JIAO TONG Paper title: "Blockchain" technology and its development team members: Contents TOC\o《1-3》\h\z\u Abstract 4 1 Introduction to blockchain technology 5 1.1 Background of the rise of blockchain 5 1.1 ． 1 Monetary system with banks as the trust center5 1.1.2 Online transactions with third-party institutions as the trust center5 1.1.3 Bitcoin network based on blockchain technology6 1.2 Blockchain basic technology8 1.2.1 Blockchain Technical Framework 8 1.2.2 Data Block 8 1.2.3 Blockchain Form 9 1.2.4 Blockchain Data Exchange Method 9 1.2.5 Complete Blockchain Data Process 10 1.3 Blockchain Characteristics 11 1.3.1 Decentralization and trustlessness11 1.3.2 Security and anonymity11 1.3.3 Collective maintenance12 1.4 Blockchain application areas12 1.4.1 Digital currency12 1.4.2 Notary audit12 1.4.3 Data storage13 1.4. 4 Financial transactions 13 2 Discussion of trust issues behind blockchain 14 2.1 Trust issues 14 2.1.1 Definition of trust issues 14 2.1.2 Centralized trust issues 14 2.1. 3 Problems caused by centralized trust 16 2.2 Blockchain technology Methods to solve trust problems17 2.2.1 Discussion on solutions to trust problems17 2.2.2 Blockchain also requires trust18 2.3 Difficulties in the implementation of blockchain technology to solve trust problems19 2.4 Outlook20 3 How to view the development of blockchain 21 3.1 How to view the development of blockchain 21 3.1.1 Attitudes of industry stakeholders 21 3.1.2 Banks’ attitudes toward blockchain 21 3.1.3 Government’s attitude toward blockchain 22 3.2 How to view blockchain The rise of "blockchain" new technology 23 References 24 Group division of labor 25 Abstract Blockchain, as the underlying technology of digital currency, has attracted widespread attention around the world in recent years, especially this year, which has reached a climax of attention. This article is a course report presented in the theory and practice course of socialism with Chinese characteristics. It mainly explains blockchain technology and the economic society behind it from three parts: blockchain technology introduction and trust issues. Behind blockchain and how to view the development of blockchain. This issue is discussed more fully.
Keywords: blockchain digital currency, decentralized trust issues, introduction to blockchain technology, background of the rise of blockchain, currency system with banks as the center of trust, if banks do not exist in life, then how can we carry out reliable, Trustworthy transactions between us? What about the fair deal we agreed on? Transactions between acquaintances may occur between acquaintances, but what about strangers? What should we do between groups that have no basis for mutual trust? Many times, this kind of transaction is difficult to complete. There is a complete lack of necessary mutual trust between strangers, and both parties always distrust each other. Then when the transaction relationship extends to the entire society, everyone forms an island of trust, and the entire society forms the following loose, disconnected relationship diagram, and the social economy will inevitably decline. This was also the problem for all Byzantine generals. Although the army was large, there was no mutual trust among the generals, and in the end they could not conquer a small city. When banks appeared, economic transaction relationships were different. As a completely stable and credible third-party authority, the bank is located on both sides of the transaction. The bank then acts as a trusted intermediary between transactions between strangers. Both parties to the transaction recognize the bank's unshakable creditworthiness and interact with the bank for their respective capital flows. Banks act as intermediaries to communicate the flow of funds between strangers, thereby completing reliable transactions between strangers. At this time, banks have become the center point of transaction relationships in the entire society. Everyone is connected to the bank and then indirectly to everyone else for reliable transactions. For bank-issued currency, it actually represents the bank's reliability and trust, and is a certificate of bank trust.
Online transactions with third-party institutions as the center of trust. Under the current rapid development of the Internet, online transactions are frequent and the transaction volume is huge, and it has become an important part of the country's GDP. It is particularly important to ensure the reliability of online transactions. Current online transactions rely on third-party trusted institutions. Transaction relationships in the online environment are very similar to those in the real environment. Without the necessary reliable trust between buyers and sellers, it will not be easy to complete transactions that take into account their respective interests. The mutual trust between buyers and sellers relies on the protection and maintenance of third-party institutions. The buyer stores the required funds in a third-party trusted institution, and the seller provides goods and services to the buyer driven by the event. When both parties confirm that they have obtained the initial commitments from both parties, the third-party institution completes the fund flow and the transaction is completed. These third-party institutions include: WeChat, Alipay, online banking, Amazon Meituan, Uber and other platforms that provide various specific transaction services. The current Bitcoin network sharing economy based on blockchain technology relies heavily on third-party trust centers. This highly centralized transaction relationship network must have its own shortcomings: too centralized. The security of centralized institutions is relatively weak. When the outside world has a serious impact on the organization, the organization is prone to collapse, unable to provide stable and available services to the outside world, and has poor disaster recovery capabilities. The Trust Center is not always reliable. The trust center is maintained by a group, and insiders will inevitably conduct secret attacks within the organization out of their own interests, harming the interests of users. At the same time, the trust center may also take extreme measures considering its own overall interests. Increase transaction costs.
