When we talk about Bitcoin, the blockchain we refer to is solely the blockchain technology, which is the core technology behind Bitcoin. However, due to its excellence, this technology has given rise to many other cryptocurrencies. Because of its revolutionary potential, it is expected to be applied to finance, healthcare, supply chains, and many other fields in the future, even affecting every aspect of our lives. The term “blockchain” has now become a synonym for a new domain.

Today, let’s not discuss these applications of blockchain but focus on why the blockchain technology is so excellent.

First, let’s define it: Blockchain is a distributed ledger technology that ensures the security, transparency, and immutability of data through encryption and consensus algorithms. It consists of a series of “blocks” connected in chronological order, each containing a set of transaction records and an encrypted hash value pointing to the previous block, forming a chain-like structure.

If you don’t understand, here’s an example:

Imagine you and your friends have a shared ledger. Whenever a transaction occurs, such as you lending a friend 10 yuan, you record it in the ledger. This ledger has several special features:

1. Decentralized

This ledger is not kept by one person but is identically replicated and updated in real-time for everyone, so everyone knows what is recorded, and no one can secretly change it.

2. Transparent

Everyone can see all the records in the ledger. There are no hidden places, and all transactions are public.

3. Immutable

Once a transaction is recorded in the ledger and confirmed by everyone, it cannot be changed. If someone tries to alter the transaction record, the inconsistency will be immediately apparent in everyone’s ledger.

4. Secure

Transaction records are protected by complex mathematical problems (like a hard-to-crack password), ensuring that no one can easily tamper with or forge records.

How does it work specifically?

Every time there is a new transaction (for example, you lend a friend another 10 yuan), everyone verifies whether the transaction is genuine and legal. Once confirmed, the transaction is recorded on a new page. In addition to the record, there is a string of numbers on the page, which is derived from mathematical calculations of the transactions on the previous page (using a specific formula), known as the hash value. Each new page is linked to the previous one through the hash value, forming a chain, which is the “blockchain.” If someone tries to tamper with the transaction records on a page, it will change the hash value of the next page, affecting all subsequent transaction records, and thus will be immediately discovered.

When you and your friends have such a ledger, it is secure, publicly transparent, immutable, and can be used anytime, anywhere, even allowing anyone in the world to join and use it. What would you use it for? It would be a pity to use it just for accounting.

If blockchain technology is like the underlying technology of programming, Bitcoin is the first operating system to use this technology, demonstrating the basic functions of blockchain, which can only handle simple tasks. Ethereum, which emerged after Bitcoin, is like the Windows operating system, which I would call the second-generation operating system. It not only provides the basic functions of blockchain but also introduces the concept of smart contracts and decentralized applications (DApps), allowing developers to create and run various complex applications on its platform. After Ethereum, innovations in blockchain technology continue to emerge, including decentralized finance (DeFi), digital collectibles (NFTs), cross-chain technology, distributed storage, privacy protection technology, and decentralized autonomous organizations. These new applications greatly expand the scope of blockchain technology applications, and the blockchain ecosystem is continuously developing.

But what’s the use of all this? After all, we already have the internet and operating systems, with countless applications and a nearly perfect ecosystem. Why should people move from the existing internet to the blockchain? Does it have any absolute advantages? Indeed, it does. The answer has already been mentioned in the previous text. Blockchain technology has a significant advantage in data processing, being secure, publicly transparent, and efficient. These characteristics enable it to solve trust and efficiency issues that the internet cannot address. Everything we have done on the internet in the past could potentially be done again on the blockchain.