Project Report on Block Chain

Technology and Its Impacts

Submitted in Partial Fulfillment for the Degree of
Bachelor of Business Administration

S.S. Jain Subodh P.G. (Autonomous) College, Jaipur

(2022-23)

Submitted By Submitted To
Udit Gupta Jeetendra Singh
2141209 Assistant Professor
B.B.A. V Semester
 TO WHOM SO EVER IT MAY
CONCERN

This is to certify that Mr. Udit Gupta student of BBA V

Sem from S.S. Jain Subodh P.G. (Autonomous) College;
Jaipur has successfully completed his 45 days project
training in our organisation.

His research is very beneficial for the company. His work

was excellent. We wish all success for his future endeavors.

Company Seal

Jeetendra Singh

1
 CERTIFICATE

This is to certify that the Project Report entitled “Project

Report on Block Chain Technology and Its Impacts” is a
record of project work done independently by Mr. Udit
Gupta under my guidance and supervision and that it has
not previously formed the basis for the award of any
degree, fellowship or associate ship.

Mr. Jeetendra Singh

S.S. Jain Subodh P.G. (Autonomous) College, Jaipur

2
 DECLARATION

I hereby declare that this project report entitled “Project

Report on BlockChain and Its Impacts” is a bonafide record
of work done by me during the course of summer project
work and that it has not previously formed the basis for the
award to me for any degree/diploma, associate ship,
fellowship or other similar title of any other
institute/society.

Udit Gupta

S.S. Jain Subodh P.G.(Autonomous) College

Jaipur

3
 ACKNOWLEDGEMENT

It is not often in life that you get a chance of appreciating

and expressing your feelings in black and white to thank
the people who have been a crucial part of your successes,
your accomplishments, and your being what you are today.
I take this opportunity to first of all thank the Faculty at
S.S. Jain Subodh P.G. (Autonomous) College, especially
Dr. K.B.Sharma, Principal, and Dr. Priti Gupta for
inculcating and instilling in me the knowledge, learning,
will-power, values and the competitiveness and
professionalism required by me as a management student.

I would like to give special thanks to Mr. Jeetendra Singh

for educating me silver lining in every dark cloud. Her
enduring efforts, guidance, patience and enthusiasm have
given a sense of direction and purposefulness to this project
and ultimately made it a success.

I express my sincere and heartiest thanks to everyone who

has contributed towards the successful completion of the
Project, undertaken by me at MBA Hub (Ranchi).

Last but not the least; I would like to thank my family: my

parents, for supporting me spiritually throughout my life.
The errors and inconsistencies remain my own.

Udit Gupta

4
 CONTENTS

1. Abstract.............................................................................6
2. Summary...........................................................................8
3. Introduction......................................................................9
4. History..............................................................................16
5. Section 1: Blockchain Technology Overview...............23
5.1 Electronic Register of Transactions..................................24
5.2 Encrypting Data.................................................................26
5.3 Verification of Transactions..............................................28
5.4 Timestamping....................................................................30
6. Section 2: Application of Blockchain to Records.........32
7. Section 3: Public Transactions and Legal.....................34
Structure
8. Section 4: Public Implications of Blockchain...............37
Technology
9. Section 5: Digital Currencies/Securities........................40
10. Section 6: Blockchain Benefits and Risks......................43
11. Blockchain Evolution.......................................................47
12. Impacts on Global Economy and Economic.................50
Benefits of Blockchain
13. Widely Adopted Blockchain Platforms and.................57
Services
13.1 Hyperledger.....................................................................58
13.2 Microsoft Azure BaaS (Blockchain-as-a-Service).........63
13.3 Comparison of Bitcoin and Ethereum............................67
14. Conclusion........................................................................68
15. References/Bibliography.................................................72

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 ABSTRACT

A blockchain is essentially a distributed database of records

or public ledger of all transactions or digital events that
have been executed and shared among participating parties.
Each transaction in the public ledger is verified by
consensus of a majority of the participants in the system.
And, once entered, information can never be erased. The
blockchain contains a certain and verifiable record of every
single transaction ever made. Bit coin, the decentralized
peertopeer digital currency, is the most popular example
that uses blockchain technology. The digital currency bit
coin itself is highly controversial but the underlying
blockchain technology has worked flawlessly and found
wide range of applications in both financial and
nonfinancial world.

The main hypothesis is that the blockchain establishes a

system of creating a distributed consensus i n the digital
online world. This allows participating entities to know for
certain that a digital event happened by creating an
irrefutable record in a public ledger. I t opens the door for
developing a democratic open and scalable digital economy
from a centralized one. There are tremendous opportunities
in this disruptive technology and revolution in this space
has just begun.

This white paper describes blockchain technology and

some compelling specific applications in both financial and
nonfinancial sector. We then look at the challenges ahead

6
and business opportunities in this fundamental technology
that is all set to revolutionize our digital world.

As blockchain is a distributed ledger, hence every

transaction is stored on more than one computer, which
makes us sure, that every transaction is going to be
permanent without any fear of loss. As blockchain is
distributed, it can neither be owned nor be fully controlled
by a single entity. Transactions are between two parties,
and no other parties are involved, this results in lower cost,
and once a transaction is performed, it cannot be changed
under any circumstances.

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 SUMMARY

 A valid blockchain is a reliable way of confirming the

party submitting a record to the blockchain, the time
and date of its submission, and the contents of the
record at the time of submission.

 A blockchain is an electronic ledger (register) of digital

records, events, or transactions that are represented in
condensed form known as a hash (digital security
feature), authenticated, and maintained through a
“distributed” or “shared” network of participants using
a group consensus protocol (multiple users).

 Blockchain technology is already in use in the private

sector, though clearly in the early stages of adoption,
the most prevalent example being virtual currency
known as Bit coin.
.
 At present, the costs and challenges associated with the
use of blockchain technology for Vermont’s public
recordkeeping outweigh the identifiable benefits.

 Providing legal recognition of blockchain technology

may create a “first mover” advantage with the potential
to bring economic activity surrounding the development
of blockchain technology to Vermont, but this potential
is difficult to quantify and challenging to capture due to
the nature of the technology.

8
 INTRODUCTION

Blockchain is a decentralized transaction and data

management technology developed first for Bitcoin
cryptocurrency (Yli-Huumo et al., 2016). Satoshi
Nakamoto is the name used by the unknown person (or
persons) who designed bitcoin, created Bitcoin Core
(original reference implementation) and devised the first
Blockchain database. The Blockchain technology enables
maintenance of a shared distributed ledger, Blockchain,
which can be simultaneously read and modified by all
involved parties but is not owned by any party. This can be
implemented with no trust, as in the case of Bitcoin.
Another possibility for implementation is limited amount of
trust as in the case of consortium Blockchains. The
possibilities of the Blockchain technology has inspired and
fueled an entire ecosystem around it, focused on fully
unleashing its potential. This area has had exponential
growth in the past couple of years, leading to a number of
platforms, applications, startups, projects and research
around this new invention. (Baliga, 2016)

In practice Blockchain is a distributed database solution

maintaining a continuously growing list of data records that
are confirmed by the nodes participating in it. The data is
recorded in a public ledger, including information of every
transaction completed. This kind of decentralized solution
does not require any third party organization in the middle.
The information about every transaction completed is
shared and available to all nodes. This makes the system
9
more transparent than centralized solutions. The nodes in
Blockchain are also anonymous, which makes it more
secure for other nodes to confirm the transactions. (Yli-
Huumo et.al, 2016)

A blockchain is an electronic ledger of digital records,

events, or transactions that are cryptographically hashed,
authenticated, and maintained through a “distributed” or
“shared” network of participants using a group consensus
protocol. Much like a checkbook is a ledger of one’s
personal financial transactions, with each entry indicating
the details of a particular transaction (withdrawal or
deposit, recipient and sender, amount, date, etc.), the
blockchain is a complete listing of all transactions, whether
financial or otherwise. However, unlike a checkbook, the
blockchain is distributed among thousands of computers or
“nodes” with a process for validating transactions that
utilizes a group-consensus protocol. Making an addition to
a blockchain ledger requires the approval of the network at
large making retrospective changes essentially impossible.

Blockchain technology’s most disruptive aspect is its

ability to eliminate the need for third-party intermediaries
in some transactions. The technology is, in the words of its
creator, a “system based on cryptographic proof instead of
trust, allowing any two willing parties to transact directly
with each other without the need for a trusted third party.” 3
Because many industries rely upon guarantors,
authenticators, and “trusted third parties” (in fact, they are

10
often industries themselves), blockchain technology is
likely to be extremely disruptive.
This report provides a high-level summary of how
blockchain technology works. It also discusses current
applications of blockchain technology and possible future
applications – in both the context of private transactions
and public records. Finally, the report addresses some of
the possible economic opportunities connected with
blockchain technology as well as risks associated with both
the technology and its uses.

While the study group evaluated blockchain technology

generally, its impact will be affected most by its
implementation. Evaluating the soundness of blockchain
technology is akin to evaluating the efficacy of a lock. Just
as the security of a lock is called into question if everyone
in town has a copy of the key, the security of the
blockchain is heavily dependent on its protocols– how it
verifies transactions, what encryption algorithms are used,
and more. Without proper implementation, as with any tool
or technology, the efficacy of the blockchain will be
compromised.

