A blockchain is a chain of blocks one after another. Certain information is stored in each block, and they are connected into a chain according to the time sequence of their generation. This chain is saved in all servers, as long as one server in the whole system can work, the whole blockchain is safe. These servers are called nodes in the blockchain system, and they provide storage space and computing power support for the entire blockchain system. If you want to modify the information in the blockchain, you must obtain the consent of more than half of the nodes and modify the information in all nodes, and these nodes are usually in the hands of different subjects, so it is extremely difficult to tamper with the information in the blockchain thing. Compared with traditional networks, blockchain has two core features: one is that data is difficult to tamper with, and the other is decentralization. Based on these two characteristics, the information recorded in the blockchain is more authentic and reliable, which can help solve the problem of people's mutual mistrust.

1 origin

Blockchain originated from Bitcoin. On November 1, 2008, a person who claimed to be Satoshi Nakamoto published the article "Bitcoin: A Peer-to-Peer Electronic Cash System", explaining that based on P2P network technology, The architectural concept of the electronic cash system, such as encryption technology, time stamp technology, blockchain technology, etc., marks the birth of Bitcoin. Two months later, the theory entered practice, and on January 3, 2009, the first genesis block with serial number 0 was born. A few days later, on January 9, 2009, a block with serial number 1 appeared, and was connected with the genesis block with serial number 0 to form a chain, marking the birth of the blockchain.

2 Concept Definition

In the narrow sense, blockchain is a chained data structure that combines data blocks in a sequentially connected manner in chronological order, and is a non-tamperable and non-forgeable distributed ledger guaranteed by cryptography. Generalized blockchain technology uses block chain data structure to verify and store data, uses distributed node consensus algorithm to generate and update data, uses cryptography to ensure the security of data transmission and access, and uses smart contracts composed of automated script codes , a new distributed infrastructure and computing paradigm for programming and manipulating data.

3 Development History

In 2008, Satoshi Nakamoto first proposed the concept of blockchain. In the following years, blockchain became the core component of the electronic currency Bitcoin: as a public ledger for all transactions. By utilizing a peer-to-peer network and distributed timestamp servers, blockchain databases can be managed autonomously. The blockchain invented for Bitcoin made it the first digital currency to solve the double spending problem. Bitcoin's design has become an inspiration for other applications.

In 2014, "Blockchain 2.0" became a term for a decentralized blockchain database. For this second-generation programmable blockchain, economists believe it is a programming language that allows users to write more sophisticated and intelligent agreements. Therefore, when the profit reaches a certain level, it can obtain income from the dividends of completed freight orders or shared certificates. Blockchain 2.0 technology skips transactions and "intermediaries that act as arbitrators of money and information in the exchange of value." They are used to keep people out of the globalized economy, enable privacy, enable people to "money the information they have," and have the ability to secure returns for owners of intellectual property. The second-generation blockchain technology makes it possible to store an individual's "permanent digital ID and image" and provides a solution to the "potential social wealth distribution" inequality.

On January 10, 2019, the State Internet Information Office issued the "Blockchain Information Service Management Regulations". On October 24, 2019, during the 18th collective study of the Political Bureau of the Central Committee, General Secretary Xi Jinping emphasized that "the blockchain is an important breakthrough for independent innovation of core technologies" and "accelerating the development of blockchain technology and industrial innovation" . "Blockchain" has entered the public's field of vision and has become the focus of society's attention.

4 types

public blockchain

Public Block Chains: Any individual or group in the world can send a transaction, and the transaction can be effectively confirmed by the blockchain, and anyone can participate in its consensus process. The public blockchain is the earliest blockchain and the most widely used blockchain. The virtual digital currencies of major bitcoins series are all based on the public blockchain. There is only one blockchain corresponding to this currency in the world. .

Industry blockchain

Consortium Block Chains: Multiple pre-selected nodes are designated by a certain group as bookkeepers. The generation of each block is jointly decided by all pre-selected nodes (pre-selected nodes participate in the consensus process), and other access nodes Can participate in transactions, but do not ask about the bookkeeping process (essentially, it is still managed bookkeeping, but it becomes distributed bookkeeping, the number of pre-selected nodes, how to determine the bookkeeper of each block becomes the main risk point of the blockchain) , anyone else can make limited queries through the open API of the blockchain.

private blockchain

Private Block Chains (Private Block Chains): Only use the general ledger technology of the blockchain for bookkeeping. It can be a company or an individual. Storage schemes are not much different. Traditional finance wants to experiment with private blockchains, while the applications of public blockchains such as bitcoin have already been industrialized, and the application products of private blockchains are still being explored.

