Examples of blockchain in the financial sector. So, do banks still need blockchain? Venture funding or ICO
Blockchain is a technology for storing data, rights and obligations, protected by mathematical rules so that no outsider can take possession of them. The rights to your property cannot be stolen, forged or deleted. If you need a very simple analogy, I recommend reading the short tale about the Indestructible Chest.
If you need more detailed explanation, read on:
It's no secret that blockchain technology is penetrating deeper into different areas of our lives. And if previously the blockchain was simply a database of Bitcoin cryptocurrency transactions, now it is an opportunity to revolutionize data storage and processing systems. In terms of influence, blockchain is compared with the development of the Internet or universal smartphoneization. Everyone and everyone is writing about blockchain. Number of startups planning to use new technology, has long exceeded a thousand. And in the very near future we will see the impact of blockchain on our lives.
However, there is one caveat: there are not so many real services on the blockchain. Most developers are still only talking about what they plan to do and what it will look like. But there are also pleasant exceptions. Blockchain platform Emer is such, it includes already running services for e-business and provision network security. The combination of these basic services makes it easy to create any blockchain-oriented applications with the highest levels of reliability and performance.
To begin with, you need to understand that blockchain is a completely new category of database and there is no point in using it where classic ones are used. Blockchain is like a diamond safe, in which anyone can put anything, anyone will see what is put there, but only the owner of the item can take it away or change it. You need to understand that its main properties are distribution, publicity and mathematical reliability. The sum of these properties opens the door for businesses to very low costs in a number of areas. As well as the emergence of completely new products for individual use, which are impossible without it (for example, this one)
The main components of the platform for building business applications are listed below:
EmcSSH
An extension to the standard SSH network administration protocol. Makes network administration more secure by storing public keys and access control lists (ACLs) on the blockchain. Completely eliminates the possibility of a common hacker attack “man in the middle” (MIM), in addition, the problem of “single administrator” is solved.
In simple words: When using this technology, each user of the system has a secret file (if necessary, protected by a password), with which he logs into all computers to which he is allowed access. If a file is stolen, the user himself can instantly block access or change the key file to a new one. If an employee is fired, his access is immediately blocked. Additionally, the system is fundamentally invulnerable to a number of hacker attacks, to which almost all other systems are vulnerable. Technology is simply indispensable when it comes to managing a large number devices remotely. For example, a network of servers, ATMs, remote office terminals, etc.
Example:
Before using Ems SSH, the company had 20 servers. Each server had its own users registered. The servers were controlled by five different system administrators. To gain user access to the server, it was necessary to notify the administrator. The administrator created account and sent the keys. Each server had a separate procedure for adding a user. When an employee was dismissed, it was required to notify all system administrators of his departure. Upon dismissal system administrator it was necessary to recreate the keys all users, because they were potentially compromised.
If a user lost a laptop, it was urgently necessary to notify all administrators about the need for temporary blocking given user and regenerating keys.After implementing EmcSSH, all tasks will be solved by one employee, who simply registers which users (not their keys) have access to which servers. Users get access immediately, no changes are required to the server itself.
When an administrator leaves, no changes are required. Revocation of access for a user who has lost a computer is carried out instantly and immediately from all servers. The key is replaced in the same way. When putting a new server into operation, there is no need to register new users on it. It is important to note that the work of managing users is generally removed from system administrators.
Advantages:
The possibility of a MiM attack (“man in the middle”) on the communication channel is completely excluded. Network administration overhead costs are significantly reduced.No password is required each time you connect to a remote server.Essentially, you only need one key to log into an unlimited number of sites or devices, which can be indispensable for the banking industry, where you need to manage a large number of branches and ATMs.
Quickly change the key yourself if you suspect it has been compromised.A worldwide system, you can manage geographically distributed resources with the same security as in local network.
Allows you to quickly provide access to third-party agents, such as outsourcers, auditors, etc.There is no need to have dedicated domain controllers, which significantly reduces the cost of administration processes.Reliability increases.
The performance of a login depends only on the performance of a specific server and does not depend on the domain controller and network connection with him. Improves safety and controllability. There is no single administrator who manages all records. Here everyone has their own area of responsibility, and the hierarchy is created by links between ACLs and keys within the blockchain. Ability to use emcSSH ACL for other services, such as emcSSL
Competitive Products(on-premise): Puppet and LDAP + Kerberos
EmcSSL
Extension for standard user SSL protocol. Stores digital fingerprints of user certificates on the blockchain. Authorizes users and makes access to remote sites completely secure.
