Canadian Government Executive - Volume 23 - Issue 02

A blockchain is a decentralized digital ledger that tries to overcome these problems. It has five defining parts. Traditionally, the stock and flow of assets are tracked in a ledger book. These days, digital ledgers are stored on computers. Those who control access need to be trusted to not make self-serving changes and to protect the ledger. Whenever you make a simple trans- action, such as wire someone money or charge a credit card, the ledgers of intermediary organizations are updated. What might appear simple is, behind the scenes, a cumbersome and rickety coordination process. Anyone in the net- work can read the ledger but public-key cryptography protects accounts by encoding them. Each account is controlled with a long number called a private key kept secret in a trusted software wallet . Moving items between accounts involves using the private keys to generate sharable codes (including a public key) needed to conduct a transaction (see below). B Y P E T E R S T O Y K O GOVERNMENT BLOCKCHAIN Decentralized digital money (cryptocurrency) is the typical application of blockchains. Bitcoin ( ) is the most successful example—how successful is up for debate. As a method of payment, the Bitcoin system is only able to process a few transactions a second due to design limitations that prevent the system from scaling. As a store of value, Bitcoin is subject to exchange rate volatility and is not easily exchanged into a fiat currency, such as the one you use everyday. Hacks and scams remain a threat. Nonetheless, Bitcoin is a prosper- ous market (worth 21 billion Canadian dollars) that demon- strates the promise of blockchain technology. Consider the basic stages of a Bitcoin transaction. A buyer wants to exchange bitcoins for a good. The new block is added to the end of the chain which is circulated in the network. The transaction request spreads through the network where it is verified using the public key and digital signature. The seller generates an add- ress and sends it to buyer. Every ten minutes, a bitcoin miner generates a new block by solving a tough math problem through trial and error. The validated transaction is bundled with others and placed inside the block. ��������� ������� The buyer’s private key is used to create and sign a transaction request. Records of previous trans- actions are bundled into the request to show that she owns the bitcoins. A public key is also generated. Why? Once confirmations arrive, the seller can spend the bitcoins. It is prudent to wait until another block is added before consider- ing the transaction permanently recorded given the possibility of malicious behaviour. Wait six blocks with high-stakes transactions. BUYER MINER SELLER Copies of the block- chain are distributed throughout a decentralized network via peer-to-peer file sharing techno- logy for safe keeping and openness. A block is a page in the ledger. Unlike with a paper ledger, these pages can store thousands of transactions (up to a set limit), are added regu- larly, and cannot be changed once fully established in the chain. A consensus mech- anism sets how blocks are added and transactions verified so everyone in the network gets the right version of the chain. ������� ��� ������� ��� ��������� ������ ��� ����������� ������� The header sec- tion of each block links the blocks together. This is done with a hash chain . A hash is a long string of numbers and letters made by an algorithm from an input. The input in this case is the content of the block. If any transaction is changed, the block’s content no long matches it’s hash. A block’s hash is copied in the next block, so that no block can change without invalidating the chain. 12 / Canadian Government Executive // February 2017