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Text/Wenquan Around the New Year of 2018, blockchain was extremely popular. First, on December 7, 2017, the price of Bitcoin suddenly soared to nearly $20,000, which was nearly 20 times the price at the beginning of 2017. Later, on January 10, a screenshot of Xu Xiaoping, the founder of Zhen Fund, sharing the development trend of blockchain in the CEO group of the invested companies was circulated and quickly swept the WeChat Moments. Among them, Xu Xiaoping's words were thrilling: "The blockchain revolution has arrived. This is a great technological revolution that will prosper those who follow it and perish those who go against it." Previously, blockchain had never attracted this much attention. In 2008, a paper by Satoshi Nakamoto announced the birth of Bitcoin, a digital currency, and Bitcoin's underlying technology, blockchain, gradually came into the public eye. However, except for a round of sharp rises and falls in Bitcoin around 2013, which attracted countless fans, the obscure term "blockchain" has not received much attention from the public. But this time, things are really different. 1
Bitcoin has been climbing for two years Many interviewees believe that the reason why blockchain has received widespread attention this time is mainly due to the soaring price of Bitcoin. The most direct reason for the surge in Bitcoin prices is that the two major exchanges in Chicago announced the launch of Bitcoin futures. The two exchanges rushed to launch Bitcoin futures contracts. First, on December 1, 2017, the Chicago Mercantile Exchange Group (CME) announced that it planned to launch Bitcoin futures contracts on December 18. A few days later, on December 4, 2017, the Chicago Board Options Exchange (CBOE) announced that it would launch Bitcoin futures at 6 pm Eastern Time on December 10, in order to get ahead of CME. As soon as these two pieces of news came out, the price of Bitcoin jumped directly from around $10,000 to around $20,000 in just half a month, almost in a straight line. It took more than nine years for the price of Bitcoin to rise from 0 to $10,000, but it only took 17 days to rise from around $10,000 to around $20,000. But what does this have to do with blockchain? "It is the rising price of coins that continues to attract more talent and capital to the blockchain field." Cai Dong, vice chairman of the Blockchain Industry and Development Forum of the Ministry of Industry and Information Technology, board member of the Linux Foundation Hyperledger and chairman of the China Technical Working Group, assistant to the president of Wanda Network Technology Group and general manager of the Big Data Center, and chief architect, told NetEase Technology that at present, what is worrying industry peers is that if they do not issue coins to build blockchain projects, the attractiveness to talent will be greatly reduced. There is another phenomenon - originally, the "currency circle" and the "chain circle" had almost no intersection. People in the "currency circle" have been mining in a low-key manner in recent years, while people in the "chain circle" mainly study the underlying architecture technology and scene implementation of blockchain. But now, the two circles are merging, and people in the currency circle have invested heavily in underlying blockchain projects and teams, as well as a large number of landing projects; at the same time, the bigwigs in the currency circle have also begun to enter the field of artificial intelligence computing, which also requires massive computing power (computing power). For example, Bitmain, which monopolizes the world's mining computing power, recently launched the first TPU tensor processor BM1680. If you look carefully at the Bitcoin price trend chart over the years, you will find that the reason for this wave of Bitcoin price increases is not simple, and it is not just the result of short-term speculation and the stimulation of good news. Bitcoin is currently in its second major bull run in history, and it is very different from the first wave of Bitcoin price increases. The first bull market occurred in the fourth quarter of 2013. The rise in the exchange rate was based on the good news released by the Federal Reserve. At that time, more and more countries and businesses began to accept Bitcoin. On November 18, 2013, after the then Federal Reserve Chairman Ben Bernanke's positive attitude towards Bitcoin was exposed by the media, the price of Bitcoin reached its first high point in history, reaching a peak of $1,147.79 on November 30. However, the good times did not last long. Less than a month later, on December 5, 2013, the People's Bank of China and five other ministries and commissions issued the "Notice on Preventing Bitcoin Risks", causing the price of Bitcoin to plummet on the same day. In the following years, it fluctuated downward all the way, and the price of the currency never exceeded $1,000 again. The second bull market started in January 2017. After the price of Bitcoin reached the high point of $1,000 again, it continued to rise for another year. Even after the recent plunge, the price is still above $10,000. In fact, throughout 2016, the price of Bitcoin has been slowly climbing and fluctuating upward. The reason why the price of Bitcoin has been climbing during this wave - industry insiders told NetEase Technology - is mainly ICO. Yes, it was the ICO that was stopped by the central bank and seven other ministries in September 2017. Although ICO was stopped in China, it still exists in other countries. "ICO has never stopped, and they all go overseas." More than one industry insider interviewed told NetEase Technology. A careful look at the development history of ICO shows that although its popularity in China reached its peak in August and September 2017, it actually received widespread attention as early as 2016. The continuous fermentation of ICO is indeed consistent