5 features

Decentralization: Blockchain technology does not rely on additional third-party management agencies or hardware facilities, and there is no central control. Except for the self-contained blockchain itself, through distributed accounting and storage, each node realizes self-verification and transmission of information and management. Decentralization is the most prominent and essential feature of blockchain.

Openness: The foundation of blockchain technology is open source. In addition to the encrypted private information of all parties to the transaction, the data of the blockchain is open to everyone. Anyone can query the blockchain data and develop related applications through the public interface. , so the whole system information is highly transparent.

Independence: Based on consensus-based specifications and protocols (similar to various mathematical algorithms such as the hash algorithm adopted by Bitcoin), the entire blockchain system does not rely on other third parties, and all nodes can automatically and securely verify and exchange data within the system , without any human intervention.

Security: As long as you cannot control 51% of all data nodes, you cannot manipulate and modify network data arbitrarily, which makes the blockchain itself relatively safe and avoids subjective and artificial data changes.

Anonymity: Unless there are legal requirements, technically speaking, the identity information of each block node does not need to be disclosed or verified, and information transmission can be anonymous.

6 Architecture Model

Generally speaking, the blockchain system consists of data layer, network layer, consensus layer, incentive layer, contract layer and application layer.

Among them, the data layer encapsulates basic data and basic algorithms such as underlying data blocks and related data encryption and time stamps; the network layer includes distributed networking mechanisms, data dissemination mechanisms, and data verification mechanisms; the consensus layer mainly encapsulates network nodes Various consensus algorithms; the incentive layer integrates economic factors into the blockchain technology system, mainly including the issuance mechanism and distribution mechanism of economic incentives; the contract layer mainly encapsulates various scripts, algorithms and smart contracts, and is a blockchain The basis of programmable features; the application layer encapsulates various application scenarios and cases of the blockchain. In this model, the chained block structure based on time stamps, the consensus mechanism of distributed nodes, the economic incentives based on consensus computing power, and the flexible and programmable smart contracts are the most representative innovations of blockchain technology.

7 core technologies

distributed ledger

Distributed ledger refers to the fact that transaction bookkeeping is completed by multiple nodes distributed in different places, and each node records a complete account, so they can all participate in supervising the legality of the transaction, and can also jointly testify for it.

Different from traditional distributed storage, the uniqueness of blockchain distributed storage is mainly reflected in two aspects: First, each node of blockchain stores complete data according to the block chain structure, while traditional distributed storage Generally, the data is divided into multiple parts according to certain rules for storage. The second is that the storage of each node in the blockchain is independent and equal in status, relying on the consensus mechanism to ensure the consistency of storage, while traditional distributed storage generally synchronizes data through the central node to other backup nodes. No single node can record the ledger data alone, thus avoiding the possibility of a single bookkeeper being controlled or bribed to record false accounts. There are also enough bookkeeping nodes. In theory, unless all nodes are destroyed, the accounts will not be lost, thus ensuring the security of the account data.

asymmetric encryption

The transaction information stored on the blockchain is public, but the account identity information is highly encrypted and can only be accessed with the authorization of the data owner, thus ensuring data security and personal privacy.

consensus mechanism

The consensus mechanism is how to reach a consensus among all accounting nodes to determine the validity of a record. This is not only a means of identification, but also a means of preventing tampering. The blockchain proposes four different consensus mechanisms, which are suitable for different application scenarios and strike a balance between efficiency and security.

