Bitcoin and blockchain technology is growing so rapidly that even those who have not heard of cryptocurrency or understand how it works are looking to invest and explore the space. Blockchain technology and cryptocurrencies have today become parallel platforms for people to start executing standard transactions. Now, if a new system is slowly replacing an existing system, then there must be some problems with the current system. We will introduce the current concepts of bitcoin and blockchain by understanding the current problems in the banking system.

Problems with the current banking system.

Any existing system will have some problems. Let's look at some of the most common problems with the banking system.

High transaction costs

Let's look at an example to better understand this.

Here, Chandler sends Joe $100, but before Joe can receive the money, it must go through a trusted third party like a bank or financial services company. After deducting 2% of the transaction fee from this amount, Joe received only $98 at the end of the transaction. Now that doesn't seem like a big amount, but imagine if you're sending $100,000 instead of $100, the transaction costs will increase to $2,000, which is a big amount. According to SNL Financial and CNNMoney, JPMorgan Chase, Bank of America and Wells Fargo earned more than $6 billion in 2015 from ATMs and overdraft fees。

Double expenditure

Double expenditureIt's a mistake in the digital cash scheme， where the same single digital token is spent twice or more。 in order to assist You better understand the question， Let me give you an example.：

Peter only had in his account500 dollars。 He launched himself at Adam at the same time2 pen transaction， The price is400 dollars， Mary is the500 dollars。 Usually the deal doesn't go through， Because he didn't have enough in his account900 Dollar balance。 nevertheless， By copying or forging the digital token associated with each digital transaction， He can complete these transactions without the required balance。 This operation is called Double expenditure。

Internet fraud harmony account hacker

In India, the number of fraud cases related to credit/debit cards and online banking was 14,824 in 2016. The net amount involved in these fraud cases is Rs. 7,779 crores, out of which Rs. 2,100 crores is from Internet fraud and Rs. 4,164 crores is from ATM / Debit card related frauds.

financial crisis harmony crash

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Imagine that.， Give all your savings to someone you trust， Just know that they've gone， And lost it somewhere else。 Here it is.2007 - 08 Occurrence of the year， Banks at the time harmony Investment institutions are already borrowing heavily， and give them as subprime mortgages to people who can't even afford to pay those loans。 This, in turn, led to one of the worst financial crises of all time， Estimated to cause close to11 trillion dollars（11 $ billion） cost of damage。 This is just one of the most popular examples， How often do we hear about banks harmony Financial services firm collapses due to internal fraud？ The entire third-party system is establish On the basis of blind trust in the intermediary。

We saw some of the most common problems that everyone faces. Having a system that overcomes these problems and provides us with a This is exactly what Blockchain Technology does, and it's not a good thing.

Now let's try to understand the blockchain harmony bitcoin (virtual currency) How to solve these problems， The following leads to the blockchain。

How does blockchain solve these problems?

Here are some ways in which blockchain technology can solve the above problems：

dispersion system

In contrast to banking and financial organizations that are controlled and regulated by central or federal authorities, blockchain systems take a decentralized approach. Here, everyone who is part of the system is equally responsible for its growth and collapse. Each person involved in the system has power, not a single entity with power.

Public General Ledger

The ledger holding the details of all transactions that occur on the blockchain is open and fully accessible to everyone associated with the system. Once you join the blockchain network, you will be able to download the full list of transactions since launch. Although the full ledger is publicly accessible, the details of the people involved in the transactions remain completely anonymous.