with the rise in Bitcoin prices. (As shown in the figure below, the curve before 2017 looks relatively flat, but because the spacing of the vertical axis of the coordinate system is 5,000 US dollars, a small fluctuation is a few hundred US dollars.) Among the factors that have caused the ICO craze for two years, technological progress is the foundation. There are three types of blockchains: public blockchain, consortium blockchain, and private blockchain. For example, Ethereum, a public blockchain with a greater impact, and Hyperledger, a consortium blockchain, have made great progress in the past few years: The Ethereum project was released in January 2014. On March 14, 2016, Ethereum released the official version Homestead, marking the end of the beta version. On December 17, 2015, the non-profit Linux Foundation announced the launch of the Open Ledger Project, which was later renamed the Hyperledger Project. The project will develop an enterprise-level open source distributed ledger framework, with participation from several IT and financial giants including IBM. Nearly two years later, on July 12, 2017, Hyperledger announced the official release of its first product-level solution, Fabric, for building applications. Figure 1 Comparison of Bitcoin price trends and blockchain technology evolution So the question is, what projects have been used with the large amount of capital and talent that has poured in? 2
Blockchain is everywhere NetEase Technology and EditorAi have conducted data statistics on blockchain projects that can be publicly queried on the Internet to understand the current overview of blockchain projects. EditorAi was founded in 2015 and previously provided automatic writing services for financial and technology media. Since 2017, EditorAi has begun to pay attention to the blockchain field and found that there are a lot of startups in the blockchain field, and the quality of white papers varies. Therefore, it hopes to use artificial intelligence technology to assist in the rating of blockchain projects. In the early stage, it will use artificial intelligence technology to analyze the text of blockchain white papers to help more people identify the quality of projects. EditorAi has counted the top 1,400 blockchain companies with transaction data from its BCWhitePaper.com database (excluding companies like IBM that have invested in and accumulated experience in blockchain technology but whose main business is not blockchain, that is, only startup projects). The statistical projects appeared from July 1, 2017 to January 19, 2018. Statistics show that the countries with the most blockchain projects are the United States, Russia, the United Kingdom and other countries. Some small countries that are relatively developed in the financial and cybersecurity fields, such as Switzerland, Estonia, Israel, etc., also have a large number of high-quality blockchain startups due to their first-mover advantage and policy encouragement. There are not many blockchain projects in mainland China, only 18. However, if mainland China and Hong Kong are added together, there are 46, which can be ranked after Switzerland and before Estonia. (As shown in Figure 2) Figure 2 In terms of different fields, the most popular one is cryptocurrency, and there are many platform and technology-based projects. The most prominent industries are entertainment and banking, and the applications in other industries are just beginning. (Figure 3) Figure 3 From the perspective of platform distribution, the vast majority of blockchain projects are based on Ethereum’s smart contract technology. (See Figure 4) Figure 4 So here comes the question: Didn’t it say that 90% of ICO projects are unreliable? Yes, but there are some reliable ones among them. It is not easy to invest in a reliable blockchain project. It is probably not an exaggeration to say that it is “fighting hard”. Lenovo Capital Investment Director Yang Linyuan started paying attention to blockchain startups in 2015, and soon discovered that traditional venture capital methods simply did not work in this field. This is one of the reasons why mainstream investment institutions are not very common in this field. "Most blockchain projects use ICO to raise funds, and the pace from launch to completion is extremely fast. If we use the traditional VC process, it will take at least a month from project establishment and due diligence to investment decision-making, and the opportunity will be lost by then," Yang Linyuan told NetEase Technology. According to Yang Linyuan's observation, more investors are investing in their own name, and the investment methods are completely different - you have to mix in the circle, everyone recognizes each other, and people leave you some coins, and investors have almost no pricing power. He told NetEase Technology: "Traditional investment has a whole set of valuation and pricing models. But blockchain investment does not follow this routine. If you set your own price, you will not be able to invest in the project. The supply and demand relationship between investors and entrepreneurs has changed. Traditionally, entrepreneurs seek investors, but in blockchain projects, investors seek entrepreneurs. Investors who do not have the resources and ability to add value to the project find it difficult to get a share." The next question is, are these blockchain projects just playing around in small areas, or will they enter life on a large scale and truly affect everyone? 3
