Ethereum: Decentralized Applications and Autonomous Organizations


Introduction and motivation

With the rapid development of information technologies, cryptocurrencies have proliferated in recent years, providing people with convenience to trade online. Among others, a new type of cryptocurrency called Bitcoin [1] emerged, which has become the most popular cryptographic digital currency so far. Bitcoin is a decentralized cryptocurrency that provides an open, self-regulating alternative to traditional currencies managed by central authorities such as banks and governments. Bitcoin utilizes an innovative technology that permits users to transfer currency online without relying on any centralized trusted parties. It makes use of cryptographic proofs of work, digital signatures, and a peer-to-peer (P2P) network to preserve a public ledger known as blockchain, which includes the history of all transactions.

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 between the majority of the participants in the system. Once entered, information can never be erased. The blockchain contains a certain and verifiable record of every single transaction ever made. At the point when the block reaches a certain size, it is timestamped and linked to the previous block through a cryptographic hash, thereby forming a chain of timestamped blocks (hence the name blockchain), as depicted in Fig. 1.

Blockchain technology is being successfully applied in both financial and non-financial applications. It has the potential to reduce the role of one of the most important economic and regulatory actors in our society, the middleman. Today, we have a true P2P platform that enables many exciting things without powerful intermediaries or a sovereign government [2]. The blockchain revolution changes the digital world by enabling a distributed consensus and anonymity, where each and every past and present online transaction, involving digital assets, can be verified at any time in the future. In addition, blockchain uses leverages a distributed power that works autonomously without a single point of control, a single party that can shut the system down, and any information stored on a central server, resulting in improved security and availability.

Today’s blockchain is certainly being hyped. Many claim that the blockchain revolution will affect not only our online lives but will profoundly change many more aspects of our society, e.g., the economy, among others. Blockchain lowers the barriers to enter businesses for entrepreneurs and gives the disadvantaged access to opportunities and basic information. It creates platforms for a distributed capitalism, not just a redistributed capitalism. Banks see a more secure and better designed means of clearing transactions. Other industries are more interested in “smart contracts,” which provide the possibility of selling services to customers via the Internet far more simply and efficiently. Meanwhile, blockchain enthusiasts imagine the outsmarting of corporate monoliths by linking buyers and sellers through technology.

Blockchain technology was initially linked to Bitcoin, as it is the main and first application of the network. However, there exist many other use cases and several hundred different applications beside Bitcoin that use blockchain technology as a platform. Ethereum is one of them.

blockchain transaction workflow

Fig. 1. A graphical representation of blockchain transaction workflow [1].


Ethereum

Launched by Vitalik Buterin in 2013, Ethereum [3] is a type of open software platform that runs on blockchain technology. The creation of applications used to be a complex process, requiring advanced skills in programming and cryptocurrency. Ethereum is changing this. Its platform can be used not only as cryptocurrency, but also allows developers to define their complex operations in a way they wish to develop. It enables them to write, distribute, and interact with next-generation decentralized applications (DApps) that may be used in many other fields, while making the process of creating applications much easier and more efficient. It can be used for realizing non-financial blockchain DApps.

In a narrow sense, Ethereum refers to a protocol suite that defines a platform for DApps. At its heart lies the so-called Ethereum Virtual Machine (EVM), which is capable of executing code of arbitrary algorithmic complexity. Ethereum is also "Turing complete." Developers may create DApps using the built-in language Solidty, which is based on existing languages such as Python and JavaScript.

Ethereum includes a P2P network protocol like any other blockchain. The database of blockchain is maintained and updated by many nodes connected to the network. EVM runs on every node of the network. Likewise, the instructions also run on all nodes. That's why Ethereum is occasionally called a "world computer."

The immense parallelization of computing across the entire Ethereum network does not render computation more efficient. Indeed, the parallelization renders Ethereum expensive and slower than a traditional computer. However, given that every Ethereum node runs EVM to maintain consensus across the network, decentralized consensus provides Ethereum with absolute levels of fault tolerance, which in turn ensures zero downtime by removing a single point of failure and making data stored on blockchain censorship-resistant and unmodifiable.

