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62BLOCKCHAIN AS THE BASIS OF DIGITAL ECOMONY
Tokanov O.S.
Tokanov Olzhas Serzhanovich- Student, COMPUTER ENGINEERING AND TELECOMMUNICATION DEPARTMENT, FACULTY OF INFORMATION TECHNOLOGY, INTERNATIONAL INFORMATION TECHNOLOGY UNIVERSITY, COMPUTER SYSTEMS AND SOFTWARE ENGINEERING ALMATY, REPUBLIC OF KAZAKHSTAN
Abstract: the recent high instability of the financial markets of not only developing but also developed countries warms investor interest in new forms of monetary assets. One of these forms are crypto-currencies, and the most common of them is bitcoin. The article considers attractive features of virtual currency and cryptology. Dangers and risks arising in connection with the decentralization of the payment system are also described.
Keywords: cryptocurrency, cryptotechnology, bitcoin, blockchain, fiduciary money, money substitute.
1. INTRODUCTION
The development of blockchain-technology is associated with the appearance of bitcoins. In 2008, the Internet network article "Bitcoin: digital peer payment system "(Bitcoin: A Peer-to-Peer Electronic Cash System) with the authorship of a person or groups of individuals under the pseudonym of Satoshi Nakamoto [1]. The article presented principles building a peer-to-peer payment system with the ability to make electronic transactions between the participants of this system, bypassing financial institutions are intermediaries. The author argued that at the time of writing the article, this task could partially have solved using a digital signature, but this was feasible only if there were a trustee supervising double spending, this deprived the advantages of this approach. The article further describes the decentralized solution using the ideas of the peer-to-peer system, cryptography, mathematical rules, such as for example, proof of work and general rules for conducting transactions between participants of the system. This decision was the name is blockchain [2].
The conclusion of Nakamoto's article is as follows generalization: the paper proposes a system of electronic transactions, not based on trust. Building scheme began with the traditional representation of coins based on digital signatures providing control of possession, but allowing double waste. This problem, stated in the article, was solved through a peer-to-peer network and a "proof of work " to record a public transaction history [3]. Attempt of an attacker who does not have a greater part of network resources, change old records, computationally becomes practically impracticable. The strength of the network is its simplicity structure [2]. All nodes work simultaneously, constantly exchanging information. There is no need identification, since go on some specific route, transfer information is carried out on the basis of the principle "Least cost".
However, there is a very contradictory situation, when the blocking technology is beginning to be used banks to improve their operating effectiveness and thereby indirectly contribute to the increase the popularity of crypto currency, which, in its queue, creates an alternative to the existing financial infrastructure.
2. BLOCKCHAIN
Blockchain is a multifunctional and multilevel information technology, it is intended for reliable accounting of various assets. The technology of reliable distributed storage of records of all ever committed transactions. The blockchain is a chain data blocks, the volume of which is constantly growing as far as adding new blocks with records of the most recent transactions. This is the chronological base data, i.e. a database in which time it was recorded inextricably linked with themselves data, which makes it non-commutative.
Data is represented by a sequence of records, which can be supplemented. Records together with auxiliary information are stored in blocks. Blocks are stored as a single-linked list. Each
participant is represented by a node that stores all actual data array and contacts with other nodes. Nodes can add new records to the end list, and also inform each other about the changes list [4].
Next, we will consider the mechanisms using which are carried out this activity, and those characteristics that are provided by data mechanisms.
The basic model of data distribution in the system, constructed on the block, it is possible to present in the form the following sequence of actions:
1. A new transaction is sent to all nodes of the network, the network built on the principle of a peer-to-peer network, transaction falls into the pool of raw data on these nodes.
2. Specialized machines (previously operation Mining could be performed on ordinary PCs), called mining, add transactions, located in the pool of raw data in the block.
3. Each miner attempts to select a block hash, satisfying the specified conditions (in the lockbox, the condition was the presence at the beginning hash of a certain number of zeros), this the operation is called proof-of-work. Also at the moment, another way to confirm the right to exercise blocking operations - method of confirmation share (proof-of-stake). Both methods will be considered us later [5].
4. Once the miner receives a satisfying the hash of the block, the data block is sent to all participants of the network, and the miner himself receives a reward for adding a block. It is not critical if the block is not received all nodes as soon as the node that missed one of the blocks, he will get the next one after him, he will request missing information to fill out an obvious pass.
5. The nodes that receive this block produce check for correctness of transactions and absence so called double waste. If the block does not pass check, it is discarded.
6. If agreement is reached on the correctness of the block, miners start working on a new data block, based on the hash of the newly added block [3].
It should be clarified that all transactions are carried out with cryptographic confirmation.
