Evolution of the Blockchain | Part-1

evolution-of-blockchain

With the development of information technology and the rise of cyberspace, network behavior based on social media is becoming an important aspect of individual and social action. As an important achievement in the development of human technological innovation, blockchain technology is expected to make important progress in data security and personal privacy protection, but it is still some time before it is truly mature and fully applied.

As an emerging technology, blockchain has important innovation significance to the existing social order and pattern. Its “decentralization”, “distrusting” and “autonomy” characteristics can improve economic efficiency, reshape trust mechanisms, and innovate social governance. mode. At the same time, blockchain faces a series of challenges: there is a double paradox between “decentralization” and traditional regulatory models and “decentralization”, “smart contracts” and existing legal systems are difficult to connect, and technologies under “consensus mechanism” There is a gap with reality.

The application of blockchain in reality is only the evolution of the original system or model. The future-oriented development of blockchain technology should focus on the benign mutual construction of “technology” and “society”, focusing on the development of “responsible blockchain” Technological innovation “.

The fourth industrial revolution: the historical position of the development of blockchain technology

Technology development promotes social progress, and mankind is entering a new era of technological development. The first industrial revolution began in 1775 when Watt transformed the steam engine, the second industrial revolution began in the electrification revolution at the end of the 19th century, and the third industrial revolution began in the computer revolution of the 1950s.

The fourth industrial revolution that is currently going through will be one that includes innovation in the manufacturing field brought about by the popularization of computers, 3D printing and robots, and changes in human health and lifestyle brought about by life science and technology. Comprehensive revolution. China is currently at the historical intersection of the new globalization, the fourth industrial revolution, and the “triple overlap” of social transformation.

Blockchain is regarded as one of the important disruptive technologies since the third industrial revolution. As an important achievement in the development of human technological innovation, blockchain technology has made important progress in data security and personal privacy protection. In the historical background of “three overlaps plus”, blockchain technology has attracted continuous attention from the scientific, technological, industrial and policy circles.

Investment bank Goldman Sachs (Goldman Sachs) ranks blockchain and artificial intelligence technology as the next seven emerging technologies; the financial magazine “The Economist” introduced it in detail through a cover report, thinking that blockchain will trigger Changes in trust mechanisms on the Internet.

Governments of various countries have also introduced policies to actively promote the application of blockchain in financial and social management: In January 2016, the British government released the report “Distributed Ledger Technology: Beyond Blockchain” to promote the construction of blockchain government to National strategic height; in June 2016, the US Department of Homeland Security (DHS) subsidized US $ 600,000 to six companies devoted to the application and development of government blockchain technology in October 2016, the Ministry of Industry and Information Technology of China issued the “China Block The White Paper on Chain Technology and Application Development positions the blockchain as an effective technical means to improve the level of social governance.

In the 1880s, Huxley pointed out when accepting “The Origin of Species”: “The known” is limited, and the “unknown” is infinite; from a knowledge point of view, we stand on a small island, surrounded by a vast ocean. The task of each of our generations is to open up a little more land and slightly increase the scope and firmness of our territory. In the early 20th century,

Einstein also said: The incomprehensible thing in the world is its intelligibility. It should be said that the information and Internet technologies that were launched in the 1960s have become an important tool for mankind to transform the world. It has been and is affecting the global modernization process, and constantly refreshes the overall imagination of mankind.

The blockchain technology that has emerged in recent years is starting a “new era of trust” that disrupts centralization. Blockchain technology is not only a technological innovation movement but also a major change in social lifestyle. Compared with the classical Internet, some people even believe that blockchain technology is starting an era of the modern Internet.

However, in the face of the “intelligible” blockchain, history still shows the similarity of knowledge structure, and the contemporary people’s “unknown” and “known” of the blockchain clearly show an imbalance. The opportunities, risks, and challenges of technological development are undoubted of great significance from the perspective of multidisciplinary dimensions. The development of blockchain technology cannot be statically examined in isolation. We must not only have the “height of historical panoramas”, but also pay attention to the “deep flow of history”; both highlight the “historical features” of a specific period and conduct systematic research. Comprehensive analysis.

