On September 18th, the 2019 Shanghai Blockchain International Week: the 5th Blockchain Global Summit, hosted by Wanxiang Blockchain Lab, came to a successful conclusion.
Dr. Xiao Feng, Vice Chairman and Executive Director of China Wanxiang Holdings, Chairman and General Manager of Wanxiang Blockchain, delivered the closing speech " Thinking Caused by Libra ".
The following is the full text of the speech (organized from the on-site shorthand, some of which do not affect the original intention).
Taking advantage of the organizer's privileges, my last speech is mainly to say thank you to all the guests who have persisted until now. Thank you everyone, for your hard work these two days!
There are more guests staying this year than last year. I know it wasn't because of me, because I was the last one last year, mainly because of Vitalik (Editor's Note:).
This year, I want to share with you some of my personal thoughts caused by Libra, not to comment on Libra.
01
Most people evaluate Libra from the perspective of currency. Some people say that it is a currency. Some people say that it is not. Is it right? I believe that it is not only sovereign institutions that can issue currency.
From the perspective of credit endorsement, in the past few thousand years, there have been three types of issuers endorsing currency credit, or issuing currency by way of credit endorsement:
1. Sovereign currency. Sovereign state institutions use their own sovereign credit endorsements. The U.S. dollar, renminbi, and future central bank digital currencies are all sovereign credit endorsements.
2. Cross-sovereign currencies. This is a currency issued under multiple sovereign credit endorsements, such as Libra that may be issued next year. Issued as a reserve currency.
3. Non-sovereign credit endorsed currency. This is also the oldest, such as gold, Bitcoin, etc., as well as the stable currency DAI (Editor's Note: Maker DAO's stable currency), which is issued using digital assets as collateral , as mentioned by Vitalik .
Whether it is Libra, Bitcoin or DAI, from the perspective of credit endorsement, there is no innovation. This is certainly not to belittle Libra or Bitcoin, but that there is nothing new under the sun. We don't need to worry, the form and function of currency are constantly changing.
In fact, there are usually three main entities issuing digital currencies:
1. Technical geek. Bitcoin is created by tech geeks. Any innovation, especially disruptive innovation, is mostly created by tech geeks from scratch. Afterwards, other agencies may continue to optimize and improve it to make it more suitable for the real world and regulatory requirements, which will gradually be promoted.
2. Commercial organizations and private organizations. Libra, and earlier announced that it will release
3. The Central Bank. The People's Bank of China has a clear road map, and European governments have also stated that they will reject Libra and issue digital currencies based on the European Union.
In summary, perhaps the most appropriate way to issue digital currency is to create it by tech geeks, explore it by private institutions, and finally issue it by the central bank.
Cash has absolute legal compensation, but bank currency does not. In the United States, the deposit insurance limit before 2008 was US$100,000, and after the financial crisis it was US$250,000. Therefore, it is actually safer to use 100% assets as collateral like Libra. But if 100% of the reserve is in the central bank, it is perfect. If it is managed by a third-party market, it will be flawed, because there will definitely be risks.
Dr. Chuanwei Zou also mentioned earlier that digital currency is a very special currency, not a general currency, and cannot be used to solve all the general functions of currency, so it must be a currency that is combined with scenarios, specific needs, and specific uses.
Why does Internet payment appear instead of services provided by banks? Quite simply, if two people buy and sell on the Internet, if you use a bank transaction, it may take 3 to 4 steps to complete the payment. The customer conversion rate on the Internet will drop from 80% to 2% if it exceeds three steps. If there are so many purchases that cannot be achieved due to cumbersome payment, transaction, and payment processes, the commercial viability of e-commerce will be lost.
Payment must be combined with the scene, and must be completed anytime, anywhere, wherever and whenever needed, and Internet e-commerce can be done. Similarly, if you do not work with commercial institutions that can combine scenarios, traffic, and customer needs, the promotion of central bank digital currencies may also encounter trouble.
02Financial Perspective
Libra claims to build a new generation of financial infrastructure. Why can you say that? Because it is based on blockchain.
Three things at the bottom of the blockchain are used to build a new generation of financial infrastructure: new accounting methods, new account systems based on encrypted digital wallets, and new accounting units based on cryptographic digital currencies.
