Chain Bazaar Make it easier for the blockchain to land

Chain Bazaar Make it easier for the blockchain to land

Picture丨From the Internet

Picture丨From the Internet

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Report Directory

1. Blockchain 101: Basic knowledge of blockchain technology for beginners

2. Blockchain type

3. History of Blockchain

4. How does the public chain work?

5. Proof of Work (PoW) and Proof of Stake (PoS)

6. The Triple Dilemma of Blockchain and Scalability: Decentralization, Security, and Scalability

7. What is the difference between Bitcoin and Ethereum blockchain?

8. Compared with traditional finance, what are the advantages of blockchain?

9. What are the disadvantages of blockchain?

10. Promising blockchain applications and killer applications

11. How to invest in blockchain technology

12. Blockchain companies worthy of attention in 2021

13. Blockchain is the present and the future

Imagine a world where you could send money directly to the unbanked, and it did so in seconds instead of days and without paying exorbitant fees to banks.

You can store your money in an online wallet that is not tied to a bank, meaning you have "your own bank" and have complete control over your money. You don't need a bank's permission to use a wallet or move it, you don't have to worry about third parties taking it, and some economic policies can't manipulate it.

This is not the world of the future, but the life of the growing number of enthusiastic early adopters of blockchain technology. And these are just a few important use cases of blockchain technology that are changing the way we trust and exchange value, we will discuss other use cases below.

Yet for many, blockchain technology remains a mysterious and even somewhat daunting topic, while others are skeptical that we will ever use the technology in the future. Such skepticism is understandable today, as we are still in the early stages of development and widespread use of blockchain technology.

Blockchain technology in 2021 is like the Internet in the late 1990s. Blockchain technology is by no means a short-lived frenzy. It will always exist. When you read this article, it means that you are also standing in the era frontier.

When you read through this article, you will do a better job of making investment decisions in blockchain technology, and you will be more wise and independent. At the same time, it can also enable you to maintain your own style in conversations with family and friends. Let us analyze in detail below.

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Blockchain 101: The Basics of Blockchain Technology for Beginners

Blockchain technology is the concept or protocol behind the operation of blockchains, the technology that makes it possible for cryptocurrencies (digital currencies that use cryptography) like Bitcoin to work like email on the Internet.

Blockchain is an immutable (unalterable means recorded transactions or files cannot be changed) distributed ledger (a digital record of transactions or data stored in multiple places in a network of computers) that currently has many use cases beyond the category of cryptocurrency.

Immutable and distributed are two fundamental properties of blockchain. The immutability of the ledger means you can always trust it to be accurate, and the distributed nature protects the blockchain from network attacks.

The information contained in a block depends on and links to the information in the previous block, and over time, eventually forming a chain of transactions, hence the word blockchain.

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There are four types of blockchains:

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1. Public chain

Public chains use proof-of-work or proof-of-stake consensus mechanisms. Two common examples of public chains are Bitcoin and Ethereum.

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A private chain is a blockchain that is not open and has access restrictions. Those who want to join need permission granted by the system administrator. They are usually managed by a single entity, which means they are centralized, Hyperledger is a typical use case, essentially a private, permissioned blockchain.

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3. Alliance chain

Here, we should note that there is no 100% consensus on whether alliance chains and hybrid blockchains are different. Some people distinguish the two, while others believe that the two are the same.

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A sidechain is a blockchain that runs parallel to the main chain. It allows users to move digital assets or transmit information between two different blockchains, improving the scalability and efficiency of the main chain. A typical example is Liquid Network.

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The history of blockchain goes back farther than you can imagine, and we can briefly summarize its history with four simple key questions.

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Who Invented Blockchain?

But the most famous cause is Satoshi Nakamoto (a pseudonym for a person or group of people) who invented and implemented the world's first digital currency, the first blockchain network block of Bitcoin.

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Because blockchain technology is the foundation of blockchain, it cannot be owned by a single person, just like the Internet, anyone can use this technology to run and own their own blockchain.

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Satoshi Nakamoto.

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Satoshi Nakamoto sent ten bitcoins to Hal Finney, which was the first bitcoin transaction in history. In 2004, Hal Finney established the first reusable proof-of-work system.

