Long story short
Blockchain is an advanced database that utilizes decentralized accounting technology.
The three most important characteristics of blockchain are: decentralization (distributed), anti-tampering (information transparency), and consensus mechanism.
Blockchain technology has been increasingly used in virtual currency, supply chain management, games, music, charity and other fields.
What is blockchain
Simply put, blockchain (Blockchain in English) is an advanced shared database that utilizes decentralized accounting technology. For those who are completely new to blockchain, they need to break down the above definition of blockchain into the following small questions:
What is centralization?
At present, if we want to transfer money to others, we need to do it through a bank. After the bank receives our transfer request, it will transfer the funds in their system. The accounting method on the ledger is: "User A -1 yuan, user B +1 yuan."
This is a very centralized process: because in this process, our money is stored in the bank, the actual transfer of money is operated by the bank, and the accounting is also operated by the bank - the actual transfer process In fact, the initiative does not lie in the hands of users. Therefore, when a bank has a system error, is hacked, or even goes bankrupt, the safety of users' funds cannot be guaranteed.
The dilemma of the centralized transfer process for both the payer and the payee is: the payee can claim that they did not receive the money when they received the money, and the payer can also claim that they paid the money when they did not.
What is decentralization?
Decentralization refers to excluding centralized institutions or individuals in a centralized system and dispersing control among multiple participants.
Take the transfer process as an example: In a decentralized world, all users’ computers have a ledger shared around the world. When user A uses blockchain technology to transfer money to user B, everyone’s computer ledger It will always display: "User A -1 yuan, user B +1 yuan". In this way, neither party to the transaction can lie. If a bad guy wants to attack and tamper with the ledger, he will need to change 51% of the global computer ledger at the same time, which greatly improves security and credibility. This is why blockchain technology is also called distributed ledger technology (DLT, Distributed Ledger Technology).
The above example of centralization actually illustrates the challenges currently faced in traditional finance, and also reflects the importance and necessity of developing blockchain technology.
The difference between blockchain and general databases
There are three main differences between blockchain and general databases:
Blockchain is decentralized and cannot be modified by anyone; while general databases are centralized and administrators can modify the content.
Blockchain only accepts uploaded data; general databases can edit and delete data.
The ledgers of all parties in the blockchain are consistent; companies generally do not share their own general database. For example, it is impossible for Bank of China and Bank of America to share a database, but blockchain users in China and the United States do use the same decentralized database.
The difference between blockchain and cloud storage
In blockchain technology, you need to provide your hardware resources to store the general ledger; with cloud storage (such as Google Drive, Baidu Cloud Disk) you only need to upload your data or software, and the hardware used to store data is provided by provided by the service provider.
Therefore, blockchain is more suitable for scenarios that require decentralization, decentralization, traceability and non-tampering. There is a certain threshold for ordinary users; cloud storage is more suitable for convenient, scalable and low-cost scenarios, and is easier for ordinary users to use.
What is the relationship between blockchain and virtual currencies such as Bitcoin?
Many people equate blockchain with Bitcoin, but in fact the two are completely different in nature. The main differences can be summarized in 2 points:
Blockchain is the underlying technology used by virtual currencies such as Bitcoin. In addition to Bitcoin, blockchain has many different application scenarios: charity, games, music, supply chain, etc. The current applications of Bitcoin are only currency speculation and a small number of store payment scenarios.
Bitcoin is considered a valuable “currency” that can be bought and sold through virtual currency exchanges. As a technology, blockchain itself has no value. No one will ever say that they "buy or sell" blockchain, but will only say that they "learn" or "use" blockchain technology.
Practical applications of blockchain
Application of blockchain in charity industry
The application of blockchain in the charity industry mainly has the following three aspects:
Improve the transparency of charitable organizations: Relying on the traceability of blockchain, the income and expenditures of charitable organizations can be recorded on the blockchain and support public viewing and tracking. Donors and supervisors can easily and quickly understand each transaction. The destination of a donation.
Enhanced data security: Relying on the immutable nature of the blockchain, donation and expenditure data are stored on the blockchain and cannot be modified or deleted, thus ensuring the integrity and security of the data.
Increased efficiency: Smart contracts on the blockchain can automate donation and funding agreements, reducing administrative costs for charities. For example, smart contracts can automatically trigger donations when a certain charity goal is completed.
The charity projects under the Alipay APP that we are familiar with introduced blockchain technology as early as 2017 to improve senior transparency.
