Bitcoin is a public permisionless blockchain
Is Hyperledger Fabric a public Blockchain? It is an enterprise blockchain that is designed for business application development. It is not a public blockchain. Hyperledger Fabric is a private blockchain framework and is one of many projects within the Hyperledger blockchain platform. The framework is used as a foundation from which to develop blockchain-based applications, networks, and more. Because Hyperledger Fabric is private and requires permission to access, businesses can segregate information like prices , plus transactions can be sped up because the number of nodes on the network is reduced.
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Public, Private, Permissioned Blockchains Compared
Blockchain supports a variety of decentralized applications enabled by its immutable, decentralized, and trustless properties. However, there are no unifying criteria for blockchain architecture across the organizations and business models. This variance has created complex and diverse blockchain products.
Costs in every economic exchange with partners are associated with two metrics: transaction costs due to market imperfections and agency costs due to conflict of interest and information asymmetry in an organization. To understand the effectiveness of economic activities by blockchain intervention and facilitate strategic alignment, we use transaction cost and agency cost as theoretical lenses to explore the impacts of blockchain, discuss the transformation of those costs, and support our arguments using a case study.
Our study proposes that blockchain technology brings two more benefits, trust and transparency, to the existing Internet-based business services, and helps improve corporate governance. Smart contracts improve the execution time of transactions significantly and increase transaction volume rapidly.
As the internet shifts hierarchies toward electronic markets, lack of trust between peers inhibits exchanges. Blockchain applications provide a framework for building trust between peers through its consent mechanism, which allows organizations to construct trust and operate in a more decentralized manner. Thus, by including blockchain in the current Internet infrastructure, the decision boundary of organization forms would extend outward.
Finally, the transformation of costs in different stages of the blockchain transition, as described in our study, has important managerial implications for the organization structure and the role of third parties. Blockchain does not assume away transaction and agency costs but pushes the transformation of the two, forming a more efficient economic entity.
This study contributes to the academia and the industry. We first add to the understanding of blockchain from the perspective of exchange technology.
Second, we contribute to the prediction of organization boundaries. Third, the shift in the role of third parties supports the transaction cost theory in terms of controlling opportunism. Lastly, this study facilitates the development of blockchain business models and contributes to the practice. Blockchain is an emerging information technology IT that supports a variety of decentralized applications enabled by its immutable, decentralized, and trustless properties.
Despite its promising future, there are concerns that blockchain applications are overpromised and underdelivered. Some researchers argue that the same tasks addressed by blockchain can also be done by alternative technologies more efficiently 1.
The necessity and the impact of blockchain technology vary across organizations and business models. However, with the hype of block chain technology, corporates are pouring funds into blockchain technology, developing pilots, and proofs-of-concept, but little progress has been made. IT sectors are devoted to optimizing the performance of the system, and most existing studies discuss the potential of blockchain use cases from the perspective of General-Purpose Technology GPT Davidson et al.
GPT focuses on the improvement of multifactor productivity of the system. However, blockchain applications have no unifying criteria for blockchain architecture across organizations and business models. This variance has created complex and diverse blockchain products, so-called blockchain hype, while the applicability of blockchain is underexplored. While focusing on the functionality of a blockchain system, we may narrow the scope to Information System IS constructs and overlook organizational-wise variables Agarwal and Lucas, Managers should think outside the chaotic phenomena of blockchain hype and understand how new technology can integrate with existing business processes.
A firm-level perspective to re-examine blockchain can be provided through Exchange Technology ET , which emphasizes the efficiency and the scope of transactions in market exchanges between economic entities Davidson et al. This study aims to provide managerial insights to examine the applicability of blockchain with respect to the existing business processes of an organization.
We seek to answer the following research questions. Research question 1: What effects does the introduction of blockchain technology have on the boundaries of an organization with respect to IT infrastructure? Research question 2 : How does the introduction of blockchain transform the transaction costs of a firm? Propositions 2a, 2b, and 2c are developed for each type of transaction costs in section The Impact of Blockchain on Transaction Cost and supported by our case discussion in section Transformation of the Transaction Costs by Blockchain Intervention.
Research question 3 : How does the introduction of blockchain transform the agency costs of a firm? Propositions 3a, 3b, and 3c are constructed based on each type of agency costs in section The Impact of Blockchain on Agency Cost and supported by our case discussion in section Transformation of the Agency Costs by Blockchain Intervention.
Research question 4: How do the new transaction costs and agency costs interact and what effects does this have on the organization when adopting blockchain technology to the existing business process?
We introduce the last proposition Proposition 4 in section The Impact of Blockchain on Agency Cost and demonstrate our analysis in section Transformation of the Transaction Costs by Blockchain Intervention and section First-stage Transformation. We use transaction cost theory and agency theory to examine the interaction between the determinants of the two theories and blockchain properties.