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How does the public chain work?

Let's start the discussion with the easiest part.

As a society, we create ledgers to store information, which in turn has all kinds of applications. As a simple example, we can use ledgers in the real estate industry to store records related to house renovations and sales, or to record all transactions of a company.

At present, traditional ledger records mainly rely on double-entry accounting to store transaction records. While double-entry bookkeeping is an upgrade to single-entry bookkeeping that lacked transparency and accountability, double-entry bookkeeping has its drawbacks: Entries are entered separately, making it difficult for two parties to a transaction to verify each other's records.

Records stored using traditional ledgers are also susceptible to tampering, meaning anyone can easily edit, delete or add to records, making it less likely to confirm that information is accurate.

The public chain effectively solves these two problems and the way we generate trust, and develops the traditional bookkeeping model into a triple bookkeeping method. A third transaction record is cryptographically sealed on the blockchain, which creates a tamper-proof record that is stored in blocks and verified by a distributed consensus mechanism.

These consensus mechanisms also ensure that new blocks are added to the blockchain, an example of a consensus mechanism is Proof of Work (PoW), often referred to as "mining".

The mining mechanism is not universal to all blockchains and is the consensus mechanism currently used by Bitcoin and Ethereum, although Ethereum plans to transition to an alternative unrestricted proof-of-stake (Pos) consensus mechanism by 2022.

Let's discuss how Bitcoin works. When we send bitcoins, a small fee (in bitcoins) is paid to a network of computers to confirm the validity of the transaction, which is then bound to a queue to be processed along with other transactions to be added to a new block.

Computers (nodes) verify the list of transactions in a block by solving a complex mathematical problem, resulting in a hash value consisting of 64-bit hexadecimal numbers.

Once the transaction is resolved, the block is added to the network, and the sum of the fees we paid for this transaction and other transaction fees left and right on the block is the miner's reward.

Each new block added to the network is assigned a unique key, and to obtain each new key, the previous block's key and information are entered into a formula.

As new blocks are continuously added during the ongoing mining process, the blockchain becomes more secure and more difficult to tamper with. Anyone attempting to edit the record will be denied. All future blocks depend on information from previous blocks, and this dependency from one block to the next forms a securely linked blockchain.

Now, let’s dive in and explore the triple dilemma of proof-of-work (Pow) vs. proof-of-stake (Pos) and blockchains, which is the foundation upon which public blockchains work.

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Proof of Work (PoW) and Proof of Stake (PoS)

The PoW workload proof consensus mechanism and the PoS equity proof consensus mechanism, although their goal of reaching a consensus on transaction validity remains the same, the way they reach consensus is slightly different.

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1. What is the PoW workload proof consensus mechanism?

PoW, the technical term for current mining, is also the original consensus mechanism. As we write this, Bitcoin and Ethereum are still using this consensus mechanism. But as mentioned earlier, by 2022, Ethereum will switch to the PoS proof-of-stake consensus mechanism. PoW is based on cryptography, and the principle is to solve mathematical equations that only computers can solve.

The example in the previous section on how blocks are added to the Bitcoin blockchain explains the system.

To solve these problems, developers have built other consensus mechanisms, the most popular of which is the PoS proof-of-stake consensus mechanism.

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2. What is the PoS Proof of Interest consensus mechanism?

The PoS consensus mechanism still uses encryption algorithms for verification, but transactions are verified based on how many tokens (also known as their pledged shares) the selected verification node holds.

Technically, there is no mining by individuals and no block rewards. Instead, blocks are "forged". Those involved in this process lock a specific number of tokens on the network.

The larger a person's stake is, the more mining power they have and the more likely they are to be selected as a validator for the next block.

The result is faster and cheaper transactions, with cryptocurrencies such as NEO and Dash, for example, sending and receiving transactions within seconds.

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The triple dilemma of blockchain and scalability: decentralization, security, and scalability

Most blockchain projects are built around the three core attributes of decentralization, scalability, and security, and developers are always trying to balance these aspects without compromising.

Let's look at these concepts in more detail and explore the pros and cons:

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1. Decentralization

Here speed becomes an important metric, it takes longer to send a transaction because multiple confirmations are required to verify the transaction, which is why Bitcoin transactions are slow.

