Blockchain is a very secure and reliable decentralized network. People can record transaction behavior, store data and exchange value in a distributed ledger, and the whole process is not controlled by any centralized organization, but is maintained by computers distributed around the world.
Similar protocols to blockchain were actually invented as early as the 1980s and were used to verify timestamps in documents in the 1990s. However, the first truly decentralized blockchain was first proposed by an individual named "Satoshi Nakamoto" in the Bitcoin White Paper in 2008.
Blockchain technology is the underlying technology of the Bitcoin network, and the Bitcoin open source software was released in 2009. It is worth mentioning that the Bitcoin white paper did not actually use the term "blockchain", and this concept was gradually introduced and promoted by people who promoted the development of this technology.
Blockchain can be regarded as a transaction history record, in which each block is "connected" with the previous block in order, forming an immutable record in a peer-to-peer network. By applying encryption trust and guarantee technology, each transaction is assigned a unique identifier or digital fingerprint.
Its trust, responsibility, transparency and security features make blockchain an ideal choice for many organizations and trading partners to access and share data, forming a third-party, consensus-based trust. All participants maintain an encrypted record of each transaction in an undeniable, decentralized, highly scalable and resilient recording mechanism without additional costs or intermediaries. The decentralized single source of information reduces the cost of executing trusted business interactions between parties that may not fully trust each other.
In a permissioned blockchain, participants have the right to participate in the network, and each participant is responsible for maintaining an encrypted record of each transaction. Any company or group that needs secure, real-time, and shareable transaction records can benefit from this unique technology. Its advantage is to improve security and availability, avoid central vulnerabilities, because there is no single location to store all content.
The following definitions help to understand blockchain and its underlying technology and application scenarios in depth:
A smart contract is a computer program hosted and executed on a blockchain network. Each smart contract contains code that specifies the predetermined conditions, and when these conditions are met, the result will be triggered. By running on a decentralized blockchain instead of a centralized server, smart contracts allow multiple parties to share results in an accurate, timely, and tamper-resistant manner.
Smart contracts are powerful automation infrastructure because they are not controlled by central administrators and are not easily subject to single-point attacks by malicious entities. When applied to multi-party digital protocols, smart contract applications can reduce counterparty risk, improve efficiency, reduce costs, and provide new transparency to processes.
Smart contracts follow the simple if/when…then… statement, which is written into code on the blockchain. When the predetermined conditions are met and verified, the computer network will execute the operation. These operations may include issuing funds to relevant parties, registering vehicles, sending notifications, or generating vouchers. Subsequently, when the transaction is completed, the blockchain will be updated, making the transaction unchangeable, and only authorized parties can view the results.
In smart contracts, in order to meet the needs of all parties and complete the task successfully, multiple provisions can be established. In order to establish these terms, participants must reach an agreement on how transactions and their data are represented on the blockchain, agree to establish rules for managing these transactions, and consider and define a framework for resolving disputes.
Not all blockchains have the ability to run smart contracts. Although some blockchains or second-layer networks (such as Arbitrum, Avalanche, Base, BNB Chain, Ethereum, etc.) are examples of smart contract compatibility, blockchains like the basic Bitcoin blockchain do not have native smart contract functions. The main difference between these blockchains is their ability to execute and store arbitrary logic at the bottom.
