1.1 Emergence and significance of blockchain technology

Blockchain is the most talked about direction nowadays, integrating distributed data storage, peer-to-peer transmission, consensus mechanism, encryption algorithm and other computer technologies, and is considered another disruptive innovation in the Internet era. Because of its huge breakthrough in data storage and information transmission, it is likely to fundamentally change the operation mode of the existing economy and finance. It may even cause a new technological innovation and industrial change globally.

Blockchain is a kind of distributed ledger that combines data blocks in a sequential manner in chronological order into a chain data structure and is cryptographically guaranteed to be tamper-proof and unforgeable. The essence of blockchain is a distributed bookkeeping system, and digital cryptographic assets (such as Bitcoin) are precisely the assets or currencies in digital form carried on this system, i.e., digital cryptographic assets are just the representation of bookkeeping, and blockchain is its underlying set of distributed, encrypted, and trusted bookkeeping system and clearing system.

Blockchain has the following significant advantages.

- Distributed

The distributed nature of blockchain, also known as decentralization, is the most fundamental feature of blockchain. In a traditional centralized network system, the destruction of one central node can paralyze the whole system, but for a blockchain network, due to the use of distributed accounting and storage, there is no centralized hardware or management agency, the rights and obligations of any node are equal, and the data blocks in the system are jointly maintained by the nodes with maintenance functions in the whole system, so an attack on a node cannot destroy the whole network.

- Open Source

Based on the blockchain system using open source procedures, open rules and high participation, the data of the blockchain is open to all except the private information of the transaction parties is encrypted, and anyone can query the blockchain data and develop related applications through the open interface, and the information of the whole system is highly transparent.

- Hard to tamper/unique and reliable

Once the information of the blockchain system is verified and added to the blockchain, the data on the chain is backed up in each network node and will not be deleted, making it extremely costly to attack the entire network, thus ensuring that the data in the blockchain network is difficult to tamper with and uniquely trustworthy.

- Invisibility / Security

Although all data records and update operation processes in the blockchain system are open to the whole network nodes, the private information of its traders is processed by hash encryption, i.e. data exchange and transactions are carried out anonymously. Encryption is simply the process of converting the original message by algorithmic means, and the recipient of the message is able to decrypt the cipher text with a secret key to get the original text. Blockchain uses many sophisticated encryption algorithms to ensure the reliability and security of the system.

Blockchain technology has become the most talked about topic in the global innovation field and has been called the core technology with the most potential to trigger the fifth wave of disruptive revolution. At present, the application of blockchain has been extended to many fields such as finance, the Internet of Things, intelligent manufacturing, supply chain management, etc. It will bring new opportunities for the development of cloud computing, big data, AI, and other new-generation information technology, and has the ability to trigger a new round of technological innovation and industrial change.

The first driving force of economic growth is technological innovation, and the efficiency of its growth is determined by the combination of capital flow, information flow, and logistics in this social structure. The growth and development of blockchain and its crypto-digital currencies bring three underlying changes to it: the first is the realization of information as value and industry as finance; the second is the emergence of more decentralized, community-based, and liberalized collaborative organizations; and the third is the realization of cost reduction and efficiency improvement in collaborative mechanisms.

As defined in the Economist magazine, blockchain is the machine of trust. It will redefine production relations and make the whole ecology more trustworthy.