Application of blockchain in the gaming industry
The application of blockchain in the gaming industry mainly has the following three aspects:
Virtual asset management: Blockchain can be used to manage virtual assets in games, such as in-game currencies, equipment, props, etc. These assets can be recorded on the blockchain and exchanged and transferred between different games, thereby increasing their value and usefulness. This can also reduce the involvement of middlemen and increase the transparency and efficiency of transactions.
Anti-cheating: Blockchain can be used to prevent cheating in games. For example, blockchain can record every action and transaction in a game, making the game more difficult to hack and cheat.
Incentive mechanisms: Blockchain can be used to design better incentive mechanisms to promote player participation and contribution. For example, blockchain can implement a token system so that players can receive rewards and recognition, thus encouraging them to participate in the gaming community and ecosystem.
Blockchain applications in the music industry
Blockchain technology can bring more transparency, efficiency and fairness to the music industry, while providing better copyright protection and revenue opportunities for music authors and owners. At present, the application of blockchain in the music industry mainly includes the following three aspects:
Copyright management: Blockchain can be used for music copyright management, allowing music authors and owners to better control the copyright of their works. Blockchain technology can track and verify copyright information of music to prevent piracy and improper use.
Decentralized distribution: Blockchain can be used for decentralized music distribution, allowing music authors and listeners to interact and trade directly without the involvement of middlemen. This increases the accessibility and usability of music while reducing distribution costs.
Cross-border payments: Blockchain can be used for cross-border payments, allowing music authors and owners to transact and transfer across the globe. Blockchain can realize decentralized payments and transfers while ensuring the security and privacy of transactions.
Application of blockchain in supply chain management
The three major elements in the supply chain industry are: materials, money, and people. Blockchain technology can be applied in these three aspects:
Product logistics tracking: Blockchain can track all information during the logistics and transportation process, including the starting point, destination, transportation company, transportation time, etc. of the product, allowing participants to better control the logistics process and ensure the quality and safety of the product. and legality. This can help consumers better understand the quality and history of the product while reducing the circulation of counterfeit and inferior products.
Money Management: Blockchain can be used for money management, allowing for safer, faster, and cheaper transactions. Blockchain can realize decentralized payments and transfers while ensuring the security and privacy of transactions.
Supplier Management: Blockchain can be used for supplier management, allowing for better supply chain management and collaboration. Blockchain can record suppliers’ credit evaluations, transaction records, contract terms and other information, making cooperation between suppliers and customers more transparent, fair and efficient.
Others also asked the following questions
What are the disadvantages of blockchain technology?
Although more and more companies and individuals understand and use blockchain technology, the following three major problems need to be overcome in order for blockchain technology to be truly adopted on a large scale:
Privacy issues: Blockchain technology has the characteristics of anonymity and decentralization, so all information and transactions will be permanently recorded on the blockchain. This may lead to personal privacy issues.
High energy consumption: Because the way blockchain technology works requires a lot of computing resources and energy, it has a high energy consumption, which can have a negative impact on the environment. According to estimates by the U.S. environmental protection group Earthjustice, virtual currency mining activities in the United States between mid-2021 and 2022 produced more than 27.4 million metric tons of carbon dioxide emissions, which is equivalent to 2021 emissions from the largest coal-fired power plant in the United States. three times.
The technical threshold is too high: Blockchain technology is still a relatively new technology, so it requires high-level technical talents and complex technical support during the development and application process. This is the main reason that currently limits the application of blockchain technology in most fields.
Why there are always blockchain-related scams
As a technology, blockchain itself is neutral and does not involve fraud. However, due to its anonymity, decentralization, non-tampering and other characteristics, blockchain technology will be used by some criminals to carry out fraudulent activities. There are two main reasons why blockchain-related scams are rampant:
High learning threshold: Because blockchain technology is an industry with high entry barriers, ordinary people may only know that it is a very powerful thing. However, the learning threshold is too high, making it easy to be deceived by some "fake teachers". Even some fraud projects will use the banner of blockchain technology to defraud, but in essence they are "selling dog meat with a sheep's head." Some people who don't know why they just want to participate in blockchain projects are easily deceived.
Lack of supervision: Currently, countries around the world generally lack effective supervision and legal frameworks for blockchain technology. This allows some people to use blockchain technology to carry out fraudulent activities, and also results in law enforcement agencies having no basis to follow and sentencing some criminals after they are caught. , let alone recover the victim’s losses.