International electronic financial exchanges have begun to

explore the adoption and utilization possibilities of
Blockchain technology in their trade processing and
reporting for execution and clearing (Peters & Vishnia
2016). Interest has also arisen in industry domain towards
Blockchain’s possibilities together with Internetof-Things
(IoT) or Industrial Internet. There haven’t been a lot of IoT

11
applications that use the technology efficiently, although
the biggest opportunities could be found there. The
Blockchain technology offers a disruptive solution to the
problem of security and privacy in the Internet of Things
environment, providing a new computational layer where
data can be safely processed and analyzed, remaining
private. (Atzori, 2016)

The rapid development of the Blockchain technology and

its various applications has risen need for the guidelines for
adopting it. Wang et al. (2016) have researched and
presented Blockchain maturity model and its adoption
process. The study can be seen as a systematical guide for
institutions to adopt Blockchain. Even more important than
easiness of technology adoption are the valid and value
creating use cases in which the technology will be used as
enabler. Greenspan (2015) has presented some guidelines
to ensure that a Blockchain use case is valid and the way to
avoid pointless Blockchain projects.

This Blockchain review presents technology basics,

Blockchain platform review and deep dive to the most
popular Blockchain platforms. The feasibility of public,
private and consortium Blockchain technology is discussed,
and requirements for feasible Blockchain use cases
presented. In addition to this, the review of promising use
cases, that Blockchain technology has enabled or can
enable in the future, has been collected from public sources
and materials.

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Following figure presents Blockchain fundamentals in high
level (Guardtime, 2017).

Figure 1. The Blockchain Fundamentals (Gault, 2016).

The advantages of Blockchain technology outweigh the

regulatory issues and technical challenges. One key
emerging use case of blockchain technology involves
“smart contracts”. Smart contracts are basically computer
programs that can automatically execute the terms of a
contract. When a pre-configured condition in a smart
contract among participating entities is met then the parties
involved in a contractual agreement can be automatically
made payments as per the contract in a transparent manner.

Smart Property is another related concept which is

regarding controlling the ownership of a property or asset
via blockchain using Smart Contracts. The property can be
physical such as car, house, smartphone etc. or it can be

13
non-physical such as shares of a company. It should be
noted here that even Bitcoin is not really a currency--
Bitcoin is all about controlling the ownership of money.
Blockchain technology is finding applications in wide
range of areas—both financial and non-financial.

Financial institutions and banks no longer see blockchain

technology as threat to traditional business models. The
world’s biggest banks are in fact looking for opportunities
in this area by doing research on innovative blockchain
applications. In a recent interview Rain Lohmus of
Estonia’s LHV bank told that they found Blockchain to be
the most tested and secure for some banking and finance
related applications.

Non-Financial applications opportunities are also endless.

We can envision putting proof of existence of all legal
documents, health records, and loyalty payments in the
music industry, notary, private securities and marriage
licenses in the blockchain. By storing the fingerprint of the
digital asset instead of storing the digital asset itself, the
anonymity or privacy objective can be achieved.

In this report, we focus on the disruption that every

industry in today’s digital economy is facing today due to
the emergence of blockchain technology. Blockchain
technology has potential to become the new engine of
growth in digital economy where we are increasingly using
Internet to conduct digital commerce and share our
personal data and life events.

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There are tremendous opportunities in this space and the
revolution in this space has just begun. In this report we
focus on few key applications of Blockchain technology in
the area of Notary, Insurance, private securities and few
other interesting non-financial applications. We begin by
first describing some history and the technology itself.

15
 HISTORY

Although blockchain is a new technology, it already boasts

a rich and interesting history. The following is a brief
timeline of some of the most important and notable events
in the development of blockchain.

2008
• Satoshi Nakamoto, a pseudonym for a person or group,
publishes “Bitcoin: A Peer to Peer Electronic Cash
System."

2009
• The first successful Bitcoin (BTC) transaction occurs
between computer scientist Hal Finney and the mysterious
Satoshi Nakamoto.

2010
• Florida-based programmer Laszlo Hanycez completes the
first ever purchase using Bitcoin — two Papa John’s
pizzas. Hanycez transferred 10,000 BTC’s, worth about
$60 at the time. Today it's worth $80 million.
• The market cap of Bitcoin officially exceeds $1 million.

2011
• 1 BTC = $1USD, giving the cryptocurrency parity with
the US dollar.
• Electronic Frontier Foundation, Wikileaks and other
organizations start accepting Bitcoin as donations.

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2012
• Blockchain and cryptocurrency are mentioned in popular
television shows like The Good Wife, injecting blockchain
into pop culture.
• Bitcoin Magazine launched by early Bitcoin developer
Vitalik Buterin.

2013
• BTC market cap surpassed $1 billion.
• Bitcoin reached $100/BTC for first time.
• Buterin publishes “Ethereum Project" paper suggesting
that blockchain has other possibilities besides Bitcoin (e.g.,
smart contracts).

2014
• Gaming company Zynga, The D Las Vegas Hotel and

Overstock.com all start accepting Bitcoin as payment.

• Buterin’s Ethereum Project is crowd funded via an Initial

Coin Offering (ICO) raising over $18 million in BTC and

opening up new avenues for blockchain.
• R3, a group of over 200 blockchain firms, is formed to

discover new ways blockchain can be implemented in

technology.
• PayPal announces Bitcoin integration.

2015
• Number of merchants accepting BTC exceeds 100,000.
• NASDAQ and San-Francisco blockchain company Chain
team up to test the technology for trading shares in private
companies.
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2016
• Tech giant IBM announces a blockchain strategy for
cloud-based business solutions.
• Government of Japan recognizes the legitimacy of
blockchain and cryptocurrencies.

2017
• Bitcoin reaches $1,000/BTC for first time.
• Cryptocurrency market cap reaches $150 billion.
• JP Morgan CEO Jamie Dimon says he believes in
blockchain as a future technology, giving the ledger system
a vote-of-confidence from Wall Street.
• Bitcoin reaches its all-time high at $19,783.21/BTC.
• Dubai announces its government will be blockchain-
powered by 2020.

2018
• Facebook commits to starting a blockchain group and also
hints at the possibility of creating its own cryptocurrency.
• IBM develops a blockchain-based banking platform with
large banks like Citi and Barclays signing on.

The blockchain technology promises to revolutionize the

way of business. It has effects on various sectors, from
financial to manufacturing as well as education. Satoshi
Nakamoto released the well-known whitepaper about the
technology in 2009. In the paper, he provided details of
how the technology was well equipped to enhance digital
trust given the decentralization aspect that meant nobody
would ever be in control of anything. Ever since Satoshi
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Nakamoto exited the scene and handed over Bitcoin
development to other core application developers, the
digital ledger technology has evolved resulting in new
applications that make up the blockchain history (Url-4,
2018). The evolution of Bitcoin and other cryptocurrencies
have both drawn significant attention and also threatened
the very foundations of the financial system. After all, this
was the intention of Satoshi Nakamoto when the global
financial crisis hit not only USA but also the global
economy harder than any crisis in history.

But after the global financial crisis, the year 2009 is not the
exact date that blockchain concept revealed. Blockchain
was invented in 1991. Blockchain history dates back to
early 1990’s by two researchers: Stuart Haber and W. Scott
Stornetta. They both touted as the co-inventor of the
blockchain technology. Several aspects of the Bitcoin
blockchain architecture are based on Stornetta’s work.
They described the concept of a cryptographically secured
network of blocks.

The first mention of blockchain architecture was held in a

publication that Stornetta coauthored described a digital
hierarchy system known as a “block chain” that utilized
digital time-stamps for ordering transactions. They worked
on a cryptographically secured chain of blocks whereby no
one could tamper with timestamps of documents.
Afterwards they upgraded block chain system to
incorporate Merkle trees that enhanced efficiency thereby

19
enabling the collection of more documents on a single
block in 1992 (Url-5,2019).

Additionally, by 1998 Nick Szabo had begun working a

decentralized digital currency which was called as Bit
Gold. It wasn’t until 2009 that developer Satoshi Nakamoto
implemented the first blockchain. Nakamoto is known for
creating the world’s first digital currency called Bitcoin.
Nakamoto is a group of developers who collaborated in
order to use blockchain technology to create Bitcoin.
Bitcoin utilized blockchain technology on a peer-to-peer
network as a ledger for any transactions made with Bitcoin,
(Url-6, 2019). Very little is known about Nakamoto as
people believe whether he or she could be a person or a
group of people that worked on Bitcoin, which was
accepted as the first application of the digital ledger
technology. Figure 2 above Blockchain history is
illustrated.

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Figure 2. The History of Blockchain Technology Source:
Url-4, 2018.

Moreover, blockchain technology has several essential

features developed in time. One is that it allows a deep
transition from a centralized transactional model, which
until today has prevailed, to a decentralized one. distributed
system should turn out to be a more robust and reliable
solution than is usually provided by a centralized authority
to its stakeholders – such as a government to its citizens
(Collomb, Sok, 2016 ). Table below summarized standard
transactions versus blockchain ones.

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Table 1. Standard Versus Blockchain based Transactional
Models Source: Collomb, Sok, 2016.

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 SECTION:1 – BLOCKCHAIN
TECHNOLOGY OVERVIEW

This report does not attempt to provide an in-depth,

academic study of the underlying technology of blockchain.
Numerous scholars, entrepreneurs, and jurists have covered
at length and with greater technological proficiency the
details of blockchain technology. Instead, the report
explains the underlying building blocks that comprise
blockchain’s technological foundation. Though each
implementation may vary, a few key elements are
characteristic of blockchain:

 Creation and maintenance of an electronic register of

transactions,
 Encryption of hashes (digests) of transactions,
 Validation or verification of those transactions; and
 Time stamping those transactions.