Evolution, characteristics and significance

Blockchain technology: origin and development. Blockchain is a series of data blocks that are generated by using cryptographic methods. It is a new application model of computer technology such as distributed data storage, point-to-point transmission, consensus mechanism, and encryption algorithm.

The key innovation of blockchain technology is that it allows its participants to transfer assets over the Internet without the need for a centralized third party. The application scenarios of blockchain are usually divided into three stages: blockchain 1.0 is mainly for digital currency; blockchain 2.0 is mainly for smart contracts; blockchain 3.0 will be suitable for more scenarios and will create a “blockchain era”.

From the history of the development of blockchain technology itself, in 2008, a scholar named “Satoshi Nakamoto” published an article envisioning a “point-to-point electronic cash system” and named it “Bitcoin”; 2009 In January, the first block of this cash system (the genesis block) was born, marking the birth of bitcoin that was not controlled by the central bank and any financial institution; after that, bitcoin began to spread rapidly and its value rose all the way.

The widespread popularity of Bitcoin is accompanied by various chaos and scams, which have an impact on the normal financial order, so that central banks of various countries have to introduce corresponding measures to restrict them. In October 2014, the British Library held a seminar on the future of Bitcoin. During this period, the underlying technology of Bitcoin, “Blockchain”, went from behind the scenes to the stage for the first time and entered people’s vision.

Bretton Woods Bitcoin White Paper

In January 2015, the “2015 Bretton Woods Bitcoin White Paper” released at the Bitcoin Conference in Miami, USA, made the first comprehensive report on the history, circulation status, and prospects of Bitcoin and blockchain technology. The white paper pointed out that the development of blockchain has to go through three stages. Blockchain 1.0 is a digital currency application, which is mainly to deploy cash-related encrypted digital currency in the blockchain. The typical representative is Bitcoin; Blockchain 2.0 is intelligent Contract application, mainly refers to the construction of credible economic activities in the financial or economic field based on blockchain technology, such as stocks, futures, notarization, etc .;

Blockchain 3.0 refers to the application of pan-blockchain beyond currency and contracts, involving Government, health, Internet of Things, and other fields. Since then, the research literature on the blockchain has also begun to explode, but most of it has been concentrated in the field of economics and IT technology. However, whether it is domestic or foreign, the focus of academic circles on the blockchain is mainly the introduction of its technical principles, essential characteristics, and the concept of future applications, and there is a lack of in-depth theoretical system research.

This is to a large extent

It comes from its own characteristics and development status. The blockchain is in the ascendant, and related practical applications, theoretical research, and regulatory systems all require a long time to construct and test. Therefore, in terms of the present, the technological development of blockchain is far ahead of its theoretical research.

According to the technology maturity curve (The Hype Cycle) widely recognized by the industry, as of July 2017, the blockchain is still in the “peak period of expected expansion”, and the next stage will transition to the “bottom period after the bubble burst”. But it still takes 5 to 10 years to become a truly mature mainstream technology.

This means that the market has placed too high expectations on the development of blockchain. Compared with the focus on technology itself, capital and public opinion are more enthusiastic about the future business model. This current situation of infinitely amplifying the halo of new technologies is not particularly beneficial to the healthy development of the blockchain industry.

Based on this, we need to fully recognize the innovation of the blockchain on the existing social order and pattern, and also need to seriously reflect The new problems that these innovations may cause are the only way to allow theoretical research and understanding to truly guide practice.

Generally speaking, a blockchain is an Internet database technology that is essentially a distributed ledger. Specifically, it refers to a data chain formed by sequentially connecting a large amount of information stored in a block in order of its occurrence time through a cryptographic algorithm.

Among them, according to the access and management rights of the data link, it can be divided into the public chain, alliance chain, and private chain. People often mention that applications such as “Bitcoin” and “Ethereum” belong to the public chain, that is, anyone Can send transaction requests and obtain effective confirmation of the blockchain, and can participate in system maintenance work, read and write data, therefore, the blockchain is “decentralized” “detrusted” “traceability” “autonomy” “And other characteristics are also mainly for public chains.

The “decentralization” of blockchain technology helps to improve economic efficiency. Since the birth of human society, most social scenes and most historical stages have been operating in a “centralized” mode, that is, the power and function are concentrated in a certain organization or individual, which will arrange production and life in a unified manner, up to the state power system. As far as family affairs management is concerned, this model is basically adopted.

