Distributed Ledger Technology: What is behind it?

As already reported and commented elsewhere, the scientific advisory board of the British government has addressed the issue of distributed ledgers and blockchain and has written a report on it. The report is open to the public. Here a rough overview of the document is presented and some points, which are interesting, are represented.

A government that comments on Bitcoin loophole?

Many in the community weren’t exactly enthusiastic after reading some comments on the document and expected the usual “Bitcoin loophole is bullshit, the blockchain is grandiose” talk. If you look at the primary source, which is onlinebetrug you are surprised; Bitcoin is often mentioned in the document as an example of distributed ledger applications (in the article the blockchain is more commonly referred to as a distributed ledger) and is not always rated negatively. However, other applications (keyword smart contracts) are also mentioned and, of course, the role of the government in this technology is considered.

Distributed Ledger Technology – beyond Blockchain is a document consisting of seven parts. It looks at the vision and technology behind Blockchain, discusses governance, and looks at security issues. Furthermore, the disruptive potential, application possibilities for the government and finally possible perspectives for a global use are considered. One can see: A thoroughly universal view of the phenomenon of blockchain. In addition, the following case studies on already existing applications (or advanced beta versions) of the blockchain will be presented:

Everledger, a system in which diamonds receive a certificate – if you like, a kind of onename for Klunker. This would make it possible to trace the path of every diamond excavated back to its origin. They also want to use smart contracts to automate the conditions of diamond transport and sales.

SETL wants to be a block-chain-based infrastructure that simplifies credit, investment and securities trading. SETL promises up to one billion transactions per day, which would be interesting for Bitcoin.

Estonia is backing various projects (financial transactions, a blockchain-based investing platform to support start-ups and the use of a public key infrastructure, i.e. a public ledger in which citizens’ data is stored and via which they vote, conduct their banking business, complete their tax returns, view their children’s school performance or file their last will and testament.

Focus on Smart Contracts and the news spy

One notices in the document that smart contracts are a big trend in the news spy. Furthermore, the focus of the report is less on currencies, but on other application areas, especially in areas that are important for a government. It is shown that the news spy structure of the block chain, since it is stored decentrally, makes data loss almost impossible and attacks on the system also become difficult. According to the authors of this report, the blockchain is therefore very well suited to guarantee automated tax payments, the distribution of funds, document security or a complete value chain. Of course, it is emphasized that for most applications a permissioned ledger (i.e. a blockchain that is centrally controlled) would be preferred so that a government would continue to have control over it. It is emphasized that a law apparatus and an algorithmic control of processes in the block chain must influence each other positively. In this respect, the strongest criticism of Bitcoin is also made: Although Bitcoin is a decentralized system, governance itself, according to the authors, is in the hands of a small group of developers or large mining pools.

All in all, the document is surprisingly “pro-Bitcoin”, despite the favourisation of a semi-centralised blockchain and the above-mentioned criticism. It also refers to Silk Road and similar illegal marketplaces, but you can see in the document that it was written before Mike Hearns article. The report is a good review of the possibilities and shows what could be achieved with the blockchain. It’s not so much a technical document for insiders as something for newbies – or a brochure to hand to skeptics.