The protocols which implement these elements in a

particular blockchain influence the reliability of the
information contained therein.

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 Electronic Register of Transactions
Any system that records data must have a format and
location for storing it. A register of transactions or other
records is simply a list of every transaction that has been
recorded by the system. For example, a municipality’s
register of title and deed transfers and the aforementioned
checkbook are registers. The blockchain is a continually-
growing digital register of transactions. Each set of
transactions (the number of which is prescribed by the
protocol) is considered a block in the chain, and the register
as a whole is the blockchain. This chain is stored and
continually added to by a network of computers, each of
which is known as a node. Each node has, at minimum, a
copy of a certain number of the most recent blocks, and
some might possess a copy of the entire blockchain. To add
a block to a chain, parties broadcast to the network the
details of the transaction, and nodes verify these
transactions, as described below. Once a node has verified
the prescribed number of transactions, and solves additional
computational problems dictated by the protocol, that block
can be added to the chain (see Figure 1). Other nodes add it
to their chain as well. In this way, the blockchain grows
mostly identically at each of the individual nodes. The
responsibility for storage of the transaction ledger is
distributed to many individuals, adding redundancy with
little risk of corruption or errors.

24
Figure 3: Nodes independently verify transactions before
agreeing on those that are valid

25
 Encrypting Data

One of the fundamental pieces in digital security is the

encryption of information; the translation of one piece of
data into another using a mathematical algorithm so that the
original data is obscured and can only be accessed by the
intended recipient(s). Encryption pervades nearly every
aspect of digital recordkeeping and the transaction of
business of all kinds over the internet, in both public and
private contexts. However, it is important to distinguish
between two types of the same technique. First is what is
typically called encryption, which is essentially a one-for-
one translation from one set of data to another. If a
document is encrypted using a mathematical formula, it can
be decrypted to produce the original document.

Blockchain technology typically uses the encryption

method known as cryptographic hashing. When a
transaction is submitted, the contents of that transaction
plus a few key pieces of metadata (including the timestamp
and the parties involved) are encrypted using a
mathematical algorithm. The output is known as a hash; a
short digest of the data. An electronic record run through
the cryptographic hashing algorithm using a particular key
(or set of keys) will always produce the same hash. Any
change, however insignificant, in the document will cause
the hash to be significantly different. Furthermore, since the
hash is merely a short digest of the original, it is not
possible to decrypt a hash maintained in the blockchain and
produce the original document, but it is possible to use the

26
hash to verify a copy of a transaction or document
maintained outside of the blockchain. Blockchain
technology uses cryptographic hashing to save space. It
rapidly becomes impractical or impossible to maintain the
entire ledger if every encrypted document is fully
registered, and the computing costs to decrypt entire
transactions would be very large.

27
 Verification of Transactions

Each party to a transaction has two keys: a public key,

which is known to the world, and a private key, which is
kept secret. These keys are digital certificates stored on the
user’s computer systems that allow for the encryption and
decryption of data. A sender uses his or her key to encrypt
the transaction data. The recipients, in this case all nodes in
the network; use the public key to decrypt information
required by the blockchain’s protocol to validate the
transaction. Examples of required information include the
digital signature of the sender, knowledge that the sender
has not previously sent a conflicting update, and that
nothing else in the update is invalid. This technology is
nearly identical to that used in many existing digital
signature or e-sign technologies; a sender generates a
digital signature from his/her private key which can then be
verified by anyone using his/her public key.6 This
technique is an essential and proven technique for securing
communications over potentially insecure channels and has
been in use in the public and private sector for decades.

A blockchain user or group of users will cryptographically

hash the record of any transaction. This hash is then
broadcast to the network as the evidence that a particular
transaction has occurred or event has been logged.
Individual network nodes receive this broadcast and begin
the process of ensuring that it is valid in accordance with
the protocol of that particular blockchain. Once a requisite
number of nodes agree that a set of transactions is valid
28
(i.e., reaching a consensus), those transactions can be added
to the chain as a block, and future blocks can be built upon
the information contained therein. This ensures continuity
of transactions and an unbroken transaction history. (See
Figure 4)

Figure 4: New blocks are added to the chain, and are

linked to previous blocks

29
 Timestamping

The link that ties individual blocks together is the

timestamp. Recording the timing of the transaction is
essential to the nature of the blockchain. The chain is only
appended, never retrospectively edited. When a node
verifies a transaction, it checks it against (among other
things) timestamps of previous transactions. This is done to
ensure that, for example, if an individual transacts 1 unit at
12:00 and that same unit at 12:01 and tries to record both,
the network will come to the consensus that the second
transaction is invalid. Similarly, this allows data stored in
the blockchain to be placed in chronological order. This
timestamp references the timestamp of the previous
transaction as well, effectively making a “chain” of
transactions. Individual timestamps are also encrypted and
sourced from a trusted timestamp server, making the
timestamps resistant to compromise.

Each block added to the chain is mathematically linked to

the block before it, as well as to those blocks following it.
This is done through a linking of the timestamp, the hash of
the previous block, the hash of the entire chain, et cetera,
depending on the protocol. Because of the distributed,
consensus-driven nature of the blockchain it is nearly
impossible for an attack to compromise the entire system.
The number of nodes (and attendant computing power)
required to confirm an error or malicious attack would be
impractical in a large blockchain like Bitcoin. Trying to
forge a previously verified block would be akin to changing
30
the shape of a brick in an ever growing stack – each
subsequent brick would also need to be modified to fit with
the previously one. The blockchain is resistant to
compromise due to the nature of the linked blocks.
However, as will be discussed, there are ways the use of
this technology is vulnerable to compromise, but they are
not fundamental vulnerabilities with the blockchain itself.

31
 SECTION:2 – APPLICATION OF
BLOCKCHAIN TECHNOLOGY TO
RECORDS

Record accuracy and trustworthiness, especially in the

context of electronic records, is critical to the usefulness of
the record. A record that cannot be trusted effectively
cannot be used. The measure of trustworthiness is primarily
based on the reliability, accuracy, and authenticity of the
record.

Reliability is defined as the trustworthiness of a record as a

statement of fact, based on the competence of its author, its
completeness, and the controls on its creation; accuracy is
defined as the correctness and precision of a record’s
content, based on the above and on the controls on the
recording of content and its transmission; and authenticity
is defined as the trustworthiness of a record as a record,
meaning that the records is what it purports to be, free from
tampering or corruption, based on the competence of its
keeper(s) through time (i.e. creator and/or preserver) and on
the reliability of the records system(s) in which it resides.
Blockchain technology does not address the reliability or
accuracy of a digital record. Instead, it can address a
record’s authenticity by confirming the party or parties
submitting a record, the time and date of its submission,
and the contents of the record at the time of submission.

32
Blockchain technology offers no assistance in terms of the
reliability or accuracy of the records contained in the
blockchain; if bad data is used as an input, as long as the
correct protocols are utilized, it will be accepted by the
network and added to the blockchain. If a document
containing false information is hashed as part of a properly
formatted transaction, the network will validate it.
Furthermore, the network is unable to distinguish between
a transaction by an actual user and a malicious transaction
by someone with unauthorized access to the user’s private
key. Furthermore, the network obviously could not through
its protocols determine whether a sender was reliable in
terms of the veracity of their submitted information.

Where blockchain technology does provide an advantage is

in its ability to evaluate the authenticity of records. As
explained above, a transaction that has been verified and
added to a valid blockchain is mathematically secure. The
hash of a document existing outside the blockchain and the
hash registered within the blockchain will be identical if the
documents are identical. If the documents are different (due
to forgery, corruption, error, or other problems) the hashes
will not match. Thus, the blockchain can potentially
provide an immutable registration of a record, to which
future records can be compared for authenticity. Any
presumption of validity around records registered in a
blockchain must be limited to authenticity. The statutory
language set forth in Appendix B reflects this distinction
between reliability/accuracy and authenticity.

33
 SECTION:3 – PUBLIC
TRANSACTIONS AND EXISTING
LEGAL STRUCTURE

Information is essential to any individual or organization

for a multitude of purposes: proof-of-fact, legal or
regulatory compliance, efficiency of operations,
accountability and transparency, and more. Blockchain
technology is a tool for the management of information,
specifically the records of transactions. Whether the content
of that transaction is the hash of a transfer of Bitcoin from
one wallet to another, a contract agreed to by two parties,
or a document registered for purposes of future verification,
each of these instances represents the creation of an
electronic record that is encrypted, distributed, verified, and
eventually added to an ever-growing ledger of other
transactions.

Private record keeping may benefit, through reduced costs,

from utilizing blockchain technology to eliminate
centralized recordkeeping or authenticity-verifying
authority. Two issues complicate these possible advantages.
First, the blockchain does not store documents, only
hashes. Parties transacting business in a blockchain would
need to preserve electronic documents themselves (which
could be confirmed by comparison to the hashes in the
blockchain). Private individuals and organizations are often
not well-equipped for the long-term preservation of their
electronic records. Second, while a blockchain may reduce

34
costs, there will likely still be some transaction fees related
to verification, as described above.

