How does blockchain create trust?

Abstract: Blockchain generates accounting rights through competition mechanism, ensuring the decentralization of accounting nodes and the consistency of account data of all accounting nodes. Today, let's talk about how the accounting method of blockchain makes it a machine for creating trust? 01 The traditional accounting method of accounting is something that everyone is familiar with. Especially now, you don't need to carry cash when you go out. How much money you have is equivalent to how much money you have in your bank account, Alipay or WeChat wallet...

The blockchain generates accounting rights through a competitive mechanism, ensuring the decentralization of accounting nodes and the consistency of ledger data of all accounting nodes.

Today, let’s talk about how blockchain’s accounting method makes it a machine for creating trust?

01 Traditional accounting method

Accounting is something that everyone is familiar with. Especially now, you don’t need to carry cash when you go out. How much money you have is equivalent to the balance after you have recorded various income and expenditure in your bank account, Alipay or WeChat wallet.

So what is bookkeeping? For example:

Xiao Zhang's monthly salary is 10,000 yuan. During the salary payment process, the bank will record: the company account deducts 10,000 yuan and Xiao Zhang's account adds 10,000 yuan. After the salary is paid, Xiao Zhang uses WeChat Pay to buy a piece of clothing on Double 11, spending 500 yuan. At this time, WeChat will record: Xiao Zhang's account deducts 500 yuan and the merchant's account adds 500 yuan.

We recognize this accounting method based on trust in the bookkeepers (third-party institutions such as banks and WeChat Pay). However, they belong to centralized accounting systems, and it is difficult to avoid accounting failure and distortion due to system failures, company bankruptcy or other reasons.

If everyone can have a ledger, everyone can participate in accounting together, and the ledgers are synchronized in real time, the ledgers will become more open, transparent, authentic and reliable. In this way, if any party has problems, it will not affect the safe operation of accounting. Compared with accounting by individual institutions, this is obviously a better way of accounting, which is actually the accounting method of blockchain.

02 Blockchain accounting method

In the blockchain system, bookkeepers are selected according to a set of competition rules, and all participants have the opportunity to win and be elected as bookkeepers. Let's assume that the rule is a Rubik's Cube competition, and whoever completes the Rubik's Cube first will get the right to keep the book. This reflects a feature of blockchain bookkeeping: decentralized bookkeeping. Bookkeepers are randomly generated by playing the Rubik's Cube game, ensuring that the bookkeeper is no longer a centralized institution.

In each Rubik's Cube competition, there is only one winner, who is responsible for bookkeeping. The bookkeeping information is packaged into a data packet, which is called a block (i.e., a new block is mined). After other players verify that it is correct, they copy (download and synchronize) this new block to the blockchain they maintain. This ensures that although all players use distributed bookkeeping, everyone's account book data is consistent (the information on the blockchain is the same). This reflects the second major feature of blockchain bookkeeping. All nodes (players participating in the game) maintain the same account book, which is very convenient for reconciliation.

So how can we ensure that the bookkeeper will not cheat and keep false accounts?

This is achieved through a verification and reward mechanism. All players will verify the authenticity of the winning player's account. If a player makes a false account, other players will not recognize the account, and the winning player will waste the opportunity to make a false account. Moreover, every time the right to make a false account is obtained, it means a generous reward. Making a false account is equivalent to automatically giving up the reward. Therefore, the winning player will not make a false account for the sake of interests.

Even if he is a saboteur who deliberately makes trouble, he will not be able to pass the verification of other players in the end, because only the correct accounting will be recognized by all players. This ensures the correctness of the accounting data.

Once accounting is completed, a new block is mined. The information of this block is fixed, and it has its own unique data fingerprint (i.e. hash value. The hash value of the block is generated by performing a hash operation on the block. If any change occurs to the block, the hash value of the block will change greatly).

In the next round of the game, the new winning player records a new page of bills (mines a new block). The header of the new bill (block header) needs to record the data fingerprint of the previous page of bills (the hash value of the previous block). This ensures that the previous page of bills and the current bill are closely associated with each other in a clear order.

If the bill data on the previous page is modified, its data fingerprint (hash value) will change and cannot correspond to the hash value recorded in the next page of the bill. All players can recognize that this is an invalid chain that has been tampered with and discard it.

The header of the previous block also records the hash value of the previous block, so the entire blockchain is linked together and has a strict sequence. If the data of a block is tampered with, the accounting data of all subsequent blocks will change, which can be described as "a single move affects the entire body." This is the third major feature of blockchain accounting: all blocks on the chain are linked together, and the algorithm ensures that the information on the entire chain cannot be tampered with.

03 Summary

The blockchain generates accounting rights through a competitive mechanism, ensuring the decentralization of accounting nodes and the consistency of the ledger data of all accounting nodes. By referencing the hash value of the previous block in the new block, the data of the entire chain is guaranteed to have a strict order and cannot be tampered with. Through the above methods, the transaction information on the blockchain is ensured to be credible, so the blockchain is a machine for creating trust.