction has
historically required a counter party to process the transaction. Disintermediation
involves removing the middleman, which by definition disrupts the business
models and incentive economies that are based on mediation. There’s been a
wave of disruption in recent years as a result of digital technologies, which have,
in turn, been driven by marketing insights and the desire for organizations to
provide a richer user experience.
Blockchain is a technology that aims to catapult this disruption by introducing
trade, trust, and ownership into the equation. The technology pattern represented
by blockchain databases and records has the potential to radically improve
banking, supply chains, and other transaction networks, providing new
opportunities for innovation and growth while reducing cost and risk.
Industries putting blockchain
technology to work
Let’s briefly look into blockchain use cases:
Blockchain in the enterprise
Now that we’ve looked at where blockchain is emerging in various industries,
let’s talk about what principles should guide the use of blockchains in an
enterprise. Why would an enterprise want to apply blockchain technology to one
of its systems or applications?
What applications are a good fit?
Organizations will need to establish criteria for use during the application design
process to help them assess where they can best apply blockchain technology.
The following are some examples of criteria that could help an enterprise
determine which applications or systems would benefit from it:
Applications that adhere to trade, trust, and ownership: As described
previously, these three tenets—trade, trust and ownership—are fundamental
to any blockchain system. Trade and ownership imply the churn and the
transfer of ledger entries, while trust points to the trustless nature of a
transaction system.
Applications that are fundamentally transactional in nature: There is
often a debate about why we can’t achieve the benefits of blockchain from a
distributed database, that is, a no-SQL or a relational database. But a multiparty transaction is what makes an application suitable for blockchain.
There needs to be long-running processes with numerous microtransactions that will be verified and validated by the blockchain-powered
transaction system. However, databases can still be used for persistence or
replication to fit enterprise systems. Other considerations include small data
set sizes that could increase over time, logging overhead, and so on.
Business networks that are comprised of non-monopolistic
participants: This third criteria addresses distributed versus decentralized
computation models. Blockchain trust systems can work within any model;
however, the trust aspect of a blockchain business network comes from
multi-party participants with non-monopolistic participation (the
consortium permissioned network model). Oligopolistic participation might
be acceptable (the private permissioned network model), but it’s essential to
devise a trust model that assures the prevention of centralized control, even
with rational behavior of the participants. Many internal use cases do not
adhere to this principle and are more for distributed application models.
For enterprises trying to either understand or determine where to employ
blockchain meaningfully, there’s a simple approach to thinking through use case
selection. An appropriate use case for a sustainable blockchain solution will
achieve long-term business objectives and provide a strong return on technology
investment.
This starts with an enterprise problem—an issue big enough for the enterprise
to expend resources/time—and the recognition of cohorts that have the same
problem. When companies realize that an enterprise problem is also an industry
problem (such as security lending, collateral lending, and so on), they’ve found
a use case where the promise of blockchain has the most potential.
While organizations are determining the benefits of various aspects of
blockchain for their enterprise applications, they also need to recognize the
fragmentation of the whole blockchain landscape. There are numerous
innovative approaches available for solving a specific challenge with blockchain.
A lot of vendors offer variants of the trust system that are specialized to address
particular use cases, and they’ve defined the use cases that will benefit most from
blockchain in a given industry, for example. Such specialized vendors often
promise a fast solution to meet consumer demands for quick digital interactions.
The tenets of blockchain can be instrumental in delivering rapid consumerdriven outcomes such as decentralized, distributed, global, permanent, codebased, programmable assets, and records of transactions. We should exercise
caution with regards to thinking of blockchain as a hammer to solve every
enterprise application challenge, but it can be of use in many transactional
applications.
Now, let’s discuss how blockchain is perceived in the enterprise and some of the
challenges that arise with enterprise adoption of the technology. In the following
section, I’ll focus on three areas that help set the tone for blockchain in an
enterprise context.
How does the enterprise view
blockchain?
Radical openness is an aspect of blockchain as a digital trust web, but in an
enterprise, it’s vital to consider the impact and implications of radical openness.
A public blockchain can operate with extreme simplicity, supporting a highly
distributed master list of all transactions, which is validated through a trust
system supported by anonymous consensus. But can enterprises directly apply
the model of the trustless system without modifying the fundamental tenets of
blockchain?
