I. What is Blockchain?
Blockchain is a chain of blocks containing information, transmitting encrypted data to help prevent fraud or data modification.
Blockchain is likened to a digital ledger where all activities related to financial transactions are closely monitored and it is impossible to change the transaction once it has been successfully confirmed.
II. Blockchain technology – a combination of 3 types of technology:
- Cryptography: to ensure transparency, integrity and privacy, Blockchain technology uses public key and hash function.
- Peer-to-peer network: Each node in the network is considered as a client and also a server to store a copy of the application.
- Consensus mechanisms: All nodes participating in the system must comply with the rules of the consensus game (PoW, PoS, …) and are motivated by economic motivation.
III. History begin
In a 1982 essay, Cryptologist David Chaum first proposed a protocol similar to today’s Blockchain.
W. Scott Stornetta, Stuart Haber gave the first description of Blockchain which according to them the purpose of blockchain is in order to prevent time-changing into documents in 1991
And blockchain technology was first created by an anonymous person or group named Satoshi Nakamoto in the open source code called Bitcoin in 2008.
IV. Blockchain systems are divided into 3 main categories:
- Public: Anyone has the right to read and write data on the Blockchain. The process of validating transactions on this Blockchain requires a lot of participating nodes. Therefore, to attack this Blockchain system requires a huge cost and is really not feasible. For example: Bitcoin, Ethereum, etc.
- Private: The user is only allowed to read data, not write because this belongs to an absolutely trusted third party. Since this is a Private Blockchain, the transaction confirmation time is quite fast because only a small number of devices are required to validate the transaction. For example, Ripple is a form of Private Blockchain, this system allows 20% of the nodes to be fraudulent and only the remaining 80% is stable.
- Permissioned (also known as Consortium): a form of Private but adds some other features, this is a combination of Public and Private. Example: Banks or joint-venture financial institutions will use their own Blockchain
V. Main features of Blockchain technology
- Impossible to forge, unbreakable blockchain chains:
Theoretically, only quantum computers can interfere with and decrypt the blockchain. Only when there is no internet in the world will the blockchain be destroyed.
Blockchain data cannot be edited and stored forever, if there is a modification, a trace will be saved
The information and data in the Blockchain are distributed and absolutely safe.
Anyone can track the path of data in the blockchain from one address to another and can track the entire history on that address.
- Smart contract
Smart contracts are digital contracts embedded in if-this-then-that (IFTTT) code, allowing them to self-execute without the need for a third party.
VI. Versions of Blockchain technology
- Blockchain Technology 1.0 – Currency and Payment: The main application of this version is cryptocurrency: including currency conversion, remittance and creation of a digital payment system. This is also the area most familiar to us that sometimes quite a lot of people mistakenly believe that Bitcoin and Blockchain are the same.
- Blockchain Technology 2.0 – Finance and Markets: Banking and Financial Processing: Scaling Blockchain, bringing in financial and market applications. Assets include stocks, checks, debt, title, and anything related to an agreement or contract.
- Blockchain Technology 3.0 – Design and Oversight: Bringing Blockchain beyond financial borders, and into fields such as education, government, healthcare, and the arts.
VII. How does blockchain work?
The most known and discussed application of Blockchain technology is cryptocurrency. Bitcoin is a unit of digital currency with the code BTC, like the US dollar itself has no value, it only has value because there is a community that agrees to use it as a unit of transaction. goods and services.
In order to keep track of the amount of Bitcoin that each person owns in certain accounts and keep track of the transactions arising therefrom, we need a ledger, in this case it is the Blockchain and this is the reality. is a digital file that keeps track of all Bitcoin transactions.
This ledger file is not stored in a central server, like in a bank or in a data center, rather it is distributed worldwide through a network of peer-to-peer computers. data storage and computation execution. Each of these computers represents a “node” of the Blockchain network, and each node has a copy of this ledger file.