The reason is large that it can meet the needs of effectively allocating and using resources and organizing human and material resources to engage in large-scale production activities. However, with the continuous development and evolution of social forms, people gradually realize that the “centralized” organizational model has many drawbacks.

Taking a government agency as an example, it is divided into a hierarchical organizational system based on the scope of functions, bureaucracy, and division of power. It promotes administrative decision-making from top to bottom. Within the system, each node can only be from its superior, that is, the center. Passively receive instructions and information without any initiative; outside the system, each center is independent and does not communicate with each other, resulting in an inefficient flow of information and value. “Decentralization” has become a useful attempt to change the old model, and its voice and application requirements are increasing day by day.

Contrary to “centralization”, the so-called “decentralization” means that at each node, participants can equally participate in system decision-making management, without the exclusive control of a single node, typical representatives such as the market economy and the Internet. In a freely competitive market economy, each market participant decides their own production and trading under the impetus of Adam Smith’s so-called “invisible hand” without interference from external factors. Centralization; the Internet based on the TCP / IP protocol (Transmission Control Protocol / Internet Interconnection Protocol) also has the characteristics of decentralization.

If Web1.0 is only a network of traditional media, then Web2.0  Then the concept that everyone is the center and the resources are shared interactively is truly realized. Its essence is the decentralization of information dissemination. Blockchain technology relies on the Internet as hardware and distributed database technology as software support, while achieving decentralization of transactions and decentralization of information dissemination, greatly improved the efficiency of reaching consensus and value transfer.

Take “digital currency” as an example, it has properties similar to fiat currency, that is, Marx ’s so-called value scale, circulation means, payment means, storage means, world currency and other monetary functions. The difference is that it is a non-governmental issue Virtual currency. Currency is a special commodity, and the form of currency has evolved from physical currency to precious metal currency to credit currency represented by paper money.

It is itself a process of continuously improving transaction efficiency and reducing transaction costs. Compared with credit currency, digital currency is issued Both costs and transaction costs are greatly reduced. In addition, the current credit currency is monopolized by the central banks of various countries. This will lead to the inevitable exchange rate risk in international trade and increase the cost of commodity transactions.

On the other hand, due to the lack of a unified coordination mechanism in the international monetary system, inflation in a country It can be passed on to other countries; and the digital currency’s “does not rely on the central bank” and “can flow around the world” can well avoid the problems of currency over-issuance and exchange rate manipulation, and adapt to the objective needs of economic globalization. In recent years, data currency has developed rapidly.

In some countries and regions, it has been included in the official regulatory system and gained its status as a legal trading tool, which means that its policy risk is relatively reduced, while its liquidity is greatly Enhancement, therefore, the digital currency has become a hot new investment product that has been hyped around the world, and many new industries have been formed around it, such as trading platforms and mining industries.

The “detrust” of blockchain technology will reshape the trust mechanism. “Trust” is an ancient topic, from the “contract” in the ancient Roman commodity society to the “covenant between man and God” in Western European medieval Christianity, to the “sincerity” and “faith” in traditional Chinese culture. People’s understanding of “trust”. Entering the modern society, various disciplines have begun to try to interpret “trust”.

Economics believes that in the case of limited information and computing power, trust is a rational calculation to avoid risks and reduce transaction costs. is all The core of the transaction is the cornerstone of the entire market economy. In the view of sociologist Luman, the world is extremely complex, and its possibilities are far beyond the system’s ability to reflect on it.

Therefore, people need to simplify complexity, eliminate uncertainty, and ignore possibilities through trust . The relationship between people in the traditional society is simple, basically an acquaintance society, mainly to protect trust through blood, religion, tradition and so on. Even so, people have developed a set of rules and practices to endorse various social activities. Take the contract in the era of ancient Roman law as an example. When the commodity enters the circulation link from the production link, in order to exchange security, people gradually formed many habits and ceremonies about exchange, and eventually evolved into a general rule for adjusting commodity exchange.

Generally speaking, the contract mainly depends on the trust and loyalty of both parties to ensure the implementation, but in real life, there will always be all kinds of uncertain accidents that make the contract unable to perform smoothly. Therefore, in order to overcome this trust problem, people have agreed in advance on various default situations, corresponding responsibilities, and independent third parties that can be sought after disputes. The independent third party is often a centralized existence with a certain authority. In other words, contract law rules and third-party external forces are an effective way to solve the trust problem. This institutional experience has been applied to modern society.

