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THE IMMUTABILITY CONCEPT OF BLOCKCHAINS AND
BENEFITS OF EARLY STANDARDIZATIO
N
Frank Hofmann
*
, Simone Wurster
*
, Eyal Ron
§
and Moritz Böhmecke-Schwafert
*
*
Chair of Innovation Economics Berlin University of Technology, Berlin - Germany
and
§
Cryptom Technologies UG, Berlin - Germany
ABSTRACT
The blockchain technology can be regarded as a
groundbreaking invention with the potential to bring the
digital revolution to the next stage by helping to realize
peer economy solutions. The blockchain technology and the
concept of blockchain immutability is discussed. The
benefits of early standardization of the blockchain
technology are argued based on the literature and the
analysis of the central blockchain immutability
characteristic. From this, a framework is proposed aimed
at understanding the dimensions and boundaries of
blockchain immutability. The resulting framework is
suggested as a good practice standard for the
implementation of blockchain systems. Based on these
efforts, the article supports initiatives to better exploit the
blockchain technology’s full potential by standardization.
Keywords— blockchain, standard, immutability, peer
economy
1. THE PEER ECONOMY AND THE ROLE OF THE
BLOCKCHAIN TECHNOLOGY
The digital revolution has been heavily impacting
organizations, economies and modern societies in the last
decades ([1] p. 4-9). As one of the latest waves of IT
innovations following social media, mobile devices, the
internet as well as personal and mainframe computers in the
last decades ([2] p. xii), the blockchain technology,
spearheaded by the innovative Bitcoin application, has
emerged as a potentially disruptive IT innovation [3][4][5].
The disruptive effects of the blockchain technology do not
only concern business models by bringing intermediaries
under competition, as it allows intermediary services
without single trusted actors [6][7][8]. It has as well the
potential to be an answer to the global change in markets
driven by automation: Digitization is not just about the
ubiquitous use of algorithms and ICT that revolutionize
labor and consumer markets, but it also enables new
opportunities in the form of IT-supported collaboration in
the "peer economy" ([1] pp. 243): Tasks are split and
sourced to a crowd instead of using well defined
organizations. Peer-to-peer exchanges and collaboration
between people allow them to crowd-participate in
innovating markets ([1] pp. 241-247), to which the
decentralization enabled by the blockchain technology
offers a promising solution (see [2] p. 27, [4], [9], [10] p.
272). By virtue of immutable and redundantly held data
records as well as distributed consensus mechanism,
blockchains can further contribute to controlling the flood
of digital data by providing common single reference points
to share data and to evaluate key data (see [2] pp. 30-31,
[4], [11]).
Following the introduction, the blockchain technology is
presented and then discussed with the case of the "DAO
wars". In the fourth chapter the need for early
standardization of blockchain technology is elaborated.
Subsequently, a framework is introduced in order to
contribute to development of the technology by early
standardization.
2. HISTORY AND CENTRAL CHARCTERISTICS OF
THE BLOCKCHAIN TECHNOLOGY
The blockchain technology advent began in 2008 with the
Bitcoin application. Following the publication of the
Bitcoin whitepaper by Satoshi Nakamoto (pseudonym) in
2008 [12], the cryptocurrency Bitcoin was set up in 2009. It
was used for the first time commercially in 2010 in order to
purchase pizza for the price of 10,000 bitcoins [13]. From a
price for a pizza order in 2010, the value of the 10,000
bitcoins rose until October 2017 to more than a 400,000
US$ (see [14]), illustrating Bitcoin’s strong dynamics.
Soon after its launch, a wide array of further blockchain
technology applications were developed ranging from so-
called "colored coins" building on the Bitcoin blockchain
[15] to new blockchain implementations such as Ethereum
[16] or Hyperledger [17]. Currently, the blockchain
tracking website coinmarketcap.com lists about 1,150
cryptocurrencies and other applications [18].
We propose, that a blockchain can be defined as "a distrib-
uted database that is practically immutable by being main-
tained by a decentralized P2P network using a consensus
mechanism, cryptography and back-referencing blocks to
order and validate transactions." [19].
