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It is better to manage the army than to manage the people. And the enemy.
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Blockchain

Ezios is also embracing a Rollup-centric roadmap; NEAR is also designing for data availability sharding. This article mainly discusses the modular trend of Ethereum.

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The "Blockchain Trilemma" limits the possibility of achieving extreme development of all attributes simultaneously, so simply expanding based on a single-layer blockchain cannot solve Ethereum's dilemma.

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  • Modular Mixed Scaling: layer1 (data sharding) + layer2 (rollups)

The architecture design is mainly divided into four layers: execution layer, settlement layer, consensus layer, and data availability layer. In many cases, the industry also refers to the execution layer and settlement layer collectively as the execution layer, and the consensus layer and data availability layer collectively as the consensus layer.

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Execution Layer: Responsible for processing on-chain transactions, executing on-chain orders, and verifying the execution of transfers and smart contracts, primarily based on Rollups. After modular blockchain development reaches a certain stage, users typically interact with the blockchain based on the execution layer, including signing transactions, deploying smart contracts, and transferring assets. The execution layer addresses the scalability of the blockchain.

Settlement Layer: The settlement layer is used to verify the execution results of the execution layer, such as Rollups, resolve disputes, and settle state commitments.

Consensus Layer: The consensus layer reaches consensus on the validity of state transitions by downloading and executing the contents of blocks through a full node network, thus providing ordering and finality, and validating block production through a PoS mechanism.

Data Availability Layer: Ensures that transaction data can be used (ensuring storage and verifiability). It is necessary to publish and store the data required to verify the validity of state transitions in this layer. In the event of malicious block proposers withholding transaction data, the data from the data availability layer can be used for verification.

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The core mechanisms introduced by Danksharding are mainly: PBS and DAS.

PBS (Proposer Builder Separation) refers to the separation of block proposers and block builders when constructing blocks. The Proposer proposes the block, and the Builder bids for the transaction ordering rights and calculates the block header. The Proposer packages the transactions based on the Builder's calculations and writes the block header into the block to complete block production. Before the introduction of PBS, block proposers (Miners before the Merge, Validators after the Merge) could maximize their mining profits by viewing which transactions were in the mempool and adopting certain strategies to capture MEV opportunities. After introducing the PBS mechanism, this role separation mechanism, combined with the bidding mechanism for Builder ordering rights, can to some extent solve the MEV problem, with the final MEV profits being shared among all validators in the network. In addition, PBS also helps address the synchronization issues between sharding and the beacon chain, as well as the censorship resistance of the Ethereum network.

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DAS (Data Availability Sampling) is an effective method to address blockchain state explosion. It allows validating nodes to check block availability. By using DAS checks, light clients can verify whether a block has been published by only downloading some randomly selected blocks. Since DAS can perform parallel verification of block data, even if the number of data shards increases significantly in the future, it will not increase the burden on individual validating nodes; instead, it will encourage more validating nodes to join, thereby ensuring sufficient decentralization of validating nodes.

Ultimately, Danksharding can achieve centralized block production for Ethereum through PBS, decentralized validation through DAS, and possess a certain degree of censorship resistance, ensuring that Ethereum becomes a scalable consensus layer and data availability layer capable of supporting more Rollups in the execution layer. (PS: Centralized block production and decentralized validation are also concepts proposed by Vitalik in Endgame regarding the future development of Ethereum.)

First, let's consider a question: if you want to buy a book online, what is the transaction process?

Step 1: After you place an order, you transfer the money to Alipay.

Step 2: After Alipay receives the payment, it notifies the seller that they can ship the goods.

Step 3: After receiving the notification, the seller ships the goods to you.

Step 4: After you receive the goods and are satisfied, you confirm receipt.

Step 5: Alipay receives your notification and transfers the money to the seller.

Although you are transacting with the seller, the entire transaction revolves around Alipay. Therefore, if there is a problem with the Alipay system, such as a meteorite falling from the sky and destroying Alipay's servers, or if Alipay goes bankrupt due to a global economic crisis, Alipay might simply state that this transaction does not exist, resulting in a failed transaction, leaving the buyer and seller entangled and unable to prove their case.

To understand how a decentralized blockchain operates, let's simplify the entire decentralized distributed structure to an extreme case for exploration. Suppose there is a decentralized small city with five lively friends who lend money to each other like this:

Assume B borrows 1 dollar from A. At this moment, what do the people in the city do? A shouts in the crowd: "I am A, I lent B 1 dollar!" B also shouts in the crowd: "I am B, A lent me 1 dollar!"

