Bitcoin: The best blockchain application

Thank you all. It is a great honor to be here today to communicate with you. Before I start, let me share an interesting story. An hour ago, my colleague Sun Xiaoxiao proposed to his girlfriend through blockchain, and the proposal was successful. I benefited a lot from listening to the lectures of the four guests. However, some listeners may feel that blockchain is so far away and virtual, but it is not. My sharing will give you a direct view of the blockchain phenomenon and interpret blockchain in the most popular language.

In the past two weeks, the price of Bitcoin has soared from 3,000 yuan to the current 4,800 yuan. Two weeks ago, I submitted this topic to the organizer, and it seemed that I had revealed the secret.

Of course, Bitcoin, as the best blockchain currently, does not need to be measured by price. Since its birth in 2009, its stability and robustness have been obvious to all. Moreover, the concept of blockchain itself is derived from Bitcoin. Most of the blockchains we are talking about today have nothing to do with Bitcoin and have been separated. From digital currencies running on blockchains, they have become assets running other values. However, I still have a strong interest in sharing Bitcoin's blockchain with you, the first blockchain of mankind and the best blockchain at present.

On the 12th, I was giving a talk in Changsha, and a guest said that in the Bitcoin industry, there are only two businesses that make money, one is mining, and the other is exchanges. I was the next guest to come on stage, and I said, hello everyone, we at HaoBTC are both mining and exchanges.

Well, let's start with Bitcoin mining. Bitcoin mining is actually the maintenance and promotion of the operation of the blockchain, and is the most basic industry of the blockchain. At present, our mines account for 5% of the world's total, which means that for every 100 bitcoins produced in the world, 5 are mined by us.

This is our mining farm, located in Kangding, Sichuan, at a small hydropower station on the Dadu River. Sichuan is extremely rich in hydropower resources, and here we use wastewater and waste electricity to mine Bitcoin.

This is a Bitcoin mining machine, Avalon's mining machine. The company behind Avalon's mining machine is Canaan Creative, which has just been wholly acquired by A-share company Luyitong for 3.06 billion yuan. What does this illustrate? The concept of blockchain has been spreading for a long time, but if capital is to be landed, it is more stable and reliable to land through the Bitcoin industry. After all, the technical threshold and market operation are there for several years. Of course, most of the current domestic blockchain entrepreneurs are also transformed from Bitcoin enthusiasts.

(This is the mine's air cooling system and water cooling system, responsible for taking the heat out of the mine)

(This is the mine at night, shining with blue crystal light, full of science fiction)

What are the miners doing? They are calculating, 24/7. Here I will explain the concept of blockchain and its operating principle, taking the Bitcoin blockchain as an example. We all know that blockchain is essentially a ledger, a decentralized, public and transparent ledger.

Then we analyze it from the perspective of readability and writability.

Every file has readability and writability, and the same is true for blockchain. Here, the readability of blockchain means that everyone can query every transaction on the blockchain, mainly if you know his Bitcoin address, it is open and transparent. Now when we send express delivery, we can check where each item is sent according to the express delivery number. The same is true on the blockchain, where each transfer is transferred to and whether it has been transferred. Of course, this ledger is different from express delivery. The express delivery status is recorded by the express delivery company, while the blockchain is recorded by everyone, which refers to writability.

The writability of blockchain refers to who has the power to record things on the blockchain, which means who has the power to keep accounts, referred to as "accounting rights". If the blockchain is likened to a ledger, then there is a page every ten minutes, and this page is a "block". This "block" records the transaction information of the entire Bitcoin network in the previous ten minutes. What the accounting rights have to do is to package this block and then spread it to other nodes in the entire network. This process is Bitcoin mining. The 30,000 mining machines in our mine do this.

The question is, why would anyone be willing to do this seemingly tiring accounting right? The answer is that Bitcoin has a reward system. Whoever obtains the accounting right can get a certain amount of Bitcoin (now 25 Bitcoins per block, 12.5 Bitcoins after July 2016, and this is a mechanism that has been halved every four years since January 2009). Since there is a reward, everyone wants to grab this accounting right. The question that follows is how to design this competition system. The answer is that the founder of Bitcoin used elliptic encryption algorithm and hash algorithm to design a very difficult problem. There is no shortcut to solve this problem. You can only try all possible solutions without a program until you find the answer. Whoever calculates it first will be rewarded with 25 Bitcoins for this block. At the same time, the information of the previous block in the blockchain will be used as the initial condition for solving the problem in the next block. In this way, the security of each block is accumulated, ensuring the immutability of the blockchain data as an account book.

At present, the computing power of the entire network is 1500P. If each P of computing power is 2 million, the cost of maintaining the Bitcoin blockchain is 3 billion yuan, and 15 million kWh of electricity is consumed every day. It can be seen that maintaining a viable and robust blockchain is very costly and expensive.

With this calculation, the maintenance cost of the Bitcoin blockchain is huge. However, if you think of this as a monetary system that combines the issuance, circulation and settlement of currency, and the fact that there are tens of millions of people using Bitcoin and the number is constantly growing, perhaps this is a very reasonable cost.