Validation of each transaction

Each transaction is cross-checked through the ledger carry out verification， and send a confirmation of the transaction a few minutes later。 By using multiple complex encryption algorithms harmony hash algorithm， Eliminated Double expenditure existing issues。

Low or no transaction fees

transaction fee Not usually applicable， However, some variants of the blockchain do implement certain minimum transaction fees。 With banks harmony Fees implied by other financial institutions compared to， These transaction costs are relatively small。 If the transaction needs to be completed as a priority， Then the user can add an additional transaction fee， in order to prioritize the validation of transactions。

Now that we've talked about the problems with existing systems and learned how blockchain technology can overcome these challenges, I'm sure you have some idea about blockchain systems.

in this regard， You may still want to know about blockchain harmony bitcoin (virtual currency) What the hell is it?。 So let's try to understand these important concepts in the next part of this blockchain tutorial。

What is Blockchain harmony bitcoin (virtual currency)？

Before we move on to the blockchain， Understanding what is bitcoin (virtual currency) Very important：

bitcoin (virtual currency) is a cryptocurrency invented by an unknown programmer or group of programmers harmony Digital payment systems， Its name isSatoshi Nakamoto。 This means that they can resemble The usual currency is used as， But no. resemble Dollar bills exist physically like。 They are online currencies that can be used to buy things。 These are the same as the ones on people's computers“ digital cash” resemble。 bitcoin (virtual currency) Exists only in the clouds， as ifPaypal，Citrus perhapsPaytm。 Even if they are virtual， Rather than the material， As they are transferred from person to person through the network， And they are. resemble Cash like use。

The Bitcoin system is based on a peer-to-peer network and transactions occur directly between users with no intermediaries. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain. Because the system has no central repository or single administrator, Bitcoin is known as the first decentralized digital currency.

bitcoin (virtual currency) Production makes them a unique currency。 Unlike ordinary currency， bitcoin (virtual currency) Cannot be created on demand。 only2100 ten thousand bitcoin (virtual currency) Can be created， which has created1700 ten thousand bitcoin (virtual currency)。 As soon as a block containing a valid transaction is added to the blockchain， It will create bitcoin (virtual currency)。 This is the creation of bitcoin (virtual currency) harmony Through various mathematical harmony Encryption algorithms ensure no forgeries bitcoin (virtual currency) The only means of being created or disseminated。 Let's learn more nowBlockchain。

What is blockchain?

The blockchain can be called the spine of the entire cryptocurrency system。 Blockchain technology not only helps users execute transactions using cryptocurrencies， It also ensures the security of the users involved harmony anonymity。 It is an ever-growing list of records， known as a block， They use cryptography for linking harmony protection。 The blockchain can act as“ liberalization harmony distributed ledger， can be verified with verifiable harmony A permanent way to record transactions between the parties”。 This account shared by everyone in that network is public， Viewable by all。 This brings transparency harmony Trusted entry system。

A block is a blockchain of' today's' part， It records some or all recent transactions， And once completed, it is entered as a permanent databaseVlockchain。 Each time a block is completed， Both generate a new block。

Blockchains are usually managed by peer-to-peer networks， Common adherence to protocols for validating new blocks。 Once recorded， The data in any given data block cannot be changed retroactively， without changing all subsequent blocks of data harmony The collusion of the network majority。 Once a transaction stored in the blockchain is permanent。 They can't be hacked or manipulated。 Once we get into the concept of blockchain， We will learn more about this。

You can learn what blockchain is with this short animated video， Learn about these topics with examples， with assist You better understand the concept。

Now I hope you're interested in bitcoin (virtual currency) harmony Blockchain has a better understanding。 In ourBlockchain Moving on in the tutorial blog， Let's see.Blockchain Functionality of the technology， with assist We understand why it's so popular.。

Features of Blockchain

The following are the most important features of blockchain technology that make it revolutionary.

• SHA256 hash function
• public-key encryption
• Distributed ledger and peer-to-peer network
• Certificate of work
• Confirm the reward

Let's try to understand each of them one by one.

SHA256 hash function

The core hashing algorithm used in blockchain technology isSHA256。 The purpose of using a hash is because the output is not' encrypted'， i.e. it cannot be decrypted back to the original text。 It is a“ uni-directional” encryption function， For any size of source text is a fixed size。 In order to better understand， Let's look at the following example：

If you look at the first example, we enter the input as "Hello World" and get an output of "a591a6d40bf420404a011733cfb7b190d62c65bf0bcda32b57b277d9ad9f146e". However, by adding "! ", the output becomes exactly "7f83b1657ff1fc53b92dc18148a1d65dfc2d4b1fa3d677284addd200126d9069". If we change "H" to "h" and "W" to "w", the output value becomes "7509e5bda0c762d2bac7f90d758b5b2263fa01ccbc542ab5e3df163be08e6ca9".