1. Coding Principle
In fact, the ledger is always maintained by computers in a peer-to-peer network that are connected to each other. So it will have some differences:
– In the banking system, we only know our own transactions and account balances, on the Bitcoin Blockchain you can see everyone’s transactions.
– The Bitcoin network is a distributed network that does not need a third party to act as an intermediary to process transactions.
– The Blockchain system is designed in such a way that it does not require trust and is guaranteed by the reliability obtained through special mathematical cryptographic functions.
To be able to make transactions on the Blockchain, you need a piece of software that will allow you to store and exchange your Bitcoins called a cryptocurrency wallet. This cryptocurrency wallet will be protected by a special encryption method that uses a unique pair of security keys: a private key and a public key.
If a message is encrypted with a specific public key, only the owner of the private key that is a pair with this public key can decrypt and read the message content.
When you encrypt a transaction request with your private key, you are creating a digital signature that is used by computers in the Blockchain network to verify the sender and the authenticity of the transaction. This signature is a string of text and is a combination of the transaction request and your private key.
If a single character in this transaction request message is changed, the digital signature will change accordingly. Therefore, it is difficult for a hacker to change your transaction request or change the amount of Bitcoin you are sending.
To send Bitcoin (BTC), you need to prove that you own the private key of a particular digital wallet because you need to use it to encrypt the transaction request message. Once your message has been sent and encrypted, you no longer need to reveal your private key.
2. Rules of Ledger
Every node in the Blockchain is keeping a copy of the ledger. Thus, each node knows what your account balance is. The Blockchain system only records each requested transaction and does not keep track of your account balance.
To know the balance on your e-wallet, you need to authenticate and confirm all the transactions that have taken place on the network that are related to your e-wallet.
This “balance” verification is done by calculations based on the link to previous transactions. Looking at the picture above, in order to send 10 BTC to John, Mary needs to create a transaction request that includes links to previous transactions with a total balance equal to or exceeding 10 BTC.
These links are viewed as input value, the nodes in the network will verify if the total amount of these transactions equals or exceeds 10 BTC. All this is done automatically in Mary’s wallet and checked by nodes on the Bitcoin network, Mary just sends a 10 bitcoin transaction to John’s wallet using John’s public key.
The fact is that the nodes will check all transactions related to the crypto wallet you previously used to send Bitcoin (BTC) by referencing the transaction histories. Having a record will store the unused BTC and is kept by the network nodes which simplifies and speeds up the verification process. Thus, crypto wallets avoid double-spending transactions.
The source code on the Bitcoin network is open source, which means that anyone with an internet-connected computer can join the network and make transactions.
However, if there is any error in the source code used to broadcast the transaction request message, the associated Bitcoins will be lost forever.
Remember, there is no customer support or anyone who can help you recover a lost transaction or forget your crypto wallet password as this is a distributed network. For that, you need to store your wallet’s password or private key extremely carefully and securely.
3. Principle of block creation
Transactions after being posted on the Blockchain network will be grouped into blocks, and transactions in the same block are considered to have occurred at the same time. Transactions that have not been executed in a block are considered unconfirmed.
Each node can group transactions together into a block and send it to the network as an implication for subsequent blocks to be attached to. Any node can generate a new block. So, the question is: which block will the system agree to? which block will be the next block?
To be added to the Blockchain, each block must contain a piece of code that acts as a solution to a complex math problem generated by an irreversible hash.
The only way to solve such a math problem is to guess random numbers, which when combined with the previous block content produces a system-defined result. This can sometimes take about a year for a typical computer with a basic configuration to correctly guess the numbers to answer this math problem.
The network stipulates that each block is generated after an interval of every 10 minutes, because in the network there are always a large number of computers that are all focused on guessing this sequence of numbers. The node that solves such a math problem gets the right to mount the next block on the chain and send it to the entire network.
So what if two nodes solve the same problem at the same time and transmit their resulting blocks simultaneously to the network? In this case, both blocks are submitted to the network and each node builds successive blocks on top of the one it received first.
