Understanding the core of Bitcoin and blockchain technology

Introduction: IBM President and CEO Ginny Romanti has said that blockchain technology is far more important than artificial intelligence. Why do you say that? We know that blockchain technology is the fundamental technology that supports the existence of Bitcoin. This is an amazing concept that can contain any message using Bitcoin. With the blockchain, it is impossible to re-cost bitcoin, which forms the ultimate security model. The current industry believes that the blockchain concept is so important because it can be applied in other areas than currency.

Specifically to talk about the blockchain, we have to talk about bitcoin first. There are two main reasons for talking about bitcoin:

The first is because blockchain technology is born with bitcoin. It can be said that there is no bitcoin. Blockchain technology may take many years to come, and may not appear.

The second is that Bitcoin is the most successful and current mature example of industrialization of blockchain technology. Of course, it is not suitable for all scenarios, because it is just a digital currency type public chain. It is also because it is the most mature digital currency public chain at the earliest, so it is likely to play the role of the Internet's base currency in the future.

In addition, there are various alliance chains and notarized chain derivatives.

The origin of bitcoin

In 2008, a person named Nakamoto Satoshi (a mysterious Japanese-American, the founder of Bitcoin, but in Bitcoin's gradual climate in December 2010, he disappeared from the Internet), An article in the paper "Bitcoin: A Peer-to-Peer Electronic Cash System" first proposed Bitcoin. Nakamoto combined with previous digital currency inventions such as B-money and HashCash to create a fully decentralized electronic cash system that does not rely on central authority for currency protection or settlement verification. In the following years, the blockchain became a core component of the digital currency bitcoin. From the birth of Bitcoin, 450,000 blocks have been generated.

It can be said that Bitcoin opened the blockchain door.

Digital Asset Trading Platform Coco Network COO Zhu Jiawei said that “blockchain” and “bitcoin” are derived from Cyberpunk, which can be said to be a product of a group of Internet geeks who do not trust the global government and the existing financial system. : Using advanced technology and the spontaneous combination of free people to fight against the current global system. Such an act of not trusting a certain central system ultimately promotes the activation of a trust machine. The blockchain is not only a bitcoin or a currency, but also a series of trust-based applications such as smart contracts.

So what is a blockchain?

Blockchain English Blockchain, its essence is a database protocol or technology, a bit like the Internet's underlying protocol TCP / IP concept. A distributed database system in which different nodes participate together is an open ledger system (ledger) consisting of a string of data blocks or data packets generated by cryptography, that is, blocks, for each The block data information is automatically time stamped to calculate a data encryption value, that is, a hash. Each block contains the hash value of the previous block, starting from the genesis block and chaining to the current area, forming a blockchain.

Blockchain technology is considered to be the next generation of disruptive core technologies after steam engines, electricity, and the Internet.

In essence, blockchain technology is a storage technology for transaction records. It permanently stores the transaction records, and can never be deleted after storage. Only new transactions can be added in order, so that all transaction history is never ended. This seemingly simple functional description is actually profound. It motivates us to rethink how to create transactions, store data, and exchange assets. It is the starting point for a huge change.

The basic principles are not difficult to understand. The basic concepts include:

Transaction: An operation that causes a change in the status of the ledger, such as adding a record;

Block: Recording transactions and status results that occur over a period of time is a consensus on the current state of the ledger;

Chain: It is a series of blocks that are connected in series according to the order of occurrence. It is a log record of the entire state change.

If the blockchain is used as a state machine, each transaction is an attempt to change the state once, and each time the consensus generated block is the participant confirms the result of the state change caused by all the transaction contents in the block. Explain in plain language: If we assume the database as a book, reading and writing the database can be regarded as a kind of accounting behavior. The principle of blockchain technology is to find the fastest and best person in accounting for a period of time. This person registers the bill and then sends the information on this page of the ledger to everyone else in the system. This is equivalent to changing all the records of the database and sending them to every other node in the whole network, so the blockchain technology is also called distributed ledger.

Blockchain technology core point

· A point-to-point distributed network (each network node synchronizes data);

· A book of all transactions (blockchain);

· A decentralized transaction verification (based on cryptographic transaction security, script verification transaction fulfillment contracts or smart contracts);

· A decentralized quantitative currency issue (distributed mining, mining pool mining agreement, workload proof generation of new blocks);

The great value of blockchain technology

In fact, the core of blockchain technology is to solve the problem of trust cost. Decentralization and de-intermediation is the core concept of blockchain technology. The blockchain despise all the old minds that impede our minds, and it will subvert the management of transaction execution and centralized control. The blockchain loosens the reins of trust, which has been firmly controlled by various central institutions, such as banks, policy makers, clearing houses, governments, and large companies.

