Bitcoin Technology Blueprint

What other uses does Satoshi Nakamoto’s Blockchain have?

The simplest application of Blockchain is to build a basic storage system, and perhaps it will be put into use in the near future. Those who advocate social transparency and freedom of information believe that government records can be presented in the form of Blockchain, which allows the public to truly participate in the legislative process and express their opinions.

Each data block is set with two flags, one is the creation time, and the other is the password proof of the creator. Each added data block will have a timestamp. You can prove that a certain file does exist at that point in time by comparing the hash value in the Blockchain with the hash value of the file you have. Because Bitcoin transactions have strong encryption protection, they can replace the common username and password authentication mode. In the system, a Bitcoin address can be regarded as a username, and the private key can be regarded as a password. Anyone who conducts Bitcoin transactions with you needs to verify whether you have a private key to decrypt.

Blockchain, the core technology of Bitcoin, has many areas where it can shine, and it also solves the problem of network censorship. Metadata cannot be deleted once inserted into the blockchain. Using this important feature, developers have created a decentralized new version of Twitter, Twister, and a decentralized domain name registration website, Namecoin. "Everything we have, everything we do, is managed by a large number of data records," said Kirby from Factom. "Banks are databases, insurance companies are also databases, and the economy is basically a bunch of digital records. You need to take advantage of the concept of a global accounting ledger. If you can bring together the world's data in this way, it will be very exciting." These are just examples of how Blockchain can be used to change the network storage model.

But storing data is just the tip of the iceberg of Blockchain's functions. After all, the Bitcoin network is not just a trading platform. Behind it is a global team of miners, forming a powerful distributed virtual machine system, and their role in the network is obvious. When miners receive some transaction requests, they will verify each request. This operation can be very simple, first verify your identity, check whether you have enough Bitcoin, and then choose to accept or reject the transaction.

What else can miners be asked to do?

For example, "Don't verify this transaction before I die." Or "When you verify this transaction, please adjust the transaction value. The real-time price of Tesla Motors' stock is the amount I want to trade." In the first example, the requester can ensure the authenticity of the will without relying entirely on lawyers. In the second example, it shows how to create a distributed stock market. All of this shows that the calculations performed by miners can have more uses.

The existing Bitcoin protocol advocates the use of a minimalist programming language to limit miners from doing anything fancy. But developers are constantly discussing whether to add some new features to the protocol. If Bitcoin is to participate in more than just static calculations, adding some complexity is necessary. Recognizing this, developers added a new feature called multi-transactions in 2012. This feature allows users to distribute the ownership of a Bitcoin address to other people and set up multiple private keys for them. Since then, many companies have begun to provide escrow services based on multi-transactions.

However, if you want to change Bitcoin's open source protocol, it will inevitably take time and adjustment to meet the requirements of all parties. Some people say that this adjustment process will hinder the development of Bitcoin. "There are five major camps now: developers, miners, merchants, users and service providers (network wallets). It takes consensus among the five parties to achieve major protocol changes." Andreas Antonopoulos, author of the Bitcoin User Guide, said, "It is difficult to make some radical changes now, and the possibility of major changes has gradually narrowed."

But developers are still trying to optimize the Blockchain. There is a possible solution to relieve programmers from adding too much length to the Blockchain. Adam Back originally proposed to use hash functions as a security guarantee for Bitcoin operation. Now he has begun to advocate the use of parallel Blockchain, referred to as sidechain. This function can open up "small compartments" for the Bitcoin ecosystem. First, it needs to freeze the Bitcoin on the main blockchain so that it cannot be paid out, and then based on certain principles, transfer their value to another small Blockchain parallel to the main chain, and define the process as reversible. With the introduction of the sidechain concept, developers can freely build a variety of trading platforms, and Bitcoin owners can also play freely on this experimental platform, but all of this will not be completely separated from the Bitcoin ecosystem. Just last month, Blockstream, together with 10 heavyweights in the Bitcoin community, released an open source link called Sidechain Elements.

Ethereum's ambition far exceeds the development speed of Blockchain. They set up a project to build a brand new Blockchain, so that the entire Bitcoin network can achieve fully distributed operation. Miners no longer just receive commands and then verify the execution. Ethereum intends to allow miners to run and verify software that has nothing to do with the transaction itself. At the time of this article, Ethereum only has a limited access test version and has not yet been officially launched. However, in theory, even if Ethereum stops developing, you can use the existing platform to replace the complicated server system with a shared virtual machine to interact with various types of applications. They have a seemingly incredible goal, "We are creating a brand new Internet," Lubin said, "For Ethereum, each node will correspond to a virtual machine with full computing power. Developers can upload a transaction by using simple programming codes, and then the system will recognize these codes and install this code on the network." In this way, users are interacting with applications on the surface, but in fact they have sent a request to access the Blockchain.

The Ethereum project was very successful in its fundraising. The Ethereum Foundation is a non-profit organization registered in Switzerland that chose to raise funds by selling ether coins (Ether). Unlike Bitcoin, Ethereum had already reserved a batch of ether coins before it was launched to the public. Over a period of 42 days last summer, the Foundation sold a small portion of its reserves in exchange for Bitcoin. The sale was exchanged for 31,529 Bitcoins (at a price of $18 million at the time). The success of this quasi-fundraising experiment not only brought in more and more operating funds, but also gave software developers outside the ether core team enough ether coins to continue developing Blockchain applications.

Over the past few months, developers have been showcasing their projects at conferences around the world. In March, at a conference in New York, developer Connor Keenan showed an application that implements all the basic functions of the Reddit web forum. The program code has now been written to the Ethereum Blockchain. To use the program, you need to create and publish a transaction request on the network and spend a small amount of ether coins. Then, Ethereum miners will run a copy of the program on their computers, allowing you to freely add articles and comments.

Or take the example of a car rental company. Instead of going to a rental car location, swiping a credit card, and picking up the keys, you send a transaction request through Ethereum, which creates a contract with the rental company. The rental payment activates a code on a smart card that opens the car. Another piece of software on the blockchain monitors the number of miles you drive and sends that number to your payment bar, which is then automatically forwarded to the rental company. Those in the Bitcoin camp respond that this model is unnecessary and could be a disaster. “I’m very pessimistic about the more complex approach, and the fact that independent companies are not secure once their interests are dispersed,” said Gavin Andresen, a developer of the Bitcoin Core protocol. “Maybe at the end of the day, when we have self-driving cars and robot inspectors, you’ll think, ‘Well, maybe we can create an independent company that runs entirely by code without human involvement.’ I think it’s going to be a long time before we get to that point.”

Lubin thinks we probably won’t get there with the Bitcoin protocol. “Bitcoin is a narrow protocol. It does one thing and does it very well,” he said. “You can potentially build a lot of things on Ethereum, and it all happens at the application layer, which is easy to use, and it translates everything from the application layer to software that millions of people know how to write, instead of fiddling with complicated private key cryptography.”

Bitcoin has only been around for a few years, and some people in online forums are already threatening to narrow its application prospects. Developers may argue about what the future of Bitcoin will be like, and what the next generation of Bitcoin applications will be. But there is one thing they all agree on: the future will develop in many directions. At least in this regard, Bitcoiners happily reach a consensus.