Do organizations view this disruptive technology as a path to their
transformation or merely a vehicle to help them improve their existing processes
to take advantage of the efficiencies that the trust system promises? No matter
what, enterprises will want the adoption of blockchain to be as minimally
disruptive to the incumbent system as it can be, and that won’t be easy to
achieve! After all, the design inefficiencies of the incumbent system are what
have compelled the enterprise to consider this paradigm shift. A lot of the
concepts and use cases for blockchain are still distant from enterprise
consumption.
The first industry to experiment with and adopt blockchain was the financial
services sector, as it has been facing down the fear of being disrupted by another
wave of start-ups. Like many industries, it is also driven by consumer demands
for faster, lower-cost transactions. Financial services has a well-defined set of
use cases including trade financing, trade platform, payment and remittance,
smart contracts, crowd funding, data management and analytics, marketplace
lending, and blockchain technology infrastructure. The uses for blockchain
we’ve seen in this industry will likely permeate to other industries such as
healthcare, retail, and the government in the future.
The blockchain is a nascent technology that brings together a lot of good ideas,
but it still has some maturing to do for enterprise use. The lack of defined
standards to promote interoperability between multi-domain chains could be a
challenge. Enterprises that adopt it will therefore need to build competency so
that they can contribute to further innovation and help with necessary blockchain
standards development. This, in turn, could help bring unique opportunities to
both improve existing business practices and develop new business models built
in a blockchain-powered trust web:
Litmus testing to justify the
application of blockchain technology
Fundamentally, blockchain addresses three aspects of the transaction economy:
Trade
Ownership
Trust
The notable technology elements of blockchain are:
Technology behind the trust system: Consensus, mining, and the public
ledger
Secret communication on open networks: Cryptography and encryption
Non-repudiation systems: Visibility to stacks of processes
While the implications of blockchain technology may be profound, organizations
should devise a set of enterprise-specific criteria that can be applied to existing
or new projects that may gravitate towards enterprise blockchains.
Given the versatility of blockchain technology and the current hype curve,
enterprises should use a chain decision matrix as a tool to ensure that they have a
structured approach to apply a foundational technology to a business domain.
This approach will also lend itself to a consistent blockchain infrastructure and
trust system management, which will prove vital as many application-driven
chains evolve and the demand for enterprise visibility, management, and control
grow.
Integrating a blockchain
infrastructure for the whole
enterprise
Any enterprise adoption of blockchain should have the goal of disrupting
incumbent systems. Thinking about integration with enterprise systems of record
is one way to work towards this. In this manner, an enterprise can implement
blockchain-driven transaction processing and use its existing systems of record
as an interface to its other applications, such as business intelligence, data
analytics, regulatory interactions, and reporting.
It’s vital to separate the infrastructure for enterprise blockchain technology from
the business domain that uses chain technology to gain competitive advantage.
Blockchain can be seen as an enterprise chain infrastructure that’s invisible to
businesses and operating behind the scenes, while promoting the interprise
synergy between various business-driven chains. The idea is to separate the
business domain from the technology that supports it. A chain application ought
to be provisioned by a business domain that has a suitable trust system. The trust
system, as I’ve stated repeatedly, is central to any blockchain endeavor, and
therefore it should be appropriate to the needs of a given business application.
The cost of the infrastructure and compute requirements will be dictated by the
choice of trust system available to an enterprise.
By separating out the blockchain technology infrastructure, designing an
architecture around a pluggable trust system by using trust intermediaries and a
design that promotes flexibility, and a modular trust system, the business can
focus on the business and regulatory requirements, such as AML, KYC,
nonrepudiation, and so on. The technology infrastructure for blockchain
applications should be open, modular, and adaptable for any blockchain variant,
thereby making the blockchain endeavor easy to manage.
Interprise synergy suggests driving synergies between numerous enterprise
blockchains to enable inter and intra enterprise chain (interledger) connections.
In this model, the transactions would cross the various trust systems, giving
visibility into the interactions to enterprise governance and control systems.
