How does blockchain create trust?

Today, let’s talk about how the accounting method of the blockchain makes it a machine for creating trust?

Traditional Bookkeeping

Accounting is something everyone is familiar with. Especially now, you don’t need to bring cash when you go out. How much money you have is equivalent to the balance of your bank account, Alipay or WeChat wallet after accounting for various income and expenses.

So what is accounting? for example:

Xiao Zhang’s monthly salary is 10,000 yuan. During the salary payment process, the bank will record: the company account will be reduced by 10,000 yuan, and Xiao Zhang’s account will be added by 10,000 yuan. After getting paid, Xiao Zhang took advantage of Double 11 to pay 500 yuan for a piece of clothing with WeChat payment. At this time, WeChat will record: Xiao Zhang’s account will be reduced by 500 yuan, and the merchant’s account will be added by 500 yuan.

President of Shanghai Pudong Development Bank: Will continue to increase investment in blockchain, etc.: Pan Weidong, President of Shanghai Pudong Development Bank, was asked about the "future investment plan for financial technology" in an interview, saying that he will definitely continue to increase investment, at least maintain Double-digit growth. Specifically, Shanghai Pudong Development Bank has detailed plans, including cloud computing, blockchain, and distributed technology. New infrastructure requires long-term continuous investment, research on cutting-edge technologies, and the formation of large-scale applications. Traditionally, banks only focused on applications and did not consider research, but today they must track some new technological trends, such as artificial intelligence. (21st Century Economic News) [2020/6/19]

We approve of this accounting method based on trust in the bookkeepers (third-party institutions such as banks, WeChat payment, etc.). However, they are centralized bookkeeping systems, and it is difficult to avoid bookkeeping failures and distortions caused by system failures, company bankruptcy or other reasons.

CCID Sun Huifeng: You can pay attention to the investment opportunities of blockchain in power grid dispatching, green certificates and other fields: On March 13, Sun Huifeng, President of CCID Consulting Co., Ltd., published an article on Xinhuanet "UHV will become a new world-class manufacturing in China business card". The article points out that the smart grid is still in the stage of rapid growth. With the improvement of the intelligent level of the power grid, the demand for information communication is further expanded. In the field of electric power information communication, it is recommended to pay attention to the related applications of mobile communication network and satellite communication network. In the field of hardware, it is recommended to pay attention to smart meters. In the field of electric power data, you can pay attention to the State Grid Cloud and energy big data of the specialized cloud platform and big data center in the electric power field. In addition, some progress has been made in the application of artificial intelligence and blockchain in fields such as power grid dispatching, green certificates, electronic invoices, photovoltaic subsidies, etc. You can pay attention to investment opportunities in related fields. [2020/3/13]

If everyone can have a ledger, everyone can participate in bookkeeping together, and the ledger will be synchronized in real time, and the ledger will become more open, transparent, authentic and reliable. In this way, if there is a problem with any party, it will not affect the safe operation of accounting. Compared with bookkeeping by individual institutions, this is obviously a better bookkeeping method, which is actually the blockchain bookkeeping method.

News | Jinan Municipal Government Service System Has Applied Blockchain Technology: According to the website of the Jinan Municipal People's Government, blockchain technology has been applied to the Jinan Municipal Government Service System. Relying on the "Dawei Chain", the intelligent government affairs system of Jinan High-tech Zone innovates the data sharing model and government service model to realize the credible flow of digital credit, digital materials, and digital certificates across departments, fields, and systems. The average time spent on the service of "enterprise start-up" has been reduced by 75% compared with before. [2019/10/27]

Blockchain Accounting Method

Golden Morning News | Virgin Group uses blockchain technology to upgrade financial management applications Liberia intends to issue a national digital currency: 1.\tUK Virgin Group uses blockchain technology to upgrade financial management applications

2.\tLiberia plans to issue national digital currency Merit

3. \tFBI: The use of Bitcoin transactions on the black market has decreased significantly

4.\tVenezuela and China hold meeting to discuss development potential of petro

5.\tCanadian digital currency exchange MapleChange is offline

6. \tMoscow court rejects appeal against Telegram ban

7.\tRipple co-founder invests in digital currency platform

8. \tMoscow court rejects appeal against Telegram ban

9.\tOKEX exchange will close 58 encrypted trading pairs[2018/10/29]

In the blockchain system, bookkeepers are selected according to a set of competition rules, and those who participate in the competition have a chance to win and be elected bookkeepers. We assume that this rule is a Rubik's Cube competition, whoever solves the Rubik's Cube first will get the right to bookkeeping. This reflects a feature of blockchain bookkeeping: decentralized bookkeeping. The bookkeeper is randomly generated by playing Rubik's Cube to ensure that the bookkeeper is no longer a centralized institution.

In each Rubik's Cube competition, only one winner is produced, and he is responsible for bookkeeping. The bookkeeping information is packaged to generate a data packet, which is called a block (that is, a new block is dug out). After the other players have verified that they are correct, they will copy (download and synchronize) the new block to the blockchain they maintain, which ensures that although all players are distributed accounting, everyone's ledger data is consistent (blockchain same information as above). This reflects the second major feature of blockchain accounting. All nodes (players participating in the game) maintain the same ledger, and reconciliation is very convenient.

So how to ensure that the bookkeeper will not cheat and keep false accounts?

This is achieved through verification and reward mechanisms. All players will verify the authenticity of the winning player's account. If a false account is kept, other players will not approve of this account keeping, and the winning player will waste an opportunity to keep accounts in vain. Moreover, every time you get the right to keep accounts, you will be rewarded generously, and keeping false accounts is equivalent to giving up the rewards automatically. Therefore, the winning player will not keep false accounts out of interest.

Even if he is a saboteur who deliberately makes trouble, he will not be able to pass the verification of other players in the end, because only correct bookkeeping will be recognized by all players. This ensures the correctness of accounting data.

Once the bookkeeping is completed, a new block is dug out. The block information is fixed, and it has its own unique data fingerprint (that is, the hash value. By hashing the block, the block’s Hash value, any change in the block, the hash value of the block will have a huge change).

In the next round of the game, the new winning player will record a new page of bills (to dig out a new block), and the head of the new bill (block header) needs to record the data fingerprint of the previous page of bills (the hash of the previous block) value), which ensures that the previous page of bills and the current bill are closely related with a clear order.

If the bill data on the previous page is modified, its data fingerprint (hash value) will change and cannot correspond to the hash value recorded in the bill on the next page. All players can recognize that this is a tampered invalid chain and discard it.

The header-zce of the previous block also records the hash value of the previous block, so that the entire blockchain is interlocking and has a strict sequence, and as long as the data of a certain block is tampered with, all subsequent The accounting data of the block will change, which can be described as "a single hair will affect the whole body". This is the third major feature of blockchain bookkeeping: all blocks on the chain are interlocking, and the algorithm ensures that the entire chain information cannot be tampered with.

Summary

The blockchain generates bookkeeping rights through a competition mechanism to ensure the decentralization of bookkeeping nodes and the consistency of all bookkeeping node data. By referencing the hash value of the previous block in the new block, it is ensured that the entire chain data has a strict sequence and cannot be tampered with. Through the above methods, it is ensured that the transaction information on the blockchain is credible, so the blockchain is a machine for creating trust.

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