Blockchain and “Bikers”

Last year, financial giants including JPMorgan Chase, Citigroup, Goldman Sachs, and Nasdaq all expressed their enthusiasm for blockchain technology. The blockchain technology that these giants are enthusiastic about is also called distributed ledger. So, the question is! What exactly is a distributed ledger? Let's use a short story to illustrate this - a cyclist.

To make it clear, let's start with another thing - people transporting bonds vs. people waiting for transactions. Before the establishment of NASDAQ, people rode bicycles carrying bags full of bonds on Wall Street in order to complete the settlement as quickly as possible. Later, as the business increased, the bicycles were no longer able to handle it. There was a period of time in the 1960s when Wall Street only traded four days a week, four hours a day, in order to keep the settlement speed up with the trading volume.

Later, the DTC clearing system appeared! But in essence, it is still a bicycle, just with an accelerator. After this development, it still doesn't work, because a bicycle can't outrun a computer. So, in 1971, a meeting was held to discuss and brainstorm, and the DTC clearing system was born. The method of this system is that all transactions must be conducted within the system, including brokers must also access this system. Nasdaq is still using it today.

However, there is a more important problem. This is a "centralized" system. Obviously, its problem is just to change a bicycle that can step on the accelerator. We often see in some movies and TV dramas that the death of the emperor or the head of the family leads to chaos or even collapse of the entire country and nation. The fundamental reason is that the centralized system cannot last long. When there are enough transactions and enough brokers, we will find that this system is also in danger of paralysis or even collapse.

So, experts wondered, would an autonomous, distributed system be better? The answer is yes . Blockchain is a distributed ledger where every node can see the general ledger and then maintain it, but cannot tamper with it unless you control more than 51% of the nodes, which is impossible.

To put it more simply, if your family has an account book, you are responsible for keeping accounts. In the past, your parents gave you their wages, and then you recorded them in the account book. Thinking about it, it is still a little exciting. In the middle, if you want to buy delicious food because of greed, you may record less than ten yuan in the account book; then you want to buy a mobile phone, and the account book may record less than a few thousand yuan. This is just an example. I believe that many people wanted to take some pocket money from their parents' pockets when they were young. But with a distributed ledger, these problems will not exist. Because you are keeping accounts, your father is also keeping accounts, and your mother is also keeping accounts. They can all see the general ledger, and you cannot change it, and your parents cannot change it either. In this way, your father who wants to buy cigarettes and you who are greedy cannot tamper with the account book.

Characteristics of blockchain

Back to financial institutions, distributed ledgers have the same function. Distributed ledgers have the characteristics of decentralization, trustlessness, immutability, and digital encryption security. Those headache-inducing problems such as liquidation, auditing, and patching of loopholes are swept away!

This is the story we are going to tell today - blockchain and "cyclists". Do you understand the concept of distributed ledger? If you still have doubts, please see the picture below.