The consensus mechanism of the blockchain has the characteristics of "the minority obeys the majority" and "everyone is equal". Among them, "the minority obeys the majority" does not refer to the number of nodes, but can also be computing power, the number of shares or other computers that can be compared Feature amount. "Everyone is equal" means that when a node meets the conditions, all nodes have the right to give priority to the consensus result, which can be directly recognized by other nodes and finally become the final consensus result. Taking Bitcoin as an example, it adopts proof of work. Only when more than 51% of the accounting nodes in the entire network are controlled, it is possible to forge a record that does not exist. When there are enough nodes joining the blockchain, this is basically impossible, thus eliminating the possibility of fraud.

smart contract

Smart contracts are based on these credible and non-tamperable data, which can automatically execute some pre-defined rules and terms. Taking insurance as an example, if everyone’s information (including medical information and risk occurrence information) is authentic and credible, then it is easy to automate claims settlement in some standardized insurance products. In the daily business of insurance companies, although transactions are not as frequent as in the banking and securities industries, the reliance on trusted data continues unabated. Therefore, the author believes that the use of blockchain technology, from the perspective of data management, can effectively help insurance companies improve their risk management capabilities. Specifically, it is mainly divided into policyholder risk management and insurance company risk supervision.

8 applications

The financial sector

Blockchain has potential huge application value in financial fields such as international exchange, letter of credit, equity registration and stock exchange. The application of blockchain technology in the financial industry can eliminate third-party intermediary links and realize point-to-point direct connection, thereby greatly reducing costs and quickly completing transaction payments.

For example, Visa launched Visa B2B Connect based on blockchain technology, which can provide institutions with a lower-cost, faster and safer cross-border payment method to process global business-to-business transactions. Know that traditional cross-border payments need to wait 3-5 days, and pay a transaction fee of 1-3% for this. Visa has also teamed up with Coinbase to launch the first bitcoin debit card, and Citibank is testing the cryptocurrency "Citicoin" on the blockchain.

(China) In August 2022, the country's first digital renminbi pass-through payment service was successfully launched in Xiong'an New District, realizing a new breakthrough in the application scenario of digital renminbi in the blockchain payment field in the new district.

Internet of Things and Logistics

Blockchain can also be naturally combined in the field of Internet of Things and logistics. Through the blockchain, logistics costs can be reduced, the production and delivery process of items can be traced, and the efficiency of supply chain management can be improved. This field is considered to be a promising application direction of blockchain.

The blockchain can realize the comprehensive transmission of information in the entire network through the hierarchical structure of the scattered network connected by nodes, and can verify the accuracy of the information. This feature improves the convenience and intelligence of IoT transactions to a certain extent. The blockchain + big data solution uses the automatic filtering mode of big data to establish credit resources in the blockchain, which can double improve the security of transactions and improve the convenience of IoT transactions. Save time and cost for the application of intelligent logistics mode. Blockchain nodes have very free entry and exit capabilities, and can independently participate in or leave the blockchain system without any interference to the entire blockchain system. The blockchain + big data solution takes advantage of the integration capabilities of big data to promote the expansion of basic users of the Internet of Things to be more directional, and to facilitate user expansion among scattered users of smart logistics.

public service

The blockchain is closely related to the production and life of the people in the fields of public management, energy, transportation, etc., but the centralized nature of these fields has also brought some problems, which can be transformed with the blockchain. The decentralized and fully distributed DNS service provided by the blockchain can realize domain name query and resolution through point-to-point data transmission services between nodes in the network, which can be used to ensure that the operating system and firmware of an important infrastructure are not Tampered, it is possible to monitor the status and integrity of the software, find bad tampering, and ensure that the data transmitted by the system using IoT technology has not been tampered with.

digital rights field

Through blockchain technology, works can be authenticated to prove the existence of text, video, audio and other works to ensure the authenticity and uniqueness of ownership. After the title of the work is confirmed on the blockchain, subsequent transactions will be recorded in real time to realize the full life cycle management of digital copyright, which can also be used as a technical guarantee in judicial evidence collection. For example, Mine Labs, a startup company in New York, USA, has developed a blockchain-based metadata protocol. This system called Mediachain uses the IPFS file system to realize the copyright protection of digital works, mainly for digital image copyright protection applications.

Insurance field

In terms of insurance claims, insurance institutions are responsible for fund collection, investment, and claims, often with high management and operating costs. Through the application of smart contracts, neither the policyholder's application nor the approval of the insurance company is required, as long as the claim conditions are triggered, the automatic claim settlement of the policy is realized. A typical application case is LenderBot, which was launched in 2016 by the blockchain company Stratumn, Deloitte and payment service provider Lemonway. It allows people to register for customized micro-insurance products through the chat function of Facebook Messenger, and exchange funds between individuals. High-value items are insured, and the blockchain replaces the role of a third party in the loan contract.

