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Mastering Blockchain
Mastering Blockchain

Mastering Blockchain: Deeper insights into decentralization, cryptography, Bitcoin, and popular Blockchain frameworks

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Mastering Blockchain

Chapter 2. Decentralization

Decentralization is not a new concept; it has been used in strategy, management, and governance for a long time. The basic idea of decentralization is to distribute control and authority to peripheries instead of one central authority being in full control of the organization. This results in several benefits for organizations. such as increased efficiency, quicker decision making, better motivation, and a reduced burden on top management.

In this chapter, the concept of decentralization will be discussed in the context of blockchain; the goals of both are similar, whereby no single central authority is in control. Methods of decentralization and routes to decentralization with some examples will also be presented. Also, the decentralization of the blockchain ecosystem, decentralized applications, and platforms for decentralization will be discussed in detail. Many exciting applications and ideas emerge out of the decentralized blockchain technology...

Decentralization using blockchain

Decentralization is a core benefit and service provided by the blockchain technology. Blockchain by design is a perfect vehicle for providing a platform that does not need any intermediaries and can function with many different leaders chosen via consensus mechanisms. This model allows anyone to compete to become the decision-making authority. This competition is governed by a consensus mechanism and the most commonly used method is known as Proof of Work (PoW).

Decentralization is applied in varying degrees from semi-decentralized to fully decentralized depending on the requirements and circumstances. Decentralization can be viewed from a blockchain perspective as a mechanism that provides a way to remodel existing applications and paradigms or build new applications in order to give full control to users.

Information and communication technology (ICT) has conventionally been based on a centralized paradigm whereby database or application servers are ...

Methods of decentralization

There are two methods that can be used to achieve decentralization. These methods are discussed in detail in the following sections.

Disintermediation

This can be explained with the help of an example. Imagine you want to send money to your friend in another country. You go to a bank that will transfer your money to the bank in the country of your choice for a fee. In this case, the bank keeps a central database that is updated, confirming that you have sent the money. With blockchain technology, it is possible to send this money directly to your friend without the need for a bank. All you need is the address of your friend on the blockchain. This way, the intermediary is no longer required and decentralization is achieved by disintermediation. However, it is debatable how practical decentralization is in the financial sector by disintermediation due to heavy regulatory and compliance requirements. Nevertheless, this model can be used not only in finance...

Routes to decentralization

Even though there are systems that existed before bitcoin or blockchain that can be classed as decentralized to a certain degree, such as BitTorrent or Gnutella file sharing, with the advent of the blockchain technology many initiatives are being taken in order leverage this new technology for decentralization. Usually, the bitcoin blockchain is the first choice for many as it has proven to be the most resilient and secure blockchain with a market cap of almost 12 billion dollars. An alternative approach is to use other blockchains, such as Ethereum, which is currently the tool of choice of many developers for building decentralized applications.

How to decentralize

A framework has been proposed by Arvind Narayanan and others that can be used to evaluate the decentralization requirements of a variety of things in the context of blockchain technology. The framework basically proposes four questions that, once answered, provide a clear idea as to how...

Blockchain and full ecosystem decentralization

In order to achieve complete decentralization, it is necessary that the environment around the blockchain is also decentralized. Blockchain itself is a distributed ledger that runs on top of conventional systems. These elements include storage, communication, and computation. There are other factors, such as Identity and Wealth, that are traditionally based on centralized paradigms and there's a need to decentralize these aspects too in order to achieve a fully decentralized ecosystem.

Storage

Data can be stored directly in a blockchain, and with this, it does achieve decentralization, but a major disadvantage of this approach is that blockchain is not suitable for storing large amounts of data by design. It can store simple transactions and some arbitrary data but is certainly not suitable for storing images or large blobs of data, as is the case in traditional database systems. A better alternative is to use distributed hash tables...

Decentralization using blockchain


Decentralization is a core benefit and service provided by the blockchain technology. Blockchain by design is a perfect vehicle for providing a platform that does not need any intermediaries and can function with many different leaders chosen via consensus mechanisms. This model allows anyone to compete to become the decision-making authority. This competition is governed by a consensus mechanism and the most commonly used method is known as Proof of Work (PoW).

