Author | Danhua The source of the
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Foreword
Globally, Bitcoin and blockchain have become a craze, as evidenced by the picture:
What are the current status and contradictions of the blockchain industry?
To put it simply, the status quo is a double world of ice and fire. The side of fire is that a group of people who accept and understand the blockchain (let’s call them insiders) are rushing into various industry applications and technical problems, and the scale of financing is constantly being refreshed (of course, there is a mix of fish and dragons, which will be discussed in detail later). ).
The side of the ice is that most people, including the majority of IT people, have a vague understanding of blockchain, and their attitudes are relatively cold, and the majority of people who question and misunderstand. There are serious faults in the diffusion of knowledge.
There are multiple reasons behind the two layers of ice and fire:
The first is because the blockchain itself has technical barriers and conceptual barriers. It takes a long time to fully understand and truly agree.
Second, price volatility and speculation attract most of the energy of the insiders, and the focus on technology and applications is weakened. In the face of a big bull market, people who are busy making money do not have much incentive to promote it.
Based on the above considerations, this topic will share my thoughts and views on blockchain in the past few years, accelerate the diffusion of knowledge, and stimulate attention and innovation. We believe that blockchain will eventually disrupt the world.
The topic focuses on two, the first investment, the second entrepreneurship.
In other words, the reader's expected takeaway at the end of the feature should be:
First, if I want to invest in digital currency and blockchain, how to judge the investment value, how to think and analyze.
Second, if I want to start a business, which directions are worth trying.
That's why our title is "Why Bitcoin Can Save Programmers". To put it more bluntly, there are at least four reasons why programmers should pay attention to blockchain:
- Only programmers can go deep into the code layer.
- Compared to others, programmers have a better understanding of blockchain, and their investments are more likely to be successful.
- Blockchain can unleash a huge and unimaginable space for innovation. If you have the urge to start a business and have a good idea, come and change the world.
- Huge cognitive pleasure: I can still play like this, why didn't I think of it.
It is strongly recommended that everyone study the blockchain and actively invest or start a business. There are so many opportunities, whether it is financial or career.
You have a huge advantage and a huge opportunity. I really envy you. As a code idiot, Danhua can only cheer for everyone, looking forward to finding a half-official position in your unicorn company in the future.
Bitcoin and Blockchain Basics
This chat is the first in a series that introduces the basics of Bitcoin, blockchain and digital currencies. Bitcoin and blockchain are the products of technological progress, and they have certain technical thresholds. This section will introduce the basic principles in an easy-to-understand way, in preparation for the in-depth topics that follow. Specifically include:
- Opening: What the hell is a halving release?
- The basic structure of Bitcoin.
- Why is Bitcoin so awesome?
- Mining and mining pool layout.
- Why is blockchain immutable?
- smart contracts.
- Coin crowdfunding ICO.
What the hell is a halving release?
Start with a high school math problem.
Suppose there is a sequence of numbers, the first number is 1, the second number is 0.5, the third is 0.25, each item is half of the previous item, and the list goes on indefinitely. What is the sum of the sequence?
Simple mental calculation, the result is 2. The sum of the sequence is twice the first term. The total circulation of Bitcoin is 21 million, and the source is here.
2018 college entrance examination mathematics finale
Bitcoin software setting: a block is generated every 10 minutes. In the initial four years, the miner will be rewarded with 50 bitcoins for each new block (newly issued currency) found. After that, the block reward will be halved every four years (or accurate). Say every 210,000 blocks), that is, 25 new bitcoins are issued for each block in the next four years, 12.5 new bitcoins are issued for each block in the next four years, and so on.
Q: What is the total amount of Bitcoin issued?
Answer:
The total amount of Bitcoin mined in the first four years is: A=506243654=10512000.Applying the above formula, the total amount of bitcoins finally mined is 2 times that of the first four years, 21 million. Currently, it has entered the third four-year period, that is to say, 75% of bitcoins have been mined and circulated in the market.
The current block reward is 12.5. In other words, assuming that it takes 20 minutes to read this article, within these 20 minutes, the Bitcoin network will generate 2 blocks, corresponding to the newly issued 25 bitcoins, with a total value of about 750,000 yuan. Miners all over the world, in these 20 minutes, snatch the 750,000 yuan of income.
Birth of Bitcoin
The birth of Bitcoin started in 2008.