Libra is To C, claiming to establish a personal payment system for 2.7 billion people. JPM is To B, and an inter-bank clearing system must be built. They are all based on new accounting methods, new accounts, and new accounting units.
In order to facilitate the understanding that Libra is a new generation of personal payment system, I have divided the evolution of the personal payment system.
Paper currency is the first huge reform and innovation of personal payment system. Before the advent of paper money, personal payments were very inconvenient, especially cross-regional payments. If you want to ship silver dollars from Shanghai to Beijing, you need to go through the escort, pushing the cart and leading the horse. It will be much more convenient once you have banknotes.
The emergence of banknotes as a more convenient form of currency is actually related to the development of science and technology: the papermaking and printing techniques of the Song Dynasty were mature enough. It is the continuous development of technology that meets the demand for lower cost and higher efficiency payments.
The second-generation personal payment system is an electronic payment system based on bank cards. Paper money is difficult to cross borders, but bank cards are more convenient to pay all over the world. Similarly, bank card electronic payment systems also benefit first from the development of communication networks.
The third-generation personal payment systems are Alipay and WeChat Pay. This is a mobile payment system based on Internet wallets. In the Internet scenario, the payment service of bank accounts can no longer meet and solve real-time peer-to-peer payment needs, so Internet payment was born. Bank cards do not directly complete transactions with customers, but through Internet wallets.
The fourth-generation personal payment system is a digital currency payment system based on blockchain and cryptographic addresses created by Libra.
It can be seen that in these four generations of payment systems, except for the second generation which directly uses bank accounts and payment networks, banks are hidden in the back end.
The concept of open banking has existed a long time ago. Banks are not without a role under the promotion of new technologies, but will hide behind them, export account capacity, payment capacity, etc. through API, or use a complete banking system to support other customers.
From a financial perspective, yesterday Yao Qian already talked about the relationship between digital finance and digital assets, so I won't talk more about it. The new generation of digital financial system requires blockchain and digital currency, or the digital financial system is built on the blockchain digital currency financial infrastructure.
How to understand the digital economy from a corporate perspective? The driving factor of the industrial economy is fuel, and the driving factor of the digital economy is data.
How does data drive a business? My conclusion is to model the data by computer, use algorithms to organize the data, and at the same time program the business process of the enterprise or turn it into a smart contract.
This digital economy is not a digital economy from an economist's perspective. A series of digital technologies such as the Internet, Internet of Things, cloud computing, artificial intelligence, and blockchain help companies complete the organization of digital economy and digital business.
These digital technologies have the following characteristics:
1. Cross time and space. Data circulation has no borders, spans time and space, and crosses organizations.
2. The data is penetrating. Vertically, it can penetrate the market level and turn transactions into point-to-point. Buyers and sellers no longer need intermediaries, and horizontally, the industry chain can be shortened.
Because of peer-to-peer, transaction settlement must be real-time. Using a bank card to buy things in a mall is not a point-to-point transaction, because it takes time for the merchant to receive the money, but it’s okay because the bank provides a credit guarantee.
But what if there is no intermediary guarantee like a bank? Then clearing and settlement must be implemented, and the blockchain is a network where transactions, clearing, and settlement are completed simultaneously.
The characteristics of digital technology make digital finance remove the intermediate links, and take point-to-point payment and clearing and unsecured transaction settlement as its core features. Blockchain and digital currency are the best technical solutions to meet these needs.
03
The characteristic of blockchain technology is that it is sufficiently digital, that it is cross-border, cross-temporal, and cross-organized. It is also distributed, self-organized, and decentralized. Decentralization does not mean the decentralization of social governance, but the decentralization of business activities.
To a certain extent, real blockchain-based applications must reflect the above two characteristics.
Any new application based on disruptive technology has always had two routes.
Route 1: Treat the new technology as a tool to improve the traditional business model and get an increase in marginal benefits.
Route 2: Treat the new technology as a system to reconstruct the underlying logic of business.
There are many cases. For example, a few years ago, when Internet companies talked about "financial technology", many people in the traditional financial industry liked to talk about "technological finance". Technology is a tool used to improve existing business models. And "financial technology" is to use the Internet and digital technology to reconstruct the underlying logic of finance.