The existing legal framework in Vermont for use and

validity of electronic transactions and records is set forth in
the Uniform Electronic Transactions Act (“UETA”). UETA
provides a broadly-defined legal framework for parties who
wish to conduct electronic transactions in Vermont. Most
uses of blockchain technology, although not specifically
identified, would fall within the recognition provided to
electronic records, signatures, and contracts afforded by
UETA. However, UETA’s recognition of electronic
transactions is limited in some respects, including by the
application of other statutory requirements.

While UETA may cover many of the transactions for which

people currently contemplate utilizing blockchain
technology, it does not cover everything. A transaction
under UETA is “an action or set of actions occurring
between two or more persons relating to the conduct of
business, commercial, or governmental affairs.”
Prospective uses for the blockchain are not limited to the
transaction of business between two parties. In certain
situations, a single party may wish to register some
information in the blockchain; for example, a will or other
document with long-term value. Such single-party
registrations are not transactions within the meaning of
UETA (although still constituting “transactions” in the
blockchain sense), and thus might not be covered by

35
UETA. Blockchain-specific legislation could account for
such records.
UETA is intended to be a broadly construed authorization
with respect to electronic transactions, but creates no
obligations for their use. Under UETA, in litigation,
electronic transactions and records are treated in the same
manner as manual or paper records. There is no indication
that current law prohibits or in any way disfavors the use of
blockchain for electronic transactions, but to the extent the
legislature wishes to clarify this recognition, it should be
done outside of the bounds of UETA. Modifying the
uniform statute may undermine both its uniformity and its
approach to broadly address dynamic and changing
technologies. It may also trigger pre-emption of Vermont’s
version of UETA by the federal E*SIGN law.

36
SECTION:4 – PUBLIC IMPLICATIONS
OF BLOCKCHAIN TECHNOLOGY

Public records are essential to the state of Vermont both for

the fulfilling its statutory responsibilities and for the public
to inspect and monitor the actions of public servants. State
law makes this clear: “Officers of government are trustees
and servants of the people and it is in the public interest to
enable any person to review and criticize their decisions
even though such examination may cause inconvenience or
embarrassment.” Ultimately, state government is
accountable to the people, and the inspection of records
provides one of the primary means for ensuring this
accountability. Additionally, Vermont defines public
records concisely: "public record" or "public document"
means any written or recorded information, regardless of
physical form or characteristics, which is produced or
acquired in the course of public agency business.

Electronic data created or received by the state of Vermont

in the course of business is a public record, and must be
managed according to the requirements set forth in Title 1,
Chapter 5, and Subchapter 3. Therefore it is of the utmost
importance for the State to use recordkeeping systems and
implement records management policies that produce and
preserve trustworthy electronic records and safeguard
against the risks of loss of those records.

37
Public records are held in the custody of the state, whether
that is an agency or an individual acting in his or her
capacity as an officer of that agency. Although 1 V.S.A. §
318 outlines the responsibility of the custodian in specific
circumstances, the custodian of a public record is charged
with the responsibilities of preserving and providing access
to the records.

A public officer, by virtue of his or her office, is the legal

custodian of all papers, books, and records pertaining to his
or her office. It is the custodian's duty to preserve the
public records, and to ensure that nobody alters or destroys
them. The custodian is also responsible for delivery of such
documents to his or her successor. The law presumes that a
public officer will properly perform his or her duty as to the
care, management, and control of records, and their
preservation, and if a particular paper is not found in a
public office where, if in existence, it ought to be, it will be
presumed that it never existed.

There ought to be an unbroken chain of custody from the

point of creation or receipt of a record through its active
and inactive life until its final disposition. Inserting an
existing public record into any system employing
blockchain technology could violate legal expectations
relating to the custody and control of public records.

At present blockchain technology adds little in terms of

public recordkeeping. The records kept by the State are
presumed reliable and accurate in terms of content.

38
Moreover, effective records management policies and
procedures by agencies should address the authenticity of
records. The need to preserve copies of electronic records
for long periods of time is already essential to state
business and strategies and tools are in place to address
these needs. Because blockchain technology would likely
result only in the registration of hashes, the state would still
need to preserve original documents long-term. In light of
the very limited possible benefits and the likely significant
costs for either entering into a private or public blockchain
or setting up a state-operated blockchain, at this time,
blockchain technology would be of limited value in
conducting state business.

39
 SECTION:5 – DIGITAL
CURRENCIES/SECURITIES

Blockchain technology appears ideally suited to alter the

way in which financial assets are currently transacted,
affecting capital markets, clearing houses, and exchanges
with broker-dealers and banks. Systems that currently rely
on a trusted middleman to support and/or guarantee the
authenticity of a transaction today could efficiently be
conducted using the blockchain. The financial industry is
beginning to accept the utility of blockchain technology
and certain functions within the sector are already using
blockchain-based technology for transferring ownership or
custody of financial assets. The amount of money the
financial industry is investing in this new technology is
evidence of the potential utility of blockchain technology to
complete such functions. A November 2015 article on
CNN.com indicates that financial services firms have
invested $1 billion in blockchain-related entities.

Financial services companies cite many benefits of

blockchain technology. These benefits include reducing
operations staff currently required to transact services
through the use of a secure, immutable, reliable digital
ledger that is constantly updated, such as a blockchain.
Similarly, financial services firms can minimize operational
complexity with the use of the blockchain. Currently,
securities clearing and trading operations take two to three
days to settle a trade. This delay can lead to credit and

40
liquidity risks. Blockchain-authenticated trading (current
bitcoin based system) takes minutes. A standalone system
could potentially authenticate transactions even faster.
Faster transactions reduce the risk of purchaser default. For
example, financial institutions that have custody over large
financial assets are looking to the technology to help
comply with the Dodd-Frank Wall Street Reform and
Consumer Protection Act. The efficiency of transactions
that blockchain technology can provide may help to reduce
counterparty credit risk which may reduce an institution’s
balance sheet capital requirements under Dodd-Frank.
Distributed ledgers virtually eliminate credit and liquidity
risk by requiring pre-funding, in which the cash and
collateral to be traded pre-exist prior to trading.

A securities transaction system entirely based in the

blockchain could essentially eliminate the illegal practice
of “naked short-selling.” Short selling allows a person to
borrow securities they do not own and sell them for cash
value. The short-seller bets against the market, anticipating
the value of the borrowed stock is likely to decrease. Naked
short-selling is the illegal practice of short-selling stocks
that don’t actually exist. This is accomplished by
manipulating the time lapse of authenticating a transaction.
A distributed blockchain system would essentially prevent
such activity because virtually no delay would exist
between accepting a trade and closing the transaction.

Vermont banking statutes already address and regulate

certain virtual currency transactions, as “money services.”

41
Businesses that sell stored value Bitcoins in Vermont are
engaged in money transmission, requiring a license.

Similarly, at the federal level, the Department of the

Treasury Financial Crimes Enforcement Network
(“FinCEN”) issued guidance on this subject on March 18,
2013.25 While a user of Bitcoin (to purchase goods and
services) is not under FinCEN’s regulatory authority, an
administrator or exchanger of Bitcoin is a Money Services
Business (“MSB”) or “Money Transmitter” and must
comply with FinCEN’s regulations including those relating
to reporting and recordkeeping.26 27 The language set
forth in Appendix B would not create or carry any
presumption that the underlying activity supported by that
record is legal. Thus, the applicability of existing civil and
criminal laws and regulations governing Bitcoin or other
blockchain activities related to securities and money
transmission would remain unchanged.

42
 SECTION:6 – BLOCKCHAIN
BENEFITS AND RISKS

Benefits

Blockchain technology is developing and expanding at a

rapid pace. During the drafting of this report, many new
developments occurred, and the market for blockchain
technology has had several new entrants. As is discussed
further in Appendix C, banks, news organizations, and
scholars recognize the potential of blockchain as a
significant disruptive technology. Private parties will likely
utilize blockchain technology for recording transactions
and verifying records.

The study group does not doubt the potential economic

impact of blockchain technology generally. Possible
increases in economic activity could be direct or indirect.
The potential direct economic benefits might arise from
businesses and parties that utilize the blockchain choosing
Vermont law for their contractual relationships. This may
result in additional legal and accounting work in Vermont.
Indirectly, Vermont’s affirmative recognition of this
technology may provide cachet that would attract
businesses working in this area to locate here, but the study
group has no concrete evidence of this. The group sees the
greatest potential economic benefit as blockchain-related
services (the nodes of networks, the storage of the originals
of electronic documents) locating in Vermont, but the

43
nature of the blockchain is opposed generally to the
centralization of these services.

To the extent that Vermont can be part of a process of

economic and technological innovation that is likely to go
forward with or without any legislative recognition, early
acceptance of this technology may result in some economic
benefit to the State. It is not clear that legislation set forth
in Appendix B would successfully lure such activity to
Vermont.

Risks

The study group has identified only very limited risks to

Vermont associated with express legal recognition of
private records utilizing blockchain technology. The
underlying principles that underpin this technology are well
established, and recognizing it for confirming authenticity
of a document seems well-founded. There are, however,
some risks associated not with the technology itself, but
with its broader use.