At the time, the world was in deep financial crisis, and people generally lost confidence in large financial institutions, even technical experts. An anonymous self-proclaimed Satoshi Nakamoto — we don’t know who he really is — has published a paper online that proposes a theoretical idea for Bitcoin.
In January of the following year, the Bitcoin software was born, and the genesis block was dug out, which opened a Pandora's box of digital currency innovation.
It is very interesting that Satoshi Nakamoto left an unmodifiable sentence in the genesis block:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
Translation: 3 January 2009, Times headline - Chancellor on brink of second bailout for banks).
This sentence may mean Satoshi Nakamoto's mockery of traditional finance.
The design of Bitcoin itself contains anarchism (decentralization) and technological idealism (strictly defined block generation and new currency issuance mechanism).
The entire system revealed a strong distrust of the government and financial institutions, and was also interpreted by activists as resistance and distrust of inflationary fiat currencies.
Therefore, Bitcoin inherently has value preferences.
The basic structure of Bitcoin
The basic structure of Bitcoin can be summarized in the following 9 paragraphs:
Bitcoin has three meanings: it not only represents the Bitcoin network, but also refers to the Bitcoin software used by network nodes, and it can also refer to the digital currency unit (Token) traded in the network.
The Bitcoin network is a P2P network composed of several nodes to broadcast transaction information and data blocks. This network includes miners, Bitcoin software, wallets, users, exchanges, etc.
Miners refer to network nodes that generate proof-of-work by repeating hash operations. Miners are primarily responsible for validating transactions and packaging them into blocks, in return for block rewards and transaction fees (also known as miner fees).
Bitcoin software is the core software of the system. At present, the development of Bitcoin software is completed by the Bitcoin Core team, and there are also some competing teams. The improved protocol to the core software is called BIP.
A wallet refers to software that holds bitcoin addresses and private keys, and can be used to receive, send, and store your bitcoins. Users should keep their wallets safe to prevent loss of private keys.
In the bitcoin network, people use bitcoin addresses to receive and manage bitcoins, similar to email addresses. The address looks like a string of garbled characters, because the length is like this: 19fJnPC4vsvXFkx77TB95GFLnMVKoTo45v, and the character starts with the Arabic numeral "1".
Processing transactions is a core function of the Bitcoin network. A transaction is the transfer of bitcoins from one address to another. More precisely, a "transaction" refers to a signed data structure that expresses the transfer of value. Each "transaction" is broadcast and transmitted through the Bitcoin network, collected and packaged into blocks by miner nodes, and stored permanently somewhere in the blockchain.
Blocks and blockchains: A block is a collection of transaction data that is stamped with a timestamp and the unique tag of the previous block. The block header is hashed to generate a proof-of-work, which verifies the transactions in the block. Valid blocks will be appended to the main blockchain after consensus of the entire network.
Bitcoin represents the culmination of decades of cryptography and distributed systems, a unique and powerful combination that brings together four key innovations. include:
- A decentralized peer-to-peer network (Bitcoin protocol)
- A public transaction ledger (blockchain)
- A decentralized mathematical and deterministic currency issuance (distributed mining)
- A decentralized transaction verification system (transaction script)
These four points work closely together to form the entire Bitcoin software system.
Exchanges refer to companies that provide digital currency and legal currency exchange platforms, and are an important part of the Bitcoin ecosystem. The exchange itself has nothing to do with the Bitcoin network, and the exchange can be understood as an enterprise user of the Bitcoin network. At present, most users buy and sell Bitcoin through exchanges (offline transactions can also be selected). At present, there are thousands of exchange companies in the world and dozens of them in China, all of which are small start-up companies with different scales.
Why is Bitcoin so awesome?
Why is the design of Bitcoin so awesome? Explain it and you'll understand.
The current Internet is mainly about information transmission. From the early bulletin boards to the current WeChat and Facebook, it has been possible to transmit information very conveniently at any two points in the world.
However, the transfer of any two points is not yet possible. Domestic Alipay and WeChat Pay realize free transfer nationwide, but on a global scale, they still need to rely on the traditional financial system.
The great thing about Bitcoin is that, for the first time, anyone can transfer value from anywhere to another person on the planet instantly, without any intermediaries. People call the Internet represented by Bitcoin the "Internet of Value" to distinguish it from the current so-called Internet of Information.
Bitcoin adopts a P2P network structure, which is extremely flat. There is no central authority and no banking system responsible for circulation and bookkeeping. The system manages transactions and issues new currencies through numerous nodes (miners) in the Bitcoin network. It's open source, open, and transparent, and anyone can participate. No individual or single entity has complete control over the Bitcoin system.