At this point, the other people in the city, C, D, and E, hear this news and take out their little notebooks to silently record: "On a certain date, A lent B 1 dollar."

After simplifying the decentralized model, we find that in this city of only five people, a decentralized system has already been established that does not require a bank or Alipay. This model does not require trust relationships or an organization with credibility. When everyone in the distributed structure keeps accounts, tampering with the ledger becomes impossible. For example, if B suddenly denies the debt: "I don't owe A 1 dollar!" At this point, the people, C, D, or E, would stand up and say: "No, my notebook clearly records that on a certain date, you borrowed 1 dollar from A, and there is no record of you repaying it."

We notice that in this model, the so-called 1 dollar is not important, and no one cares; "1 dollar" has become a variable that can be replaced with any concept, as long as everyone acknowledges it as something of value.

For instance, A shouts in this city: "I created a Balala energy!" The others in the city hear it, and everyone writes down in their little notebooks: "Someone has a Balala energy." They don't even need to know what Balala energy is; A actually has a Balala energy. What can A do next? A can shout again: "I gave B a Balala energy."

Question 1: Why should I help you keep accounts?

Why should you shout to the sky, and others should help you keep accounts? Is their time free? Is their little notebook free? So, to get everyone to help me keep accounts, I add a new rule: I decide to reward the first person who hears my shout and records it in their notebook. The reward mechanism is also simple; the first person to hear my shout and record it can receive a Balala energy as a reward.

This Balala energy is not given for free; it is a reward for your labor, just like working can earn money. You help me keep accounts, and the entire system will reward you. What you need to do is as follows: First, you need to be the first to hear my shout and record it in your notebook; after recording, you must immediately tell everyone in the city—"I have recorded this statement; if you record it now, it won't matter," and others will give up this money-making opportunity; at the same time, you need to do one more thing: give your record a unique number, then shout out the record and the number together, so the next person can continue with this record and unique number.

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  • The blockchain system creates a block approximately every 10 minutes, which contains all transactions that occurred across the network during that time. Each block also contains the ID (identifier) of the previous block, allowing each block to find its predecessor, thus forming a complete transaction chain from its inception to the present.

Two, Hash Algorithm

The hash algorithm is a one-way cryptographic mechanism that ensures transaction information is not tampered with in the blockchain. The hash algorithm takes a plaintext input and converts it into a shorter, fixed-length hash data in an irreversible manner.

It has two characteristics:

  1. The encryption process is irreversible, meaning we cannot deduce the original plaintext from the output hash data;

  2. The input plaintext corresponds one-to-one with the output hash data; any change in the input information will inevitably lead to a change in the final output hash data.

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In the blockchain, SHA-256 (Secure Hash Algorithm) is typically used for block encryption. This algorithm has an input length of 256 bits and outputs a random hash data string of 32 bytes. The blockchain encrypts the transaction information in a transaction block using the hash algorithm and compresses the information into a hash string composed of a series of numbers and letters. The hash value of the blockchain can uniquely and accurately identify a block; any node in the blockchain can obtain the hash value of this block through simple hash calculations, and if the calculated hash value remains unchanged, it means the information in the block has not been tampered with.

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In discussions about blockchain, we often hear terms like public key and private key. This refers to the asymmetric encryption method, which is an improvement over the previous symmetric encryption method (using usernames and passwords).

Let’s briefly introduce it using the model of email encryption: the public key is for everyone to use; you can publish it via email or allow others to download it from a website. The public key is actually used for encryption/verifying signatures. The private key is personal and must be kept very carefully, preferably with a password; the private key is used for decryption/signing, and it is owned by the individual. In the Bitcoin system, the private key is essentially an array of 32 bytes, and both the public key and address generation depend on the private key. With the private key, one can generate the public key and address, allowing the spending of Bitcoin associated with that address. The way the private key spends Bitcoin is by signing the unspent transactions corresponding to that private key.

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Information Sender: Signs the information with the private key and encrypts it using the recipient's public key.

Information Receiver: Uses the sender's public key to verify the sender's identity and decrypts the encrypted information with the private key.

Four, Timestamp

The timestamp in the blockchain exists from the moment a block is generated; it corresponds to the authentication of each transaction record, proving the authenticity of the transaction record.

The timestamp is directly written into the blockchain, and the blocks that have already been generated in the blockchain cannot be tampered with. Once tampered with, the generated hash value will change, rendering it invalid data. Each timestamp will include the previous timestamp in its random hash value, and this process repeats, linking together to eventually form a complete chain.