Market Disruption

One effect of blockchain technology could be a massive

disintermediation of the financial system. It could replace
all of the current procedures that process, record, reconcile,
and audit transactions with a system where participants
trade directly. While the state may see some small gains in
first-mover legal work and a potential blockchain tech
44
startup, the true economic benefits of blockchain
transactions are the potential reduction in transaction costs
to the participants. The individual economic gain must be
balanced by the inevitable losses in employment in those
areas where people are no longer needed to perform all of
the back-office work. Moreover, any attempt to regulate
blockchain may actually make Vermont a less hospitable
environment. Currently, blockchain is not subject to any
unique regulation. Any regulation that results in additional
costs may, in fact, dissuade companies from locating in
Vermont

Consumer Protection

There is no indication that blockchain technology itself

creates new consumer protection concerns. When the
technology serves as a platform for conducting commercial
transactions, it will likely be utilized by some to engage in
unfair and deceptive acts and practices in violation of the
Vermont Consumer Protection Act. These transactions
would remain subject to consumer protection laws,
enforceable by the State or by private individuals.

Because Bitcoin is currently the most commonly utilized

and understood use of blockchain technology, it is worth
noting general consumer risks associated with it. First,
because Bitcoin is not backed by a single government or
organization (but instead is decentralized) it is subject to
significant volatility. Consumers holding Bitcoins risk
experiencing wide swings in the value or purchasing power

45
of the Bitcoin they hold. Additionally, because use of
Bitcoin as a payment system is not subject to the regulatory
scheme of more traditional payment systems, there may be
additional risks related to returns and transaction reversals.
The Federal Trade Commission has identified some of
these general risks related to engaging in transactions using
Bitcoin.

In addition to the fraudulent or illegal activities conducted

using Bitcoin, there are limited consumer protection
concerns related to the broader use of blockchain
technology. Integral to the technology is the maintenance
of private keys by participants. A private key is essentially
an additional source of personally identifiable information
(like credit card numbers, Social Security numbers, or bank
account numbers). Based on current implementations of
blockchain technology, if a private key is lost or stolen, an
individual has no recourse. At best, a person who loses a
private key will be required to obtain a new key to add to
the blockchain. At worst, the loss or compromise of a
private key is complete loss of control over one’s
blockchain transactions. The only way to identify someone
online in some of these blockchain systems is through the
use of a private key; a malicious party could masquerade
convincingly as the user until a private key is deactivated.
Essentially this creates an additional identity theft risk.

46
 BLOCKCHAIN EVOLUTION

A blockchain’s three main benefits are that it provides

transparency, authentication and auditing abilities and
generally evolution of blockchain technology can be held in
two phases. First phase consists of years between 1991 and
2013. Actually the cost of the bankruptcy of Lehman
Brothers in 2008 to the USA is estimated in trillions and
unfortunately it triggered a chain of events that sent several
countries into economic recession or depression. Bitcoin
came into being in 2008 as the first application of
Blockchain technology. One contributor to the crisis was
the centralized payment and monetary system based on
clearinghouses that act as intermediaries between buyers
and sellers and take on the risk of defaults. Bitcoin is an
innovative technology that may allow banks to settle
accounts among themselves without relying on centralized
entities. Based on Blockchain technology, Bitcoin is
considered the first decentralized currency system that
works on a global scale. It relies on cryptographic proofs of
work, digital signatures, and peer-to-peer networking in
order to provide a distributed ledger containing transactions
(Ateniese et al, 2017). Ever since Bitcoin number of
applications have cropped all of which seek to leverage the
principles and capabilities of the digital ledger technology.
Consequently, blockchain history contains a long list of
applications that have come into being with the evolution
of the technology (Url-4, 2018).

47
Blockchain phase 2 is called Contracts and consists of
years between 2013 and 2015. Developed by Vitalik
Buterin, Ethereum was born out as a new public blockchain
in 2013 with extended functionalities compared to Bitcoin,
a development that has turned out to be a pivotal moment
in Blockchain evolution timeline. He differentiated
Ethereum from Bitcoin Blockchain by enabling a function
that allows people to record other assets such as contracts.
With his development new features expanded Ethereum
functionalities from being a cryptocurrency to be a platform
for developing decentralized applications as well. In 2015,
Ethereum blockchain has launched and become one of the
biggest applications of blockchain technology given its
ability to support smart contracts used to perform various
functions (Url-4, 2018).

Also in 2015, In 2015, the Linux Foundation unveiled an

Umbrella project of open source blockchain called hyper
ledger. Hyper ledger does not support Bitcoin or any other
cryptocurrency. Hyper ledger focus is to encourage the use
of blockchain technology to improve performance and
reliability of current systems to support global business
transactions. It is something like a hub for open industrial
blockchain development. (Url-7, 2019).

In 2017, a company called Eos published a paper detailing

a new blockchain protocol powered by an EOS as the
native cryptocurrency. s main purpose is to encourage the
deployment of decentralized applications through an
autonomous decentralized corporation. Phase 3 of

48
Blockchain began in 2018 and called applications. In recent
years, a number of projects have cropped up all leveraging
blockchain technology capabilities. Neo is one of the
applications launched in China, billed as the first open
source, decentralized and blockchain platform. Neo casts
itself as the Chinese Ethereum having already received the
backing of Alibaba CEO Jack Ma. Another cryptocurrency
platform is optimized for the Internet of things (Iot)
ecosystem as it strives to provide zero transaction fees as
well as unique verification processes. Called IOTA. Than
Monero Zcash and Dash blockchains came into being as a
way of addressing some issues such as security and
scalability (Url-4, 2018).

49
 IMPACTS ON GLOBAL ECONOMY
AND ECONOMIC BENEFITS OF
BLOCKCHAIN

Blockchain can be defined as a chain of blocks of

information, called digital ledgers. These ledgers are
chronologically linked and replicated not in a centralized
database but in a distributed database. Information can be
added as blocks and never deleted and also any change is
monitored and validated by the chain Each block is
protected by cryptographic algorithms, and only authorized
ones can access the information. Although private
blockchains exist, a typical blockchain is public and
identified as “decentralized”. The four main kinds of
blockchain applications are money transfer and payments,
property registries, contractual agreements, and identity
confirmation. Replacing the dependency on trust with
cryptography means that most verification, identification,
authentication, and similar forms of assurance,
accreditation, certification, and legalization of identity,
origin, competence, or authority of persons or assets can be
assured by mathematics (Ljutic, McPhee, 2017).

In another words, Blockchain (distributed ledger

technology) is a network software protocol that enables the
secure transfer of money, assets, and information via the
Internet, without the need for a third-party intermediary
such as a bank. A blockchain can be used as a digital
registry to record, transfer, and verify asset ownership

50
(such as home, auto, stocks, bonds, mortgages, and
insurance etc.), and also can be used to preserve the
integrity and authenticity of sensitive documents or records
(e.g., passports, visas, driver’s licenses, birth and death
certificates, voter registration, contracts, wills, patents, and
medical records). In a network economy with blockchain
based asset transfer, personalized financial and government
services might be better tailored to individual needs. With
Blockchain technology, many daily operations involving
money, assets, and documents could start to be conducted
on digital networks with the help of cryptographic security
algorithms. Given that less friction and human involvement
may be needed to transfer goods and services, less physical
infrastructure might be needed to make it happen (Swan,
2017).

It is widely accepted that the computational architecture of

blockchain technology (distributed ledger technology)
creates a wide range of potential uses. For instance, by
providing an immutable, distributed ledger, it can help to
facilitate not only peer-to-peer payments, but also manage
records, track physical objects and transfer value via smart
contracts, all without a third party or manual reconciliation.
Developments in computer processing power and
networked computer systems have facilitated advances in
blockchain applications, while the domination of
smartphones has made digital wallets possible and
increasingly relevant. Additionally, there has been a
proliferation of IoT (internet of things) and AI (artificial
intelligence) applications that can automate bigdata

51
collection and processing for use in blockchain platforms
(Wef, 2018).

Blockchain applications are commonly used with

cryptocurrencies i.e. currencies that use public-key
cryptography as security measure and to prevent
counterfeiting transactions. Blockchain technology can be
seen both as a technical and as an economic innovation
(Liebenau, Elaluf-Calderwood, 2016). Blockchain
technology (distributed ledger) can be utilized as a
transactional mechanism for “sharing economy” services,
as it solves trusted recording of large-scale peer-to-peer
activities naturally. Blockchain as an economic innovation
offers solutions where there exists a need for a reliable
record of transactions in a decentralized environment where
not all parties can be fully trusted (Mainelli, Smith, 2015).
And blockchain technology has created a global economy
of immediate trust and value, built on an agreement and
complex computer algorithms. Also digitized streaming
money and payment channels could be techniques to
quicken the 30–60–90 day terms and uncollectible debt
problem in supply chain finance, and facilitate a just-in-
time economy for money (Swan, 2017).

When it comes to Blockchain economy, it can be defined as

a term for a move toward cryptocurrencies and digital
ledger systems, and away from traditional national hard
currencies and legacy, old fashioned ledger systems. In the
blockchain economy, technologies like bitcoin and
blockchain are the typical tools for financial management,

52
rather than traditional software application programs
managing existing national currencies. Also the blockchain
economy is a scenario and potential future environment that
cryptocurrencies will replace current monetary systems
globally (Url-8, 2018). Also with blockchain-based asset
transfer, personalized financial and government services
might be better tailored to individual needs. Blockchain
technology currently revolutionizes the storing,
management and transfer of value between digital identities
in many economic sectors.

The Future of the Blockchain Market Report revealed

distributed ledger technology (DLT) named blockchain
optimistically would have a positive economic impact. It
will contribute as much as $120 billion dollars worldwide
between 2018 and 2024. Also the study revealed that the
benefits offered by blockchain meant mainstream adoption
was highly probable. They predicted that blockchain could
contribute anywhere between $87 billion to $120 billion by
2024, depending on which industries add it and the rate of
adoption (Url-9, 2018).