Fractal visibility and the associated protection of enterprise data are important to
consider when looking at these interactions between business units and external
enterprises. An invisible enterprise chain infrastructure can provide a solid
foundation to evolve enterprise connectors and expose APIs to make incumbent
systems more chain-aware.
Interprise synergy will flourish due to conditional programmable contracts
(smart contracts) between the business chains:
How can an enterprise know if it is ready for blockchain? More importantly,
when considering blockchain consumption, should its focus be on integration
with incumbent transaction systems, or an enterprise-aware blockchain
infrastructure?
To take full advantage of the promise of enterprise blockchain, an integrated
enterprise will need more than one use case and will need to drive interprise
synergy. The most successful blockchain consumption strategy should focus on
technology initially and then consider integration with existing enterprise
business systems. This will facilitate collective understanding and accelerate
enterprise adoption of the blockchain, hopefully on the path of least disruption.
Enterprise design principles
As stated previously, blockchain technology promises to be the foundation for a
secure transaction network that induces trust and security in industries that are
plagued with systemic issues around trust and accountability. It aims to generate
market and cost efficiencies.
In the past few years, as blockchain technology has come to maturity, we’ve
focused on how enterprises and businesses can use the technology to relieve pain
points and herald new business models. Organizations that have begun to see
blockchain’s potential are now beginning to reshape business networks that are
burdened by the systemic costs of archaic processes, paperwork, and technology.
Business drivers and evolution
In the recent past, organizations would run internal business systems and IT
infrastructure out to the internet to harness the collaborative potential of
interconnected and accessible systems. Blockchain technology is taking this to
the next level, offering true digital interaction facilitated by trusted business
networks. In the internet era, successful enterprises adopted and adapted to
technological challenges, whereas in the blockchain era, business, rather than
technology, is the driver for proliferation.
While blockchain technology is interesting on its own, there are a lot of other
mechanics of a business network that ought to be evaluated as well, including:
Consensus models: Which trust system is most fitting for your business
network?
Control and governance: What entities are permitted to do what? Who
will own the investigative process if there’s a system anomaly?
Digital asset generation: Who creates an asset in the system? Who governs
it?
Authority for issuance: In a system that’s truly decentralized, the notion of
authority does not hold together. So in a blockchain network, who would be
responsible for governance, culpability, and eventually regulations?
Security considerations: How will the network address enterprise security,
including new security challenges imposed by a shared business network?
We imagine a purpose-built blockchain network that’s focused on a plurality of
business domains, for example, mortgages, payments, exchanges, clearing, and
settlement of specific asset types. In an enterprise context, we visualize a
centralized network in which like-minded business entities share a consensus
consortium. There are several practical reasons to back this idea of a centralized
network, including the following:
The use of domain-specific business language, which leads to the
construction, management, and governance of smart contracts as proxy
business representations
A defined asset type, which leads to governance, management, and
valuation (for exchange, fungibility, and so on) of the digital representation
of assets
Appropriate regulation, given that every industry and business network is
regulated separately, and therefore the burden of adhering to regulations and
other related costs can be shared in the business network
Other related business functions such as analysis, analytics, market data,
and so on
We’ve now covered the business drivers for enterprise blockchain, so next let’s
consider what can ensure the sustainability and longevity of a blockchain
network.
Ensuring sustainability
Blockchain-based business networks are continuing to evolve and grow, and as
they do, there will be no turning back on core issues such as trust models, data
visibility, and exploiting a network for competitive advantage.
Focusing on sustainability can seem paradoxical because it promotes open
collaborative innovation while at the same time locking down constructs such as
consensus or trust systems and the governance systems for managing assets,
smart contracts, and overall interaction in a multiparty transaction network.
Blockchain system design needs to take all of this under consideration.
A business network with a successful system design needs to align well with the
blockchain tenets of trade, trust, ownership, and transactionality in a multi-party
scenario. Without building on these core tenets, business networks may not
realize the promise of blockchain technology in a sustainable way.