I hope that with this example you have understood the complexity of the algorithm, as even the smallest change in the input can lead to a huge change in the output.

public-key encryption

This cryptographic technique helps the user by creating a set of keys called public and private keys. Here, the public key is shared with others, while the private key is kept secret as a user. To understand what these keys do, let us look at the following example to gain a better understanding.

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If Chandler had sent Joey some bitcoins, the transaction would have three messages.

• Joey's bitcoin address (Joey's public key)
• The amount of bitcoin Chandler gave Toy.
• Chandler's bitcoin (virtual currency) address（ Chandler's public key）

All of this data, as well as encrypted digital signatures, is now validated via network transmission. The digital signature is again the hash value of Chandler's Bitcoin address and the combination of the amounts he sends to Joey. The digital signature is encrypted by the private key. Once the miner who must verify the transaction receives the data, he goes through two processes simultaneously:

1. He takes all of Joey and Chandler's unencrypted data (such as transaction amounts and public keys) and provides it to the hashing algorithm to obtain the hash value, which we will call Hash1
2. He takes a digital signature and decrypts it using the chandler's public key to get a hash value, which we will call Hash2

If both Hash1 and Hash2 are the same, this means that this is a valid transaction.

distributed ledger harmonyP2P web

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Everyone on the network has a copy of the ledger。 No single centralized copy。 Let me go through the following example assist You understand what a ledger is： Suppose you need to convert the10 bitcoin (virtual currency) Send to your friend John， Yours bitcoin (virtual currency) The balance is974.65， John has a balance here37. Your balance will be deducted10 BTC and creditJohn account。

Blockchain has a unique way to do this。 bitcoin (virtual currency) There are no accounts in the blockchain ledger harmony balance。 Each trade from the first trade is stored under a nameBlockchain the growing database。 There's about2050 trading blocks of transactions， So far， Blockchain484,000 trading blocks， About2.5 billion transactions。

This ledger is spread over bitcoin (virtual currency) Of all the users of the blockchain， i.e. central location where ledger is not stored。 Everyone on the network has a copy of the ledger， And the true copy is the set of all distributed ledgers。

Certificate of work

You may be wondering if everyone has a chunk account and who adds blocks to the blockchain? How do people trust this person?

accordingly， We do. Certificate of work concrete concepts。 That's basically it resemble Solve a very big problem。 It requires a lot of computational work。 This work is done by what we call miners bitcoin (virtual currency) People in the network do it。 The job of these miners is to validate transactions and solve complex mathematical problems associated with creating blocks。 Adjust the difficulty of the problem， so that10 The average minute solves the problem。 Miners search for specific random numbers（ Mathematical value）， It gives The intended expectation hash。 The current difficulty level is like this， You need to try20.6 more than a trillion random numbers to get the correct hash。

Each block has a hash value， It is the final hash value of the previous block， The hash value of the transaction data harmony A combination of random numbers。 The final result hash of the block must start with a specified number of trailing zeros。 It is this calculation that finds random numbers that meet the criteria， This makes mining computationally expensive。

Therefore, the person who finds such random numbers is a successful miner and he/she can add their blocks to the blockchain. Through our P2P distributed network, he/she broadcasts their blocks and each verifies that the hashes match, updates their block chain and immediately starts solving the next block.

