Rational understanding and perceptual practice of blockchain: How to correctly understand blockchain and choose the correct technological development route?

Author: Li Bin (Micro Focus Bank Financial Technology Principal Investigator)

Source: FinTech Micro Insights

Editor's Note: The original title was "The Rational Knowledge and Sensitive Practice of Blockchain"

There are two leaping processes in cognition. Only through perceptual practice can we have rational knowledge, and with rational knowledge we can guide perceptual practice.

–Karl Marx At present, blockchain technology has been elevated to the height of national strategy, and has become an important breakthrough for independent innovation of China's core technology. However, with the upsurge of the blockchain, there have been various chaos in the society in the name of the blockchain and deceiving. Just this week (2020.2.17), a virtual currency exchange that once reached the top of the entire trading network announced the collapse and dissolution, and the value of user assets that could not be redeemed reached hundreds of millions of dollars.

So, how should it be correct for the general public who want to clearly identify the authenticity of the value of the blockchain, the enterprises that want to use the blockchain technology to support the development of the real economy, and the institutions that are committed to optimizing public management and social governance? Know the blockchain and choose the right technological development path?

Seawater and Flame: Definition, Category and Route of Blockchain

At present, among many information technologies, the degree of confusion in the meaning of "blockchain" is the most serious, and almost 1,000 people have 1,000 interpretations of blockchain. Even many explanations try to take the "blockchain" out of the category of information technology and raise it to a subversive concept of philosophy, sociology, political science, economics, and even metaphysics in order to achieve eye-catching goals. .

In fact, the term blockchain was first mentioned in 2008. As an abstract concept, it only represents a collective term for multiple types of information technology combinations. After years of discussions in dozens of countries including China, this year also finally clarified the definition of blockchain at the international standard level. According to the expression in ISO22739: Blockchain is a district that uses cryptographic technology to confirm consensus. Blocks, the distributed ledger added in order.

The narrow block chain technology (or public chain) at the beginning of the birth only included block-type data structures, time stamps, proof-of-work consensus mechanisms, asymmetric encryption algorithms, and point-to-point communication protocols. Smart contract technology. The technology itself is neutral, but due to the limited performance and storage capacity of these technologies combined, and the lack of security and regulatory governance measures, it cannot be used in real business scenarios, so it is only used to generate relative Bitcoin and Ethereum. Closed-loop virtual currency application. This also caused the public to often confuse the boundaries of technology and applications in the early days, mistakenly equating "blockchain" technology with "virtual currency" applications.

Although the newly developed public chain project has gradually increased the entry threshold for bookkeeping nodes since then, in exchange for performance improvements and increased commercial feasibility, it still retains endogenous virtual currencies as an ecological incentive. Means and price speculation tools, in essence, still bypass the traditional financial supervision and administrative supervision requirements, in disguise to realize the "currency issuance right" or "security issuance right" that should have been coordinated by the central bank or the securities industry regulatory agency.

It can be seen from the review that some public chain projects and their generated virtual currency patterns have been continuously renovated, speculative, prices have skyrocketed, risks have rapidly gathered, and suspected illegal sale of token tickets, illegal securities issuance, illegal fundraising, financial fraud, pyramid schemes, etc. This kind of illegal and criminal behavior has caused a large number of social stability and financial stability incidents. Therefore, since September 4, 2017, seven ministries and other regulatory agencies have continuously issued relevant regulatory requirements to restrict and prohibit ICOs, virtual assets, virtual currency transactions, and mining. Recently, during the promotion and promotion of blockchain technology at all levels of departments, virtual currency activities have shown signs of rising again. In order to further strengthen prevention and control efforts, at the end of November 2019, the People's Bank of China Shanghai Headquarters, Shenzhen Local Financial Supervision Administration, The Beijing Municipal Bureau of Local Financial Supervision issued intensive papers and once again emphasized the need to continuously monitor the virtual currency business activities within its jurisdiction. Once found, it should be disposed of immediately, and it should be dealt with as early as possible to prevent problems before they occur.

There is sea water on one side and flames on the other. The day and night of the virtual currency based on the public chain technology route is a foregone conclusion, and the alliance chain technology that requires tokens and access permissions has gradually matured in recent years and has taken on the heavy task of enabling the development of the blockchain-enabled industry.

