To talk about the origin of blockchain, we must first introduce the history of currency development:
History of Currency
Commodity currency era: In early society, barter was the main form of transaction, and people directly exchanged one commodity for another. However, this method requires that the needs of both parties coincide exactly, so it is very inconvenient. Later, certain commodities began to be generally accepted as a medium of exchange because of their versatility or value. This was 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 a widely accepted form of currency due to their scarcity, plasticity, durability and other characteristics. People began to mint gold and silver coins, which were the first real currencies in human history.
Paper money era: Although metal currency is convenient, with the expansion of economic transactions, carrying and storing have become extremely inconvenient. Therefore, paper money came into being. The earliest banknotes originated from the Tang and Song Dynasties in China. But the paper currency at that time was not guaranteed by the national credit like it is now. Its value was still guaranteed by the gold or silver behind it.
Credit currency era: 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 credit currency era. Most of today's 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.
Digital currency era: With the development of the Internet, electronic payment systems and electronic currencies 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 Moubao or Mouduo, there is something in this process. There is a third party, which is this platform. This is the so-called centralized transaction model . You and the seller provide the third party with Personal information, but then the question arises, what? That is, if the third party collapses or runs away, it will be troublesome. Our property and personal information will be harmed. So how to solve this problem? This requires mentioning the concept of decentralization, that is, not through the third The three parties directly complete the transaction, and then both parties confirm and declare that the transaction has been completed to complete the transaction process. But at this time, another problem arises, that is, the supervision of the third-party agent is removed, and What should I do if the person I was trading with took the money and refused to give me the goods, or took the goods and ran away without giving me the money?
So we ushered in today’s theme
Blockchain Currency Era: To solve these problems, blockchain technology and cryptocurrencies were created. Bitcoin is the first application to implement blockchain technology, it is a decentralized digital currency
Blockchain definition
So what is blockchain? In the "China Blockchain Technology and Application Development White Paper 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 blockchain form data. 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 operate data. Distributed infrastructure and computing paradigm, this paragraph may be relatively abstract, it doesn’t matter, let’s continue
Distributed Ledger Technology
We just mentioned that blockchain currency solves the problem of third parties, so how does it achieve it? At its 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 because all participants (called nodes) share and synchronize their copies of the ledger. It ensures the security and non-tamperability of data through complex cryptography technology.
This may not be easy to understand. Let’s give an example. For example, if we trade with others within the class, we find a trustworthy person, such as the monitor, to be a witness for each transaction. The monitor will record the transaction in his ledger. However, a question arises at this time. What if the squad leader modifies the account book? 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 let the whole class help record it. In this way, the ledger cannot be tampered with, and the trust problem is solved.
But at this time someone asked again, why should I keep accounts for you? I can't spend my time and energy in vain. Therefore, students who keep accounts quickly and well will receive certain rewards. 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 solution of this puzzle is actually verified through a mechanism called "proof of work". Every time a new Bitcoin is generated, that is, a new block is added to the blockchain, the answer to this puzzle is made public and everyone can easily check whether the answer is correct, but it takes a long time to arrive at the answer. But it requires a lot of calculation 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 within a period of time will be packaged together to form a "block", and all blocks are connected to each other to form a "blockchain", 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 rely on a central node or central authority.
In the example just now, we explained what blockchain is and mentioned an important thing, that is, what is it? Yes, it is Bitcoin. Bitcoin, as the first practical cryptocurrency and blockchain The application of technology 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.
Bitcoin and its inventor Satoshi Nakamoto
So who invented such a powerful thing? In 2008, an individual or organization calling himself Satoshi Nakamoto published a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System". This paper introduced for the first time Bitcoin concept. 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 this 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 was subsequently iterated and improved with the collaboration of the open source community . Satoshi Nakamoto quit the project in its early stages, 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 that runs Bitcoin. We just mentioned that Bitcoin is positioned as a peer-to-peer electronic cash system, which can eliminate the problems that we have in the original online transactions. A third party must be introduced, and Bitcoin uses decentralized technology to eliminate such a third party. This is achieved by using blockchain technology.
Bitcoin and pizza
Since Bitcoin, as a currency, needs to be traded and used, can it be traded and used? Here we have to mention an interesting story. On May 18, 2010, a programmer with the online name Laszlo (real name Laszlo Hanyecz) posted a message on the Bitcoin Forum that exchanged 10,000 Bitcoins for two pizza help post
“I love pizza and would like to use 10,000 Bitcoins in exchange for pizza. The pizza can be store-bought or homemade, but I need you to deliver it to my door.
On May 22, after four days of waiting, Laszlo posted a successful transaction at 5:17 pm that day: I just want to report that I successfully traded 10,000 Bitcoins for pizza, thanks to jercos (real name Jeremy Sturpant), this incident is the first time that Bitcoin is widely known to interact with real-world products. In fact, before this, there were some very niche circles trading Bitcoin, but this incident is widely known, so this incident The event is of great significance, so many people call May 22nd Bitcoin Pizza Day.
Development of the technical foundation required for blockchain technology
We just mentioned Satoshi Nakamoto’s contribution to the blockchain, so did Satoshi Nakamoto create all of this out of thin air by one person or group? Actually no, all of this is standing on the shoulders of those who came before us.