A related term is "distributed ledger". It was found that both
terms correlate and that, based on the last data of spring
2017, "blockchain" is the leading one [20]. There is
however no clear consensus on the definitions yet, as a
distributed database does not have to use blockchain
technology [21]. For the purpose of this article, we consider
the usage of the blockchain technology as defined, which is
shortly described afterwards. At the core of blockchain
technology is the decentralization of the database control
([6], [22] p. 219), which can be in its extent considered as a
"revolutionary new computing paradigm" allowing a new
level of coordination and collaboration ([2] p. 92).
The blockchain developer Richard G. Brown described the
decentralization of trust (see [2] p. vii, [23]) as shifting the
"trust boundary" from protecting a whole system against the
outside by controlling access and centrally ensuring data
validity, down to the individual participants in a blockchain
network ([24], see also [12]). As blockchain network
participants no longer need to trust each other or a third
party to cooperate, dynamic online networks can form to
share resources such as data and processing power or
interact for different purposes in a peer to peer network.
A central property for the participants’ trust in the
blockchain is the immutability of the data records [3][11].
This means, that recorded data cannot be manipulated or
modified after being accepted by the blockchain network.
As discussed later in the case of the "DAO wars" and
subsequent chapters, the concept of immutability is also
extended to the rules and even the functions of blockchain
applications by parts of the blockchain community.
The shift of the trust border to the individual user level is
realized by technical principles of blockchain technology:
Information is stored in a chain of data blocks, each of
which references the preceding data block by an
alphanumeric string derived from the preceding block
(typically using a hash function), which makes it
improbable to manipulate the data published in a block
without being noticed, as the reference values would no
longer fit the referenced data blocks ([10] pp. 64-65, [12]).
New data is integrated by a distributed consensus
mechanism
1
leading to a convergence towards a commonly
accepted state, which in the case of the Bitcoin blockchain
means, that each participant creating data blocks selects the
longest valid blockchain in order to attach new blocks ([10]
pp. 65-68, [12]). The creation of blocks is for example in
the Bitcoin blockchain, so-called "mining", is motivated by
a block creation reward and transaction fees in bitcoins, but
requires a processing of a power-costly cryptographic proof
to demonstrate commitment and deter malicious behavior
([10] pp. 38-45 and 104-119, [12], see also [3]). This results
in an agreement on a sequence of valid data blocks, with
valid meaning for Bitcoin that the preceding data blocks are
correctly referenced and are consistent with the rules and
the (publicly visible) past Bitcoin transactions in the
blockchain ([10] pp. 66-69).
The immutability of recorded data on a blockchain can be
breached. A breach of immutability can occur due to bugs
in the code (see e. g. [25], [26]) But breaching the
immutability of recorded data is possible even in an
idealized implementation of a blockchain, although it is
1
Several versions of consensus mechanisms are
developed for blockchains, see e.g. [3].
considered in general (a) improbable or (b) extremely
difficult.
(a) An improbable breach of immutability would occur, if
one tried to attack the blockchain data structure of blocks
chained by hashes. If it can be assured that it is improbable
to find two blocks with identical hash value,
mathematically called "collision resistant", then such an
attack will not be possible in practice. While for each
possible hash value theoretically an infinite number of
blocks exists, for which a hash function gives this value, a
well-defined hash function makes it improbable to find
such two blocks even if a user is holding an unreasonably
high amount of computational powers ([27] pp. 153-156).
This principle has not yet been proven for the standardized
CRSC hash functions [28], which are currently used in
applications, but it is a strong belief of the community that
this is the case ([27] pp. 231-236).
(b) An extremely difficult breach of immutability is one
that requires a very large amount of resources to convey,
but which is in principle possible. One example is an attack
on Bitcoin’s consensus mechanism: If one possesses a
computational power which is higher than 50% of the
computational power of the whole network, one can try to
delete a transaction from the blockchain by sending a
modified blockchain as consensus. Bitcoin's hash power
sums up to more than 10,000,000 TH/s at the end of
October 2017 [29], which means that about 740,741 units
of one of the strongest miner (Antminer S9, 13.5 TH/s,
1265 dollars apiece as of 4th October, 2017, see [30] and
[31]) are needed. This would cost around 937 million
dollars not including electricity costs and other needed
efforts.
