Blockchains For Automation Professionals And The IOT Internet Of Things

Check out a detailed 5 Minute Roadmap To Understanding Blockchains.

Hi,

This isn’t as bad as you may think. They are structurally quite easy to understand. As soon as you grasp the idea of hashing and the idea that there is a consensus protocol as part of the structure then you are well on you way to getting it.

The following short notes are the outline and the key points from our short journey.  If I only had 5 minutes this is what I would tell you.

Prime Numbers:

• Multiplying two large prime numbers together – Easy
• Reversing the operation – find the factors – Insanely Hard
• This is the basis of public / private key encryption.

Hashes:

• A mathematical formula. Feed data in. (words, images etc)
• Get a number out.
• Every chunk of data produces a different number.
• Aha – a signature.

Distributed Ledgers:

• Imagine that someone broke into your bank and destroyed / stole their servers?
• Imagine the bank records were stored on thousands of duplicate servers scattered around the world.
• You might have a higher level of trust.

Public, Visible:

•  Imagine that every record on every server is visible to anyone in the world.
• Imagine the servers are not under the control of one entity.
• You would have a high(er) trust of the data if all the servers matched.

Consensus:

• The only problem is when new data is written to all these distributed ledgers.
• How do you know the blocks of new data being added are valid ?
• The cheating might occur here.
• The ledgers talk to each other in public. Anyone who breaks the rules gets ignored or kicked out (called branching).
• Encrypt / Sign the messages so people cant alter them.

Mining:

To add a new data record, a calculation must be performed. A very hard calculation to do but easy to verify. One so hard that it takes the average desktop PC about 2.7 million years. It’s a race between miners. The 1st one to announce the correct answer wins. The others get nothing.  The ledgers all use the 1st correct answer announced and add the block of data.

• The winning miner also gets a piece of the blockchain itself. In the case of bitcoins is worth money because the blocks of the bitcoin are bitcoins.
• Miners on some chains also charge transaction fees.
• Mining is expensive – You need energy to run high power computers.

Trust:

• Trust comes from working with untrustworthy people, miners and servers.
• To cheat, you have to change the majority of the ledgers simultaneously

To change data in the past you have to recalculate all the answers for previous blocks and update all the ledgers before anyone else spots it because its all in public view.

Organized crime uses blockchains do you think they trust each other ?

Quick Summary:

• Each block in a blockchain contains the hash (signature) of the previous block.
• To verify a block calculate its hash – this is easy and fast.
• Extract the signature from where it is stored in the next block and compare.
• The  forward chaining of signatures gives the system a ‘trivial to verify’ ability.
• So trivial that bitcoin blockchain does not keep your balance. Rather it calculates by reverifying every single transaction.
• The distributed public ledgers
• The consensus protocol that ruthlessly ignores cheaters.
• The fact that the rules are built into the blockchain itself. The blockchain is not only a ledger of data it is also set of instructions.

Bitcoins / ICO’s:

• Bitcoins are a special version (implementation) of a blockchain.
• Not all blockchains are equal. Usually the designer has a specific purpose in mind.
• In the case of Bitcoins it was financial. In the case of Ethereum it was to make a general purpose blockchain that people could embed programs in.
• Bitcoins will always get rarer because it gets harder and harder to make them and people lose them all the time.
• Rarity and value do not correlate.
• People spin off bitcoins by changing the rules – they get rejected by the old blockchain. And they become a new chain. What is the value of the coin on the new chain. That’s what an Initial Coin Offering (ICO) will determine.

Smart Contracts:

• If data in a blockchain is immutable then how about a program embedded in the chain.
• It is immutable too – meaning it is guaranteed to execute under its trigger condition
• The program is visible and distributed so it can be verified.
• How do you know you can trust the lotto – that their selections are crooked and that they will have the money to pay if you win. If the program and the money is imbedded in the blockchain. You can inspect it any time you want. On any of the distributed ledgers.
• A program embedded in a blockchain is called a contract.

The end…

Ongoing:

This information is fleshed out in a series of Chipkin publications.

1. Checksums and Hashes – The roots of blockchains
2. Blockchains – Features, Structure, Operation
3. Blockchain Smart Contracts
4. Blockchain Applications
5. Blockchains – Risk, Lies and Hype
6. Hands On – Spend a few dollars and do some basic blockchain things.

About the Author:

Peter Chipkin is the President of Chipkin Automation Systems Inc – a company with a reputation for excellence in service and customer support. With over 30 years of experience in automation, controls, and in Communications and Automation software development, Peter still relies on honesty and integrity to make sure each job is done right. While originally from South Africa, Peter now resides in Vancouver with his family – including Jack the Husky.

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