Since the 20th century, with the advancement of industrialization and the development of globalization, human society has entered a “risk society”, resulting in more diverse uncertainties, and traditional social trust, mainly interpersonal trust, has gradually developed into relying on rules and legal guarantees. Systematic trust in the system.

Since the beginning of the 21st century, trust research has continued to expand in depth. One of the landmark achievements is the concept of “post-trust society” and the development of related research. If the German sociologist Ulrich Beck (1986) used the “Risk Society” to look at the general situation of the developed industrial society, the British risk researcher Lonner Luftstedt ( Ragnar Lofstedt, 2005) ‘s “Post-trust Society” concept responds to Baker’s “risk society” from the perspective of social trust.

People are more dependent on third parties and institutional systems than ever before. Government, experts, media and other subjects with voice have become high-risk roles to monitor and prevent risks. People ’s demand for trust is more urgent than ever. However, the more so, the “trust crisis” is more prominent: financial fraud, counterfeit and shoddy products, academic fraud, false news and other dishonest incidents occur frequently, overdrawing people’s trust bottom line. These fraudulent incidents focus on explaining that even if there are relevant rules and third-party supervision, the traditional credit mechanism will still be seriously ineffective, and the new social form requires innovative trust mechanisms.

Blockchain technology can undoubtedly cope with this realistic demand. As mentioned earlier, the blockchain is essentially a distributed accounting system. This technical structural feature fundamentally distinguishes it from all previous centralized systems: Because the system is distributed and there is no unified central node Controlled, so the decision will be reached by all nodes based on a consensus mechanism; and because the information exchange between any two nodes follows a fixed algorithm, the corresponding rules will judge the validity of the exchange on their own, so the two parties do not need to pass the public identity to make the other party trust;

When the exchange is completed, the information will be broadcast to all nodes, and recorded and stored by the latter, which further determines that almost no one can modify and destroy the information saved on all nodes. On the contrary, the information on each node is Both can be traced and queried. Taking “Smart contract” as an example, when the cryptographer Nick Szabo proposed the theory in 1994, his so-called “intelligence” is not related to the current “artificial intelligence”, but refers to “Automation”, that is, when a predetermined condition is triggered, the computer automatically executes a preset program containing the corresponding contract terms to achieve the agreement reached by the contracting parties.

Smart contracts can minimize the occurrence of malicious defaults and unexpected situations, reduce the losses caused by fraud, and urge the execution costs of contract performance. In short, smart contracts allow trusted transactions without third-party guarantees, which resolves the trust crisis that may arise during the performance of the contract.

The “autonomy” of blockchain technology will trigger innovation in social governance models. With the gradual maturity of the blockchain technology and the widespread application in the financial field, the technology has gradually expanded into the field of social governance.

Since the emergence of the “state” in human society, the form of organization has been centralized for most of the time. Government agencies with a bureaucracy as the organizational structure basically manage social and public affairs in a “management-regulation” mode. In addition to the problem of inefficiency, this model also has problems such as power rent-seeking due to the concentration of power and the fairness crisis caused by opaque information.

Governance is derived from the word “Steering” in Ancient Latin or Ancient Greek. The original meaning is to control, guide and manipulate, which refers to the exercise of authority within a specific range. As the process of globalization accelerates, exchanges and interactions around the world are becoming closer and more frequent, and the environment and international relations of the country have become unprecedentedly complicated.

In order to adapt to the increasing diversification of economic and social life caused by the influx of different world factors, since the 1970s, the West has launched a government reform movement that seeks a new government governance model and constructs a new type of public suitable for post-industrial society and information society The governance model has become the pursuit of governments of various countries.

Since the 1980s, “governance” has been imported into some developing countries by international organizations such as the Global Governance Committee, the United Nations, and the World Bank. The new governance model opens up efforts and attempts to form a collaborative platform for multiple actors. Actors include governments but are not limited to governments. Non-governmental organizations, private institutions, and individual citizens can all become actors.

Read: Evolution of the Blockchain | Part-2

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