Why does Libra adopt the "Association" structure? Why doesn't Facebook control it? It is also based on the technical characteristics of the blockchain. If Facebook builds Libra around itself, it is likely that no one will use it because it is difficult to trust it completely.
What I talked about earlier is the characteristics of digital technology, which makes the decentralization of business activities an inevitable trend. Now, when we talk about the development of business, there are two main points:
1. Economic Globalization 2.0
Because of the Internet, now is not the era of corporate globalization. It is not a company turning itself into a multinational company, but any individual can conduct peer-to-peer transactions.
Economic globalization has developed into personal globalization. Solving point-to-point transactions and achieving point-to-point services have become a prominent problem. The characteristics of real-time clearing and settlement and point-to-point transaction settlement of blockchain technology can be used to help the globalization of personal business activities.
2. Economic digitization
When the data is gathered to a certain extent, the circulation is basically across time and space. This makes the financial payment needs of many commercial activities available anytime, anywhere. Failure to provide payment and clearing services that meet the demand in a virtualized manner will be eliminated by the market. The best case is the comparison between NFC's near-field payment and the scan code supported by Internet companies.
Therefore, the new life needs, business needs, and financial needs brought by new technologies must be met in a distributed and decentralized way. Regardless of whether the block rewards of the blockchain are rewarded once every 10 minutes or once every second, they are actually paid for those who have done the work for the blockchain in these 10 minutes or 1 second.
I have read a report. About 34% of people in the United States do odd jobs. They are not affiliated with any company or hired by anyone. Instead, they provide services to everyone through the Internet. The best salary calculation method for the gig economy is to pay by time. If you can make good use of the blockchain labor compensation mechanism, then the gig economy can be realized globally. For example , if you hire Brazilians in China to work for you, you don’t need an intermediary, and the friction coefficient is zero. What a great thing. thing.
The sharing economy is the same. You rent an item for others to use for 10 minutes, how do you get paid? Through bank transfer, or through smart contracts on the blockchain?
Obviously, the future sharing economy and gig economy are based on blockchain and digital currency. At present, I can't think of a better solution than it, close to zero cost, and can efficiently complete the incentive problems of the gig economy and the sharing economy in real time, as well as the payment of compensation.
Today (Zou Chuanwei) just introduced the distributed economy white paper. The distributed economy ecology can be played in an infinite loop. It will not end up like a gambling, and it will not let a single person lose all or win everything.
This reminds me of Mr. Jack Ma, the founder of Alibaba, who said "customers first, employees second, shareholders third", which is a distributed economy concept in a simple sense.
Not long ago, nearly 200 well-known American entrepreneurs from the American Business Roundtable released a new corporate manager mission-"Enterprises cannot maximize the interests of shareholders", but should maximize social welfare, which means that all parties involved in the enterprise Welfare should be compatible with incentives and be taken care of, and not only highlight one of them, especially the maximization of shareholder benefits.
Blockchain provides incentive compatibility for stakeholders, rather than one of them. Both Bitcoin and Ethereum have no shareholders, and all participating parties can get incentives. The old problem of "incentive compatibility" in economics has been best solved on the blockchain.
Yesterday, someone asked me how to value the public chain. I explained that the valuation of the public chain is completely different from that of the PE. When talking about company valuation in a VC way, if you are valued at 100 million U.S. dollars, I am willing to raise 10% of the shares, and the remaining 90 million U.S. dollars belongs to the founding team. This is only the valuation of the company at the shareholder level. It is a matter between shareholders and investors.
When the blockchain project had a valuation of US$100 million, the founding team retained 20%, the foundation retained 20%, development incentives and ecological funds retained 20%, and another 20% was given to other investors. This $100 million is distributed to all stakeholders involved in the blockchain, not just shareholders. This truly achieves incentive compatibility and will bring about "Pareto Optimality" in infinite loop games.
The above are some thoughts caused by Libra. thank you all!
Message Mining Issue 333: In Dr. Xiao Feng’s sharing, what views do you agree with? Or what inspiration did it give you? Welcome to share your views in the message area.
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"Sound Description: This article reprinted from" universal block chain ", the article is a guest speaker independent views do not represent the position of vernacular block chain, does not constitute any investment advice or recommendations. 』
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