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Blockchain 1.0 to Blockchain 4.0—The Evolutionary Transformation of Blockchain Technology

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Blockchain is a propitious technology that has gained immense popularity and tractions. It has tremendously revolutionized the peer-to-peer information exchange by combining cryptographic principles with decentralization, immutability and transparency. The term blockchain has been coined from its fundamental feature of being a distributed ledger where each record or block is secured and bound to its successive blocks through hash functions thus resulting in this chain of blocks. This chapter first gives the historical background of this expeditious technology. It then proffers a description of the basic terminologies in blockchain, it’s types, basic structure of block and different consensus models popularly known. The prime emphasis of this chapter is to bestow an extensive study of the chronological evolutions in Blockchain Technology by highlighting the nitty-gritty of each generation in detail. It also illustrates a parameter wise differences amidst the several generations in terms of their principle areas, consensus models used, utility of smart contracts, the energy and cost requirements and execution speed and scalability. In the end, a Blockchain in Supply Chain Management test case has also been elaborated in this chapter.
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Chapter 3
Blockchain 1.0 to Blockchain 4.0—The
Evolutionary Transformation
of Blockchain Technology
Pratyusa Mukherjee and Chittaranjan Pradhan
Abstract Blockchain is a propitious technology that has gained immense popu-
larity and tractions. It has tremendously revolutionized the peer-to-peer information
exchange by combining cryptographic principles with decentralization, immutability
and transparency. The term blockchain has been coined from its fundamental feature
of being a distributed ledger where each record or block is secured and bound to its
successive blocks through hash functions thus resulting in this chain of blocks. This
chapter first gives the historical background of this expeditious technology. It then
proffers a description of the basic terminologies in blockchain, it’s types, basic struc-
ture of block and different consensus models popularly known. The prime emphasis
of this chapter is to bestow an extensive study of the chronological evolutions in
Blockchain Technology by highlighting the nitty-gritty of each generation in detail.
It also illustrates a parameter wise differences amidst the several generations in terms
of their principle areas, consensus models used, utility of smart contracts, the energy
and cost requirements and execution speed and scalability. In the end, a Blockchain
in Supply Chain Management test case has also been elaborated in this chapter.
Keywords Blockchain ·Distributed ledger ·Bitcoin ·Ethereum ·Hyperledger
fabric ·Cryptographic hash ·Consensus models
3.1 Introduction
The assurance of CIA triad comprising of confidentiality, integrity and availability
is the prime emphasis of any cryptosystem to provide a holistic security approach to
safeguard all critical and sensitive data. Data theft has been a major cybersecurity
issue that threatens these primary purposes of cybersecurity. Over the years, several
technologies have been proffered to eliminate this issue where Blockchain Tech-
nology [14] is the latest inclusion. Data while transit as well as storage is vulnerable
to many plagiarism and pilferage situations that makes tracing back the criminal and
P. Mukherjee (B)·C. Pradhan
School of Computer Engineering, KIIT Deemed to be University, Bhubaneshwar, India
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021
S. K. Panda et al. (eds.), Blockchain Technology: Applications and Challenges,
Intelligent Systems Reference Library 203,
https://doi.org/10.1007/978-3-030-69395- 4_3
29
30 P. Mukherjee and C. Pradhan
original data extremely strenuous. Blockchain Technology abolishes such scenarios
to great extent. A blockchain [5] can be interpreted as a distributed database that
incorporates every event or transaction, executed and shared amongst the concerned
parties. Each transaction is vehemently verified and once an information is entered,
it can never be erased without the consent of the involved parties.
Blockchains are thus like public registers where every transaction is accumulated
as a series of blocks. They are essentially based on the concept of Cryptography
and Distributed Systems. Each successive block stores the hash [6,7]oftheits
preceding block. Thereby, if any modification is made into the previous block, its
corresponding hash is modified and hence here is a mismatch with the one stored in the
successive block. This features makes blockchain tamperproof and the contaminated
block can be easily identified. Also blockchains eliminate the need of any central
authority for any kind of validation. Another important feature of blockchain is its
distributed nature [5,8] where its several copies are stored by different parties over
different networks which makes any modification quite tedious and further enhances
the security of blockchains.
