Instead of thinking about what will change 10 years from now, think about what will be the same 10 years from now

Why -Why?

Why bitcoin? Why blockchain?

This topic, I am a little bit of hot topic, this article is more about the significance of the existence of blockchain. Just as every product is an answer to a question, blockchain is a very representative answer to a question. If we want to figure out “Why blockchain? , we start by asking “Why bitcoin?” It might be a very good start. So why bitcoin? What problem does Bitcoin solve?

Becomes 2008

Bitcoin: A Peer-to-peer Electronic Cash System The Bitcoin white paper was published on October 31, 2008. In 2008, in addition to the Beijing Olympic Games, there is also the financial tsunami from the Real estate in the United States. There’s a wikipedia page and there’s a lot of similar articles on the web, and there’s a very famous movie called The Big Short which is also about the 2008 financial crisis.

In summary, a lot of people with unstable jobs borrowed money from the bank to buy a big house, borrowed money and didn’t pay back the money, and then defaulted. The borrower defaults on the lender, and the lender has a borrower that defaults a lot, defaults on his lender, layers of nesting dolls and eventually the whole financial market is destroyed.

So the question is, how could someone with a precarious job borrow so much money? One reason for this is that the rating agencies were corrupt and rated risky debt as low risk. We need to know that while the other side is assessing our risks, we are also assessing the other side. For an authoritative rating agency, we should trust the results issued by authoritative rating agencies. But in the wake of this incident, we don’t trust the rating agencies. When trust is broken, it’s a very big problem.

trust

Humans, as a species, have only one goal: a longer existence. Then the only goal for individuals, for people, would also be a longer existence. Under this goal, people live as a group, first as a family, then as a tribe and then as a nation, and the ultimate goal of internationalization is for the whole group of humans to cooperate as a group.

For groups, no matter how big the system may be, the greatest need of people as a group is trust. If there is no trust in a group then the group will not exist.

But how do you define trust? Suppose your friend John says he can get there in 10 minutes every day, but he always gets there in 15 minutes. Another friend, Li Si, says he gets there in 10 minutes every day, but sometimes he gets there in 4 minutes, sometimes in 16 minutes. Suppose you were exposed to a toxin that would kill you in 15 minutes, and both Tom and Tom had the antidote but your phone could only make one call. Would you call Tom or Tom in that situation?

In my opinion, I call John at 15 minutes, because although he is sure to lie to me about 10 minutes, he will be there in 15 minutes. And Lee, I’m not sure he’ll be there in 15 minutes.

So it seems to me that the essence of trust is certainty, the certainty that you have about what John or Tom will do in the unknown future.

Back in 2008, asset rating agencies had absolute say over the entire financial system, and the valuation of real estate assets was built around a few authoritative appraisal agencies.

When the crisis hit, the first thing we found was that the rating agencies were not always right. We questioned the authority of the American financial system.

How to do it – How?

All right, let’s say you’re at the beginning of 2008, and we’ve identified a huge problem in American society, where people with authority, people with power can basically point fingers. How to solve this problem? Some say we do it through democracy, some say we do it through insurgency, but some say we need a whole new financial system. This system is called bitcoin.

What is – What?

Now, that’s the hard part, and we need to develop a better system to replace the current financial system. The existing financial system is a centralized system, the most central node is authority, to process all information and store all information.

Take a bank for example, we transfer money should send application to transfer money to the bank, undertake judgement, record, operation by the bank, transfer money to destination account. When we check our own balance, we essentially ask the bank for our records. Here, decisions, records, and operations are completely in a black box. We have no idea what’s going on in there. If we’re going to replace the financial system, it’s going to be peer-to-peer transfers, and all the transfers are going to be public.

The bitcoin scheme is that all nodes in the system have the right to record and query transactions.

How to do that? So let’s say we have three guys, four guys, five guys and each of them has a bookkeeping book. Joe transfers 2 yuan to Joe, and in order to let everyone know about the transfer information, Joe writes it down in the book and shouts in the group, so that everyone updates the data in their books.

