This article is the first of a three-article series (\u2460\u2461<\/a>\u2462<\/a>) on architecting blockchain-based applications. The series is based on results of an internal workshop of the Fraunhofer IESE department ACE (Architecture-Centric Engineering) in 2018.<\/p>\n <\/p>\n Authors (main editors underlined): Susanne Braun, Frank Elberzhager, Matthias Gerbershagen, Andreas Giloj, Sebastian Heupts, Steffen Hupp, Alberto Lara, Rodrigo Falc\u00e3o<\/u>, Matthias Naab<\/u>, Kai Plociennik<\/u>, Bernd Rauch, Dominik Rost, Johannes C. Schneider<\/u>, Stefan Schweitzer, Adeline Silva Sch\u00e4fer, Balthasar Weitzel.<\/p>\n <\/p>\n If you want to develop innovative ideas, architectures, and prototypes of applications based on blockchain technologies: Don\u2019t hesitate to contact us!<\/p>\n<\/div>\n The rise of the Bitcoin currency<\/a> made blockchain known to a vast majority of people<\/strong> in the IT business and even the overall population. We could get the impression that at least the finance world will undergo a major revolution<\/strong> in the next years because of blockchain technology, which both new and traditional companies are exploring. While the projected impacts and visions are immense, real applications<\/strong> beyond crypto currencies are<\/strong> not wide-spread<\/strong>, yet.<\/p>\n The development of blockchain-based applications is nowadays often technology-driven<\/strong> and done with a trial-and-error<\/strong> approach. The goal of most companies is to gather first experiences and to learn about technologies and potentials. Available literature is either extremely technical and detailed or high-level and visionary. Additionally, we found in literature that key terms are often confused and used in an overloaded way. Nevertheless, architects need to be able to reason precisely when architecting blockchain-based applications and make well-informed decisions on central architectural questions. This is especially important because the developed applications are used for handling data that is of high relevance to the users. Hence, we decided to give guidance for architecting blockchain-based applications<\/strong> in the following way:<\/p>\n The following figure summarizes the contents of our article series. Foundations<\/a> | Smart Contracts<\/a> | Technologies<\/a> | Applications & Impact<\/a><\/p>\n The purpose of a blockchain is to be a public digital ledger that is operated by peer participants in a distributed way<\/strong>. The participants want to keep track of transactions<\/strong> that they make, and they want to make sure that the record of transactions cannot be tampered with, so that everyone can rely on unaltered data in the transaction record. This is achieved without the need for a central authority<\/strong>, since a blockchain is made up from peer nodes. Hence, blockchain technology enables the development of innovative applications that are easily scalable and robust, without the need for up-front invest in IT infrastructure. Since the concrete concept of „what a transaction is“ can be handled in a flexible way<\/strong>, this includes applications such as the well-known crypto-currencies Bitcoin and Ethereum, where the transactions refer to value in some currency system, but also other applications are conceivable such as ones where the transactions refer to files in a distributed file system or to commitments in a legal system.<\/p>\n In the absence of a central authority, the system of peer nodes forming the blockchain determines the correct state of the ledger via a consensus algorithm.<\/em> In the consensus algorithm, the nodes negotiate the correct state of the ledger by executing a certain communication protocol and „voting“ for the next state. The basic idea here is that the transaction data in the blockchain is stored in a sequence of data blocks, to which new blocks can be appended. In principle, any node in the system can append a new block of data to the sequence, which is called mining<\/em>. The following figure gives an overview on how data is stored in the sequence of data blocks:<\/p>\n Starting with an initial genesis block<\/em> containing potential bootstrapping information, blocks of transaction data are mined as described above, i.e., appended to the existing sequence of blocks. This is done using cryptographically safe, i.e., collision-resistant, hash functions to link blocks and data: The hash values computed for previous blocks‘ headers and the hash trees computed for the transaction data in a block certify the integrity of the referenced data, since by collision-resistance of the used hash functions, it is computationally hard to find different data (in a try to manipulate the blockchain) with the same hash value. Hence, one assumes that no such attempt will succeed and integrity of the blockchain will be given.<\/p>\n In a public, permissionless<\/em> blockchain, where anybody can participate in the mining process, there is a risk that a node might be malicious. Hence, certain „proof concepts“ are used in different blockchain technologies: Nodes must prove to act in the interest of the whole community when mining blocks of new transaction data. A popular proof concept, used e.g. in the Bitcoin technology, is Proof of Work<\/em> (PoW), where a node is required to solve some computationally hard problem before being able to append a new block of data to the chain. This makes it hard to alter the data in the blockchain in a malicious way, since one would need a very large amount of computational resources to succeed in manipulating the consensus process in which the nodes vote for the correct state of the ledger. However, e.g. in a so called 51 % attack<\/em>, where a malicious party possesses 51 % of the computing resources in the system, an attack could be successful.