Blockchain Technology first came into limelight with the inception of Bitcoin
by Santoshi Nakamoto [9] back in 2008 and has been transfigured to greater extents
since then. The first generation of Blockchain, Bitcoin [1,10,11] was a decentralized
peer-to-peer digital currency which eliminated the presence of any central authority
such as banks or intermediaries. To address the trust issues amidst the participants,
Bitcoin implements consensus models [12] to ensure the authenticity and integrity
of the users. Due to the limited functionality of the first generation in only finan-
cial sector, further advancements were made to adopt Blockchain for other domains
as well. Ethereum [13], the second generation technology has immense application
for crowdsourcing through its trustworthy smart contact clauses. A smart contract
[14] is a an autogenously assertive contract where the compliance between buyers
and sellers are directly converted into lines of codes across a distributed, decentral-
ized blockchain network. Hyperledger [15] is another advancement which provides
higher modularity and versatility than Ethereum due to its permissioned architecture.
The third generation Blockchain has inbuilt verification mechanism and more effi-
cient faster and cheaper than previous versions. Combining Artificial Intelligence
with Blockchain Technology has already paved way for the fourth generation of
blockchain as well.
This chapter first gives the historical background of this expeditious technology.
It then proffers a description of the basic terminologies in blockchain, it’s types,
basic structure of block and different consensus models popularly known. The prime
emphasis of this chapter is to illustrate a thorough study of the chronological evolu-
tions in Blockchain Technology by highlighting the nitty-gritty of each generation in
detail. It also illustrates a parameter wise differences amidst the several generations
in terms of their principle areas, consensus models used, utility of smart contracts,
the energy and cost requirements and execution speed and scalability. In the end, a
Blockchain in Supply Chain Management test case has also been elaborated in this
chapter.
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 31
3.2 Fundamentals of Blockchain
The related work section first delves into the historical background of Blockchain
Technology. It then puts forward the important terminologies related to it. The struc-
ture of a block is described in detail. Next the types of Blockchain are elaborated.
The nitty-gritty of successive generations of Blockchain Technology are discussed
in separate sections along with the works of several researchers in brief.
3.2.1 Historical Background
In 1980s, advent of crypto bound signatures revolutionized exchange of data amidst
the sender and receiver. In 1989, Digicash [16,17] exchange via email became pretty
popular. In the successive years, the usage of digital documents became common and
major emphasis is laid on assuring their authentication, efficiency and reliability. In
1991, Haber and Storenetta [1820] first suggested the concept of time stamping
a digital document to ensure they cannot be backdated and are tamperproof. In
successive years, incorporation of Merkle Trees allowed collection of several digital
documents into a block which enhanced their security. In the late 90s, usage of digital
currencies [21] became quite predominant.
Digital currencies are intangible and only available electronically, unlike physical
currencies. Transactions using digital currency cannot be undone in future and they do
not need any central authority, as a result of which chances of fraudulent transactions
are eliminated. They are also faster and cheaper than physical cash transfers. Szabo
[22] introduced the concept of “bit gold”, a decentralized digital currency in 2005
based on different cryptographic elements. In Szabo’s system [23], Bit gold begins
by generating a public challenge string while using a benchmark function The user
then generates a “proof of work [24]” string from the same function, and every details
associated to the transaction are stored in a title registry which is an immutable record.
The last bit of string is responsible for creating the next set of strings and thus Bit
gold is non-fungible.
Finney [25] proffered a system called “RPoW, Reusable Proof Of Work”, which
operated by obtaining a non-exchangeable Hashcash [26] based proof of work token.
In reciprocation, a RSA-signed token is created which is exchangeable amongst the
users.. This abolished the probability of denial of service. RPoW also got rid of
double spending problem. It tracks the possessionship of tokens on an authentic and
credible server that enables every user to verify the truthfulness and integrity in real
time.
Drawing ideologies from the existing digital currency concept and fundamen-
tals of cryptography, in 2008 Satoshi Nakamoto brought the concept of Blockchain
Technology into limelight by implementing the first blockchain as the public ledger
for transactions made using “Bitcoin [9]”. Since its inception, Blockchain has been
garnering the attention of several researchers for its immensely secure features.