The alliance chain, which was born in 2015 and iteratively updated, can be regarded as a representative of generalized blockchain technology. The subdivided technology modules it covers are also increasing day by day: it includes not only blockchain data structures, but also intelligence. Basic blockchain components such as contracts and encryption algorithms, including distributed architecture, distributed storage, practical Byzantine fault tolerance consensus mechanism, cross-chain mechanism, digital identity authentication module, distributed event management mechanism, multi-party secure computing, zero-knowledge proof Various homogeneous encryption and other privacy protection algorithms and many other subdivided technology modules. The most important thing is that the alliance chain completely abandons the virtual currency-based incentive method, and increases the interface of regulatory nodes, and adheres to the development path of legal compliance.


Figure 1: The two major blockchain types formed by the combination of different subdivision technologies

It is not difficult to find that if you compare Bitcoin with two hundred lines of code in 2009 to the mainstream alliance chain system with hundreds of thousands of lines of code in 2019, it is no different than one is an aircraft model and the other is a real aircraft. Its technology Complexity, application capability boundaries, security, and governance difficulties are all different. But unfortunately, there are still a large number of books, publications, and reports on the market that use Bitcoin's underlying technology or other public chain technology as the standard lesson plan for blockchain technology, but for more complex and practical alliance chain technology solutions, No word was mentioned, which essentially formed a large misleading effect.

At the application boundary, the alliance chain technology is not limited to its own capabilities, but can be integrated with other emerging technologies. For example, the combination of blockchain and big data technology can keep records of each step of collection, transaction, circulation, and computational analysis on the chain and can be traced through the entire life cycle, so that the quality of big data can be trusted and endorsed. To promote effective collaboration between multiple participants related to big data, expand scenarios such as joint reconciliation, joint risk control or joint audit to break the data island phenomenon; combined with technologies such as the Internet of Things, edge computing, 5G, etc., can promote trusted products Traceability and circulation, the service effect of IoT equipment can also be traced; combined with artificial intelligence federal learning technology, it can promote trusted data interaction and cooperation among multiple departments, and realize the training of algorithms and models without the need to exchange data. Reliable verification of the effect of training; combined with cloud computing technology, a more robust distributed architecture and a more scalable multi-chain cross-chain scenario can be realized. Based on this, the value of the alliance chain has become one of the important information technology components in the digital economy era, helping to build a new generation of information technology infrastructure, empowering the industry, and supporting the transformation and upgrading of the real economy.

For the convenience of expression, the following "blockchain" in this article refers to the alliance chain technology or distributed ledger technology that does not involve coins.

Open source VS closed source: the contention of the underlying platform of the blockchain

For different subjects who have also chosen the technical route of the alliance chain, in the process of exploring and constructing the underlying platform, two major factions of open source and closed source have gradually formed. However, from the current development trend, many closed source platforms have also accelerated the pace of open source or given a time window for future open source.

In terms of open source blockchain platforms, there are IBM-led Hyperledger Fabric platforms in foreign countries. There are already open source blockchain platforms in China that are led by Weizhong Bank and Golden Link Alliance, Zhongan Technology, JD.com, and Baidu.

In terms of closed-source blockchain platforms, Tencent's TrustSQL, Ant Financial Alliance Chain, and Ping An's FiMAX One Account Chain are well-known platforms. The source code of the platform is not open to the public. The platform is currently mainly used to support applications within its ecosystem. Development provides blockchain cloud services to the outside world in the form of or through BaaS.


Figure 2: List of major domestic and foreign blockchain platforms

Taking the initiative to open source the latest research and development of core technologies, although it means not only "giving people to fish", but also "giving people to fish", but also can get good feedback through open source openness. On the one hand, diversified developers in the open source community can discover the shortcomings and vulnerabilities of the open source platform in time, and quickly upgrade and iterate into a better platform; on the other hand, open source openness can accelerate the promotion of business cooperation among participants in the open source community. The continuous development and expansion of the open source community also helps to incubate more innovative business models.

For example, Weizhong Bank and several members of the Golden Chain Alliance open source working group completely open sourced their jointly developed alliance chain underlying platform FISCO BCOS in 2017. To date, the open source community has brought together tens of thousands of community members, 500 companies and institutions have jointly participated in the construction of the blockchain industry ecology, and hundreds of application cases have been implemented, covering government affairs, finance, public welfare, medical care, education, transportation, copyright, supply chain, recruitment, agriculture, social networking, games, etc. In this area, over 60 applications have been running stably in the production environment, and have now developed into the largest open source alliance chain community in China.

