Understand the logic and principles of blockchain technology in one article

1. The foundation needed for blockchain: artificial intelligence

What is blockchain? Today I will try to express the most profound logic to you in the most colloquial language.

Essentially, blockchain has been described as “a swarm artificial intelligence system.”

The question is, what is artificial intelligence?

There have been many controversies in the scientific community regarding the definition of "intelligence". Han Feng, a Ph.D. from Tsinghua University, proposed a theory from physics while studying blockchain. The theory is as follows: In principle, according to Landauer's principle, "entropy" is the most chaotic and ignorant state of things. Irreversibly eliminating one bit of "entropy" will produce one bit of information, and this process will consume at least KT ln2 of energy.

Since the chaotic and ignorant state of things is eliminated, the bit of information generated is "intelligence".

Most of the current institutions and systems are regarded as "one-centered" intelligent systems, including the existing banking system (the central bank is the center), the monetary system (the central bank is the center), and national institutions (the central government is the center).

The characteristic of centralization is that the central node has the information of distributed nodes, and the sub-nodes do not have the information of other nodes (centralization, non-public transactions).

Moreover, the pain point of centralization is that the security of the system depends on the security of the central node, and the distributed nodes have no control over this.

Schematic diagram of centralized nodes/Shenwan Hongyuan Research

The best metaphor for a center and multiple centers that can be used in the animal kingdom is: a bear and a bee, a bear's den and a beehive.

The bear is the central decision maker and makes decisions for itself, while the bees follow the basic protocols of the hive, such as keeping a certain distance from the bees next to them.

From Centralization to Decentralization

In a centralized system, usually only one node makes decisions, so the "entropy" solved and the "bits" obtained are less (smaller). For a center to complete the N*Kln2 entropy reduction problem of N nodes, it needs to compress 2 to the Nth power. In this process, the difficulty of solving the problem will increase exponentially.

The formula is Kln2 to the power of N

If the number of nodes is greater than 45, the center can be compressed at superluminal speed. What does this mean? This is beyond the physical limit.

And every bee is considered a Maxwell's demon.

Maxwell's demon concept map source/Internet

What is Maxwell's demon?

Google it: Maxwell's demon is a demon created by Maxwell. It guards a door in the middle of a container filled with liquid or gas. When liquid or gas molecules in Brownian motion (uncorrected motion) come into contact with it, it always puts the faster-moving molecules on one side and the slower-moving molecules on the other side. In this way, after a period of time, one side of the container becomes hot while the other side becomes cold. Work can be done using the hot side. In this way, a "perpetual motion machine" can be created. (But the rebuttal argues that this violates the second law of thermodynamics. It has been theoretically proven to be impossible. That is to say, either such a "demon" does not exist at all; or this "demon" also needs to "eat", that is, consume energy. The result will only be counterproductive.)

In plain words, an ideal "Maxwell's demon" can be understood as an artificial intelligence with a self-compensation mechanism.

2. Origin of blockchain

Having said so much, what is the use of Maxwell's demon? It is the foundation of decentralization.

What is the blockchain we are talking about? We know that Bitcoin requires a computer terminal to record accounts. The process of competing for the right to record accounts and completing the process is called mining, and every "miner" who records accounts is a "Maxwell's demon."

Regarding mining, a more academic expression is: the essence of Bitcoin "mining" is to repeatedly calculate the hash value of a random string (a string transformation operation, commonly used in encryption and digital signatures) and check whether the result meets specific requirements. Bitcoin "mining" hardware has gone through four development stages: CPU->GPU->FPGA->ASIC. Currently, the Bitcoin industry uses ASIC chips to complete mining calculations.

In terms of process, it is implemented as follows: nodes in the network collect valid but unverified transactions, which are placed in blocks in chronological order. Various nodes join in and try to solve the workload problem. This behavior of nodes is called mining.

The earliest blockchain technology became famous because of Bitcoin, which was the first to apply blockchain technology. Blockchain is also the cornerstone of Bitcoin transactions.

It is “a storage and verification protocol”.

It is also a "decentralized database" that ensures security through distributed storage and full network verification. These features are well used in Bitcoin.

Blockchain solves three major pain points:

Decentralization: (Remember the "Kln2?" formula for a single central intelligent system in the previous article?) In a centralized system, when the number of participating nodes increases from 5 to 100, the system risk increases; in a multi-centralized system (that is, decentralized), when the number of participating nodes increases from 5 to 100, the system risk decreases exponentially.

Security: Blockchain can also solve the TCP/IP security transmission problem and the trust problem of information networking and decentralization. Building a value Internet based on the TCP/IP protocol can fundamentally change the existing financial industry production mode and subvert social organization and production mode. Trust: Since each node in the blockchain has the information of each node, the information can be anonymous (transactions are public); the approval of transactions in the system depends on the consensus principle of all nodes, and the rules are fair and mandatory for all nodes (decentralized). Moreover, as time goes by, the number of transactions increases, and the chain of synchronous updates in each node becomes longer and more difficult to tamper with.

3. Blockchain Application

The most representative of centralized and decentralized systems are banks and Bitcoin.

In the banking system: Traditional bank ledgers are characterized by centralization and non-public transactions.

The bank has all the information of user accounts and transaction history (centralization) Users only have their own records and cannot know other users' transaction records (transactions are not public) If all transaction payment records are in hand, account information can be deduced (centralization risk)

Its transaction record is as follows:

In the Bitcoin trading system, it has the characteristics of decentralization and public transactions.

In Bitcoin, there is no central node (decentralization)

All transactions are public (transactions are public)

However, all transactions are anonymous, so even with all transaction information, it is impossible to infer the account information corresponding to an individual (security)

Its transaction record sample is as follows:

In fact, more than 50 banks around the world are developing and applying blockchain technology. We can see the following news:

2016/6/22 BNP Paribas and seven other financial institutions jointly developed a blockchain clearing system (BNP Paribas, French Trust Bureau, Euroclear Bank, Euronext, S2iEM, Societe Generale and Paris Financial Markets Association)

In 2016, the focus will be on designing a new blueprint for a high-performance pound settlement system based on blockchain technology (Bank of England)

2016/6/24 Ripple adds 7 banks as technical partners to build R3-style cooperation network Ripple announced that it has added 7 new banks to their technical cooperation network, and is expected to become the world's first company to truly use blockchain-based technology for cross-border transfers (Santander Bank, UBS, UniCredit Bank, ReiseBank, Canadian Imperial Bank of Commerce, National Bank of Abu Dhabi (NBAD) and ATB Financial) Banks' application of blockchain technology is just the tip of the iceberg. In the fields of securities, payment, land registration, investment and financing, logistics, etc., the application development of blockchain technology has been carried out. I would like to end the vision of blockchain technology application with a picture of Guojin Securities, especially the vision of "programmable society". It is really great to think about it!