After the birth of Bitcoin, people were shocked by the simplicity and beauty of its design and the infinite possibilities to inspire, and began to invest in or copy it frantically, and then derived countless "imitation versions", generally called altcoins. Some altcoins are simple imitations and parameter modifications of Bitcoin, while others are subversive.
So far, the digital currency industry has officially appeared on the stage of history.
The so-called digital currency, also known as cryptocurrency, generally refers to the endogenous transaction tokens in the decentralized network containing blockchain technology (Blockchain).
Typical digital currencies include Bitcoin, Ethereum, Litecoin, etc., as well as some forked coins, such as Ethereum Classic, Bitcoin Cash (BCC), etc. Bitcoin is the first and most successful digital currency with the largest market capitalization.
At present, there are more than 800 kinds of digital currencies in the world, and the total market value of the industry has reached 160 billion US dollars. If you want to browse all the current digital currency varieties, we recommend the website www.coinmarketcap.com. The chart below lists the top 7 digital currencies by market capitalization.
Mining and mining pool pattern
In the huge decentralized network, there are individual and enterprise nodes, as well as miners specializing in mining. They have huge computer rooms, and these machines are responsible for verifying all the transactions that take place in the network and packaging them into blocks (one every 10 minutes), which are concatenated into a blockchain through a hash algorithm.
The huge computing power pooled by all miners essentially constitutes a physical protection for the Bitcoin network. Because, to tamper with network data or attack the entire network, it needs to pay a huge cost of computing power.
And because the network is decentralized, partial paralysis does not affect the operation of the entire network. The more nodes, the higher the computing power and the higher the network security. The figure below shows the trend of network computing power since the birth of Bitcoin.
Miners do this, of course not for free. In return for the network to miners, miners who mine new blocks will receive the block reward Coinbase and transaction fees inherent to each transaction in the block. The earliest block reward was 50 bitcoins, which has since been reduced to 25, and is currently 12.5.
Although the number of new coins issued has been reduced to a quarter, the price has increased by far more than 4 times, thousands of times, so there are still countless people coming in. Bitcoin computing power and price have formed a positive feedback loop, and the computing power competition has essentially turned into a brutal arms race.
The current mining pool pattern is basically stable, mainly composed of players from China and the United States. Large mining pools include antpool, btc.top, f2pool, btc.com, viabtc.com, etc. As shown below:
Why is blockchain immutable?
It is often said that blockchain transaction records are immutable and trustworthy. Why?
Understanding this requires the introduction of a concept: the Hash algorithm. There are many kinds of Hash algorithms. The basic function is to convert a data file of any length into a unique corresponding fixed-length string.
You can understand that a string of fixed-length garbled tags is generated for any file.
This algorithm is irreversible, that is to say, once you get this label, you cannot deduce the original data file in reverse.
If there is a little change in the data file, such as adding a punctuation mark, then after re-hash, the new label is also very different from the original label.
There is no way to infer what has changed in the data file from the difference between the old and new labels. Thus, with tags, it is easy to verify that a certain file existed at a certain moment, or to verify that two files are the same.
It is this irreversibility that determines the immutability of the blockchain. In each block, in addition to the transfer transaction data within ten minutes, there is also a block header.
The block header contains the hash value of the previous block data. These hashes are nested layer by layer and have a fixed length, and finally all blocks are concatenated to form a blockchain. The blockchain contains all transactions and all new currency issuances that have occurred since the chain was born.
If I'm the bad guy, I'm going to tamper with a transaction. Transactions include sender and receiver, as well as the amount transferred. The sender's bitcoins can be traced all the way back to the block in which the coin was first newly issued.
The legitimacy of the sender's possession of these bitcoins is guaranteed by the original issuing block record of the coin and all historical transaction records related to the coin.
Therefore, to tamper with a transaction means that all hashes and related transaction records after it must be tampered with, which requires extremely high computing power and difficulty, and has a zero probability of success.
So there are so-called 6 confirmed problems. After a transaction is packaged into a block, and then 6 blocks are connected in series, this transaction is basically unchangeable. Can be compared to queuing.
If everyone agrees that the longest queue is the legal one, then after you are in line, the most important concern should be: how many people are behind you. Because the more people behind you, the more stable your legitimate interests are.
In the news, chain pictures are often used to show blockchain, which is strictly speaking inaccurate. Chains or necklaces, the structure is linear.