The Ethereum platform is designed to be featureless or value-agnostic. It’s up to entrepreneurs and developers to decide for what purpose it should be used, similar to programming languages. Ethereum is particularly suited for an application that intends to automate direct interaction between peers or facilitate coordinated group action across a network, e.g., applications for P2P market-place coordination or the automation of complex financial contracts. Unlike Bitcoin, Ethereum’s potential goes well beyond financial exchange automation. It may be applied to any kind of non-financial application with security, trust, and permanence requirements, e.g., voting, asset-registries, governance, and IoT.

Ethereum uses blockchain to track its own cryptocurrency called “Ether.” Ether is the digital token used to pay transaction fees and other computational services on the Ethereum network. It is the second most popular cryptocurrency payment method in the world, just behind Bitcoin, and has a market capitalization of 950 million US$. The price of an Ether token is volatile just like other cryptocurrencies, though Ethereum is so much more than simply a digital asset. It was never created to compete against altcoins, but to be something totally unique and different.

Ethereum may be used to codify, decentralize, secure, and trade just about anything: voting, domain names, financial exchanges, crowdfunding, company governance, contracts and agreements, intellectual property, and even smart property thanks to hardware integration. Borrowing the concept of distributed consensus and cryptographic proof that makes cryptocurrencies such as Bitcoin so effective in trustless payments, Ethereum extends the use of these technologies to trustless agreements. This allows developers to easily build innovative new products on a censorship- and collusion-resistant basis. In fact, Ethereum’s technology is only at the beginning of its potential growth stages, possibly extending to dozens of industries and thousands of services.

Decentralized Applications (DApps)

DApps are apps that serve a specific purpose. DApps run on blockchain networks, are not controlled by any central authority, and are not limited to cryptocurrency systems. In fact, any centralized service can be converted into a DApp using Ethereum. As opposed to traditional centralized applications, where the backend code is running on centralized servers, DApps are apps whose server-client models are decentralized. According to the general theory of decentralized applications, DApps are like the web applications we all know. The front-end client part is written with a typical programming language. The real distinction is that rather than using an API interfacing with a database, a smart contract is used to associate with a blockchain network and is hosted on a decentralized storage using an appropriate protocol, e.g., Swarm or IPFS, as illustrated in Fig. 2. DApps have their backend code running on a decentralized P2P network. It has an unlimited number of members from all sides of the market. They are more flexible, transparent, distributed, resilient, and have a better incentivized structure than current software models [4]. For instance, DApps are able to store value inside themselves, as opposed to traditional applications. Another advantage of DApps is the trust that services will not be shut down, as opposed to numerous previous instances when online services have been discontinued to the frustration of their users.

Ethereum is currently an emerging field with a lot of challenges. The platform has been becoming an area for potentially endless different applications across many different services and industries [5]. Examples of currently successful applications running on the Ethereum network are as follows:

Augur: A decentralized prediction market, where users reap rewards by making predictions on events. Anyone may enter and make predictions, e.g., about the winners of political elections. Those who make correct forecasts win monetary rewards. It also allows users to create their own prediction markets, which may ask questions about anything.

BlockApps: This app enables users to build, deploy, and launch DApps quickly, whether private, semi-private, or public industry specific. It provides the easiest way to write, develop, and implement applications, starting from the proof of concept to production and then finally, integrating it onto the blockchain.

Weifund: By using smart contracts this application provides an open platform for crowdfunding. Contributions are converted into digital assets that are stored on the Ethereum blockchain and subsequently may be used, traded, and sold. It helps cut out the fees that traditional online crowdfunding platforms take from contributions.

Provenance: This application helps make supply chains completely transparent. The entire process is available on the blockchain, including the origin of the product. Consumers can access this app and make an informed decision about what they want to buy before making the purchase.