In simple words:
When a person logs into a website (for example, a banking site), information transmitted to and from the user can be stolen (for example, passwords can be stolen). Our solution makes data transmission completely secure and undetectable, even if the entire network is under the control of an attacker. In addition, actions are greatly simplified if a client loses certificates (for example, if a computer or key is stolen). The solutions currently used have inconvenient limitations. For example, they are paid. Registration and replacement of keys takes time. And most importantly, they are tied to a third party - a certification authority.
Example:
If your site uses EmcSSL technology, the user does not need to obtain special keys for your resource. The user can safely work with your site from an Internet cafe or any other unsafe place. And even if the network is completely controlled by attackers, the interaction will be safe.It will be much more convenient for the user to have one key for all sites (which can be easily and quickly changed, if necessary, it will be updated immediately on all resources). For many, this opportunity will be an additional argument in favor of your server. In addition, this technology is much cheaper than similar solutions and its operation cannot be blocked at the provider level as directed from above.
Advantages:
The possibility of a MiM attack on the communication channel is completely excluded. You do not need to enter a password each time you access the site.A single certificate for an unlimited number of sites.The certificates are self-signed, that is, the participation of a third party is not required, which: Makes the process of generating certificates fast, convenient and free. Speeds up and simplifies the revocation of a compromised or expired certificate and its replacement. Increases client security, since there is no need to trust a third party. Simple and convenient passwordless authorization (password can be used as part of double authentication) Compatibility with proven reliable industry standards: X.509, PKCS#11, PKCS#12, RFC2818. Already supported in browsers and web servers, that is, no additional plugins or other untested applications are needed.
Competitive Products: OpenID, OAuth, Facebook
login
Advantages over competitive products:
There is no transfer of trust to a third party, meaning that someone similar to Facebook cannot access your accounts and block them. The system cannot be blocked or compromised due to a failure on any authorization server or due to other problems and/or malicious actions of a third party. Placing data on the blockchain makes the system completely secure against man-in-the-middle (MiM) attacks, which is especially important for mobile applications.
Emc InfoCard
Electronic business cards that are stored on the blockchain and can be linked to client certificates EmcSSL. They allow you to store any information about the user in a structured manner, which adds convenience when visiting many sites.
In simple words:
In essence, this is an electronic business card with the ability to change data after its transmission. Imagine how convenient it would be if you could change information on business cards that you've already given out (for example, title, phone number or postal address!). Man or legal entity can create an information block about himself, including all the desired fields - name or title, contact information, website address, physical address, telephone, etc.) that cannot be replaced or faked. This block can be used to automatically create personal account on web resources.
Example:
You create a card and fill in your contact details and other information. Further, when registering on any resource that supports this technology, your data can be downloaded automatically (you do not have to enter it). In addition, when you change them, they will automatically change on all sites that support it. Anyone in the world will be able to find your company and the information you provide about it.
EmcTTS - digital time fingerprint
The service allows you to record the time of placement of any documents in the blockchain. An indispensable service for placing insurance and other similar contracts. Resolves issues of copyright priorities, patent issues, etc.
In simple words:
It is possible to register a document on the blockchain so that its existence on a specified date can be easily verified. It will be easy to verify that the document actually existed on the date of registration and was exactly as provided. The work of notary and patent offices is noticeably simplified, accelerated, and cheaper, and most importantly, any possibility of falsification is eliminated: now, simply by placing any document on the blockchain, you can register the priority of the invention or the date of conclusion of the contract. In this case, both the document itself and the date and time of its placement will be recorded forever, without the slightest possibility falsification.
Examples of use:
- When concluding an agreement between companies A And B the agreement was registered on the blockchain. For this purpose, a company employee A took a photo/scan of the document and posted its checksum (“hash”) on the blockchain. At the same time, the company B did not perform any actions and may not even know about this operation.A year later the company B refused to comply with the terms of the contract, claiming that the copy of the contract available to the company A, allegedly was changed by the company A(additional points were added or numbers were corrected a considerable time after signing, when A found that these items need to be added). Employees B illegally make changes to their copy of the contract.Company A provides electronic copy(photo) of the contract and proves it using technology EMC TTS that the agreement at the moment immediately after its conclusion was exactly what it is now (that is, A reliably proves that the clauses were in the contract initially, and were not introduced later when the need for their inclusion arose).
