Four characteristics of blockchain

After discussing the two basic functions of value representation and value transfer of the blockchain for the two main systems of Bitcoin and Ethereum, and discussing digital assets, tokens and token economic systems, let's look at the block The characteristics and uses of the chain, try to answer the question "what is the use of the blockchain". The answer lies in the four fundamental properties of the blockchain.

After observing the changes brought about by Ethereum, the characteristics of the blockchain and the applications related to these characteristics have been clearly presented to us. The four basic characteristics are: untamperable, unreproducible uniqueness, smart contracts, decentralized self-organization or community (see Figure 1).

Blockchain is not just technology, it will also bring changes from the economic, management and social levels, it may change the way of human transactions, it will change currency, ledgers, contracts, collaboration, etc., which we will discuss in subsequent chapters discussed.

A picture to understand the blockchain: from basic to application Figure 1: A picture to understand the blockchain: from basics to applications

Next, we first discuss these four basic characteristics of the blockchain. One of the four characteristics of blockchain: immutability The most well-understood property of a blockchain is its immutability.

Immutability is based on a unique ledger of "block+chain": blocks with transactions are continuously added to the end of the chain in chronological order. To modify the data in a block, all blocks after it need to be regenerated.

One of the important roles of the consensus mechanism is to make it extremely expensive to modify a large number of blocks, making it almost impossible. Taking a blockchain network that uses proof-of-work (such as Bitcoin, Ethereum) as an example, only with 51% of the computing power can it be possible to regenerate all blocks to tamper with data. However, destroying data is not in the self-interest of players with large computing power, and this practical design enhances the reliability of data on the blockchain.

Generally, transaction data in the blockchain ledger can be considered as not being "modified", it can only be "modified" by new transactions that are approved. The process of correction will leave traces, which is why the blockchain cannot be tampered with, and tampering means changing or misinterpreting it by false means.

In the files and relational data that are commonly used now, unless a special design is adopted, the system itself does not record the traces of modification. The blockchain ledger adopts a different design from files and databases. It draws on the actual ledger design—retaining traces of records. Therefore, we cannot "modify" the ledger without leaving a trace, but only "modify" the ledger (see Figure 2).

Blockchain ledger "cannot be modified, only corrected" Figure 2: Blockchain ledger "cannot be modified, only corrected"

The blockchain's data storage is called a "ledger" (the general ledger), a name that fits its essence very well. The logic of the blockchain ledger is similar to the traditional ledger. For example, I may have transferred a sum of money to you by mistake, and the transaction is accepted and recorded in the blockchain ledger. The way to correct errors and omissions is not to directly modify the ledger and restore it to the state before the wrong transaction; it is to make a new corrected transaction and you transfer the money back to me. When the new transaction is accepted by the blockchain ledger, the errors and omissions are corrected, and all the correction processes are recorded in the ledger, and there are traces to follow.

The first type of vision to put the blockchain into use is to take advantage of its immutable properties. The application of traceability of agricultural products or commodities is to record their circulation process on the blockchain to ensure that the data records have not been tampered with, thus providing evidence of traceability. One vision for applying blockchain in the supply chain field is to ensure the reliability of records by ensuring that those who touch the ledger cannot modify past records.

In March 2018, in the "Blockchain Technology Practice White Paper" released by the online retail group JD.com, JD.com believes that the three application scenarios of blockchain technology (distributed ledgers) are: cross-subject collaboration, requiring low-cost trust, There are long-term trading chains. These three application scenarios take advantage of the immutable nature of the blockchain. Multiple agents collaborate on an immutable ledger, reducing trust costs. The state is stored in the blockchain ledger, and the state of uninvolved data will not change, and the earlier the data is, the harder it is to be tampered with, which makes it suitable for long-term transactions. The second of the four major characteristics of the blockchain: the uniqueness required to represent value Whether it is an interchangeable token (ERC20), a non-fungible token (ERC721), or other proposed token standards, Ethereum's tokens demonstrate an important feature of the blockchain: representing value required uniqueness.

In the digital world, the most basic unit is the bit, and the fundamental property of the bit is reproducibility. But the value cannot be copied, the value must be unique. We've discussed it before, and this is where the paradox lies: in the digital world, it's hard for us to make a file unique, at least not universally. This is why now we need a centralized ledger to record value.

In the digital world, we cannot hold banknotes in the same way we have cash. In the digital world, we need credit intermediaries such as banks, and our money is recorded with the help of bank ledgers.

The blockchain technology brought by the Bitcoin system can be said to bring "uniqueness" into the digital world for the first time, while the token of Ethereum has popularized the value representation function in the digital world.

At the beginning of 2018, two leaders of China's technology Internet companies invariably emphasized the "uniqueness" brought by blockchain. Ma Huateng, the main founder and CEO of Tencent, said: "Blockchain is indeed an innovative technology. It expresses uniqueness digitally, and blockchain can simulate the uniqueness of physical objects in reality."

Li Yanhong, founder and CEO of Baidu, said: "After the arrival of the blockchain, virtual items can be truly unique. Such an Internet will be very different from the previous Internet."

The discussion and prospect of the token economy is based on the fact that in the digital world, the blockchain provides a decentralized way of value representation and value transfer at the basic level of the network. In the era of blockchain 2.0 represented by Ethereum, a more general value representative-token has emerged, which has entered the era of digital assets from the digital cash era of blockchain 1.0. The third of the four major characteristics of blockchain: smart contracts From Bitcoin to Ethereum, the biggest change in blockchain is "smart contracts" (see Figure 3). The Bitcoin system is designed for a digital currency, and its UTXOs and scripts can also handle some complex transactions, but with significant limitations. While Vitalik created the Ethereum blockchain, his core goals are all around smart contracts: a Turing-complete scripting language, a virtual machine (EVM) that runs smart contracts, and a series of subsequent developments. Standardized smart contracts for different types of tokens, etc.

