Distributed Computing with Permissioned Blockchains and Databases

Motivation

A new era is emerging in the world of distributed computing with the growing popularity of blockchains. Traditionally, the Internet allows to exchange only data or information directly between two parties or users; a transaction, say, involving the purchase of an item requires a third party which can be trusted. Third parties often come in the form of a digital marketplace, a bank, or a trusted intermediary. Blockchains can eliminate third parties, since they are characterized by transparency, i.e., the blockchain content is visible to each participant, and being append-only, which is crucial for updating a blockchain. Conceptually, a blockchain is a decentralized and distributed digital ledger that consists of records representing transactions; since these records are tied to their history using hash values no existing record can be altered retroactively. The only kind of update allowed is to extend a given blockchain by additional records, which, assuming that the majority of participants does not pursue a dishonest intention, results in a stable view on transactions (which implies that not every party or node maintaining the blockchain needs to trust everybody else). The participants can verify and audit transactions, which results in a trustable workflow where participants' uncertainty regarding data security is marginal. The use of a blockchain also eliminates infinite reproducibility of digital assets; it confirms that each unit of value was transferred only once.

By storing data across its network, the blockchain eliminates the risks that come with data being held centrally yet opens up for an application of distributed technology that was previously developed in other contexts. Blockchains come in two flavors: An open, permissionless, or public, blockchain network does not require any guarding against bad actors, and no access control is needed; anybody can join and leave. Hence applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer. Permissioned (private) blockchains are emerging as open source protocols where openness and collaboration are encouraged among authenticated participants. They can hence restrict who can participate in the consensus processes as well as who can transact.

From a database point of view, a blockchain can be considered as a log of ordered transactions since nodes keep replicas of the data and agree on an execution order of the transactions. A key property is the assumption that nodes behave in an arbitrary or Byzantine fashion. By being able to tolerate Byzantine failure by design, a blockchain offers stronger security than a database system. Although enterprise-grade database systems support applications like security trading and settlement, asset and finance management, or banking and insurance, blockchain technology has the potential to disrupt the status quo since they incur lower costs of infrastructure and human labor. In particular the immutability and transparency of a blockchain reduce human error as well as the need for manual intervention due to conflicting data.

While there is currently no standard in the blockchain space, all the ongoing efforts involve some combination of database, transaction, encryption, consensus and other distributed systems technologies. Some of the application areas in which blockchain pilots are being carried out are: smart contracts, supply chain management, know your customer, derivatives processing and provenance management. This seminar will survey some of the ongoing blockchain projects with respect to their architectures in general and their approaches to some specific technical areas. It will focus on how the functionality of traditional and modern data stores are being utilized or not utilized in different blockchain projects. It will also distinguish how traditional distributed database management systems have handled replication and how blockchain systems do it.