Building machine trust, value delivery, and smart contracts on the blockchain brings the following features commercially:

The first big feature: the cost of trust close to zero. Internet companies have a very long period of time to build their credit needs. For example, it takes many years for Taobao to establish credit. In the blockchain, everyone trusts code, algorithms, and rules, so the cost of trust drops to a very low level;

The second major feature: the marginal cost of construction and trading assets approaches zero. Traditional assets that are used for trading require a large amount of reliance on third parties, and they must be packaged, endorsed, etc. by investment banks, banks, securities companies, etc., and the fees and thresholds are extremely high. With the blockchain, these are not a problem, and the cost is extremely low. The value-transfer attribute of the blockchain also naturally solves the problem of payment, and there are genes that support global payments.

From the above perspective, the blockchain itself is a super platform. Access to traffic, assets and services can help the industry to be platformized and financialized. The blockchain has even brought about a new commercial civilization – we call it the “blockchain economy”, from a traditional cooperative network based on trust between acquaintances to an open collaboration based on transparent rules. This new business rule is different from tradition because it allows commercial organizations of any size to create a completely credible and fully enforced system of rules that flattens the gap in the ability of large and small institutions to construct business trust.

Once the blockchain technology enters the public's field of vision, it will bring a trend. Let's take a look at the application of the blockchain in the future.

1. Banking finance industry: GianCarlo Bruno, head of the financial services industry at the World Economic Forum, said in the report that “blockchain technology is no longer the edge of the financial industry, but will occupy the core position”. The report estimates that about 80% of banks around the world will launch distributed ledger projects next year.

2, taxi service: the emergence of uber changed the way we travel, but in many European countries uber is illegal, they think that the emergence of uber undermines the market rules of taxis.

A startup company is using the blockchain to do a real decentralized carpooling. The practice is to invent a coin. The driver can get this kind of coin as long as he contributes his own resources. It is just like mining. In fact, these taxi drivers own the shares of the company. Rationally solved the problems that uber faced in the European market.

With the maturity of blockchain technology, blockchain technology will be used in future network security, banking, payment transfer, elections, stock trading, and judicial notarization.

Of course, the technical development of the blockchain will not be completed overnight. The actual use of these application scenarios also requires follow-up of various other conditions, including laws, models, operations, and usage habits.

Future trends in blockchain

In the future, it is more likely to develop a path that combines with traditional credit intermediaries such as banks to become a means for traditional credit intermediaries to improve efficiency, rather than revolutionizing or even replacing traditional credit intermediaries. In other words, the true "public chain" cannot be finally developed. The future blockchain will complement the traditional credit intermediation in the "private chain" scenario to improve the operational efficiency of traditional credit intermediaries. , reducing their operating costs.

The blockchain has three basic stages:

Blockchain 1.0 stage, electronic money, including bitcoin, Ripple and so on. The e-money phase can do the simplest decentralized transactions.

The blockchain 2.0 era, which is the era we are in, with the blockchain as the key stage, the most important are the smart contracts, digital assets and decentralized commercial applications, including certification and payment. Wait.

The 3.0 phase of the blockchain is a completely decentralized social network that we hope to form in the future. If we can achieve this, it means that we can form a trust relationship with the society at a very low cost, so that the entire society can run at a cost. dramatically drop.

Regarding the blockchain, netizens have these views.

Netizen 1: Many people have explained the principle of blockchain technology and some technical details from a technical point of view, and also gave a very cool screenshot. But these are not important to ordinary people. Just like everyone who knows how to use Internet technology now, you don't need to understand the TCP/IP protocol. If you want to get a WeChat public account to sell a poison mask, or a live webcast, it doesn't affect the underlying technology. In a word, if Internet technology solves communication problems, blockchain technology solves the problem of trust.

Netizen 2: The working principle of the blockchain is described in the simplest possible language. Take the bitcoin blockchain as an example. You can think of the blockchain as a public book of bitcoin. This book:

1. Stored on each bitcoin node of the Internet, each node has a complete backup

2. It records all bitcoin transfer transactions since the birth of Bitcoin

3. The ledger is stored in partition blocks, each block containing a portion of the transaction record. Each block records the id of the previous block, forming a chain structure, hence the blockchain.

4. When you want to initiate a bitcoin transaction, you only need to broadcast the transaction information to the p2p network. The miner records your transaction information as a new block and connects to the blockchain, and the transaction is completed.

Netizen 3: Blockchain technology will become a technology that is likely to reconstruct the financial system from the bottom.

Netizen 4: At present, Bitcoin is the largest and most widely used system in the world. We use Bitcoin technology to apply blockchain technology to other fields. Currently, there are several directions, such as new public chain, private chain and side chain.

Netizen 5: The blockchain may be applied to clearing and settlement, equity trading, auditing, notarization and other fields in the future.

Netizen 6: Blockchain technology, the biggest role that people know at present is to solve the "most trust" problem in the commercial society and financial society. There is something vital in the market economy. This is "trust." If there is no trust, no transaction can be established.

There is still a long way to go before the blockchain is really widely used. Welcome netizens to continue to communicate~