The Performance, Interoperability and Integration of Distributed Ledger Technologies
Abstract: In the wake of the financial crisis of 2008, Bitcoin emerged as a radical new alternative to the fiat currencies of the traditional banking sector. Through the use of a novel kind of probabilistic consensus algorithm, Bitcoin proved it possible to guarantee the integrity of a digital currency by relying on network majority votes instead of trusted institutions. By showing that it was technically feasible to, at least to some extent, replace the entire banking sector with computers, many significant actors started asking what else this new technology could help automate. A subsequent, seemingly inevitable, wave of efforts produced a multitude of new distributed ledger systems, architectures and applications, all somehow attempting to leverage distributed consensus algorithms to replace trusted intermediaries, facilitating value ownership, transfer and regulation.In this thesis, we scrutinize distributed ledger technologies in terms of how they could help facilitate the digitization of contractual cooperation, especially in the context of the supply chain and manufacturing industries. Concretely, we consider them from three distinct technical perspectives, (1) performance, (2) interoperability and (3) integration. Voting systems, with or without probabilistic mechanisms, require significant time and resources to operate, for which reason it becomes relevant to investigate how the costs of running those systems can be mitigated. In particular, we consider how a blockchain, a form of distributed ledger, can be pruned to in order to reduce disk space requirements. Furthermore, no technical system part of a larger business is an island, but will have to be able to interoperate with other systems to maximize the opportunity for automation. For this reason, we also consider how transparent message translation between systems could be facilitated, as well as presenting a formalism for expressing the syntactic structure of message payloads. Finally, we propose a concrete architecture, the Exchange Network, that models contractual interactions as negotiations about token exchanges rather than as function invocations and state machine transitions, which we argue lowers the barrier to compatibility with conventional legal and business practices.Even if no more trusted institutions could be replaced by any forthcoming distributed ledger technologies, we believe contractual interactions becoming more digital would lead to an increased opportunity for using computers to monitor, assist or even directly participate in the negotiation, management and tracking of business agreements, which we see as more than enough to warrant the cost of further developing of the technology. Such computer involvement may not just save time and reduce costs, but could also enable new kinds of computer-driven economies. In the long run, this may enable new levels of resource optimization, and not just within large organizations, but also smaller companies, or even the homes of families and individuals.
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