ConsenSys: This app studio is a creation of Joseph Lubin, the co-founder of Ethereum. The app is a portal of products for developers, allowing them to have the correct tools to help them build apps for Ethereum. It enables new service and business models to be constructed on the blockchain.

Given that a DApp is built on the decentralized Ethereum network, it is not owned by a single entity. Instead, it is the outcome of collaboration between all players. This means that it cannot be censored nor removed by anyone.

Recently, big companies like Uber and Airbnb adopted the concept of DApps and decentralized the “real-world” parts of their business by offering a decentralized and reliable data store. They are among the first ones to adopt decentralized solutions. Their decentralized business plan will encourage the development of many more decentralized applications. In fact, as mentioned above, each of these applications tries to rewire the economy using blockchain innovation, thereby bringing us closer to a decentralized world.

DApp

Fig. 2. Illustration of a DApp using blockchain with smart contracts and storage protocols [3].


Decentralized Autonomous Organizations (DAOs)

The most remarkable thing about cryptocurrencies and blockchain might be how they enable a people and organizations on a global level, all acting in their own interest, to create something of immense shared value. Many observers assert that this is a real alternative to current companies. The decentralization, crowd-based technologies of cryptocurrencies, distributed ledgers, distributed consensus and smart contracts are the possibility to fundamentally change the way people organize their affairs and offer a new paradigm for enterprise design. Companies are squarely at the core of modern capitalism, but the core can often be beaten by a technology-enabled crowd [6]. Two recent efforts to substitute a crowd for a company: blockchain technology and Decentralized Autonomous Organizations (DAOs). DAOs are decentralized organizations without a central authority or leader. They operate on programming code that is encoded on the Ethereum blockchain. Like the blockchain, the code of a DAO moves away from the traditional organization by removing any requirement for centralized control and people power. Not even the original developer of the DAO has any extra authority and it runs independently without the need for human intervention. It’s funded by a group of individuals that cover its basic costs and give the funders voting rights rather than any kind of ownership or equity shares. This creates an autonomous and transparent system that will continue on the network for as long as it provides a useful service for its customers.

DAOs exist as open-source, distributed software for executing smart contracts built within the Ethereum project. DAOs are like a decentralized organization, except that artificial intelligence (AI) based autonomous agents make the decisions, not humans. The protocol operates on a decentralized stack and doesn’t need any legal bindings or documents, no managers, and no central server. Humans aren’t in charge, but instead are on the edges. AI is what makes the decisions and the DAO maintains itself, as illustrated in Fig. 3. DAOs aren’t just defined by having AI make all the decisions, they also have their own internal capital.

DAO

Fig. 3. DAOs automate the work of corporate leaders and managers [3].


Today, many feel that the DAO was exactly what was needed to overcome the biases and deficiencies of the core of modern capitalism. It’s a paradigm shift that could offer new opportunities to democratize business. A DAO enables peoples to build and design their own organizations customized to the optimal needs of their mission, vision, and strategy to change the world [6].

Recent progress

Blockchain technologies have been gaining massive momentum, attracting the attention of researchers over the last few years. In [7], the authors introduce a technically detailed survey on blockchain. It takes a data-processing centric view of blockchain technology, treating concurrency issues and efficiency of consensus in blockchain design. Approaching from that perspective, the paper tries to make a connection between blockchain technologies and distributed transaction processing systems. The authors of [8] characterize and analyze some essential features of distributed ledger technologies, including Ethereum. They present security challenges, explore drawbacks, and describe their relationship with the onion router network TOR.

Mining is an important part of blockchain technology as it is what keeps the system functioning and capable of being truly decentralized. Mining in Ethereum uses a proof-of-work protocol. There is no way to cheat the system as it is impossible to fake an answer to the math equation or pretend to have worked. It’s a tight, secure system. Cryptocurrency mining can be said to be the modern alchemy as it transforms electricity into digital gold. The profitability of this largely depends on the total computing power the miners devote to solving the problems. In [9], the authors formulate a model of the dynamics of a queue-based reward distribution scheme in a popular Ethereum mining pool.

