14 Economy Informatics vol. 19, no. 1/2019

Block-Cloud: The new paradigm of

Dan-Cristian CEARNĂU The Bucharest University of Economic Studies, Bucharest, Romania [email protected]

Distributed Ledger Technology (DLT), also known as „”, represents a new paradigm in how applications are designed and built. Even though the blockchain emerged as a consumer-focused technology (form Bitcoin), it’s adoption in the enterprise environment has increased dramatically in the last years. The user’s focus on privacy, security and transparency has motivated corporations to invest in distributed applications throughout their structure and operations. The main frameworks for enterprise blockchain solutions are coming from well established IT&C corporations like (partnership with Ethereum), IBM (Hyperledger Fabric), JP Morgan (Quorum) and others. The blockchain technology is pretty new, and it cannot fully replace legacy centralized cloud-based solutions. The scalability issue of DLT is well-known, as the most advanced blockchain technologies can only process a few hundred transactions per second. This is nowhere near the speed of Visa’s payment system that can process more than 2000 transactions per second. Keywords: Blockchain, Cryptocurrency, Cloud computing, Block-cloud, Blockchain-as-a- Service (BaaS) DOI: 10.12948/ei2019.01.02

Introduction and a lower level of confidence. The 1 In the human evolution, the man evolved advantages of this technology, coupled with alongside society in a series of revolutions another relatively modern development (as an that led to great improvements on all domains: implementation, not as a concept) of ICT, cultural, social, industrial, etc. Today we are namely cloud computing, are now leading to living what futurologist as Alvin Toffler in increasingly spectacular solutions in the “Future Shock” and more recently Michael digital economy, electronic money, e- Dertouzos in “What Will Be: How the New Government, or electronic citizen (e-citizen). World of Information Will Change Our In this paper we will be able to deal with the Lives” anticipated more than 20, respectively impact of the two technologies in the context 50 years ago. They imagined a world in which of the digital economy, materialized in at least the information technology is based on two paradigms: Blockchain learning. (BaaS) and Blockchain as a Cloud (BaaC). Today, technological singularity is no longer just a concept, it’s a reality. The technical and 2. Cloud Computing scientific progress that has materialized in real According to NIST (National Institute of revolutions has recorded not only a one-way Standards and Technologies), cloud amplification movement, but perhaps even an computing is an advanced calculation model acceleration. Today, on the 30th anniversary for convenient, on-demand and remote access of the World Wide Web, Information and over the to a configurable set of Communication Technology (ICT) has shared resources (networks, servers, external become not only a neo-factor of production memory, services). These resources can be for most businesses but the indispensable delivered quickly with minimal administrative factor of any activity. This is the context in effort and minimum interaction with the which a new technological revolution - the provider. There are three basic cloud models Blockchain revolution - takes place in the face [1]: of an "apparent financial crisis" in 2008-2009

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IaaS (Infrastructure as a Service) is the lowest most participants in the system. Once entered, level of abstraction. The user is provided with the information cannot be deleted. The block complete computing infrastructure contains a secure and verifiable record of each (processors, memories, storage space, transaction ever made (figure 1). To use a bandwidth, servers) in the form of a virtual basic analog, it's easy to steal a cookie from a machine. These virtual machines are created cookie jar kept in a secured place rather than on demand and destroyed when they are no stealing the cookie from a cookie jar kept in a longer needed by designated agents market, of thousands of people. There are and hypervisors. Customers can allocate their three different types of blocks: own resources using Ucloud Middleware • public: such as Bitcoin, are large Programs or cloud management systems distributed networks that run through a (CMS). Examples are Web Services native symbol. They are open for anyone EC2, Compute Engine, to participate at any level and have an VMWarevCloud. open source code that the community PaaS () is an maintains. intermediate level. Platforms are built on IaaS • permission: such as Ripple, control roles foundations and are offered to customers that individuals can play on the network. along with development tools and There are still large and distributed environments. Examples are , systems that use a native token. Their , and Apache. basic code may or may not be open source. SaaS () is the top level, • private: tend to be smaller and not use a application level closest to the average user. token. Applications are web and are usually accessed Their belonging is closely controlled. These through web browsers. They can be mail, types of blocks are favored by consortiums collaborative, office, file storage applications. that trust members and trade confidential Examples can be Oracle, , information. All three types of blocks use Microsoft, Google, Yahoo, . cryptography to allow each participant in any given network to manage the registry in a safe 3. Blockchain way without the need for a central authority to A blockchain is basically a distributed impose rules. The removal of the central database of records or a publication of all authority from the database structure is one of transactions (digital events) that have been the most important and powerful aspect of the executed and divided between the blocks [2]. participating entities. Each transaction in the public register is verified by the consensus of