2
Therefore, and in all cases known to the authors,
immutability was so far only breached by forks, meaning
different distributed software versions of the same
blockchain existing in parallel, as will be discussed in the
case of the DAO in chapter 3. The ability to validate the
recorded blockchain data and the authentication of users by
encryption keys as digital signatures are as well central to
form a decentralized consensus without the need to know
and trust the participants in a blockchain network
3
[22][32].
There are also additional measures to be taken into account,
e.g. to counter misbehavior and attacks. A more detailed
and encompassing discussion of the technology can be
found in [10][32][33].
Enabling new forms of peer collaboration and coordination
and thus novel business models and applications,
blockchain technology is attracting wide interest as shown
in various implementations and applications (see [18], [34],
[35]). As it is an emerging and still maturing technology,
solutions are needed to clarify and standardize its basic
terms and concepts, as the next chapter will demonstrate.
2
Smaller networks may face higher risk, but may
as well offer less incentives for would-be attackers.
3
With the cryptographic keys the user input is
authenticated - the anonymity is a design choice.
3. THE CASE OF THE DAO WARS
Besides its industry-wide publicity, the blockchain
technology also experienced setbacks. Among the most
prominent incidents were the one of the Bitcoin exchange
Mt. Gox with a tremendous damage of $350m in Bitcoin
cryptocurrency [36] and of the Ethereum-based
"Decentralized Autonomous Organization" (DAO) with an
initial damage of $50m in the cryptocurrency ether [37].
Such adverse events could jeopardize user trust in the
blockchain technology significantly.
The latter case with the hack of the DAO or the so-called
"DAO wars" caused fundamental discussions regarding the
concept of immutability as a central characteristic of block-
chains [38][39][40].
The DAO blockchain is one of the first attempts to form a
decentralized crowd-funded organization on the Ethereum
blockchain by which users can obtain shares by buying so-
called DAO tokens [38]. These tokens give them propor-
tional voting rights on the investment into specific projects
and accordingly the corresponding economic rents [38].
The blockchain code and the immanent rules and automa-
tisms were not supposed to be subjects of change and thus
were regarded as "immutable" [40]. In June 2016, an at-
tacker used a only recently noticed breach in the DAO code
to appropriate tokens from other participants equivalent to
about $50 million [37].
As the implemented code delayed payout, the DAO and
Ethereum community had four weeks to react to "the at-
tacker’s" transfer. Due to the DAO’s significance in the
Ethereum ecosystem, a controversial discussion evolved
within the blockchain communities, such as on the Reddit
forum, whether to undo the breach exploitation in that time
[38][41][42].
If the DAO were a traditional centrally managed
organizational software, the common procedure would have
been to solve the breach in the code and transfer the $50m
back to its original owners. However, the DAO structure
building on blockchain technology requires a network
consensus on how to proceed [38][39].
One view point advocated a correction of the Ethereum
protocol to fix the consequences of the breach in the DAO
code. The second most prevalent view of the community
argued, that there should be no ex-post modification as
undoing the manipulations would be a violation of the
"immutability principle", which sees the code as the single
point of truth [38][39].
In the end the majority decided on a protocol correction
resulting in a split into two different Ethereum blockchains,
breaching the immutability by a fork [38], but without
solving the discourse about the perception of blockchain
immutability. The "DAO wars" have shown, that the central
attribute immutability is not commonly understood within
the blockchain developer community.
Besides others incidents, this revealed the ambiguity of
blockchain concepts in the field of blockchain technology.
Misconceptions like these challenge the future development
and jeopardize trust in such blockchain solutions
significantly.
It is also noteworthy, that the principle of using blockchain
tokens for investments, so-called "initial token offerings"
(ICO), is a popular financing method for blockchain start-
ups, which underlines the significance of clarifying the
concept of immutability.
We argue, that this issue can be addressed by appropriate
standards specifying fundamental blockchain terms,
concepts and characteristics, an appropriate business to
customer communication regarding these characteristics as
well as regarding the resulting rights and duties on the side
of the blockchain developers and users. Following the need
for early standardization revealed by the case of DAO, the
benefits of early standardization will be argued in the next
section.
4. NEEDS AND CHALLENGES FOR EARLY
STANDARDIZATION OF BLOCKCHAINS
Standards play a central role for industrial societies and
international technology systems [43]. They can be
understood as a consensual, public document from a
recognized institution for the "achievement of the optimum
degree of order in a given context." ([44] p. 12). In addition,
besides consolidated scientific and technological
contributions, standardization also considers learning from
practitioner experiences to optimize community benefits
from standards [44].