Public welfare field

The data stored on the blockchain is highly reliable and cannot be tampered with, so it is naturally suitable for social welfare scenarios. Relevant information in the public welfare process, such as donation projects, fundraising details, fund flow, recipient feedback, etc., can be stored on the blockchain, and transparently publicized conditionally to facilitate social supervision.

9 Problems faced

Judging from the progress of practice, most of the applications of blockchain technology in commercial banks are still being conceived and tested. Faced with many difficulties, the main ones are:

(1) Restricted by current concepts, systems and laws. The characteristics of blockchain decentralization, self-management, and collective maintenance have subverted people's production and lifestyle, downplayed the concept of the state and supervision, and impacted the current legal arrangements. For these, the whole world lacks theoretical preparation and institutional discussion. Even for Bitcoin, the most mature blockchain application, different countries have different attitudes, which inevitably hinders the application and development of blockchain technology. Clearly, there is still a long way to go to solve these problems.

(2) At the technical level, the blockchain still needs a breakthrough. Blockchain applications are still in the initial development stage of the laboratory, and there are no intuitive and usable mature products. Compared with Internet technology, people can use specific applications such as browsers and APPs to realize the browsing, transmission, exchange and application of information, but the blockchain obviously lacks such breakthrough applications and faces high-tech barriers. Another example is the problem of block capacity. Since the blockchain needs to carry all the information generated before copying, the amount of information in the next block is greater than the amount of information in the previous block. If this is passed on, the information written in the block will increase infinitely, bringing Incoming information storage, verification, and capacity issues need to be resolved.

(3) Competitive technical challenges. Although many people are optimistic about blockchain technology, there are many technologies that promote human development. People will use whichever technology is more convenient and efficient. For example, if blockchain technology is applied in the field of communication, the way of sending information is to send to everyone in the whole network every time, but only the person with the private key can decrypt and open the letter, so the security of information transmission will be greatly increased . Similarly, quantum technology can also do it. Quantum communication—using the quantum entanglement effect to transmit information—also has the characteristics of high efficiency and safety, and has made considerable progress in recent years. For blockchain technology, it is Has a strong competitive advantage.

Summary: A one-sentence explanation of the blockchain: a distributed accounting system formed based on various technologies such as cryptographic algorithms, consensus mechanisms, point-to-point transmission, mathematics, and computer programming.

10. The Birth and Evolution of Blockchain

In 2008, a cryptographer named Satoshi Nakamoto published an article "Bitcoin: A Peer-to-Peer Electronic Cash System" (Chinese translation: Bitcoin: A peer-to-peer electronic cash system) The white paper that started the era of Bitcoin (BTC).

On January 3, 2009, the first genesis block with serial number 0 was born, and a week later, on January 9, a block with serial number 1 appeared, which marked the birth of the blockchain.

11. Interpretation of blockchain-related terms

1) Satoshi Nakamoto: The founder of Bitcoin, whose true identity is still unknown. Some people say that they are Americans, and that they can control the world after issuing Bitcoin; others say that they are Japanese, because Satoshi Nakamoto is more like a Japanese name;

2) Block: In the blockchain network, multiple files are packaged and put together, which is similar to putting these files into a box, so it is also called a digital block.

3) Chain: The blocks are sorted in chronological order and formed by concatenating the hash values between the previous block and the next block. It is not a real chain, but a metaphor.

4) Block Header (Block Header) and Block Body (Block Body): It is an index fake block is divided into two parts, the block header and the block body. The block header stores the hash value of the previous block, the current block The hash value, nonce, timestamp and Merkle root of the block, while the block body stores all the real data.

5) Hash Value (Hash Value): refers to the "data fingerprint" obtained through a hash function (also known as hash function, digital digest) through a short random string representing an input message of any length.

6) Random number (Nonce): A one-time random number automatically generated by the system, used to solve mathematical problems, and the random number will be regenerated every time it is solved.

7) Timestamp (Timestamp): refers to the character sequence that exists in the block from the moment the block is generated and is used to mark the transaction time of this data. It is generally stored in the block header and is unique.