16 Economy Informatics vol. 19, no. 1/2019

Fig. 1. Blockchain, connection structure (adaptation from [8])

As a peer-to-peer network combined with a by a mysterious person known only by the time-sharing server, the blockchain databases nickname Satoshi Nakamoto. Unlike the can be managed autonomously to exchange traditional currencies issued by central banks, information between disparate parts. There is the bitcoin has no central monetary authority. no need for an administrator, blockchain users No one controls it. Bitcoins are not printed as being the administrator. In addition, dollars or euros; they are "mined" by people blockchain networks can be used for "smart and more and more by businesses that run contracts" or for scripts that run automatically computers around the world using software when certain conditions are met. For example, that solves mathematical puzzles. Instead of Ethereum users must meet pre-established relying on a central monetary authority to conditions that prove someone owns a certain monitor, verify and approve transactions and token and have the authority to send the manage money, bitcoin is activated by a money that they claim to have. Multiple computerized computer network made up of blockchain users can create contracts that its users' machines, similar to the underlying require more than one set of entries to trigger BitTorrent and Skype networks. Bitcoin has a transaction. For example, real estate several advantages over other current transactions require signatures between transaction systems [3]: buyers, sellers and their financial institutions. • Cost: bitcoin removes the need for a middle-man; 4. Bitcoin • Efficiency: transaction information is Bitcoin is the most popular example that is recorded once and is available to all intrinsically linked to blockchain technology, parties through the distributed network; being virtually the first cryptocurrency from • Secure: a transaction cannot be changed; the digital financial market. It is also the most this can only be reversed with another controversial, as it helps create a multibillion- transaction, in which case both dollar global anonymous transaction market transactions are visible. without any government control. Therefore, it Bitcoin is actually built on the blockchain has to deal with a series of regulatory issues foundation, which serves as a common bitcoin involving national governments and financial registry. Think of the blockchain as an institutions. As I said, bitcoin is a digital coin operating system, such as Microsoft Windows launched in 2009, amid a deep financial crisis,

Economy Informatics vol. 19, no. 1/2019 17 or MacOS, and bitcoin as just one of the many allow manufacturers to divide production applications that can be run on that operating houses with original equipment manufacturers system. Blockchain provides the means to and regulators to reduce product withdrawals. record bitcoin transactions - the shared Bitcoin and blockhain are not the same. registry - but this common registry can be Blockchain provides the means of recording used to record any transaction and track the and storing bitcoin transactions, but the movement of any items, whether tangible, blockchain has many uses beyond bitcoin. intangible or digital. Bitcoin is just the first case of use for the For example, the blockchain allows securities blockchain. The electronic coin used in to be capitalized in minutes rather than days. bitcoin consists of an electronic signature It can also be used to help companies manage chain (figure 2). the flow of goods and related payments, or

Fig. 2. A Bitcoin transaction (adaptation from https://bitcoin.stackexchange.com/questions/10279/explainations-about-chaining-of-transactions)