Here are seven design principles to support and sustain growth in a blockchain
business network:
The network participants need to have control of their business
The network has to be extensible, so that participants have flexibility to join
or leave the network
The network must be permissioned but also protected, to safeguard
competitive data while facilitating peer-to-peer transactions
The network should allow open access and global collaboration for shared
innovation
The network must be scalable for both transaction processing and encrypted
data processing
The network has to be able to accommodate enterprise security and address
new security challenges
The network needs to coexist with established systems of record and
transaction systems in the enterprise
We will list the design principles graphically as follows:
The principles that drive blockchain
adoption
In any enterprise, blockchain adoption is driven by three principles: the business
blueprint, the technology blueprint, and enterprise integration.
The following are some indispensable things to consider when choosing a
blockchain framework according to these three principles:
Business blueprint: Blockchain promises to create a business network of
value based on trust. To do this, it’s vital to understand how various
blockchain frameworks handle network interaction patterns, inefficiencies,
and vulnerabilities.
Technology blueprint: If technology is to align with business imperatives,
organizations need to make appropriate technology and architecture choices
for their needs. Transactions per second (TPS), enterprise integration,
external system integration, and regulatory and compliance requirements
may be taken under advisement here. These decisions are all part of the
technical due diligence necessary to properly budget for blockchain
adoption.
Enterprise integration: Integrating blockchain into enterprise systems,
especially an adjacent system, is an important business and technology
consideration (because downstream transaction systems affect critical
business systems) as well as a cost point. Based on my experience, if
organizations don’t focus on adjacent system integration early in the
planning, it can impede adoption, because it has a significant cost impact on
blockchain projects.
In the following sections, I cover each of these design considerations in a bit
more detail.
Business considerations for choosing
a blockchain framework
Numerous criteria come into play when organizations are evaluating whether to
adopt blockchain to address their pain points. Here are some considerations from
a business perspective:
Open platform and open governance: The technology standards a
business chooses will set the stage for enterprise blockchain adoption,
compliance, governance, and the overall cost of the solution.
Economic viability of the solution: Whatever blockchain framework an
organizations chooses should provide cost alignment to its existing business
models, charge backs, compute equity, and account management. This
flows into ROI.
Longevity of the solution: As organizations aspire to build a trusted
network, they’ll want to ensure that they can sustain the cost and operation
of the network so that it can grow and scale to accommodate additional
participants and transactions.
Regulatory compliance: Compliance issues are closely tied to transaction
processing and can include events such as industry-specific reporting and
analysis for business workflows and tasks, both automated and humancentric.
Coexistence with adjacent systems: A blockchain network needs to be
able to coexist with the rest of the enterprise, network participants, and
adjacent systems, which may have overlapping and complementary
functions.
Predictable costs of business growth: Business growth depends upon
predictable metrics. Historically, a lot of industries have focused on
transactions per second, but that measurement differs from system to
system based on system design, compute costs, and business processes.
Access to skills and talent: The availability of talent affects costs as well
as maintenance and the longevity of a blockchain solution as the industry
and technology evolve with continued innovation.
Financial viability of technology vendors: When choosing vendors, it’s
vital to think about their viability when it comes to long-term support and
the longevity of your blockchain solution. You should examine the longterm vision and the sustainability of the vendor or the business partner’s
business model.
Global footprint and support: Blockchain solutions tend to involve
business networks with a global reach and the related skills to support the
network’s expansion with minimal disruption.
Reliance on technology and industry-specific standards: Standards are
critical, not only in helping to standardize a shared technology stack and
deployment, but also in establishing an effective communication platform
for industry experts to use for problem solving. Standards make low-cost,
easy-to-consume technology possible.
Blockchain vendors offer various specializations, including:
Variant trust systems: Consensus, mining, proof of work, and so on.
Lock-in to a single trust system
Infrastructure components that are purpose-built for particular use cases
Field-tested design through proof of concept
The technological risk of a vendor not adhering to reference architecture based
on standardized technology set is a fragmented blockchain model for the
enterprise.
From a business point of view, an open standards-based approach to blockchain
offers flexibility, along with a pluggable and modular trust system, and therefore
is the most ideal option. This approach keeps an enterprise open to specialized
blockchains such as Ripple, provides a provisioning layer for the trust system,
and offers a separate business domain with the technology to support it.