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2. Scalability

Scalability refers to the ability of a system to handle an increasing number of transactions. Scalability is critical for mass adoption because any system needs to operate efficiently as more and more people use it.

Here's a rough breakdown of how many transactions per second Ethereum, Bitcoin, and credit card companies can process:

Bitcoin: 7 transactions per second

Ether: 30 transactions per second

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3. Security

3. Security

Security is the ability of a blockchain to be protected from attacks, unfortunately exchanges and source code have been hacked many times. This shows that many developers are concerned with scalability and decentralization. And this comes at the expense of safety.

Bitcoin and Ethereum are currently the largest cryptocurrencies and blockchains in the world, so it makes sense to discuss and compare them.

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1. Basic knowledge of Bitcoin

The Bitcoin network is a public, decentralized peer-to-peer payment network that allows users to send and receive bitcoins without the involvement of banks. BTC is the only tradable cryptocurrency and Bitcoin blockchain token on the Bitcoin network.

Transactions are recorded using digital ledgers, and nodes ensure that they follow the POW workload proof consensus mechanism (or perform mining). To many, Bitcoin may seem complicated, but when you think of Bitcoin as a combination of three things, things become very simple.

Peer-to-peer payment system: You can send money from one person or company to another without the need for a bank, and sending money this way is faster, safer, and cheaper than using traditional financial methods.

A store of value like gold (usually BTC is called digital gold), but it is much easier to transfer than gold.

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2. Basic knowledge of Ethereum

In 2013, Vitlaik Buterin discovered the limitations of Bitcoin during a meeting with fellow Bitcoin developers. Vitlaik Buterin decided to improve the Bitcoin blockchain and build Ethereum.

The Ethereum network is a public, decentralized, peer-to-peer network that, like Bitcoin, uses nodes and allows users to send and receive the cryptocurrency Ether (later changed to Ethereum).

Dapps, short for "decentralized applications," are computer programs that can interact with the Ethereum blockchain. Smart contracts, however, run on the Ethereum blockchain, and once certain conditions are met (written into computer code), smart contracts can be executed automatically without an intermediary. For example, a smart contract could be programmed to send a portion of your bitcoins to a designated person after your death.

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3. Comparison between Ethereum and Bitcoin blockchain

But they differ greatly in what they were created for and in what capacity, Bitcoin is a decentralized payment and store of value system. Its blockchain is a database of all bitcoin transactions and keeps track of bitcoin ownership. Ethereum is not just a payment system, it allows smart contracts and applications to be built on top of it, making it a much more complex blockchain.

Compared with traditional finance, what are the advantages of blockchain?

（1）to trustto trust

（2）: Blockchains are immutable and can automate trusted transactions between counterparties that do not require mutual knowledge, transactions can only be executed if both parties satisfy the procedural conditions.unstoppable

（3）: Once the conditions programmed into the blockchain protocol are met, the transaction cannot be reversed, changed, nor can it be stopped if it has been initiated, it will be enforced and no institution including - banks, governments or third parties will be able to stop it .: The records on the blockchain cannot be changed or tampered with, Bitcoin has never been hacked. A new block of transactions is added only after a complex mathematical problem is solved and verified by a consensus mechanism. Each new block has a unique encryption key derived from information from the previous block, and the key is added to a formula.

（4）decentralizeddecentralized

（5）: No single entity maintains the network. Unlike central banks, decisions on blockchains are made through consensus mechanisms. Decentralization is very important to ensure that people can easily access and structure transactions on the platform.: In the traditional financial system, you need to pay a fee to a third party like a bank to be able to process the transaction. Blockchain removes these intermediaries and lowers fees. Some systems return fees to miners and staking nodes.

（6）peer to peer: Cryptocurrencies like Bitcoin that allow you to send money directly to anyone, anywhere in the world, without intermediaries like banks that charge transaction fees or fees.