The cryptocurrencies of an owner are of the entire transaction history. Every node transferred to the next chain with the hash on the network stores a copy of this history. value of the previous transaction, and the Ethereum is a distributed computing system electronic signature is passed to the public key that enables decentralized applications (or of the next owner. The addressee can check Distributed Applications called DApps) tor un the signature to confirm the property chain. In on a decentralized, trustless environment. this process, there is a problem: the recipient Contracts written in a smart contract-specific is not able to ensure that one of the owners has programming languages are compiled into not used the currency (s) several times. A 'bytecode', which a feature called the reliable central authority is introduced to 'ethereum virtual machine' (EVM) can read verify all dual-use transactions to resolve this and execute. All the nodes execute this issue. contract using their EVMs. Every node in the network holds a copy of the transaction and 5. Ethereum smart contract history of the network, in Ethereum idea was first drafted in 2013 by addition to keeping track of the current 'state'. Vitalik Buterin, a software developer that was Every time a user performs some action, all of involved in the bitcoin community. The the nodes on the network need to come to structure of the ethereum blockchain is very agreement that this change took place. similar to bitcoin's, in that it is a shared record

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The ethereum platform is built with a Turing- creation of cyber-free areas. This includes 24- complete language that is functionally hour monitoring and proactive identification different from Bitcoin. Any system or of suspicious activities and real-time response programming language able to compute to such threats. Both cloud and blockchain anything computable given enough resources significantly reduce costs. Blockchain, as well is said to be Turing-complete. It can simulate as cloud, avoids potential design a computer and is said to be the most inefficiencies from its processes. expressive. Bitcoin, for instance, is not Turing Before companies such as Amazon could complete as it only provides a very simple provide cloud services, the storage mechanism to distribute money. Ethereum, infrastructure was very decentralized. the so-called “World Computer”, allows rules Companies hosted their own servers in their to be written in any way that can be expressed own offices. This has allowed greater control by code and enables smart contracts. but also higher costs. Companies need internal Running Distributed Applications (DApps) expertise to configure and maintain costly on the blockchain also offers added security servers and units. They also had to invest in benefits. Since the transactions are distributed backups outside the redundancy space. It is no and encrypted across the Ethereum surprise that most organizations have gone to blockchain, there is no central place for a the cloud. At about $ 25 per terabyte a month, hacker to breach and gain access. services such as the Amazon S3 offer Ethereum is probably the most complex incredible value and, by replicating data blockchain system ever implemented because across multiple data centers, provide you with it has it’s own programming language in reliable time and redundancy. This which a very broad range of functionalities convenience has blinded us from the can be implemented. disadvantages. When we use a cloud service, we put tremendous confidence in third parties. 6. Blockchain vs. Cloud We trust these third parties to ensure our most Cloud technologies are the blockchain's sensitive and most private data. These data are predecessors, and developers who offer usually unencrypted. Moreover, costs seem innovations in this area should also take small, but that's because we do not have a account of blockchain opportunities. good point of reference. Blockchain private networks could be run in A blockchain allows the creation of a cloud security environments, which could decentralized and distributed storage market. therefore play a key role in blockchain The most successful markets identify implementations. At the same time, the cloud insufficient resources and meet the growing and the blockchain have so many common demand. Uber, for example, corresponded to issues that the deployment of cloud underused cars, and consumers demanded blockchain pilot projects would ensure that better transport options. On a block storage many of their advantages are put into motion market, hosts sell their storage capacity in one shot [4]. excessively, and tenants acquire this surplus Cloud and blockchain have security capacity and upload files. The files are protection systems, allowing total data encrypted, fragmented and intelligently encryption. The ability of cloud deployment distributed in dozens of nodes. Using a jam models to explicitly address private, allows a few things that were previously community, and public scenarios fits perfectly impossible: complete decentralization and with the nature of the blocks, driven by true redundancy. Amazon S3 performs dedicated chain design members. Both are redundancy by distributing files to regional resistant to cybercrime. Blockchain qualifies data centers. for this because of its peer-to-peer model, This makes each an important while cloud is shielded from efficiently point of failure. In a decentralized block, evolving and actively contributing to the where data is stored on dozens of individual

