Teach you to understand the blockchain technology behind Bitcoin

Since Bitcoin was created in 2008 by an unidentified crypto enthusiast who called himself "Satoshi Nakamoto", Bitcoin has thousands of fans around the world, especially many IT technicians and financial practitioners. They believe that finance will enter the era of cryptocurrency and Bitcoin technology will completely subvert the financial market.

     Blockchain is the core technology of Bitcoin, with the characteristics of decentralized storage, highly transparent information, and not easy to be tampered with. According to a paper published by "Satoshi Nakamoto" in 2008, blockchain is "a completely new P2P electronic cash system that does not involve a trusted third party." In order to realize the dream of a decentralized system like "Satoshi Nakamoto", Bitcoin must avoid any reliance on third parties, such as banks behind traditional payment systems.

How blockchain works

     Essentially, a blockchain is a decentralized, distributed electronic ledger that tracks who owns how much bitcoin, maintained by all bitcoin users around the world.

     The blockchain is a group of decentralized client nodes that obtain the right to keep accounts by solving a computational problem. Any node on the blockchain network can observe the entire ledger. The blockchain data is jointly maintained by each node, and each participating node can obtain a copy of the complete database.

     Clients that participate in processing blocks can earn a certain amount of newly issued bitcoins, as well as transaction fees paid by users to speed up transaction processing. However, in order to obtain the newly generated bitcoins, the client that participates in processing blocks needs to spend a lot of time and computing power. This process is called "mining."

     According to the Bitcoin website, anyone can become a Bitcoin "miner" by running software on specialized hardware, and they operate in countries around the world, with no one person having control over the network.

     HSBC analysts Anton Tonev and Davy Jose said that blockchain provides a partial and so far optimal solution: how to verify trust in a decentralized system. This means that blockchain essentially solves the problem of traditional reliance on third parties, because this protocol not only meets the needs of centralized institutions to track transactions, but also enables trust between strangers. Blockchain technology and secure processes enable trust between strangers when there is no trusted third party.

Blockchain may become the ultimate “helicopter money”

     After the financial crisis subsided, central banks around the world began to withdraw from "unconventional policies", including negative interest rates and quantitative easing. Steve Major, global head of fixed income research at HSBC, pointed out that when a new crisis emerges, all options will be considered. One possible option is "helicopter money", that is, the central bank purchases newly issued government bonds, which greatly increases government spending.

     Steve Major said blockchain is an ideal tool for "helicopter money."

     We believe that blockchain can be thought of as a form of super helicopter money and because it solves the problem of trust, it could become the ultimate “unconventional policy”.

The following diagram explains the flow of blockchain currency:

     Financial companies on Wall Street are investing in blockchain and rushing to establish a presence. Visa, Nasdaq , and Citi Ventures have invested in a San Francisco blockchain startup called Chain, with a financing amount of $30 million. Nasdaq OMX Group Inc is testing blockchain technology. This technology has the potential to overturn traditional financial transaction methods and turn them into a Bitcoin-like transaction method.