（7）transparenttransparent

（8）: Public blockchains are open-source software, anyone can access them to view transactions and their source code. They can even use their code to build new applications and make suggestions for improvements to the code, in a way that the blockchain system accepts or rejects suggestions in a consensus manner.universal bank

: Two billion people worldwide do not have bank accounts. Because anyone can access the blockchain to store money, it's a great way to provide the unbanked with the financial services banks can provide, avoiding theft that occurs due to holding cash in the physical world.

Public blockchains are not without dangers and challenges. The following are the issues of greatest concern at present:

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1. Environmental impact

Blockchain networks like Bitcoin use a lot of electricity to verify transactions, which leads to an increased burden on the environment. Bitcoin consumes more electricity than a mid-sized European country, and its mining threatens China's climate change goals.

However, many would argue that Bitcoin is held to a higher environmental standard than anyone and anything. This may be true, especially given that blockchain and Bitcoin are alternatives to the traditional financial system, which can be far more power-hungry and have a much greater environmental impact.

With a study by Galaxy Digital showing that Bitcoin consumes less than half the energy of the traditional banking system, you could argue that Bitcoin is a step in the right environmental direction.

However, maintaining a balanced perspective is critical when considering cost, environmental impact, and blockchain benefits.

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2. Personal Responsibility

One of the most important strengths of blockchain and cryptocurrencies is also its greatest weakness. When you invest in a public open-source blockchain by mining or buying cryptocurrency and storing it in your digital currency wallet (your wallet is like your bank account, no one else has access to it but you and own password), only you control your money.

Unsurprisingly, a significant portion of bitcoins will be permanently lost, with estimates that 20% of current bitcoins, or 3.7 million coins, may be lost forever.

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3. Growing pains

Fortunately, developers are building solutions to improve blockchain scalability and the speed of transactions. For example, the lightning network allows transactions to occur off the bitcoin blockchain to speed up transactions. On Ethereum, many innovative Layer 2 solutions are being developed to improve scalability and speed, including rollups, zero-knowledge proofs, and sidechains.

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4. False narratives

Some cryptocurrencies have undoubtedly been used for illicit activities, the most famous example being Silk Road: People use Bitcoin to transfer money and buy drugs on the platform.

However, this is no different from the illicit activities that often occur when people use other currencies such as US dollars.

It is a false narrative that cryptocurrencies are used only or primarily for illicit activities, and that this will only delay their inevitable adoption, which would greatly benefit everyone, including the financial system.

Promising Blockchain Applications and Killer Apps

Here are some promising use cases:

（1）cryptocurrency: The "killer app" of the blockchain today is encrypted assets. Cryptocurrencies allow us to move value across borders faster and cheaper without banks. Besides Bitcoin and Ethereum, other digital currency examples include Polkadot (DOT), NEO, Cardano (ADA), Tether (USDT), Binance Coin (BNB) and Litecoin (LTC).

（2）smart contractsmart contract

（3）: A smart contract is a type of code written into a computer, that is, a contract that can be automatically executed without an intermediary after the conditions are met.decentralized bank

（4）: The use of blockchain technology in banking is also proliferating. For example, many banks such as Barclays, Canadian Imperial Bank and UBS are interested in how blockchain can improve the efficiency of back-office settlement systems.Video Games/Art

（5）: You may have heard of Crypto Kitties, a game launched on the Ethereum blockchain. A virtual pet in the game even sold for more than $100,000.Peer-to-peer energy trading

（6）: People can buy and sell energy directly without an intermediary.Supply Chain and Logistics Tracking

（7）: Blockchain is being used to trace the origin of precious metals and food. For example, Walmart and IBM partnered to create a food traceability system. Based on open-source ledger technology, it makes it easier to track contaminated food.optimize medical procedures

（8）: Blockchain can speed up the time it takes to pay health insurance premiums to patients and store and securely share medical data and records.: Property ownership records can be securely stored and verified on the blockchain. These records cannot be tampered with and make it easier to verify ownership of properties.