However, the Blockchain system always requires each node to build on the longest blockchain it receives. So if there is ambiguity about which block is the last one then as soon as the next block is resolved each node will apply to the longest chain.
Since the probability of concurrent block construction is very low, it is almost impossible for multiple blocks to be solved at the same time and multiple times to generate different chained blocks. As a result, the entire block-chain will quickly stabilize and merge once every node is in consensus.
VIII. Some practical applications of Blockchain
1. Business Services
Microsoft and ConsenSys are working together to make Ethereum Blockchain as a Service (EBaaS) available on Microsoft Azure so Enterprise customers and developers can have a blockchain development environment.
Google is also said to be working on a proprietary blockchain to support the business. Parent company Alphabet is developing a distributed ledger that third parties will be able to use to store data, allegedly related to Google’s cloud services for businesses.
2. Energy industry
A project full of focus on distributed energy and water systems using blockchain technology in Fremantle, Australia, . Solar panels are being used in a sunny area to collect electricity, which is then used to heat water and provide power, and the data is recorded on the blockchain.
Chile’s National Energy Board has begun using blockchain technology as a means of validating data regarding the country’s energy use. Sensitive data will be stored on the blockchain as part of an initiative to help modernize and secure the South American nation’s electrical infrastructure.
3. Application in agriculture and seafood industry
Blockchain is currently being used to support sustainable fishing. Illegally caught fish is an endemic problem in the industry, and distributed ledger technology provides a means to prove where fish was caught, processed and sold. This “net-to-plate” chain allows inspectors to determine whether fish are from areas notorious for human rights abuses or from countries affected by economic sanctions.
Do you know where your food, clothes, etc come from? Supply chain management is an extremely complex field and often involves dozens of intermediaries from production to purchasing.
So how can we ensure the quality, transparency, and reliability of products on a long journey from producer to consumer? The answer is blockchain.
Food industry: A Blockchain application that can improve transparency and efficiency in finding out what foods may be contaminated and where throughout the supply chain.
OriginTrail: Is a blockchain platform that allows consumers to know where the food goods they buy come from and how they are produced
4. Blockchain application in construction
Ukraine is honored to be the first country to use blockchain to facilitate a property agreement. A property has been sold by prominent crypto advocate and TechCrunch founder Michael Arrington.
This deal is enabled with the support of smart contracts on the Ethereum blockchain and is intended to be the first of many completed by Propy, a startup specializing in real estate transactions. blockchain-based.
Railway operator Novotrans in Russia is using blockchain technology with the goal of improving the speed of its operations. One of the largest stock operators in the country, will use blockchain to record data regarding repair requests, inventory and other issues related to their operations. The idea is that blockchain records will be more resistant to tampering and data corruption.
Land use rights
The Georgia government uses it to register land titles. They created a custom designed blockchain system and integrated it into the digital records system of the National Public Registry (NAPR). Georgia is currently taking advantage of the transparency and fraud reduction offered by blockchain technology.
5. Application in waste management activities
Waltonchain’s RFID technology is being used by the Smart Waste Management System in China. Using Walton’s blockchain, the project will enable waste level monitoring to improve operational efficiency and optimize resources.
6. Applications in the wholesale and retail industry
Mobile payment (Mobile payment)
Cryptocurrencies with underlying blockchain technology are being used to facilitate mobile payments in a wide range of projects. One of the latest initiatives announced, launching in the fall of 2018, will involve a consortium of Japanese banks. They will use Ripple’s technology to enable instant mobile payments.
Supply chain management is considered one of the most beneficial use cases for blockchain, making it ideal for industries where goods are passed through many different hands, end-to-end, or manufacturer to shop. IBM and Walmart have teamed up to launch the Blockchain Food Safety Alliance in China. The project, run in conjunction with Fortune 500 company JD.com, is designed to improve food safety and tracking, making it easy to verify that food is safe to consume.