According to [45][46], four categories of standards can be
distinguished:
• semantic standards,
• measurement and testing standards,
• interface standards and compatibility standards and
• quality standards and variety-reducing standards.
Regarding the product life cycle, [47] identified three types
of standards: Anticipatory, participatory, or responsive
standards. Anticipatory standards are standards "that must
be created before widespread acceptance of devices or
services". Participatory standards "proceed in lock-step
with implementations that test the specifications before
adopting them" and responsive standards "occur to codify a
product or service that has been sold with some success"
([47], p. 2).
This paper refers to participatory standards, although it
could be argued, that the suggested framework as well as
consortia efforts or some international standardization
committees have an anticipatory character as well, since
they set the road for a broader implementation. It is directed
as a quality standard towards supporting technology
diffusion and acceptance.
Regarding innovative areas, the benefits of standards may
refer, for example, to R&D and the diffusion of innovation,
the time-to-market of new products, support for the
technology transfer and the creation of critical mass (see
[48], [49] for overviews of the advantages of
standardization).
Besides the long list of advantages, which standards may
provide, they can also introduce risks, such as monopoly
power, regulatory capture and raising costs of competitors
or reduced choice on markets [48]. An example of how to
mitigate the risks is given in [50]. [48] explicitly
emphasizes the positive influence of standards on
innovations as well. Likewise [46] shows various benefits
that standardization of an emerging technology such as the
blockchain field can achieve. As the understanding of the
very concept of what a blockchain is still ambiguous (see
[51], [52], [53]), early standardization efforts could help
significantly to clarify mutual understanding.
It is found in [54], that users are willing to use a
blockchain, if the blockchain technology is easy to use
concerning both the technological and business side, useful
in terms of effectivity and efficiency benefits and incurs
only acceptable risks regarding security, privacy or
stability. Trust impacts these user assessments [54] and
standards can support both the evaluation of a blockchain
application as well as the trust in the technology itself.
In line with these considerations, [55][56] specify as the
current needs for standardization reference architecture,
taxonomy as well as ontology. In that respect, the concept
of the immutability concerns both taxonomy and ontology
of blockchains. [57] adds, that international standards,
standards that assist a new emerging technology to be rolled
out and deployed with greater clarity, certainty and market
confidence, shared solutions for customer requirements as
well as for smart contracts are important.
According to [57], leading standardization organizations, in
particular, ISO, ITU and CEN respond to these needs. ISO
for example, created a roadmap, covering a three year
period between April 2017 and April 2020. Key issues,
addressed by ISO working groups and study groups,
include "Terminology", "Taxonomy / Reference
Architecture", "Identity", "Interoperability", "Governance",
"Security & Privacy", "Use Cases" and "Smart Contracts".
Additionally, large industry-supported consortia such as
Hyperledger Fabric of the Linux Foundation have been
evolved to develop modular blockchain solutions [58][59].
This article adds to these efforts by (a) introducing and
explaining the fundamental blockchain immutability
characteristic in chapter 2 and 3 as well as (b) suggesting an
appropriate user and investor communication as well as
management of this characteristic in the next chapter.
In line with the findings of [56][57], it is essential that the
recorded data and the rules of cooperation in the blockchain
network are reliable for the participants to trust the
network. This requires a clarification of its immutability
characteristics, respectively the conditions under which the
active blockchain can be modified (see [42]) furthering
trust and customer confidence. The question has thus to be
posed, under which circumstances should a blockchain be
subject to modifications, while at the same time ensuring a
non-manipulable consistent consensus between the
networks’ participants. To achieve consensus, but also to
incorporate the user requirements, the early involvement of
all stakeholders is critical in defining such requirements.
5. SUPPORT OF TECHNOLOGY USAGE BY
MANAGMENT OF IMMUTABILITY
A remarkable characteristic of the blockchain evolution is
its technology development in open as well as distributed
communities. The knowledge exchange is driven by the
sharing of whitepapers and realized often informally or
even anonymously by means such as forums and blogs or
face-to-face discussions and conferences (see also [60],
[61]).
