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Author: Lin Xidong | tencent cloud senior engineer

There is no need to expounding how hot blockchain is recently. Whether you take the initiative to understand it, or are flooded by bitcoin/crypto / 3o ‘clock sleepless blockchain, I believe that the concept of blockchain has been budding in the hearts of most people. But with blockchain so hot, what can it do? What does it have to do with me? What are the real-world applications? These questions have also puzzled me for a long time. Through my intermittent attention and understanding recently, I will share them with you. Because the knowledge level is limited, unavoidably there are mistakes, welcome to correct, learn together, progress together.

Blockchain applications are varied, some are to cut leek (the vast majority of ICOs in the current coin circle), some are to censure hot spot (such as blockchain mobile phone, blockchain watch, blockchain toothbrush, etc.), after some investigation, I think more meaningful applications may include but not limited to the following seven:

Note: If you need to know what blockchain is, please go out and search on Baidu/Google. There are many people who understand better than me and speak better than me, but it is no longer popular. The following describes each application scenario.

Application Scenario 1: Information sharing – Information alignment improves efficiency

This should be the simplest application scenario of blockchain, which is the exchange of information.

1. Pain points of traditional information sharing

  • Either information is issued and distributed by a unified center, or batch reconciliation is scheduled between each other (typically once a day). For timely information sharing, it is difficult to achieve real-time sharing.

  • The two parties of information sharing lack a trusted way of communication, making it difficult to determine whether the received information was sent by the other party.

2. Blockchain + information sharing

First of all, blockchain itself needs to keep the data consistency of each node, so to speak, it has its own information sharing function. Second, real-time problems can be realized through P2P technology of blockchain. Finally, a secure and reliable information sharing channel can be constructed by using the immutable and consensus mechanism of blockchain.

You may also have such a question: to solve the above problem, without block chain technology, I can also build a cryptographic channel! But I would say that since blockchain can solve these problems and add nodes is very convenient, why not use blockchain until you have a secure and reliable information sharing system in place?

3. Application cases

Take Tencent’s own application — Public welfare search chain as an example. We can see the value of blockchain in information sharing by borrowing a good picture below.

2. Application Scenario 2: Copyright protection — cannot be tampered with and stored forever

1. Pain points of traditional authentication

  • The process is complicated: take copyright protection as an example, the existing authentication and certification methods take a long time to register, and the cost is high.

  • Lack of public credibility: For example, individuals or centralized organizations may tamper with data, so it is difficult to ensure public credibility.

2. Blockchain + forensic proof

  • Process simplification: When blockchain is applied to authentication, it is very convenient to register and inquire, and there is no need to go between different departments.

  • Secure and reliable: The decentralized storage of blockchain ensures that no one organization can tamper with data arbitrarily.

3. Application cases

The application of blockchain in the authentication field includes copyright protection, legal storage, etc. The following takes copyright protection as an example to briefly say how to achieve copyright registration and inquiry by blockchain. (1) Electronic ID card: encrypt the copyright information such as “applicant + release time + Release content” and upload it. The copyright information is used for the unique blockchain ID, which is equivalent to having an electronic ID card. (2) Timestamp protection: When the copyright information is stored, the timestamp information is added, such as the same right, can be used to prove the sequence. (3) Reliability assurance: the decentralized storage, private key signature, and immutable characteristics of blockchain enhance the reliability of authentication information.

In August 2016, Onchain, Microsoft (China), Faeda and other institutions established the electronic storage blockchain alliance “Faeda” in Beijing.

In December 2017, weBank, the Arbitration Commission (Guangzhou Arbitration Commission) and Hangzhou Yibi Technology Co., LTD jointly launched the arbitration alliance chain, which is used for the depositing of evidence in judicial scenarios; In March 2018, the first “arbitration chain” judgment was issued in Guangzhou.

Application Scenario 3: Logistics chain – traceability and anti-counterfeiting

Goods need to go through a number of steps from the manufacturer to the consumer (the process may look like the one above). Cross-border shopping is even more complicated. The intermediate link often goes wrong and consumers are easy to buy fake goods. And the problem of fake goods is plaguing the major businesses and platforms, there is no solution.

