This article is the first in my blockchain series. I hope this series can help beginners who are new to blockchain better understand what is blockchain
Currency History
Speaking of the origin of blockchain, we first have to introduce the history of currency development:
Commodity currency era: In early society, barter exchange was the main form of transaction, and people directly exchanged one commodity for another. However, this method requires the needs of both parties to be exactly the same, so it is very inconvenient. Later, certain commodities began to be generally accepted as a medium of exchange because of their versatility or value, which is commodity currency, such as shells, livestock, rare metals, etc.
Metal currency era: With the development of society, rare metals such as gold and silver have gradually become widely accepted forms of currency due to their scarcity, plasticity, and durability. People began to mint gold and silver coins, which was the first real currency in human history.
Paper currency era: Although metal currency is convenient, with the expansion of economic transactions, it becomes extremely inconvenient to carry and store. Therefore, paper currency came into being. The earliest banknotes originated in the Tang and Song Dynasties of China. But the paper money at that time was not guaranteed by the national credit as it is now, and its value was still guaranteed by the gold or silver behind it.
The era of credit currency: As we all know, due to the disintegration of the Bretton Woods system, the gold standard also disintegrated. With the collapse of the gold standard, currency entered the era of credit currency. Most of the current currencies are actually credit currencies, they have no physical support, and their value mainly comes from people's trust in the country's economic strength and policies.
The era of digital currency: With the development of the Internet, electronic payment systems and electronic currency have emerged. Electronic payment methods such as credit cards and Alipay make transactions more convenient. However, this centralized electronic currency system also has many problems, such as transaction security and privacy protection. For example, if you buy something on an e-commerce platform, there is a third party in the process, that is, the platform. This is the so-called centralized trading model. You and the seller provide personal information to the third party, but this problem arises. Well, that is, if the third party crashes or runs away, it will be troublesome, our property and personal information will be damaged, so how to solve this problem, this requires the concept of decentralization, that is, not Complete the transaction directly through a third party, and then both parties confirm and declare that the transaction is completed to complete the transaction process, but at this time there is another problem, that is, the supervision of the third-party agent is removed, and What should I do if the person I traded with just took the money and didn't give me the goods, or took the goods and didn't give me the money?
So we ushered in today's topic
Blockchain Currency Era: In order to solve these problems, blockchain technology and cryptocurrency were created. Bitcoin is the first application to implement blockchain technology, which is a decentralized digital currency
Definition of Blockchain
So what is a blockchain? In the "White Paper on China's Blockchain Technology and Application Development 2016" issued under the guidance of the Ministry of Information Technology, the authoritative definition of blockchain is that, in a broad sense, blockchain technology is the use of data in the form of blockchain. structure to verify and store data, use distributed node consensus algorithms to generate and update data, use cryptography to ensure the security of data transmission and access, and use smart contracts composed of automated script codes to program and manipulate data. distributed infrastructure and computing paradigm
distributed ledger technology
We just mentioned that the blockchain currency solves the third-party problem, so how is it realized? At the core is distributed ledger technology, a technology that enables multiple participants in a network to simultaneously access, verify and record transactions. It does not require a centralized manager or middleman, as all participants (called nodes) share and synchronize their copy of the ledger. It ensures the security and non-tampering of data through complex cryptography technology.
It may not be easy to understand. Let’s take an example. For example, we trade with others within the class. Every time we trade, we find a trustworthy person, such as the monitor, and ask him to be a witness. The monitor will record the transaction on his ledger. However, a problem arose at this time, what if the squad leader modified the ledger by stealing himself? In order to avoid this situation, when there is another transaction, the students will send the transaction to the group, inform the whole class, and ask the whole class to help record it together. In this way, the ledger cannot be tampered with, and the trust problem is also solved.
But at this time someone will ask, why do others keep accounts for you. Therefore, students who are fast and good at bookkeeping will get a certain reward. This reward is Bitcoin, which also serves as the transaction medium and accounting unit in this system.
Of course, actual blockchain systems are much more complex than this model. In the real Bitcoin network, thousands of computers around the world compete to solve mathematical puzzles in order to become bookkeepers. At the same time, in order to prevent cheating, the solving process of this puzzle is actually verified through a mechanism called "proof of work". Whenever a new bitcoin is generated, that is, a new block is added to the blockchain, the answer to this puzzle will be made public, and anyone can easily check whether the answer is correct, but to arrive at the answer But it requires a lot of computational work. This is called "Proof of Work".