Annchain, an enterprise-level blockchain platform led by Zhongan Technology, was also open sourced in December 2017.It can provide rapid chain deployment, middleware, audit browsing, system monitoring and other supporting tools or products, and has been used in dozens of business scenarios. Engineering applications.

The JZ chain developed by JD.com was open sourced in the first quarter of 2019 and launched simultaneously with the developer community. It has now supported the supply chain traceability, finance, public welfare, precision poverty alleviation, second-hand goods trading, medical health, etc. involved by the JD Group. Multiple types of business scenarios.

As far as the technical research directions of the major platforms are concerned, the optimization of the consensus mechanism and the single-chain performance of the blockchain is nearly perfect. It is expected that in the future, it will be used in privacy protection algorithms, cross-chain technology, multi-chain parallel computing technology, distributed storage, and distributed Breakthroughs in broader segmentation technologies such as digital identity continue.

With the increase in the number of Chinese low-level platforms and the continuous research of core technologies, the application volume of Chinese companies' blockchain technology patents has begun to lead the world. According to the data disclosed by the intellectual property industry media IPRdaily in the "2019 Top 100 Global Blockchain Enterprise Invention Patent Lists", as of October 25, seven companies in the top ten of the list came from China, of which Alibaba, Ping An Wechat Bank and Weizhong Bank all entered the top five seats.

In terms of the formulation of global blockchain technology standards, China is also already in the early stages. Since 2017, many domestic companies such as Weizhong Bank, Wanxiang Blockchain, Zhongan Technology, Ant Financial, Ping An of China and other enterprises have been unified as representatives of Chinese members under the leadership of the Standard Institute of the Ministry of Industry and Information Technology. Participated in the development of blockchain standards for ISO and IEEE and other international standardization organizations. At present, a number of standards on blockchain terminology and concepts, reference architecture, security, and privacy protection have been completed and entered the development stage. It has contributed a lot in terms of subdivisions such as terminology, reference architecture, application cases, data format specifications, classification and ontology.

Application Paradigm: Opening the door to distributed commerce

As an important component of the new-generation information technology infrastructure, the application scope of the blockchain is not limited by the industry, so it can widely support multi-party cooperation scenarios in various industries, so that ordinary people can truly feel the convenience brought by technology. For example, the application of blockchain government affairs helps achieve the goal of letting the people run less or not; the judicial application of blockchain helps to reduce the arbitration cost and improve the efficiency of arbitration among public or small and micro enterprises; the application of blockchain traceability has Helps make common people eat more assured food; various financial applications based on blockchain help solve the problem of difficult and expensive financing for the real economy; blockchain invoice applications help to save the public from frequent invoices upset. In the future, the blockchain may play a role in people's clothing, food, housing, and even spiritual civilization. For example, the application of blockchain social governance will help promote good deeds, optimize social governance models, and help achieve the sustainable development goals of human civilization.

Compared with other technical solutions, the main advantages of blockchain technology solutions include: distributed multi-party cooperation, trusted data recording and certification, full process traceability, intelligent execution of contract logic, and other aspects.

(A) Distributed multi-party cooperation-This advantage is mainly realized and guaranteed by functional components such as the consensus mechanism and peer-to-peer network in the blockchain system, including the efficient and secure communication between peer-to-peer peers. Nodes participate in consensus and confirmation at the same time, ensuring the ability of data consistency among nodes with the same ledger record. In addition, it can also construct a distributed peer-to-peer underlying topology, implement data fragmentation and routing processing, and can flexibly expand capacity and fault tolerance. Typical cases in this regard are the inter-institutional reconciliation platform jointly developed by Weizhong Bank and Huarui Bank and launched in August 2016. Later, Luoyang Bank, Changsha Bank, etc. have also successively accessed, and the platform has accumulated more than 8000 records so far. 10,000 real financial transactions are error-free, effectively reducing operational risks and operating costs. There is also a trade finance blockchain platform created by the People's Bank of China. Since it was launched at the end of 2018, 30 banks have accessed it, realizing multi-level financing of supply chain receivables, cross-border financing, supervision of international trade accounts, The external payment tax filing form and other services were chained.