- The author of a work of art places a photograph of his work with his signature on the blockchain. Thus, he confirms that on the date of this operation the work already existed and he had a copy of it, that is, he can easily prove his primacy in possessing a copy. Note that the checksum of the photograph is placed in the storage, and not the photograph itself, that is, it is fundamentally impossible to obtain data about the work from the blockchain (it simply is not contained there).
- An employee of the company saved signatures of documents related to the activities of his company in the blockchain. Subsequently, he can easily prove the authenticity of the documents and the fact that they were not made “retroactively” - that is, that they existed at the time when he placed their imprint. Note that the documents themselves do not end up on the blockchain and do not violate trade secrets in any way, that is, they do not put the company at risk.
Emc DPO - Digital Proof of Ownership
This service can be used to confirm rights to any type of property that has unique numbers assigned to it - VIN numbers of cars, cadastral numbers of land plots, apartment numbers in a house, software license numbers and much more. When an asset is sold or transferred, the owner is automatically deprived of ownership rights and it passes to the new owner.
In simple words:
Based on this service, you can reliably and safely manage the ownership of any unique object (having a unique number or unique characteristics - location, name, etc.). To transfer ownership to another person, the previous owner performs a simple operation on the blockchain, and ownership passes to the owner he specified.
Examples:
When purchasing a car, the right to own a car with a certain VIN number is taken away from the old owner and transferred to the new owner. Link to unified register unique numbers in the blockchain makes the possible theft of a car for the purpose of resale completely meaningless, because It is simply impossible to enter a fake VIN number. In addition, you can easily track the entire history of the car, starting from its release: change of owners, repairs, accidents, etc. The same applies to apartments and land plots. The Emc DPO service also resolves the issue of illegal licenses for software- you can’t sell the same thing license key on expensive programs (server applications, Autocad workstations, etc.) to different customers.
Emc Atom - two-way transaction without third party participation
Used for sales in conditions where both parties do not trust each other. Eliminates the need for a third party guarantee (Escrow part).
In simple words:
Typically, when concluding a transaction, two trading parties are forced to turn to a third party (bank, independent law firm, etc.) to guarantee the execution of the transaction. The Emc Atom service allows you to immediately carry out the act of purchase and sale, when the seller receives the money and the buyer the right to own the property (see DPO).
Example:
If the software uses the EMC DPO service for licensing (the program, when launched, accesses the blockchain and checks whether it has current user right to use this program), then it is possible to make it possible for the user to sell his license to an interested party for EMC coins. In this case, the transaction will be protected.
For example, if user A has a license for a program, and B wants to buy this license, then a double transaction is created in which B transfers the agreed amount to A’s wallet, and A transfers to B the right to use the program. The transaction is completed automatically when both users have checked and confirmed that they are satisfied with everything. After the transaction, A receives funds, but loses the opportunity to use the program. B becomes the owner of the license to use the program.
Emc DNS for creating ultra-reliable networks and protecting against DNS spoofing
Distributed networks of organizations connected via the Internet can be disrupted due to failures or malicious attacks on the centralized domain name system (DNS). The alternative distributed domain name system Emc DNS removes the network's dependence on public DNS, which makes the network virtually invulnerable.
In simple words:
Blockchain-based DNS allows you to avoid blocking of Internet resources, as well as various types of DDOS attacks.
High-speed virtual transactions
All payment systems have transaction costs expressed either in money or in material resources consumed. The concept of virtual transactions is based on the technology of probabilistic aggregation of virtual micro-transactions into real ones. Since only virtual transactions take place in the system, the technology removes restrictions on network performance in the TPS metric, because This option is only applicable for real transactions.
In simple words:
This technology allows you to make micro-payments for ultra-small amounts (say, a fraction of a penny), with minimal transaction costs. You can pay for streaming traffic - telephony, video lessons, videos, real-time consultations, without a subscription, without creating an account.
Thus, the use of the totality of these services, like building blocks in a building, makes it possible now to create and use different operating schemes in the financial, banking, insurance and tax areas. It won’t be long before many people use blockchain, but only a few will be able to say that they were the first to use innovative technologies and improve their business and the quality of service for their clients and employees.
