Blockchain-based sharing services: Toward smart cities
To understand the blockchain solution, we summarize the features of the management and computing of blockchain-based sharing services via the triangle framework of service orientation (Zhao et al. 2008). Altogether, there are six types of service relationships among human, technology, and organization. As shown in Fig. 3, where each arrow indicates a type of service relationship, the management of blockchain-based sharing services mainly deals with relationships involving people, while the computing of blockchain-based sharing services mostly relates to relationships involving technology.
In the blockchain-based approach, being trust-free is a central feature of people’s relationships. The Economist describes blockchain as “the trust machine,” indicating that it takes care of trust issues between individuals (Economist 2015). In other words, the economic system, which is built on blockchain technology, runs without people, thus making a transaction “trust-free.” Historically, trust has underpinned business, often involving a reliable third party, which is expensive. Blockchain technology provides a viable alternative to eliminate intermediaries, thereby lowering operational costs and increasing the efficiency of a sharing service. With blockchain technology, the world’s most fundamental commercial interactions can be re-imagined; the door to invent new styles of digital interactions in trust-free sharing services has been opened.
The dynamic of people being trust-free in blockchain business services is based on transparency and privacy in the service relationship between human and technology. Blockchain technology enables people to access the records of every transaction they make, as it permanently records transaction history at every node of the blockchain (SpendMatters 2015). Furthermore, blockchain transactions are recorded using public and private keys (i.e., long strings of characters that people cannot read); thus, people can choose to remain anonymous to protect their privacy while enabling third parties to verify their identity (Economist 2016). Enigma (enigma.media.mit.edu), a cloud platform created by the Massachusetts Institute of Technology (MIT), is an example of blockchain technology; it allows different parties to jointly store and run computations on data while keeping the data itself completely private.
Due to the change in the trust model of blockchain-based system, the service relationship between the elements of human and organization in blockchain-based sharing services has become democratized. In blockchain-based sharing services, trust is not placed in an individual, but rather distributed across the entire population. The use of central authorities is replaced by a community of peers in the form of a peer-to-peer network; no one can unilaterally take actions on behalf of the community. In such a democratized context, governments cannot manipulate an election by coercing individuals, and corporations cannot unilaterally break the rules of the system.
Automation in blockchain-based sharing services is the most salient feature of service relationships between organizations. Based on the features of being trust-free and democratized, blockchain technology has enabled business transactions with strangers without the need for a trusted intermediary; meanwhile, software can automate much of the transaction process, allowing contractual promises to be enforced without human involvement. The automation of doing business in blockchain-based business services has attracted significant interest in various industries. A German startup that specializes in blockchain applications called Slock.it (www.slock.it) offers smart locks called “Slocks” controlled by Ethereum, a public platform founded on blockchain-based distributed computing. The owner of a Slock can set a deposit amount and a price for renting his property, and a customer can pay the deposit through a transaction to the Ethereum blockchain to get permission to open and close the Slock. With Slock.it, locks are controlled by automatically executing business contracts in the blockchain, and businesses such as renting Airbnb apartments can become fully automated.
Elements such as being smart, distributed, secure, shared, and encrypted in the computing of blockchain-based sharing services provide the foundation for being trust-free, democratized, automatic, transparent, and private. The computing of blockchain-based sharing services supports the automation of business transactions and services. Enabled by blockchain technology, Internet of Things (IoT) devices can participate in trust-free transactions, and contracts can be captured in computing codes to automatically perform the obligations that parties have committed to in an agreement. The concept of “smart contract”, proposed by Nick Szabo in 1993, has now been implemented in the Ethereum blockchain; a smart contract contains code functions and can interact with other contracts, make decisions, store data, and send ether to others. Watson IoT, a cognitive system developed by International Business Machines (IBM), involves a blockchain that enables information from devices – such as locations based on radio-frequency identification (RFID), barcode scanned events, or device-reported data – to be conveyed to blockchain-based ledgers to update or validate smart contracts (O'Connor 2016). Within a web of contextualized smart contracts, software agents could be set up to dynamically manage each distributed autonomous organization, connecting physical nodes in a network (such as computers, smartphones, and sensors) to devices (such as smart TVs, fridges, and cars). In the long term, the computing of blockchain-based sharing services – along with the highly efficient IoT powered by the Internet and a web of agents, smart transactions, and contracts – will automate sharing business (Morrison 2016).
The distributed nature in a service relationship between technology and organization is an important aspect of the computing of blockchain-based sharing services. Distributed computing and distributed algorithms allow democratized nodes in a blockchain to reach a consensus. In a distributed system, different nodes need to prove that they are working toward the same goal and ensure consistency. Bitcoin creator Satoshi Nakamoto proposed the proof of work (POW) mechanism to create distributed consensus in a process of repeatedly running hashing algorithms to validate electronic transactions, or so-called bitcoin mining (Nakamoto 2008). According to IBM (IBM 2015), adopting distributed computing to process hundreds of billions of IoT transactions that occur daily can significantly reduce costs associated with installing and maintaining large amounts of centralized data; thus, blockchain technology has democratized devices in terms of distributed computing, which will ensure the future of the IoT.
Security in blockchain-based service computing is a significant backbone of trust-free sharing services. Security is comprised of confidentiality, integrity, and availability; it requires the concurrent existence of: (1) the availability for authorized actions only; (2) confidentiality; and (3) integrity where “improper” means “unauthorized” (Avizienis et al. 2004). As the blockchain is decentralized, the availability of blockchain data does not rely on any third parties. With private and public key cryptography, part of a blockchain’s underlying protocol, confidentiality becomes virtually indisputable. Integrity is ensured since the blockchain can be regarded as a distributed file system where participants keep copies of files and agree on changes by consensus. The history of blockchain-based applications such as Bitcoin and Ethereum has proven the sustainability and continuous improvement of security in blockchain-based service computing.