What is cryptocurrency? Why should we support it? (1)

I didn't expect that my first article on Matters would be about cryptocurrencies. In fact, I want to do knowledge promotion more about alien-related issues, but because of my personal Facebook post a few days ago, I got some responses. Feel free to write an article!

What is currency? Simply put, it is a medium of exchange that can be recognized by both buyers and sellers. The main purpose of using currency in the transaction process is to avoid bartering, because it is very difficult to make do with buyers and sellers who have mutual needs and are willing to exchange goods/services with each other. I grow watermelons, you write novels, he cooks, and the other repairs the car. How many watermelons can be exchanged for a novel? How many meals can be cooked to exchange a car? Without currency to provide a reference, it is difficult for both parties to complete the transaction.

So what can be used as currency? The answer is that anything can be used as currency, even small stones, leaves, petals, etc. on the roadside can be used as currency, as long as the buyer and the seller agree. Seeing this, some people may refute "How can small stones on the side of the road be used as currency?". Of course, the change copper used in every country is a small stone, and its value is given by the users through government regulations and acceptance. But in essence, the copper plate in everyone's wallet is a stone, and the banknote is a paper with a pattern printed on it, but ordinary people don't think about physical currency that way.

As for the electronic currency, what about electronic currency? Electronic currency has no physical entity and cannot be touched. During the transaction process, the buyer cannot really take any electronic currency to the seller, but completes currency ownership through mutual accounting and reconciliation. conversion of rights. For example, today Alice wants to spend 100 yuan to buy a pair of shoes with Bob through the Internet. When Alice places an order, she is actually updating her account book and writing "Alice handed over 100 yuan to Bob". At the same time, Bob is also updating his account book, noting that "Bob received 100 yuan from Alice". As long as the ledgers of both parties are consistent, we can conclude that Alice has handed over 100 yuan worth of electronic money to Bob.

However, since electronic money has no entity, in order to ensure that both parties of the transaction will not make false accounts and generate electronic money that did not exist in the process, a third-party financial institution has always been required to monitor and check the accounts. Intervention or even account revisions as they occur. This will increase transaction costs for electronic payments, making small transfers infeasible. In addition, all transactions can be reversed or even cancelled by third-party financial institutions, which also increases the distrust between buyers and sellers. A person named Satoshi Nakamoto published a paper on the Internet on October 31, 2008. He first proposed the idea of cryptocurrency to solve these problems. Here, I will briefly describe what Mr. Nakamoto proposed. 's model.

1. There is no third-party financial institution to supervise every transaction record, and the ledger is recorded and updated by each user participating in the network.
2. Before updating the ledger, each user must find the solution to a math problem before writing the transaction record. The speed of solving the problem depends on the CPU computing power of the user's computer.
3. After the account book is updated, it will be encrypted by the user and broadcast to the whole network. After receiving it, other users will give up the account book being processed. The new account book information received shall prevail, and the next round of account book will be performed. Update the contest.
4. Users who successfully update the ledger are rewarded with virtual currency.
5. The ledger with the fastest update progress (ie the longest ledger link) is regarded as the transaction process that has actually occurred.

Through the setting of some rules and algorithms, the authors of the paper mathematically prove that the probability of successful fraudulent accounting decreases rapidly as the number of transaction records increases. Account tampering is unlikely to succeed unless the CPU computing power of the user who wants to falsify the account is greater than the sum of the CPU computing power of all other users in the network system. Under such an operational structure, there is no longer a need for a third-party agency to perform the auditing role.

Although it is a breakthrough in the field of computer science, the emergence of cryptocurrencies has had a profound impact on the economy, society, politics, and other fields, and its contribution to the development of human civilization goes far beyond reducing the cost of electronic transactions. . The next article will outline a few issues that I have personally noticed and give some examples to explain why people should support cryptocurrencies?