32 P. Mukherjee and C. Pradhan
3.2.2 Basic Terminologies in Blockchain
Blockchain is basically a public distributed database which holds the encrypted
ledger. Ledger [27] means a file that keeps on growing constantly. Blockchain prin-
cipally contrasts from a database because of its decentralization feature. Each and
every record in a database stored in a central server. On the contrary, in a blockchain
every participant retains a copy of each record. A block [28] is a data structure
consisting of most recent and previously never occurred or included records. The
aboriginal block of a blockchain is termed as the genesis [29]. Each of the successive
blocks incorporate the hash [30] of its preceding block. A hash is non-invertible which
means a hash can be calculated from a particular input but not the vice versa. Also,
hash is collision resistant. It is tedious to retrieve two different inputs resulting in the
same hash value. Hash incorporation into Blockchain Technology makes it highly
secure because even a negligible change in a block hugely differs its hash which is
then reflected in all the successive blocks. As a result of this, any kind of intrusion
is strongly noticed. Figure 3.1 demonstrates the block diagram of a blockchain.
Blockchain is thus keeps a time-stamped, protected, chronometric and immutable.
Transactions are the basic building blocks of a blockchain system. This feature of
blockchain finds adequate application in several financial as well as non-financial
organizations.
Any user or device within the Blockchain is termed as a node. Specific nodes
that perform block verification process are coined as Miners [31]. Each Blockchain
has certain set of rules to carry out different operations and these rules are termed
as Consensus [32,33]. Every block in a blockchain is visible to each participant in
the network, but they cannot replace, modify or add new blocks unless verified and
validated by at least 51% of the peers. This is termed as Proof of Consensus [12].
Proof of Work [34] additionally mandates that for a new node to become a participant
or for any existing node to add or modify a block, they also need to find the solution to
specific laborious mathematical puzzles to prove their eligibility. Proof of Stake [35]
states that every participating node has to put something at stake. For example, each
have to prove their identity and validate themselves. Since an adversary will never
Fig. 3.1 Block diagram of blockchain
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 33
successfully pass these clauses he cannot interfere into a blockchain thus, making it
safe and private.
3.2.3 Structure of a Block
The structure of a block can be assumed to be divided into two sections, one
comprising of the header with all metadata and the other consisting of all the
transaction details. Figure 3.2 illustrates the stricture of block.
First of all, the metadata consists of Previous Hash which is used to chain the
current block with its preceding block in the blockchain.
The second set of meta data comprises of the information pertaining to mining
competitions such as Timestamp, Difficulty and Nonce. Mining [36] in Blockchain
is performed by high end computers that solve complex mathematical problems to
receive rewards in return, thus completing the verification procedures. Timestamp
gives the creation time details for a particular block thus eliminating the denial of
Fig. 3.2 Structure of a block
34 P. Mukherjee and C. Pradhan
service scenarios. Difficulty gives the complexity that was used to create this block.
In cryptography, nonce [37] is an arbitrary number that can be used only once in the
entire communication. In Blockchain, nonce is the number that miners are competing
for. Successfully mining means that the winning miner was the first to guess the
nonce, which is a string of random numbers affixed to the hashed contents of the
block, which is again rehashed.
The final metadata includes the Merkle Tree root which a data structure to
summarize all the transaction details in the corresponding block in an efficient
manner.
In order to identify a block, users can either use the block hash or the block
height [38]. Block height is described as the number of blocks before it. Thus it can
be calculated as the length of the block minus one. The block height of the entire
blockchain is obtained from the height of the most recent block or the highest block
in the chain.
Every first and unique transaction carried out by a miner is termed as the “Coinbase
Transaction”. The miners utilize it to collect their rewards for every correct solutions.
Other transaction fees collected by them are also added to this Coinbase Transaction.
3.2.4 Types of Blockchain
The different types of Blockchain are categorized on the basis of their applications.
Primarily the two broad types of Blockchain are Public and Private Blockchain. Two
variation also exist like the Consortium and Hybrid Blockchain. Figure 3.3 illustrates
Fig. 3.3 Types of
blockchain
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 35
the types of Blockchain in a nutshell.
Public Blockchain [3941] is are the most simple and publicly accessible
blockchains. They are open source, non-restrictive, fully distributed, decentral-
ized and permission less. Any entity with internet access can sign into a Public
Blockchain to become an authorized participant and become a user, miner or devel-
oper. The contents of the blockchain are readily available to every node with complete
transparency. The major benefit of Public Blockchain is its uncontrollability or not
granting full authority to any particular node. All the nodes adhere to the consensus
mechanisms to ensure the security of the public blockchain. The most common
use of Public Blockchains are for mining activities and cryptocurrency interchange.
Thus, the most common public blockchains are Bitcoin, Ethereum and Litecoin
blockchains. Figure 3.4 represents a fully distributed Public Blockchain where every
device has full access to the blockchain and can easily interact with each other.
