Is blockchain a repeat of the rise and fall of P2P, or a brand new disruptive innovation?

Blockchain has the characteristics of decentralization, trustlessness, scalability, anonymity, etc. It can solve the problems of central platform monopoly, credit certification difficulties, information asymmetry, etc. Blockchain has attracted more and more attention and favor from industry insiders for its unique technical advantages.

Recently, there has been a lot of news about blockchain technology represented by Bitcoin. On the one hand, Baidu has completely removed Bitcoin-related advertisements, and on the other hand, the international credit card organization Visa announced that it will apply blockchain technology to interbank settlement and payment. With both good and bad news, is blockchain technology represented by Bitcoin a repeat of the rise and fall of a new round of P2P, or a brand new disruptive innovation?

Relevant experts interviewed said that the four current characteristics of blockchain can be compared to the situation in the early stages of P2P development. Traditional finance is actively embracing blockchain, and its development prospects may be linked to national strategies such as the “Belt and Road Initiative”.

The four major characteristics can be compared to the early days of P2P

It is understood that blockchain is an important concept of Bitcoin. It is essentially a decentralized database and the underlying technology of Bitcoin. Blockchain is a string of data blocks generated by cryptographic methods. Each data block contains information about a Bitcoin network transaction, which is used to verify the validity of the information (anti-counterfeiting) and generate the next block.

According to industry insiders, blockchain technology has the advantages of decentralization, convenience, high security, fast accounting, low cost, mutual monitoring and verification, and open and transparent information. The application of blockchain technology may be more extensive outside the financial field. However, in actual applications, blockchain technology also has many problems such as low performance, low transaction frequency per unit time, lack of technology application ecological environment, insufficient relevant application cases, and rampant scammers in the name of blockchain.

As a new category of Internet finance, what are the characteristics of the current development of blockchain finance in China?

Huang Zhen, founding president of the Internet Finance Thousands Association and director of the Institute of Financial Law at the Central University of Finance and Economics, said that the current problems with the application of blockchain and digital currency in China are similar to the early development of P2P in China, with four characteristics:

First, blockchain technology looks very new. This is not because the technology itself is new, but because it is new to the audience. It has been nearly ten years since blockchain was used as the underlying technology of Bitcoin. In addition, blockchain is developed in the same vein as the distributed structure of the P2P main network, but many people do not have a clear understanding of it.

The second is the enthusiasm. The current enthusiasm for blockchain has surpassed the P2P enthusiasm of the past. The hype of public opinion has led to blind following and a certain bubble in the industry. However, many people do not understand the basic principles and applications of blockchain, so this enthusiasm also has an unhealthy tendency. We need to stay sober and rational.

The third is chaos. The current chaos of blockchain is no less than the chaos of P2P in the past. Recently, scams that have stolen the name of blockchain and used the banner of blockchain have continued one after another, and this time the scam is more fierce than the previous scams. It is a global joint operation to deceive and defraud.

Fourth, it is slow. Currently, many things are just superficial. There are few truly innovative things and few things that really solve practical problems. In addition, the policies and regulations issued by the regulatory authorities are also slow. On the one hand, the development speed is fast, and on the other hand, the speed of actually solving problems and supervision are slow, resulting in time lags and differences in understanding, which will cause many problems.

Huang Zhen believes that blockchain technology should get out of the current dilemma of China's unhealthy ecology and become the basic technical framework for the next wave of greater opportunities in Internet finance. Now, from the underlying P2P framework to the underlying blockchain framework, it has become the infrastructure and living environment of the entire society. We hope to make life and society better through the advancement of science and technology.

When facing a new technology, our core idea is to encourage innovation while guarding against risks, especially to avoid repeating the same mistakes. I am very worried that someday another coin will be released, which will lead to the stigmatization of the entire blockchain industry. This is possible. We do not want to destroy this industry or discredit this technology, but we hope to get out of the paradox of the past cycle of chaos and chaos, so as to avoid the tragedy from happening again.

Wang Dong, director of Jishi Zhaoye, emphasized that it is difficult for ordinary people to distinguish whether the digital currency application of blockchain is a real application or a scam, and should be treated with caution. The most important thing for blockchain projects with digital currency applications to attract people's attention and investment is to have a relatively fair currency issuance mechanism. Whether the ideas and methods of currency issuance mechanism design are reasonable and legal is very important for the application of blockchain. If it is slightly off, it may lead to the trap of illegal fundraising.

