Blockchain != DLT
An over glorified term
There has been a tremendous hype over the past two years about all the hidden potential, and yet to prove, that Blockchain can bring to the world. Along with debates about if there can be such thing as a private Blockchain or if it is just a DLT (Distributed Ledger Technology) implementation, or whether or not this can be replaceable with a common and already known database without unnecessary robustness and complexity.
Blockchain derives from “chain of blocks”. A data structure with blocks of items.
Let us go back to the beginning of its conception. The first “Blockchain” implementation is attributed to Bitcoin, but in fact, Satoshi Nakamoto did not mention the word “Blockchain” in the whitepaper titled: “Bitcoin: A Peer-to-Peer Electronic Cash System”. In the whitepaper, it is mentioned a “chain of hash-based proof-of-work”, “chain of digital signatures”, “chain of ownership”, etc. And, in section 3, Timestamp Server, it is mention for the first time the word “Block”, where it is explained the following:
“A timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash” ¹
It clearly illustrates that there are things grouped together in a way to form a block, and once done, then that block is linked to the previous one via a hash. That’s it! until this point we’re talking about a data structure.
Bitcoin as a protocol for decentralization
Bitcoin is more than a data structure, it is a protocol. It is the combination of a variety of topics, such as decentralization, network protocols, distributed computing, cryptography, consensus algorithms, game theory, and so much more. But, is it right to attribute all these ancient concepts to the definition of “Blockchain”?
While Blockchain has become a buzzword, distributed ledgers have existed for decades. The concept of distributed computing is not new, neither distributed databases. Nevertheless, there is a key element that was missing before, and that is decentralization, which is about removing the man in the middle, giving the power back to the participants without the need of any central authority. And, this is the root element for the creation of Bitcoin, powered by philosophy and enthusiasm, among other things.
Decentralization was a very huge challenge, and Bitcoin was the first implementation, although not perfect, to mitigate some of the important threats to it, like Sybil attacks, single point of failure, Byzantine fault, and many more.
DLT as a broad term
Distributed Ledger Technology (DLT). This is the term that many other companies have adopted for the implementations of their “Blockchain” inspired solutions, such as Hyperledger projects, Quorum, Digital Asset, and Corda. At a certain point, it is confusing when these projects use the term DLT interchangeably with the term Blockchain. Although the definitions are different, these platforms do share a lot of features with the early implementations of cryptocurrencies, especially Bitcoin and Ethereum.
The main difference between the Distributed Ledger platforms mentioned above and cryptocurrencies is that they are not public decentralized. Both are Peer-to-Peer networks and are also examples of a distributed application, and file-sharing network. Yet, the enterprise applications are meant to be permissioned and private, with also the possibility of keeping certain data public while being permissioned at all times for business purposes. And from here another phrase was coined: “Blockchain for business”.
Blockchain or DLT
“Blockchain for business”
“Blockchain for the enterprise”
Probably this is what fueled all the debate among communities, discussing what is Blockchain and what is not. The companies that use a combination of these phrases also clarify in their official documentation that they are Distributed Ledgers, and explain their own implementation according to what has been presented by other platforms in the past, in an attempt to keep concepts in a standard form of understanding.
However, just like cryptocurrencies have something to distinguish from each other, also the DLT platforms have different paradigms, in other words, different ways of doing things.
For instance, if we read the whitepaper of Corda, it is explained that Corda is a distributed ledger software, a solution inspired by Blockchain systems and that its fundamental building block is a “state object” ².
On the other hand, if we read the official documentation of Hyperledger Fabric, it is defined as a platform for distributed ledger solutions⁴, and we will find how they explain its chain of blocks as a structure⁵.
Does that mean that if I accomplish to create a chain of hashes in a database I can call it Blockchain?
Does that mean that if I manage to create an append-only structure with a chain of hashes or references I can call it Blockchain?
Unfortunately, yes and no. Since the beginning, the chain of blocks was treated as a data structure in the Bitcoin whitepaper, and the rest of elements that surround it are components of the system. But this is where we can see the over glorified term of Blockchain because a lot of attributes and capabilities have been given to the term disproportionately.
Incentives
In public and permissionless solutions, we can not talk about Blockchain without a cryptocurrency. The incentive is necessary to keep all the players aligned to the game. If no award is given, then the implementation will perish. Usually, that reward is given in the form of token. And the harder to get the reward, the more valuable it is, making the chain work autonomously. Most of the complexity implemented for that reward is in the form of mining.
In contrast, private and permissioned solutions cannot be exposed in the same manner as cryptocurrencies do, because the reward of a token becomes useless, even if they will try to mimic the solution of mining they will perish. That is why most of the Distributed Ledger platforms for the enterprise were designed to not use a native cryptocurrency. Hence, the incentive in those is different. There is value on sharing data, enhancing the data veracity, automating business logic, reconciliation of data, reduction of disputes, reduction of trust in intermediary systems, just to mention some. All these features are key drivers to incentive the participants, to collaborate for a win-win relationship among the concerned parties in a consortium, on a need-to-know basis.
Conclusion
Distributed Ledger Technology (DLT) is a broad term where the fundamentals of Blockchain and cryptocurrencies are part of it, whilst a DLT may not necessarily be a chain of blocks.
DLT platforms for the enterprise were created for specific private and permissioned solutions, inspired by what the first cryptocurrencies brought to the table. Public decentralization was removed, but a consortium of parties to create consensus is still possible. Protocols were adapted, concepts were adopted, some data structures were replaced and others were implemented pretty much the same.
A public and permissionless solution best leverages a Blockchain implementation with cryptocurrency.
The incentives are different from one solution to another, and platforms must not be used interchangeably for one use case to another since each solution has a reason to exist.
If we let philosophy aside computer science, we can use data structures and protocols as we pleased. After all, regardless of what we call it, technology is a medium to accomplish objectives, and if we can successfully achieve them, then that technology is useful.
References
[1] Bitcoin: A Peer-to-Peer Electronic Cash System
[2] The Corda Platform: An Introduction
[3] Corda documentation. States.
