Blockchain Applications: Better Understanding of Blockchain Technology

Eray Erol

Industrial Engineering Department, MEF University, Istanbul, Turkey

Abstract

Today’s world needs a more secure and transparent solution for storing data. Because people
generate lots of data. Blockchain is an efficient way to keep data secure and secure. Most
known applications of blockchain are usually transactions of money. On the other side, there
are numerous applications of blockchain to build different systems. In this paper, blockchain
fundamental features are explained one by one to get deeper understanding. After that, three
different examples of blockchain applications are given. The results of examples show that
applying blockchain provides cost-saving, ımmutablity, transparent tracking, and
decentralized world and solutions. Overall, blockchain technology offers a whole different
world and further research can solve several problems of blockchain and blockchain can
become more preferable.

Keywords

Blockchain Technology, Data, Transparency, Immutablity, Security, Decentralized, Smart

Contract, Blockchain Applications.

1. Introduction

Storing and transferring data is one of the most important things in today's world and the
internet provides access to data easily and in a shaped way as a video, photograph or text. On
the other hand, people generate data almost every minute. For example; vote for selections,
subscribe to a social network, liking a social media post even if trading a Turkish carpet. In
addition, generating data isn’t always between people. It can also be between companies or
between companies and people. Shortly, there are lots of ways to generate data.

The question is what is the best way of recording and storing data and keeping it safe. First
days of recording of data was just writing in large and thick ledgers and storing the ledgers
safety stock room. Obviously, the old technique had lots of flaws, for that reason the history
of humanity and nations isn't clear. After that, many technologies were invented in the
twentieth century. Keeping data online and cloud in a center was one of the most efficient
ways of these technologies but there are still some flaws like trust, immutability,
transparency, and most importantly centralization. Finally, blockchain technology showed up
and presented groundbreaking solutions.

The aim of this study is to provide a better understanding of blockchain by demonstrating

some blockchain applications and analyzing some current applications.

2. Understanding Blockchain technology

Blockchain is a peer-to-peer and distributed ledger system that allows peers to transact
directly with each other eliminating the requirement for a central authority. Without the
involvement of a third party, anyone may swap assets and carry out transactions using
blockchain. There are some features of blockchain that make the blockchain more effective.
The feature of blockchain which given that in figure 1 will be discussed in the next parts.

2.1 Distributed Ledger

First one is distributed ledger. This means everyone has a copy of the transaction ledger in the
participations on the network. In this way, transaction data isn't kept in a center.Although it is
not always necessary, operating distributed ledgers without a third party can often result in
significant cost and time savings [1].

2.2 Peer to Peer Network

Second feature is peer to peer networks that clear away third parties. When a peer-to-peer
network is activated on the blockchain, it supports the maintenance of an exact duplicate of
the records while also guaranteeing the data's accuracy [2].

2.3 Transparency

The next feature is transparency. Each node has the same agreed-upon copy of the ledger for
this reason there is no friction regarding the transactions. The information about the ledger is
controlled by one authority in centralized systems, which lack transparency [3].

2.4 Consensus

Blockchain has a consensus to assist the network to make fast and unbiased decisions.
Consensus is a way of agreement on any transaction and it ensures bitcoin becomes more and
more decentralized. Because, a great majority of the participants of the blockchain network
must reach a consensus to actualize a transaction [4].

2.5 Encryption
Blockchain encryption protects and hides data or networks, making it harder for unauthorized
parties to access them. The SHA-256 hashing technique is mostly used as the hash function in
blockchains for encryption. It is almost impossible to crack a hash function created by the
SHA-256 technique [3]. Satoshi Nakamoto, who is an anonymous person or persons who
invented Bitcoin, commented about the SHA-256 algorithm at the Bitcointalk Forum;
“SHA256 will not be broken by Moore's law computational improvements. If it's going to
break, it will be by a groundbreaking breaking method.”.

2.6 Immutability

The usual system of recording ledger calls as CRUD. The name comes from the first letter of
create, read, update and delete. Blockchain technology offers a different way of recording
ledger which is immutability. The blockchain is considered immutable if it cannot be changed
and is therefore a permanent network [3]. If a transaction was recorded on blockchain it
cannot change or deleted. That feature makes blockchain more reliable and secure than other
techniques.

