Blockchain Builds Trust and Accelerates Digitization

Blockchain has been a hot topic in recent years. Benefiting from its integration with technologies such as distributed data storage, point-to-point transmission, consensus mechanisms, and encryption algorithms, blockchain can effectively identify fraud when data is transferred. Blockchain has expanded from the financial industry to the Internet of Things (IoT), supply chain management, data storage, and transaction fields — and is increasingly accepted as the transaction platform that enables cities to build trusted digital environments.

The Rise of Blockchain

As an independent technology, the history of blockchain dates back to the birth of bitcoin in 2008. By 2018, blockchain ledgers had entered a third phase of utility.

Typical Smart City Scenarios

• City Data Transactions: Shaping Transparent and Auditable Processes

Data is the foundation of Smart Cities. The effective exchange and convergence of data are prerequisites for promoting Smart City development. The anti-tampering and traceability features of blockchain foster trust between participating entities, and achieve sustainable and remarkable growth through data transactions for all parties.

The scope of data ownership, including transaction and authorization histories, is recorded in blockchains so ownership can be confirmed. Further, refinements in the authorization process standardize data usage. At the same time, data collection and distribution can be recorded in blockchains to ensure transparency and trace points of origin. In this way, data sources are restricted and quality is enhanced. The decentralized data transaction network can support IoT networks that are distributed citywide, including real-time transaction tracking. Decentralized, blockchain-based data platforms can form large-scale global transaction scenarios so that all parties obtain the data required for transparency.

• Smart Assets: Broadening Smart City Digitization

The acceleration of city digitization is leading to the increasingly wide use of identity authentication for Internet, IoT, and social and economic scenarios. However, identity services are faced with problems such as private data breaches, identity fraud, and fragmentation, which pose great challenges to users, devices, and systems.

Blockchain has the potential to become a foundational technology in the identity and access management fields due to its high reliability, transaction traceability, and collaboration features. Applying blockchain to identity and access management services may shape a collaborative and transparent identity management solution — and thereby form a digital asset management environment for cities. The liquidity of digital asset proofs far exceeds those of traditional substantial proofs, which help reduce transaction costs and shorten investment cycles, making it possible to raise funds quickly. Digital asset proofs can register substantial products such as real estate, billboards, and cars.

• Smart Energy: Promoting Sustainable City Development

Sustainable city development requires the widespread use of new types of energy. To realize the development of the Internet from digitization to informatization, and finally to intelligence, blockchain is transforming existing industries through three high-value capabilities:

• Precise measurement: Blockchain-based data ensures trust, access control, and privacy using both public and private keys.

• Ubiquitous interaction: Trust is transferred between Internet interaction bodies through blockchain based on trusted measurements, enabling trust-based interoperation.

• Optimized decision-making: Blockchain-based Internet devices interact with each other in point-to-point mode, forming a regional consensus. This prevents complex areas and deadloop consensus caused by a large number of distributed devices from forming, thereby effectively improving efficiency.

Huawei recently applied blockchain technology to a smart new energy project. Huawei’s blockchain technology allows users to clearly view each transaction record and understand the source of each kilowatt-hour of electricity, that is, from the source point — for instance, a power station’s photovoltaic inverter circuit. In addition, users can select the power source based on price and available energy yield. Power generation enterprises can dynamically calculate a power station’s supply and demand, and then adjust generation strategies and prices according to consumption.

• Smart Healthcare: Building a Health Protection System

From cradle to grave, healthcare has the following characteristics: A large amount of data (including image data, diagnosis data, disposal data, and drug-use data generated by various medical devices); multi-party participation (including hospitals, disease control centers, community health service institutions, maternal and child healthcare institutions, and insurers); lack of a trusted party because of inconsistent interests (for example, competition among the patients, insurers, and hospitals); objective evidence collection (for example, facts such as accident records, can be used by multiple parties); and a large number of process interactions (for example, medical treatment often involves multi-party process interactions). A unified data interaction mechanism will greatly improve efficiency.

Blockchain’s advantages coincide with the above characteristics. When using blockchain, a unified, secure, and traceable account book records healthcare service information throughout a patient’s entire lifecycle, and can be shared to facilitate a decentralized information exchange.

In addition, based on cutting-edge technologies such as smart contracts and on- and off-chain data interoperation, various processes can be automatically applied to further improve efficiency. For example, a smart contract can simplify insurance reimbursement and ensure pharmaceutical safety and authenticity by monitoring the entire supply-chain process.

Huawei’s Smart City Blockchain Solution and Technological Innovation

Huawei’s Smart City blockchain solution focuses on typical application fields with blockchain as its core; integrates networks and terminals (including chips) to form a three-in-one end-to-end blockchain framework; and melds software and hardware to provide a faster and more secure end-to-end blockchain solution.

• Chip: The software infrastructure, including a consensus algorithm, is incorporated into the chip architecture to improve security and operational efficiency, and solve blockchain’s ‘last mile’ problem.