Speaking of the user groups of Bitcoin, I would like to start with a game platform, Steam. This American game platform has nearly 200 million users, of which 10 million are from China. In November 2015, this game platform removed Alipay payment and accepted Bitcoin payment instead. Suddenly, there were a lot of Steam users in our wallet, and the number is doubling every day. It can be seen that in the field of cross-border small-amount payments, Bitcoin has a very strong demand, not only for games, but also for the purchase of digital products such as music, books, and images. In the IT industry, Bitcoin is even more of a global currency. Bitcoin is used for hiring code writers and rewarding open source libraries.

If entrepreneurs of other blockchains want to divest themselves from Bitcoin and start another blockchain, the first issues they may need to consider are: who has the power to exercise the right to keep accounts on this chain; how to motivate everyone to keep accounts; and how to ensure that this blockchain remains robust and cannot be attacked. This is extremely difficult. The previous guests mentioned several methods: POS, DPOS, and POW. In fact, it proves that POW is the best way for public chains. Of course, if it is a consortium chain or a permissioned chain, it is up to you.

So what is a better solution? My preferred answer is Bitcoin sidechain , which will enable the transfer of Bitcoin and other digital assets between multiple blockchains, which means that users can access new blockchain systems while using their existing assets. Simply put, sidechains are like bridges that connect the Bitcoin blockchain and other blockchains. Bitcoin miners, while maintaining and promoting the Bitcoin blockchain, also promote the operation of other blockchains.

Of course, Bitcoin sidechain technology is still under development. This is the feature I am most looking forward to after the Bitcoin Lightning Network. It will make the Bitcoin blockchain the infrastructure of this revolution and the cornerstone of the value Internet. Just like the Internet, it will become a public chain. On the basis of the public chain, many private chains, alliance chains, and industrial chains will be derived, which together form the entire free-flowing large value network.

In retrospect, why do we need blockchain in this era? In a nutshell, blockchain is a machine for creating credit, which is no longer based on moral credit or legal credit, but on mathematical credit. In this era, we can exchange information with any stranger in the world point-to-point, but we cannot transfer value point-to-point. WeChat transfer and Alipay transfer are still based on trust in third parties, trusting that Alipay and WeChat will not run away or make mistakes in accounts. The birth of blockchain has met the human need for point-to-point value transfer.

For example, Bitcoin, we can run Bitcoin clients to transfer value to anyone in the world without relying on a third party. After 2014, people saw the charm of blockchain and began to wonder whether other assets besides currency can be transferred point-to-point through blockchain. For example, if I have 100 shares of China Everbright Bank, I can transfer them directly to anyone in the world, instead of trading through a securities exchange. If China Everbright Bank registers shares with blockchain, this function can be realized.

So what can blockchain do, and what industries will it bring revolutionary changes to? In short, any industry with credit problems can use blockchain to simplify transaction processes, decentralize, and remove intermediaries. Below, we will briefly imagine the future of blockchain from several scenarios.

First: transfer of right of use or ownership.
In the current sharing economy, what is shared is the right to use. If the sharing economy is combined with blockchain, the future blueprint is waiting. Since the previous guest has already made a detailed explanation here, I will not repeat it. Simply take real estate as an example. If everyone's property certificate is registered using blockchain in the future, then when we rent a house, we only need to generate a smart contract on the blockchain of the corresponding house, and use the public key and private key to complete the transfer of the right to use the house during the lease period. When we sell a house, we can also complete the transfer of house ownership in a similar way.

Second: payment and clearing system.
As far as I can remember, last year’s Alipay computer room problem caused hundreds of millions of users to be unable to use the system for three hours; and at the end of each year, the central bank will conduct clearing, and inter-bank transfers will be unavailable for a few days. If blockchain is used as a payment and clearing system, this problem will not exist, because blockchain is distributed, and the failure of a single node or multiple nodes will not affect its use. At the same time, blockchain itself can automatically clear, without the need for additional clearing. Of course, facing a large number of users, blockchain will also face efficiency challenges.

Third: Authenticity certification system.
This uses the openness, transparency and immutability of blockchain. For example, there are many counterfeit products on the market for famous watches. The only trust we have is to buy them in specialty stores or official stores. In fact, this trust is not solid. If the information of famous watches from manufacturing to delivery is registered on the blockchain, then it will be very convenient for us to identify famous watches. If there is a problem, if the blockchain is used for endorsement, at least some manufacturers or some links without problems can use this part of the data to prove their innocence, and at the same time, some data of the links with problems can become evidence for accountability.

Blockchain, a trust-creating machine, can complete the transfer, transaction and storage of any valuable object in the world, increase the speed of mutual trust, reduce the cost of building trust, and thus improve the efficiency of various social activities. However, blockchain also faces many problems. First of all, the biggest obstacle of blockchain is that it involves existing interest groups in various aspects of society. For example, the Real Estate Bureau cannot allow the registration of real estate certificates to be placed on the blockchain for point-to-point transactions, otherwise taxes cannot be collected. At the same time, due to the limitations of computer hardware, the current blockchain technology cannot cope with the use of hundreds of millions of users and cannot keep up with the efficiency.

Finally, although the current environment and technology are not yet ready for the explosive use of blockchain, blockchain is an idea and a philosophy. In the future, it will eventually be fully implemented and mankind will usher in an era greater than the Internet.

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