In recent days, with the announcement of the speech of the Political Bureau of the Central Committee of the Communist Party of China, blockchain has once again become the focus of the public. It not only quickly made the headlines of the major media, but also led to A 40% rise in the depressed Bitcoin. Meanwhile, it also pulled the market of A-share blockchain related concept stocks. Overnight, blockchain seems to be standing in the strongest wind.
In fact, as early as 2015, with the great popularity of Bitcoin, blockchain was once a boom, but except in the financial field, it was basically a barbaric growth situation. However, this time, blockchain technology was specifically mentioned in the Politburo’s study, and also pointed out the development direction in terms of theory, foundation, applied talents and so on. So, what can the blockchain which has been mentioned as the national core technology achieve on earth?
Introduction to Blockchain
What is Blockchain
Before answering that, let’s take a look at what a blockchain is. According to Wikipedia, a blockchain is a set of records (also known as blocks) that are protected by cryptography and linked together. Each block contains the encrypted hash of the previous block, the corresponding time stamp, and the transaction data (usually represented as a hash value calculated by the Merkle Tree algorithm), which makes the block content difficult to tamper with. A distributed ledger, concatenated with blockchain technology, allows two parties to effectively record a transaction and verify it permanently.
Taking Bitcoin as an example, the diagram of the blockchain is as follows:
It can be seen from this that blockchain is a distributed ledger that only increases and cannot tamper with the history. The increase of each block is completed through a certain consensus mechanism. For example, Bitcoin uses PoW, which means that miners verify and package transactions, and compete to write a new block by solving mathematical problems. Theoretically, only by mastering 51% of the computing power of the whole network can an effective attack be formed. Although different blockchains have created different consensus mechanisms, the core is to solve the problem of how to guarantee trust (such as confirmation of authority, double flower) under the premise of decentralization. So far, most consensus mechanisms have worked very well.
The shape of the blockchain
According to the characteristics of consensus mechanism, blockchain can be divided into three types:
- Public chain: A form of digital currency, such as Bitcoin and Ethereum, in which anyone can participate in bookkeeping. It is completely decentralized and the books are open and accessible. For the sake of its own safety, this chain needs a certain incentive mechanism to ensure enough participants. However, with the rise of “speculation” behavior, the lack of supervision leads to the drastic fluctuation of its own value. Therefore, it is difficult to form a formal commercial application before truly solving the above problems.
- Private chain: This chain is owned by a single organization and is actually a centralized product that can only be used within the organization. There are very few scenarios where this can be used unless the organization is complex enough, where interaction between departments is inefficient and there is a lack of trust;
- Alliance chain: Weakly centralized form, bookkeepers are formed by alliance negotiation, and books are only shared within the alliance. In this way, there is no absolute center. A certain consensus is formed through the binding force of the alliance, and transaction costs are reduced and efficiency is improved through the sharing of ledgers. Personally, I think that in the case of data privacy protection, the alliance chain is the form of block chain to shine. Therefore, the following paper mainly discusses the alliance chain.
Block the birth of the chain was originally intended to serve the COINS, but has its own public, tamper-resistant, traceable, etc, especially as intelligent contracts in the chain of blocks, the computing power is introduced in the future in participating in various social and economic activities, especially all kinds of approval and deposit certificate, traceability and audit and so on will have extremely extensive application prospect.
Due to the characteristics of blockchain itself, the financial industry is the first to pay attention to the value of blockchain, and has carried out a lot of meaningful practices.