If one of the links is removed, the entire chain loses little. The structure of the blockchain is not like this, because there is a hash algorithm, the bite is stronger, and it cannot be changed without hurting others. This is where the immutable nature of the blockchain comes in.
The application prospect of blockchain
After understanding these, and comparing with the traditional financial system, you will know: Why does the blockchain sound so strange and difficult to understand at first, but once you understand it, you will immediately exclaim: FUCK, this is the future, this is the financial the future of. P2P lending and Internet finance are all scum.
First of all, digital currency has pure Internet genes. At present, various Internet financial attempts are mostly dependent on the traditional financial system, and the reform is not thorough enough and inherently insufficient.
Second, it realizes "technology-driven finance" for the first time. In traditional finance, technology is in charge of the IT department, the business department makes demands, and IT is responsible for the implementation. Unlike Bitcoin, it has a complete set of game rules formulated by technical geniuses, which dominate the operation and development of the system. This is a huge shift in the fundamental paradigm.
The consequence of this is that future financial innovations will be dominated by the technical genius of financial thinking, leaving bankers to stare blankly.
Third, as a form of currency, compared with gold and paper money, it has a series of advantages: small size, high scarcity, high value, easy to divide, uniform quality, no decay, easy to carry, difficult to counterfeit, high transparency, It is traceable and auditable, decentralized (the issuance, circulation, settlement, bookkeeping, etc. are endogenously integrated), low threshold (anyone can access), low cost, no borders, and programmability. Of course, the disadvantages are also obvious, such as irreversible transactions, power consumption, and unstable currency values.
Fourth, a decentralized blockchain is essentially a never-ending machine, which opens up a paradigm of large-scale, distributed collaboration. Using this model, we can do many things that were previously unimaginable.
In the future, driven by the blockchain, we are no longer limited to one company, and we can participate in the projects we are interested in at any time (even if it is far away from the other side of the world), contribute our own strength, and get corresponding rewards. .
Fifth, Bitcoin will unleash a larger world. And let's go up the stairs.
If you understand Bitcoin as a currency and payment network, from barter in the early days of mankind, to shells, metal currency, gold and silver, paper money, to the current cashless network (Alipay, etc.), to the digital currency represented by Bitcoin , you will find that this is a natural upgrade process: currency is virtualized step by step, step by step away from our trust in physical objects and entities.
The financial system has become increasingly trustless and self-trusting. Bitcoin just abstracts the most essential and indispensable factors, stripping away the physical and human factors.
Most people who think that Bitcoin has no value are indulged in the inherent framework of "physical trust" and "entity trust", and do not realize that in the long history of currency evolution, people's inherent trust in physical objects and entities has become more and more weak.
Before we trusted gold, we trusted kings/emperors, then we trusted dollars (In God we Trust engraved on the dollar), governments and banks. In the future, we will completely break away from financial intermediaries, trust blockchain, and trust mathematics and code.
Let's abstract a bit.
At the heart of the Bitcoin network is the processing of transactions, and the simplest of them all. Can you expand a bit and do some complex transactions? Like bonds, stocks, real estate, any other assets and rights?
of course can.
Friends who understand the fixed income business will be afraid of bond trading (multi-market, multi-link, etc.), and a problem in one link can make your life worse than death.
Anyone who has bought a house can also experience the pain of real estate transactions. If the title certificates are all electronic, and the parties to the transaction use multiple signatures, the transaction process will be greatly simplified.
There are also securities and insurance businesses that can try blockchain. The specific application mode will be discussed in depth in subsequent articles.
Similar is the intellectual property (IP) market. Listening to music, watching videos, you can make a transaction, even if the transaction amount is small. Since digital currency can be subdivided infinitely, natural drops are suitable for small transactions. As you can imagine, this will unleash a massive long-tail market.
smart contract
These transactions are still too simple, can we abstract it a bit more?
What is the most complex and abstract transaction?
is a contract.
A contract represents a standard form of transaction between distrusting or weakly trusting parties. People trust and respect contracts because the mechanisms behind them are laws, lawyers, courts, culture, and a sense of morality. Tech geniuses have ambitious plans to bring contracts, the most complex form of transaction, to the blockchain.
This is the so-called smart contract, which executes the contract by programming and automatic execution, and implements the concept of "code is the law", which completely eliminates the situation of different identification, buck-passing and litigation in the execution of the contract.