Blockchain technology has been holding many promises

for not only the financial sector, in particular its financial
markets infrastructure, but also for the insurance industry.
At the heart of this enthusiasm for blockchain lies the new
decentralized transactional model that the technology
permits, whose principles are based upon Satoshi’s white
paper about peer to peer communication (2008).
Blockchain technology is very likely to have a very strong

53
impact on the digital economy and global e-commerce,
precisely because of this decentralized transactional model
that it facilitates. And indeed, even if the share of e-
commerce has been steadily rising since the age of the
Internet, essentially over the last score of years, it remains
that the main transactional paradigm is centralized
(Collomb, Sok, 2016).

While blockchain technology is affecting financial sector

heavily, with blockchain technology, new industry leaders
are emerging. Financial services seem near term future
leader of blockchain. Other sectors such as energy,
industrial products, healthcare and utilities. Figure below,
World Economic Report experts shows proportions of
sectors effected by distributed ledger technology
(blockchain) with the help of PwC Global Blockchain
Survey in 2018 (Wef, 2018).

54
Figure 5: Industries Seen As Leaders in Blockchain
Source: Wef, 2018.

According to some experts, there are four waves of

anticipated blockchain deployments summarized in Table 2
below. They initially expect the first two waves to be
focused on sharing and using data, before expanding to
critical infrastructure once confidence in blockchain
technology grows. The third wave involves the adoption of
blockchain technology in major pieces of capital markets
infrastructure. Truly decentralized financial ecosystem will
arise in final wave, is perhaps the most ambitious and the
most uncertain one (Url-10, 2019).

55
Table 2: Blockchain Waves Source: Url-10, 2019

56
 WIDELY ADOPTED BLOCKCHAIN
PLATFORMS AND
SERVICES

In the following chapters, we will present two common

Blockchain platforms that provide different solutions to
enterprise Blockchain development, Microsoft Azure BaaS
and Linux Foundation’s Hyperledger, and comparison of
two most adopted public Blockchains, Bitcoin and
Ethereum.

Figure 6: Blockchain as a Service (BaaS) competitors.

(Fuentes 2016)

57
 Hyperledger

The Hyperledger Project is Linux Foundation’s

collaborative effort to create an enterprise-grade, open-
source distributed ledger framework and code base. It aims
to advance Blockchain technology by identifying and
realizing a cross-industry open standard platform for
distributed ledgers, which can transform the way business
transactions are conducted globally. (Cachin 2016) Also,
Hyperledger is considered as an effort to bring Blockchain
technology to mass markets as a business-ready Blockchain
fabric (Hyperledger Whitepaper, 2016

Note! The name Hyperledger has previously (before

November 2015) been actively used for financial
technology platform from company Hyper (later
DigitalAssetHoldings). As DAH joined the Linux
Foundation’s Blockchain project as one of the founding
members in December 2015, the brand name
“Hyperledger” was also donated to the project with their
codebase. Today, the name Hyperledger thus represents
completely different architectural design and codebase
compared to the original financial permissioned distributed
ledger because in addition to DAH’s contribution, Linux
Foundation’s Hyperledger has got many other codebase
donations e.g. from IBM. (Swanson, 2016)

In February 2017, Hyperledger Project has 100 members

(partly depicted in Figure 7). Among them there are tech
giants like IBM and Intel but also financial parties like
58
 messaging service company SWIFT and international bank
consortium R3CEV. In fact, R3CEV has also open-sourced
their distributed ledger Corda and handed it over to
Hyperledger project. (Gautham, 2016)

Figure 7: Hyperledger partners (Manoj 2016).

As a starting point for its effort, Hyperledger has identified challenges of existing
Blockchain implementations:
· Limited throughput
· Slow transaction confirmations
· Designed for cryptocurrency
· Poor governance
· No privacy
· No settlement finality
· Anonymous Processors.

These challenges combined with varying industrial requirements for Blockchains across different
use-cases make it impossible to find one solution that fits all.

59
Therefore, Hyperledger has been designed to be modular with pluggable options to suit different
needs. (Hyperledger Project, 2016) By providing a modular framework that supports different
components for different uses, it brings together a number of independent efforts to develop open
protocols and standards. Consequently, this approach will enable a variety of Blockchains with
their own consensus and storage models, and services for identity, access control and contracts.
(Hyperledger- Wikipedia, 2016)

Structure

To achieve these goals, several R&D efforts have been donated to Hyperledger project: IBM’s
codebase and intellectual property from its ADEPT project on Ethereum as well as other
research. Digital Asset Holdings’ Hyperledger brand and related code and developer resources.
R3’s framework for transactions, designed with its consortium partners to meet the requirements
of its global banks and other financial institutions. These set the scene for Hyperledger; a focus
on enterprise specific applications, robustness, security and business support. (Michalik, 2016)
“We want other banks and other parties to innovate with products that sit on top of the platform,
but we don’t want everyone to create their own platform… because we’ll end up with lots of
islands that can’t talk to each other.” James Carlyle, the chief engineer at New York-based
fintech firm about R3CEV’s Corda joining Hyperledger (Gautham, 2016)

60
Figure 8: Key concepts and benefits of Blockchain for
business. (O ’dowd, 2016)

Hyperledger has defined its project scope so that its focus is

on the shared ledger and its internal structures. Therefore,
the application layer as well as value added systems are out
of the project’s scope (Figure 9).

Figure 9: Hyperledger Project Scope (Hyperledger Project

2016).

Thus, the focus of the project is in designing “an evolving

Blockchain fabric that permits for compliance with
regulations, while supporting the varied requirements that
arise when competing businesses work together on the
same network. The central elements of this specification
are smart contracts called “chaincode”, digital assets,

61
record repositories, a decentralized consensus-based
network, and cryptographic security.” (Lombardo, 2016)

As a result, reference architecture for this kind of

Blockchain fabric is presented (Figure 10).

Figure 10: Hyperledger reference architecture

62
 Microsoft Azure BaaS (Blockchain-as-a-
Service)

In November 2015, Microsoft announced with ConsenSys

(the collective of Ethereum coders) to start offering
Ethereum Blockchain as a Service (EBaaS) on the Azure
platform so that enterprise clients and developers can have
a single click cloud based Blockchain developer
environment. (Allison 2015) In the later phase, as more and
more partners have joined in the Azure ecosystem, Marley
Gray, Principal Program Manager of Azure Blockchain
Engineering comments that “It’s getting hard to keep
saying Blockchain for everything in this space, so I'll just
start referring to it as the distributed ledger ecosystem”.

Thus, Blockchain as a Service is NOT a Blockchain, but a

Dev/test platform for all different types of Blockchains or
in other words, a place for partners to put new platforms,
frameworks, tools and services for customers to discover
and experiment with. Among others, innovation firm R3
with its financial institution partners has simulated financial
transactions using Azure BaaS.

The financial services are not the only beneficiaries of

distributed ledgers. Public sector and industries (e.g. retail,
manufacturing) as well as healthcare are also strong
potentials for this technology. Within the Azure platform,
these user sectors may find it useful to combine the existing
Azure IoT and predictive analysis tools with their
Blockchain solutions, e.g. in healthcare the data from
medical devices and wearable.
63
Pieces of Azure Blockchain-as-a-Service offering

The initial EBaas offering contained two tools that allowed

for rapid development of smart contracts based
applications: Ether. Camp (An integrated developer
environment) and BlockApps (a scalable Ethereum
compliant platform for rapid development, deployment and
management of enterprise Blockchain applications).

Project Bletchley

“Bletchley is Microsoft’s architectural approach to building

an Enterprise Consortium Blockchain Ecosystem. To be
clear, this is not a new Blockchain stack. It is Microsoft’s
approach to bring distributed ledger ﴾Blockchain﴿ platforms
into the enterprise to build real solutions addressing real
business problems while keeping the platform open.”

Azure will remain open to all protocols, consensus

algorithms, databases and virtual machines. However,
Bletchley will introduce a modular framework allowing for
you to choose what combination of technologies best fits
the business domain you are trying to address. Because
each Blockchain/distributed ledger will have all nodes on
that network agree, there will by default be many ledgers.
(Gray, 2016a)

64
Figure 11: Azure Enterprise Blockchain has a modular
framework (Gray, 2016a).

Figure 12: Bletchley is Microsoft’s architectural approach

to building Enterprise
Blockchain Ecosystem (Gray, 2016a).
65
In Figure 12 is depicted the architecture of Bletchley. The
leading idea of the Base Platform located down is that it
may comprise any pluggable distributed ledger
implementation and the implementation can also be
swapped if needed. Further, there is a Middleware Layer
(blue one, also called Fabric) that offers many important
services for consortium Blockchains: Identity and
certificate services, Encryption and Cryptlet (more on this
below) services, Blockchain gateway and Data services as
well as Management and Operations. These services may
ease the development of distributed applications
remarkably. Additionally, the user may find useful parts for
one’s applications in the Marketplace. In there, e.g. base
platform components, additional distributed Fabric
services, Cryptlets as well as full Smart Contract libraries
are provided and also new ones can be created to get paid
for them.