On the eve of large-scale commercialization The answer is the latter. NetEase Technology has learned that blockchain technology has already been put into practical use in finance and agricultural product traceability, and in the future blockchain will be applied to more areas that you can't imagine. The word "blockchain" sounds unfamiliar and difficult to understand. In short, it is a distributed database technology. In the application of finance, according to an interview with NetEase Technology, its core role is to synchronize information in real time, and this information is correct, leak-free, and cannot be tampered with. In this regard, WeBank, Baidu Finance, and Wanxiang Blockchain all have related applications. WeBank's blockchain reconciliation system is an early example of practical application in the domestic financial sector. In August 2016, WeBank launched a cross-institutional alliance chain, and then Shanghai Huarui Bank, Luoyang Bank, and Changsha Bank were connected to it. It is mainly used for reconciliation between WeBank and its partner banks. Funds settlement between partner banks is a heavy task. The traditional reconciliation method is "batch file reconciliation": that is, WeBank and its partner banks will agree on a certain time point to summarize all the data of the previous trading day, and output it into a file in the agreed format to see whether the account records of both parties are consistent. Zhang Kaixiang, chief architect of WeBank's blockchain, told NetEase Technology that after applying blockchain, project information between WeBank and its partner banks can be synchronized in near real time. So far, the platform has been running stably for more than a year with zero failures, and the number of real transactions recorded has reached tens of millions. Baidu Finance applies blockchain technology to ABS (asset securitization, which generally refers to selling assets that lack liquidity but have predictable income by issuing securities in the capital market to obtain financing and maximize the liquidity of assets). Xiao Wei, head of Baidu Financial Blockchain Lab, explained to NetEase Technology that issuing ABS requires the participation of multiple parties, including Baidu Financial, asset generators, trusts, securities firms, rating agencies, law firms, etc. As a technical service provider, Baidu built the blockchain service end BaaS (Blockchain as a Service) and introduced blockchain technology. Each participating institution in the project serves as a participating node on the blockchain. In this way, all information about the assets can be synchronized in real time to each participant, that is, each participating node on the blockchain, so that the information cannot be tampered with. If tampered with, it will leave traces and be discovered by everyone, which can ensure asset transparency. At Shanghai Wanxiang Blockchain Co., Ltd., blockchain technology is also applied to supply chain finance. In 2017, Shanghai Wanxiang Blockchain Co., Ltd. developed a supply chain financial service platform to optimize the accounts receivable financing process. For suppliers, the business platform will effectively shorten the payment period, reduce financing costs, and protect sensitive information from being leaked during the purchase and sales process; for financial institutions, the financial platform will effectively eliminate false trade and improve operational and risk control efficiency. In August 2017, Xiao Feng, Vice Chairman and Executive Director of Wanxiang Holdings, explained in detail to NetEase Technology the role of blockchain in this process. He said that Wanxiang Group started out by making auto parts and had an auto parts supply chain. Blockchain can avoid problems in the supply chain that would otherwise require a lot of manpower and material resources to solve. For example, there was a supply chain in the production of auto parts - the OEM issued an order, which was broken down to the second, third and fourth-tier suppliers. After the fourth-tier supplier processed the order, it would submit a semi-finished product to its upper level, and finally to Wanxiang as a finished product. Wanxiang then gave the order to the OEM, and the OEM paid. All the information in between cannot be fully shared without blockchain. When banks provide loans to small and medium-sized suppliers, they need to conduct on-site investigations to understand the financial status of these small and medium-sized suppliers. However, after applying blockchain technology, there is no need for loan officers to go to the company to investigate, because all information flows, capital flows and logistics can be on one ledger, so that banks can provide financial services to a small supplier at a low cost. "In this way, the loan interest rate for small and medium-sized supply chain companies can be reduced from 18% to 8%, and the account period can even be reduced from 9 months to 1 month. Do you think this is a huge cost saving?" Xiao Feng introduced happily. This work is now mainly led by Wanxiang Blockchain CTO Luo Rongge. Luo Rongge told NetEase Technology that this blockchain-based automotive parts supply chain platform is now online. In terms of agricultural product traceability, there have been many attempts, from leading companies like Wanda to small startups. Cai Dong, assistant to the president and chief architect of Wanda Internet Technology Group, told NetEase Technology that Wanda Internet Technology's Wanda Deep Source product traceability and security platform has been deployed in Sicily, Italy, where organic food is produced in abundance. Using blockchain technology, this platform can record information on all aspects of food production and transportation, ensuring that organic food is genuine and not just "OEM" products. (As shown below) With a similar idea, the startup Quanmin Chain officially launched "MeiGou Blockchain E-commerce" in August 2017. Zheng Yu, the founder of Quanmin Chain, explained to NetEase Technology that the difference between blockchain e-commerce and ordinary e-commerce is that MeiGou will use blockchain technology to record the entire process of food selection, planting, spraying, fertilization, harvesting, storage, transportation, supermarkets, and users, making the entire food production process information transparent, and there will be corresponding chips on the food packaging to store relevant information. The