Decentralization is applied in varying degrees from semi-decentralized to fully decentralized depending on the requirements and circumstances. Decentralization can be viewed from a blockchain perspective as a mechanism that provides a way to remodel existing applications and paradigms or build new applications in order to give full control to users.

Information and communication technology (ICT) has conventionally been based on a centralized paradigm whereby database or application servers are under...

Methods of decentralization


There are two methods that can be used to achieve decentralization. These methods are discussed in detail in the following sections.

Disintermediation

This can be explained with the help of an example. Imagine you want to send money to your friend in another country. You go to a bank that will transfer your money to the bank in the country of your choice for a fee. In this case, the bank keeps a central database that is updated, confirming that you have sent the money. With blockchain technology, it is possible to send this money directly to your friend without the need for a bank. All you need is the address of your friend on the blockchain. This way, the intermediary is no longer required and decentralization is achieved by disintermediation. However, it is debatable how practical decentralization is in the financial sector by disintermediation due to heavy regulatory and compliance requirements. Nevertheless, this model can be used not only in finance but also...

Routes to decentralization


Even though there are systems that existed before bitcoin or blockchain that can be classed as decentralized to a certain degree, such as BitTorrent or Gnutella file sharing, with the advent of the blockchain technology many initiatives are being taken in order leverage this new technology for decentralization. Usually, the bitcoin blockchain is the first choice for many as it has proven to be the most resilient and secure blockchain with a market cap of almost 12 billion dollars. An alternative approach is to use other blockchains, such as Ethereum, which is currently the tool of choice of many developers for building decentralized applications.

How to decentralize

A framework has been proposed by Arvind Narayanan and others that can be used to evaluate the decentralization requirements of a variety of things in the context of blockchain technology. The framework basically proposes four questions that, once answered, provide a clear idea as to how a system can be...

Blockchain and full ecosystem decentralization


In order to achieve complete decentralization, it is necessary that the environment around the blockchain is also decentralized. Blockchain itself is a distributed ledger that runs on top of conventional systems. These elements include storage, communication, and computation. There are other factors, such as Identity and Wealth, that are traditionally based on centralized paradigms and there's a need to decentralize these aspects too in order to achieve a fully decentralized ecosystem.

Storage

Data can be stored directly in a blockchain, and with this, it does achieve decentralization, but a major disadvantage of this approach is that blockchain is not suitable for storing large amounts of data by design. It can store simple transactions and some arbitrary data but is certainly not suitable for storing images or large blobs of data, as is the case in traditional database systems. A better alternative is to use distributed hash tables (DHTs). DHTs...

Smart contract


A smart contract can be thought of as a small decentralized program. Smart contracts do not necessarily need a blockchain to run; however, due to the security benefits that the blockchain technology provides, it is now becoming almost a standard to use blockchain as a decentralized execution platform for smart contracts. A smart contract usually contains some business logic and a limited amount of data. Actors or participants in the blockchain use these smart contracts or they run autonomously on behalf of the network participants.

These small programs reside on the blockchain and execute business logic if some specific criteria are met. More information on smart contracts will be provided in Chapter 6, Smart Contracts, which is dedicated to a detailed discussion of smart contracts.

Decentralized organizations


Decentralized organization (DOs) are software programs that run on a blockchain and are based on the idea of real human organizations with people and protocols. Once a DO, in the form of a smart contract or a set of smart contracts, is added to the blockchain, it becomes decentralized and parties interact with each other based on the code defined within the DO software.

Decentralized autonomous organizations


Just like DOs, a Decentralized autonomous organization (DAO) is also a computer program than runs on top of a blockchain and embedded within it are governance and business logic rules. DAO and DO are basically the same thing, but the main difference is that DAOs are autonomous, which means that they are fully automated and contain artificially intelligent logic, whereas DOs lack this feature and rely on human input in order to execute business logic.

