Blockchain: a panacea for wealth or deadly arsenic?

Blockchain has been talked about a lot recently. Some people are already familiar with the concept, but some people are still confused. There are too many related contents on the Internet now, which makes people confused and have no idea what blockchain is.

So is blockchain just hype or is it real and worth looking forward to? This article will slowly explain it all. As the saying goes, using physical objects to explain concepts will not make a big difference, but using concepts to explain concepts is basically a scam.

The core of blockchain is to solve the trust problem

Although it is a cliché, I still have to say it again, what exactly is blockchain. The so-called blockchain is a new application model of computer technologies such as distributed data storage, peer-to-peer transmission, consensus mechanism, encryption algorithm, etc. The so-called consensus mechanism is a mathematical algorithm in the blockchain system that realizes the establishment of trust and the acquisition of rights and interests between different nodes.

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In a narrow sense, blockchain is a chain data structure that combines data blocks in a sequential manner in chronological order, and is a distributed ledger that is cryptographically guaranteed to be tamper-proof and unforgeable.

In a broad sense, blockchain technology is a new distributed infrastructure and computing paradigm that uses block chain data structures to verify and store data, distributed node consensus algorithms to generate and update data, cryptography to ensure the security of data transmission and access, and smart contracts composed of automated script codes to program and operate data.

The biggest feature of blockchain is that it cannot be tampered with or forged, or in other words, the cost of tampering and forging is very high. It solves the most fundamental problem between people - the trust problem. It can replace a third party as a simple program to make judgments, allowing both parties to conduct transactions without scruples.

Blockchain is designed as a protection measure, such as a highly fault-tolerant distributed computing system. Blockchain enables hybrid consistency. This makes blockchain suitable for recording events, titles, medical records and other activities that require data collection, identity management, transaction flow management and provenance management. Blockchain has great potential for financial disintermediation and has a huge impact on leading global trade.

Current blockchain applications

To be precise, the blockchain craze has spread rapidly from overseas markets to China's capital market. As blockchain technology has broad application prospects in many fields, it is highly sought after by the market, but it is also full of controversy. The regulatory authorities have also paid attention to the current craze caused by blockchain in the capital market.

However, at present, some relevant people believe that there is uncertainty in the resource investment required for the extended research and development of blockchain technology. The blockchain industry is currently in its incubation period and companies still need to spend a lot of time exploring it. Its market prospects are difficult to predict.

Interestingly, although blockchain is very popular in the current capital market, many listed companies have an ambiguous attitude towards the industry. Some companies said they have just established a blockchain strategy and started recruiting talents, while some listed companies have clearly stated that they will not get involved in this field for the time being.

Although many listed companies have issued risk warning announcements, some listed companies have actively stated that they have participated in blockchain technology, and many projects and strategies have just been established recently.

Data shows that blockchain is a new application model of computer technologies such as distributed data storage, peer-to-peer transmission, consensus mechanism, encryption algorithm, etc. In the financial field, blockchain technology has very broad application prospects in digital currency, payment settlement, smart contracts, financial transactions, Internet finance and other aspects.

The creation of virtual currency

Due to its broad commercial prospects, blockchain has also attracted a large amount of capital, and a large number of companies have entered the blockchain. According to statistics, in the past three years, venture capital in blockchain has exceeded 1.4 billion US dollars. As of the end of April 2017, 455 blockchain and Bitcoin-related companies around the world have received a total of 1.947 billion US dollars in financing, of which 114 million US dollars were obtained in China; China has a total of 61 companies that have received investment, ranking second in the world.

Currently, there are about 150 blockchain startups in the country, and 11 blockchain startups have received VC investment with a total investment of about 226 million yuan.

Of course, when it comes to blockchain investment, virtual currency is inevitably involved. Blockchain is an important concept of Bitcoin. It is essentially a decentralized database and also the underlying technology of Bitcoin. Blockchain is a string of data blocks generated by cryptographic methods. Each data block contains information about a Bitcoin network transaction, which is used to verify the validity of the information (anti-counterfeiting) and generate the next block.