Economy Informatics vol. 19, no. 1/2019 19 nodes, intelligently disposed across the globe, business processes - and is supported by a it is extremely difficult to cause significant cloud platform with the industry's highest disturbances. Total security. No third party compliance portlet. controls user data or has access to user files. IBM () - In February 2017, IBM Each node stores only encrypted user data announced that it would offer Blockchain as a fragments. service using Hyperledger. "With the help of the new IBM blockchain services available on 7. Blockchain as a Service (BaaS) Bluemix, developers can access fully Blockchain is a transformation technology integrated DevOps tools for building, with the potential to expand digital deploying, running and monitoring transformation beyond the walls of a company Blockchain applications on IBM Cloud." and into the processes it shares with vendors, Hyperledger is an open source collaboration customers and partners. At its center, a block effort designed to promote breakthrough is a data structure used to create a digital technologies like blockchain. It is a global transaction log, which, instead of resting at a collaboration hosted by the Linux Foundation, single provider, is shared between a including leaders in finance, banking, IoT, distributed network of computers. The result supply chain, manufacturing and technology. is a more open, transparent and verifiable These 130+ members and 8 ongoing projects, system that will fundamentally change the including Hyperledger Fabric and way we think about exchanging values and Hyperledger Composer, work together to assets, imposing contracts and exchanging create an open and standardized framework data. for businesses and the code base. An increasing number of businesses invest in Amazon (AWS) - In May 2017, Amazon blockchain as a secure and transparent way of announced a collaboration with the Digital digitally tracking property ownership over Currency Group, one of the largest investors assets beyond the confines of confidence. in blockchain companies. The deal will They are redesigning shared business provide Blockchain-as-a-Service to DCG processes, and create new cross- portfolio members so they "can work in a organizational collaboration patterns . Many secure environment with customers including of the cloud leaders have seen the potential financial institutions, insurance companies, benefits offered to customers by Blockchain and enterprise technology companies." AWS as a service (BaaS) and have begun to provide collaborates with financial institutions and a certain level of BaaS capabilities [5]: blockchain technology suppliers to stimulate Microsoft (Azure) - In November 2016, innovation and facilitate seamlessly Microsoft gave the first shot. They have experimentation. Scott Mullins, head of the announced a partnership with ConsenSys to financial affairs development department provide Blockchain Ethereum as a Service worldwide, said, "DCG is a recognized leader (EBaaS) in the Azure environment. in distributed blockchain technology and we Delivering the service will allow "customers are delighted to work with them and with and partners to play, learn and succeed at a portfolio companies to provide laboratory low cost in a dev / test / production ready environments for enterprise experimentation production environment," says Marley Gray, with blockchain technology on AWS ". Microsoft Cloud and Enterprise. As an open, flexible and scalable platform, Azure supports 8. Blockchain-as-a-Cloud a growing number of distributed technologies Blockchain is a "thin cloud," compared to a that meet the specific business and technical traditional cloud computing infrastructure, requirements for security, performance and and is therefore more suited to running new operational processes. Azure provides a fast, types of "thin" programs, specifically called low-cost and low-risk platform for "smart contracts," which are the logic of collaborating organizations experiencing new business executes on blockchain virtual