1. Tradition is the means of anti-counterfeiting traceability

Take The anti-counterfeiting technology of Moutai liquor, which has been plagued by fake and shoddy products, for example. Since 2000, there has been a unique RFID tag in the bottle, which can be read in NFC mode through mobile phones and other devices, and then verified by Moutai APP to prevent counterfeit products. At first glance, this anti-counterfeiting effect is very reliable. However, in 2016, the anti-counterfeiting of Moutai liquor was still detonated. Although it was verified OK by NFC, it was identified as fake liquor by Moutai professionals. Later, 800,000 fake anti-counterfeiting label records were found in the database audit of “National Liquor Moutai Anti-counterfeiting Traceability System”, which was forged by personnel of anti-counterfeiting technology company. Moutai then switched to security chips for anti-counterfeit labels.

But the pain point exposed here has not been solved, that is, the anti-counterfeiting information is held in a central organization, people with authority can be arbitrarily modified. (Note: This anti-counterfeiting method of Moutai also derived from the recycling of old bottles, old bottles of counterfeit wine industry, there is still a long way to go).

In May 2017 Guiyang Number Expo, Ma Ge suggested that Moutai anti-counterfeiting use block chain; So what are the advantages of combining blockchain and logistics chain?

2. Blockchain + logistics chain

  • Blockchain has no centralized node, and all nodes are equal. It is impossible to modify data by mastering a single node. It is necessary to control enough nodes to forge data, which greatly increases the cost of data forgery.

  • By nature, blockchain is open and transparent, making it possible for anyone to make public inquiries, and the probability of falsifying data being detected is greatly increased.

  • The imtamability of blockchain data also ensures that the sold product information has been permanently recorded, and it is impossible to achieve secondary sales by simply copying anti-counterfeiting information.

  • After the block chain on all the nodes of the logistics chain, the goods can be traced from the producer to the consumer, forming a complete chain; The more missing links a product has, the more likely it will be exposed as a fake product.

3. Application cases

At present, there are many players in the logistics chain, including Tencent, Ali, JINGdong, Wal-mart and so on. It is said that Ali’s cainiao has taken the lead in the block chain application of hai Tao import, and has preliminarily realized overseas commodity traceability, international logistics and import declaration traceability, and domestic logistics traceability; The next step is to trace the source of the production enterprise. The picture below is a schematic diagram of alibaba’s newbies using blockchain in overseas shopping.

According to the latest news, At the third Global Logistics Technology Conference in March, Tencent and China Federation of Logistics and Purchasing (” China Federation of Things “) officially signed a strategic cooperation agreement and released a blockchain logistics platform. There is a lot of room for imagination when strong countries join forces.

Application Scenario 4: Supply chain finance — Solving financing difficulties for small, medium and micro enterprises

1. Traditional supply chain single point financing

In the general supply chain trade, from the procurement of raw materials, processing, assembly and sales of enterprises are involved in the expenditure and income of funds, and there is a time difference between the expenditure and income of enterprises, which forms a capital gap, most of which need to finance production. Let’s start with a simple supply chain (I don’t know about complex ones), as shown below:

Let’s take a look at the financing of each of these characters:

  • Core enterprises or large enterprises: large scale, good credit, strong bargaining power, by taking goods before payment, extend the account period to transfer the capital pressure to subsequent suppliers; In addition, its financing capacity is the strongest.

  • Tier 1 suppliers: can obtain bank financing through creditor’s rights transfer of core enterprises.

  • Other suppliers (mostly small, medium and micro enterprises) : small scale, unstable development, low credit, high risk, difficult to obtain bank loans; Also can’t think the core enterprise has a very long account period; Generally, the smaller the business, the shorter the account period, small businesses also need cash to take goods. The comparison is like this: small, medium and micro enterprises lend money to big enterprises without interest.

2. Blockchain + supply chain finance

Facing the financing difficulties of micro, small and medium-sized enterprises in the above supply chain, the main reason is the lack of an effective trust mechanism between banks and small and medium-sized enterprises.