Private Blockchain [42,43] is restrictive, centralized, permissioned and operate
only in closed networks such as any organization where only selected members are
allowed to participate. They have a central authority who fully controls the authoriza-
tion, participation and accessibility. Participants of that same organization mandato-
rily require the consent of the central authority to join the Private Blockchain. The
contents of the blockchain are only available to the permitted participants and any
Updation or modification into the blockchain also necessitates the permission of the
authority. They are thus more secured and controlled than Public Blockchains and
find commonly deployed in e-voting, supply chain management etc. Hyperledger
and R3 Corda are popular examples of a Private Blockchain. Figure 3.5 gives the
Block Diagram of a Private Blockchain.
Fig. 3.4 Fully distributed
and decentralized public
blockchain
36 P. Mukherjee and C. Pradhan
Fig. 3.5 Centralized private
blockchain
Consortium Blockchain [4446] is a specialized category of Private Blockchain
where multiple organizations control and manage the blockchain instead of only one.
Thus it has the similar benefits as that of a Private Blockchain. Since it is a collab-
orative network, it is more productive and efficient both collectively as well as indi-
vidually. Consortium blockchains are typically used by banks, government organiza-
tions, etc. Figure 3.6 illustrates a Consortium Blockchain. Examples of consortium
blockchain are; Energy Web Foundation, R3, etc.
Fig. 3.6 Consortium
blockchain
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 37
Table 3.1 Comparison between the most prominent types of blockchain
Parameter Public Private Consortium
Permission Permission less Permissioned Permissioned
Decentralization Fully decentralized Centralized Less centralized
Participants Anybody Permissioned and known
entities
Permissioned and known
entities
Authority Anyone Single central authority Multiple central authority
Reading Rights Anyone Invited users Depends on scenario
Writing Rights Anyone Approved users Approved users
Consensus PoS/PoW Multiparty consensus Multiparty consensus
Speed Slow Fast Fast
Table 3.1 highlights the comparison amidst these three prominent types of
Blockchain.
Hybrid Blockchains [4749] are combination of Public and Private Blockchains.
It incorporates the privacy and permissioned facilities of Private Blockchain and
the simplicity, flexibility and transparency of Public Blockchains. Participants of a
Hybrid Blockchain can control the authority and accessibility of the data stored in
it. Dragonchain is the most common example of a Hybrid Blockchain.
3.3 The Evolutionary Transformation of Blockchain 3.1
Till date Blockchain Technology has undergone four major evolutions and each of
these has been discussed in the following sections.
3.3.1 Blockchain 1.0
The first generation of Blockchain, Blockchain 1.0, originated from the concept of
Distributed Ledger Technology (DLT) [5052]. Distributed ledger is a database that
is consensually shared amongst several participants thus enabling public witnesses
to eliminate double spending scenarios. The most prominent application of DLT was
cryptocurrency where Bitcoin [53] played a pivotal role. Bitcoin thus became the
“cash for the internet” and paved way for “Internet of Money [54]”. After its launch
in 2009, Bitcoin proved its stability, reliability, efficiency, simplicity, independency
and security to keep a track of transaction records and transfer authority of these
records from one user to another directly. It essentially utilizes consensus and mining
mechanisms to exchange cryptocurrencies. Figure 3.7 gives the overall working with
Bitcoins. A real life scenario where Alice wants to send 1 Bitcoin (BTC) to Bob is
portrayed in Fig. 3.8.
38 P. Mukherjee and C. Pradhan
Fig. 3.7 Working model using bitcoins
Fig. 3.8 Bitcoin transaction lifecycle
Swan [55] highlighted the utility of Bitcoin being deployed as a cryptocurrency
in applications pertaining to cash transfer, remittance and digital payments whose
generation and transfer is solely based on encryption mechanisms and works inde-
pendent of any central bank. Thus Bitcoin has the potential to prove to be a blueprint
of a new economic policy. Böhme et al. [56] thoroughly studied the Bitcoin design
principles, its underlying technologies and processes, the various uses of Bitcoin for
consumer payments as well as the probable risks associated with it. Narayanan et al.
[57] elaborated the mechanics of Bitcoin, their mining and regulations in their work.