We then study how the interaction effects impact the corresponding cost variables in the two theories. The discussed cost transformations are laid out as our research propositions.
A blockchain company, InsurePal, is selected to explore our discussed cost transformations. Through the company's official documents, we select a business process and define the cost variables of the two theories in the scenario to examine how those variables transform when blockchain technology involves. Since blockchain is still evolving, we position our case in different blockchain transition stages and discuss research questions supported by our case scenarios.
The rest of paper is organized as follows. In section Background and Related Work, we introduce background information on blockchain and summarize our literature review on the transaction and agency theories. We share our research propositions in section Research Proposition and support these propositions with a case study in section Research Methodology.
Finally, in sections Discussion, Conclusion and Limitations, and References, we provide a discussion, highlight our contributions and provide concluding remarks. Blockchain has four main properties: transparency, immutability, programmability, and decentralization. First, a blockchain is a distributed ledger without control from central institutions. Every participant in the network has an identical copy of the ledger, resulting in a transparent shared data source.
A blockchain can be viewed as a permanent database that keeps track of all transaction records Davidson et al. Lastly, the credentials data is exposed to all participants, potentially including those with less ethical motives.
In the event of a malicious attack, a blockchain system can continue working to a satisfactory level within this decentralized setup no single point failure Bahga and Madisetti, A participant's ability to freely enter a blockchain network determines the level of decentralization in blockchain applications Abadi and Brunnermeier, There are three types of blockchain ledger systems—private, permissioned, and permissionless Zheng et al. A private blockchain can be deployed by a centralized institution whose clients are not involved in the operation process.
A permissioned blockchain is formed by a consortium that can regulate the system. A permissionless blockchain enables users to freely enter the market when they generate enough computation power to interact with the blockchain. Whether a blockchain adapts to an existing business process depends on its configuration and business context.
For example, Peters and Panayi elaborate on the difference of configurations between permissioned and permissionless blockchains Peters and Panayi, Since those participants can freely join the network, the design of incentives is crucial to motivate their participation. The well-known examples of cryptocurrencies Bitcoin, Ethereum, and more are a result of permissionless blockchain.
A permissioned blockchain is designed as a transit product to enable the shift of existing business applications from a private centralized blockchain to a decentralized, permissionless blockchain. Thus, alternative consensus mechanisms are required. These two contexts of blockchain ledger systems imply different cost structures of blockchain implementation. This study discusses the transformation of costs during the blockchain evolutionary process. Transaction costs are developed and classified into three types Mahoney, First, search and information costs are incurred to reduce uncertainty before a transaction is executed.
Second, bargaining costs are incurred during negotiations before reaching a common agreement. Third, policy and enforcement costs are incurred during the supervision of a contract.
The core concept of transaction cost theory aims to enhance economic efficiency within the process of product or service exchange through the market. In addition to the production costs of goods, transaction costs play a crucial role in finding an efficient economic entity and its decision boundary.
Other than the above-mentioned categories of transaction costs, Williamson proposed three determinants of transaction costs— frequency, asset specificity and uncertainty as key dimensions that capture the characteristics of economic exchange between institutions Williamson, An asset is site specificity when a natural resource only available at certain location.
An asset is physical specificity when a specialized tool is developed for a unique business purpose. An asset is human-specific when the required knowledge or skills are built through a learning-by-doing model with trading partners. An asset is time-specific when the value exchange between the user is dependent on a limited period of time. Since transaction costs are durable, extant studies have demonstrated the transformation of these costs when a new technology emerges e.
In this study, we further explore where blockchain has surpassed previous interventions provided by the internet. Within an organization, the principal-agent problem stems from conflicts of interests between managers the agent and shareholders the principal and information asymmetry. Blockchain is predicted to mitigate the principle-agent problem. The principal and agent desire for their counterparts to optimize their interests. A contract is fulfilled to supervise and restrict the agent's behavior.
The contract creates monitoring costs, bonding costs , and residual losses Mahoney, The agent is also required to commit to contractual obligations so that managerial behavior is not harmful to the principal— bonding cost. Sometimes the interests between principals and agents are still misaligned due to uncertainties, contributing to the third agency costs— residual losses. Residual losses are opportunity costs that occur when parties fail to fulfill a contract, despite that contract being optimally established to ensure the interests of both parties.
Two determinants are crucial to mitigate the agent-principal problem: incentive and accountability. First, in the principal-agent relationship, it is common for the principal to provide incentives to motivate engagement with their agent and mitigate the moral hazard issue. Empirical evidence extended from Jensen and Meckling's base model Jensen and Meckling, concluded that agency cost is inversely related to the agent's economic rewards Ang et al.