8) Merkle Root: refers to the Merkle tree (Merkle tree) obtained by hashing the transaction data in the block body, also known as the hash tree, a binary tree, often used to Quickly check whether a specific transaction exists. After the transaction is hashed first, the leaf nodes are obtained, and then every two leaf nodes are hashed, and each intermediate node is the hash value of its first two child nodes, and so on, until finally a hash value is generated, This final hash value is called the Merkle root, also known as the Merkle root.

9) Node: refers to each participant or network node in the blockchain network.

10) Full Node: refers to a node with a complete blockchain account book. The full node occupies a large amount of memory. It needs to synchronize the data of all blockchains, and is mainly responsible for the broadcast and verification of blockchain transactions.

11) Peer-to-Peer: It means that a single node can directly interact with other nodes without intermediate nodes or intermediaries.

12) Mining: It is not real mining, but refers to the process of digitally recording information by using computer hardware to "solve a mathematical problem". Because its working principle is very similar to mineral mining, it is called "mining".

13) Mining Difficulty: A measure of the difficulty of recording information onto a digital record known as a blockchain. In the Bitcoin consensus process, in order to maintain the block generation speed at 10 minutes, the resulting mining difficulty will be adjusted regularly.

14) Miner: refers to the network nodes in the blockchain network that continuously perform hash operations to solve mathematical problems and generate proof of work.

15) Block Height (Block Height): The height of a block refers to the number of blocks between it and the genesis block in the blockchain. For example, if the block height is 100, it means that there are 100 blocks between this block and the genesis block.

16) Genesis Block: refers to the first block in the blockchain system, known as the "Genesis" block, which is generally used for initialization without transaction information. For example, in the Bitcoin system, the genesis block was created by Satoshi Nakamoto.

17) Distributed: Realized through the P2P technology of the blockchain, it describes a complete copy of a system that is run and maintained by multiple computers at the same time, without any person or organization.

18) Ledger: refers to the data structure of the blockchain and a recording state of all transaction information, which is similar to bookkeeping, so it is called "ledger".

19) 51% attack (51% attack): In the Bitcoin system, when the computing power advantage of the system exceeds half of the system (>50%, that is, 51%), you can tamper with or revoke your own payment records, so It can create blocks faster than other nodes, which is not conducive to system stability.

20) Double Spending: It means that after a node with a large amount of computing power sends a transaction, when the funds are not confirmed in time, it sends another transaction and sends the same currency to other nodes. (One money spent twice)

12. Classification of blockchain

1) Public Blockchain: Completely decentralized, any node can access it, everyone can participate in the calculation of the blockchain, and anyone can download the complete blockchain ledger. Networks such as Bitcoin and Ethereum are all public chains. It is characterized by privacy protection and low system efficiency.

2) Consortium Blockchain: Semi-centralized, the authority of each participating node is completely equal, and each node performs data interaction and trusted exchange without complete trust. Each node of the consortium chain can only join the network after being authorized. For example, Hyperledger Fabric, R3 Alliance, etc. It is characterized by self-endorsement and high system efficiency.

3) Private Blockchain: Centralization, in some blockchain application scenarios, developers do not want anyone to participate in this system, so they establish a private area where only authorized nodes can participate and view all data blockchain. For example, private institutions, internal enterprises, etc. It is characterized by collective endorsement and high system efficiency.

4. Hierarchical structure of blockchain

1) Data Layer: mainly describes the physical form of the blockchain system, which is the chain structure of the blockchain starting from the genesis block, including block data, random numbers, timestamps and public and private keys Such data is the lowest data structure in the entire blockchain technology.

2) Network Layer (Network Layer): It mainly realizes the mechanism of distributed network through P2P technology, including P2P networking mechanism, data dissemination mechanism and data verification mechanism.

3) Consensus Layer (Consensus Layer): Consists of consensus algorithms and consensus mechanisms, which enable highly dispersed nodes to efficiently reach consensus on block data in a decentralized blockchain network, and is one of the key technologies of the blockchain .

4) Actor Layer: It mainly includes the issuance system and distribution system of economic incentives. Its function is to provide certain incentives, encourage nodes to participate in the verification work in the blockchain, and incorporate economic factors into the blockchain technology in the system.

5) Contract Layer: It mainly includes various scripts, codes, algorithm mechanisms and smart contracts, which are the basis of blockchain programming.

6) Application Layer: It encapsulates various application scenarios and cases, similar to applications on computer operating systems.