The dynamic, large and varied field of proposed blockchain
solutions makes it also difficult to accurately pinpoint the
benefits of the proposed and typically unproved solutions.
Taking as well the immature state of the technology and
ambiguity of concepts into account as discussed before, the
development of the blockchain technology can be described
as chaotic. In [53] an approach to define terms for the
complex blockchain technology development is proposed.
However, as the DAO case has shown, the central role of
immutability requires further considerations.
Consequently, guiding quality standards for operation and
implementation are needed to better handle the chaotic
technology development. Supplementing committee
discussions on term definitions to promote common
understanding, on references to compare and test, or on data
exchange specifications for compatibility, the presented
framework focuses on the system aspect of the blockchains
and the support of its management.
In the following, an approach to clarify the principles of
blockchain immutability is proposed as a participatory
quality standard to support the roll-out and deployment by
clarifying the central concept of immutability and its
management for operations. With a layered framework, the
implementation of immutability is made manageable for
blockchain developers and users.
The immutability concept concerns both the data and the
code of the blockchain as discussed before. The
immutability of the data is generally seen as an
uncontroversial aspect realized by the technical properties
of the blockchain data structure as discussed in chapter 2.
It has to be pointed out, that blockchain solutions have
limits in what they can achieve: While immutability of
recorded data may be ensured, the data may be erroneous
before entry into the blockchain. The consensus system
may be used to verify entry data, but this has limits in what
the participants can reliably deliberate and consent on (see
[62]).
The immutability of the code is however a highly
controversial concept, as shown in the DAO case in chapter
3. No code is created in perfect state integrating all
operative requirements from the start. A blockchain code
has to be, and in all popular cases known to the authors is,
continuously adapted. For a distributed consensus system,
there are differences in how far users are affected by a code
change. Adding a function for comfort, fixing a bug or
improving the handling of a data format has a different
impact for the users than changing the rules of the system
that concern trust: The privileges of data integration, the
miner incentives, the consensus finding system and so on.
As discussed beforehand, the blockchain technology still
has technological issues such as scalability, security,
privacy, functionality, efficiency and reliability that needs
to be improved ([63], [64], [65], [66], [67], [68], [69])
making software updates necessary. An update would be
successful, if the blockchain network participants use the
new code and drop the outdated code version. The
acceptance is of critical concern, as it has the potential to
cause inconsistent and incompatible versions to coexist
(forks), divide the network and impact trust. From the
impacted users’ perspective, a blockchain code could be
modified in several ways assuming the required IT
infrastructure to operate the network as given:
(a) The software code could be modified to improve the
code execution or remove specific weaknesses without
altering key properties (e.g. "Performance Improvements"
in [70] or "Test for LowS signatures" in [71]).
4
Users can
simply acknowledge such changes.
(b) The software code could be modified to offer additional
functions concerning data administration (e. g. "Standard
script rules relaxed for P2SH addresses" in [72] or "Block
file pruning" in [73]).
5
Users have to inform themselves
about the new possibilities or potential limitations.
(c) The software code modification could alter or affect key
blockchain network properties (e. g. the discussed
"correction" of the DAO hack or an update to the
cryptographic proof of work in the Bitcoin blockchain as
discussed in [74]). In such cases, users need to review the
changes and consent to them.
The presented framework takes the distinctive perspective
of the network participants, who have to place their trust in
the system, to help manage the inherent conflict within the
concept of conditional immutability of a blockchain. From
the described differences in impact on the system users,
four layers are derived (see figure 1):
(1) The execution layer at the bottom of figure 1 represents
the software code execution running locally on the users'
hardware and that operates on the IT infrastructure. It forms
the basis for the following layers. Changes on this layer are
performance, stability or security improvements. They do
not alter functionalities for participants, carried data,
network properties or consensus mechanism as experienced
by the users.
If well documented and transparent, e. g. as blog entries on
a regular schedule, such changes are part of the
maintenance work and will not in general negatively impact
the trust of the users.
(2) The function layer concerns the related functions
allowing the users to work with the data. Changes on this
layer between local execution and system layer may be a
4
Due to technical reasons downward compatibility
may be broken in some cases, which can lead to divisions.