Technology considerations for
choosing a blockchain framework
When organizations consider the technology implications of blockchain, they
should start with the premise that it is not just another application. It’s a
production network that involves risks and costs to ensure correct upkeep and
maintenance.
Here are some important things to ponder when evaluating blockchain’s
technological impact.
Identity management
Identity management is a complicated, involved topic, especially in regulated
industries where identities must be managed and have significant business
consequences, such as around activities including Know Your Customer
(KYC), Anti-Money Laundering (AML), and other reporting and analytics
functions:
Permissioning is the concept of member enrollment certificates
(eCerts) and transaction certificates for each member (tCerts); these
enable an entity to be permissioned and identified while transactions are
completed
End user identity, which is maintained by a participating entity in the
blockchain network, is the mapping of the LDAP/User registry to the tCerts
or transaction ID for the sake of tracing (Know Your Customer, as well as
Know Your Customer’s Customer)
Other identity management considerations include:
An LDAP or existing user registry won’t go away and has to be considered
as a design point, since there’s typically been significant investment and
security policies in place for mature authentication and authorization
systems
Trust systems are at the heart of blockchain technology and must pave the
way for trust with identity insertion (for use cases that require transactional
traceability)
The identity on blockchain and for blockchain
Identity acquisition, vetting, and life cycle
Alignment with trust systems based on use cases
Scalability
Scalability is both a business and a technology consideration, given the way
downstream transaction systems can affect critical business systems. Technology
choices for scalability, for example database choices for the shared ledger,
adjacent system integration, encryption, and consensus, bring about a system
design that can accommodate the predictable costs of growth in network
membership or transactions.
Enterprise security
There are three layers of enterprise security to think about:
The physical IT infrastructure layer, which includes use case-specific
issues such as EAL5, network, and infrastructure isolation requirements.
The blockchain middleware layer, which includes requirements for crypto
modules, encryption levels, encryption on data storage, transfer and data at
rest, and visibility of data between participants in the network.
The blockchain consensus (trust system layer), which is central to
blockchain and necessary to guarantee basic data store properties. If there
are more players in the network, they have to bring capital equity to scale.
This is about building a shared data store with enterprise data qualities at a
lower barrier to entry. Consensus, even minimal consensus, is necessary to
ensure this on the architecture in place. There’s now a divide between
cryptocurrency-based trust systems and non-cryptocurrency-based trust
systems. The former models, such as POW/PoS, aren’t sustainable for
enterprise use cases aspiring to create permissioned blockchains.
Development tooling
Considerations for development tooling include an integrated development
environment, business modeling, and model-driven development.
Crypto-economic models
The crypto-economic model refers to a decentralized system that uses public key
cryptography for authentication and economic incentives to guarantee that it
continues without going back in time or incurring other alterations. To fully
grasp the idea of blockchain and the benefits of cryptography in computer
science, we must first understand the idea of decentralized consensus, since it is
a key tenet of the crypto-based computing revolution.
Decentralization with systemic
governance
The old paradigm was centralized consensus, where one central database would
rule transaction validity. A decentralized scheme breaks with this, transferring
authority and trust to a decentralized network and enabling its nodes to
continuously and sequentially record transactions on a public block, creating a
unique chain—thus the term blockchain. Cryptography (by way of hash codes)
secures the authentication of the transaction source, removing the need for a
central intermediary. By combining cryptography and blockchain, the system
ensures no duplicate recording of the same transaction.
Blockchain system design should preserve the idea of decentralized digital
transaction processing, adapting it into a permissioned network, while
centralizing some aspects of regulatory compliance and maintenance activity as
needed for an enterprise context.
Enterprise support
Having enterprise support for blockchain is important for the same reasons as the
reconsideration of estimation effort. Remember that blockchain should not be
thought of as just another application. It’s a production network that involves
risks and costs for upkeep and maintenance, and it won’t be able to simply use
existing applications for development, infrastructure, and services.
Use case-driven pluggability choices
To make sure your blockchain solution can allow for use case-driven
pluggability choices, consider the following issues.
Shared ledger technology
The use cases, design imperatives, and problems you’re trying to address through
blockchain will all help determine the choice of shared ledger and database
technologies.