Decker and Wattenhofer [58] analyzed the information propagation in Bitcoin
network by using multi-hop broadcasting to update the ledger. They also claimed
that this mode of propagation led to delays thus resulting in inconsistencies and
blockchain forks [59]. Bitcoin is largely based on mining mechanisms which involves
solving algo-puzzles to verify monetary transactions in order to receive cryptocurren-
cies as rewards. O’ Dwyer and Malone [60] studied energy consumption in Bitcoin
mining in details. They carefully inspected when Bitcoins prove to be profitable in
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 39
comparison to the energy consumed while mining and suggested special hardware
modifications to achieve maximum profits.
Antonopoulos [61] explained in detail how Bitcoin works and its detailed imple-
mentation along with the mining and consensus mechanisms. Velde [62] backed the
technical and conceptual accomplishments of Bitcoin to be inculcated in existing
financial sectors because of its freedom from any central authority intervention. The
fact that anonymity and decentralization of Bitcoin makes it a potential game changer
in micropayments and virtual worlds e-commerce was suggested by Grinberg [63].
Blockchain 1.0 thus has myriads of advantages over the traditional payment
mechanisms such as low transactional costs and relative anonymity in transactions.
Bitcoins will never be out of market as there have an adequate supply. Bitcoins apart
from eliminating double spending, also remove counterfeiting by enabling secure
trackable and transparent transactions.
Amidst all its achievements, Bitcoins also have some major setbacks. The first
generation of Blockchain essentially utilizes the Proof of Work (PoW) consensus
mechanism that necessitates the computation of complex mathematical puzzles. Due
to the complexity involved, PoW is time-consuming and uses colossal amounts of
energy comparable to the overall profits earned. In this, the approval of transaction
is also pretty slow than electronic channels. Research shows that Blockchain 1.0
can handle at most seven transactions per second thus having a substantially slow
throughput. Conti et al. [64] studied the security and privacy issues of Bitcoin in
details. Eyal and Sirer [65] highlighted that Bitcoin is extensively vulnerable to
Selfish Mining that is practiced by colluding miners to earn more revenues than their
mining capabilities. Thus ultimately Bitcoin proceeds towards a centralized scheme
fully under the control of these selfish miners. Androulaki et al. [66] claimed that
behavior-based clustering techniques can unravel the real identities of the otherwise
anonymous Bitcoin users up to 40%. Another vital drawback of Satoshi’s idea of
Blockchain 1.0 is that it utilizes only 1 megabyte (MB) blocks of information on
bitcoin transactions. The last and most notable shortcomings of Blockchain 1.0 are
their inability to support Smart Contracts and other application sectors instead of
financial utilities.
3.3.2 Blockchain 2.0
The wasteful mining and poor scalability of the first generation Blockchain prompted
Buterin [67] to extend the concept of Blockchain beyond currency. This led to the
advent of second generation of Blockchain i.e. Ethereum which is based on new
concepts of smart contracts along with Proof of Work consensus mechanisms.
Smart Contracts [68] are autonomous self-managing computer programs that
execute automatically on the basis of predefined clauses between two parties. These
contracts are impossible to be hacked or tampered with. So Smart Contracts [69]
largely reduce the cost of verification, execution, and fraud prevention and enable
transparent contract definition.
40 P. Mukherjee and C. Pradhan
Fig. 3.9 Working of smart contract
Figure 3.9 shows how smart contracts works. The first step is formulation of
the contract between two parties. It involves the terms, rules and conditions of the
agreement has to be accepted by the two counterparts and translated into a code. No
changes can be made into the contract without the consent of the involved parties. The
smart contract is then deployed into the blockchain. As soon as the events mentioned
in the contract occur, the code automatically executes. Practical example of such
events can be expiration of an insurance policy or delivery of goods. Once the code
execution is over, the contract will automatically transfer the value to the pertinent
receiver. The settlement is thus completed instantly, securely and efficiently. This
transfer is also recorded into the blockchain.
Ethereum [67,70] utilizes the implementation of smart contracts into Blockchain.
It’s a community-built technology behind another cryptocurrency Ether (ETH) [71]
having an array of applications in almost every field such as electronic voting, real
estate and trading. In the Ethereum, instead of contesting for bitcoins, miners compete
for Ether [72]. There is a another type of token involved in Ethereum which is utilized
to reward miners for including transactions in their block, termed as gas. Every smart
contract execution necessitates a particular amount of gas to be sent along for alluring
miners to incorporate it into the blockchain.
Good [73] discussed the protocol of Ethereum and fundamentals of smart contract
to autonomously enforces regulation for such interactions. Dannen [13] gave a thor-
ough insight into Solidity which is the high level programming language to implement
smart contracts. Antonopoulos and Wood [74] gave the step by step guide to build a
smart contract using Solidity. They explained how to chose the appropriate Solidity
version, downloading and installing it, writing the simplest smart contract, compiling
it with the Solidity Compiler and finally deploying it into the Blockchain.
