Blockchain Technology Special Topic: Blockchain, Exploring and Advancing in the Wind

The Central Bank's digital currency research project released the report "Pros and Cons and Development Trends of Blockchain", which attracted the attention of the market. The report believes that the advantages of blockchain are: 1. It cannot be tampered with, which is more secure. 2. Heterogeneous multi-active, high availability. 3. New collaboration mechanism, more efficient. 4. Smart contracts, more advanced. Disadvantages: 1. Performance issues need to be overcome. 2. Privacy protection needs to be strengthened. 3. Upgrade and repair mechanisms need to be explored.

A-shares experienced two blockchain booms in the first half of 2016

They are mid-March to mid-April and mid-May to the end of June respectively. We believe that the market’s understanding of blockchain needs to shift from concept to substance at this stage, starting from the basic concepts and key points of blockchain, and then moving on to the problems that need to be solved in applications and industries.

Traditional chip design companies do not pose a threat for the time being

We believe that considering investment returns, industry scale, social benefits, etc., traditional chip design companies such as HiSilicon and Intel are not easy to defeat in the short term, or are unwilling to enter the existing mining machine chip industry. But in the long run, traditional IC design companies can reach the level of existing mining machine chips. Faster R&D, high speed, low power consumption, small area, low chip cost, and high credibility are the strengths of traditional IC design companies.

Scaling and speed issues

The first step in blockchain implementation is technical optimization. How to combine existing technologies in application scenarios is also a big problem. 1. Currently, blockchain stores more text, and it is difficult to store files. Each block stores only 1M. The largest Bitcoin blockchain now has 419,000 blocks, totaling 410G. 2. The transaction speed is slow, and it cannot handle the large concurrency of stock exchanges, and cannot do high-frequency trading. The transaction frequency of Bitcoin blockchain is about 6.67 times/second. Each transaction requires 6 blocks to confirm, and it takes 10 minutes to generate a block. It takes 1 hour for the entire network to confirm a transaction.

Easy to apply in areas with weak centers and weak supervision

Blockchain is not a panacea. Its value lies in being able to do better than existing systems. Some systems that are already running very healthily do not need to be transformed with blockchain innovation. Strongly centralized trading systems are not suitable and do not need to be transformed with blockchain, such as stock trading systems; decentralized and weakly regulated field applications, such as item traceability, equity transfer of non-listed companies, real estate transfer, and insurance sales. Decentralized software and government welfare distribution. Blockchain technology is easy to use for things that cannot be centralized, such as international remittances. Cross-industry and cross-company points systems. There are many needs for weak credibility, and there are also many needs that can be seen.

However, we believe that it will take a long time to demonstrate and test the application in the financial system. At least after it matures in the weakly regulated field, it can penetrate into the core financial field, such as bill trading. This is a demand-driven innovation. Without the application demand of financial institutions such as banks and securities companies, it is difficult to develop the application of blockchain in the financial field. In addition, we believe that global crowdfunding can be done better with blockchain. (Guoxin Securities)