Blockchain is a decentralized distributed ledger technology that, through cryptography, consensus mechanisms, and distributed networks, achieves immutability, transparent sharing, and multi-party collaboration of data. The following are the core concepts and applications of blockchain:
1. Core characteristics of blockchain
1. Decentralization
- Data is not stored relying on a single central node, but distributed across multiple nodes in the network, avoiding single points of failure and centralized control.
2. Immutability
- Once data is written to a block and linked to the chain, it is almost impossible to modify (requires over 51% of node computing power to attack, which is extremely costly).
3. Transparency and traceability
- All transaction records are publicly visible and can trace historical data through the chain structure.
4. Security
- Ensuring data security and user authentication based on cryptographic algorithms (e.g., SHA-256, elliptic curve encryption).
2. Basic structure of blockchain
1. Block
- A unit that stores transaction data, including block headers (hash values, timestamps, random numbers, etc.) and transaction information.
2. Hash
- The unique identifier for each block, similar to a 'digital fingerprint'. The hash of the current block contains the hash of the previous block, forming a chain structure.
3. Consensus mechanism
- The core algorithm that ensures all nodes reach consensus on new blocks, common types:
- Proof of Work (PoW): Verifying transactions through computational competition (e.g., Bitcoin).
- Proof of Stake (PoS): Selecting validators based on the amount of tokens held and the duration (e.g., Ethereum 2.0).
- Delegated Proof of Stake (DPoS): Validators are elected by token holders' votes (e.g., EOS).
3. Key technologies of blockchain
1. Smart Contract
- Automatically executed program code that triggers operations when conditions are met (e.g., Ethereum supports decentralized applications DApps).
2. Cross-chain technology
- Realizing data and asset interoperability between different blockchains (e.g., Cosmos, Polkadot).
3. Privacy protection
- Zero-knowledge proof (ZKP), ring signatures, and other technologies enhance transaction privacy (e.g., Zcash, Monero).
4. Application scenarios of blockchain
1. Cryptocurrency
- Bitcoin (digital currency), Ethereum (smart contract platform), etc.
2. Financial sector
- Cross-border payments, supply chain finance, securities trading (e.g., DeFi decentralized finance).
3. Supply chain management
- Tracking the source of goods to ensure data authenticity (e.g., IBM Food Trust).
4. Digital identity
- Users self-manage their identity information to prevent data abuse.
5. Public services
- Government data notarization, election voting, intellectual property protection.
5. Challenges of blockchain
1. Scalability issues
- Transaction processing speed is limited (e.g., Bitcoin processes about 7 transactions per second).
2. Energy consumption
- PoW mechanism leads to high energy consumption (the annual electricity consumption of Bitcoin is comparable to that of some countries).
3. Regulation and compliance
- Anonymity may be used for illegal activities, requiring a balance between decentralization and legal constraints.
6. Future development directions
- Layer 2 scaling: Enhancing performance through technologies like Lightning Network and Rollup.
- Green blockchain: Transitioning to low-energy consensus mechanisms (e.g., PoS).
- Web3 and the Metaverse: Supporting decentralized virtual economy as underlying technology.
Blockchain is reshaping the trust mechanism through technological innovation, penetrating from the financial sector into more industries, becoming an important infrastructure in the digital economy era.