The brilliant Ethereum is determined to become a universal, Turing-complete smart contract platform. Its endogenous token, ether, becomes the "fuel" for executing smart contracts. Every time a miner executes the code of a smart contract, he needs to get a certain amount of ether as an incentive.
From this point of view, the abstraction level of smart contracts is higher, so the market prospects are greater.
Digital currency and blockchain are not just a software invention, but also a transformation of the basic social model. Its proliferation and evolution could profoundly change the way the world works, and even the idea of human society - shared imagination (consensus).
Coin Crowdfunding ICO
An Initial Coin Offering (ICO), an IPO similar to a stock listing. ICO is a way of crowdfunding, you give me money (RMB, Bitcoin, Ethereum, etc.), and I give you a certain percentage of project tokens. It is a form of grassroots financing that is outside legal supervision and does not rely on mainstream financing channels, and has continued to be popular this year.
The nature of the tokens that investors get depends on the settings of the project itself. Most tokens are for a certain blockchain project, and the token is a circulating asset on the chain.
The project team uses the chain to realize some specific applications, incentivizing more participants to purchase, use, and trade these tokens, and realize the appreciation and monetization of the tokens. There are also some tokens, which themselves stipulate the project's income rights, dividend rights, and voting rights (similar to stocks).
Unlike IPOs, IPOs are all mature companies, and ICOs are often a preliminary idea (disclosed in a white paper), and a team can publicly declare that they have started an ICO. Therefore, ICO financing corresponds to the seed round financing in equity investment, which is very early and has great risks.
ICO does not have the characteristics of equity and ownership like IPO. Most investors value the appreciation after listing, which is similar to the price difference and hype value in the primary and secondary markets obtained from new shares. IPO is very demanding and the process is slow, while ICO does not have any threshold, it is fast, it is easy to cross borders, and it is suitable for small projects and global projects.
The shortcomings of ICO are also obvious, and information disclosure, anti-money laundering, investor protection, and investor suitability management are also seriously inadequate.
The earliest ICO was in 2013, MasterCard, which raised more than 5,000 bitcoins, and finally failed. The most successful ICO' was Ethereum, which raised $18 million in Bitcoin at the time, and is now worth $27 billion.
2017 is the first year of the ICO outbreak, and countless projects over 100 million have been born, and the currency value has risen several times, dozens of times, and hundreds of times. As of mid-July, there are about 2.6 billion ICO projects in China.
Most projects, after the ICO, will seek to allow new project tokens to be traded on a trading platform, that is, they can be exchanged for fiat currency. This is equivalent to the secondary market.
How to judge whether an ICO project is good or not?
The answer is basically guesswork. Because the information you can get is very limited. If you really want to evaluate, just follow the VC's idea to see if the project team is reliable, see if the project content is logical, and so on.
Of course, not all projects can find exchanges and sell them smoothly. If it cannot be listed on an exchange, it can only be traded privately.
ICOs of course face the risk of legal supervision. Once the government declares ICOs illegal, the price of tokens may plummet and the market popularity will drop rapidly. In addition, the current ICO market is a mixed bag, and there must be many scams, misappropriating projects, and even misappropriating projects.
Therefore, the project team has to guard against running away. In the days when we wrote this article, China has begun to implement regulation on ICOs, some platforms and conferences have been suspended, and there is news that ICOs are suspected of illegal fundraising.
There is another risk, ICO platform risk. The matchmaker may also close down or run away, or encounter legal risks.
The SEC has issued several warnings about the risks of ICOs, arguing that "ICOs" and "Token Sales" are still regulated by federal securities laws. Subsequently, the exchange Bitfinex announced that it would no longer provide US investors with some of the ICO tokens listed on the trading platform, and would also rectify other related services.
On August 24, the Legislative Affairs Office of the State Council issued a document stating that the "Regulations on Disposal of Illegal Fund-raising" drafted by the China Banking Regulatory Commission was publicly solicited on the Chinese Government Legal Information Network.
On the evening of August 30, the China Internet Finance Association issued the "Reminder on Preventing Various Risks Related to Absorbing Investment in the Name of ICO" (hereinafter referred to as "risk reminder"), saying that some institutions engaged in financing activities in the name of ICO, and related financial activities did not. Anyone who obtains any permission is suspected of fraud, illegal securities, illegal fundraising, etc., remind investors to be vigilant, treat with caution, and bear investment risks by themselves.
I believe that the regulatory policy for ICO will be introduced in the future, whether it is a one-size-fits-all, a sandbox, or a loose filing system, we will wait and see. (End of full text)