<\/p>\n To summarize, the approach to provide a public digital ledger without a central authority is attractive, but one has to be aware that there is a price one has to pay for that:<\/p>\n Whether one is willing to pay the price of not having a guarantee on unalterability of the data in the ledger is a question of the concrete application that has to be developed. With respect to the second point, we mention that depending on the concrete setting in which the blockchain should be used, problems such as the mentioned high energy consumption using proof of work can be attenuated<\/strong>:<\/p>\n \u201cA smart contract<\/a> is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible <\/strong>transactions without third parties by using trackable and irreversible transactions<\/strong>.\u201d This definition<\/a> outlines all aspects that are crucial to smart contracts. In the context of blockchains, when we talk about a smart contract, we usually mean program code being executed on the runtime environment provided by the blockchain.<\/p>\n In contrast to traditional contracts, no authorized third parties<\/strong> as e.g. notaries, the government, or a centrally trusted bank are needed to guarantee the fulfillment of a contract. Instead, contracts are enforceable by their program code, which is expressed by the so-called \u201ccode as law\u201d principle.<\/p>\n The fact that smart contracts are stored on the blockchain in an unchangeable way has two crucial consequences:<\/p>\n The implementations of smart contracts differ depending on the blockchain technology. In Ethereum<\/a>, one of the most popular platforms for smart contracts, smart contracts are usually written in a C-like programming language Solidity<\/a>, which compiles to byte code that is finally stored on the blockchain. The effective computing capabilities of smart contracts<\/strong> are limited<\/strong>. There are two main reasons for this:<\/p>\n Thus, complex calculations easily become very expensive. To put it with the words from the Ethereum Development Tutorial<\/a>: \u201cRoughly, a good heuristic to use is that you will not be able to do anything on the EVM that you cannot do on a smartphone from 1999.<\/em>\u201d<\/p>\n While there are lots of simple use cases that one can build with a single smart contract, e.g. ledgers for own crypto currencies or tokens, more complex applications are usually built by combining several smart contracts together, which is possible since one smart contract can call functions from another smart contract. Because there is no single point to attack such decentralized applications (DApps)<\/strong>, they are highly fault-tolerant and very difficult to attack. On the other hand, DApps are difficult to build (complex protocols, few ready-to-use components), difficult to maintain (bug fixing) and difficult to extend (updates, scaling). In Ethereum, operating a DApp can also become more expensive compared to regular apps due to a so-called gas fee<\/em> which has to be payed to the mining node every time a function of a smart contract is executed.<\/p>\n We have already mentioned that a smart contract can access data from the blockchain and from other smart contracts. However, many real world contracts concern external data like stock prices, weather data, flight (delay) schedules or sensor data of IoT devices. In the smart contract\/blockchain context, so-called oracles<\/strong> provide this data by storing it in the blockchain. There are different approaches to oracles, the simplest being trusted third party service provider that add a timestamp to the data and digitally sign it, which, however, adds again dependency to single authorities. Other mechanisms include a consensus protocol of several independent trustees or a web of trust.<\/p>\n Use cases<\/strong> for smart contracts have been discussed a lot in the past. They reach from simple conditional payments<\/strong> (e.g. money back on flight delay) over decentralized government<\/strong> (voting and publishing of elections in the blockchain), economy of things<\/strong><\/a>, health data<\/strong> (with automatic health insurance handling) up to rental agreements<\/strong> (of apartments, bikes, cars in combination with smart locks) and (software) license management<\/strong>. However, few of these use cases are in fact implemented and established at the time of writing this article. Ethereum has a list of available DApps, where you can find applications mostly from the sectors gaming\/gambling and financial trading\/exchanges, the first belonging to \u201clet\u2019s try out what is possible with this new technology\u201d and the latter being the most typical blockchain use case: speculation with crypto coins.<\/p>\n Many different blockchain technologies are available today. Unless some very special use case has to be handled and someone with expert knowledge in cryptography and network protocols is available, we recommend choosing from already existing technologies.