20 Economy Informatics vol. 19, no. 1/2019 machines (VM). Blockchain infrastructure most important technologies that have seen does not replace cloud computing. It separates widespread adoption have and democratizes certain parts of it. been virtualization and Bitcoin. Moreover, the blockchain infrastructure Virtualization paved the way for cloud resembles a cloud computing infrastructure computing and the Bitcoin protocol has the layer. When running a cloud application (for potential to reinvent finance using example, or Microsoft cryptographic building blocks called Azure), it will be billed for a combination of . time, storage, data transfer, and computing The existing cloud infrastructure will play a speed requirements. The innovation with the vital role in deploying and maintaining the cost of the virtual machine (for example, on private blockchain solutions. Cloud Ethereum) is that it pays to run business logic infrastructure providers are provide on the blockchain that actually runs on blockchain solutions with critical components physical servers, but you do not have to worry like: about setting them up because they are ü Network – The cloud infrastructure managed by others users who are paid for providers have access to large bandwidth running the infrastructure [6]. network connections. This enables blockchain Therefore, Blockchain Cloud has a form of solutions to scale and be used by more users pricing model at micro-value, which is and processes. parallel to the traditional cloud computing ü Using machine learning alghorithms and stack, but with a new layer. But here is the other services that are already available using challenge to run applications on this new the cloud platforms, developers can rely on infrastructure: something needs to be done. the scalability and reliability of the system This work comes in the form of adhering to a ü Storage – is a very popular new paradigm of decentralized applications service that already exists on the market for following a new architecture created by Gavin more than a decade. Using Storage-as-a- Wood as "web3". Web3 is an architecture that Service, cloud companies can provide storage runs specifically on blockchain. Using capacity on demand, thus enabling blockchain Ethereum as a primary example, a web3 application developers to focus on building architecture includes an advanced client processes and logic components that deliver browser, blockchain register as a shared new features. Large cloud providers also offer resource, and a virtual computer network more efficient and cheaper storage solutions, running smart business logic programs in a duet o their partnership with hardware decentralized manner [7]. This new paradigm manufacturers. [9]. exemplifies the future direction of • Building a BlockCloud decentralized cryptographic computerization. Access management, transfer and transactions It is a variant of the existing Web application operated on the stored data are managed by architecture, which consists of running the blockchain application. By distributing the JavaScript inside the browsers and the server access rights, blockchain solutions enable the code running on the company's servers. creation of a secured and transparent system of data acess and manipulation. A BlockCloud 9. Block-Cloud: Redefining Cloud solutions system offers the traceability needed for cloud using Distributed Ledger Technology providers to offer solutions that enables their (DLT) customers to easily track the usage of all Larry Parallelogram, CEO of Avogadro resources stored in their system. Even a modes Corporation, the world’s largest computing PetaByte cloud needs to process billions of company, recently announced that they have transactions every second. These transactions completed the migration of all mission critical need to be added to the blockchain system and processes to Avogadro’s compute platform, then processed distributed using the nodes. BlockCloud. Over the last ten years two of the The requirements regarding the network,

Economy Informatics vol. 19, no. 1/2019 21 storage, and processing power makes this systems. There are solutions to reduce energy almost impossible. consumption. For example, at Rutgers • Building a BlockCloud University, in New Jersey, the researchers One of the most valuable innovations brought designed a data center that is placed on the by the Distributed Ledger Technology (DLT) roof of the building and is fully powered by is the transparency of the system. Processes solar energy. that are executed on a blockchain Qarnot Computing designed a product named infrastructure can be traced starting from the Q.Rad. The system is a heater that uses high- entry point of the data, to the manipulation and performance processors as a heat source. exit points. The blockchain can be used as an Q.Rad are installed in each room of a house, audit tool for existing cloud infrastructure. and the heat produced by the system is used Access logs, instructions as well as data by the residents of that house. The system is management can be distributed to multiple processing computing tasks provided by the nodes in the system, providing both Qarnot Cloud infrastructure. By relaxing transparency and trust to clients using the access to systems like this, a cloud cloud platform. infrastructure provider could drastically • Cloud-based Blockchain reduce the carbon footprint of this system. Comparing Cloud-based Blockchain solution With the adoption of the smartphone, a large to legacy cloud systems, they offer limited number of devices suddenly started to hit the resources for running distributed applications. cloud infrastructure. This new load needs to A few KB of storage, a very inneficient virtual be addressed and cloud infrastructure needs to machine and a protocol with a big latency. Of grow rapidly. At CES 2015, Intel's CEO Brian course, these blockchain technologies will Krzanich announced SoC "Curie", a Quark (2 evolve in order to overcome some of these Ghz) processor on 32 bits, Bluetooth, flash issues and deliver the performance needed for memory and RAM. This platform will enable live applications. IoT devices to be easily developed, and Cisco The research for providing more accessible, estimates that by 2020 there will be more than secure and stable access to computing power 50 billion IoT devices connected to the is going-on for many years. A distributed existing cloud infrastructure. cloud solution will enable access on-demand, We are now entering a new era in which with reduced costs and improved security and distributed infrastructure solutions need to transparency.There are 3 main reasons for embrace new devices in order to provide which a distributed computing infrastructure efficient processing of their computational would challenge the existing providers of tasks. HPC, Cloud and Big Data. HPC and Cloud Cisco introduced its fog computing vision in Computing are too expensive and complex, January 2014 as a way of bringing cloud especially for small enterprises.There are computing capabilities to the edge of the opportunities to reduce the cost associated network and as a result, closer to the rapidly with the usage of the cloud infrastructure. growing number of connected devices and Distributing access as well as enabling users applications that consume cloud services and to share their computing power to a cloud generate increasingly massive amounts of infrastructure will increase the adoption and data. drive down the overall cost of the system. Microsoft added Blockchain-as-a-Service The distributed cloud solutions will open new (BaaS) on the Azure platform. Microsoft also markets to share the existing infrastructure signed a partnership with a consortium of between providers as well as to individuals more than 40 banks, including Goldman that are willing to share their personal Sachs. These financial institutions received computing power. Data centers are power access to Azure and resources from Microsoft hungry, they require a large quantity of energy in order to develop and deploy their own in order to maintain the servers and cooling blockchain applications. Microsoft also