• Network: To safeguard blockchain’s large-scale commercial use, the network needs to be involved in blockchain processes. In addition, network architectures need to be upgraded from the original Peer-to-Peer (P2P) topology to a tree structure.

• Huawei’s Blockchain Service (BCS): A cloud service product based on open-source blockchain technology and Huawei’s extensive experience with distributed parallel computing, Platform-as-a-Service (PaaS), data management, and security encryption.

The Huawei Cloud blockchain service is an open, easy-to-use, flexible, and efficient technology. It focuses on a platform built using blockchain cloud technology for the purpose of helping ecosystem partners quickly and efficiently build Smart City blockchain solutions and applications on the HUAWEI CLOUD. Huawei has innovated key technologies based on the difficulties and pain points in blockchain applications.

• Consensus Algorithms

Consensus efficiency is blockchain’s core ability to provide external services. The Practical Byzantine Fault Tolerance (PBFT) algorithm uses complex full point-to-point communications to monitor various abnormal behaviors. The communication complexity reaches O(n²) and requires a large number of signature verifications, which increases system overhead. In addition, the PBFT cannot reach a consensus during primary node selection. Although primary node selection may be continuously performed, if the newly selected primary node cheats or becomes faulty, then blockchain’s service capability will be greatly reduced or even invalidated.

Huawei’s blockchain uses an efficient consensus algorithm that supports PBFT with independent intellectual property rights to rectify algorithm defects. Unnecessary signature verifications decrease, and communication complexity is reduced from O(n²) to O(n), which improves consensus efficiency and scalability. At the same time, the consensus process is improved to ensure blockchain service stability during node failure and primary selection.

• Security and Privacy Protection

• OSCCA-approved encryption algorithm: Huawei’s blockchain supports SM2/3/4, which meets compliance requirements and provides multiple encryption algorithms per the requirements of the Office of the State Commercial Cryptography Administration (OSCCA), a Chinese certification program for information security products.

• Homomorphic transaction encryption: 1) Provides a homomorphic encryption library. User transaction data is encrypted using the public key, and transaction data is encrypted for calculation and storage in the account book. Even if a node is attacked and the account book is obtained, records cannot be decrypted. 2) Provides scope proof verification. The endorsement node endorses the ciphertext and verifies transaction accuracy without decryption. In this way, malicious transaction risks can be identified and smart contracts can be correctly executed. Huawei uses an improved algorithm that yields a performance boost that is 10 times greater than traditional addition-supported homomorphic encryption and zero-knowledge proof based on loop-signatures.

• Zero-knowledge proof: Huawei’s blockchain provides zero-knowledge proof capabilities to protect user privacy and reduce data breach risks.

• Smart contract security: Huawei’s blockchain provides a smart contract detection tool to prevent malicious vulnerabilities from invading user data through smart contracts. Users can continuously monitor the provided container’s running status and effectively isolate vulnerabilities, and they can ensure contract-running security by controlling its access permissions.

• Consensus security: Huawei’s blockchain provides hardware-based consensus algorithms with formal verifications that ensure consensus mechanism security, increase efficiency, and upgrade network stability.

• Account book security: Huawei’s blockchain provides a hardware-based protection mechanism to protect local account book confidentiality and integrity, and prevent tampering.

• Off-chain Channels

Transaction processing in unit time is still one of the main bottlenecks in large-scale blockchain applications. Due to the distributed architecture of blockchain, unequal node computing capabilities and different network conditions make an entire network consensus difficult to achieve, which hinders transaction processing.

The blockchain community has long been debating and developing transaction capacity expansion solutions. The existing solutions include block expansion, consensus algorithm improvement, security hardware assistance, Segregated Witness (SW), lightning networks, transaction/status fragments, and multi-layer chains. None of the preceding solutions meet the three key requirements of decentralization, scalability, and security at the same time. However, balance points are expected to be found for specific scenarios.

In large-scale Decentralized Applications (DApps), small payments account for the majority of transaction requests. Small transactions do not require confirmation in a timely manner, so when massive amounts of small transactions are processed through off-chain channels, they do not interact with the main chain. The main chain records the final transaction status only when the channel is closed or when the transaction party exits, which greatly relieves the processing demand. This is the design idea behind off-chain micro-payment channels. Huawei adopts an innovative mode of ‘on-chain/off-chain execution’ based on efficient and secure handshake transaction party protocols in order to realize more than 2,000 Transactions Per Second (TPS) over a single channel between users.

The Future Development of Smart City Blockchain

In 2017, blockchain and related industries developed rapidly, and China took the lead in the digital economy with its trusted blockchain technology. Rapidly developing Smart City solutions will synergize with blockchain technology, and usher in new opportunities.

• Application: 2018 is the first year to see the proliferation of blockchain applications. Before standards are finalized, it is critical to perform trial runs in different Smart City fields, among which government data transactions, proof storage, and IoT fields will be the first. In essence, these fields need to leverage blockchain to build a fair and trusted business environment.

• Technology: Security is an important consideration when building blockchains, and the OSCCA-approved encryption algorithms will become the main blockchain application standards in major markets in China.