In the second topic, we are going to talk about how automation in processes is achieved with blockchain technology. In the first part, we will complement the basic concepts of blockchain technology and explore further concepts that considerably expand the areas of application of Blockchain. In the second part, we will look at one use case in detail. The Bitcoin blockchain implements a cryptocurrency and it is customized for applications in the financial sector. The customization also concerns the scripting language of Bitcoin that offers pre-defined actions when a transaction is issued. However, this scripting language is not sufficient to implement complex actions such as the processing of sensor values, the implementation of auction mechanisms or the monitoring of tasks. In contrast, the Ethereum blockchain, a different blockchain platform, provides Solidity, a general purpose programming language, to implement smart contracts. For example, a smart contract could specify that a smart lock should give access to a bicycle only, if the fee for the rent has been payed. The smart contract itself also lives on the Blockchain and is therefore verifiable and immutable too. The Ethereum blockchain was the first blockchain to introduce smart contracts and is part of the second-generation blockchains. This blockchain infrastructure was developed by Vitalik Buterin and his colleagues and it is available since 2015. The native cryptocurrency is Ether. Smart contracts can be implemented to automate processes other than currency exchanges. The Ethereum blockchain is generic, meaning it can be used for all kinds of blockchain applications and is not limited to a specific industry or application area. For example, the slock.it use case involving smart locks to make the process of renting objects easier is being built using the Ethereum blockchain. Smart contracts are the means for the automation of processes. In the use case Blockchain for Education, smart contracts are used to automatically verify digital certificates. Let’s say, a learner has sent several digital certificates to a potential employer who wants to verify their authenticity using a verification service. This service takes as input the digital certificate, calculates its fingerprint and calls a smart contract, which checks if this fingerprint is stored on the blockchain. In the use case Smart Grid the automation of energy trading processes is in the focus. The smart contracts compare energy production and energy consumption and perform auctions to match suppliers and consumers of energy. Smart contracts are also used for the payment of the traded energy. Both the Bitcoin and the Ethereum blockchain use proof of work as a consensus mechanism. This consensus is very difficult to find, but is ideal for permissionless blockchain networks, meaning anyone’s computer can become a node in the blockchain network. Other consensus mechanisms are proof of stake, a lottery protocol or validation nodes, which could increase the performance and therefore the scalability of the Blockchain. However, at the same time, they negatively affect the openness of the blockchain network. For example, if the consensus mechanism is based on explicitly selected nodes, then becoming a node in the blockchain network must be strictly controlled. In summary, Ethereum is a second-generation blockchain that introduced smart contracts, which support general applicability and enable automation of processes. For example, the use case Blockchain for Education automate document verification and the use case Smart Grid automates local energy trading. The selected consensus mechanism influences performance and openness of blockchain networks.