In order to improve trust, transactions based on third-party trust centers must pay additional trust costs, thus increasing transaction costs. In order to overcome the shortcomings of the trust center, the scholar Satoshi Nakamoto published an article "Bitcoin: A Peer-to-Peer Electronic Cash System" in 2009, aiming to develop a fully distributed peer-to-peer electronic currency system and remove the trust center. Trust Center. Trust Center, Bitcoin. Blockchain technology is the underlying basic technology of Bitcoin. Since then, blockchain and Bitcoin have entered the public eye. Judging from search trends, attention to blockchain technology has increased rapidly in the past five years, reaching its peak this year. At present, major Internet companies, stock exchanges, banks, etc. have begun to develop blockchain technology to seize the right to speak in new technologies. In addition, from the perspective of areas of concern, European, American and Russian countries pay more attention to blockchain technology, while my country pays less attention. Therefore, this group decided to introduce some knowledge and perspectives about blockchain. Blockchain Basic Technology Blockchain Technology Framework Blockchain technology is actually not a new technology. Just like Lego bricks, different shaped bricks can be combined creatively to produce very artistic creations. Blockchain is a clever combination of existing mature technologies to build a distributed peer-to-peer electronic currency system. The figure below shows the core technical components of blockchain technology. They are introduced below. A blockchain of data blocks is similar to the beginning of a book. One block of the blockchain corresponds to one page of the book. The title of the block header corresponds to the block header of the block, describing the overall information of the block; the specific content of the paper corresponds to the deblocking body of the block, describing the specific transaction information of the block; the page number corresponds to the block number and signature Describes the relative position of blocks in the blockchain.
The figure below shows the specific data structure of a specific block. The block header contains the digital signature of the previous block and describes the relative position of the block; the timestamp describes the generation time of the block to ensure timing; the others are used to describe the block data. The block body is encrypted transaction information, in which the fund flow corresponding to the first basic transaction is the reward for the node that generated the block. Encrypt the entire block and obtain the digital signature of the block, which is used to build the blockchain. Books in the form of blockchain connect pages describing specific content through page numbers to achieve the purpose of describing things meaningfully. Blockchain uses the same idea: different blocks contain different transaction information, and these blocks are connected through digital signatures to fully describe the transaction record over time. The essence of blockchain is a collection of orderly, meaningful, and traceable transaction data. Blockchain data exchange method Most traditional Internet applications are designed based on the client/server (/) model. The server stores all the required data and the client accesses the required data from the server over the network. But blockchain technology doesn’t follow this model. File sharing software such as File Sharing uses a peer-to-peer network (Peer To Peer) to realize the data sharing function between users of various nodes without the need for a central node. Blockchain is also based on such a peer-to-peer network for time data exchange. In a peer-to-peer network, there is no central node. Each node can act as a server and client. Some or all of the data required for a blockchain is stored in each node of the peer-to-peer network. The entire network contains multiple parts of the complete blockchain. Each copy achieves a high degree of data redundancy. Compared with the traditional centralized C/S model, there is less need to consider the potential risks caused by data damage or loss.
The complete blockchain data process is as follows: after the user generates transaction information, the encrypted transaction information is broadcast to the peer-to-peer network. Nodes in the peer-to-peer network save transaction information locally and add it to the blocks they create after verifying the validity of the data. The node continuously generates random numbers to solve a specific mathematical problem () until a random number that meets the requirements is obtained. The node broadcasts the block data it calculates that meets the requirements to the peer-to-peer network, and other nodes verify the block. Among all generated blocks, the block data with the largest workload (proof of work) is selected to be linked to the main chain, and other nodes in the network synchronize the main chain data. Characteristics of Blockchain Decentralization and trustlessness Blockchain technology is based on a peer-to-peer network. There are no centralized nodes in the network, and all nodes can communicate directly without going through a central node. This overcomes the insecurity caused by excessive concentration of centralized nodes; in addition, the mutual trust between the communicating parties is based on the consensus algorithm recognized by the entire network, so the so-called distrust is not complete distrust, but distrust. This center translates into trust in a common, collectively approved consensus algorithm. The security and anonymity of the cryptographic algorithm ensure the anonymity and irreversibility of transaction information. Timestamps ensure the timing of data, can effectively obtain detailed transaction information from a specific time to the present, and ensure traceability. Reward mechanism: Every time a block is generated, the entire peer-to-peer network will generate a transaction containing specific bitcoins to reward the node that generated the block. When Bitcoin reaches saturation in the later period, rewards will be provided through reward transaction taxes to ensure that other network nodes actively participate in the verification of data and the generation of blocks.