Confirm the reward

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bitcoin (virtual currency) The final step in the deal is to reward the miners who create the latest neighborhoods。Blockchain This reward is provided to validate the transaction harmony Maintaining the blockchain。 The current rewards per block are12.5 bitcoin (virtual currency)（3,427,850 Rs./or $53,390）。 this is bitcoin (virtual currency) The most interesting part of the mine。

bitcoin (virtual currency) Incentives are the only way to generate new money into the system， And I believe that by2140 year， all2100 ten thousand bitcoin (virtual currency) will be mined。

With this， I hope you're right nowBlockchain Technology has more understanding harmony admire。 Blockchain ratio bitcoin (virtual currency) Much more。 Finance is just thatBlockchain One of many industries designed to destroy。 Read onBlockchain tutorial， Now let's seeIBM harmonyMaersk an example of， Learn how the supply chain industry is disrupted by blockchain。

Blockchain tutorial: use cases

Maersk is a Danish conglomerate with activities in the transport and logistics and energy sectors. Since 1996, Maersk has been the world's largest operator of container ships and supply vessels. The company is headquartered in Copenhagen, Denmark, has subsidiaries and offices in 130 countries and employs approximately 88,000 people.

IBM is an American multinational technology company, primarily engaged in business solutions, security solutions and storage solutions since 1921

Operational requirements.

As part of a very dynamic supply chain industry, keeping track of the slightest changes is of utmost importance to our customers. They needed a solution that would allow them to complete the shipment process without delaying the paperwork. This solution is able to bring together all stakeholders of the system and provide real-time status for shipments.

Challenges.

Today, 90 per cent of global trade is accounted for by the shipping industry. This supply chain flows due to the complexity of peer-to-peer communication and the sheer volume of traffic. These communications are handled through loosely coupled land transport providers, freight forwarders, customs, brokers, government ports and ocean carriers. It is estimated that the cost of documentation and information for containerized cargo is more than twice that of the actual physical shipment.

Solution.

IBM and Maersk are addressing this issue by designing a distributed licensing platform for supply chain ecosystem access for exchanging event data and processing document workflows.

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Merck and IBM are adopting blockchain technology to create a global tamper-proof system by digitizing transaction workflows and tracking shipments end-to-end. This eliminates friction including expensive point-to-point communications. This cooperation will be initiated to track millions of container voyages per year and integrate with customs authorities on selected trade lanes.

Results.

• Provides a secure supply chain system for all stakeholders involved in the data exchange platform.
• establish Tamper-proof repository, to store all the documents that are part of the process.
• Regular shipping activities help to reduce significant Delay harmony Fraud， Billions of dollars are saved each year。
• decrease Between trade organizations barriers , which led to a 3% increase in global GDP.
• assist Increase in overall trade volume 12％。

This is how blockchain technology assist Maersk (name)， And has been in assist Many other companies around the world。

The above is only the concept of blockchain 1.0, but now blockchain has developed to 2.0, which can complete many applications using blockchain decentralized implementation to ensure the security, fairness and justice of data.

The use of blockchain allows the development of decentralized applications and now the areas of blockchain 2.0 applications.

smart contract (computing)

Distributed accounting enables the coding of simple contracts to be performed when specified conditions are met.Ethereum is an open source blockchain project developed specifically to make this possible. Nevertheless, in its early stages, theEthereum It is possible to validate the usability of blockchains at the scale of real world change.

At the current level of technology development, smart contracts can be programmed to perform simple functions. For example, derivatives can be paid for when financial instruments meet certain benchmarks, using blockchain technology,Bitcoin Automatic payments can be made.

sharing economy

resembleUber harmonydrop by dropSuch companies are thriving and the sharing economy has been a success. However, currently, users who want to share fulfillment sharing services have to rely on people likeUber Such an intermediary. By enabling peer-to-peer payments, the block opens the door to direct interaction between the two sides - a truly decentralized sharing economy.

Early examples.OpenBazaar Use blockchain to create a peereBay . By downloading the application to your computing device, you can work withOpenBazzar suppliers to make transactions without paying transaction fees. agreed irregularlySpirituality means that personal reputation will be more important to business interactions than it currently is ineBay on is even more important.

crowdfunding

resembleKickstarter harmonyGofundmeSuch crowdfunding platforms are doing advanced work for the emerging peer economy. The popularity of these sites indicates that people want to have a direct say in product development. Blockchain has taken this interest to a new level, potentially creating a large number of venture capital funds.

