A must-have “Bitcoin application package” for blockchain developers

The blockchain technology behind Bitcoin will not only change the financial industry, but also reform other fields through Internet application models, from contract signing to voting. But what exactly are these applications made of?

Joel Monegro (Joel Monegro joined Union Square Ventures in 2014. Prior to that, he was the co-founder of 3 startups. Monegro has deep research in computer science and economics) pointed out the most basic patterns and trends in the structure of Bitcoin applications. He called it the "Bitcoin Application Package". This application package includes the following components:

Miners and blockchain

Joel told us that “the miners mentioned here are nodes in the computer network. They work together to verify Bitcoin transactions. Correspondingly, they will also receive corresponding Bitcoin rewards in this process.

The Wikipedia entry on Bitcoin provides a deeper understanding of the mining process and how blockchain is used in it.

Mining is the process of adding new transaction records to the public ledger of past Bitcoin transactions. We call the ledger of past transactions a blockchain because it is made up of a series of blocks. The blockchain provides a record of transactions that have occurred to the rest of the network. Bitcoin nodes use the blockchain to distinguish between legitimate Bitcoin transactions and illegal duplicate Bitcoin transactions.

Mining is intentionally designed to be source-heavy and difficult to manipulate, so that the number of blocks miners discover each day is relatively constant. Individual blocks must contain verification to prove their validity, which is done by other Bitcoin nodes using the hash cash algorithm.

The original purpose of mining was to enable Bitcoin nodes to reach a secure, interference-resistant consensus. Mining is also a mechanism for applying Bitcoin to the system: miners receive transaction fees and "subsidies" for the newly created currency in transactions, all in order to disperse the new currency and encourage people to improve the security of the system.

It is called Bitcoin mining because it is similar to the mining process of other commodities: a certain amount of effort is required to gradually apply the new currency at a certain rate, just like the process of gold becoming a traded commodity in the market.

Bitcoin, or Bitcoin alternatives, are expensive. As we discussed before, you need to invest in a mining system to earn transaction fees. In some cases, the cost of mining coins is too high to be cost-effective.

Overlay Network

The simplest definition of an overlay network is another computer network built on top of a network. Regarding Bitcoin, Joel wrote: " Developers are building networks parallel to the Bitcoin blockchain to complete tasks that the Bitcoin network cannot complete, but it will also utilize some of the features of the Bitcoin blockchain, such as timestamps, verification functions, etc.

Blockchain parachains are “public and private networks that may or may not follow the Bitcoin system.” Parachains are an example of a duplicate network, Monegro added: “Whatever form these duplicate networks take, one thing they have in common is their relationship to the Bitcoin blockchain, the benefits they derive from it, and the ability to achieve greater liquidity without having to bootstrap their own cryptocurrency or blockchain.

Distributed Systems

With blockchain, we are enabling the development of open, distributed systems for the first time. These are systems built on data (thanks to overlay networks and blockchains), utility, and transactions, not just by a single entity. “The best example of a differentiated system built on top of a distributed data layer is Bitcoin,” Mongero said.

The potential of distributed systems lies in their ability to “unlock every part of the application package so that users and investors can use these services.” For example, a common, decentralized data can enable P2P transactions that support Bitcoin. OpenBazaar has applied this function to its P2P market (OpenBazzar is a decentralized commodity trading market that combines the characteristics of eBay and BitTorrentt. It uses Bitcoin for transactions, has no fees, and does not have to worry about censorship. Therefore, compared with e-commerce platforms such as eBay and Amazon that provide centralized services, OpenBazz does not need to pay high fees or worry about the platform collecting personal information, causing personal information to be leaked or resold for other purposes. In 2015, it received investment from Andreessen Horowitz and Union Square Ventures, two major venture capital firms in the technology industry).

Open source commercial calling interface

To help ordinary developers develop application packages, it should be "simple and fast, allowing developers of different skill levels to quickly build applications and complete testing in distributed systems."

For example, Chain.com's calling interface and Coinbase's (the first Bitcoin exchange and Bitcoin media with a formal license in the United States) Toshi node (a Bitcoin full node open source program released by Coinbase)

However, it should be clear that there are some differences between the two

1. Open source: distributed software development;

2. Open call interface: distributed business development model;

Toshi can be said to be an example of open source, and Chain.com can be said to be an example of an open calling interface.

Blockchain Applications

Mongero said this is a consumer-facing application package, adding:

“Applications built on this system will be in many ways the same as the ones we use today, just like Coinbase and PayPal have the same program. The difference is that they will be built on top of a distributed system and they will be able to talk to each other, just like different email apps and bitcoin wallet apps can talk to each other.”

Joel appreciates this application package because it was developed from the bottom up, which will lead to the development of countless innovative technologies.