Blockchain technologies facilitate many innovative business models that have not been possible previously, e.g. ride-sharing and agri-food supply chain tracing [10]. Due to the highly distributed nature of IoT services, blockchain also attracts the attention of researchers in the IoT domain. The IoT is increasingly becoming a popular technology in both the consumer and enterprise spaces. The vast majority of IoT platforms are based on a centralized model, in which a broker or hub controls the interaction between devices. However, this approach has become impractical in many scenarios, where devices need to exchange data between themselves autonomously. This specific requirement has lead to efforts towards decentralized IoT platforms. The design issues and architectural methods of blockchain-driven IoT (B-IoT) services aren't yet well explored. A developer should design B-IoT services as close to the fully distributed architecture as possible.

Blockchain technology facilitates the implementation of decentralized IoT platforms such as secured and trusted data exchange as well as record keeping. In such an architecture, the blockchain serves as the general ledger, keeping a trusted record of all messages exchanged between smart devices in a decentralized IoT topology [11]. An example of Ethereum based IoT application is the so-called Smart Home System (SHS) [12], which consists of heterogeneous home machines, appliances, and sensors to automate operations like lighting, air conditioning, and surveillance, among others. The homeowner can check every transaction that has been done inside the SHS. Moreover, policies can be set up for handling transactions only by the person authorized to access and monitor data. The paper reviews also the Ethereum blockchain packages for SHS according to its smart contract features for handling access control policy, data storage, and data flow management. Today, many SHS applications in the market exist, including Samsung Smart Things, Google Brillo/Weave, Apple HomeKit, and Amazon Alexa.

IoT devices are often built with connectivity, but not computation in mind. Consequently, IoT networks cannot handle computationally complex consensus algorithms. Proof of Work, the workhorse of cryptocurrencies, demands far too much to be effectively used in IoT. Proof of Stake, variants of it, or entirely different protocols are more likely to be implemented, but none of these have yet seen standard adoption for IoT.

Low power wide area (LPWA) technologies have become popular recently. Among various LPWA technologies, Narrow Band IoT (NB-IoT) and long range (LoRa) are two main leading competitive technologies. Unlike NB-IoT networks that are mainly built and managed by mobile network operators, LoRa wide area networks (LoRaWAN) are mostly operated by private companies or organizations, which may bring trust issues between IoT applications and network operations. In [13], the authors propose to create a blockchain technology based solution in order to build an open, trusted, decentralized proof of concept to enable low-power, resource-constrained IoT end-devices to access a blockchain-based infrastructure. To achieve this aim, an IoT gateway is configured as a blockchain node and an event-based messaging mechanism for low-power IoT end-devices is proposed. A demonstration of the system is realized by using LoRa nodes and a gateway in a private Ethereum network.

Research challenges

Up to now, most research on Ethereum has been focusing on the IoT. Now it is time to go beyond IoT and enable human presence in the age of the Tactile Internet. While IoT opened up many opportunities for automation for a wide array of Internet-enabled gadgets, the Tactile Internet aims at reclaiming and increasing human presence in robotics and state-of-the-art remote control technology. The Tactile Internet enables haptic feedback by delivering physical sensations in real time and networked control systems, which work in such an intertwined and immediate way that highly dynamic processes can be automated or controlled remotely.

This is possible thanks to the key feature that distinguishes the Tactile Internet from its predecessors, namely, the increased availability of high-speed connections via mobile Internet with a very low end-to-end latency on the order of 1-10 ms. This aspect is crucial as it eliminates waiting times between a human user and a tele-operated robot imitating the movement for remote uses such as tele-surgery.

