Forbes: Blockchain and Decentralization

On a bright Sunday morning in the year 2030, you stroll into a local grocery store to buy some milk. With a wave of your hand, your smartwatch detects the transparent encryption chip built into the milk carton and obtains its hash code. In that instant, the milk is yours, undisputedly yours.

In the future, it is indeed possible that we will no longer use cash to buy things, and completely re-invent the concept of ownership of things. Even though the Internet has changed our lives in many ways, there has never been a way to truly "own" something digital without the recognition of a centralized authority. Everything you own online now, from money to your identity, requires an impartial third-party certification body to prove it. This is the only way we can truly prove that you own it. If you think about it, technically speaking, all your online assets are actually borrowed by you. Until now, that is no longer the case.

Entry: Blockchain

Blockchain is a huge, fraud-proof distributed ledger that may be a new infrastructure in the future. This public ledger can transparently record and verify all transaction records using a consensus algorithm without the intervention of a third party. It uses mathematical algorithms to replace intermediaries. Because the infrastructure of blockchain is decentralized, it reduces a lot of friction and time waste compared to traditional centralized methods.

Blockchain technology is a typical symbol that surpasses traditional and ancient institutions such as government. The efficiency of blockchain technology requires us to focus on specific people in each industry - from engineers to bankers to lawyers. A group of people who have not been changed by the Internet until now.

To many skeptics, decentralized technology sounds like cynical, anti-authoritarian nonsense. To many others, it may be nothing more than geeky fantasies. However, the most visionary innovations can often be predictions of a better future. Much like the Internet in the 1990s, blockchain networks are ahead of their time. If we go back to 1995, remember the headline of Newsweek: "Why the Internet Failed", which emphasized the problem that "reading on a screen is not convenient." The same skepticism is looking at blockchain and decentralized digital currencies.

Despite being so far ahead of its time, blockchain has shown great potential to eliminate today's inefficiencies and insecurities in handling asset ownership, which is impossible to ignore. Although we don't know where blockchain technology will eventually take us, we can be sure that early adopters of blockchain technology will be the biggest beneficiaries. When pioneers establish a new ecosystem, the demand for blockchain engineers will grow exponentially. But the problem is that these things can't be learned in school. When blockchain technology begins to penetrate our society, engineers related to cryptography, distributed databases, and network security will be in great demand, and these disciplines are not always prioritized in computer science.

Safer, cheaper and faster

Combining decades-old algorithms, blockchain technology is the underlying technology of the digital currency Bitcoin to maintain transactions. It uses a protocol called "Proof-of-Work (PoW)" to confirm ownership by spending time doing digital puzzles. Most importantly, it is immutable. This means that once a "block" (a page of ledger that records transactions) is created, it can never be changed. This is the secret weapon to ensure the security of the blockchain, because it is mathematically impossible to cheat the blockchain. This technology will not be limited to Bitcoin - it can be used with other blockchain technologies to handle almost any problem. Here are a few examples.

Blockchain technology is complex and subtle, but its basic theoretical logic is simple. The "proof of work" mechanism used by the blockchain is achieved by consensus among multiple parties involved. In order to verify whether everything is true, the blockchain uses the "longest chain" rule. In other words, the longest chain represents the truth. Andreas M. Antonopoulos, a Bitcoin developer and promoter, explains how "proof of work" helps blockchain transactions securely:

1. On the blockchain, miners bear the financial cost (spending computer power to process hash values) to use the "proof of work mechanism" to ensure the security of the blockchain;

2. If miners act according to the rules, they will be rewarded;

3. Miners are motivated by funds and will act according to the rules.

In theory, it is impossible to cheat in this system. Of course, there are some theoretical weaknesses. For example, Ghash.io is the largest mining pool in the Bitcoin system. Its computing power in the system has been close to 51% of the total computing power of the system many times, posing a threat to the security of the system. Large mining pools seem to be the biggest threat to the Bitcoin blockchain at present, because they have the potential to make the entire system over-centralized.

Greg Slepak, a blockchain lecturer at Blockchain University, said: "If mining becomes more centralized than it is now, Bitcoin will still work, and it may still survive mainstream adoption, but it will no longer be Bitcoin. It will just have a 'Bitcoin' name, but it will become a very inefficient 'PayPal'."

If engineers can come up with a solution to address 51% attacks while keeping the entire system decentralized, it will greatly help blockchain accelerate its path to mainstream adoption.

Bankers are exploring the use of blockchain technology to apply to their own systems, migrating the system to a distributed database through blockchain. The world's nine largest banks are working together to study how to build a unified financial ecosystem on the blockchain. The following picture perfectly explains why financial professionals are so interested in this technology and are beginning to enter the market. Because of the decentralized nature of blockchain, assets can flow faster and more economically than traditional centralized methods.