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The blockchain utilizes the Merkle tree data structure to store the values of all leaf nodes and generates a unified hash value based on this. The leaf nodes of the Merkle tree store the hash values of data information, while non-leaf nodes store the hash values obtained from hashing the combinations of all their leaf nodes.

Similarly, any change in the data of a block will cause the Merkle tree structure to change. During the verification and comparison of transaction information, the Merkle tree structure can significantly reduce the computational load of the data; after all, we only need to verify the unified hash value generated by the Merkle tree structure.

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One of the characteristics of Bitcoin is its immutability; all records are unalterable and publicly verifiable. Once a Bitcoin address published by a hacker receives Bitcoin, a record is added to the ledger, and everyone's ledger will synchronize to update this record. Everyone can check this record, and subsequent various transfer and withdrawal records for this address are also verifiable. As long as the hacker performs operations like withdrawing Bitcoin that require interaction with reality, they will inevitably leave traces.

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In the blockchain, all nodes trace back to the source, which is the first block in the blockchain, known as the "Genesis Block."

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After the "Genesis Block" was born, Bitcoin users continuously "solve problems," that is, they calculate to find values that meet specific SHA-256 hash requirements. This process is known as "mining" in Bitcoin.

When any user calculates a qualifying value first, they will broadcast it across the network, and other nodes in the network will verify this information. If verified, other nodes will abandon their calculations and add the newly created block to the previous block.

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The capacity of a Bitcoin block is 1M, which is 1,024KB (kilobytes) = 1,048,576 bytes. Therefore, the total number of transactions contained in a block is: 1,048,576 ÷ 250 ≈ 4,194.3 (transactions). The confirmation time for a block in Bitcoin is 10 minutes, which is 600 seconds. Thus, the number of transactions a block can process per second is: 4,194.3 ÷ 600 ≈ 7 (transactions). A block can only process 7 transactions per second; if the transaction data is larger, it may not even reach 7 transactions. This can lead to a result where Bitcoin transactions become congested and slow. After a transaction occurs, many transactions are still waiting in line for confirmation. How long do they have to wait? Eventually, congestion may reach a point that exceeds the capacity limit, leading to a crash!

  1. Bitcoin Classic believes that the maximum value of this field should be adjusted to 2M, and in the future, there are plans to take the median size of the previous 2,016 blocks and multiply it by an agreed factor to determine the upper limit of the next batch of blocks.

  2. Bitcoin XT believes this value should be modified to 20M and doubled every two years until the upper limit reaches 8.3G (gigabytes).

  3. Bitcoin Unlimited believes this value can be any size, even infinitely large, determined by the mining pool. The characteristics of hard forks are as follows:

  4. There is no forward compatibility; previous versions will become unusable and require mandatory upgrades.

  5. There will be two chains at the blockchain level: one old chain and one new forked chain.

  6. Agreement on the fork upgrade must be reached at a specific point in time; those who disagree will enter the old chain.

The definition of a soft fork is as follows:

A soft fork refers to when the data structure of Bitcoin transactions changes, allowing non-upgraded nodes to verify blocks produced by upgraded nodes, and upgraded nodes can also verify blocks produced by non-upgraded nodes.

  1. It has good compatibility; some functions of previous versions can still be used without upgrading.

  2. There is no chain fork at the blockchain level; there are just new and old blocks in the chain.

  3. For a relatively long time, it allows for the continued use of the original version to generate old blocks alongside new blocks.

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Blockchain technology is essentially a distributed database where accounting is not controlled by individuals or a centralized entity but is maintained and recorded collectively by all nodes. No single node can tamper with it.

If you want to tamper with a record, you need to control more than 51% of the nodes or computing power in the entire network simultaneously, which is practically impossible as the number of nodes in the blockchain is infinite and continually increasing, and the cost of tampering is extremely high, making it unaffordable for almost anyone.

Characters#

Regardless of who they are, when they appeared, or whether they will appear again in this life, they have realized the dreams I shouted out loud as a child—"I want to change the world" and "I want to become the world's unsolved mystery." Now let's talk about the legendary experiences of this legendary figure.

The legendary Satoshi Nakamoto is depicted as a figure who embodies an economist, mathematician, cryptographer, and top hacker. His legendary history began on November 1, 2008, when he published a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System." He then put theory into practice by creating the first block in the Bitcoin world on January 4, 2009, known as the "Genesis Block." On January 11 of the same year, he developed a client with a very simple name—Bitcoin Client version 0.1, calling on friends to join in.