It is helpful to compare the Tactile Internet to the IoT and 5G mobile networks and elaborate on their commonalities and subtle differences. For illustration, Fig. 4 provides a view of the aforementioned commonalities and differences through the three lenses of IoT, 5G, and the Tactile Internet. The major differences may be best expressed in terms of underlying communications paradigms and enabling devices. IoT relies on machine-to-machine communications (M2M) with a focus on smart devices (e.g., sensors and actuators). In co-existence with emerging M2M or machine type communication (MTC), 5G will maintain its traditional human-to-human (H2H) communications paradigm for conventional triple-play services (voice, video, data) with a growing focus on the integration with other wireless technologies and decentralization. Conversely, the Tactile Internet will be centered around human-to-machine (H2M) communications leveraging tactile/haptic devices [14]. More importantly, despite their differences, IoT, 5G, and the Tactile Internet seem to converge toward a common set of important design goals:

  •     Very low latency on the order of 1-10 ms
  •     Ultra-high reliability with an almost guaranteed availability of 99.999 percent
  •     H2H/M2M coexistence
  •     Integration of data-centric technologies with a particular focus on WiFi
  •     Security


lenses

Fig. 4. The three lenses of IoT, 5G, and the Tactile Internet: Commonalities and differences [14].


In this project, we study several key research challenges related to Ethereum and the Tactile Internet:

Decentralized transactions: The decentralized transaction model of Ethereum blockchain technology fosters trust among transactions without requiring any intermediary. However, the potential shift to decentralized trust transactions on a large-scale basis for every sort of interaction and transaction (human-to-human, human-to-machine, machine-to-machine) may imply a dramatically different structure and operation of society in ways that cannot yet be foreseen, where currently established power relationships and hierarchies could easily lose their utility.

Trust: Ethereum blockchain technology allows for the creation of decentralized trust and reliance between two or more parties in the form of storing, moving, and managing value in such a way that the existence of huge governmental systems will be dispensable in the future. The technology itself is a distributed database that maintains a list of all transactions and grows continuously over time.

Interoperable communications: The ability of machines, devices, sensors, and human end-users to connect and communicate with each other via a highly tactile network of communications ensures quasi-real-time exchange of information and decisions, even if network resources are shared among mobile virtual network and service operators.

Decentralized decisions in Tactile Internet: The ability of cyber-physical systems to make decisions on their own and perform their tasks as autonomously as possible holds great promise. A significant amount of attention has been paid to multi-agent systems, where autonomous agents, robots, and smart things participate in business processes among people. Only in the case of exceptions, interferences, or conflicting goals, tasks are delegated to a higher level. To achieve a valuable outcome, decentralized architectural and technological solutions will need to be deployed. In [15], the authors provide an architectural solution for devising a business activity protocol for multi-agent systems. They also reviewed Ethereum blockchain technology and smart contracts as potential candidates for organizing a communications network for autonomous agents.

Research directions

The combination of Ethereum and Tactile Internet can be very powerful solution. Ethereum blockchain enables resilient, truly distributed systems to interact with peers in a trusted and auditable way. Smart contracts help automate complex multi-step processes. The devices in the Tactile Internet ecosystem are the points of contact with the physical world. When every one of them is combined, automated time-consuming workflows become possible in new and unique ways, thereby achieving cryptographic verifiability as well as significant cost and time savings.

Starting with a technical survey of Ethereum blockchain in the context of the emerging Tactile Internet, the project breakdown is as follows:

  •     Studying challenges to build and implement a distributed P2P architecture for the Tactile Internet based on Ethereum blockchain technologies
  •     Studying the potential of Ethereum to coordinate interaction between humans, machines, and smart contracts
  •     Developing decentralized and autonomous control systems for Tactile Internet applications
  •     Reinforcing trust in Tactile Internet-based Ethereum platforms


We believe that the integration of Ethereum and the Tactile Internet will lead to huge transformations across several industries, bringing about new business models and having us reconsider how existing systems and processes in our economy and society are implemented in a more decentralized fashion.

Researchers

Graduate Student
  •     Abdeljalil Beniiche

Advisor
  •    Prof. Martin Maier

References

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[2]
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[3]
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