On the Internet, countless people conduct transactions every day, and many people help record these transaction information. All transaction records generated over a period of time will be packaged together to form a "block", and all blocks are connected to each other to form a "block chain", which is the entire ledger. In this system, everyone can see the ledger, thus forming a decentralized system, that is, a system or network that does not depend on a central node or central authority
In the example just now, we explained what a blockchain is, and mentioned an important thing, that is Bitcoin - Bitcoin, as the first practical cryptocurrency and the application of blockchain technology, It is of great significance and importance. It breaks the shackles of the traditional financial system and opens up a new way of trading for the world.
So who invented Bitcoin? In 2008, an individual or organization claiming to be Satoshi Nakamoto published a paper entitled "Bitcoin: A Peer-to-Peer Electronic Cash System", which introduced Bitcoin for the first time. the concept of. It describes a new online payment system that enables electronic transactions to be sent directly from one party to another without going through a financial institution. At the heart of the new system is a distributed public ledger called a blockchain, which records all transactions and enables all participants to verify and accept new transactions.
The first version of the Bitcoin system was released by Satoshi Nakamoto in 2009, and then iterated and improved with the collaboration of the open source community. Satoshi Nakamoto withdrew from the project at an early stage, leaving maintenance of the project to other developers.
So what is the relationship between Bitcoin and the blockchain? In fact, the blockchain is the underlying technology of Bitcoin. We just mentioned that Bitcoin is positioned as a peer-to-peer electronic cash system, which can eliminate our previous online transactions. A third party that must be introduced, and Bitcoin eliminates such a third party with decentralized technology, then this is achieved by using blockchain technology
Technical foundation required for blockchain technology
We just mentioned Satoshi Nakamoto’s contribution to the blockchain, so did Satoshi Nakamoto create all this out of thin air by one person or group? Actually not, all this is standing on the shoulders of predecessors,
In 1976, Diffie and Herman first proposed the concept of public key, and established the foundation of modern cryptography through the scheme of secure communication between public key and private key.
In 1977, three mathematicians designed the RSA algorithm and successfully realized asymmetric encryption. In 1980, Ralph Merkel proposed the Merkle tree, a data structure that was later adopted by Bitcoin and became an important part of the blockchain.
In 1982, Shaw published a paper and proposed the blind signature technology, and in 1990 he founded the digital cash company and experimented with a digital currency system eCash.
In 1985, Koblitz and Miller independently proposed the elliptic curve encryption algorithm, which is an asymmetric encryption algorithm based on elliptic curves, which has high security and uses a small key.
In 1991, Haber and Stornetta proposed a timestamp protocol to ensure the security of digital files.
In 1997, Adam Barker invented the hashcash algorithm mechanism, which is a proof-of-work mechanism, which was later widely used in mining algorithms.
In 1998, Dai Wei published the B-money white paper, which is an anonymous, distributed electronic encryption currency system. In the same year, Nick Szabo invented the digital currency BitGold, which uses the proof-of-work mechanism.
In 2001, the US National Security Agency (NSA) released the SHA series of algorithms, which became the hash algorithm later adopted by Bitcoin.
In 2005, Hal Finney designed Reusable Proofs of Work (RPoW).
So far, all technical foundations of blockchain technology have been solved in theory and practice
Blockchain Development After Bitcoin
Blockchain performance extension:
Suppose an e-commerce company wants to use blockchain technology to track the supply chain of goods. During peak shopping periods, such as Black Friday or Singles Day, the transaction volume will increase significantly. In this case, traditional blockchains, such as Bitcoin or the nascent Ethereum, may not be able to process a large number of transactions quickly. In this way, users may have to wait for minutes or even hours to get their transactions confirmed, which is obviously unacceptable.
Therefore, blockchain needs to find a way to increase its processing power while maintaining its core advantages of decentralization, security, and transparency. This is called "blockchain scaling".
Cross-chain interaction:
Suppose a person has a certain amount of assets on chain A, and he wants to transfer these assets to chain B. In order to protect his privacy, he may not want to disclose the specific details of this transaction, such as the amount of the transaction or his identity information. In this case, zero-knowledge proof can play an important role. He can prove that he does own these assets on chain A by providing a zero-knowledge proof, and that he has the right to make this transfer, without disclosing any further information. The verifier on chain B can confirm the validity of this transaction by verifying this zero-knowledge proof, while ensuring the privacy of the user.
At the same time, the communication between blockchains also needs to use encryption algorithms to ensure data security. For example, the transaction data between chain A and chain B needs to be encrypted before it can be transmitted in the network. In this way, data can be prevented from being stolen or tampered with during transmission.
In this way, cross-chain interaction realizes the safe, private and effective transfer of assets and data between different blockchains, making it possible for the wide application of blockchains.