The story gradually evolved, and Bitcoin finally had its first transaction, Bitcoin had an exchange rate, Bitcoin enthusiasts had chat rooms, Bitcoin mining difficulty was adjusted, Bitcoin was recognized by the laws of certain countries, and Bitcoin's market value reached nearly $40 billion (estimated based on May 2017 data)... Of course, Bitcoin's growth has also been accompanied by some "negative energy," such as Bitcoin's price surges and crashes, Bitcoin being stolen, and being sued. In short, Bitcoin's history is colorful, and we will elaborate on it later.

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What role did Satoshi Nakamoto play in these events? The creator of the events. Why do I say this? Because he disappeared; no one in the world has seen Satoshi Nakamoto, nor has anyone heard his voice. The FBI and media worldwide have been searching for him, but no one has found him. Everyone can see his statements in forums, emails, and website homepages during the early days of Bitcoin's founding in 2008, but investigations into these seemingly clue-filled statements ultimately lead to dead ends.

Satoshi Nakamoto is always depicted with a back view in various images, but we look forward to the 99 legends created by "every Satoshi Nakamoto."

When Nick Szabo was "hit" by a vending machine, it was like Newton being hit by the "apple of God" falling from a tree, leading to his epiphany and the invention of Newton's laws of motion. In the blockchain field, there is also a person who was "hit" by a vending machine, and he invented smart contracts.

Nick Szabo is a computer scientist, cryptographer, and legal scholar, a pioneer of innovative concepts like smart contracts, and he has been suspected of being Satoshi Nakamoto. He is currently raising funds to establish a blockchain technology company.

Essentially, the working principle of these automated contracts is similar to the "if-then" statements of other computer programs. Smart contracts interact with real-world assets in this way. When a pre-programmed condition is triggered, the smart contract executes the corresponding contract terms. [2] Currently, financial institutions such as UBS, Barclays, and JPMorgan are researching the use of smart contracts for automated transaction settlements, which can significantly reduce costs.

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When the above three conditions are met, we will find that smart contracts have become like today's Alipay; you don't need to know the technology behind it, but you trust it, and you have to use it to complete transactions. In the world of blockchain, smart contracts will be ubiquitous.

Female leaders in blockchain emerging from Wall Street

Because Bitcoin and the blockchain technology behind it inherently carry a geeky aura and a proud quality of "you mere mortals cannot comprehend the darkness of night," the authorities and opinion leaders in the blockchain industry are more often low-key men who do not like to express their views.

However, there are still a few female opinion leaders who stand out, such as Catherine Nicholson, CEO of the blockchain startup BlockCypher, which has raised $3.5 million, and Bryce Master, CEO of a digital asset holding company.

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Self-taught Basic language from a young age

Let's briefly discuss the resume of this legendary figure. Marc Andreessen may not be as famous as Bill Gates or Steve Jobs, but every step he has taken is closely related to the development of the internet, and we can talk about his entrepreneurial experiences.

In the first decade, the halo surrounding Andreessen was "Netscape," the creator of the first-generation browser. In 1992, Andreessen and his friends developed the first web browser with image elements, Mosaic. In 1993, Andreessen and his partners founded Netscape. In 1995, Netscape went public in New York, with a market value reaching $2.9 billion at one point. At the age of 24, Andreessen became a billionaire overnight. Later, due to the rise of the IE browser (Microsoft's web browser), Netscape was forced to sell to AOL in 1999, marking the end of Andreessen's first entrepreneurial experience.

Andreessen's second entrepreneurial experience also rode the wave of the internet; he and his partners founded a cloud computing company named "Loudcloud." However, from 2002 to 2006, the U.S. entered the era of the internet bubble burst, and venture capital firms were unwilling to fund internet companies. In 2007, the company was sold to HP for $1.6 billion.

Afterward, Andreessen joined the board of Facebook, served as a consultant to Twitter's then-CEO Evan Williams, and in 2009, he co-founded the Andreessen Horowitz venture capital firm.

Marc Andreessen's connection to blockchain is also related to this venture capital firm, which invested in the Bitcoin trading platform Coinbase, the Bitcoin startup 21Inc, and the blockchain data provider TradeBlock. Of course, these alone are not strong evidence for him being listed as a prominent figure in the blockchain field.

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The Digital Currency Group has the power to invest, acquire companies, and hold capital permanently. We are not a fund; we do not need to return funds to limited partners but rather redeploy capital within the company. Our goal is to accelerate the development of a better financial system. Barry Silbert

References#

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Blockchain technology has been recognized by many banks, and several banks have established related blockchain laboratories dedicated to using blockchain technology to create an ultimate transformation tool for bank backends. A report from Spain states that if all banks use blockchain technology internally, they could save $15-22 billion annually by 2022.