Ethereum blockchain led the way with the introduction of DAOs for the first time. In DAO, the code is considered the governing entity rather than humans or paper contracts. A Curator, however, is a human entity that participates as someone who maintains this code and acts as a proposal evaluator for the community. DAOs are capable of hiring external Contractors if enough input is received from the token holders (participants). The most famous DAO project is The DAO (https://daohub.org) as it raised 168 million...

Decentralized autonomous corporations


DAOs, Decentralized autonomous corporations (DACs) are a similar concept but are considered a smaller subset of DAOs. The definitions of DACs and DAOs can sometimes overlap, but a general difference is that DAOs are usually considered to be nonprofit, whereas DACs can make money via shares offered to the participants and by paying dividends. These corporations can run a business automatically without human intervention based on the logic programmed within them.

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Key benefits

  • Get to grips with the underlying technical principles and implementations of blockchain.
  • Build powerful applications using Ethereum to secure transactions and create smart contracts.
  • Explore cryptography, mine cryptocurrencies, and solve scalability issues with this comprehensive guide.

Description

Blockchain is a distributed database that enables permanent, transparent, and secure storage of data. The blockchain technology is the backbone of cryptocurrency – in fact, it’s the shared public ledger upon which the entire Bitcoin network relies – and it’s gaining popularity with people who work in finance, government, and the arts. Blockhchain technology uses cryptography to keep data secure. This book gives a detailed description of this leading technology and its implementation in the real world. This book begins with the technical foundations of blockchain, teaching you the fundamentals of cryptography and how it keeps data secure. You will learn about the mechanisms behind cryptocurrencies and how to develop applications using Ethereum, a decentralized virtual machine. You will explore different blockchain solutions and get an exclusive preview into Hyperledger, an upcoming blockchain solution from IBM and the Linux Foundation. You will also be shown how to implement blockchain beyond currencies, scability with blockchain, and the future scope of this fascinating and powerful technology.

Who is this book for?

This book appeals to those who wish to build fast, highly secure, transactional applications. This book is for those who are familiar with the concept of blockchain and are comfortable with a programming language.

What you will learn

  • Master the theoretical and technical foundations of blockchain technology
  • Fully comprehend the concept of decentralization, its impact and relationship with blockchain technology
  • Experience how cryptography is used to secure data with practical examples
  • Grasp the inner workings of blockchain and relevant mechanisms behind Bitcoin and alternative cryptocurrencies
  • Understand theoretical foundations of smart contracts
  • Identify and examine applications of blockchain technology outside of
  • currencies
  • Investigate alternate blockchain solutions including Hyperledger,
  • Corda, and many more
  • Explore research topics and future scope of blockchain technology
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Table of Contents

13 Chapters
1. Blockchain 101 Chevron down icon Chevron up icon
2. Decentralization Chevron down icon Chevron up icon
3. Cryptography and Technical Foundations Chevron down icon Chevron up icon
4. Bitcoin Chevron down icon Chevron up icon
5. Alternative Coins Chevron down icon Chevron up icon
6. Smart Contracts Chevron down icon Chevron up icon
7. Ethereum 101 Chevron down icon Chevron up icon
8. Ethereum Development Chevron down icon Chevron up icon
9. Hyperledger Chevron down icon Chevron up icon
10. Alternative Blockchains Chevron down icon Chevron up icon
11. Blockchain-Outside of Currencies Chevron down icon Chevron up icon
12. Scalability and Other Challenges Chevron down icon Chevron up icon
13. Current Landscape and Whats Next Chevron down icon Chevron up icon

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Eth Mar 31, 2017
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This book is a good and comprehensive introduction to Blockchain. Great resource for self study.
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Amazon Customer May 03, 2018
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guy I sent it to said it was great
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Augustine Mensah Apr 09, 2017
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Well written book with good examples. 100% recommended!!
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Amazon Customer Apr 10, 2017
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Very well written book! Recommended!
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OCG# Jul 06, 2017
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A "more than I bargained for" purchase. Would make a great text book for a course on the subject. Would dread the homework.
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