In 2016, one such experiment, the compassion-based DAO (Decentralized Autonomous Organization), crowdfunded a staggering $200 million in just two months. Participants purchase "DAO tokens" that allow them to vote on smart contract ventures (with voting rights proportional to the number of DAOs they hold). The subsequent destruction of the project's funding is evidence that proper due diligence was not conducted, with disastrous consequences. In any case, the DAO experiment shows that the block has the potential to create a "new paradigm of economic cooperation".

governance

By making the results fully transparent and publicly accessible, distributed database technology allows for transparency in elections or any other form of voting. Ethereum-based smart contracts help automate processes.

application， meeting rooms， Making organizational decisions happen on blocks。 As a matter of fact， This means managing digital assets， equity or information， firm governance will become completely transparent harmony Verifiable。

Supply chain audits

Consumers are increasingly wondering if the company's ethical statements about their products are true。 Distributed ledgers provide an easy way to prove that the background to what we buy is real。 Transparency comes with a date harmony The timestamp of the location based on the block， For example, an ethical diamond that corresponds to a product number。

Provenance, based in the UK, provides supply chain audits for a range of consumer products. Using the Ethereum blockchain, the Provenance pilot project ensures that fish sold in Japanese sushi restaurants is already sustainably harvested by suppliers in Indonesia.

File Storage

Going to centralized file storage on the Internet brings obvious benefits. Distributing data across the network protects files from being hacked or lost.

Planetary file system（IPFS） It is easy to summarize how distributed networks work。 Similar toBittorrent The way data is moved over the Internet，IPFS Get rid of the client on the set - Server relationships（ i.e. currentWeb） demand for。 Internet consisting of fully decentralized sites has the potential to speed up file transfers harmony Streaming time。 Such an improvement would not only facilitate。 This is a necessary upgrade to the network's current heavy-duty content delivery system。

Forecasting the market

Crowdsourcing of predictions of event probabilities has been shown to be highly accurate. The average opinion eliminates the unexamined bias of sophomoric judgment. The forecast market for payments based on the outcome of the event has been active. Blockchain is a "smart crowd" technology that will undoubtedly find other applications in the coming years.

However, in Beta, the prediction marketplace app Augur can provide sharing for the results of real-world events. Participants can make money by buying the correct predictions. The more shares you buy in the correct result, the higher the payout. With a low capital investment (one dollar), anyone can ask questions, create a market based on the predictions, and collect half of all transaction costs incurred by the market.

Protection of intellectual property rights

It is well known that digital information is infinitely renewable - widely distributed thanks to the Internet. This gives global web users a goldmine of free content. However, copyright owners have not been so lucky, and as a result have lost control of their intellectual property and financial woes. Smart contracts protect copyrights and automatically sell creative works online, eliminating the risk of file copying and redistribution.

Mycelia uses blockchain to create a peer-to-peer music distribution system. Founded by British singer-songwriter Imogen Heap, Mycelia allows musicians to sell songs directly to audiences, as well as issue license samples to producers and distribute royalties to songwriters and musicians, all of which are automated through smart contracts. The block distribution capability to pay in fractional encrypted amounts (micropayments) suggests that this use case has a great chance of success for block chains.

Internet of Things (IoT)

What is the Internet of Things？ Network control management for certain types of electronic devices - For example, monitor the air temperature in a storage device。 Smart contracts make automation of remote system management possible。 Software， sensor harmony The combination of networks helps objects harmony mechanisms data exchange。 The result is improved system efficiency， and improve cost monitoring。

manufacturing， technology harmony The telecommunications industry's biggest manufacturers are vying for dominance of the Internet of Things。 think of Samsung，IBM harmonyAT＆T。 The natural expansion of existing infrastructure is controlled by the current company， IoT applications range from predictive maintenance of mechanical components to data analysis and large-scale automated system management。

Neighborhood Microgrid

Blockchain technology can be purchased harmony sale Neighborhood Microgrid renewable energy generation。 When solar panels generate excess energy， Based onEthereum target smart contract (computing) will be automatically reassigned。 similar type smart contract (computing) Automation will have many other applications， Because the Internet of Things is a reality。