（9）NFT marketNFT market

（10）: NFT is a digital synonym for items such as paintings and clothing, and the NFT market provides an open platform for purchasing NFT.Music Royalty Tracking

（11）: The blockchain can track music streams and instantly pay those who have contributed to the song.Anti-Money Laundering Tracking System

（12）: Authorities can more easily trace the original source of funds because every transaction on the blockchain is recorded and leaves a tamper-proof trail.personal identity security

（13）: Traditional identity storage systems are insecure and fragmented. Blockchain provides a unified, immutable and interoperable infrastructure so you can store and manage records securely and efficiently.New Insurance Allocation Method

（14）: Examples include peer-to-peer insurance, parametric insurance, and microinsurance.: Advertisers can use smart contracts to automate ad delivery. For example, an ad will only be shown to an audience if certain criteria are met.

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How to Invest in Blockchain Technology

Since blockchain offers some promising use cases, has helped many companies become more efficient, and has attracted big players like Amazon (Amazon) and Tesla (Tesla), it could be an attractive investment option.

But there are risks: this is a brand new technology and many projects may not succeed, so only invest what you can afford to lose, do exhaustive research to determine if the project is worth investing in, and decide what exposure you want level.

For example, you can gain more exposure by investing directly in cryptocurrencies instead of exchange-traded funds (ETFs).

 （1）Having said that, invest carefully depending on your goals and risk tolerance, here are the various ways you can invest in blockchain:Buy shares in companies using blockchain technology

（2）: Such as Visa, Walmart, and Siemens listed on traditional stock exchanges such as the New York Stock Exchange. You can buy stocks using online brokers such as Vanguard and Betterment (US).Invest in companies that hold Bitcoin on their balance sheets

（3）, for example, Square, WeWork, MicroStrategy, and Tesla. You can also buy shares in related companies.Use centralized exchanges or decentralized exchanges to configure cryptocurrencies like Bitcoin and Ethereum

（4）. Trading on centralized exchanges has been the norm in the crypto world long before the advent of decentralized exchanges. With a centralized exchange, you don't have your own private keys, the exchange is the custodian that stores your funds. Decentralized exchanges are peer-to-peer without intermediaries. Binance, Kraken, Bittrex, Bitfinex, Luno, and Coinbase are all centralized exchanges, and Uniswap, Compound, KyberSwap, Airswap, IDEX, SushiSwap, Balancer, and Totle are all decentralized exchanges.Invest in Crypto Exchange Traded Funds (ETFs)

（5）. An ETF is a basket of securities that tracks an asset or index that you can buy and sell on exchanges throughout the day. For example, many traditional ETFs include bonds, currencies, commodities, and stocks and track the S&P 500. In the crypto space, you can invest in a variety of ETFs, such as the Bitcoin ETF that tracks the price of Bitcoin. Each ETF will vary depending on who is launching it. Companies offering ETFs include Grayscale, Galaxy Digital and Gemini.Invest in Crypto Mining Companies

（6）, such as Riot, Hive, and Marathon. Many mining companies offer investors the opportunity to participate indirectly by issuing company shares. To invest in Riot, use an AOL broker like Robinhood. To invest in Hive and Marathon, you can choose Canadian brokerage companies like Questrade, TD Direct Investing or BMO InvestorLine.Buy cryptographic hardware and mine yourself

（7）. While bitcoin mining requires a significant capital outlay, you can also mine other coins with a fairly low barrier to entry.. Another way to mine cryptocurrencies yourself is to join a mining pool. A mining pool pools the computing power of others on the network, thereby increasing the chances of a successful block being mined. The rewards for all mined blocks are shared among the miners in the pool.

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Blockchain Companies to Watch in 2021

These public companies either use blockchain or have cryptocurrencies on their balance sheets. There are also companies that allow you to trade cryptocurrencies, or are mining cryptocurrencies.

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Blockchain is the present and the future

With many promising real-world use cases, such as faster cross-border payments and the application of smart contracts, blockchain technology is here to stay.

As more companies realize how blockchain technology can help them, they will invest more resources, money and time in the technology, and even more use cases will emerge. While we know that blockchain technology remains a complex topic for many, it doesn't have to be complicated for you.

We hope this guide will give you the confidence to start conversations with friends and acquaintances on the topic of blockchain technology, and will unpack and simplify this often-intimidating topic whenever you need to talk about any blockchain technology. When sorting out concepts, please refer to this article.

Most importantly, we hope this article sparks a spark in you to learn more about a technology that is fundamentally changing the way we trust and exchange value.

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