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Don't Be Fooled by the Blocks That It Got

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Don't Be Fooled by the Blocks That It Got Don’t be fooled by the blocks that it got. Blockchain, a revolution or not? W.R. van Nes 321311 ERASMUS UNIVERSITY ROTTERDAM Supervisor Erasmus School of Economics Dr. B. Kuipers Urban, Port & Transport Economics Second assessor Master thesis written at CARU containers O. de Jong MSc Preface Well, here I am. Sitting at CARU containers Rotterdam at the Seattleweg, working on the final pieces of my thesis. This was all quite unexpected to say the least. I would like to thank Siebren Hoekstra for putting me in the spotlight at CARU containers and Merijn Zondag for inviting me for a talk at the company. Because I definitely wanted to know the company better but I could not do a full-time internship, I got offered every kind of flexibility that was possible. I would like to thank Rob Tromp and Rob Feenstra for this fantastic opportunity. I have learnt a lot during this internship about CARU containers and the people that work here. The atmosphere is very pleasant and generous. I could ask anyone about anything. What I noticed later on is that some of the employees were also honestly interested in my thesis subject. My topic arose during a brainstorm session with both Merijn Zondag and my supervisor from the Erasmus University Bart Kuipers, who I would both like to thank for the guidance that was offered during the entire thesis process but also for some tips that might be useful for the rest of my life. During my research I got into contact with several blockchain experts in the field. Sander van Loosbroek, Aljosja Beije, Arthur Janse and Gerard Bottemanne: thank you for taking your time to answer all my (maybe sometimes stupid) questions about blockchain, bitcoin and the supply chain. I really got the idea that it took my thesis to a higher level. Furthermore a thank you to all the employees of CARU containers for the warm welcome and the official and less official conversations that we had about almost every topic that can be thought of. Last but certainly not least I would like to thank my parents for the support that they have given in my entire life. Always, no matter what did or did not happen. - Wesley - ii Abstract This paper tries to offer a non-exhaustive overview on blockchain. It is presented as being a management rather than a technical topic. With the help of the fathers of economics, the history of transactions and institutions are described accompanied by the current status of the economy. The blockchain protocol of Satoshi Nakamoto solves the problem of digital double spending. The whole protocol of hashing, blocking, chaining and mining is described together with the issues of limited computer power and computer memory, next to the general subjects such as the security of the assets and the publicity of information. The applications of the cryptocurrency bitcoin and the smart contracts basis of ethereum are reviewed. In the supply chain, blockchain can be used for more transparency regarding the origin of products, cargo shipment tracking and cargo shipment weight. Currently, IBM and Maersk are working together on a new blockchain solution in the shipping and logistics industry. As this thesis is written at CARU containers, the implications in the container sector for this company specifically will be debated and recommendations are given for different scenarios in the future. The developments need to be followed closely as the impact of blockchain could be very disadvantageous. The blockchain protocol is able to make one big ledger that is distributed, synchronized and cryptographically secured. It can make trusted third parties largely obsolete. Blockchain is still in its infancy, therefore a lot of issues need to be solved and more applications can still be developed but slowly and steadily it acquires the potential to improve the entire economy and to replace a part of the activities of the current actors in the supply chain. iii Content Introduction ..................................................................................................................... 7 Technological developments .............................................................................................. 7 The supply chain .............................................................................................................. 7 Transactions .................................................................................................................... 8 Blockchain in short ........................................................................................................... 8 Problem statement ........................................................................................................... 9 Academic relevance .......................................................................................................... 9 Practical relevance .......................................................................................................... 10 Design and method ......................................................................................................... 10 Chapter one - history...................................................................................................... 12 1.1 The Wealth of Nations ........................................................................................... 12 1.2 Institutions .......................................................................................................... 13 1.3 Costs of trading .................................................................................................... 13 1.3.1 Transaction costs by Coase ............................................................................. 14 1.3.2 Transaction costs by Williamson ....................................................................... 15 1.4 Global developments ............................................................................................. 17 1.4.1 Credit crunch ................................................................................................. 17 1.4.2 Economic rates .............................................................................................. 18 1.4.3 Political factors .............................................................................................. 20 1.4.4 Ecological factors ........................................................................................... 21 1.5 Current status ...................................................................................................... 22 Chapter two - blockchain ................................................................................................ 24 2.1 In the middle of the crisis ...................................................................................... 24 2.2 The problem of double spending ............................................................................. 24 2.3 The blockchain protocol ......................................................................................... 25 2.3.1 Requirements ................................................................................................ 25 2.3.2 Hashing ........................................................................................................ 27 2.3.3 Blocking ........................................................................................................ 28 2.3.4 Chaining ....................................................................................................... 29 2.3.5 Mining .......................................................................................................... 31 2.3.6 Smart contracts ............................................................................................. 31 2.4 Blockchain bottlenecks .......................................................................................... 32 2.4.1 Multiple blockchains ....................................................................................... 32 2.4.2 Privacy ......................................................................................................... 32 2.4.3 Speed, size and security ................................................................................. 33 2.4.3.1 The mini-blockchain................................................................................. 34 2.4.3.2 The blocktree .......................................................................................... 34 2.4.3.3 The bigchain ........................................................................................... 34 2.4.3.4 The DAG-structure .................................................................................. 35 2.4.3.5 Finding a balance .................................................................................... 35 iv 2.4.4 Cryptographic puzzle alternatives ..................................................................... 35 2.4.4.1 Proof-of-stake ......................................................................................... 36 2.4.4.2 Proof-of-activity ...................................................................................... 37 2.4.4.3 Other proofs ........................................................................................... 37 2.4.4.4 Verification and validation of information .................................................... 37 2.4.5 Legal implications .......................................................................................... 38 2.4.6 The Paxos anomaly .......................................................................................
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