Consensus
Consensus guides the trust system and drives technology investment in
blockchain application infrastructure, and therefore is at the heart of blockchain.
Also, there isn’t one consensus type that fits all use cases. Use cases define the
interaction between participants and suggest a most appropriate trust system
through consensus models.
Consensus is a way to validate the order of network requests or transactions
(deploy and invoke) on a blockchain network. Ordering network transactions
correctly is critical because many have a dependency on one or more prior
transactions (account debits often have a dependency on prior credits, for
example).
In a blockchain network, no single authority determines the transaction order;
instead, each blockchain node (or peer) has an equal say in establishing the
order, by implementing the network consensus protocol. Consensus
consequently ensures that a quorum of nodes agree on the order in which
transactions are appended to the shared ledger. Consensus, by resolving
discrepancies in the proposed transaction order, helps guarantee that all network
nodes are operating on an identical blockchain. In other words, it guarantees
both the integrity and consistency of transactions in a blockchain network.
Crypto algorithms and encryption
technology
Choosing a blockchain system design may be guided by crypto library and
encryption technology as well. An organization’s use case requirements will
dictate this choice and drive technology investments in blockchain application
infrastructure:
Asymmetric: RSA (1024-8192), DSA (1024-3072), Diffie-Hellman,
KCDSA, Elliptic Curve Cryptography (ECDSA, ECDH, ECIES) with
named, user-defined, and brainpool curves
Symmetric: AES, RC2, RC4, RC5, CAST, DES, Triple DES, ARIA, SEED
Hash/message digest/HMAC: SHA-1, SHA-2 (224-512), SSL3-MD5MAC, SSL3-SHA-1-MAC, SM3
Random number generation: FIPS 140-2 approved DRBG (SP 800-90
CTR mode)
Use case-driven pluggable choices
As previously stated, use cases will define the interaction between participants
and will suggest the most appropriate trust system using consensus models.
Enterprise integration and designing
for extensibility
Designing a blockchain network to coexist with existing systems of record in an
organization is important as a cost consideration. Integration should be through
both business and technology issues, since downstream transaction systems
impact essential business systems. By working with many enterprises, I’ve found
that integrating blockchain with the adjacent systems has a significant cost
impact on their blockchain projects. It really needs to be addressed early in the
planning stages, so not to adversely affect enterprise adoption.
It’s also important to think about operational issues. By safeguarding the
elements of trade, trust, and ownership—and the inherent properties of
blockchain such as immutability, provenance, and consensus—a trust system
promises to help eliminate redundant and duplicate systems and processes.
These duplications cost an organization significant resources, leading to slower
transaction processing and associated opportunity costs. One goal with
blockchain adoption should be to address the central pain point of the existing
process. The aspiration is for a transparent ledger that increases trust, saves time
and significant costs, and provides better customer service.
As for network extensibility, designing for extensibility means taking future
growth into consideration as you plan the implementation. Extensibility
measures a system’s ability to extend and the level of effort that will be required
to implement extensions. Extensibility is important with blockchain business
network design, not only to accommodate for the dynamic nature of business
(with all its regulations, competitive pressures, and market dynamics), but also to
accommodate for network growth (the addition of regulators, market makers,
disruptions, service providers, and so on).
The following are some design considerations to help ensure network
extensibility:
Flexibility with membership:A blockchain network may start with a finite
group of participants and roles, but new participants could later want to join
the network, and others may want to leave. Therefore, you have to consider
the mechanics of membership changes, including access to (shared) data.
The member type is also an important thought when designing for
extensibility, as the roles and type of members may change over time.
Compute equity: There’s a split between trust systems based on
cryptocurrency and trust systems based on compute equity, so this is a fairly
new concept. The types of participants and their business interests in the
network are determinants of long-term sustainable infrastructure costs and
maintenance. For instance, cost models of regulators may differ greatly
from cost models of the primary beneficiary of a blockchain-powered
business network.
Shared business interests: Blockchain networks promise specific
advantages for businesses, such as reduced risk, a reliable and predictable
transaction network, lower compliance costs, and so on. But these shared
interests can lead to other operational issues, such as data sharing and
ownership as entities join and leave the network. Since regulations around
data ownership evolve, as well as industry requirements for the durability of
data, these should be evaluated carefully when you design a blockchain
system.