Blockchain + Cross-border Payments

Currently, the mainstream traditional cross-border remittance method is wire transfer, which generally takes 3-5 business days. In addition to the intermediary banks charging certain fees, SWIFT (Society for Worldwide Interbank Financial Telecommunication) also charges high telecommunication fees for message exchanges through its system. For example, in our country, a single cross-border remittance through a bank incurs a telecommunication fee of 150 yuan.

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Blockchain + Supply Chain

Supply chain finance, simply put, is a financing model where banks connect core enterprises with upstream and downstream companies to provide flexible financial products and services, using funds as a solvent to increase liquidity in the supply chain.

In today's supply chain finance system, the supply chain of a specific product includes everything from raw material procurement to the production of intermediate and final products, ultimately delivered to consumers by the sales network, connecting suppliers, manufacturers, distributors, retailers, and end-users into a whole.

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Blockchain + Information

Once banks establish their own blockchain, due to its tamper-proof characteristics, customer information and transaction records, once confirmed, are not subject to any human intervention and cannot be tampered with. This helps banks identify abnormal transactions and prevent fraud.

At the same time, banks can also use blockchain technology to establish a distributed ledger information system to detect and analyze the transaction behaviors of all node users. If any abnormal behavior occurs, the system will issue a report, effectively preventing fraud, money laundering, and other illegal activities.

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Behind the soaring popularity of blockchain, governments, large financial institutions, and corporate groups around the world are investing substantial resources into blockchain research. The application OKLink, under OKCoin, is a next-generation global financial network built on blockchain technology and is China's first commercial blockchain application. It aims to enhance the efficiency of global value transfer while improving the user experience for global remittance. This application currently covers over 20 countries and regions, including China, Japan, South Korea, and Southeast Asian countries. Its main clients are small and medium-sized financial participants globally, including banks, remittance companies, and internet financial platforms, with monthly transaction volumes reaching tens of millions of dollars.

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The disadvantages of traditional cross-border remittance methods include long cycles and high fees. In contrast, OKLink, based on blockchain technology, allows users to complete cross-border transfers at lower costs and faster speeds under a decentralized mechanism. OKLink uses blockchain technology to enable direct payments and settlements between remitters and recipients, eliminating all intermediary fees. The entire network only charges a fee of no more than 0.5% based on the intermediary exchange rate, with no hidden fees, ensuring that the recipient receives the agreed amount.

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Blockchain technology also has significant advantages in internet security management and authentication, being frequently used in social networks, identity verification, and educational credential verification. In this section, we will explore a specific aspect—identity cards. What kind of chemical reaction occurs when blockchain meets identity cards? If there were identity cards in the blockchain world, what would they look like? Now, let's study a fascinating term—"Distributed Smart Identity Authentication System," which is the "identity card" of the blockchain world. Identity cards are magical things; they are usually inconspicuous but become indispensable when lost. An identity card is a document used to prove the holder's identity, used in hotels, train ticket purchases, etc. Losing, forgetting, or having it stolen can be a disaster. If you are still worried about various issues caused by identity cards, then a smart identity authentication system based on blockchain technology might help eliminate your concerns. Your blockchain identity card would display your passport photo, online avatar, a non-modifiable key creation date, and key identification below your name. This identity card would also include a signature field, a unique QR code, a transaction number, and a hash algorithm proof.

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Below are the steps to create and use a blockchain identity card, generally divided into three steps:

  1. Choose a unique name

This way, others can find your blockchain ID. As long as you keep your password safe, no one can take your name away.

  1. Create and confirm your personal profile

Connect your blockchain identity card with your social network profile to prove that this is your blockchain identity card and confirm your personal information.

  1. Start using your blockchain identity card

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Your blockchain identity card is shared on your webpage, social network profile, and business card, making it easy for people to find you online. The blockchain identity card has two advantages: it securely and conveniently solves the problem of information loss; it will never be lost or tampered with.

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The "Appreciation" program aims to standardize the exercise and tracing of all rights to works through smart contracts while introducing copyright service providers for transactions during the creation process. This can be called a one-stop service for blockchain copyright, from source to product, which cannot be modified once rights are confirmed. We can imagine that if blockchain copyright proof is widely promoted, those plagiarists would not be as rampant as they are today. Using blockchain technology to solve copyright maintenance issues seems like a beautiful thing, but it actually faces three major challenges:

  1. The commercialization and popularization of blockchain technology, like the currently popular VR (virtual reality), although the concept is well-known, the adoption rate remains low.

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References#

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Ownership of this post data is guaranteed by blockchain and smart contracts to the creator alone.