As the most popular virtual currency, Bitcoin is also thriving in the market. The concept of Bitcoin was first proposed by Satoshi Nakamoto in 2009. The open source software designed and released based on Satoshi Nakamoto's ideas and the P2P network built on it are Bitcoin is a P2P digital currency. Peer-to-peer transmission means a decentralized payment system.

Moreover, Bitcoin is not issued by a specific monetary institution. It is generated based on a specific algorithm and a large amount of calculation. The Bitcoin economy uses a distributed database composed of numerous nodes in the entire P2P network to confirm and record all transactions, and uses cryptographic design to ensure the security of each link in the currency circulation.

The biggest difference between Bitcoin and other virtual currencies is that its total number is very limited and extremely scarce. The currency system had no more than 10.5 million in 4 years, and the total number will be permanently limited to 21 million thereafter.

However, it is precisely because of its ingenious design mechanism that is difficult for most people to understand that it has broken the central bank's monopoly on currency issuance for a century, and its experience of being exploited by hackers and criminals in its early days has made people unwilling to recognize that Bitcoin is a natural currency.

Increasingly stringent regulation

Due to the natural characteristics of Bitcoin, its transactions and circulation are also very difficult to regulate, resulting in many criminals using Bitcoin to engage in some special activities.

Nowadays, people who engage in transactions similar to Bitcoin in my country are not protected by law, and experts also say that virtual currency is illegal and investment losses are not protected by law. In addition, on December 11, 2017, the State Administration for Industry and Commerce also published an article titled "Beware of New Internet Frauds Using MLM as a Means", issuing a risk warning for new Internet frauds using MLM as a means and under the banner of virtual currency.

The current threshold for digital currency is very high. To enter this industry requires considerable knowledge reserves. For ordinary people who are seriously lacking in professional knowledge, they should never participate in this dangerous financial game. Moreover, many virtual currencies are still unknown, and there is the possibility of pyramid schemes and illegal fundraising. Those who made a lot of money before have withdrawn, and those who come in later are basically here to fill the pit. However, many people have a fluke mentality, thinking that they will not be the last batch of leeks cut, so it is better to play less of this game of passing the parcel.

The China Internet Finance Association calls on consumers and investors to recognize the nature of the relevant model, enhance risk prevention awareness, invest rationally, and not blindly follow the hype. For the IMO model and various ICO and "virtual currency" trading venue services that continue to be provided to domestic residents through the deployment of overseas servers, if any illegal financial activities are found, they can be reported to the relevant regulatory authorities or the China Internet Finance Association, and those suspected of illegal crimes can be reported to the public security organs.

Beware of blockchain hype

Of course, the emergence of a new thing is always accompanied by various problems, but it is not all negative news. According to foreign media reports, the South Korean government's policy coordination office issued an announcement stating that South Korea will start implementing a real-name system for cryptocurrencies as planned and will strongly respond to illegal cryptocurrency transactions.

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According to reports, South Korea will make a decision on the bill to close cryptocurrency after a comprehensive discussion; it will support blockchain research and development investment. However, at the same time, Yonhap News Agency quoted an unnamed official from the South Korean presidential office as saying that the bill to close cryptocurrency exchanges may not be included in the government's measures immediately.

China's current attitude towards virtual currency is relatively resistant, as can be seen from its strong regulation of Bitcoin trading platforms. Other countries, on the other hand, have a more open attitude towards Bitcoin, but are also strengthening regulation to prevent it from becoming too widespread and affecting their domestic economy and people's livelihood.

Compared with the popularity of virtual currencies, Bitcoin, as the underlying technology and infrastructure of Bitcoin, is not far behind. However, what is interesting is that many of the so-called blockchain technologies are nothing more than copies of more mature digital currency architectures. Some companies do not even master these most basic parts, but in order to catch the heat, keep up with the trend of market value management, and raise stock prices, they all label themselves. Amid the popularity of blockchain, we need to be wary of market speculation risks.

summary

The current blockchain still lacks specific theoretical and application support in a broader field. It is still in its early stages of development and is very immature. However, due to the current hot market, this far-from-mature concept has been hyped up. As a result, the current blockchain technology has become a speculative project. For many people, the current blockchain is not a panacea for getting rich, but a deadly dose of arsenic.

Finally, I would like to emphasize that investment has a direction and you need to be cautious when entering the market.