Blockchain

Don Tapscott, author of the best-seller The Digital Economy: Promise and Peril in the Age of Networked Intelligence, believes that the blockchain “is becoming the heart of the innovation economy”, rather than robots, big data, or even AI. Governments and businesses around the world have developed a strong interest in blockchain as the technology is capable of solving many problems during conventional online transactions.

Blockchain is a new application of computer technologies of distributed data storage, point-to-point transmission, consensus mechanism, and encryption algorithm. It is an important concept supporting BitCoin. Fundamentally, a blockchain is a decentralized database. As the underlying technology of BitCoin, a blockchain is a chain of blocks, using each block appended to the previous block via some algorithm specific to the blockchain. A block contains data for a batch of BitCoin transactions, which is used to validate information authenticity (for anti-counterfeiting purposes) and to generate the next block.

Simply put, a blockchain is a distributed ledger, a reliable data base maintained in a trustless decentralized system. Let’s take Alipay as an example here. A conventional transacting method is that a buyer shops on Taobao platform, then makes the payment to the intermediary platform Alipay. When the seller has delivered the goods and the buyer has confirmed reception, the buyer will notify the platform to direct the payment to the seller’s account. In this case, Alipay platform acts as a trustworthy transaction authority, which keeps a record of every transaction in its system and prepares a gigantic ledger containing all relevant information. However, once the center is hacked or the ledger tampered with, the whole system will be endangered.

The transaction model supported by blockchain technology is quite another thing. Under this model, buyer and seller can directly transact with each other without the presence of any intermediaries for credit transactions. When a transaction is completed, the system sends the transaction information to the P2P network via broadcasting, and all nodes or hosts will record the transaction upon information validation and confirmation. We can see that a ledger in blockchain is not controlled by a single centralized authority, but is under the collective control of each party in the system. It means that all the nodes and hosts will back up the transaction data. Even if one of them breaks down, gets attacked or tampered with, the overall data record will not be affected. Transaction data is transmitted within the network using encryption, so one needs to intercept at least 51 percent node data and decode it within a very limited time. The possibility is deemed close to zero.

In spite of certain security limitations and deficiencies, blockchain provides a scaled consensus mechanism that can resolve trust issues with higher efficiency through establishing a decentralized trusty network. So far, its application has gone beyond the boundaries of digital currencies such as BitCoin. As a data management system that remains secure and reliable without interference of an authoritative intermediary, blockchain will provide solutions to many problems in finance, the internet of things, logistics, public services, digital copyright, and public welfare, and make a great difference to all of society.