Blog manager: Giovanni Capaccioli

Translated by: Lawlinguists

The advantages of blockchain in the cloud.

The advantages of blockchain in the cloud.

The advantages of the blockchain and the cloud: in recent years we have seen a relentless growth of interest around the blockchain technology, with the question often being raised as to whether such a technology was necessary, given cloud usage, which is also expanding rapidly. In this article we will attempt to lay the foundations for refuting the arguments often suggesting that the two technologies might be similar by showing the cloud’s limitations, which have made the expansion of the blockchain necessary. 

Blockchain and the cloud: sharing.

At first glance, the concept of blockchain might appear similar to that of the cloud: the key idea is the “Sharing” of information, which could be data or something else; indeed, the cloud enables users to pick a company (e.g., Google or Amazon) to which they can entrust their data to be able to use it “on demand” from any workstation connected to the Internet. 

However, when conducting serious analysis of the blockchain technology, the differences begin to appear obvious.

The technical term is DLT: Distributed Ledger Technology, i.e. shared register technology.

Blockchain is specific among DLTs for the method and tools it uses to structure itself and achieve its purpose.

Whereas the cloud is based on sharing, storing and retrieving data on the web, the blockchain “transfers (i.e., shares) value”. It is in fact able to protect at a high standard the value of a piece of data (a document, software, a consultancy, an article…) and to transfer it to someone else in a secure, traceable way, even in the case of peculiar documents, such as accounting, administrative or medical ones.

The absence of an intermediary in blockchain.

All this without an intermediary, which the cloud itself could ideally be; this is one of the advantages of the blockchain. The cloud acts as an intermediary here, a business we must trust: as a matter of fact, it retains the data that we entrust to it.

As we have seen, the cloud is a centralised system based on servers; this is where the blockchain starts to distinguish itself as a decentralised-distributed system based on a large number of physical nodes and actual miners, thus not on one or few servers or virtual servers.

Let’s start by highlighting the features setting the cloud apart and the advantages the blockchain has over the cloud.

The cloud: What is it?

The term cloud refers to a range of services offered by a provider to a customer: we are talking about virtual or physical servers, data storage and so on. 

By exploiting cloud technology, users of this product may use the data they have saved within simply by accessing their cloud workstation through the internet. With the cloud, users no longer need to have all the data saved on their computers – they can simply retrieve it from their cloud.

The structures offering cloud storage are actual companies, which create a large number of data centres in which they host the servers. These suppliers provide by hooking their computer to the Internet.

The cloud: A useful tool for businesses, but how secure is it?

Without providing too many specific details about its operation, the difference between a cloud and a blockchain is quite obvious. Companies like Dropbox, Amazon, Google and so on have created their own servers. It is certainly true that the cloud has moved data away from companies, allowing them to have more space to develop by entrusting their data storage to experts in the field (Google, Amazon and so on). The work itself has benefited: companies can work in the cloud with professionals, allowing them to access their data stored in the cloud. But just how secure is this system, really? The data that is shared is often sensitive, private data that none of us would wish to see compromised. The convenience and functionality of the cloud is lacking if the system is then hacked and everyone is able to take advantage of the data it contains. This is where one of the advantages of the blockchain becomes even more important.

The reasons behind the creation of the blockchain: security

In recent history, various hacks of centralised cloud systems can be ascertained; perhaps one of the most blatant examples is what happened to Dropbox: following an update, any user could log into any other account belonging to any other user without needing any sort of password, thus allowing anyone to do whatever they liked with the files of the unfortunate victims.

The advantages of the blockchain: The double key system.

This is what makes one of the advantages of the blockchain even more important.The double-key system protects the user’s identity under the umbrella of an alphanumeric key: a private key. Each user will have their own private key with which they may “digitally sign” transactions. The user will also have their own public key, which then gives rise to a sort of user localisation within the blockchain, as if it were an IBAN code. It will be used to double check on whom will be sent money.

The time-stamp in blockchain.

The time-stamp is another security feature: it is a time marker precisely used to identify a specific transaction, a specific block, within a precise time lapse. This is essential, because it represents the temporal fingerprint (together with the digital fingerprint) of the transaction or the block.