If all the nodes of the supply chain are connected, the data reliability of the core enterprise is guaranteed through the private key signature technology of blockchain. Contracts, bills and other links are the digitization of assets, facilitating circulation and realizing value transmission.

As shown in the figure above, after blockchain solves the problem of data reliability and value circulation, banks and other financial institutions no longer evaluate smes individually when they are financing them. Instead, they stand at the top of the entire supply chain and conduct comprehensive analysis and evaluation of transaction information such as bills and contracts on the chain by trusting the payment willingness of core enterprises. That is, by virtue of the credit strength and reliable transaction chain of core enterprises, to endorse the financing of small, medium and micro enterprises, to realize the leap from single link financing to the whole chain financing, so as to alleviate the financing difficulties of small, medium and micro enterprises.

3. Application cases

More mature has not seen, Tencent has already entered the bureau.

5. Application Scenario 5: Cross-border payment — improve efficiency and reduce costs

1. Traditional cross-border payment

Cross-border payment involves a variety of currencies and has exchange rate problems. Traditional cross-border payment relies heavily on third-party institutions. The simplified model is shown in the figure above, with two problems.

  • Complicated process and long settlement cycle: traditional cross-border payment is basically non-real-time. Banks process transactions in batches all day long, and it usually takes more than 24 hours to complete a transaction. The cross-border payment of some banks seems to be real-time, but in fact, it is the receiving bank that makes advance payment of a certain amount based on the credit of the remitting bank, and then carries out capital settlement and reconciliation at the end of the day, so the business processing speed is slow.

  • High fees: Traditional cross-border payment models have a large number of manual reconciliation operations and rely on third-party agencies, resulting in high fees. According to McKinsey’s global Payments 2016 report, the average cost of completing a cross-border payment through the correspondent bank model is between $25 and $35.

2. Blockchain + cross-border payment

The existence of these problems is largely due to information asymmetry and no effective trust mechanism has been established.

As shown in the figure above, the introduction of blockchain solves the problem of asymmetric cross-border payment information and establishes a certain degree of trust mechanism. There are two benefits.

  • Improved efficiency and reduced cost: access to block chain technology, through the public and private key technology, to ensure the reliability of data, and encryption technology and decentralization, to achieve the purpose of data can not be tampered with, finally, through P2P technology, to achieve point-to-point settlement; Traditional central forwarding is eliminated, which improves efficiency and reduces costs (and envisages the possibility of popularizing cross-border micropayments).

  • Traceability, can meet the demand of regulation: the traditional point-to-point settlement without scale application, in addition to the issues of trust and has regulatory loopholes (point-to-point private deals, the risk of money laundering), and block chain trading transparency, information disclosure, transaction records permanent implements the traceability, comply with regulatory requirements.

3. Application cases

Application status: Ripple, Circle, China Merchants Bank, etc.

Application Scenario 6: Asset digitization — facilitates asset circulation

1. Problems existing in physical assets

  • Physical assets are often difficult to divide and circulate

  • The circulation of physical assets is difficult to monitor, and there are risks such as money laundering

2. Blockchain implements asset digitization

  • After digitization, assets are easy to divide, convenient to circulate and low transaction costs

  • After assets are digitized with blockchain technology, all asset transaction records are open, transparent, permanently stored and traceable, fully meeting regulatory requirements

3. Application cases

Taking Tencent’s Weihuangjin app as an example, we continue to borrow the picture on Tencent’s official website of blockchain (TrustSQl.qq.com). It can be seen that after the digitalization of assets, circulation is more convenient and no longer depends on issuing institutions. And it became possible to buy 0.001 grams of gold, lowering the barrier to participation.

7. Application Scenario 7: Token — go to intermediary and trust

It was not like to add tokens, but when it comes to blockchain, tokens are always around; Since blockchain is born from Bitcoin and has the property of token, bitcoin is the most successful application of blockchain at present.