Consensys Located in Brooklyn， One of the world's most important companies， being worked on forEthereum Development of a range of applications。 One of the projects they are working on isTransactive Grid， with distributed energy equipmentLO3 cooperate。 Prototype projects currently running are in useEthereum Smart contracts for automatic monitoring harmony Reassign the microgrid。 This so-called“ Smart grid” beIoT An earlier example of a feature。

identity management

Need better on the web identity management。 The ability to verify your identity reduces the risk of financial transactions that occur online。 nevertheless， The remedy for the security risks posed by online commerce is imperfect。 Distributed ledgers provide an enhanced way to prove who you are， and the possibility of digitizing personal documents。 Having a secure identity is also important for online interaction， For example, in the sharing economy。 After all， Good reputation is the most important condition for online trading。

Developing digital identity standards is proving to be a very complex process。 In addition to the technical challenges， Universal online identity solution requires private sector harmony Cooperation between Governments。 moreover， Need to navigate the legal system in different countries， The problem becomes very difficult。 E-commerce on the Internet currently relies onSSL certificate（ Small green lock）， Used for secure transactions on the network。 Netki is a want to create for the blockchainSSL Standard startup。 Netki Recently announced350 ten thousand dollars of seeds，Netki at2017 Products will be available at the beginning of the year。

Anti-money laundering（AML） harmony Get to know your customers（KYC）

Anti-Money Laundering (AML) and Know Your Customer Well (KYC) have a lot of potential for development in this area of blockchain applications. Currently, financial institutions must perform a labor-intensive, multi-step process for each new customer. KYC costs can be reduced with cross-agency customer verification while increasing the effectiveness of monitoring and analysis.

Launch Polycoin has an AML / KYC solution that involves analyzing transactions. Transactions identified as suspicious are forwarded to the Compliance Officer. Tradle is developing an application called Trust in Motion (TiM). As the "Instagram for KYC", TiM allows customers to take snapshots of key documents (passports, utility bills, etc.). Once verified by the bank, the data is encrypted on the chunk.

Data management

Today， In order to exchange your personal data， People can use it for freeFacebook and other social media platform. future， Users will be able to manage harmony Sell data generated by its online activities。 Because it can be easily distributed in small quantities， bitcoin (virtual currency)（ or something like that） It is most likely the currency used for this type of transaction。

The MIT project Enigma has learned that user privacy is a key prerequisite for creating a marketplace for personal data. Enigma uses encryption to allow individual datasets to be split between nodes while running batch computations on the entire data set. Data fragmentation also makes Enigma scalable (unlike those blockchain solutions that replicate data on each node).

Land ownership registration

As publicly accessible, distributed ledgers, blockchains can make all kinds of records more efficient. The attribute title is an example. They are often vulnerable to fraud, as well as being expensive and labour-intensive to manage.

Embargo-based land registration projects are under way in some countries. Honduras was the first government to announce such an initiative in 2015, although the current status of the project is unclear. This year, the Republic of Georgia entered into an agreement with Bitfury Group to develop a blockchain property rights system. Hernando de Soto, a high-profile economist and property rights advocate, will reportedly advise on the project. Recently, Sweden has announced that it is experimenting with a block-type property application.

share transaction

The potential for increased efficiency in stock settlement is share transaction The block structure in provides a powerful use case。 When performing a point-to-point operation， Transaction confirmation becomes almost instantaneous（ Instead of taking three days to clear）。 potentially， This means that intermediaries（ clearing house， auditors harmony supervisor） Be removed from the process。

Many stocks harmony Commodity exchanges are blocking applications that provide their services in their original form， Including the Assy stock exchange（ Asx）， Deutsche Boerse（ Frankfurt Stock Exchange, Germany） harmonyJPX（ Japan Exchanges Group）。 NasdaqLinq It is a platform for trading in the private market（ UsuallyIPO Former startup harmony between investors）， This is the region's recognized forerunner of the most high-profile。 with building blocks technology companiesChain cooperation，Linq announced in2015 year to complete its first share transaction。 Nasdaq recently announced that， Development of a trial blockchain project for Estonian stock proxy voting。

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