Cross-border payment and remittance
Ripple is the earliest practice of cross-border money transfer based on blockchain. The principle is based on the xCurrent settlement system, using the Interledger Protocol, by establishing a mapping between the bank’s existing account and the ILP distributed ledger. Fast clearing between banks through the Ripple network. Its business model is as follows:
Excerpt from “Cross-border Payment Solutions Combining Blockchain and Stablecoin”
The general process is that the payer proposes to make overseas payment, and the remitting bank first exchanges KYC/AML information, remittance amount, commission fee and other information through xCurrent to confirm. Then, the transaction will be broadcast on Ripple Net respectively. When the transaction is confirmed and the consensus is reached, Bank A and Bank B will respectively increase or decrease the actual account corresponding to the recipient and the sender according to the change of their ILP book liquidity, so as to achieve the purpose of real-time and low-cost cross-border remittance. Currently Ripple is only focused on building Ripple Net, simplifying access through a unified API and using XRP to create a faster, cheaper and more stable payment network.
At present, in addition to Ripple, AlipayHK, the Hong Kong version of Alipay, has launched the cross-border remittance service of blockchain based on electronic wallet. Its users can transfer money to Philippine users through blockchain technology. In 2017, Visa launched Visa B2B Connect, a fast, secure, and predictable cross-border payment system based on blockchain. MasterCard also opened its blockchain-based API to the public on its developer platform in 2017.
In the US cash equity market, for example, there is a large amount of repetitive manual confirmation and reconciliation processes involved between the buyer clients, broker-dealers, trust/custodian banks and the Depository Trust and Clearing Corporation (DTCC) of the transaction, resulting in a transaction being completed in less than a second but taking up to two days to clear. Therefore, if Blockchain is introduced, it is expected to significantly reduce and eliminate transaction errors and reduce manual intervention, which is estimated to reduce at least 2 billion US dollars per year. It also reduces settlement time, reduces trade risk and reduces the amount of capital the broker/dealer needs to set aside for outstanding and outstanding trades.
So far, a number of exchanges around the world have tried blockchain technology. The Depository Trust and Clearing Corporation of America joined the Hyper Ledger project launched by the Linux Foundation and published the white paper Empowerment of Disruptive: Exploiting the Potential of Distributed Ledger and Improving the Post-Transaction Environment. German Renaissance credit Banks such as use of test block chain have done many business, such as Renaissance credit bank research issued euro commercial paper, based on the technology of distributed books in order to realize business process automation, and carried out based on the test block chain of securities issuance and trading, prove that a block chain has obvious advantages; The Australian Securities Exchange (ASX) has announced that it will use distributed ledger technology to provide post-trade services for shares, replacing its existing post-trade settlement system, Chess. As of November 2017, the blockchain system has completed a two-year proof-of-concept and suitability test, which is estimated to save exchanges, regulators, participants, custodians and other participants $4 billion to $5 billion per year when applied to the stock market after trading.
This year, Facebook announced its plan to launch Libra, which is based on blockchain. The goal is to become a stable and secure digital currency that can be circulated around the world, and to provide convenient, fast and cheap payment tools on this basis. Libra ensures the stability of its currency value by anchoring a basket of currencies. From this perspective, it can be seen that Libra is not a currency in the real sense and has no essential difference with Alipay and WeChat. At present, after multiple rounds of hearings, Libra has not been able to dispel the doubts of U.S. regulators. PayPal, eBay and Visa have all withdrawn from the market since October, making Libra’s prospects very uncertain.
While Libra’s development is unknown, it will no doubt further spur countries to make progress on sovereign digital currencies. At present, 32 countries around the world, including China, have put forward the plan of digitizing their national currencies, among which China can be said to be in the forefront. As early as 2014, China started the relevant research work. This year, the People’s Bank of China has mentioned “digital RMB” for many times. It is expected that the progress has reached a certain stage and the relevant work will be accelerated.
According to the information disclosed so far, China is positioning digital currency as a substitute for cash with the same issuing system. In addition to retaining the property of RMB, it not only has the characteristics of convenience, anti-counterfeiting and low cost, but also has great advantages in anti-money laundering and anti-tax evasion. It is unknown whether blockchain is used for the underlying technical support of digital RMB. However, judging from the technical requirements such as the spread of centralized management and the support of at least 300,000 transactions/second, at least the current blockchain technology is still difficult to meet the requirements.