An example of real-life application of blockchain in business - Raketa watch factory
You can start using the above technologies now, we have collected them in one blockchain solutions platform
Statements that blockchain is exclusively about ICOs, cryptocurrencies, the financial industry, banking and the creation of public open networks are beginning to lose their significance. For example, the number of pilot projects conducted by IBM with partners from various industries already reached 400 in 2016.
“If 2016 was a year of experimental projects in the field of blockchain technologies for companies, then 2017 became a year of scaling and the transition from pilot projects to active networks. I think that in 2018 this trend will continue to develop, and quite a lot of projects will move into a productive phase. I would also note the trend of increasing integration of blockchain projects with each other and productive systems. A blockchain solution, in fact, cannot be a “separate box”; it must be integrated with the productive systems of banks or other organizations.”Vladimir Alekseev, system architect at IBM in Russia and the CIS,
speaker of the Blockchain Weekend course in Binary District
In essence, the implementation of blockchain technology is justified if three main conditions are met:
- Having an identifiable business network with participants, assets and transactions.
- There is a business problem that cannot be solved by introducing other technologies.
- There is a need to increase trust, consistency, immutability and completeness of data.
Proof of quality
IBM, Walmart, Chinese online store JD and Tsinghua University began working together in 2017 on a food safety project based on the open blockchain platform HyperLedger Fabric. The impetus for the development of the project was the rather dramatic situation associated with the number of diseases caused by food poisoning around the world. The technology makes it possible to combine all documentation along the supply chain of food products, in particular pork, and eliminate the possibility of counterfeit goods entering the store.“This solution has made it possible to significantly reduce the time it takes to search for a certain batch of goods for the necessary inspection or possible withdrawal from circulation. In the fall of 2017, the creation of a consortium was announced, which would include the largest retail suppliers from around the world, including Unilever, Kroger, and Nestle. The goal of this combination is to expand the Walmart and IBM pilot to scale the mission of food safety and supply transparency throughout the U.S. retail industry.”
Vladimir Alekseev, IBM
According to IBM experts, the blockchain solution for Walmart will help reduce the number of deaths from consumption of low-quality food products worldwide by 400,000.
Proof of authenticity
The startup Everledger uses blockchain technology to track and store data on the purity, quality and origin of diamonds. These stones often have a dark past, and traditional paper certificates can be counterfeited. Registration of a precious stone in a decentralized blockchain database reliably records its key characteristics, history of movements and resales, which eliminates the possibility of fraud, substitution or theft.Proof of Life
Very soon, decoding the human genome will become a completely common procedure and accessible to everyone. This will be able to improve the quality of diagnosis of diseases, prevent the development of many of them, and contribute to the creation of new drugs. The bold project Nebula Genomics seeks, firstly, to reduce the cost of deciphering a personal genome, and secondly, to optimize the collection and storage of personal information. To achieve these goals, decentralization mechanisms, cryptography and blockchain are used.Blockchain technology has flaws that can be exploited by attackers. We have previously described the risks associated with double spending attacks and the 51% attack. Now let's try to figure out whether blockchain can really be dangerous, and consider this problem from both skeptics and innovators.
Risks of introducing blockchain into the banking sector
Blockchain technology itself is already being actively implemented in banking systems. A good example of the use of blockchain technology is the Ripple platform. But the attitude of banks towards cryptocurrencies remains negative or neutral.
On at the moment The bank considers itself a regulator in relations between users of financial services and cryptocurrencies. Bank executives say their main goal is to help traditional financial institutions implement blockchain. At the same time, the Central Bank of Russia believes that it is premature to allow cryptocurrencies for trading. The fact is that at the moment Russian banks cannot equate cryptocurrencies even with foreign currencies due to their similarity to financial pyramids.
The main similarities between cryptocurrencies and financial pyramids:
The value of most cryptocurrencies does not correspond to the real price of the asset.
Cryptocurrencies are used by speculators for profit.
Monetary assets may disappear without compensation. Such cases have already occurred more than once in the world of cryptocurrencies due to hacker attacks.
Proponents of blockchain can cite the following counterfactuals:
The main digital currency Bitcoin has real value (https://site/blogs/cryptocurrency/pochemu-bitkojn-imeet-stoimost) and, unlike the dollar, will not depreciate due to inflation.
Speculators have always existed and will exist in all areas of activity.
In most cases, hackers do not attack the blockchain network itself, but exchanges and pools. The blockchain itself has been successfully attacked a few times.