Extant studies also analyzed how incentives contracts impact vertical relationships from the perspective of agency theory Holmstrom, ; Zenger, ; Foss, Second, Khan claims that clear accountability of the individuals can reduce the misalignment of interests between the principal and the agent Khan, A relationship-specific Internet technology is predicted to reduce the agency costs when the accountability of a task is ambiguous Jensen and Meckling, Literature has discussed the two variables in the agency theory to help clarify accountability, such as the measurement of input by task programmability Ouchi, and the evaluation of outputs by non-separability Alchian and Demsetz, Task programmability describes how the specifications of a task can be formulated in advance.
If task programmability is ambiguous, the monitoring effort would be a challenge since a manager is not able to identify and clarify the original input.
Non-separability measures the traceability of a task to a specific individual. A manager must take the responsibility to monitor the original outputs when incentives are insufficient or inefficiently allocated.
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Consensus mechanisms. Mathematical formulas. Distributed System. Super Computer. Block Header. Block Metadata. Block Footer.
How to choose the right consensus protocol for permissioned blockchain networks
Over the past several years, blockchains have evolved in a variety of flavors depending upon their build and configuration. The content stored on the blocks of the blockchain as well as the activities performed by the various participants on the blockchain networks can be controlled depending upon how the blockchain is configured and how it is expected to fulfill the desired business purpose. Broadly speaking, public and private blockchains are the two most common varieties. They are used heavily among the various cryptocurrency networks and the private enterprises. A third category, permissioned blockchains, has also gained traction. Let's take a look at the key differences between the public, private, and permissioned blockchain networks. If one desires to create a completely open blockchain, similar to Bitcoin , which enables anyone and everyone to join and contribute to the network, they can go for a public blockchain. In a public blockchain, anyone is free to join and participate in the core activities of the blockchain network. Anyone can read, write, and audit the ongoing activities on the public blockchain network, which helps a public blockchain maintain its self-governed nature. The public network operates on an incentivizing scheme that encourages new participants to join and keep the network agile.
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Blockchain Intermedio Interview Question-Answer
Ans : Ledger. Consensus mechanisms. Mathematical formulas. Ans : Consensus mechanisms. Ans : Consistency. Ans : True.
The truth behind Libra, Facebook’s new cryptocurrency
Find centralized, trusted content and collaborate around the technologies you use most. Connect and share knowledge within a single location that is structured and easy to search. As far as i understand, private block chains are built for an enterprise or a group of organizations. While i am trying to explore, i came across few technologies like Hyperledger fabric, OpenChain, multiChain. Is Hyperledger fabric a technology for private BlockChain?
As of this writing, more than half of all VC funding to date has gone into building permissioned systems on top of a permissionless network Bitcoin. Permissioned-on-Permissionless PoP systems are an odd hydra, they have all of the costs of Sybil-protected permissionless systems e. Thus it is curious to hear some enthusiasts and VCs on social media and at conferences claim that the infrastructure for Bitcoin is being rolled out to enable permissionless activity when the actual facts on the ground show the opposite is occurring. To extract value, maintain regulatory compliance and obtain an return-on-investment, much of the investment activity effectively recreates many of the same permission-based intermediaries and custodians that currently exist, but instead of being owned by NYC and London entities, they are owned by funds based near Palo Alto.
We believe in AI and every day we innovate to make it better than yesterday. We believe in helping others to benefit from the wonders of AI and also in extending a hand to guide them to step their journey to adapt with future. The traditional data analytics in retail industry is experiencing a radical shift as it prepares to deliver more intuitive demand data of the consumers. If you are a business owner, you already know the importance of business security. Security mishaps come in different sizes and shapes, such as the occurrence of fire or thefts happening inside your business premises. All these mishaps […].
Try out PMC Labs and tell us what you think. Learn More. Presently modern technology makes a significant contribution to the transition from traditional healthcare to smart healthcare systems. Mobile health mHealth uses advances in wearable sensors, telecommunications and the Internet of Things IoT to propose a new healthcare concept centered on the patient. However, major limitations include the transparency, security, and privacy of health data. One possible solution to this is the use of blockchain technologies, which have found numerous applications in the healthcare domain mainly due to theirs features such as decentralization no central authority is needed , immutability, traceability, and transparency. We propose an mHealth system that uses a private blockchain based on the Ethereum platform, where wearable sensors can communicate with a smart device a smartphone or smart tablet that uses a peer-to-peer hypermedia protocol, the InterPlanetary File System IPFS , for the distributed storage of health-related data.
Which of these is a distributed ledger that doesn't utilize transaction blocks? Which type of blockchains are controlled by a particular person or organization? Which of the following is a Leader election-based consensus mechanism? Which consensus algorithm requires the users to have a stake in the blockchain?
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