Governance: Governance includes managing technical artifacts such as
technology infrastructure and governing data and smart contracts in a
blockchain network. Layering governance in the following categories is
recommended:
Blockchain network/technology governance
Blockchain data governance
Blockchain smart contract governance
Blockchain transaction management governance
When designing for extensibility, the goal should be to ensure that the
blockchain network has sustainable operational elements and business growth
elements. For example, in a sustainable model, every participant could deploy
the chaincode that governs its own business process as it accepts and deals with
digital assets, while also putting business participants in control of changing
business processes, policies, and regulatory requirements.
Other considerations
There are a few other considerations to keep in mind apart from the previously
mentioned aspects. They are briefly explained in the following sections.
Consensus, ACID property, and CAP
A consensus model will never go to 0 because when NoSQL became the
standard, various NoSQL systems solved their problems by understanding this
CAP theorem, and the RDBMS enterprise community held steadfast to their
ACID properties. Blockchain might well provide the primitives to break CAP
and maintain ACID. Here are some thoughts.
CAP
Cap stands for:
C—Consistency: Consensus guarantees only one truth of what happened
and in what order
A—Availability: The fact that all calls to the blockchain are asynchronous
allows the invoking application to make progress while ensuring consensus
and durability (chaining also guarantees this)
P—Network partition: Consensus, again, prevents split-brain with
conflicts when things get back together after a network partition
ACID
ACID stands for:
A—Atomicity: The chaincode programming model is an all-or-nothing
behavior, which allows you to group activities together. Either everything
happens, or it doesn’t.
C—Consistency: We believe the new world of NoSQL fudges this one. I
believe this means the same as the C in CAP.
I—Isolation: Isolation indicates that two transactions are serialized, which
is exactly what block construction and chaining does.
D—Durability: The chaining and replication all over the network ensures
that if one or more nodes go down, data won’t be lost. This is why everyone
wants to bring a node and why those nodes should not be not co-located.
Attestation – SSCs are signed and
encrypted
In secure service containers (SSCs), the software, operating system,
hypervisors, and Docker container images cannot be modified. Certificates may
be included in the SSC so that they can probe themselves into being genuine to a
remote a party. For example, including an SSL certificate when building SSCs
helps ensure that you’re speaking with a genuine instance, since the SSL
certificate always stays protected (encrypted) within the SSC.
Use of HSMs
According to Wikipedia, a hardware security module (HSM) is a physical
computing device that safeguards and manages digital keys for strong
authentication and provides cryptoprocessing. These modules traditionally come
in the form of a plugin card or an external device that attaches directly to a
computer or network server.
Administering a high-security device such as an HSM can be a real challenge in
relation to sufficient security and controls. In fact, today’s standards mandate
certain methods and levels of security for HSM administrative (and key
management) systems.
Summary
Adopting blockchain in an enterprise will require a balancing act. Organizations
will not only have to run, manage, and maintain their existing infrastructure;
they’ll also need to help pave the way for this new computational model that
promises to bring transformation.
In regulated industries, organizations could face a dual impact on the cost of
compliance, since even a new technology platform still needs to adhere to
established regulatory frameworks and proven technology architecture standards
and design. Enterprises considering blockchain can look towards a pragmatic
approach by adopting a doctrine of layered defense, combining multiple
mitigating security controls to help protect their resources and data. With the
layered defense approach, digital assets/smart contracts as well as ledger data
will be guarded.
Exploring Hyperledger Fabric
The focus of this chapter is the Hyperledger Fabric project—its components,
design, reference architecture, and overall enterprise readiness. We will also
discuss the broader aim of Linux Foundation (LF) hosted Hyperledger projects
and the importance of open source and open standards. The goal is to build an
understanding of the diversity of various Hyperledger projects, and what
frameworks and tools may be suitable for particular enterprise use cases and
software consumption models. While the blockchain technology landscape is
constantly in flux, Hyperledger projects represent a structure that supports a
mature and peer-reviewed technology geared toward enterprise consumption and
fueled by a diverse set of talent and community interests.