The real estate
The immovable property of real estate is also a field that forms a good combination point with block chain, especially the application of smart contract, which will greatly save the cost of real estate (especially cross-border) transactions, reduce the corresponding risks, and also bring great convenience for the related investment and financing.
Propy is a global real estate transaction platform based on block chain, its the etheric fang to support intelligent contract for block chain support, provide support to foreign and local buyers online buying and selling property, by inviting deal, signed an agreement, payment, send report, confirm the purchase statement disclosing, steps, such as transfer, real estate contracts Completed transactions and formed contracts on the blockchain. In addition, the project has cooperated with the South Burlington City Office to achieve the interoperability of property documents and blockchain, and has gained certain legislative support. While the security and stability of the project on Ethereum is worth further observation, it is a very interesting experiment in the area of housing transactions. In China, this field started late and the amount of focus is relatively small. Most of it is driven by the government and is basically in the proof-of-concept stage.
However, I believe that as the technology on the blockchain rises to the height of the national core technology, high-quality applications based on the blockchain will surely emerge. Imagine the future of real estate from the land, drawing design, development, construction, building materials, property transactions, maintenance record, lease, mortgage, even the occurrence of major events are recorded in a can inquire tamper-resistant block chain, this will greatly increase the transparency of information, reduce the size of the operation of the “black intermediary” At the same time, it can also greatly reduce the financial cost and time cost of both sides of the transaction.
At present, the integration of multi-party data has become an urgent demand for enterprises to improve their competitiveness and efficiency. With the establishment and improvement of laws and regulations related to privacy protection, it is not only required to legally comply with the data use process, but also required to record the use process, so as to hold accountable when problems occur. As you can see, blockchain is a natural fit for the task of auditing the use of data.
TalkingData has also made some attempts in the exploration of secure data sharing and blockchain, and partnered with MIT to launch a data sharing security project called Opal (Open Algorithms). The core idea is to move public secure-vetted Algorithms to data sources. The raw data does not leave the data source during the calculation process, and the user only gets the aggregated results and does not see the raw data. Algorithms that review and do not move data ensure that protected data is not compromised.
The specific process of Opal is as follows: firstly, the algorithm provider designs the algorithm according to the data metadata information published by the data provider, and then submits the algorithm to the data provider after the algorithm is completed; The data provider reviews and verifies the algorithm to ensure that the algorithm does not disclose the original data or privacy, and saves the algorithm database after passing the algorithm. The data user shall submit an application to the data provider each time it is used, specifying the specific algorithm and data source; The data provider executes the algorithm, performs an automated security audit on the calculated results, and finally outputs the results to the user.
As mentioned earlier, blockchain performs the audit in Opal, with the participation of the data provider, the algorithm provider and the user. On the one hand, when the algorithm passes the security review, it will be released to the blockchain to prevent tampering. On the other hand, data usage requests, fingerprints of the calculation results and other information will also be published on the blockchain in the form of audit data, and this process will be automatically executed through smart contracts, so as to ensure the interests of all parties.
In other areas
With the maturity and popularity of 5G, the Internet of Things and other technologies, the application scenarios of blockchain in supply chain management, product traceability, health care, digital asset trading, copyright protection, public welfare and other fields will be more and more close to reality.
In the era of big data, the existence of data islands seriously restricts the value generated by big data. In the future, data will be integrated by technology within the framework permitted by laws and policies. Similarly, it is believed that in the near future, when a single blockchain is mature, the scene of multi-chain fusion will appear by combining cross-chain protocol, and only in this way can the advantages of blockchain be truly played and our daily production and life be served.
Promote the development of related fields
Application block chain in our country the development of the future will focus on exploring the “+” block chain used in the field of the people’s livelihood, to explore the digital economy mode innovation, drive chain blocks and depth of the real economy integration, the underlying technology push block chain services and new city construction, etc., the combination of wisdom so countries will also launch a series of policies, laws and regulations to regulate guide block the development of the chain, At the same time, it will also build the corresponding infrastructure to facilitate the implementation of blockchain applications. Correspondingly, with the continuous development of blockchain technology, it will also drive the development of other fields, and finally form a situation of mutual promotion and synergistic development.
