Why does blockchain exist and what problems it solves? Only this article explain

2024-05-14

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In recent days, "blockchain" has become a hot term. "Blockchain" has entered the public eye, becoming a focal point of attention for financial capital, the real economy, and social discourse.

So, what is blockchain? What problems does it actually solve?

In October 2015, the renowned political and business magazine The Economist published a cover article titled "The Trust Machine." It mentioned that blockchain, as the underlying framework for the digital currency Bitcoin, may have a value that has surpassed Bitcoin itself. This technology will address various trust issues we face in the digital age, in both our work and daily lives.

From ancient times to the present, our development and progress have always been hindered by trust issues. Even in the era before the internet, there were unofficial historical records that Emperor Yongzheng altered a will, changing "pass the throne to the fourteenth son" to "pass the throne to the fourth son," thus legitimizing his ascension to the throne. The princes and court officials held different views for power and interests, and the truth is actually beyond our means to investigate. Truth and falsehood, real and fake, often the truth is known only by a few. Whether these truths can be held openly and transparently by the public is the problem that blockchain aims to solve.

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Entering the industrial age, with the rapid development of communication and the internet, we have been striving to pull ourselves out of the quagmire of mistrust. The generation of information has become more convenient, and its flow has become increasingly rapid. For example, you find a new restaurant has suddenly opened near your home, and you don't even need to try it in person. You just need to search online, and you can see the pictures of the dishes and various reviews left by people who have eaten there. Usually, we would choose dishes with good reviews to order. But are these reviews necessarily reliable? Is it possible that businesses hire fake reviewers to artificially inflate the ratings? Faced with such trust issues, is there a way to establish a new mechanism of mutual trust? This is the problem that blockchain aims to solve.

For example, let's talk about betting on sports.

Suppose I bet with A on the NBA championship, and I say it's the Warriors, while A says it's the Cavaliers. But I strongly doubt A's betting integrity, fearing that if he loses, he will default on the payment. Unexpectedly, A turns the tables and doubts my betting integrity, which is simply outrageous! Then we both need a trustworthy third party to act as a referee. We can each put in $20 to a referee we both trust to hold in escrow. If the Warriors win, the $40 will be mine. If the Cavaliers win, the $40 will be A's.

The championship series finally ends, and the referee runs off with the huge sum of $40...Where has the most basic trust between people gone?

Moreover, there was a time when news about a travel software using big data to "kill the familiar" sparked heated discussions. A user who frequently used this software exposed that when planning a holiday trip with his wife and children, the price he saw for the same hotel was much higher than what his wife, who rarely travels, found. It was originally thought that the hotel's price should be the same for every customer, but in order to gain greater benefits, the intermediary trusted to offer new customers discounted prices, while giving relatively higher prices to regular customers. From this small detail, we can see that centralized entities may have been encroaching on our rights all along.

Looking back at the history of e-commerce development, the biggest problem faced by e-commerce when it first emerged was the issue of trust. Many people did not have high hopes for this new thing at the time. Should one pay first or ship first? This was once a very important question. If you pay first, you send money to a stranger you have never met, and then he mails you the goods, but whether the goods he sends you meet the requirements, or even whether he will mail you the goods as agreed after receiving the money, there is no way to guarantee it. If you ship first, you also face the same problem. So, Alipay was born, perfectly solving this problem, bringing convenience to both parties of the transaction, and also gaining rapid development itself, thus promoting the development of the entire e-commerce industry.

However, e-commerce still faces many problems. For example, when we shop on Taobao, facing the same kind of goods from various merchants, we will face the problem of choice. In order to choose a reliable merchant, we will make a comprehensive judgment based on sales volume, buyer reviews, etc., but because there are a large number of cheap water armies to brush orders and brush good reviews, this kind of judgment is not reliable. It often happens that the sales volume is very high, and the praise is like a tide, but the goods you buy are very poor, and even fake. Of course, you can choose to return the goods, which increases the time cost and logistics cost, and sometimes you find that the merchant has disappeared when you return the goods.

Therefore, blockchain is based on the information asymmetry, data is easy to be tampered with, and centralized trust issues faced in the digital age. Through consensus mechanisms, it provides a set of technical solutions. By using a distributed shared database, information is stored on each node so that everyone has the same copy of the information. In this system, there is no center, all participants collectively maintain the same ledger, and set through the principle of the minority obeying the majority to ensure the validity of the information.

In the absence of a center, each node communicates with each other, which is called "peer to peer, point to point". Of course, this is not people-to-people, or cheater-to-cheater. This kind of communication creates a new trust mechanism in the digital age, because once the digital information is recorded in this public collectively maintained ledger, it will be stored on every node of the entire network. At this time, it is extremely difficult to tamper with the information on the entire network.

Suppose you are an interviewer today, and you are interviewing candidates. Do you still have to worry about his resume being fake? As long as you use blockchain technology, all the information of the candidates in the past is public and cannot be tampered with, and there is obviously no possibility of fraud.

In the field of Internet finance, the so-called peer-to-peer lending behavior is actually completed through intermediary institutions for matching. In the world of blockchain, we no longer need these intermediaries, because individuals have established a system of mutual trust between each other, and can complete the true meaning of peer-to-peer lending.

The new trust mechanism of blockchain technology can reshape our original business model and bring us a better world.