Super easy-to-understand basic knowledge of blockchain (Part 3)

Chapter 5 Types of Blockchain


Blockchains can be broadly classified into two types: public chains and private chains. The difference between these two is whether anyone can participate or not, but depending on the difference, the suitability for the service will also differ. Here’s a rough explanation of the difference between the two.

public chain
A public chain refers to a blockchain that is open and anyone can participate. Anyone can join or leave the public chain at any time, so even the service provider cannot know the total number of participants. In addition, since an unspecified number of participants participate in the network in the public chain, it is necessary to operate the system on the premise that it includes those who commit fraud and those who do not operate normally. For that purpose, a consensus algorithm like the Proof of Work explained in the previous chapter is required, but in the case of Bitcoin’s Proof of Work, for example, it takes about 10 minutes to form a single consensus.

private chain
A private chain refers to a blockchain that restricts participants, requiring administrator approval to participate. Private chains can work without strict consensus algorithms because the number of participants can be known at all times and the risk of malicious participants being reduced. In general, since consensus is formed by majority vote of participants, there is no need to give economic incentives such as Proof of Work, and speedy transactions can be realized.


Chapter 6 Benefits of Blockchain

Zero downtime, high tamper resistance
As explained in Chapter 1 “What is Blockchain?”, Blockchain has a system that does not go down and is extremely difficult to tamper with. In the past, in preparation for system failures and tampering, central administrators spent high costs to invest in, manage, and operate servers. However, in such a centralized system, if a problem occurs in an administrator, the entire system will be affected. It can be said that the ability to fundamentally solve problems such as system failures and tampering is a major advantage of blockchain.

can keep a clear record
The fact that even the service provider cannot rewrite or erase the transaction record is an optimum property when it is desired to leave a public record. For example, if blockchain is used for company and real estate registration, tax payment, pension payment, etc., the risk of overwriting or loss can be eliminated.


Chapter 7 Disadvantages of Blockchain

Data cannot be erased or hidden

It seems to contradict the advantage, but this property can be a disadvantage depending on the time and situation. For example, the Act on the Protection of Personal Information stipulates the obligation to delete personal information at the request of the person. Instead, the information is distributed to all participants on the network, albeit in an encrypted state.

In such a case, the nature of the blockchain becomes a disadvantage, so it is necessary to devise ways such as using it in combination with an external database, etc., instead of using the blockchain alone.

Consensus building takes time

For example, let’s assume the case of trying to operate a payment system on a blockchain. As for the time required for settlement, if it is a normal credit card, it can handle a large amount of settlement processing every second, so settlement is completed in an instant, but with blockchain, it takes time to reach consensus (complete settlement). This is a common problem with public chains, as explained in Chapter 5 “Types of Blockchains”, but even private chains created to solve this problem are still slow compared to credit card payments, making global payments difficult. It can be said that improvement is necessary as a means.

If you provide a service that does not cause problems even if it takes time to build consensus, it will not be a disadvantage, but in fields where speed is required, it can be the biggest disadvantage of blockchain.

Huge transaction data

As the use of blockchain advances, the amount of data that is stored as transaction history and the amount of communication that circulates over the network will increase, so the amount will eventually become enormous. Currently, we are able to cope with the increase in the amount of communication by improving the performance of computers and networks, but when blockchain is used in all fields, the amount of communication and data handled by it will increase the performance of computers and networks. , there is a risk that it will not be possible to cope with the increase in storage.


Chapter 8 Blockchain and smart contracts

What is a smart contract

A smart contract is a mechanism that automatically concludes contracts in transactions. It literally means smart contracts, but it has been attracting attention in recent years because the automation of transaction processes that does not require human hands is compatible with blockchain.

The concept of smart contracts is older than blockchain, and was proposed by US cryptographer Nick Szabo in 1994. Nick Szabo cites a vending machine as the first smart contract, and in a vending machine, the two actions of “insert money” and “press a button” automatically execute the contract “provide a drink”. be. As you can see from this, a contract in a smart contract refers to a transaction. Therefore, many transactions on the Internet can be considered to be included in Nick Szabo’s definition of smart contracts.

Possibilities created by combining with blockchain

Smart contracts have such a meaning, but when considered in combination with blockchain, in a narrow sense, it can be rephrased as “a mechanism that automatically executes transactions on the network according to set rules.” By combining blockchain and smart contracts, it is possible to create a mechanism in which the conditions for establishing a contract are set on the blockchain, and the contract is automatically executed when the conditions are met. Naturally, this contract does not involve human intervention, and there is no fear of falsification.

For example, assume that this mechanism is introduced into a rental car. When you go to a store, there are cars lined up there, and you can get into the car of your choice and operate the touch panel to complete everything from leasing contracts to insurance contracts and payments. There is no need to go through the hands of a store clerk, no need to fill out paper forms, and no worries about handing over card information. If you stop by a gas station while driving, the car itself will pay for the gas with the payment information registered at the time of contract. You don’t even need to have an ETC card to pay for expressways. Also, perhaps, in a world where automated driving has progressed, a rental car may be automatically brought to the place where you are now just by operating it with a smartphone. It can be said that the combination of blockchain and smart contracts has the potential to bring us one step closer to the world of the future.


A transparent and efficient society created by blockchain

In the not-too-distant future, in a world where blockchain has become a common infrastructure, many transactions, contracts, and procedures will be conducted using a combination of blockchain, AI, and IoT, making it safer and more efficient. society has been realized. In that world, large resources will no longer be devoted to preparing for fraud or system failures, people will be able to focus on more creative work, and fair records that no one can deny will make society transparent.

Not only electronic terminals such as PCs, smartphones, and wearable devices, but also automobiles and buildings are connected to blockchain, and smart contracts seamlessly solve transactions that have stopped human behavior. People will enjoy convenient services that use blockchain without knowing it.

In Japan, several associations involved in blockchain are working to popularize blockchain, the Financial Services Agency is developing regulations to protect users, and the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications are also actively promoting blockchain. Looking overseas, there are also examples of efforts to digitize the government called “e-government.” The movement to utilize blockchain is gaining momentum around the world. It may not be an exaggeration to say that the slogan “technological innovation since the Internet” is an exaggeration.


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