66
 Comparison of Bitcoin and Ethereum

The two most popular public Blockchains are Bitcoin and

Ethereum. Both serve their cown specific purpose with
some trade-offs made in their design. Ethereum is a
decentralized computing platform that uses consensus
mechanism similar to Bitcoin, but allows more flexibility in
transactions which in Ethereum’s case are often referred to
as contracts. Bitcoin is more established and more rigid
system aimed primarily for financial transactions. Table 9
compares the main differences of Bitcoin and Ethereum
Blockchain systems.

Basis Bitcoin Ethereum

Key Purpose Decentralized book Decentralized
keeping system for computation engine.
financial transactions.
Primitive Data Transactions based on Contracts based on
Structure scripting language. turning-complete
programming language.
Role of Nodes Nodes validate Nodes run program code.
transactions.
Block Time On average 10 min On average 15 sec
Hashing Algorithm SHA256 ethash
Competitive Network effect Second mover advantage
Advantages More rigid More flexible

67
 CONCLUSION

The application of the Blockchain concept and technology

has grown beyond its use for Bitcoin generation and
transactions. The properties of its security, privacy,
traceability, inherent data provenance and time-stamping
have seen its adoption beyond its initial application areas.
The Blockchain itself and its variants are now used to
secure any type of transactions, whether it be human-to-
human communications or machine-to-machine. Its
adoption appears to be secure especially with the global
emergence of the Internet-of-Things. Its decentralized
application across the already established global Internet is
also very appealing in terms of ensuring data redundancy
and hence survivability. Thus the invention of the
Blockchain can be seen to be a vital and much needed
additional component of the Internet that was lacking in
security and trust before. BC technology still has not
reached its maturity with a prediction of five years as novel
applications continue to be implemented globally.

According to the Gartner Hype Cycle for Emerging

Technologies 2017, Blockchain still remains in the region
of “Peak of Inflated Expectation” with forecast to reach
plateau in “five to ten years”. However, this technology is
shown going downhill into the region of the “Trough of
Disillusionment”. Because of the wide adoption of the
Blockchain in a wide range of applications beyond
cryptocurrency, the authors of this paper are forecasting a
shift in classification from “five to ten years” to “two to

68
five years” to reach maturation. Blockchain possesses a
great potential in empowering the citizens of the
developing countries if widely adopted by e-governance
applications for identity management, asset ownership
transfer of precious commodities such as gold, silver and
diamond, healthcare and other commercial uses as well as
in financial inclusion. However, this will strongly depend
on national political decisions.

Blockchain technology is a sophisticated, interesting, and

emerging technology. It provides a reliable way of
confirming the party submitting a record to the blockchain,
the time and date of its submission, and the contents of the
record at the time of submission, eliminating the need for
third-party intermediaries in certain situations. However, it
is important to consider that blockchain technology does
not verify or address the reliability or the accuracy of the
contents, and additionally blockchain technology provides
no storage for records, but instead the hashes thereof.

Regarding economic advantages to legal recognition of

blockchain technology, Vermont is currently a hospitable
environment for commerce related to blockchain
technology even though the State has not recognized this
technology in statute at this time. The study committee has
not identified any specific legal or practical benefits from
the legislation set forth in Appendix B. However, the group
has also not identified any risk inherent in blockchain
technology that would warrant withholding the recognition
of validity set forth in the legislation. While the committee

69
does not doubt that blockchain technology and the industry
forming around it demonstrate significant economic
activity and interest, it is unclear what steps Vermont could
take to lure any of that activity to the state.

Blockchain technology is already in use in the private

sector, though clearly in the early stages of adoption, the
most prevalent example being virtual currency known as
Bitcoin. Further study is required before considering it for
the regular business of the State, and moreover, any
application would certainly need to support rather than
replace the existing records management infrastructure. It is
the belief of the study committee that the benefits of
adoption of blockchain technology by state agencies is, at
this time, not outweighed by the costs and challenges of
such implementation.

Distributed ledgers named blockchain have the ability to

securely digitize many current operations in economics and
finance, and legal and government services. Blockchain can
be defined as a decentralized public ledger, which records
transactions between users in a permanent, secure and
verifiable way. The important thing is that blockchain can
be programmed to record not only financial transactions,
but anything of value. There is a growing realization that
blockchain technology will bring a radical shift of
especially on financial assets. It is no doubt that the
financial sector is at the forefront in adoption of blockchain
technology. Blockchain is rapidly revolutionizing the
global economy. The potential effect of blockchain

70
technology – distributed ledgers - on the society and the
global economy are hugely important, as they promise to
always have an optimistic impact. Actually the potential
benefits of the blockchain are more than just economic and
the technological capacity of the blockchain is already
being harnessed to address real world problems by specific
groups.

Only nine years after the first Bitcoin white paper,

blockchain technology is now studied by companies and
governments to find possible use cases for efficiency and
can possibly trigger the third industrial revolution. On the
other hand, debate over blockchain’s promise, as well as its
limitations, is ongoing. Blockchain technology, in all its
forms, continues to evolve rapidly. It is widely accepted
that Blockchain technology future looks bright and
attractive in part because of the way governments,
developers, firms and investors are investing big as they
seek to spur innovations and applications. The
opportunities that blockchain offers need to be developed
and governed wisely, with upfront and continual
management of unintended consequences and downside
risks. Blockchain is the kind of technological breakthrough
that has the potential to make global changes. Its predicted
impact on the world economy is big enough that some of
the countries and biggest companies are already preparing
for it.

71
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quarter, p.93.
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Infrastructures: A Framework for Blockchain Enabled
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Hawaii International Conference on System Sciences,
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• Liebenau, J., Elaluf-Calderwood, S.M., 2016.
"Blockchain Innovation Beyond Bitcoin and Banking",
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"Opportunities and risks of Blockchain Technologies in
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sharing economies: an exploration of mutual distributed
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Financial Perspectives 3, (3), pp. 38-69.
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Cash System"
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Framework: What We (don’t) Know, Where We Go from
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services: What blockchain technology can contribute to
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Economy, O’reilly Media Inc.
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beyond: A technical survey on decentralized digital
currencies", IEEE Communications Surveys & Tutorials 18
(3):2084-2123.
• World Economic Forum (Wef), 2018. "Building Block
(chains) For A Better Planet".
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https://www.nytimes.com/2016/04/07/business/dealbook/th
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financial-infrastructure-an-ambitious-look-at-how-
blockchain-can-reshape-financial-services, 2016

Url-3, http://www.economist.com/news/leaders/21677198-
technology-behind-bitcoin-could-transform-how-economy-
works-trust-machine, 2015
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timeline/#prettyPhoto, Alıntı Tarihi: 03.04.2019
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Company.
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Cash System. Retrieved from https://bitcoin.org/bitcoin.pdf
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Foundations of Computer Science 1983, 403-409.
Rivest, R. L., Shamir, A., & Adelman, L. (1978, February).
A method for obtaining digital signatures and public-key
cryptosystems. ACM 21(2), pp. 120-126.

Appendix A
A cryptographic hash (using the SHA-256 algorithm) of
the text of this document:
acfa1ddcce49724dcf8c422fb52fe6510b30bedb32709cc699
b5e0e7b8c91d0d
Even making a minor change in this document (for
example, adding the aforementioned hash to the text)
produces this result using the same algorithm:

74
9cff70c1351e000c8676432c5f1fa629b61da9ec01658a5dfd
5f239313178eb1
There is no known way to reverse-engineer the original
content from the cryptographic hash. Reversing the hash
would be akin to asking: What numbers added together
equal the number 238,284?
Imagine a document consisting of a set of numbers: 05 14
23 46 71 90 Hashing a document is performing a
mathematical operation to them. For example, the sum of
the above numbers is 249. If given the sum, it is impossible
to tell with any degree of accuracy what the original
numbers are. Change one of the numbers, and the hash
changes. Hashing an electronic document is like this,
except the original input is thousands or millions of
numbers, and the mathematical operation is hundreds of
degrees more complicated than a simple summation (e.g.
take the sum, divide by 20, take the square root, add 5, with
200 more steps).
An example of a block in the Bitcoin blockchain:
Block #125552
BlockHash
00000000000000001e8d6829a8a21adc5d38d0a473b144b6
765798e61f98bd1d
# of Transactions 4
Height 125552 (Mainchain)
Block Reward 50 BTC
Timestamp May 21, 2011 1:26:31 PM
Merkle Root
2b12fcf1b09288fcaff797d71e950e71ae42b91e8bdb230475
8dfcffc2b620e3
Previous Block 125551
Difficulty 244112.48777434
Bits 1a44b9f2
Size (bytes) 1496
Version 1
Nonce 2504433986
Next Block 125553

For more technical resources on blockchain technology,

please see:
Garay, Juan, Aggelos Kiayias, and Nikos Leonardos. "The
bitcoin backbone protocol: Analysis and
applications." In Advances in Cryptology-EUROCRYPT
2015, pp. 281-310. Springer Berlin
Heidelberg, 2015.

