Introduction to Blockchains
I. What is a Blockchain?
A blockchain is a new application mode of computer technology such as distributed data storage, point-to-point transmission, consensus mechanism and encryption algorithm. The so- called consensus mechanism is a mathematical algorithm to establish trust and gain stakes among different nodes in a blockchain system. Simply speaking, a blockchain is a kind of distributed ledger. In this ledger, transaction data is organized into "blocks" one by one and then concatenated into a chain structure according to the generation sequence of blocks, so it is also called a "blockchain".
和传统账本不同的是，区块链的账本被分布式存储在区块链网络中的所有节点中。 Traditional Bookkeeping Method The ledger consists of bills page by page with one or more pieces of transaction information recorded in each bill page. There is only one copy of the ledger, which will be kept by a special person. Bookkeeping Method of Blockchains Corresponding to the bill page in the traditional bookkeeping method, we call it a "block" in the blockchain. Multiple blocks are linked according to the generation sequence, forming what we often call a "blockchain". Unlike traditional ledgers, the blockchain ledgers are distributed among all nodes in the blockchain network.
II. Common Blockchain Terms
1. Digital Wallet "Digital Wallet" is essentially a container for managing user keys (including public and private keys). When users conduct on-chain transactions with others, they need to sign the transaction with their private key to prove the legitimacy of the transaction. In addition, the wallet address generated according to the public key is the entry for the user to accept other people's transaction information. 2. Mining The essence of "mining" is that when users maintain the blockchain system, they compete for the bookkeeping right of the ledger by some algorithm (i.e. packing the existing transaction data to generate a new blockchain to be added to the chain), and get a reward given by the system to the bookkeeper (the reward is usually based on the digital currency of the blockchain system). 3. POW/POS/DPOS/..... These are so-called consensus algorithms that are used to ensure data consistency among nodes maintained by multiple users. POW: Proof of work, the core idea of which is to calculate violently a random value (Who has stronger computing power and who speaks); POS: Proof of stake, the core idea of which is "who owns more shares and who speaks"; DPOS: Delegated proof of stake, the core idea of which is "who gets the most support and who speaks". 4. 51% Attack 51% attack is an act which means that when someone has mastered more than 50% of the computing power in the whole blockchain network, he can use the computing power to recalculate and package the identified blocks, making forks to be generated in the blockchain, so as to benefit from the middle. In July, 2014, Ghash, the largest Bitcoin mine at that time, had more than 51% of the computing power of the whole network. Fortunately, Ghash did not abuse its computing power to attack the Bitcoin network, and it soon released some of its computing power at the request of the Bitcoin community, lowering itself below the safety line. 5. Smart Contracts A smart contract is a piece of code running on a blockchain. Since the data (program code is also a kind of data) written into the blockchain cannot be tampered with, we can treat this piece of code as a contract. This code can be called to produce the agreed output behavior on the premise of meeting the appropriate requirements.
Pow：工作量证明（proof of work），核心思想就是暴力计算一个随机值（谁算力强谁说话）；
Pos：权益证明（proof of stake），核心思想是“谁股份多谁说话”；
Dpos：委托权益证明（delegated proof of stake），核心思想是“谁获得的支持最多谁说话”。
所有交易数据在被写入区块链之后，就不能被后续的操作所篡改。或者换句话说，即便在后续有人对数据进行了篡改，也很容易被其他人识别出来。这就保证了区块链技术的真实可信。 也就是因为“不可篡改”这个特性，才不能将区块链定义为“一种分布式数据库”。 “不可篡改”这个特性是基于某类数学算法以及共识算法共同协作来保证的。 但是这个特性在理论上不是完全无懈可击的，传说中的“51%攻击”就可能破坏该特性。
III. Characteristics of Blockchains
1. Deconcentration/multicentrization That is, when deciding to write transaction data into a distributed ledger maintained by blockchain technology, there will not be a centralized arbitrator or bookkeeper to determine who (a node) should write data into the chain. All data or transaction information will be distributed throughout the chain. 2. Record Irreversibility Once the transaction record data is written into the blockchain, the record can never be revoked or destroyed. The reason for this is to prevent "double spending". A record to be written into the blockchain is actually not immediately effective and must wait for a certain number of subsequent blocks to be determined before it can be considered to be successfully written into the blockchain. A special "destruction" method: use a longer branch to "overwrite" the record before it is confirmed to be "effective". However, at this time, the transaction record still exists in the blockchain, only marked as "invalid". 3. Non-tampering After all transaction data is written into the blockchain, it cannot be tampered with by subsequent operations. Or in other words, even if someone tampers with the data later, it can be easily identified by others. This ensures the authenticity and credibility of the blockchain technology. That is, because of the "non-tampering" characteristic, the blockchain cannot be defined as "a distributed database". The characteristic of "non - tampering" is guaranteed based on the cooperation of some kind of mathematical algorithm and consensus algorithm. But this characteristic is not completely impeccable in theory, and the legendary "51% attack" may destroy it. 4. De-trust In the traditional transaction scenario, both parties must establish some direct or indirect trust relationship before the transaction, otherwise it is difficult to conduct the transaction. In a blockchain system, because the operation and data of the system are open and transparent, nodes that do not trust each other can form a trust basis for transactions based on such openness and transparency, so as to conduct transactions. This so- called "de-trust" is actually building trust relationships on the blockchain system.