Computing power (PoW): Through the reward mechanism, the peer-to-peer network will contain thousands of distributed nodes, and the total computing power is very powerful. As far as the current Bitcoin network is concerned, the overall computing power of the network far exceeds the sum of the computing power of supercomputers. In order to forge or tamper with data, the attacker must exceed at least half of the computing power of the entire network, and must first generate several new blockchains in the network and input them into the main chain to achieve the attack effect. But such attacks require very high costs. The collective maintenance of newly generated blocks requires most nodes of the peer-to-peer network to verify the validity of the data to ensure the redundancy and consistency of the blockchain data. This collective maintenance prevents the dictatorship that centralized management may bring. Greatly improve data transparency and reliability. In the field of blockchain applications, there are currently more than 300 digital currencies in the world, most of which are based on blockchain technology. The more famous ones include Bitcoin, Ethereum, Ripple, etc. Bitcoin, which ranks first, currently has a market share of more than 10 billion US dollars, which shows that the potential market value of blockchain technology is very huge. Notarized and audited blockchain data is timestamped, jointly verified and recorded by consensus nodes, and cannot be tampered with or forged. These characteristics make blockchain widely used in various data notarization and audit scenarios. For example, blockchain can permanently and securely store various licenses, registration forms, licenses, certificates, certifications and records issued by government agencies, and can easily prove the existence and existence of certain data at any point in time. . Authenticity.
The characteristics of data storage blockchain such as high redundancy storage (each node stores a copy of data), decentralization, high security and privacy protection make it particularly suitable for storing and protecting important private data to avoid being controlled by centralized institutions. destroy. Large-scale data loss or leakage due to attacks or improper permission management. Currently, using blockchain to store personal health data (such as electronic medical records, genetic data, etc.) is a promising application field. Financial transaction blockchain technology has very high compatibility with financial market applications. Blockchain can spontaneously generate credit in a decentralized system and can establish financial markets without the credit endorsement of central institutions, thus achieving financial disintermediation to a large extent. This has had a negative impact on the existence of intermediaries such as third-party payment and fund custody. This is a disruptive change in business models; in the field of Internet finance, blockchain is particularly suitable for or has been applied to business models such as equity crowdfunding, P2P online lending, and Internet insurance; securities and banking services are also important applications of blockchain in traditional In the field of securities trading, traditional securities trading requires multiple coordination from central institutions such as central clearing agencies, banks, securities companies, and exchanges. Leveraging automated smart contracts and the programmable nature of blockchain can significantly reduce costs and increase efficiency, avoiding cumbersome processes. Centralized clearing and delivery processes make financial product transactions convenient and fast. Trust Issues Behind Blockchain Trust Issues Discussion Trust Issues Definition Trust is the belief that the other party is honest, trustworthy, and upright. Since the concept of trust is too abstract, this article is based on the trust issues discussed in blockchain. At the same time, since blockchain is now mostly used in financial activities, this article focuses on the issue of trust in financial activities.
Centralized Trust Problems Centralized trust problems in the modern financial field are mainly reflected in the following three aspects: currency exchange process, financial supervision field, and emerging Internet economic field. (1) Currency exchange Currency exchange is the basic unit of financial activities. In currency exchange, mutual trust in the ledger or transaction enables the process of currency exchange. Figure 2-1 The process of modern currency exchange is shown in Figure 2-1. In modern currency exchange, both parties to the transaction need to rely on third-party trustworthy institutions (such as banks, Alipay, etc.). The transferor applies to the transferee for transfer, and the trusted institution applies to the transferee. After the transferee confirms, the locally stored note will be rewritten to complete the currency exchange process. Extending the above process to transactions between multiple individuals forms a currency exchange process based on centralized trust as shown in Figure 2-2 below. Figure 2-2 Schematic diagram of currency exchange based on centralized trust (2) The supervision of financial activities in the field of financial supervision, including product registration, information disclosure, fund custody, etc., all solve the trust problem, in fact, through third-party public trust institutions Settlement is a centralized trust. Most of the supervision of contemporary China's financial industry is carried out through four institutions: the People's Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission. The People's Bank of China (PBOC), referred to as the Central Bank, is the central bank of the People's Republic of China and a component of the State Council of the People's Republic of China. Under the leadership of the State Council, we formulate and implement monetary policies, prevent and resolve financial risks, and maintain financial stability.
