Is blockchain the next big thing? But it can easily fail if you’re not careful

On December 17 last year, according to the Bitcoin platform CEX.IO, the dollar price of Bitcoin broke through the $20,000 mark for the first time, setting a new historical high. After that, Bitcoin entered a period of adjustment and its price continued to fall.

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Is blockchain the next big thing?

When Bitcoin and other virtual currencies plummeted, the concept of blockchain became extremely popular. Xu Xiaoping, the founder of Zhen Fund, was enthusiastically promoting blockchain. Other companies, such as NetEase, launched a blockchain lucky cat, and Kodak also made a comeback by catching up with the concept of blockchain.

From this point of view, blockchain is the next hot spot. However, it is not easy to take advantage of this favorable trend. If you are not careful, you will fail, even if you are an experienced driver.

What is the next blockchain?

Now, people who study and invest in blockchain technology praise it as the next generation of disruptive core technology after steam engines, electricity, and the Internet. This is a bit of an exaggeration. Simply put, blockchain is a decentralized, shared, and encrypted distributed ledger technology.

Here is an example: the current process of online shopping on Taobao is: you pay money to Alipay - Alipay notifies the seller to ship after receiving the payment - the seller ships the goods - you confirm receipt - Alipay pays the seller. Alipay is the "center" between buyers and sellers.

On the blockchain, there is no "center" between sellers and buyers, but sellers and buyers trade directly. The transaction process will be recorded and broadcasted to the outside world. At this time, passers-by A, B, C, and D all heard the news, so everyone silently remembered the transaction in their hearts, and then the transaction was completed.

So this leads to a huge advantage of blockchain - decentralization, which simplifies the processing method and eliminates the risk of being controlled by centralized agents. For example, now Alipay + WeChat Pay has monopolized mobile payments, and our middlemen have run away with the money.

However, decentralization is not without risks, such as the risk of information confirmation. But now we don’t have to worry about it. A complete blockchain application includes four components, namely shared ledger, smart contract, privacy protection and consensus algorithm.

Let's use the example of borrowing and repaying money:

A said he would lend B 100 yuan, and the transaction process would be recorded and broadcasted. Passersby A, B, C, and D all heard the news, so everyone remembered the transaction in their hearts.

Then B said he received 100 yuan from A, and the transaction process was recorded and broadcasted. At this time, passers-by A, B, C, and D all heard the news, so everyone remembered the transaction silently.

At the same time, the IOUs of both parties are recorded and broadcasted in the form of smart contracts. At this time, passers-by A, B, C, and D all heard the news, so everyone silently remembered the transaction. The smart contract stipulates the trigger mechanism of the IOU and the trigger mechanism of repayment.

At this time, A says that the loan has been released, and B says that the loan has been received from A, and the IOU has been activated; if B needs to repay the debt after 3 days, the system will automatically perform the relevant operations of repaying the money after 3 days, and the transaction process will be uniformly recorded and broadcasted to the outside world. At this time, passers-by A, B, C, and D all heard the news, so everyone silently remembered this transaction in their hearts.

Therefore, there are fewer rogue behaviors between AB, because other people will have a detailed backup of the transaction, and no one can change it. In addition, it also simplifies the process of borrowing and repaying money in daily life.

In which fields will blockchain explode first?

A complete blockchain application makes blockchain decentralized, continuous, and traceable. Compared with existing Internet technologies, it can better reduce friction in information exchange and business operations. In this regard, banking and financial services, the Internet of Things, network security, certification and notarization will be the first to use blockchain technology.

In the banking sector, for example, it has been reported that UBS and Barclays Bank of the United Kingdom have begun to use blockchain technology for trials to speed up back-end settlement functions. The banking industry even said that blockchain can reduce intermediary costs by at least $20 billion.

Network security is also easy to understand. It is to send verified data through distributed encryption technology to ensure the correct source of the data. At the same time, it also makes it difficult for hackers to intercept data during this period.

The most powerful aspect is in the field of certification and notarization. How to prove "I am me" and "my mother is my mother" can be done directly by utilizing the traceability of blockchain.

According to a research report by Pacific Securities, 2017 can be seen as the first year when blockchain applications began to be gradually implemented. Technology giants and start-ups including Microsoft, Oracle, and BAT have begun to launch their own blockchain applications and products, mainly in the fields of finance and the Internet of Things.

Problems facing blockchain today

There is nothing wrong with blockchain technology itself. The biggest problems come from its products, such as virtual currencies like Bitcoin and ICO issues.

For example, Bitcoin has been used by some criminals as a tool for money laundering, pyramid schemes, smuggling and other illegal activities. For example, in June 2017, a ransomware virus called Petrwrap or Petya broke out in the UK, Ukraine, Russia, Denmark and other places, and Bitcoin was the ransom.

In addition, the Silk Road, one of the dark web platforms that was shut down, was full of drugs, pornography, hackers, killers... and all illegal items on the platform were traded through Bitcoin, with different price standards.

This is the use of Bitcoin's highly anonymous mechanism. The police or anyone can see the address and the money in it, but they cannot interfere with the use of the Bitcoin. Even if the final address can be traced, it is difficult to establish a connection between the virtual account and the real person. In addition, after several transfers, it is impossible to distinguish the source of the Bitcoin.

The other is ICO, and the authenticity of the so-called ICO project cannot be verified by anyone. Those who want to participate in the ICO project pay real money or Bitcoin, and in return they get "tokens" issued by the ICO project staff. When the ICO project fails, you will have nothing left except the tokens.

This week, China and South Korea introduced a variety of policies to suppress digital currencies. Affected by the two countries, digital currencies fell across the board, with most of the declines exceeding 20%. In the past 24 hours, among the top ten digital currencies by market value, Swiss Franc fell by more than 35%, performing the worst; Bitcoin had the smallest decline of 17.7%.

As for ICO projects, in September 2017, the People's Bank of China, the Central Cyberspace Affairs Commission, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission jointly issued an announcement on preventing risks in token issuance and financing. This basically sentenced ICO to death.

Finally, I want to say that blockchain and its products are essentially a consensus on blockchain technology, but now they are used as a tool for capital speculation. So we can all pay attention to blockchain technology now, but we must be careful about the concepts hyped by blockchain, otherwise they will fail.