5
Note that a change in data management does not
have to be contrary to blockchain data immutability.
concern for trust and consistency, as decisions to cut or add
data may concern central blockchain properties such as
historical completeness. On the other side, additional
functions to implement a contract or function to check data
may not be a great concern for trust, but part of regular
application development, which needs to be communicated.
Therefore, functional changes have to be verified for their
system impact and if necessary handled purely under the
system layer. In case neither data nor system rules are
changed, the changes can be handled as code updates.
Changes only on the function and execution layer can and
will typically occur frequently and are not of concern for
the immutability of a blockchain.
(3) The system layer concerns the users’ interactions with
the blockchain on the network level, respectively system
properties such as participation incentives, encryption,
anonymity, consensus mechanism or network permissions.
Changes on this layer require common understanding
within a peer network about the specific modalities of the
modifications (if, when and how) before implementation, as
they have the potential to affect common agreement and
subsequently trust so strongly, that they can cause network
splits as demonstrated by the "DAO wars" (see chapter 3).
They should be clearly marked and communicated well in
advance to allow a sufficient discussion. Even more
important is however, the predefinition of the modalities for
such cases to set a clear frame for the handling. Changes on
the system layer are thus to be considered possible, if the
conditions for them are described and agreed in advance.
Due to this, system properties are only conditionally
immutable. The conditions are of interest to users, investors
and regulators and have to be published upfront ideally
within the first whitepaper and.
(4) The data layer concerns the data stored on the
blockchain and thus data immutability, as any non-
consensual changes of data violates the historic consistency
and completeness of the blockchain. In general, data is only
added and there are no conditions under which data on the
blockchain can be removed. The historic data is to be seen
as immutable. It has to be noted however, that it can be
temporarily uncertain, whether data is already consensually
accepted depending on the duration of the convergence
process in the distributed blockchain network.
Figure 1: Layers of blockchain immutability
The potential impact of changes on the blockchain network
participants has to be carefully considered and clearly
communicated depending on the corresponding layer in the
framework. As a quality standard, the developers should
specify any potential changes corresponding to the four
levels, their conditionality (if, when and how) and their
possible impact in detail upfront based on the proposed
framework to increase trust and promote the diffusion of
the technology.
A suitable mechanism of how to agree on proposed changes
on the system layer would depend on the type of blockchain
and its consensus mechanism.
The "immutability of a blockchain" is thus in general the
immutability of its recorded data and the conditional
immutability of its system rules and properties. The
disclosed conditionality of changes to blockchain network
properties can be seen as the constitution of a decentralized
organization, which is realized by a blockchain.
As a final comment, the so-called smart contracts, which
are in principle program code distributed with the
blockchain, offer powerful possibilities to work with data
on blockchains depending on inputs and are in general part
of the function layer. The blockchain system does only
guarantee the validity of them as far as the consensus or
automated checks validate their properties and results.
Their power to affect data or system properties should be
clearly described and checked.
6. CONCLUSION AND OUTLOOK
Blockchain technology has the potential to become a
cornerstone of the digital revolution by enabling
decentralized cooperation in networks, when technological
development continues to address user requirements. The
development of early standards and good practices can also
offer fundamental support for the technological
development and its market acceptance.
An essential network property is the trust placed in the
recorded data respectively transactions as well as in the
rules of the decentralized network. As a result, the
ambiguous concept of immutability has evolved in the
blockchain community, but remained elusive as discussed
in the DAO wars case. To ensure the success of the
blockchain technology field, we have discussed the need for
quality standards specifying good industry practice. The
whitepaper documentation of blockchain solutions should
describe clearly the conditions under which code or even
system rules may yet change. For this purpose a
classification has been provided to support maintenance and
updates, while specifying the system property of
immutability.
When the decentralizing and coordinating potential of the
blockchain technology can be successfully exploited,
applications in many fields such as in the manufacturing
sector, the financial service sector, the health sector, E-
government or the internet of things may be realized and
drive a wave of economic and social changes (see also [2]
pp. 101-104).
To support this development standardization has been
recognized as an important topic.
Continuing research should address especially technical
short-comings to improve usability of the technology, the
competitive implementation of specific use cases to
demonstrate its potential as well as economic and legal
aspects to clarify user benefits for the different types of
blockchains and to reduce market uncertainty about future
regulation.
In addition, the development of crowd-sourcing and
collaboration applications using the blockchain technology
should be further investigated.
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