75
Decker, Christian, and Roger Wattenhofer. "Information
propagation in the Bitcoin network." In Peer-to-
Peer Computing (P2P), 2013 IEEE Thirteenth
International Conference on, pp. 1-10. IEEE, 2013.
Bos, Joppe W., J. Alex Halderman, Nadia Heninger,
Jonathan Moore, Michael Naehrig, and Eric
Wustrow. "Elliptic curve cryptography in practice." In
Financial Cryptography and Data Security, pp. 157-175.
Springer Berlin Heidelberg, 2014.
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic
Cash System. Retrieved from https://bitcoin.org/bitcoin.pdf

Appendix B
Possible Statutory Language for Blockchain
Recognition
The Committee is providing the following language as an
example of what could be considered as an enactment for
providing recognition of the validity of blockchain
approaches for the purposes of establishing the authenticity
of records. The Committee views this as a possible starting
point for the normal processes of legislative drafting.
§11. BLOCKCHAIN ENABLING
(a) In this section, “blockchain technology” means a
mathematically secured, chronological, and decentralized
consensus ledger or database, whether maintained via
Internet interaction, peer-to-peer network, or otherwise.
(b) Presumptions and admissibility:
(1) Extrinsic evidence of authenticity as a condition
precedent to admissibility in a Vermont court is not
required for a record maintained by a valid application of
blockchain technology.
(2) The following presumptions shall apply:
(A) a fact or record verified through a valid application of
blockchain technology is authentic;
(B) the date and time of the recordation of the fact or record
established through such a blockchain is the date and time
that the fact or record was added to the blockchain; and
(C) the person established through such as blockchain as
the person who made such recordation is the person who
made the recordation.
A presumption does not extend to the truthfulness, validity
or legal status of the contents of the fact or record. A
person against whom the fact operates has the burden of
producing evidence sufficient to support a finding that the
presumed fact, record , time or identity is not authentic as

76
set forth on the date added to the blockchain, but the
presumption does not shift to a person the burden of
persuading the trier of fact that the underlying fact or
record is itself accurate in what it purports to represent.
(c) Without limitation, the presumption established in this
section shall apply to a fact or record maintained by
blockchain technology to determine:
(1) contractual parties, provisions, execution, effective dates, and
status;
(2) the ownership, assignment, negotiation, and transfer of
money, property, contracts, instruments, and other legal rights
and duties;
(3) identity, participation, and status in the formation,
management, record keeping, and governance of a business
corporation, nonprofit corporation, partnership, limited
partnership, limited liability company, general cooperative
association, limited cooperative association, unincorporated
nonprofit association, statutory trust, business trust, common-law
business trust, estate, trust, association, joint venture, public
corporation, government or governmental subdivision, agency,
or instrumentality, or any other legal or commercial entity;
(4) identity, participation, and status for interactions in private
transactions and with a government or governmental subdivision,
agency, or instrumentality;
(5) the authenticity or integrity of a record, whether publicly or
privately relevant; and
(6) the authenticity or integrity of records of communication.
(d) The provisions of this section shall not create or negate:
(1) an obligation or duty for any private party, government, or
governmental subdivision, agency, or instrumentality to adopt or
otherwise implement blockchain technology for any purpose
authorized in this section; or
(2) the legality or authorization for any particular underlying
activity whose practices or data are verified through the
application of blockchain technology.

Appendix C
Opinion of and provided by Professor Oliver Goodenough,
Vermont Law School.
There is widespread conviction that blockchain technology is
likely to be a significant contributor to global economic activity
in the near and extended future. There is also a perception,
repeated by several of the reports on the blockchain, that a
clearer institutional structure, including legal recognition, would
help to liberate that activity. As the process of this Committee
has gone forward, we have been contacted by a number of
companies with interest in what Vermont is considering. What is
more speculative is whether or not a move by Vermont to fill this

77
legal void can result in the migration of blockchain-based
economic activity to Vermont. This discussion will first review
the economic potential of blockchain technology as a general
matter, citing news reports, policy analysis treatments, and
reports of investment activity in the field, and will then turn to
the possibilities for economic development in Vermont.
General Economic Potential of the Application of
Blockchain Technology
News Reports
In the last few months, there have been numerous in-depth
evaluations of the blockchain in high-profile and respected news
reports. Perhaps most prominent was the cover story in the
October 31, 2015, issue of the Economist magazine. In both a
lead and a feature article, the Economist enumerated the
potential for the technology to transform any activity where
valid, widely available, record-keeping is an essential element,
and went on to note that this includes many, many aspects of our
economy.
The Wall Street Journal has had a series of articles
describing how companies from major banks to
imaginative start-ups are making serious commitments to
blockchain-based operations. In a July 15, 2015, blogpost,
entitled “Blockchain in the Corporate Environment Has Big
Potential, But Faces Implementation Challenges,” the
Journal describes initiatives such as an experiment by the
NASDAQ to use a blockchain approach in creating a limited
marketplace for trading private securities. The implementation
challenges noted in the article include some technological
aspects, but a principal focus is the lack of a legal framework for
blockchain based transactions:
While it seems technically very likely that Smart Contracts can
be programmed to execute the lifecycle events of a financial
asset, and that those assets can be legally enshrined in computer
code as a smart asset, how are they governed by law?
As noted above, the Vermont statutory initiative being
considered here could provide a potential solution to a portion of
that challenge. The Journal goes on to conclude “assuming these
challenges can be overcome, blockchains present an enormous
opportunity for the world’s banks and financial institutions,
which have moved quickly to make investments in it.” Other
Journal articles describe blockchain exploration and
implementation by a number of financial institutions and
technology companies.
The New York Times has also noted blockchain potential for
driving the next wave of innovation in the financial field. The
summation of the expectations about Blockchain set out in an
August 28, 2015, article “Bitcoin Technology Piques Interest on
Wall St.” is worth quoting in moderate length:

78
“Most people still think of Bitcoin as the virtual currency used
by drug dealers and shadowy hackers looking to evade the
authorities.
But the innovations that helped turn Bitcoin into the most
popular virtual currency are now being viewed as a potentially
enormous disruptive force for several industries, including
accounting, music and law.
Nowhere, though, are more money and resources being spent on
the technology than on Wall Street — the very industry that
Bitcoin was created to circumvent.
“There is so much pull and interest on this right now,” said
Derek White, the chief digital officer at Barclays, the British
global bank, which has a team of employees working on about
20 experiments that explore how the technology underlying
Bitcoin might change finance. “That comes from a recognition
that, ‘Wow, we can use this to change the fundamental model of
how we operate to create our future.’”31
31 http://www.nytimes.com/2015/08/31/business/dealbook/bitcoin-
technology-piques-interest-on-wall-st.html?_r=0
In addition to these “mainstream” discussions, it is worth noting
that there are several subject specific online news sites dedicated
to the blockchain and its sub-topics of bitcoin and other online-
currencies. A partial list includes:
Blockchain - https://blog.blockchain.com/

CoinDesk - http://www.coindesk.com/

The CoinTelegraph - http://cointelegraph.com/

Cryptocoins News - https://www.cryptocoinsnews.com

Policy and Economic Analysis

In addition to this recognition in the press, serious policy
analysis has recognized the potential of blockchain. For instance,
the Bank of England issued a report on blockchain approaches in
its Quarterly Bulletin for the third quarter of 2014. The report
joins the conclusion that the distributed ledger techniques of the
blockchain are “a key technological innovation.” The full report
is available at
http://www.bankofengland.co.uk/publications/Documents/quarte
rlybulletin/2014/qb14q3digitalcurrenciesbitcoin1.pdf
In the Untied States, McKinsey & Company, the widely
recognized business consulting company, very recently
published a working paper analysis of blockchain. The
December, 2015 report was entitled “Beyond the Hype:
Blockchains in Capital Markets.” It joins with other analysis to
predict that blockchain technology will have widespread,
disruptive potential, although it sees the development of
widespread implementation as a process that will stretch over
79
several years. The report calls in several places for industry to
work with regulators to create a strong legal framework for
blockchain use. Again, a recognition statute like that under
consideration could be an important element in providing such a
framework. A copy of this working paper is available at
http://www.the-
blockchain.com/docs/McKinsey%20Blockchains%20in%20Capi
tal%20Markets_2015.pdf
Serious practice resources such as Bloomberg BNA’s
Electronic Commerce & Law Report explore non-financial
applications. Its article “Blockchain Technology
Underpinning Bitcoin Used to Authenticate Documents,
Digital Art” notes that “the blockchain offers promising
solutions for document authentication in legal disputes and for
preventing digital art forgeries.” The piece points out the need
for a legal standard of admissibility, and the limitations of the
current Federal rules to provide this. We note that the proposed
Vermont legislation would help to provide just such a standard.
The article is available at
http://lawprofessors.typepad.com/files/blockchain-article.pdf.
Academic analyses are growing in number. A partial listing can
be found at the Digital Currency Council’s library page at
http://www.digitalcurrencycouncil.com/library/
Investment activity
The commitment of money to a sector is a good read of its value
and helps indicate the scale of activities that Vermont may be
able to take a piece of. As is noted above, many large financial
institutions are making bets of internal investment on blockchain
approaches. In an "Emerging Theme Radar" note sent to its
clients in early December 2015, Goldman Sachs underscored this
spreading enthusiasm:
“While the Bitcoin hype cycle has gone quiet, Silicon Valley and
Wall Street are betting that the underlying technology behind it,
the Blockchain, can change... well everything. 32
32 http://www.businessinsider.com/goldman-sachs-the-blockchain-can-
change-well-everything-2015-12?r=UK&IR=T
33 http://www.coindesk.com/10-vc-firms-bullish-on-bitcoins-potential/.
34 http://cointelegraph.com/news/115595/1-billion-invested-so-far-in-
bitcoin-blockchain-infrastructure.
The world of start-up and venture level investment has also been
hot.” .
The website CoinDesk reported on July 19, 2015:
“With more than $800m so far invested in bitcoin and
blockchain technology startups since 2012, it's safe to say that
venture capitalists are certainly captivated.”

80