Extensive research is being carried out to utilize Ethereum in several non-financial
sectors. Yavuz et al. [75] suggested a secure e-voting system by using the Ethereum
Blockchain. Ethereum wallet or simple android mobile phones are used by users to
cast their votes. After the election is held, Blockchain 2.0 is used to store the ballets
and votes. Their proposal proved to be more efficient, reliable, cheap and transparent
to conduct e-voting. Rooksby and Dimitrov [76] proposed a Blockchain system based
on Ethereum that can be used by a university to evaluate the performance of students,
store and manage their grades and reward them cryptocurrencies if performance is
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 41
up to the mark. Internet of things (IoT) has tremendous utility in designing Smart
Homes which are fully automated to provide highest comfort to the residents. Aung
and Tantidham [77] implemented an Ethereum based Smart Home Scheme to control
access policies, data storage and flow to eliminate imposters impersonating actual
residents and stealing secretive information. Adhikari [78] proffered a Smart Health-
care system that incorporates the concepts of Ethereum to provide a secure, flexible
and more reliable schemes than traditional ones. Shih et al. [79] proposed production
and marketing of organic vegetables by using Ethereum. This methodology ensures
the authenticity of the production quality as well as the sales record.
Since Ethereum is largely based on smart contracts, they have an array of advan-
tages. Smart contacts are quite accurate and store each clauses explicitly thus
Ethereum is very minutely defined. The contract is fully transparent to all involved
parties. The execution speed of smart contracts is very fast up to 15 transactions per
second and eliminates several middle men in any kind of application.
However, smart contracts also pose several difficulty on the users because they
are extremely tricky to write [80]. Any mistakes while writing the contract can lead
to unintended adverse effects [81]. Once a mistake in the code begins to be exploited,
there is no efficient way to stop it other than obtaining a consensus and rewriting the
entire underlying code [82]. Thus to achieve maximum benefits of Ethereum, it is
essential to formulate and deploy the smart contract correctly.
3.3.3 Blockchain 3.0
The major setback of Blockchains 1.0 and 2.0 are that they are not scalable at all,
mostly based on Proof of Work and take hours to confirm transactions. All this
let to the birth of the current generation of Blockchain called Blockchain 3.0 that
aims to make cryptocurrencies globally viable. Apart from smart contracts, the third
generation of Blockchain mainly involves Decentralized Apps (dApps) [83]. They
are digital programs that run on a Blockchain network of computers instead of a single
computer and thus are beyond the purview of any central authority. This generation
is hence capable of promoting inter chain transactions with aid of techniques such
as sharding [84]. Sharding implies each node of Blockchain contains only a part of
the data on it and not the complete information. This spreads the load and makes
the system for efficient and intrusion proof. Blockchain 3.0 also utilizes Proof of
Stake and Proof of Authority [85] consensus mechanisms to enable enhanced speed
and computing power for smart contracts with no separate transaction fees. Although
Blockchain 3.0 is in its inception but aims to improve the scalability, interoperability,
privacy and sustainability of previous generations because they are designed on the
“FFM” concept which is the acronym for Fast, Feeless and Minerless. Blockchain 3.0
hence eliminates the dependency on Miners to verify and authenticate transactions
and instead use inbuilt mechanisms for the same. They are thus extremely fast to
allow thousands of transactions per second unlike their preceding generations.
42 P. Mukherjee and C. Pradhan
Blockchain 3.0 paved way for several platforms each with their unique advan-
tage to encourage Blockchain usage in every-day life. ICON projects [86]aims
to connect separate Blockchains together such that every transaction between these
blockchains is verified by a ledger itself. Thus it tries to provide a high usability, scal-
ability and reliability by eliminating any central authority or need of any transaction
fees. Another third generation Blockchain was established using DAG (Directed
Acyclic Graph) protocols [87,88] to design no block, no chain and no miner yet
public distributed ledger platform such as IOTA [89]. Another popular Blockchain
3.0 platforms are Cardano [90] which has its own cryptocurrency ADA and aims
to improve all problems with Ethereum. Aion [91] is another third generation
Blockchain network that aims to support basic blockchain architectures along with
cross chain interoperability.