Encryption algorithm and zero-knowledge proof:
Suppose a person is voting using a blockchain-based voting system. They may want to keep their voting choices private, but also want others to be able to verify that their vote was valid. In such cases, zero-knowledge proofs come in handy. It allows voters to prove that they have voted in accordance with the rules without revealing their specific voting choices.
Turing completeness and smart contracts:
Suppose an artist is using the blockchain to sell their digital artwork (described below). They may expect that each time their work is resold, they will receive a portion of the resale proceeds. In this case, smart contracts are very useful. Artists can write a smart contract that automatically transfers a portion of the proceeds to the artist every time a work is resold. This is only possible on a Turing-complete blockchain such as Ethereum.
Consortium chain:
Say several different banks, they may wish to conduct efficient and secure transactions among each other while maintaining some level of privacy. They could create a consortium chain where each bank runs one or more nodes and collectively validates transactions on the chain. In this case, the alliance chain can provide a more secure and efficient solution than the public blockchain, while maintaining the privacy of business operations.
Financial services : Blockchain can be used in financial applications such as transfer, payment, clearing and settlement systems, and smart contracts to improve efficiency, reduce costs, and increase transparency.
Supply chain management : Blockchain can provide a fully transparent supply chain, enabling consumers, suppliers and manufacturers to trace the origin of products.
Healthcare : The healthcare industry can use blockchain to store and share patient health records, improving data security and improving patient care processes.
Copyright and ownership : Artists and creators can use the blockchain to prove ownership of their work and manage copyright issues , which is known as encrypted artwork
Voting system : Blockchain can create a transparent and immutable voting system to prevent fraud.
Energy : Through the blockchain, consumers and producers can directly conduct energy transactions, which will subvert the traditional energy market.
Education : Educational qualifications and certificates can be recorded and verified on the blockchain, preventing fraud.
Potential risks of blockchain technology at this stage
Although the blockchain has so many benefits, as an emerging technology, it also has huge risks. Its risks are mainly reflected in the large price
fluctuations in several aspects: the cryptocurrency market is unstable, the price fluctuates greatly, investment Investors may face huge financial losses in a short period of time.
Security risks: While the technical foundations of cryptocurrencies, such as blockchains, are inherently relatively secure, there is still a risk of being hacked. Additionally, due to the lack of effective user protection measures, users' cryptocurrencies may be stolen.
Impossible to retrieve: If the key of the cryptocurrency wallet is lost, it may cause the user to lose access to their cryptocurrency, resulting in property damage.
Criminal activities: Due to the anonymity and untraceability of cryptocurrency, it may be used for illegal activities such as money laundering, smuggling, and electronic crimes.
digital yuan
In order to protect the property safety of the people, our country has launched our digital renminbi. First of all, the digital renminbi is a legal tender issued by the People's Bank of China. Its value is stable and equivalent to 1:1 with paper renminbi, which makes it avoid Bitcoin The sharp price fluctuations of the currency. Such stability makes the digital renminbi more suitable as a medium for transactions and shopping.
Secondly, the trading system of the digital renminbi is operated and supervised by the People's Bank of China, which makes the transaction process safer and more reliable. The People's Bank of China can effectively prevent fraud and illegal transactions and protect the rights and interests of users.
Third, compared with cryptocurrencies such as Bitcoin, the digital renminbi has a more sophisticated design in terms of privacy protection. It supports "controllable anonymous" transactions, that is, to protect users' transaction privacy under the premise of meeting legal requirements such as anti-money laundering, anti-terrorist financing, and anti-tax evasion.
Fourth, the use of digital renminbi is extremely convenient. Users can perform operations such as transfers and payments through mobile applications without worrying about complex cryptography and blockchain technology. Moreover, the digital renminbi supports offline transactions, and point-to-point transfers can be performed even without a network.
Finally, the launch of the digital renminbi will help promote the development of China's digital economy and enhance the efficiency of the financial system. It is also an important step for China in the field of global digital currency. In the future, with the continuous advancement and development of the digital renminbi, we will definitely see more innovations and applications.
Summarize
The emergence of blockchain is not accidental, but an inevitable product that meets social needs. With the in-depth development of the Internet and digitalization, people's demand for information transparency, security, and efficiency is increasing. At the same time, the idea of decentralization is increasingly recognized and accepted. The blockchain was born and developed under such social needs and trends of the times. Learning and understanding blockchain is not only to grasp a new technological trend, but also to be able to adapt to a new era of rapid change, and to see the opportunities and challenges clearly to make more informed decisions .