Traditional finance actively embraces

Faced with the emerging financial type of blockchain, will traditional finance take a positive attitude like Visa?

Recently, the Governor of the Bank of Japan, Haruhiko Kuroda, said that the operating model of financial services will continue to change with the development of blockchain technology and distributed ledgers. In his speech, Kuroda said that financial technology can affect the daily operations of the central bank, so the Bank of Japan hopes to take the lead in the field of financial technology research.

Han Han, assistant professor at the School of Economics of Peking University, pointed out that the central bank will pay attention to blockchain. On the one hand, the central bank feels threatened and challenged because no bank is involved in the issuance of Bitcoin, which is entirely done by the private sector, and the main function of the central bank is to print money. From the perspective of preventing problems before they happen, it is necessary to first understand what this thing is. On the other hand, it is related to the signature of Bitcoin or electronic currency itself. If Bitcoin is signed, then all transaction records can be tracked, which will eliminate the black market and tax evasion, and can strengthen the control ability of the central bank and the government.

Not only central banks, but also commercial banks are actively embracing blockchain. Recently, the world's four largest banks, UBS, Deutsche Bank, Santander Bank and Bank of New York Mellon, have joined forces to develop new electronic currencies, hoping to use blockchain technology to settle transactions in the future and become a universal standard for the global banking industry. UBS has teamed up with Deutsche Bank, Santander Bank, Bank of New York Mellon, and brokerage firm Ilink to promote the concept of a multi-functional settlement currency based on Bitcoin technology to central banks around the world, striving to put it into commercial use in early 2018.

Huang Jianhui, director of the Minsheng Bank Research Institute, believes that traditional banks need to transform into modern banks and use remote mobile services and artificial intelligence services to improve efficiency and enhance customer experience. From the perspective of customer experience, in the past, people used to use paper methods and go to dozens of companies to prove themselves. In the future, with blockchain technology, the entire verification, including the conclusion of contracts, can be quickly achieved; from the perspective of internal bank management, blockchain and other related technologies will mainly change the operating architecture of the banking industry, promote comprehensive upgrades, subvert the original business architecture and logical architecture, and help banks integrate various existing channels. Business models will also continue to innovate, and payment settlement, wealth management, financing and lending, and corporate Internet finance will all present new paradigms. At the same time, it will also subvert the traditional operating logic and force banks to adjust their strategic direction. The future bank will definitely present new characteristics at a certain point.

Prospects: Can be linked to the Belt and Road Initiative

Blockchain can not only transform traditional finance, but also be closely linked to national strategies such as the “Belt and Road Initiative”.

It is understood that, except for a few countries like Singapore, the common characteristics of most countries involved in the "Belt and Road" are that they are very rich in natural resources, are at a relatively early stage of economic and financial development, and have relatively weak infrastructure.

So how does blockchain fit into the “Belt and Road” initiative? Deng Di, chairman of Taiyi Cloud Technology, said there are three points:

1. Blockchain may play a key role in foreign trade. For example, when a country's goods are circulated, a lot of losses will be generated. These losses are not necessarily caused by transportation alone, but include backward systems and even corruption. Blockchain may be a solution because what is traded is not the goods themselves, but the right to pick up the goods, or the electronic contract implemented by the blockchain. This electronic contract can achieve standardization, global transactions and fast transactions due to the characteristics of blockchain.

2. A large amount of infrastructure construction is needed along the “Belt and Road”. Through blockchain, they can be connected into a large network through networking to observe the dynamics.

3. Countries along the Belt and Road often lack sources of funds. For example, the interest rate in Kazakhstan has reached 10% to 20%, which is the prevailing lending rate, and they are willing to pledge resources such as mines. However, because the currency depreciates rapidly on the one hand, and the connection with foreign financial institutions is not developed on the other hand, it is difficult to find funds. If we use blockchain to intervene in the financial systems of countries along the route, it is possible to expand the space of China's financial market.

So what technical support do these connections need? Dundee pointed out that, on the one hand, what needs to be built is no longer a private chain within a country, but a chain that spans countries and is widely followed by everyone; on the other hand, when connecting thousands of devices, blockchain needs to be able to support large-scale transactions. (China Economic Herald/Zhang Qiatang)