The China Banking Regulatory Commission (China Banking Regulatory Commission for short) was established on April 25, 2003. It is a ministerial-level agency directly under the State Council. Under the authorization of the State Council, the Bank implements unified supervision and management of banks, financial asset management companies, trust investment companies and other deposit-taking financial institutions to maintain the legal and stable operation of the banking industry. The China Securities Regulatory Commission is a ministerial-level agency directly under the State Council. The China Securities Regulatory Commission, in accordance with laws, regulations and authorization from the State Council, uniformly supervises and manages the national securities and futures markets, maintains the order of the securities and futures markets, and ensures the legal operation of the securities and futures markets. The China Insurance Regulatory Commission was established on November 18, 1998. Its basic purpose is to deepen the reform of the financial system, further prevent and resolve financial risks, perform administrative functions in accordance with the authorization of the State Council, and unify the supervision and management of the financial industry. The insurance market operates in accordance with laws and regulations. The above-mentioned four institutions in the field of financial supervision have won the trust of all members of society through the decentralization of state power, and supervise currency exchange and financial activities in a centralized trust manner. (3) Emerging Internet Economy Emerging Internet financial activities are developed based on the Internet and solve the problem of trust between transaction parties. Figure 2-3 lists some emerging Internet financial representative companies and institutions, such as: Alibaba, which solves the trust problem between buyers and sellers and empowers the development of e-commerce; Sharing economy (Uber, Didi, etc.) third-party organizations It solves the trust problem between the transaction parties and enables it to achieve near-monopoly development in the corresponding fields.
Figure 2-3 Problems caused by centralized trust in emerging Internet financial companies (1) Security issues: As shown in Figure 2-4, once the records of the third-party public trust system are tampered with, even if there are backup records. Parties to a transaction may also be unable to reach an agreement because they cannot fully trust one of the parties. Figure 2-4 Security issues of inconsistent bills (2) Cost issue: As shown in Figure 2-5, additional costs will be incurred through a third-party public trust system, which is too high. These costs will ultimately be borne by each user in various forms. Figure 2-5 Cost issues caused by centralized trust institutions (3) Time cost issue: As shown in Figure 2-6, in cross-border transactions, the clearing and settlement of transactions need to be done through a third party, rather than directly by a third party . The transaction is completed jointly by both parties, and the time cost is relatively high. Figure 2-6 The time cost problem caused by cross-border transactions How blockchain technology solves the trust problem Discussion of solutions to the trust problem (1) Security issues: Distributed ledger storage is shown in Figure 2-7. Each user's computer is considered a block of ledger records. If a record in some blocks has been tampered with but conflicts with records in other blocks, the record will be corrected. In addition, if a certain piece of information needs to be tampered with, at least 50% of the information in the block needs to be tampered with. Obviously, such costs are almost impossible to achieve. Figure 2-7 Schematic diagram of distributed ledger storage (2) Cost issue: Joint management of consensus algorithms is shown in Figure 2-8. Each user's computer that stores the ledger is considered a storage device, and this device is maintained by the user himself. In this way, compared with the centralized trust process, the cost of computer room equipment and maintenance can be reduced to almost zero.
(a) (b) Figure 2-8 Solution to the cost problem (3) Time cost problem: The Internet directly connects both parties to the transaction, as shown in Figure 2-9. All transactions are conducted directly through the Internet without going through a clearing and settlement center. It avoids the time of manual correction after errors occur, directly connects both parties to the transaction, and saves transaction time. For example: ATB, one of Canada's largest banks, announced on July 14, 2016 that it successfully used SAP and the company's technology to remit 1,000 Canadian dollars to Germany in 20 seconds, while such a payment usually takes 6 working days. To be completed. Figure 2-9 The Internet directly connects both parties in cross-border transactions. Blockchain also requires trust. We often see articles that believe that blockchain needs to be “credit-free”. In fact, blockchain builds trust through consensus algorithms. The consensus between nodes ensures the correctness of transactions. Build trust at low cost through mathematics and algorithms, rather than “eliminating credit.” However, digital asset transactions between people do not require two people to know each other or have a relationship of trust, nor does it require a third-party credit reporting agency. It just requires a trusted network where everyone trusts the blockchain. Its essence is not that there is no supervision and no credit, but that it allows society to jointly supervise, that is, social governance, rather than having a single agency issue certificates. It is not for individual institutions to prove who you are, but for society to prove you together. who is it. “Social co-authentication” is essentially a source of trust. Blockchain restores trust to its original state.
Difficulties in implementing blockchain technology to solve trust issues (1) The transaction volume of the Bitcoin system based on blockchain technology is limited to 7 transactions per second. This limit cannot be changed currently, as shown in Figure 2-10. This is incomparable with the tens of thousands of transaction loads per second of VISA and Alipay. Figure 2-10 Comparison of transaction volume per unit time of Bitcoin, VISA, and Double Eleven Alipay (2) Blockchain technology itself determines that the information of each transaction will be transmitted to everyone, and everyone is using a large amount of bandwidth to transmit Information that is completely irrelevant to him may appear, causing a waste of network resources. Although this waste is tolerable under current Internet and bandwidth conditions, as the blockchain gradually expands, this waste will increase exponentially.as shown in picture 2
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