2.7 Programmable

The last feature of blockchain is programmable. There are numerous applications of

blockchain because it is programmable. Since storing data is everywhere and everything in
today's world, with knowledge of blockchain coding a whole different and decentralized
world can be built. Some applications of blockchain will be discussed in the next part.

3. Blockchain Applications

The most known application of blockchain is Bitcoin. Bitcoin’s idea is that online payments
can be made directly from one party to another without passing through a financial institution
if electronic cash were to be strictly peer-to-peer [2]. Although most people think that the
blockchain is just Bitcoin, there are various applications.

3.1. Smart Contracts

After the blockchain technology, a new process has begun in smart contracts. owing to
security being substantially given by blockchain, this technology, which was not favored
owing to the possibilities of third-party intrusion, theft, and change, has succeeded to become
the new face of technology [5]. The advantages of smart contracts given the figure 2.
 Figure 2 [6].

To understand the smart contracts better, think about an artwork seller and those works let it
be really expensive. İt will be really hard to trust anyone when selling those masterpieces
because the recipient can be a fraud. On the other hand, the recipient may have the same
doubts as the seller. Mostly, There is a third party to meet in a middle point among seller and
buyer. So, they don't trust each other, they trust the third party.

There is one more option to sell the expensive masterpiece which is called smart contract.
Smart contract is a kind of agreement powered by coding. For example in the above case, a
smart contract would be like that; if the money of the product is paid by the buyer and the
product reaches the buyer then the seller can take the money of the product else the deal
between seller and buyer is invalid. The contract can be more complicated and contain more
if..then..else structure like figure 3.
 Figure 3 [3].

As seen, smart contracts eliminate third parties for shopping but it isn't the only thing smart
contracts can do because smart contracts execute agreements. There are so many areas to use
smart contracts, and some examples of use cases in figure 3.

Blockchain based e-vote application

Voting is the most important thing in democracies and it's considered sacred in some nations
for that reason security, reliability, transparency etc. are keystones of voting. There are lots of
techniques and systems to actualize those keystones. Of course, one of them is technology.

Technology is already used in the election system for voting. There are machines or websites
to vote online in some countries. One of those countries is Estonia. Estonia has been using
online voting since 2005 and according to e-estonia 46.7% of Estonians use internet-voting
[7]. It is possible to increase the effectiveness, accessibility, and transparency of the voting
process by using electronic voting, which is the act of casting and tallying votes using
electronic devices like computers, tablets, or smartphones [8].

Figure 4. [9].
There is a problem that voting progress is controlled by a single entity. Clearly seen, The
entity must be perfect to be a perfect voting system even if technology is used. Also, security
can be a really big problem when technology is used in voting. The votes can be stolen or
exchanged by hackers. Blockchain technology is the perfect solution to deal with The
problem of single entity and security [10].

Firstly, the vote rules can be initialized by smart contract to initialize the process of voting.
The next step is the identification phase, this step was necessary to authenticate the
personality of the voter before voting. Authentication can be done using an app, website or
vote-machine. After that, according to the voting procedures, the voter selects one or more
candidates. The vote is then hashed or encrypted using a function known as a hash that will be
recorded to the blockchain. Finally, the votes can be counted and it is impossible to change or
add the votes because of the nature of blockchain. Overall, blockchain based e-vote is more
secure than current methods and it is distributed which provides to eliminates the need of a
single entity [8, 11]. There is an example of a simplified blockchain based e-vote in figure 5.

Supply chain

Another example that can use blockchain is the supply chain. A supply chain is the network
of all the people, businesses, resources, tasks, and technological advancements involved in the
production and distribution of goods [12]. There are some challenges about the supply chain.

Figure 5 [8, 11].

First and one of the most important challenges is transparency. The supply chain data is not
always transparent or reliable. For that reason, lost or delayed goods can happen frequently.
Moreover, Information flows that are often challenging to manage and trace are part of the
supply chain [13].