1. Zhang SAN secretly wrote down the money that Li Si transferred to Zhang SAN?

To solve this problem, we need signatures for each agreement and each transfer. Bill transfers money to Bill, bill has to sign the deal. To implement a signature on a software system, asymmetric encryption is required. Each person has a private key and a public key. The public key (PK) can be seen by all, and the private key (SK) is the secret key.

The transaction information is hashed based on the originator’s PK and can only be decoded using the originator’s own SK. At this point, we agree that only successfully decoded standard information will be written to the system database.

2. What if Joe doesn’t have the $2?

Just like monopoly, when you start the system, everyone has their initial game currency, and all transfers are made in game currency. And in each transaction, the checker needs to read the book from top to bottom to determine if There is any balance transfer from Joe to Joe.

Because reading bookkeeping from beginning to end would be painful, and because the three of them could write code, they decided to build a software system. First of all, the system starts by giving everyone a balance,

{"timestamp": 0, "transaction": "transaction": "timestamp": 0, "transaction": "transaction" "state":{"transaction": 0, "transaction": 0}}Copy the code

Transactions are timed, and each transaction is timed in the system database

[{" timestamp ": 0," transaction ":"... "/"}, {" timestamp ": 1, the" transaction ":" zhang SAN to 2 yuan li si ", "state" : {" zhang ", 98, "bill" : 102, "Wang Wu ": 100}}]Copy the code

Each of these items is a “block”, strung together by a time stamp, called a “blockchain”.

3. Who will do the audit?

As stated above, each block is connected in series in chronological order.

So suppose a situation, Zhang SAN transfers 60 yuan to Li Si, so That Li Si has 162 yuan, and then Li Si transfers 160 yuan to Wang Wu. But Because Zhang SAN is far away from wang Wu, the Internet speed is poor, so Li Si’s block is sent to the system earlier than Zhang SAN’s block.

So, how do we create a mechanism to ensure that blocks are sorted in chronological order?

Here in the bitcoin white paper, a very important mechanism is introduced is “proof of work”.

First of all, we’re designing blocks that have time, that have transaction information. In order to concatenate blocks, we also need to include data from the previous block in the block.

[{"timestamp": 0, "transaction":"..."}, { "timestamp": 1, "previous_block": {"timestamp": 0, "transaction" : "... "/"}, "transaction" : "zhang SAN to 2 yuan li si", "state" : {" zhang ", 98, "bill" : 102, "detective" : 100}}]Copy the code

In this case, each block is very vulnerable to tampering and forgery. For example, both Jack and Jack tell everyone that my block is a block with timestamp=1.

Who do we listen to in a system that lacks a decisive role?

In such a software system, the best model available is for whoever has the most expensive claim to be in charge. Zhang SAN statement of the time remand a gold watch, Li Si statement of the time directly remand a suite up. So let’s do what Leo said and put Leo’s block in the system ledger.

How to implement this mechanism in software system? The implementation of Bitcoin borrows from the SHA256 mechanism. If Tom and Tom simultaneously guess a value and use the hash block for that value, the hash result will start with several zeros. Whoever finds the value first is up to him. This process is called mining in Chinese, and the hash result is called a “nonce” in Bitcoin.

At the same time, since the work can’t be done for nothing, the first person to come up with the value gets a monetary reward. So that explains why mining makes money.

A little thought of your own

I hate to describe blockchain as decentralized.

In that question, we saw that proof-of-work is essentially promoting the person who has spent more money as an authority. And hijacking the system theoretically requires 50% of the computing power (some with fewer chains). What we can actually see from this is that, without changing the mechanism, as long as bitcoin’s influence grows there will always be a very wealthy organization or individual controlling the whole blockchain in the near future.

In my opinion, the essence of blockchain lies in disclosure. Decentralization is only a stage, not the identity of the product.