In 1976, Diffie and Herman first proposed the concept of public keys and laid the foundation for modern cryptography through the scheme of secure communication between public and private keys. In the same year, Hayek first proposed the concept of allowing private issuance of currency in his book "The Denationalization of Currency", paving the way for the exploration of digital currency.
In 1977, three mathematicians designed the RSA algorithm and successfully implemented asymmetric encryption. In 1980, Ralf Merkel proposed the Merkle tree. This data structure was later adopted by Bitcoin and became an important part of the blockchain.
In 1982, Schom published a paper proposing blind signature technology, and in 1990 he founded the Digital Cash Company and experimented with eCash, a digital currency system.
In 1985, Koblitz and Miller each independently proposed the elliptic curve encryption algorithm, which is an asymmetric encryption algorithm based on elliptic curves with high security and uses a small key.
In 1991, Harper and Stornetta proposed the timestamp protocol to ensure the security of digital files.
In 1997, Adam Buck invented the Hash Cash algorithm mechanism, a proof-of-work mechanism that was later widely used in mining algorithms.
In 1998, Dai Wei published the B-money white paper, an anonymous, distributed electronic cryptocurrency system. In the same year, Nick Szabo invented the digital currency BitGold, using a 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).
At this point, all technical foundations of blockchain technology have been solved theoretically and practically.
The development of blockchain after Bitcoin
Is Bitcoin already the masterpiece of blockchain? Of course not, blockchain is still developing
Blockchain performance scaling:
A key challenge facing blockchain is how to increase the speed and capacity of transaction processing while maintaining decentralization, security and transparency. There are several main scaling strategies, including sharding, sidechains, and second-layer solutions (such as the Lightning Network). These methods all increase the complexity of the system to varying degrees, but they also enable the blockchain to support higher transaction throughput.
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, transaction volume increases significantly. In this case, traditional blockchains, such as Bitcoin or the early Ethereum, may not be able to process large volumes 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: Cross-chain interaction, also known as cross-chain technology or blockchain interoperability, refers to the exchange of information and value between different blockchain networks. This is a rapidly developing field that can help break the isolation between various blockchain networks, allowing a variety of different blockchain applications and assets to cooperate and interact with each other.
In the current blockchain environment, different blockchain networks are often isolated from each other. For example, the Bitcoin network and the Ethereum network cannot interact directly with each other. If you want to transfer Bitcoin to the Ethereum network, you need to go through a centralized exchange or other intermediary service. This situation is very different from the way we exchange information on the Internet, because on the Internet, different networks and systems can exchange information through standard protocols and interfaces.
Cross-chain technology is designed to solve this problem. By using cross-chain technology, different blockchain networks can directly exchange information and value without the need for intermediaries. For example, you can create a smart contract directly on the Ethereum network that is able to receive Bitcoins and transfer them to someone else when certain conditions are met.
Encryption algorithm and zero-knowledge proof :
Blockchain uses various encryption algorithms to protect the security and privacy of data, such as public key cryptography , hash functions, etc. Zero-knowledge proof is a special cryptographic technique that allows one party to prove to another party that a statement is correct without revealing any other information. This is very important to protect the privacy of blockchain users, especially in public blockchain networks.
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 votes are valid. In this case, zero-knowledge proofs come in handy. It allows voters to prove they have voted within the rules without revealing their specific voting choices.
Turing completeness and smart contracts:
Turing completeness means that a system can perform any possible computational task. In the context of blockchain, this usually means that the smart contract system supported by the blockchain is Turing complete, such as Ethereum. Smart contracts are self-executing scripts that automatically perform some action, such as transferring funds or issuing rewards, when certain conditions are met.
Let’s say an artist is using blockchain to sell their digital art. They may hope that every time their work is resold, they 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.
Alliance chain:
The alliance chain is jointly controlled by multiple organizations. Each organization runs one or more nodes, which maintain and verify transactions on the chain. Managers of these nodes must be authorized to join the network. Consortium chains have their advantages in many business applications, especially those that require collaboration between multiple organizations but require confidentiality and efficiency. For example, cross-border payments between banks, supply chain management, etc. In these cases, some level of trust needs to be shared between the various participants, but the security and privacy of business operations needs to be maintained. The consortium chain can provide a solution that can mutually verify transactions while maintaining business privacy.
Several different banks, for example, may want to conduct efficient and secure transactions between each other while maintaining some level of privacy. They could create a consortium chain, with each bank running one or more nodes and jointly verifying transactions on the chain. In this case, the consortium chain can provide a more secure and efficient solution than the public blockchain, while also maintaining the privacy of business operations.
Potential risks of cryptocurrencies represented by Bitcoin
Some people may say that since the blockchain currency represented by Bitcoin has so many benefits, we should quickly use it, but this is not the case. Currently, the blockchain currency represented by Bitcoin has huge risks and hidden dangers.
High price fluctuations: The cryptocurrency market is unstable and prices fluctuate greatly, and investors may face huge financial losses in a short period of time.
Security Risks: While the technological foundations of cryptocurrencies, such as blockchain, are themselves 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.
Unrecoverable: If the key to a cryptocurrency wallet is lost, it may result in users being unable to access 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 crime.
In short, although blockchain is a very important technology, it still has a long way to go before it is perfected.
Conclusion
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 day by day. At the same time, the idea of decentralization is increasingly recognized and accepted. Blockchain was born and developed under such social needs and trends of the times.