1. Problems existing in traditional currency

The traditional currency issuing power is in the hands of the state, there is the risk of excessive currency issuance

  • The yuan dynasty since established in 1271, is still around, consume large amounts of money and food, to financial problems, spamming currency for a long time, cause serious inflation, most of the people living in hot water, leading to refugees, country, in 1368, short life of yuan dynasty was only 97 years, the ghost, towards the death.

  • After Zimbabwe became independent in 1980, due to the failure of land reform and the collapse of the economy, the government failed to make ends meet and began to print money. In 2001, 100 Zimbabwean dollars were worth about 1 US dollar; In January 2009, Zimbabwe central Bank issued 100 trillion new Zimbabwean yuan (as shown below) to accelerate the currency collapse, and eventually the Zimbabwean dollar was abandoned and the “Dollarization” monetary policy was adopted. Zimbabwe’s president Robert Mugabe was ousted in a coup in 2017.

The traditional bookkeeping right is in the hands of a centralized intermediary agency, and there are risks such as paralysis of the intermediary system, default of the intermediary, cheating of the intermediary, and even cheating of the intermediary.

In March 2013, Cyprus imposed a one-off tax of about 5.8 billion euros on bank depositors in order to get a bailout. It imposed a one-off tax of 9.9% on deposits of at least 100,000 euros and 6.75% on deposits of less than 100,000 euros.

In April 2017, a 3 billion yuan fake financial management event of Minsheng Bank was exposed, which was caused by a branch president forging principal and interest guaranteed financial products, and more than 150 investors were caught.

2. How does blockchain solve these problems

Bitcoin solves the problem of trust in the issue and accounting of money. Let’s take a look at how Bitcoin solves the two problems one by one.

Spamming problem: The acquisition of bitcoin can only be obtained through mining, and the total amount of bitcoin is 21 million, which solves the problem of spamming in the issuance process. Ledger modification problem: Bitcoin’s transaction records solve the ledger modification problem through chained storage and a decentralized global network of nodes.

Chain storage can be simply understood as: the blocks storing records are connected to each other, forming a chain; The records of all blocks except the first block contain the checksum information of the previous block. Changing the checksum information of any block will cause the checksum error of subsequent blocks. Because of this correlation, no other blocks can be inserted in between, making it difficult to modify existing records.

The decentralized node can be simply understood as: all the central nodes in the world are equal and have exactly the same account book, so the failure of any node does not affect the account record. To change the ledger, you have to change more than half the nodes in the world; That seems almost impossible at the moment. Since the books can’t be changed, what if the bookkeeping is rigged? First, every transaction in Bitcoin is signed with a private key, which cannot be forged. You can modify only the transactions you initiated.

Second, is a problem about the right to charge to an account: the currency of the right to charge to an account, through work proof, can be simply interpreted as: the algorithm to determine the same time, the world is only one node won the right to charge to an account, the basic rule is who owns the more computing resources, who has the right of charge to an account and the greater the probability, only more than cut in half of the work force, to achieve double flowers.

Note: The mode of bitcoin is not replicable, bitcoin has attracted the vast majority of the world’s computing power, thus reducing the occurrence of 51% attacks and other problems; Other replicas are basically unable to obtain the corresponding computing power guarantee.

At present, bitcoin still has the problem of 51% and low efficiency to be solved. In addition, the trust problem of transaction itself is a social problem, which bitcoin has not solved and cannot be solved.

3. Application cases

The most representative of course is bitcoin, needless to say.

Note: tokens, this really don’t look good, COINS now attracted the world most of the work force, has a unique work force resources as the support is slightly better, other than traditional monetary tokens and, behind the lack of state and force for its credit endorsement, and seized the issuing benefits of various countries in the (e.g., macroeconomic regulation and control), if you think about it carefully how unreliable.

Eight, summary

There are certainly many scenarios of blockchain application, but many of them are not yet clear. For the time being, we will first sort out the above 7 scenarios and summarize them by the way.

Nine, the latter

Blockchain is so hot, but there are few practical applications; In my opinion, it is not that the current problems of blockchain technology hinder its wide application, nor is it that there are very few scenarios for blockchain to be applied. The commercial use of blockchain involves the interests of all parties, and the biggest problems may be beyond the technology.

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