IV. Types of Blockchains
Depending on the participants, blockchains can be divided into the following three types: 1. Public Blockchains As the name implies, a public blockchain is a blockchain system that anyone can participate in using and maintaining. In a public blockchain system, information is completely public. The common blockchain systems are basically public blockchain systems, such as Bitcoin, Ethereum, etc. 2. Private Blockchains Unlike the public chain, users need to obtain access control in advance when using and maintaining the private chain system. The owner of a private blockchain can control the behaviors in the chain. At present, there is no well-known private blockchain system, mainly financial institutions have a strong interest in such systems. 3. Consortium Blockchains A consortium blockchain is a blockchain system between the public blockchain and the private blockchain. Consortium blockchains are open to specific organizational teams. Common consortium blockchain systems are: Hyperledgers.
V. Possible Application Scenarios of Blockchains
In order to find a suitable blockchain application scenario, we must analyze it from the characteristics of the blockchain technology itself. Without introducing a third-party intermediary or arbitration organization (de-trust), a blockchain can provide such characteristics as decentralization, non-tampering, security a nd r eliability. T herefore, a ll a ctivities t hat d irectly o r i ndirectly d epend on third-party guarantee agencies can theoretically benefit from the blockchain technology. At the same time, the blockchain itself maintains a data record that continues to grow in chronological order and cannot be tampered with. When assets in the real or digital world can generate digital digests, the blockchain becomes the perfect carrier for the application of ownership confirmation, providing digital evidence including ownership and timestamps. Programmable smart contracts enable assets registered on the blockchain to obtain liquidity that is difficult to be provided in the real world, and ensure the transparency and non-tampering of contract rules. This provides the soil for the birth of more innovative economic activities in the blockchain, and provides a more efficient and safe flow channel for the value of social resources. 1. Financial Services The potential advantages of blockchains include reducing transaction costs and decreasing cross- organizational transaction risks. The blockchain application in this field is currently the most concerned, and many banks and financial transaction institutions around the world are the driving force. Some investment institutions are also applying the blockchain technology to reduce management costs and control risks. On the other hand, attention should be paid to possible problems and risks. For example, DAO (Decentralized Autonomous Organization was the largest crowdfunding event in history, and the management and release of funds was ensured based on the blockchain technology), such a crowdfunding experiment, reminds the applicator to handle it with caution at both the business and operational levels. 2. Traceability and Authentic Right The traceability management has a strong attraction in luxury goods, art and other industries. At present, the main technical problems in this field lie in the lack of reliable mapping between off-chain entities and on-chain digital digests, as well as the processing of transaction de-linking and the determination of source publishers. Authentic right management is of great help in combating infringement. By recording the ownership information on the blockchain, we can easily confirm whether the user has the ownership of a certain kind of stake and the effective time of the stake. At present, the technical problems in this field lie in the lack of reliable platform support and effective data integration management.
区块链带来的潜在优势包括降低交易成本、减少跨组织交易风险等。该领域的区块链应用目前最受关注，全球不少银行和金融交易机构都是助力推动者。部分投资机构也在应用区块链技术降低管理成本和管控风险。从另一方面看，要注意可能引发的问题和风险。例如DAO （Decentralized Autonomous Organization是史上最大的一次众筹活动，基于区块链技术确保资金的管理和投放）这样的众筹实验，提醒应用者在业务和运营层面都要谨慎处理。