3. USE OF BLOCKCHAIN IN THE FINANCIAL INDUSTRY
In the modern world economy, the exchange of information between different actors and industries must be 100% accurate, safe and transparent. This requires reliable and fully transparent data transmission over the Internet [6].
In order to meet the expectations of customers and for effective financial management, banks need an innovative solution in which:
• Data can be seamlessly transferred in a secure network;
• Data can not be manipulated during the postoperative period;
• Information about the transaction must only reach the right recipient;
• There is a need for a rapid exchange of information between all related parties.
Such requirements lead to the fact that in order to meet the expectations of customers, banks are looking for the latest solutions with the rapid conduct of all operations.
3. 1 What can the blockage offer?
The block system is based on reliable mathematical algorithms and has the potential to provide unprecedented transaction security with the help of a cryptographic method. Private business, medium and large enterprises can benefit greatly from the use of this technology.
Block is a distributed database that supports a continuously growing list of encrypted data without intervention or revision. The distributed model of blockage is completely perfect from the point of view of digital and mathematical transformation. This is an innovative model that can create a fundamentally new unique way of processing financial transactions.
The block-book consists of two related kinds of records:
• transactions
• blocks.
Transactions are the data that should be stored in blocks and confirmed in the block, and when and in which sequence the transactions were made, we see in the distributed registry as the main part of the database of the block account [4].
3.2 How it works?
Mathematical logic makes it possible to find a free node (all network members are independent nodes) and transfer the transaction from node to node, and as a result it reaches the destination. So the whole system works.
Financial institutions should take care of creating the basis to start working with the technologies of the blockbuster:
• All participants must have a unique identifier
• Each participant should be part of an integrated, decentralized network
• A participant can be included in the system as a direct or indirect participant in the network.
Looking at these parameters it seems that all this is similar to the current practice of
transferring financial messages. So what is the difference between a block and a traditional method?
The difference between blocking technology starts to appear when the transaction finds a unique and shortest way of transferring messages from one node to another.
Example: A-client (Debtor) of bank-A wants to transfer funds to client-B (creditor) of bank-B. Bank-A will initiate the Client's order for the processing of payments in respect of bank-B.
The mathematical logic of the block will create an instruction for clients, how the transactions will be attached to the block. This block will be found and it will be the nearest available and not overloaded node for bank A. Bank B will similarly find the next available node, so the transaction can reach Bank B. [7].
The block will be transferred to the next available node exactly as intended.
The basic rule for transferring a block / transaction: it will occur where the connections between the two nodes are the least busy. The most efficient circuits or paths can be calculated using these automated services. In a similar way, the block also supports links until it reaches its destination. The transfer of the message from the source to the recipient will occur in micro or milliseconds [8].
3.3 Where can the blockage be used?
Financial and non-financial institutions can use this new method not only to systematize accounting, but also for many other functions [9]. Below are some areas where the block has the potential to provide transparency, security and high processing speed:
• Reporting and audit
• Handling requests and responses
• Exchange trade and markets
• ATM and POS, real-time transaction processing
• Internet banking, clearing and settlement
• Identification of property rights.
As we talk more about benefits and applications in the future, we also need to think about the limitations and risks that always come with change. First of all, banks should not forget about the negative aspects in the use of the block [10].
4. Conclusion
People working in the field of computer technology, offered their very successful project -Blockchain. The essential difference between this project and many others is its global nature, the claim to create a new world currency, potentially capable of squeezing modern world currencies. Libertarian-economist Adam Gurri believes: "This is the" Holy Grail "for people who believe in free market and currency."
If this is the case, then several options are possible for how events can develop:
1. Discrediting Blockchain;
2. The demand for Blockchain among the world's financial elite, which entails using it as a long-sought substitute for the US dollar;
3. Bitcoin (derived from blockchain) will be used on a par with the dollar as a full-fledged currency system, naturally - with strict control of this system.
From the point of view of ensuring the stability of the financial system, it is advisable to have not one common currency, but a basket of currencies. The construction of financial systems must be conducted, proceeding not from the principle of alternative, but following the principles of complementarity and justice. Against this background, bitcoin, with proper state regulation, will become an intermediate link in the process of transition to a new global settlement system.
There is a high probability that the crypto currency will find its place in the modern world financial system. Most likely, bitcoin will not be able to replace the dollar or other currencies controlled by the state in the near future, but it can act as some kind of universal alternative currency recognized worldwide and can increase the stability of the financial system.
It is quite natural that the increasing popularity of bitcoin undermines the credibility of banks and financial institutions. It is noted that "the decentralized nature of bitcoins prevents any intervention by the government or financial institutions as a third party to facilitate transactions, instead people who are part of the network themselves are such a party. By destroying the process of intervention by centralized organizations, bitcoin creates a free market".
References
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