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Thematic Report1Scalability, interoperability and sustainabilitya thematic report prepared byTHE EUROPEAN UNION BLOCKCHAINOBSERVATORY some of these applications and services could be made available to end users via some of app store or marketplace. A plat presentation layer, consisting of consoles, dashboards, and development environments made available to developers, institutional users, auditors and regulators. A middle layer of services, callable by the above layers via APIs by entities and users who have the required permissions. Such services would include core APIs for reading/writing data onto the various blockchains and databases, as well as shared utilities such as identity, interoperability bridges, event listeners and oracles, and perhaps even a payment infrastructure. A plat management layer, consisting of a registry of networks and participating nodes/servers and users as well as their respective permissions, as well as various monitoring tools. A blockchain and database layer, containing the actual blockchain with the chosen consensus mechanism as well as any ancillary databases. A marketplace of templates, consisting of a menu of images of machines and containers that can be selected and deployed by institutional users to create as many servers/nodes as they see fit, including blockchain clients, and other technology stacks such as databases, web servers and others. A cloud infrastructure, in which institutional users can select and deploy as much computing and storage power as they need for their respective application.Thematic Report20Scalability, interoperability and sustainabilityRecommendationsOur purpose in writing this paper has been to shed some light on the “potential future states” of blockchain infrastructure and plats in Europe assuming large-scale adoption, and to examine the characteristics for success in getting there, as far as they can be ascertained at this time. As we hope we have been able to show, it is indeed an interesting moment for the blockchain ecosystem and industry in Europe, as a number of large projects are beginning to go live and attracting large user bases. While this is encouraging, there are still many challenges – both technical and organisational – that need to be surmounted. We believe there is a role for policy makers to help support the industry in meeting these challenges, and the good news is that the EU has already shown a clear intention to do so. In this last section, we offer a few concrete recommendations for policy makers to help continue the momentum. Standards. Today if we want to go in the direction of multi-layered interoperable ecosystem of blockchains, both policy makers and the blockchain industry, ideally working together, should prioritise the development of standards. Among these, we think the most important will be standards for digital identities in a blockchain context, and for interoperability between blockchains. Research. It is no secret that research is an important element to the success of blockchain. Currently the EU is active in supporting blockchain research in a number of ways, from the EU Blockchain Observatory the technology has not proven its usability to transfer ination. Thematic Report27Scalability, interoperability and sustainabilityAppendix Blockchain TerminologyWhat is a blockchain Blockchain is one of the major technological breakthroughs of the past decade. A technology that allows large groups of people and organisations to reach agreement on and permanently record ination without a central authority, it has been recognised as an important tool for building a fair, inclusive, secure and democratic digital economy. This has significant implications for how we think about many of our economic, social and political institutions.How does it work At its core, blockchain is a shared, peer-to-peer database. While there are currently several different kinds of blockchains in existence, they share certain functional characteristics. They generally include a means for nodes on the network to communicate directly with each other. They have a mechanism for nodes on the network to propose the addition of ination to the database, usually in the of some transaction, and a consensus mechanism by which the network can validate what is the agreed-upon version of the database.Blockchain gets its name from the fact that data is stored in groups known as blocks, and that each validated block is cryptographically sealed to the previous block, ing an ever-growing chain of data. Instead of being stored in a central location, all the nodes in the network share an identical copy of the blockchain, continuously updating it as new valid blocks are added.What is it used for Blockchain is a technology that can be used to decentralise and automate processes in a large number of contexts. The attributes of blockchain allow for large numbers of individuals or entities, whether collaborators or competitors, to come to consensus on ination and immutably store it. For this reason, blockchain has been described as a ‘trust machine’.Thematic Report28Scalability, interoperability and sustainabilityAPPENDIX BLOCKCHAIN TERMINOLOGYThe potential use cases for blockchain are vast. People are looking at blockchain technology to disrupt most industries, including from automotive, banking, education, energy and e-government to healthcare, insurance, law, music, art, real estate and travel. While blockchain is definitely not the solution for every problem, smart contract automation and disintermediation enable reduced costs, lower risks of errors and fraud and drastically improved speed and experience in many processes. GlossaryThe vocabulary used in the context of blockchains is quite specific and can be hard to understand. Here are the essential concepts you should know in order to navigate this breakthrough technology Node A node is a computer running specific software which allows that computer to process and communicate pieces of ination to other nodes. In blockchains, each node stores a copy of the ledger and ination is relayed from peer node to peer node until transmitted to all nodes in the network. Signature Signing a message or a transaction consists in encrypting data using a pair of asymmetric keys. Asymmetric cryptography allows someone to interchangeably use one key for encrypting and the other key for decrypting. Data is encrypted using the private key and can be decrypted by third-party actors using the public key to verify the message was sent by the holder of the private key. Transaction Transaction are the most granular piece of ination that can be shared among a blockchain network. They are generated by users and include ination such as the value of the transfer, address of the receiver and data payload. Before sending a transaction to the network, a user signs its contents by using a cryptographic private key. By controlling the validity of signatures, nodes can figure out who is the sender of a transaction and ensure that the transaction content has not been manipulated while being transmitted over the network. Hash A hash is the result of a function that transs data into a unique, fixed-length digest that cannot be reversed to produce the . It can be viewed as the digital version of a fingerprint, for any type of data. Block A block is the data structure used in blockchains to group transactions. In addition to transactions, blocks include other elements such as the hash of the previous block and a timestamp. Smart contract Smart contracts are pieces of code stored on the blockchain that will self-cute once deployed, thus leveraging the trust and security of the blockchain network. They allow users Thematic Report29Scalability, interoperability and sustainabilityAPPENDIX BLOCKCHAIN TERMINOLOGYto automate business logic and therefore enhance or completely redesign business processes and services. Token Tokens are a type of digital asset that can be tracked or transferred on a blockchain. Tokens are often used as a digital representation of assets like commodities, stocks and even physical products. Tokens are also used to incentivise actors in maintaining and securing blockchain networks. Consensus algorithm Consensus algorithms ensure convergence towards a single, immutable version of the ledger. They allow actors on the network to agree on the content recorded on the blockchain, taking into consideration the fact that some actors can be faulty or malicious. This can be achieved by various means depending on the specific needs. The most famous consensus algorithms include proof-of-work, proof-of-stake and proof-of-authority. Validator nodes Validator nodes are specific nodes in a network that are responsible for constituting blocks and broadcasting these blocks with the network. To create a valid new block they have to follow the exact rules specified by the consensus algorithm. Learn more about blockchain by watching a recording of our Ask me Anything session.
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