Page 72 - Proceedings of the 2017 ITU Kaleidoscope

2017 ITU Kaleidoscope Academic Conference

It is the absence of disruption what really differentiates We can find the first examples of internet-based IT ledgers
DLTs from blockchains. DLTs are decentralized and a little bit later, in the early two-thousands, like in Ohmori
distributed, yes; but are not disruptive since peers in the [4], where the author proposes an Internet accounting
network are permissioned and therefore known. This means system where transactions are entered on the spot and
that blocks do not exist but a ledger of signed transactions business data is created by the distribution of transactions.
instead. In DLTs, the network transforms into a kind of This internet-based IT ledger consists of three elements: a
consortium where controlled participants will sign web structure, an accounting system and database servers.
transactions rather than competing in an open market to The accounting system provides complete accounting
validate and assemble them to create blocks under a “Proof functions including general ledger, accounts payable and
of Work (PoW)” security model (such as in Bitcoin or receivable, purchase and sales order, inventory
Ethereum) or in a “Proof of Stake (PoS)”. Ethereum has management, fixed assets, temporary payment, multi-users,
plans to move to PoS in the near future since it is becoming multi-currencies, multi-companies and multi-languages.
too expensive to use PoW as the network grows. These allow customer and partner relation management,
Both PoS and PoW are consensus algorithms and constitute supply chain management and performance analysis.
the security element in blockchain networks. PoW requires From these two examples, we can identify that in later/
mining in stricto sensu, needing powerful mining hardware internet-based DLTs, data bases were substituted by
and therefore involving huge expenditures of electricity. accountability systems. Current DLTs are still these
PoW hardware and electricity expenses impose a cost on internet-based distributed and decentralized accountability
miners. This is used as means to secure the network and systems.
prevent the so-called “51% attach”, by making it too
expensive for attackers since they would have to gather the 2. WHAT GOT LOST BETWEEN THE FIRST
equivalent of 51% of hardware and electricity power INTERNET AND ITS CURRENT VERSION, AND
sustaining the network to succeed in their attach. On the HOW BLOCKCHAIN WILL BRING IT BACK TO US
other hand, the idea behind PoS is to use deposits of
cryptocurrency to create the disincentive. In PoS, there is Some authors define blockchain as the ‘internet of value’
less hardware involved and subsequently lower electricity [5], or the rewards layer that the internet never had [6].
expenditure but miners have to commit a certain amount of Other authors focus on its social aspect and argue that the
cryptocurrency into a smart contract, in a kind of bond or blockchain can re-decentralize the Internet [7]. It is worth
mining fee. In an eventual 51% attach to a PoS blockchain, elaborating on the later as it will help us to visualize
attackers would have to commit a large amount of their own blockchain’s user empowerment capabilities in comparison
cryptocurrency to succeed, which they would lose forever. with the Internet.
In DLTs, PoW or PoS are meaningless because participants The Internet was conceived as a distributed system (no
know and trust each other. It is therefore not needed to permission should be needed from a central authority to
assemble transactions in blocks. And, the chain is not post anything on the Web), decentralized (there is no third-
necessary either because there is no immutability threat, party managing nodes and so no single point of failure), and
what makes the token-based system of incentives to write universal (this requires all computers involved to speak the
and assemble transactions in blocks, unnecessary. In DLTs same language). Unfortunately, part of the commercial
there are no blocks and there is no chain. But DLTs arrived success that many companies had with the Internet came
long before the blockchain. We find the first DLT examples thanks to avoiding the last two principles of decentralization
in the late nineties whereas the first blockchain arrived in and universality. In this respect, the effects of the
2008 from the mysterious Satoshi Nakamoto. domination of a few companies -thanks to their de facto
In 1999 Liebman [3] publishes an article to explain why US monopolistic position-, does not promote equal access to
Baltimore Gas and Electric (BGE) switched to a pioneering the Internet market place to all IT business participants.
intranet-based IT ledger. This change was to gain control of Furthermore, from a data privacy perspective, each of the
their distributed assets and to reduce costs, both envisioned dominants holds a disproportionate amount of personal
as key strategies to compete in an open market. As information about individuals, threatening our digital
regulated monopoly, the way costs were managed in BGE - sovereignty.
and new IT introduced-, was much different than in other Finally, there is the element of trust. In this monopolistic
companies in competitive markets. BGE representatives environment, when two parties make a transaction, they
explained that the implementation of these in-house have to rely on the dominant central authority to execute the
intranet-based IT ledgers entailed a cultural change, which transaction for them, and surrender to their guarantees about
resulted in a shift to a competitive stance. This was its validity. Additionally, they will have to trust their
triggered by the adoption of novel IT since IT always notification of successful completion and agree with their
responds to market requirements and, secondly, distributed procedures on what to do in case of error. Unfortunately, if
ledgers made everyone in the company more conscious of this central figure fails or gets compromised, the transaction
keeping the costs of implementing and owning these cannot proceed or will go wrongly. Since these issues have
technologies over time and under control. been identified, many voices have been raised advocating
From this early -intranet only- DLT implementation we for decentralization and universality to be brought back to
distil that first DLTs were essentially distributed databases. the Web [5]. The blockchain has the potential to reboot our

– 56 –