The main conclusion that regulators (banks) have come to at the moment is to implement blockchain technology without legalizing cryptocurrencies. It is investments in cryptocurrencies that carry the risk of losing money. Perhaps something will change in Russia on December 28th. An important event should also take place on this day - the SegWit2x hard fork in the Bitcoin network.
Anonymity as a disadvantage of blockchain
One of the features of using blockchain as payment system is the anonymity of users. Clients can make payments for various services and goods without worrying about being identified. Such conditions are perfect for attackers for whom blockchain is handy tool in carrying out their illegal acts. The first criminal case related to blockchain was opened in connection with the trade in illegal drugs on the dark Internet.
Terrorists also enjoy anonymity. An important tool in the fight against terrorists is blocking money transfer channels. This procedure becomes significantly more complicated if attackers are able to transfer huge amounts of money in one payment, without identifying themselves at all. Thus, blockchain technology can facilitate the financing of terrorism and is therefore dangerous.
If we consider this issue from the side of blockchain fans, the following counterarguments can be given:
Blockchain makes it possible to identify all active wallets of a criminal group if one of them is identified.
Blockchain can become a universal database that can be used by government security agencies.
Corruption is an integral part of terrorism. Blockchain technology, combined with smart contracts, can deprive corrupt officials of the ability to manipulate power.
Blockchain can truly become a powerful weapon in the hands of criminals. But the truth is that any innovation can be such a weapon. Global network the Internet, atomic weapons, electricity, the wheel - all this was once an innovation, but now can be used by attackers.
Blockchain could eliminate jobs
Blockchain technology is dangerous because it can deprive millions of people of their jobs, since its implementation will eliminate the need for intermediaries in various areas:
Upon registration various types documents.
Everyone knows how ineffective government agencies can be. Thousands of officials perform similar work and duplicate documents several times, passing them to each other for additional checks. Paperwork still exists in many government activities. Blockchain does not allow documents to be duplicated or forged. The information entered into the database will be used as efficiently and autonomously as possible.
In money transfers.
Blockchain technology can eliminate intermediaries such as MasterCard and Visa. These companies charge commissions for transfers. In addition, the banks themselves will soon be able to fire most of their employees, as their work will be replaced by blockchain. We are talking about data verification, working with clients and processing databases to find fraudsters.
In insurance.
There are a lot of insurance companies. Their employees may also lose their jobs. According to statistics, more than 10% of insurance payments go to fraudsters. At this time, thousands of people cannot receive insurance payments due to paperwork and corrupt officials. This proves the fact that insurance can be ineffective and unfair.
Blockchain and smart contracts can simplify the work of insurers and make it more transparent. The technology in this case will be used as a database that cannot be falsified, and the smart contract will oblige the insurance company to pay money to the victim in automatic mode. In this case, all conditions specified in mathematical form must be met.
Blockchain technology threatens to put huge numbers of people out of work. In return, it makes it possible to work without intermediaries. When considering this issue, it should be noted that technological progress has always been aimed at maximum labor efficiency and no dangers can stop the implementation of blockchain in most areas of human activity.
10/05/2017 \ Market trends
Sergey Penkin, Deputy Head of the Analytical Department of the Association of Russian Banks.
Classic architecture of the majority information systems(“client-server” model) assumes the presence of a central participant who collects, processes and transmits data to other participants.
An example is a credit history bureau, which collects information about loans from banks, forms borrower dossiers based on it, and then distributes them at the request of clients.
Centralization is convenient because responsibility for maintaining the system’s functionality falls on one participant. But because of this, its vulnerability can lead to paralysis of the entire system. In addition, the owner of a key node in the system inevitably gains economic and political power over other participants.
Therefore, the relevance of creating decentralized, that is, peer-to-peer (peer-to-peer or peer-to-peer) systems has always been high. The complexity of the practical implementation of this task is due to the fact that with an increase in the number of participants, the volume of information traffic is rapidly increasing, and accordingly, growth is required bandwidth communication channels between everyone nodes, and not just one central one.
If there are n nodes in a hierarchical system in addition to the central one, then the number of communication channels is also n.
In a peer-to-peer system, where each node is connected to all other nodes, the number of communication channels is n*(n-1)/2.
But as the cost became cheaper and the speed of information transfer increased, the prevalence and popularity of such systems began to grow dynamically, an example of which is torrents.