Using blockchain technology a more secure, more transparent and more reliable system can
be built in the supply chain. Partners in the supply chain can evaluate the other's capabilities
and performance using distributed, immutable blockchain ledgers [14]. For instance,
information on the items and materials, their origins, locations, quality, quantity, and
underlying circumstances may all be found on a blockchain ledger. Because of the built-in
trustworthy mechanisms of the blockchain, authenticated individuals may be sure that the
information it contains accurately represents truth. Supply chain goals including trust,
affordability, and flexibility are significantly affected by that transparency and safety [15].

4. Analyzing efficiency of blockchain applications.

Blockchain technology is taking baby steps for that reason it is hard to analyze the efficiency.
On the other hand, there are some fresh applications.

4.1. Implying smart contracts healthcare industry.

Blockchain can be applied to healthcare. TokenHealth is a system that uses gamification

(reputation system) and smart contracts to improve health through a collaborative tool [16].
Main flows for the vaccination system given figure 6. The entire vaccine cycle will cost
0.000776 Ethers, or around $0.129592, to execute. details of the cost and fixed cost of a
private instance given that figure 7.

Figure 6 [16].
 Figure 7 [16].

To make private instances more profitable 955 operations are required. That means,
blockchain is more profitable until 955 vaccines operations.

4.2. Analyzing current blockchain based electronic voting systems.

There are lots of frameworks to implement blockchain technology voting systems. The main
features of Bitcoin [2], Ethereum [17], Hyperledger Fabric [18], Litecoin [19], Ripple [20],
Dogecoin [21], and Peercoin [22] are given the figure 8. As seen, every one of them has
different features. For that reason, the performance of frameworks will be different from each
other. Scalability analysis of these blockchain platforms are given in the figure 9.

Figure 8 [23].
 Figure 9 [23].

4.3 Applying blockchain to the food supply chain.

With Hyperledger Fabric which is a blockchain, Walmart provided the food supply chain with
a level of transparency. Karl Bedwell, Senior Director at Walmart Technology, said that,
“Creating a (traceability) system for the entire food supply ecosystem has been a challenge for
years, and no one had figured it out. We thought that blockchain technology might be a good
fit for this problem, because of its focus on trust, immutability, and transparency.”

The two programs, one to track the provenance of mangoes sold in Walmart's US shops and
the other used to track pork sold in its China stores, were launched in October 2016 by
Walmart and its technology partner IBM. According to the Hyperledger foundation, the time
needed to trace provenance of mangoes went from 7 days to 2.2 seconds in the US.

Walmart is currently using IBM Blockchain, which is based on Hyperledger Fabric and tracks
over 25 products from five different suppliers. “All fresh leafy greens suppliers are expected
to be able to trace their products back to farm(s) (by production lot) in seconds – not days.”
Walmart wrote in a letter to suppliers.

4. Discussion

The findings from this study explains fundamental features of blockchain, and shows the real-
life applications of blockchain to get better understanding.

Blockchain technology provides cost-saving solutions to the healthcare system with more
secure and transparent. In addition, there are so many solutions about implementing
blockchain to e-vote systems because it cannot be centralized by a single entity. More than
that, Walmart using blockchain for food supply chain and tracing provenance of mangoes
went from 7 days to 2.2 seconds. It is a big improvement. In addition to all these, blockchain
comes with its problem solving features that are presented under section 2.

Somewhat surprisingly, there are still problems about applying blockchain in today's world. It
really needs high-cost to mine the first blockchain which is Bitcoin, and it pollutes more than
usual the environment. According to the university of izmir economy Bitcoin's carbon
footprint is 25 times greater than gold. There are some environmentally friendly solutions but
they aren't used much. According to coin360 Bitcoin dominance is 46% of the whole market.
More than that, the cost of transactions of major blockchains are really high.

Blockchain is taking its baby steps, and has lots of problems to implement in today's world.
On the other hand, new solutions are coming every day. For example, Bitcoin has a high
carbon footprint but Ethereum which is the second largest blockchain has less than Bitcoin.

5. Conclusion

Overall, this study shows what can be done with blockchain and it can be implemented to lots
of things. The paper points to blockchain as providing transparency, security, and
decentralization. There is still a long way to go for the development of blockchain technology
and there are problems about cost of transactions and carbon footprint. Further research needs
to analyze the monopol systems more because the natural solution of monopolism is
blockchain.

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