This chapter will cover the following topics:
The foundation of Hyperledger
Hyperledger frameworks, tools, and building blocks
Hyperledger Fabric component design
Hyperledger Fabric – the journey of a sample transaction
Exploring Hyperledger Fabric
Understanding governance in business networks powered by blockchain
Building on the foundations of open
computing
Open source projects, such as Linux and Java, have gained strength in
mainstream businesses by serving as low-cost alternatives to commercial
software. These capabilities rival those of proprietary software, thanks to support
from a large developer community. Popular open source projects can also
accelerate open standards, the collective building blocks for products, by serving
as the common implementation. Businesses and vendors using open standards
free up development and services budgets for items that offer higher value and
competitive advantage.
Open source is a part of the wider open computing movement, along with open
standards and open architecture. Together, these initiatives enable integration
and flexibility, and benefit customers by helping them avoid vendor lock-in.
Enterprises are often required to adhere to various industry compliance and
technology governance requirements, so it’s important to consider the
implications of open technology. While it is a well-understood fact that
blockchain technology powers a business network, the issues around compliance
adherence and technology governance can have an exponential impact on the
cost of technology consumption, governance, and maintenance.
Community-driven open innovation brings order to the chaos by providing a
guiding framework for blockchain networks around network-centric software
provisioning, deployment, governance, and compliance models. Because
blockchain technology powers the business network, any application defining
the network that represents the business application and therefore the impact—
technology adoption, costs, and complexity—is also network wide. Therefore,
open community-driven technologies and open standards ought to be viewed as
a vehicle to risk management and risk mitigation with linkages to a communitydriven governance structure. We aim to discuss this at length with a
technological focus in this chapter.
Fundamentals of the Hyperledger
project
To start building an understanding of Hyperledger, let’s look at some of the key
players and fundamental elements of the Hyperledger Fabric space.
The Linux Foundation
The Linux Foundation (LF) is a world leader in supporting open technology
development, and it is highly esteemed in the developer community. LF is
fostering partnerships that address some of the world’s biggest challenges
through open source computing. It has made enormous investments in open
source projects since it was founded in 2000 and helped to build an ecosystem
that paved the way for the technologies discussed in this book.
Hyperledger
Hyperledger is an open source project that came out of the LF and was created in
order to help advance cross-industry blockchain technologies. It’s a global open
source collaboration involving leaders from numerous industries.
Open source and open standards
As noted previously, the open computing movement laid the groundwork for
blockchain and Hyperledger. Open source is a software licensing model. This
means that the user has the rights to the code and is free to use it, enhance it, or
even redistribute it, provided this is done on an open source basis.
One of the major advantages of an open source business application is the high
level of flexibility provided through open source code, modular components, and
standards adherence. This enables an organization to adapt the technology to
achieve true usability with minimal effort. Many applications that are backed by
open source technologies can be assembled, like building blocks, to solve
business problems. These building blocks come with a core set of functionalities,
and each can be enhanced to meet specific business requirements. The different
building blocks are easily integrated through the use of open-standard
technologies, and additional features that can be custom developed in a modular
way.
An open source business application can therefore provide a base set of features
at a very low cost, while enabling services engagement to enhance or tailor the
application to fully meet business needs:
The open source community also provides a global, diverse talent pool and
community with a wide range of ideas and creativity, which generate more
collaborative innovation than any single vendor ever could. It has disrupted
markets and created growth opportunities for those who recognize its
advantages.
Open source technologies such as Hyperledger and its family of projects provide
the following advantages to the industry:
Lower cost of software consumption: Open source technology-driven
projects do involve costs associated with deployment, maintenance,
management, support, and so forth. The overall costs of development and
costs associated with the talent pool, however, is largely reduced. Linking
the internal technology governance structure with the community-driven
governance structure of a Hyperledger project can greatly reduce the costs
of technology governance and compliance. The growing popularity of
Hyperledger projects represents the growth of community participation,
implying the availability of a diverse talent pool associated with
Hyperledger frameworks and tools. This is a huge cost consideration for
enterprise business networks as their requirements and business networks
grow.
Innovation and extensibility: Enterprise and business networks do not
have to have the ven…
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