22 Economy Informatics vol. 19, no. 1/2019 worked with Ripple, in developing distributed References applications. [1] Cloud Computing, Available at https://en.wikipedia.org/wiki/Cloud_com 7. Conclusions puting [January, 2019] It seems that blockchain technology is like [2] Tiana Laurence, „Introducing any other software technology, but will it be Blockchain”, in Blockchain for Dummies, in the field of information technology 2017 departments? Yes, there will be some [3] Lorne Lantz, „What is Bitcoin? ” Bitcoin, applications that will require the involvement the Blockchain, and Their Potential to of IT teams and a large suite of software to Change Our World produce end-user, back-end, intra- or inter- [4] Andrea Monaci, Blockchain on cloud company applications. But a more disturbing computing: why not? Available at aspect is that business users will also be able https://www.cloud28plus.com/apac/conte to execute their own smart contracts, P2P nt/Blockchain-on-cloud-computing-- applications, and other open blockchain apps why-not (DApps) distributed without asking for IT [5] Ed Featherston , Blockchain as a Service: permission. In the same way, SaaS was a The New Weapon in the Cloud Wars?, that allowed employees to sign Available: for services on their own without disturbing https://dzone.com/articles/blockchain-as- the company's infrastructure. This new form a-service-the-new-weapon-in-the-clou of SaaS can be implemented because a new [6] Vitalik Buterin, William Mougayar, layer of infrastructure can appear by being „Blockchain as a Cloud” in The Business supported on a peer-to-peer basis and shared Blockchain, 2016 cost. And it is very likely that the cost of this [7] Dan-Cristian Cearnău, Cloud Computing new computing infrastructure will be as cheap – Emerging Technology for as Internet access today, on a per-user basis. Computational Services, Informatica This opens the possibilities for further Economică Journal, vol. 22, no. 4/2018, application. Thin cloud represents freedom pp. 61 and flexibility for users and developers. It will [8] Jin Ho Park, Jong Hyuk Park, Blockchain allow anyone to create their own business Security in Cloud Computing: Use Cases, logic for ownership, trade, contract, Challenges, and Solutions, in Symmetry transaction formats and state transition Journal, Advanced in Artificial functions without worrying about setting up Intelligence and Cloud Computing, an infrastructure. We need to fully embrace August 2018, Available: the thin cloud as a result of the blockchain's https://www.mdpi.com/2073- infrastructures, and we need to innovate with 8994/9/8/164 the creative applications running on it. [9] Mike Gault, „BlockCloud: Re-inventing Cloud with Blockchains”, Available at https://guardtime.com/blog/blockcloud- re-inventing-cloud-with-blockchains

Dan-Cristian CEARNĂU is an experienced entrepreneur in Information Technology, owning a full stack development company. Dan has a background in advising, consulting and development of IT products is diverse, ranging from individuals starting their own companies to larger organizations looking for products that enhance their effectiveness. Starting from defining the concept and functionalities, defining the architecture and working towards an MVP. Also, he follows a doctoral program at the Bucharest University of Economic Studies, within the Doctoral School of Economic Informatics.