The merits of Blockchain 3.0 include no single controlling authority thereby no
single point of failure. dApps don’t reside on a particular IP address hence adversaries
cannot tamper with the data and security is enhanced. The have extremely high
transaction speed.
However, the thirds generation of Blockchain also has several disadvantages like
bug fixing or updating due to their decentralized nature. The consensus mechanisms
applied are comparatively complicated.
3.3.4 Blockchain 4.0
Another upcoming propitious progression in the evolution of Blockchain is the
Blockchain 4.0. It aims to deliver Blockchain Technology as a business-usable plat-
form to create and run applications thus converting the technology to fully main-
stream. It has the possibility of inculcating other prosperous technologies such
as Artificial Intelligence with Blockchain. Blockchain 4.0 enables proliferation of
a seamless integration of different platforms to work under a single umbrella in
coherence to fulfill business and industry demands.
The introductory platform to put forward Blockchain 4.0 utilities is Unibright
[92] which enables an amalgamation of several blockchain business models. Another
example is SEELE Platform [93] which allows integration in blockchain space by
permitting cross communication between different protocols across various services
harmonically. The fourth generation has the potential to allow the transactional
speed up to 1 M transactions per second which currently impossible in the existing
generations.
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 43
3.4 Comparison of Different Generations of Blockchain
After understanding the nitty-gritty of the evolutionary generations of blockchain,
this section compares basin principle, consensus mechanisms, transaction speed,
merits and demerits and examples of all of them chronologically in Table 3.2.
The usage of a particular generation thus depends on the application domain it has
to sustain with their corresponding consensus models and respective parameter speci-
fications. For Peer to Peer cryptocurrency exchange, Blockchain 1.0 stills proves to be
an simpler alternative. Other non-financial sectors like Education, Healthcare, Agri-
culture, Smart Homes etc. utilize the Ethereum platform along with smart contracts to
formulate the terms and regulations between the service provider and customers. The
third and fourth generation of Blockchain is more predominate where Blockchains
works into backend for several business models and cross communication is required
amidst several Blockchain networks. The last two generations of Blockchain is still
in its infancy and still undergoing several modifications to become potential enough
to serve mankind.
Table 3.2 Comparison between different generations of blockchain
Parameter Blockchain 1.0 Blockchain 2.0 Blockchain 3.0 Blockchain 4.0
Underlying principle Distributed
Ledger
Technology
(DLT)
Smart contracts Decentralized
Apps (dApps)
Blockchain with
AI
Consensus
mechanism
Proof of work Delegated proof
of work
Proof of stake,
Proof of
authority
Proof of integrity
Verification By miners Through smart
contracts and
miners
In-built
verification
mechanism via
dApps
Automated
verification via
Sharding
Scalability Not scalable Poorly scalable Scalable Highly scalable
Interoperability Not
interoperable
Not
interoperable
Interoperable Highly
interoperable
Intercommunication Not allowed Not allowed Allowed Allowed
Speed 7TBS 15 TBS 1000 s of TBS 1MTBS
Cost Expensive Cheaper More Cheaper Cost effective
Energy consumption Highest Moderate Energy efficient Highly efficient
Example Bitcoin Ethereum IOTA, Cardano,
Anion
SEELE,
Unibright
Application Financial
sector
Non-financial
sector
Business
platforms
Industry 4.0
44 P. Mukherjee and C. Pradhan
3.5 A Blockchain Based Supply Chain Management
Testcase
Supply Chain Management demands integration of planning and execution of
different processes such as the flow of materials, information as well as capital
income. This in detail involves procurement of raw materials from supplier, building
the finishes product by manufacturer and then transferring them from producer to
consumer. The interconnectivity the different participants in the supply chain gradu-
ally becomes more inefficient and unreliable when the business flourishes. To elimi-
nate such discrepancies Blockchain Technology has the potential to revolutionize the
Supply Chain Management. The advantages provided by Blockchain in this scenario
are enlisted below.
Blockchain enables more transparent and authentic end-to-end tracking in the
supply chain. Each organizations can create a decentralized immutable record of
all its dealings, thus allowing tracking of assets from provenance to delivery.
Blockchain enhances the trust and visibility amidst the service provider and
consumers.
Blockchain eliminates fraud and intrusion of valuable goods such as diamonds
and pharmaceutical drugs.
Blockchain abolishes all intermediary entities and curbs losses from counterfeit
and gray market trading.
Blockchain provides all participants within a particular supply chain full authority
to access the same information, thus diminishing any communication or data
transfer errors..