(B) Trusted data recording and certification-This advantage is mainly realized and guaranteed by functional components such as encryption, ledger records, digital signatures, consensus mechanisms, and privacy protection algorithms in the blockchain system, including the ability to resist keys It is cracked, supports persistent storage of transaction records, supports multiple nodes to have complete, consistent and immutable data records, and the ability to prevent illegally controlled nodes from recording information in the ledger. A more typical case in this regard is Weizhong Bank's arbitration chain application, which was launched by several depository institutions and arbitration institutions in 2018, to achieve a closed loop of electronic evidence for inspection, signing, deposit, and arbitration, thereby effectively reducing arbitration costs to About 10% of the traditional model, the arbitration efficiency has also been shortened from the traditional 6 months to less than 7 days. In addition, People's Daily builds a news copyright alliance chain based on the bottom layer of FISCO BCOS, and realizes the onlineization and automation of the entire process of digital rights confirmation, monitoring, infringement evidence collection, and litigation. Similarly, the copyright owner of Annie shares also provides copyright certificates for massive works through the blockchain, which has been connected to the Internet courts in Beijing and Hangzhou and supports one-click lawsuits. In terms of regulatory technology, there are also more prominent cases. For example, the Shenzhen Local Financial Supervision Administration and Weizhong Bank launched a blockchain-based "Internet voting decision platform" to solve the problem of mutual distrust in the process of withdrawal of online loan institutions. It has made positive contributions to preventing and mitigating financial risks.

(C) Full process traceability-this advantage is mainly realized and guaranteed by functional components such as ledger records and abstracts in the blockchain system, including the ability to verify whether the plaintext of the data has been tampered with, and to support multiple nodes to have complete, consistent, and non-tamperable Data logging and other capabilities. A more typical case in this regard is the Zhongan Bubu chicken application that was launched at the end of 2017.By combining the blockchain, the Internet of Things, and anti-counterfeiting technology, consumers can view the chicken's geographic location and step counting information in real time; throughout the production chain In the past, all information from the supply source of chicken fry, the breeding base, to the slaughtering factory, the quarantine department, and the logistics company were transferred through the blockchain to ensure the information cannot be tampered with. In addition, this year JD.com also announced that it will combine the blockchain with artificial intelligence's "pig face identification" and "cow face identification" technologies to achieve complete traceability of the entire breeding process.

(D) Smart execution contract logic-this advantage is mainly realized and guaranteed by functional components such as the consensus mechanism and smart contracts in the blockchain system, including the validity verification and recording of transactions and transactions on the premise of reaching a consensus , Or transform traditional physical assets into digitally defined commitments, or the ability of a blockchain system to automatically execute a protocol when a conditional agreement is triggered. Typical cases in this regard include Tencent Micro Enterprise Chain, Ping An SAS platform, Weizhong Bank supply chain financial services platform, etc. These projects can efficiently and conveniently realize on-chain and off-chain through the application of blockchain technology in the supply chain financial scenario. Interaction between systems and promote the efficient circulation of assets such as accounts receivable or bills on the supply chain. Chain companies under the "1 + N" financing model can thus use the credit granted to core companies to conduct financing, effectively slowing down the real economy. The problem of financing is difficult and expensive.

In essence, the transformation of distributed technologies such as blockchain will help promote the transformation of business models and transform business models from a resource-monopoly model to a more fair, equitable, and transparent model. Weizhong Bank summarized this type of business model as "distributed commerce" in March 2017, and defined it as a new type of production relationship established by multiple peer communities with commercial interests, which was preset. The transparent rules carry out new economic activities such as organizational management, division of functions, value exchange, joint provision of goods and services, and sharing of benefits. Its prominent performance characteristics include multi-party participation, shared resources, transparent model, loose coupling, intelligent collaboration, and cross-border.

3 Figure 3: From distributed technology to distributed commerce

It is true that there are many excellent blockchain industry practices and distributed business applications that we cannot list here. But it is foreseeable that with the increase of blockchain talents in various vertical industries, we will also see more valuable blockchain applications in various fields of the national economy in the future.

Development Suggestions: From "Decentralization" to "Embrace Regulation"

In the past few years, many blockchain technology practitioners have tried to bypass industry supervision and administrative supervision in the name of "decentralization", but in fact they have fallen unknowingly into illegal crimes. Marginal, this is also worth learning from future practitioners.

Therefore, it is recommended that practitioners should always maintain the governance principles of compliance development in the future, choose the technological development direction of the alliance chain, reserve the regulatory interface, support the access of supervisory nodes to supervise and manage the risks of the entire business process, and strive to explore the blockchain technology. Supervise the application of science and technology and compliance science and technology, and follow the relevant guidelines of the “Regulations on the Management of Blockchain Information Services” of the State Cyberspace Office, and actively record and develop in an orderly manner.