Many people could not get enough sleep because they stayed up late to watch the World Cup soccer games held once every four years. Japan's national team advanced to the final rounds this year, which greatly excited fans. In addition to the plays by great athletes, rousing cheers by supporters from around the world also made the news. News reports included the fact that a global soccer player had started a social network powered by blockchain. In June 2018, Andrés Iniesta, a midfielder of J-League's Vissel Kobe who has represented Spain, launched a test site for the "Olyseum" social network for sports fans together with Carles Puyol, a legendary former defender and captain of FC Barcelona, who represented Spain in the previous World Cup. They harnessed blockchain technology to deepen communication between fans and athletes.
Upon hearing the news, some may have thought, "Wasn't blockchain technology developed for virtual currencies? Does it have anything to do with social networking?" Although blockchain is a technology created to realize virtual currencies, it is also an attractive technology for enabling distributed ledgers to safely store transaction records. In addition, as new features have been developed, blockchain has evolved into a general-purpose system technology that supports various operations systems. Let's take a look at blockchain, which has already started to be used in familiar apps.
Bitcoin Was Developed for Micropayments by Internet Users
Blockchain is a distributed system technology that was invented to realize Bitcoin, a virtual currency. A blockchain consists of a large number of computers connected peer-to-peer (P2P) via the Internet (one-to-one as equal computing peers). A white paper written by Satoshi Nakamoto in 2009 entitled "Bitcoin: A Peer-to-Peer Electronic Cash System" is regarded to be the origin of blockchain.
Bitcoin is a virtual currency developed to enable Internet users to make low-cost, secure business transactions. Double-spending is an important problem for electronic payments. Unlike cash payments, e-commerce payments involve a time lag between purchase and payment; therefore, a mechanism is needed to prevent double-billing and double-spending. For this reason, when Internet users perform business transactions on the Internet, it is commonplace to pay fees to intermediaries that provide mechanisms to avoid double-spending. However, by incorporating a mechanism to prevent double-spending into its P2P system, Bitcoin realized a digital payment system (bitcoin transfer) that does not require any intermediaries. Although this system does incur system maintenance costs, the amount is less than the fees paid to intermediaries.
Bitcoin is based on a P2P system comprised of Internet users around the world who run specialized software on their own computers. What is important is that all Bitcoin transactions (transfer logs) are recorded on all computers that comprise the P2P system rather than on a specific server installed for centralized management, and Bitcoin also has a built-in mechanism to prevent falsification. If all transmission records are stored with no risk of falsification, double spending cannot occur.
Transactions Are Recorded as Blocks, and Blocks Are Connected to Create Transaction Ledgers
Blockchain is a "system technology that prevents double-spending" incorporated into the P2P system that makes Bitcoin possible. The advent of blockchain shows that the value and credit of money, which thus far have depended on governments and companies, can be ensured by technology provided by a system. Thus, the possibility that virtual currencies that are not restricted by governments or companies can be issued and traded has come to the fore. In fact, when the Cyprus financial crisis occurred in 2013, the value of Bitcoin increased because it could be traded at any time without being affected by the country's loss of credibility.
What is the mechanism that prevents double-spending? The essence of blockchain technology is that transaction records on a blockchain are divided into chunks called blocks at regular intervals, and these blocks are linked together in chronological order to form a chain. In short, all Bitcoin transaction ledgers consist of blocks and chains.
When a new block is created, information from the preceding block is used. New blocks are created at a certain time interval, and the consistency of the entire blockchain is checked every time a new block is added. Even when changing the content of a single block, the entire ledger must be reviewed. This makes blockchain a system that is nearly impossible to falsify.
Operating Bitcoin requires a large number of computers that form a P2P system on the Internet. These computers must be running 24 hours a day, 365 days a year in order to record transaction data from around the world in blocks at regular intervals. To ensure stable system operation, incentives in the form of bitcoins are provided to participants who compute large volumes of data. Transaction fees are also paid to such participants. The calculation process for maintaining this system is called "mining" because getting bitcoins resembles the process of mining metals. To receive rewards, participants (miners) must complete the calculation process faster than others; therefore, many companies have now installed a large number of computers for Bitcoin system operation and compete in increasing their calculation processing capacities.
This incentive system contributes to the blockchain system's stability in two ways. First, the entire system is continuously strengthened by the many participants who continue to work to extend the system. Second, even if a participant who had an overwhelming calculation capacity that could possibly falsify the system appears, considering the huge investment made to acquire that outstanding calculation capacity, it is safer and more efficient for the participant to contribute to system operation and receive a stable, fair reward rather than to obtain profits by falsification, which poses the risk of destroying the currency's monetary value.
Incidentally, although the terms "block" and "chain" appear in the paper by Nakamoto cited above, the term "blockchain" does not appear. The word blockchain began to be used among virtual currency researchers and became widespread because Bitcoin's core technology connects blocks like a chain.
Next page : Smart Contracts--Programs Built into Blockchain