The key improvement of blockchain 2.0 is "smart contracts" Figure 3: The key improvement of blockchain 2.0 is "smart contracts"

The emergence of smart contracts enables two people based on blockchain not only to carry out simple value transfer, but also to set complex rules, which are automatically and autonomously executed by smart contracts, which greatly expands the application possibilities of blockchain. .

Projects that currently focus on innovative applications of tokens are implemented at the software level by writing smart contracts. Using smart contracts, we can conduct complex digital asset transactions.

When discussing the development process of Ethereum, in the cold knowledge column "Smart Contract" and "Smart Contract of Ethereum", we have discussed a lot about smart contracts, so I won't repeat them here. Here, again borrowing Vitalik's discussion, repeat the software nature of the smart contract we agree with - it is equivalent to a special server-side daemon. In the Ethereum white paper, Vitalik wrote:

(Contracts) should be thought of as "autonomous agents" that exist in the Ethereum execution environment, have their own Ethereum accounts, receive transaction information, they are stabbed, and then it Automatically execute a piece of code.

The execution process of the smart contract is shown in Figure 4. The fifth and sixth definitions of blockchain are shown in Figure 5.

Execution process of smart contracts Figure 4: Execution process of smart contracts

Definition of Blockchain Part 5 and Part 6 Figure 5: Definition of Blockchain No.5 and No.6 The fourth of the four characteristics of blockchain: Decentralized self-organization The fourth characteristic of blockchain is decentralized self-organization. So far, the organization and operation of major blockchain projects themselves have been closely tied to this feature. The ideal expectation of many blockchain projects is that they become a community or ecology that operates autonomously.

The anonymous Satoshi Nakamoto completely disappeared from the Internet after completing the development of Bitcoin and the initial iterations. But the bitcoin system he created continues to operate: whether it is bitcoin as an encrypted digital currency, the bitcoin protocol is its issuance and transaction mechanism, bitcoin's distributed ledger, decentralized network, or bitcoin miners and bitcoin Development is decentralized and self-organized.

We can reasonably guess that there have been many altcoins formed by modified parameter forks and Bitcoin Cash (BCH) formed by hard forks after Bitcoin, which may all be in line with Satoshi Nakamoto’s vision. He chose "out of control," which can be seen as synonymous with autonomy.

So far, the Ethereum project is still under Vitalik's "leadership", but as discussed at the beginning of this chapter, he leads the project in the same way that Linus leads open source Linux The operating system is the same as the Linux Foundation.

Probably one of the people who thinks the most about decentralized self-organization, Vitalik has been emphasizing and adopting blockchain-based governance. The hard fork of Ethereum in 2016 was proposed by him, but it needs to be voted by the community on the chain before it can be implemented. In the Ethereum community, many standards, including ERC20, are formed spontaneously by community developers.

In the book "Decentralized Applications", author Siraj Raval makes another distinction that will help us better understand future applications and organizations. He looks at the existing Internet technology products from two dimensions: one dimension is whether they are centralized or decentralized in organization; the other dimension is whether they are logically centralized or decentralized.

He believes: “Bitcoin is organizationally decentralized and logically centralized.” And the email system is both organizationally and logically decentralized (see Figure 6).

Bitcoin is decentralized in organization, centralized in logic Figure 6: Bitcoin is organizationally decentralized and logically centralized

When envisioning the organization of the future, the ideal archetype we have in mind is often that of Bitcoin: a fully decentralized autonomous organization. But in practice, in order to be efficient and able to advance, we will move slightly closer to the centralized organization, and finally find a suitable balance point.

Now, in the blockchain projects that create and issue tokens through Ethereum's smart contracts and operate in a community or ecological manner, the ideal state of many projects is an organization similar to Bitcoin, but the actual situation is between complete and complete between decentralized organizations and traditional corporations.

When discussing the fourth feature of blockchain, decentralized self-organization, we are actually moving out from the world of code, involving the organization and collaboration of people. Now, various discussions and practical explorations also reveal the significance of blockchain beyond technology: it may serve as an infrastructure to support human production organization and collaborative change. This is another example of the complete isomorphism between the blockchain and the Internet. The Internet is not just a technology, it has changed the organization and collaboration of people.

Overall, Ethereum brings blockchain to a new level. When discussing Ethereum, if I want to summarize two keywords, then these two keywords are smart contracts and tokens; and if I can only say one, I will choose "tokens". I would prefer to find its meaning in the history of the Internet, repeating the previous analogy: as a token as a representation of value, its role is similar to HTML. With HTML, what kind of website we build is entirely up to our imagination.

Now, many people can't wait to enter the blockchain 3.0 stage, that is, not only using blockchain for digital asset transactions, but also hoping to apply blockchain in various industries and fields, from Internet empowerment to regional Blockchain empowerment, from "Internet +" to "Blockchain +". Continuing to look to the future with the development of the Internet of Information as a comparison, the Internet of Information was the first to transmit textual information, but its real explosion was the emergence of e-commerce, social networking, games, and O2O combined with offline—that is, applications. In the future, what will truly show the value of blockchain will be various applications that are currently unknown.