Blockchain streamlines administrative procedures and diminishes costs by
enabling an effective audit of supply chain data by getting rid of manual checks
for compliance or credit which are time-consuming and error prone.
Figure 3.10 illustrates a general Blockchain based Supply Chain Management
diagrammatically with all its participatory elements.
The main entities of a Supply Chain are the raw material supplier, the product
manufacturer, the finished goods distributer, the retailer and finally the consumer.
The supplier and manufacturer formulate a smart contract amongst them and the
settlement occurs between them accordingly.
Details regarding the raw material and manufacturing such as supply date,
quantity, manufacturing date, units etc. are uploaded into the Blockchain.
Once the Manufacturing is over, the manufacturer and distributer finalize the terms
of their smart contract.
Details like number of units distributable, the address of the retailer, distribution
date etc. are fed into the blockchain.
After the retailer receives the finished products, they are updated into the inventory
along with their manufacturing dates, costs expiry dates etc.
The customer can purchase from the retailer either physically or online and back
track the entire supply chain via the Blockchain to ensure the quality of the product.
3 Blockchain 1.0 to Blockchain 4.0—The Evolutionary … 45
Fig. 3.10 Blockchain based supply chain management system
The Supplier, Manufacturer and Distributer also track their relevant information
and selling of goods to manage their services accordingly.
Incorporation of Blockchain introduces more transparency into the supply chain.
Every entity can back track the information once uploaded into the Blockchain. Also
the data becomes immutable therefore nobody can upload it without the consent of
other entities. Any kinds of fraud or counterfeiting is also eliminated by the usage
of Blockchain. Thus Blockchain has the potential to transform any other business
domain like Supply Chain Management to greater extents.
3.6 Conclusion
Blockchain is a promising technology that has garnered immense interest of
researchers. It largely impacted the peer-to-peer information exchange by combining
cryptographic principles with decentralization, immutability and transparency. Since
its inception by Santoshi Nakamoto back in 2008, Blockchain technology hugely
transfigured to grater extents since then. The first generation of Blockchain, Bitcoin
was a decentralized peer-to-peer digital currency which eliminated the presence of
any central authority such as banks or intermediaries. To address the trust issues
amidst the participants, Bitcoin implements consensus models to ensure the authen-
ticity and integrity of the users. Due to the limited functionality of the first generation
46 P. Mukherjee and C. Pradhan
in only financial sector, further advancements were made to adopt Blockchain for
other domains as well. Ethereum, the second generation technology has immense
application for crowdsourcing through its trustworthy smart contact clauses. A smart
contract is a self-asserting contract where the decision between buyer and seller
are directly written as lines of codes across a distributed, decentralized blockchain
network. The third generation Blockchain has inbuilt verification mechanism and
more efficient faster and cheaper than previous versions. Combining Artificial Intel-
ligence with Blockchain Technology has already paved way for the fourth generation
of blockchain as well.
This chapter begins by describing the historical background of this expeditious
technology. It then proffers a description of the basic terminologies in blockchain,
it’s types, basic structure of block and different consensus models popularly known.
The fundamental aim of this chapter was to provide a comprehensive study of the
successive evolutions in Blockchain Technology by highlighting the nitty-gritty of
each generation in detail. It also illustrates a parameter wise differences amidst the
several generations in terms of their principle areas, consensus models used, utility
of smart contracts, the energy and cost requirements and execution speed and scala-
bility. In the end, a Blockchain in Supply Chain Management test case has also been
elaborated in this chapter.
The future scope of this book chapter involves designing a two party secure
message exchange protocol by utilizing the fundamental offerings of the relevant
version of Blockchain. Which generation will be most suitable, the formulation of
smart contract if applicable followed by its deployment and other essentials has been
left for our future endeavors.
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Blockchain has numerous benefits such as decentralisation, persistency, anonymity and auditability. There is a wide spectrum of blockchain applications ranging from cryptocurrency, financial services, risk management, internet of things (IoT) to public and social services. Although a number of studies focus on using the blockchain technology in various application aspects, there is no comprehensive survey on the blockchain technology in both technological and application perspectives. To fill this gap, we conduct a comprehensive survey on the blockchain technology. In particular, this paper gives the blockchain taxonomy, introduces typical blockchain consensus algorithms, reviews blockchain applications and discusses technical challenges as well as recent advances in tackling the challenges. Moreover, this paper also points out the future directions in the blockchain technology.
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