Finally, within the blockchain, not only is the value of the information to be transferred shared, but computing power is also shared, creating an increasingly interconnected, increasingly distributed and increasingly decentralised network, the strength of which increases as it grows, seeing as its predominant features, as described in the opening article, are:

  • Security: it is based on shared, decentralised, distributed and highly encrypted databases.
  • Immutability: it guarantees the tamper-freedom of the transactions it contains.
  • Transparency: it is based on a system of protections with private and public keys that guarantee the users’ privacy and the transactions’ traceability; the encryption guarantees security, the hashing guarantees immutability, but it is still a shared register, open to all, in which anyone may participate and check everything. Example: You could see that 2 users (whose identity is protected by their keys) have concluded a transaction.
  • Consensus-based system: This is the element that really distinguishes it; technically, it consists of the complex work that the Miners do (the Miners are the ones supporting the system, making it functional), which I will tell you about a few lines from here. For the especially curious: “Proof Of Work”, “Proof Of Stake”, and so on..

Today, many projects are studying the use and further advantages of the blockchain, one of which is supply-chain tracking: not only does the blockchain make it possible to secure the data in the ledger, but it also enables a quick check of transactions, tracing back to the initial block.

These are the reasons why, although functional technologies such as the cloud are available to us nowadays, new-generation technologies, such as the blockchain, are employed and implemented more and more.

Why is the blockchain highly tamper-free? The nodes. 

This distributed-decentralised system enables the entire network that comes to be to become gradually more secure, with an increase in Nodes. The distribution of the ledger is one of the advantages of the blockchain: a gradually increasing security level requiring that a malicious hacker intervene on at least 51% of the nodes at the same time in order to overcome the same. The more time passes, the more the nodes grow, the greater the difficulty in harming the system.

These nodes maintain and update the database (Ledger), all the while sharing and distributing it to the entire network of nodes. They are real computers using their computational capacity to carry out the tasks that the system assigned them from the get-go. This system greatly increases the safety of the blockchain.

The importance of miners

The work they perform is called Consensum (Consensus) and coincides with validating transactions and blocks: this type of work is carried out by Miners, which are basically a type of Nodes. There are different types of Consensus, because there are different types of blockchain: Proof of Work, Proof of Stake, Proof of Authority and so on.

The work done by the Miners is remunerated through the use of the Cryptocurrency, the virtual currency (coin) used by the blockchain in question. It is precisely remuneration that keeps the work of the Miners going. Without it, there would no longer be any worth to the Miners’ work, decentralised and distributed: anyone can work as a Miner. 

Cloud vs. Blockchain: Decentralisation-distribution.

Whereas the cloud security system stops at the classic login-passwords-encryption, the blockchain adds elements of difficulty, such as hashing, private and public keys, the time-stamp, total distribution and decentralisation of the ledger (database) and the block structure.

Hashing in the blockchain.

Hashing gives rise to the digital fingerprint of the block in the blockchain: it is an automatic procedure that, starting from the data contained in the block, produces a univocal hash: no block will have a hash equal to another because inside it will always contain transactions (information) that are different (even by a single comma) from the others; since each hash is tied to and directly derived from the previous one, even a change to a minimal part of a very small transaction will invalidate not only the hash of that block, but also the hashes of the following blocks. Therefore, the Nodes would never accept such a change (even if it happened) and would never replicate it: immutability. The only alternative for an “attacker” would be a very expensive and complex 51% attack.

Blockchain: New generation.

The two following features set the cloud and the blockchain further apart:

  1. Tracking
  2. Certification

Unlike the cloud, the blockchain is ideally able to track the transactions it contains, whatever the type of transaction. Its immutability over time enables the system to create a ledger in which not only are transactions and the identities of those who performed them secured (through systems such as encryption and hashing), but also, the hashing system itself makes it possible to trace them back to the genesis block, opening up the blockchain technology, for example, to markets that need to trace their supply chain in a distributed and decentralised manner.

The data entered in the blockchain itself is regarded as being certified and unalterable, since it is a direct consequence of the complex validation process, which then makes the transaction public. The same use of the Public-Private Key process enables users to “certify themselves”, or rather “identify themselves”, even creating a digital signature in the transaction.

Blockchain: New generation.

These are the reasons why, although functional technologies such as the cloud are available to us nowadays, we are exploring the use and implementation of new generation technologies such as the blockchain. This is because the blockchain itself is pushing technology to decentralise and distribute data, information, currency, computational power band cryptography, by building a system that has the power to increase its security, and even creating a digital currency supporting itself in the system and with the system.