One of the technologies for working on the basis of peer-to-peer networks is blockchain (“blockchain”), that is, decentralized storage of data placed in interconnected blocks.
The principle of blockchain and its difference from a hierarchical system can be understood using the following example.
Let’s assume that a group of people decided to keep a register of transactions: who lent what to whom, when, what they paid for, etc.
With a client-server architecture, they are forced to appoint a “registrar”, to whom all parties to one transaction will be in confidentially tell you what needs to be included in magazine operations. Since the journal is the only confirmation of transactions, its loss results in the loss of all information about transactions. The magazine can also be faked.
In the blockchain model, each member of the system has set of sheets (blocks, “block”), on which transactions are recorded in chronological order. To register a transaction, its participants publicly they declare it, after which everyone who heard it writes down the information received, each on their own piece of paper.
The sheets are numbered; the beginning of each sheet contains information about the last transaction of the previous sheet (thereby synchronizing the moment when maintaining a new document begins). Thus, the sheets are connected in chain (“chain”). If someone's sheets are damaged or lost, or doubts arise about the reliability of the information, then he has the opportunity to compare his sheets with the records of other subjects or copy their sheets. The more participants in the system (that is, copies of one sheet), the higher the reliability of the system. In such a system, there is no need for a central counterparty at all.
When disagreements arise regarding a transaction, instead of checking the journal, the conflicting parties compare their own records with information from the sheets of independent participants. The side with whose version of the event more than half of the sheet holders agree is considered right.
The considered example allows you to understand how blockchain works in closed system, whose participants know each other. In order to be able to interact between subjects who are not familiar with each other, it is necessary to authenticate and authorize system users (that is, confirm that the user matches who he claims to be and his authority to use the system, respectively).
The solution was a digital signature - a cryptographic technology for verifying the authenticity of information and confirming its authorship. The basic principle of this technology is the ability to encrypt and correctly decrypt information using private and public keys, respectively.
For example, the sender encrypts the original information - the number 500 - using a private key of the form “divide by 100 and add 1”, resulting in the number 6.
Next, the sender sends encrypted information (the number 6) and a public key of the form “multiply by 50 and add 200.” The recipient, transforming the encrypted information using the public key, receives the required information in the form of the number 500.
In this case, the recipient cannot determine the private key using the public key. Moreover, public keys can be changed for each new recipient or even message.
Electronic signatures and blockchain actively use a tool such as hashing, that is, reducing information of an arbitrary volume to an alphanumeric string of a fixed length.
Thus, the hash of the letter “f” of the Russian alphabet, created on the basis of the MD5 algorithm, takes the form. The aphorism “I carry everything I have with me” has a hash.
The same aphorism in which the letters “е” are replaced by the letters “e” has a hash.
The reverse operation of hashing (that is, restoration of the original information from a hash) is impossible.
The probability that the same hash exists for different information is negligible.
Finally, changing even one character in the original information completely changes the hash value.
A hashing-based digital signature works like this:
- the sender hashes the message, receiving the hash h;sender encrypts h private key k, receiving a signature s;the sender sends a message to the addressee, signature s and public key p;the recipient hashes the message, receiving the hash h(like the sender in point 1); using a public key p the recipient decrypts the signature s, getting the value h 1;If h=h 1, then the signature, and therefore the message, are considered authentic.
A participant in the blockchain system, when making an entry, encrypts it with a private key and at the same time reports the signature and his public key to the system. Thus, he publicly announces his authorship and allows other network participants to access this information.
As soon as the authenticity of the signature is verified, the transmitted information begins to be built into a block, that is, in fact, a database of limited volume containing various records of different participants made in a certain period of time.
The purpose of creating blocks:
- assignment of permanent address information; convenience of decentralized information storage; protection of true information from unauthorized changes.
To illustrate the principle of functioning of blocks, let’s consider the simplest blockchain system that registers money transfer transactions.
Transactions in the system are presented in the following form: sender_amount_recipient (for example, the entry “A transferred 100 monetary units to B” looks like A_100_B).
All operations are hashed. A hash record of the form “A_100_B” using the md5 algorithm mentioned above looks like 1
Let's assume that the first 2 operations with the corresponding hashes have been performed in the system.