collection of this information is currently mainly based on cameras and other equipment, such as installing cameras in the fields. Zheng Yu told NetEase Technology that at present, food traceability is mainly used for relatively high-end food needs, because in the early stage, the cost will be slightly higher. In the future, blockchain will be used in a wide range of fields. The application of autonomous driving that Baidu hopes to try is the most unexpected. To truly realize autonomous driving, a lot of data on actual road conditions must be collected, and the car must also be able to handle each situation, which requires enough data and good enough algorithms. Baidu is currently betting heavily on autonomous driving. In December 2015, Baidu officially announced the establishment of an autonomous driving division. However, to do autonomous driving well, Baidu alone is not enough. It requires car manufacturers to unite. Therefore, in April 2017, Baidu released the autonomous driving platform Apollo. If car manufacturers can share their data and algorithms, autonomous driving technology will advance rapidly. However, manufacturers are concerned about sharing algorithms and data, because data and algorithms are the core competitiveness of every automaker. Xiao Wei, head of Baidu Financial Blockchain Lab, told NetEase Technology that because blockchain is an encryption technology, after using blockchain technology, every manufacturer can encrypt the data and put it on the blockchain network. This blockchain network builds a data computing and trading platform, allowing each manufacturer to use all the data on this platform and get the results they want. However, after use, the data is still there, and the user does not know the data. Xiao Wei told NetEase Technology that the technology is now operational and has no problems. It is being promoted to various automobile manufacturers in the hope of attracting more manufacturers. In this interview, NetEase Technology also learned more applications, please see the table below: The actual implementation of blockchain applications has long become a trend. The most influential internationally are the R3 blockchain alliance and Hyperledger in the financial field. There are more than 10 blockchain alliances in China. (As shown below) But there is still a question: Are these applications still in the experimental stage, or will they quickly enter large-scale commercial applications? Are all the basic conditions required for rapid and large-scale commercial applications in place? 4
Problems during the pioneering period It must be admitted that blockchain technology still has some problems at this stage, and commercial applications also require a lot of environmental cooperation, which will take time to improve and solve. However, at present, it seems that there are almost no rigid constraints. Cai Dong, assistant to the president and chief architect of Wanda Internet Technology Group, told NetEase Technology that he believes that blockchain technology has great potential, but it is not yet particularly mature and there are still some technical problems. The most important ones are two: one is the problem of sharded storage, and the other is the problem of high-concurrency transactions. Blockchain is a distributed database technology, and in practical applications, it faces the problem of sharded data storage. In Cai Dong's view, although there are countless solutions for sharded storage, there is no reliable one yet. Of course, there are many solutions that can be used temporarily, and some of the most commonly used features or scenarios are selected to support them. In many cases, they reduce the tolerance for malicious nodes, so simplified consensus and data storage methods can be adopted. However, so far, none of them are the most ideal and complete implementations. The problem of high concurrent transactions: a Bitcoin block can only process 7 transactions per second, while the Hyperledger consortium chain can process 2,000-3,000 transactions per second, but this is far from enough to handle the current peak transaction volume. During the Double Eleven Shopping Festival in 2017, the peak payment volume of Alipay reached 256,000 transactions per second. With such high concurrent transaction volume, a large number of related blockchain technology projects are currently trying to solve this challenge. It should be noted that in order to achieve the purpose of trusted computing of blockchain, that is, to prevent enough malicious nodes from being able to forge, the technical foundation of one of the most important blockchain technologies, the consensus algorithm, often involves the above-mentioned two important challenges of shard storage and transaction, and speed delay. Zhang Kaixiang, chief architect of WeBank's blockchain, mentioned the issue of immaturity of privacy protection technology. He gave an example to NetEase Technology, for example, when multiple institutions are on the same blockchain, A and B do not want C to know the details of the transaction involving privacy. Current technology can solve this problem, but it is more complicated to solve, and the computing speed needs to be improved to an ideal level. Most of the interviewees agreed with Cai Dong’s view. However, Xiao Wei, the head of Baidu Financial Blockchain Lab, had a different view. He believes that there are no rigid technical constraints at present. He explained to NetEase Technology that blockchain technology has three characteristics: decentralization, speed, and security. You can make trade-offs among these three according to the actual needs. For example, if you have high requirements for decentralization and speed, you don’t have such high requirements for security. In the case of Alipay on Double Eleven, the requirements for decentralization are not high, and you can focus on meeting the requirements of speed and security. "At present, we have not encountered a situation