<\/p>\n We give a brief description of 5 well-known technologies:<\/p>\n Dragged by the successful use case of Bitcoin, numerous initiatives have been started to, somehow, surf on the \u201cblockchain wave\u201d \u2013 which has led to a multitude of applications that are so exotic to the point that some people, not without a reason, consider Blockchain \u201ca solution searching for a problem\u201d. Examples include the end of poverty<\/a> and human suffering, the cure of cancer<\/a>, the ownership shares of ancient sunken treasures<\/a>, among many, many others.<\/p>\n The hype around blockchain finds particular expression in numerous articles and statements about the potential impact of blockchain and the expectations towards it:<\/p>\n At the same time, there are also counterarguments and criticism of blockchain or the way how the world looks at it. To be really heard, they formulate their statements strongly, too:<\/p>\n The following key characteristics come with the usage of blockchain technologies and can be employed to come up with beneficial and innovative applications.<\/p>\n In recent years, initial scientific works such as \u201cDo you need a blockchain\u201d<\/a> have been published aiming at providing support on how to properly identify use cases for blockchain, and figuring out in which type of blockchain a potential application would fit.<\/p>\n Independent of concrete application domains, impacts and patterns of blockchain can be identified. The following impacts (which mostly express particular quality properties of the resulting applications) can be found in recent applications and in literature:<\/p>\n Existing blockchain applications are spread across diverse domains. Examples include:<\/p>\n This article has no focus on legal issues of blockchain. However, this is a very important topic in the overall design and operation of blockchain-based applications. Looking at the potential impacts and benefits outlined above, it becomes directly clear, that blockchain needs very thorough legal consideration as it often touches very sensitive data and it typically spans the boundaries of organizations. Some aspects to be considered are:<\/p>\n For some further introduction to this topic, we recommend an article about key legal issues of blockchain<\/a> by Osborne Clarke.<\/p>\nThe Need for Precise Terminology and Architecting Guidance<\/h2>\n
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<\/a><\/p>\nBackground on Key Topics of Blockchain<\/h2>\n
Blockchain Foundations<\/h3>\n
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Smart Contracts<\/h3>\n<\/div>\n
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<\/a><\/p>\nBlockchain Technologies<\/h3>\n
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Blockchain-Based Applications and Their Potential Impact<\/h3>\n
Hype and Frustration<\/h4>\n
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\n\u201cThere is\u00a0no single person in existence\u00a0who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.\u201d<\/li>\n<\/ul>\nCentral Characteristics of Blockchain for Applications<\/h4>\n
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Potential Impacts and Benefits of Blockchain<\/h4>\n
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\n<\/strong>Many established businesses rely on central authorities and expensive intermediaries and middlemen, which are perceived to dictate and add costs and to delay the business. The idea is the get rid of the intermediaries and come up with direct business relationships among parties.
\nHowever, it is often neglected that the intermediaries might add much more services and benefits than just the pure transaction. Additionally, the trust moves from authorities to software and algorithms.<\/li>\n
\nEstablished businesses are often perceived as not transparent and giving certain parties an informational disadvantage. This should be overcome by more transparency of information placed in blockchains.<\/li>\n
\n<\/strong>In traditional businesses and information systems, there is often a central authority, which can be attacked for various reasons. The distributed character of blockchains is expected to make certain attacks and fraud extremely hard or even impossible. The authenticity of data can be proven without trusting a third party. This might be in particular interesting in contexts where trustworthy central authorities are rare (e.g. in areas with unstable governments).
\nHowever, the overall trust and authenticity still relies on the trustworthiness of people entering data and a trustworthy access to the blockchain-based application itself (there might be intermediaries, which bundle the access of users to the blockchain).<\/li>\n
\n<\/strong>While many traditional business processes still heavily rely on human work and intervention, in particular when it is about contracts and legally binding transactions, blockchain and in particular smart contracts promise to strongly increase the degree of automation. Additionally, distributed and heterogeneous data silos should be broken up and consolidated in central blockchain storages.
\nHowever, the operational efficiency is often traded off against a strongly increased energy consumption.<\/li>\n<\/ul>\nExample Blockchain-Based Applications<\/h4>\n
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<\/a><\/p>\nLegal Issues<\/h4>\n
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