1. A transferred 100 monetary units to B (A_100_B). Hash of the first operation (hash1o): .
2. B transferred to D 50 monetary units (B_50_G). Hash2o: .
Data about these transactions: their content and hashes are placed in block 1, which has the structure hash1o_hash2o (e5b1586b09361eed50602f0cc9d56e14_e589a092725d01654851ad264d25dc81).
Its own hash (hash1b), formed by hashing the above structure (that is, the set of hashes of the transactions contained in it), looks like .
The following two operations form block 2:
3. B_25_ V. Hash3o: .
4. G_20_D. Hash4o: .
The structure of block 2 is as follows: hash1b_hash3o_hash4o ( _3859fa215f9f23c60fe14c0743ad0977_).
Block 2 structure hash: .
As you can see, the hash of block 2 is built using the hash of the previous block, which, in turn, is created based on the hashes of the operations contained in it.
All subsequent blocks are formed according to the model of block 2, that is, indicating the hash of the previous one.
Thus, information about operations 1 and 2 is directly reflected only in block 1, but is indirectly contained in subsequent blocks as the basis for creating its hash.
As soon as a certain number of subsequent blocks are created based on the block in which the information is included, the information is considered confirmed.
The generated blocks are sent to the participants of the blockchain system. If participant B declares that, as part of operation 2, he transferred D not 50, but 20 units, then by a majority (not less than 50% + 1) of the votes of the system participants, his statement must and will be refuted. Because if a similar operation occurred (B_20_G), then its hash would be , not . And then the hash of block 1 would also change to . Along the chain (“chain”), the hashes of all subsequent blocks would begin to change.
Cryptocurrency is an improved and more complicated type of blockchain.
Since cryptocurrencies are assets that perform the function of money, transactions with them are structured according to accounting rules. This means that the payer does not have the right to write off more funds from his electronic wallet than is available on it.
In cryptocurrencies, this principle is ensured by the fact that each debit transaction includes information about the previous transaction involving the payer’s wallet. This creates and maintains a chain of funds movement, which allows the system to quickly check the balance.
When making a transaction, the system:
1. provides a link to the sender’s previous transaction;
2. attaches the signature and public key of the sender;
3. records the address where the funds should be transferred (the owner of one wallet can create many addresses, thereby achieving high user anonymity while their funds are nominated and circulated in the form of cryptocurrencies);
4. sets the transaction amount.
That is, when making a transaction, the payer publicly announces to the entire system that he is ready to transfer funds not exceeding the balance in the wallet after the previous transaction to the address of another user. The sender's signature and public key confirm that he is authorized to make this transfer.
After checking a transaction request, the system places it in a queue to search for a block.
Since there is a possibility that an unscrupulous participant in the system can, if there is a sufficient amount of computing power, recalculate the hashes of all subsequent blocks and replace them with the true ones (for example, as a result of a hacker attack), cryptocurrency blocks are introduced additional requirements. As a rule, their hashes must include a certain number/order of characters or be less than/greater than a certain number. These restrictions are called block complexity and are dynamic in nature depending on the activity of transactions performed by users. Thus, for the Bitcoin cryptocurrency, block hashes must begin with a large number of zeros in order to be less than a certain number 2.
For this purpose, the structure of the block provides a nonce – a number, by enumerating the values of which a hash is achieved that satisfies the requirements of the system.
Due to this, the block structure looks like this: hash of the previous block_hash of the first transaction of the current block_..._hash of the last transaction of the current block_nons.
The number of nonce variants to create the required hash can reach hundreds of millions, which requires significant computing power and energy consumption for their operation.
The process of finding nonce values to form a block hash (and thus the block itself) by authorized nodes of the system is generally called mining.
A narrower interpretation of mining is the transfer of block ownership to the node that first generated the nonce, while the complexity of the block at a particular point in time is constant for everyone (the so-called “proof-of-work” principle). An alternative to mining is forging, in which each node sets its own difficulty level, inversely proportional to the amount of cryptocurrency on its balance sheet (the “proof-of-stake” principle).
Thus, those nodes that have large computing power, and in forging – more “rich”.
For forming a block, the miner receives a reward and also assigns commissions for all transactions included in the block. It should be noted that the level of commission for the transaction is usually set by the payer, but the higher the commission, the faster the transaction will find a block. Once a transaction is included in a block, it cannot be reversed.
Thus, blockchain and cryptocurrencies are created on the basis of electronic (digital) signature technologies and distributed information storage.
Distribution means that the storage and processing of all information in the system is carried out not by one authorized participant, but by all nodes that have expressed their desire.