where the requirements for these three are very high. This requires specific analysis of specific situations." Xiao Wei confirmed to NetEase Technology. In addition to technical issues, some unexpected problems will also be encountered in the early stages of commercial applications. In the tide of new retail, Wanda Internet Technology Group hopes to build a shared business platform to break the current situation of multiple transfers in different links and form a direct chain of funds and goods throughout the upstream and downstream. Cai Dong has previously described this idea to the media: In the past, the ERP (Enterprise Resource Planning) systems of the manufacturing, logistics and retail industries were separated from each other in the commodity circulation cycle, but now a new trusted computing architecture based on blockchain can be adopted to remove the existing agent wholesale system between manufacturers and Wanda. Specifically, the combination of blockchain, the Internet of Things and big data will open up the link from factory to store: the factory will directly pass the hot-selling products predicted by big data to the store, and obtain logistics and warehousing services through the auction model. After receiving the payment, the store will enable the POS terminal cash register through blockchain, and conduct instant accounting of accounts receivable and accounts payable through blockchain smart contracts. Cai Dong told NetEase Technology that this idea is technically feasible. Wanda has already done it in four stores in Wanda Plaza, and the effect is very good. After that, the price of the goods originally sold at 399 yuan can be reduced to 99 yuan. Once the user pays, the POS machine (which integrates the blockchain client SDK) can execute the blockchain's smart contract to directly record the accounts receivable and accounts payable of the four parties in the transaction - merchants, brands/manufacturers, commercial real estate managers, and platform parties. The physical store lease payment and payment can be shortened from the commonly used payment period in the logistics field such as "T+45", "T+65", "T+75" to "T+1". "We can technically achieve T+1, but what we didn't expect was that the financial and banking systems were not prepared." Cai Dong told NetEase Technology that in order to fully implement it, their suppliers' systems need to be completely transformed, but this is obviously not possible for the time being. "We are very confident because such problems will definitely be solved, and more and more technical solution providers are gaining a deeper understanding of and adopting blockchain technology," Cai Dong told NetEase Technology. From the perspective of more people, the increasing maturity of blockchain technology can indeed be felt. Liu Tong, executive commissioner of the China Cultural New Economy Development Standards Research Committee, was previously the chief architect of Cisco. When he worked at the China Cultural Relics Information Consulting Center in 2016, the center hoped to use blockchain technology to solve the registration and filing issues of folk cultural relics and artworks. However, after a round of investigation, Liu Tong found that the technology was not mature, each had its own technical standards, and there were not many institutions capable of development, so he gave up blockchain technology and adopted traditional methods. In the past two years, he feels that blockchain technology has become more and more mature. Many companies have made a lot of investment, development and research based on open source and Ethereum technology. Two years ago, everyone was talking about theory, and there were no mature products. But now there are products launched. At present, Liu Tong is selecting experimental zones and bases for the new cultural economy, and is also considering using blockchain technology as the underlying support platform. "How to use blockchain technology to create a killer application in a field" is the most urgent problem he thinks needs to be solved. "The technology is not the problem, the problem is the killer application." "In the blockchain field, there are the 'coin circle' and the 'chain circle'. These two circles despise each other and there is not much communication between them. There is a reason for this. The underlying technology of blockchain is available, but it has not been fully integrated with specific application scenarios." Liu Tong pointed out to NetEase Technology. "Two years ago when we started our business, no one had heard of blockchain, and we had to explain it for a long time. Now it's much better, at least everyone has heard of it." Zheng Yu, founder of Quanmin Chain, feels that there have indeed been very big changes. He gave an analogy: "Our current requirements for blockchain are equivalent to your requirements for iPhones. We hope for 4G and large screens, but the earliest mobile phones also developed from analog machines and big brothers. They are not perfect, but they will develop rapidly." On January 22, Xu Hongbo, founder of Chuangda Capital, attended the DLD conference held in Munich, Germany. DLD is the abbreviation of "Digital, Life, Design". It was founded in 2005 and is the most popular digital innovation conference in Europe. Xu Hongbo is one of the six drafters of the global mobile Java standard and one of the world's first artificial intelligence and robotics experts, specializing in artificial intelligence neural network computing. In addition, he is also one of the 15 members of the overall team of China's "core high-tech" major science and technology projects. After attending the conference, Xu Hongbo felt that the hottest field was blockchain. He said: "The current blockchain is like the Internet in 1997 and 1998. Although there are various bugs, it is definitely the future!" Why not go and watch the sea, or listen to the waves?
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