Digital ID Issue
Block chain itself is a very good anonymity, the participants only have a bunch of digital identity, but as the related application of be born, will inevitably request and the external individuals form a link in the physical world, in the chain of blocks of information is public, with the deepening of the application, the privacy of the individual data protection will face serious challenge; In the future cross-chain fusion scenarios, how the same individual’s digital identifiers on different blockchains form correlations is also a key factor affecting the success or failure of cross-chain fusion applications.
Therefore, national legislation is needed to establish an authoritative electronic identity identification system, possibly in the form of EID, to issue different digital identifiers for other blockchains, and to act as identity authentication and identity association in blockchain applications.
Laws and regulations, technical standards
At present, most blockchain applications are in the dilemma of proof-of-concept or difficult to be promoted. One of the reasons is the lack of legal support (such as the problem of confirming rights). At the same time, there is also a lack of normative guidance.
Blockchain is the carrier of asset value flow and plays an infrastructure role in industry application. Therefore, industry authorities or industry associations need to play a guiding and coordinating role to form influential technical standards and application guidelines that take into account multi-interests within the entire industry. Only in this way can we avoid the waste of resources and ineffective competition, and at the same time facilitate the participation of all social forces and accelerate the implementation of industrial applications.
The basic research
Blockchain itself is the application innovation of a series of mature technologies. In ten years of development, there have been few substantive technological breakthroughs. In the future, this situation will be gradually broken with the improvement of national attention. I believe that in mathematics, cryptography, economics, communication and other basic theoretical research, will be with the development of the application and a certain outbreak. Because these technologies are the foundation of the blockchain, the existing technological foundation also restricts the penetration of the blockchain into applications. Only when breakthroughs are made in these areas will it be possible to truly innovate the blockchain technology.
In addition, it is worth mentioning that, with the continuous emergence of attacks against digital wallets and smart contracts, corresponding technological breakthroughs are needed in the security field, and new security models need to be established to ensure the security of blockchain applications.
Machine learning, distributed computing, hardware
With the further development of 5G and the Internet of Things, as well as the increasing popularity of machine learning, blockchain will also achieve deep integration with these technologies. Future block chain network hardware, there are a lot of intelligence in a variety of complex business logic, and even the AI will run on the hardware in the form of intelligent contracts, which is different from the traditional in the data center based on high performance computing, powerful storage capacity and stable energy supply environment, so this will also stimulate innovation in the field of machine learning, distributed computing, etc; This, in turn, will encourage the development of underlying hardware, specialized computing chips, and security chips.
Innovation in the above technological fields is inseparable from people, so there will be considerable development in personnel training, education and other aspects.
China’s positioning of blockchain as infrastructure and core technology shows the importance of blockchain, which undoubtedly brings great benefits to the development of blockchain technology and points out the development direction of related applications. It can be predicted that the issues related to blockchain will become lively again, which will also lead to a large influx of capital, talent and technology into the blockchain industry. However, it must be clear that there is still a long way to go before the application of blockchain in the real sense is implemented without a good solution to such issues as interest barriers, privacy protection, regulation, law and income-output ratio. On the other hand, blockchain is not a panacea. For example, data sharing and the recent frequent privacy leakage related to crawlers can not be solved by blockchain alone.
In general, the development prospect of blockchain is very clear, especially in the areas of people’s livelihood and application integration that the president emphasized in his speech. In time, there will be a real and practical application of blockchain.
- “Cross-border Payment Solution Combining Blockchain and Stablecoin”
- Research on the Application and Supervision of Blockchain Technology in the Field of Securities
- “Blockchain: From Theory to Practice”
Author: TalkingData Zhao Zhigang
For a detailed description of TalkingData’s collaboration with MIT on OPAL, please read here.