Blockchain technologies have gained public attention thanks to cryptocurrencies (namely Bitcoin). However, the prospects for using blockchain technology in everyday life much wider than the financial sphere. In what areas will the implementation of blockchain technologies be most promising? Where is cryptography being used now, and where is the launch of such technologies a matter of several years, or even months?
Blockchain in finance
Most people who are only superficially familiar with blockchain associate this technology with Bitcoin and other digital currencies. Meanwhile, even in the financial sector, the use of blockchain is not limited to just the release of new versions of cryptocurrencies.
For example, an interesting example is the creation of the Polybius cryptobank. Its founders initially did business in the production of mining equipment, and themselves produced cryptocurrency. When they started having problems with monetary transactions (banks simply did not want to serve a company engaged in such “frivolous” activities), the team decided to open their own bank, where blockchain is used in most processes.
First of all, blockchain helped the founders of the crypto bank attract additional investments through ICO. In addition, all document flow of the financial structure will be carried out on the blockchain (Emercoin technology is used for these purposes). Banking transactions are another operation where blockchain is used.
Moreover, traditional banks are also considering the possibility of conducting transactions via blockchain. The most obvious option for such purposes is the Ripple platform and the cryptocurrency of the same name. Thanks to the use of blockchain technology, you can transfer almost any amount through Ripple from anywhere on Earth, automatically converting from one currency to another. For example, an entrepreneur from the United States can transfer money to his partner in Germany, and the amount in dollars will come to the recipient’s account in euros, and the procedure itself will take only a few minutes.
Another crypto bank, Crypterium, offers interesting solutions. In addition to blockchain transactions that have already become standard in this area of application, the project offers mobile payments in cryptocurrency with additional benefits such as loyalty programs, cashback, etc. It is expected that such banking will be convenient not only for individuals, but also for businesses: cryptocurrency acquisition will allow you to control everything points of sale through unified system, built on the blockchain. In addition, the bank’s clients will have access to the usual deposit and lending services, but with the convenience and security of smart contracts.
Blockchain in medicine
In almost all areas where blockchain can be used, it serves as a universal data storage that is almost impossible to hack and change. In addition, any user with the appropriate rights can gain access to this data.
Medicine is one of the areas where data storage and processing is one of the key factors. The health and even the life of the patient may depend on how quickly doctors receive examination results or medical history. Blockchain technologies make it possible to enter all data into a patient’s card, and even doctors from another city or country can access it, if necessary (for example, if the patient was forced to go to a medical facility during vacation or a business trip).
In medicine, electronic data storage mechanisms have previously been used, but they were limited to one system. Doctors from one country could go to internal internet resource and obtain the necessary information, or add new data, but foreign colleagues did not have access to this database. With the use of blockchain, specialists from other countries can be allowed to access an internal resource without any fear, having previously limited access to what is necessary.
Blockchain jurisprudence and law
If Bitcoin opened up a new format for financial relations, then Ethereum did the same in the legal sphere. Smart contracts were present to some extent in Bitcoin, but it is on the Ethereum platform that each user can create a full-fledged legal framework for their business, starting with a purchase agreement mobile phone via the Internet, and ending with registering your own business with access to ICO, launching an internal cryptocurrency and other opportunities.
There are countries where government agencies use blockchain to simplify the management of state property and legal regulation. Similar mechanisms are being actively implemented in Estonia (previously, it was possible to obtain electronic citizenship in this country).
Based on smart contracts, you can now register a marriage, and even obtain virtual citizenship - there is a full-fledged Bitnation cryptonation on the Internet. This community has its own citizens, ambassadors and even real territories.
Blockchain in other areas
There are many more areas where blockchain technology can be applied. This also applies to the real estate sector – tokenization of ownership rights to knowledge and land plots significantly increases the liquidity of assets and makes it possible for even small investors to enter into transactions. Blockchain is also used in the energy sector - tracking energy reserves at various points (gas stations and stations), as well as in entire regions, allows optimizing supplies. By using smart sensors in pipelines and storage facilities, monitoring can be improved and the risk of theft can be reduced.
The use of blockchain in the Internet of things is a separate topic. This “bundle of innovations” can be used in various fields - in industrial production, agriculture, mining, etc. There are many such examples and they all prove that blockchain technology has a great future, which is not limited to cryptocurrencies alone.
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