Blockchain

Blockchain is a technological platform capable of creating and managing a unique and distributed accounting ledger, relating to transactions of various natures and validated by the platform itself. Its main features are as follows:

• uniqueness: the ledger is unique and authentic for all transactions and all operators;
• independence: its operation is independent of the existence of a central manager, but is governed by the IT system, which is based on the active participation of users and on the sharing of the operating protocol among them;
• irreversibility: the temporal sequence and the content of the transactions cannot be modified;
• traceability: every single transaction can be traced and tracked;
• verifiability: the ledger makes it possible to trace the authenticity of a transaction;
• distributed consensus: the IT system allows individual parties (network nodes) to reach a consensus on distributed registry changes.

Therefore, Blockchain is a shared digital ledger with data structured into concatenated blocks that are maintained intact by using cryptographic techniques. Blockchain-type technologies fall under Distributed Ledgers, that are accessed in read and write mode by multiple nodes participating in the network.

The concept of Blockchain was originally introduced in the context of electronic money systems and cryptocurrencies, particularly Bitcoin (Nakamoto 2009). The name Blockchain derives from the principle of operation of the distributed ledger, which is based on the concatenation (chain construction) of blocks that contain the transactions validated by applying cryptographic algorithms. Unlike a traditional database, data validation is performed by the platform itself and not by a third-party authority. The ledger keeps a copy of every recorded transaction, and in its operation it follows transparent rules that guarantee that the recorded data cannot be altered.

Blockchain participants are a network of “nodes,” computers or servers that participate in it, representing individuals, businesses or entities. It is not necessary for the nodes involved to know each other’s identity. Trust stems from within the platform where, to ensure consistency across copies, the addition of a new block is globally governed by a shared protocol. Once a new block is generated, each node updates the copy in its possession in a process that is natively safe from future manipulation.

In general, the following steps are performed: a subject participating in a Blockchain ledgers with two cryptographic keys (one public and one private); to initiate a transaction (send or receive data or tokens, certify a change of ownership, etc.), the party connects to Blockchain and transmits its data; the network validates the transaction through its cryptographic algorithm; when the transaction is verified and validated, the new transaction can enter a data block; the transaction block is then proposed by a node in the network to be inserted into Blockchain; only after a consensus process distributed among various nodes in the network will block the approval and insertion be established; the duration of the consensus process may depend on the type of Blockchain technology; for example, Bitcoin takes about 10 minutes to reach distributed consensus; the new data block containing the new transactions is added to the existing ones in a chain that contains all validated transactions and is propagated to all nodes.

As mentioned, Blockchain has established itself as the technological platform behind cryptocurrencies, electronic payment systems not guaranteed by a bank or a central authority but coined by the platform itself in a decentralised manner, while validating the electronic register or ledger relating to all the transactions carried out. The validation process is invoked whenever a node has grouped a sufficient number of transactions to create a block, which can then be proposed for inclusion on the ledger by using cryptographic algorithms forming the Blockchain platform that supports the cryptocurrency. At present there are at least 200 cryptocurrencies: the main ones, in terms of market capitalisation, are Bitcoin, Ethereum, Ripple, EOS and Algo.

Increasingly, Blockchain is emerging as a means to manage decentralised services through secure, efficient and scalable solutions. Thanks to its features, Blockchain technologies are considered an alternative, in terms of security, reliability, transparency and cost, to databases and ledgers managed centrally by recognised and regulated authorities (public administrations, banks, insurance companies, payment intermediaries, etc.). Therefore, Blockchain is not only applied in the fintech world, but also affects all of the processes that involve a fair number of parties and that require transparent execution, as well as guarantees on the immutability of data exchanged among the same parties.

Blockchain technology also introduces the concept of Smart Contracts, i.e. the ability to create rules for the automatic processing of data transmitted on Blockchain that can be signed by multiple users. In other words, a smart contract should be understood as a published software program, whose operation can be verified by the parties concerned, and that can be invoked by a participant in Blockchain, thus initiating a process that adds additional conditions to the simple transmission of data to another user: for example, through a smart contract it is possible to check whether the data transmitted is compatible with the reference values, an indispensable condition for the proper completion of a transaction. The possibility of sharing business logics and verifying them in a distributed way, i.e. by guaranteeing that their application has taken place correctly, makes the tool of smart contracts one of the most attractive potentials of Blockchain, especially with a view to interoperability between services that are independent but need to use the same information.

The current global ICT scenario is rapidly transforming and the near future will be marked by the meeting points of the trajectories of several evolving technologies that are destined to profoundly change the digital landscape and beyond. The widespread deployment of Blockchain technologies to support digital services is accompanied by the final establishment of Artificial Intelligence and the explosion of 5G connectivity, which will facilitate the full realisation of the Internet of Things.

In its review of the Digital Single Market, the European Commission recognises Blockchain as a technology of great potential for administrations, commerce and society in general and, therefore, to be developed by following a common approach at European level. In recent years, several Blockchain-related projects have been financed, including a feasibility study on the need to set up a European Blockchain Service Infrastructure (EBSI) to encourage the development of an open, innovative, secure, transparent transactional environment that complies with current European regulations.

2018 saw the creation of the EU Blockchain Observatory and Forum, aiming to map key initiatives in the field, monitor developments in the technology and inspire joint actions on the topic, and the European Blockchain Partnership (EBP), with the purpose of ensuring that Europe as a whole plays a major role in the development and deployment of Blockchain-based solutions.

As in the case of Artificial Intelligence, the Ministry of Economic Development, an active member of the EBP, has set up a group of 30 experts on the subject of Blockchain with the aim of preparing a National Strategy, and has announced investments in research and testing of Blockchain technologies and their applications.

Fondazione Bordoni is intensely engaged, in support of the activities of the Italian Ministry of Economic Development and the Public Administration, in the study and testing of 5G technologies, exploring the potential of Artificial Intelligence, and in the design and management of digital networks and services for the public administration, citizens and the country. Such studies and tests clearly revealed the synergistic role of these new technologies and the need to develop an efficient and secure “distributed trust” infrastructure. To this end, Blockchain technology seems to offer the best guarantees in terms of security, integrity and ownership of the data produced by the Internet of Things.

It is worth noting that the majority of popular Blockchain technologies present solutions that do not always balance scalability, decentralisation and security equally. Being able to guarantee these three aspects simultaneously is considered a technical challenge, also known as the Blockchain trilemma. Considering this technological challenge fundamental to evolve the services based on distributed ledgers, the Foundation studies the solutions that provide the best compromise. Among them it has identified Algorand, the open-source technology developed by Prof. Silvio Micali, international expert in cryptography and computer security, currently Professor at MIT in Boston and winner of the Turing Prize (the equivalent of the Nobel Prize for the computer industry).

In particular, the IT solution adopted by Algorand to manage smart contracts appears to be able to increase the accountability and transparency of the algorithms implemented on Algorand and therefore to guarantee robust solutions for all the digital Public Administration’s needs.

Fondazione Bordoni has already started specific studies and in-depth analyses on Blockchain (Silvio Micali-Algorand-The Truly Distributed Ledger ) and contributes to disseminating knowledge of these technologies with the participation in and organisation of public events (“Blockchain and services: what is the role in Italy for the Public Administration and businesses?” , “Distributed Cloud, Supercomputing, and Web 3.0”)and 1 FUBINAR (“Blockchain and citizen protection”): added to this is the experience that is being gained in the field while conducting experimental projects (Robinson list).

Thanks to these skills, the Foundation provides qualified support not only to the Italian Ministry of Economic Development, but also to other public administrations requiring it.