The temptation of large companies to deploy blockchain technology is to compete for the new protocol of the Internet

Early bitcoin enthusiasts hailed the cryptocurrency as a symbol of subversion of the traditional capitalist order, but it wasn’t long before traditional financial institutions such as banks and large companies began to fight back. Today, business people make up the majority of those attending conferences on blockchain technology (the underlying technology of bitcoin), and the geeky atmosphere is gradually fading.

After eliminating the concerns about fraud and gray transactions, large companies now see the business opportunities of blockchain and want to use it to improve the efficiency of the existing financial system or find its application in new scenarios. The latest example is that UBS, Santander Bank, Deutsche Bank and Bank of New York Mellon, together with British broker ICAP and technology developer Clearmatics Technologies, announced the development of a "utility settlement coin", a new digital currency. Other banks are also developing digital currencies, such as Citi's Citicoin and Goldman Sachs' SETLcoin.

In addition, major foreign companies have also established the R3 CEV blockchain alliance, which now has 42 mainstream financial institutions outside of China, and companies such as Microsoft, Amazon and IBM are also involved. R3 blockchain technology is most likely to change international payments and clearing, but its main goal is to develop industry standards for the development of blockchain technology in the banking industry and find application scenarios.

Of course, large domestic companies are not willing to lag behind and have begun to deploy blockchain technology since the first half of this year.

China Ledger Alliance

In April this year, the country’s first blockchain alliance was established: the China Distributed Ledger Alliance (China Ledger Alliance), whose members include 11 institutions including LeTV and Wanxiang Blockchain Laboratory.

LeEco Finance has also set up its own blockchain laboratory, currently focusing on the application of business circle currency. However, according to LeEco Finance CEO Wang Yongli, it will not involve too much basic research and development.

The main direction of the alliance is the distributed ledger system and its derivative technologies, and the basic code is open source and shared. However, as Bai Shuo, former chief engineer of the Shanghai Stock Exchange, said, "We cannot rush to align with international blockchain organizations without having figured out how blockchain will be implemented in the Chinese financial sector, nor can we let each financial institution fight on its own." Therefore, the influence of the alliance is not as wide as that of R3.

Shenzhen Blockchain Alliance

In May this year, following the Ledger Alliance, Tencent’s WeBank, together with 25 institutions including Ping An Bank, China Merchants Bank, and JD Finance, jointly established the “Shenzhen Financial Blockchain Cooperation Alliance.” Its research plan includes research on the underlying technology platform of blockchain, blockchain cloud services, and blockchain financial products.

WeBank will also cooperate with cutting-edge financial technology institutions to establish a blockchain research base for the financial industry, with the goal of launching blockchain finance and pan-financial applications.

At present, this blockchain alliance has not mentioned any specific implementation scenarios to the outside world, but the focus is undoubtedly on finance.

Ant Financial

Ant Financial is one step ahead in the application of blockchain. Earlier this month, Cheng Li, chief technology officer of Ant Financial, said that Ant Financial is trying to apply blockchain in public welfare scenarios. They have cooperated with the China Social Relief Foundation to launch a blockchain public welfare fundraising project "Hearing-impaired Children Regain Their Voices" on the Alipay Love Donation Platform. Every payment will be recorded on the blockchain, and there is no manual payment process, so it is difficult to manually change the destination.

For a heavy payment system like Alipay, the current blockchain technology certainly cannot meet the demand (generally blockchain can only process about 7 transactions per second), but Ant Financial Group CTO Cheng Li believes that "its real value lies in using distributed technology and consensus algorithms to achieve a trust mechanism." This is also the reason for testing public welfare scenarios.

Ping An Group

Ping An’s focus on blockchain is quite unique. In April this year, it joined the international blockchain alliance R3.

Ping An Group's innovation executive Tu De once said that blockchain has always been an area of ​​focus and that it is "preparing to set up a fintech department to assist in the development of blockchain, either through investment or interaction."

Tu De believes that the use of blockchain technology is very important for Ping An's dozens of companies, which are involved in many fields such as finance, medical care, and health. "The use of blockchain technology in the U.S. stock market and the global stock market can save $2 billion and $6 billion respectively, so we started studying blockchain technology three years ago."

Baidu

At present, Baidu's attention to blockchain is reflected in the form of investment. In June this year, it invested in the blockchain payment APP Circle to lay out the blockchain.

Circle is an early leader in blockchain research and development in the field of online payments. It allows users to transfer funds to the app with debit or credit cards, and also convert funds into Bitcoin. Some practitioners said that Circle can be understood as a bank that uses Bitcoin as a settlement object. It will connect to local exchanges, and these exchanges can trade in local currencies. Circle's entire payment application is also based on blockchain.

New Internet Protocol

From the above, we can see that the domestic attention to blockchain lags behind in terms of scope of influence and overall progress. It is more about doing some preparatory work. Apart from Ant Financial, there are few outstanding solutions.

On the other hand, the four banks mentioned above have already started to solve the problem of financial efficiency. According to Leifeng.com, their multi-functional settlement currency is a system that uses blockchain technology to create different currencies, each of which can be directly converted into existing currencies. In essence, it is a way to put the US dollar, euro and pound into the blockchain. This multi-functional settlement currency takes advantage of the characteristics of the blockchain. The new currency will be stored in a computer network, and a transaction needs to be confirmed by all computers before it is recorded in the "chain". The transaction record will be stored in the general ledger and can be seen by all users in the network, which eliminates the need for centralized authorization.

Switching to a distributed ledger would speed up the settlement and clearing of financial markets, allowing institutions to pay for securities (such as bonds and stocks) without waiting for traditional transfers to complete. Banks could also cut back on back-office clearing departments, since transaction records could be automated. Of course, the entire system would not be available until 2018 at the earliest.

However, even if blockchain technology cannot play a real role in the short term, large companies will make plans. According to a report released by Santander and other institutions, blockchain technology can save $15-20 billion per year by 2022 after it is used in payments, securities trading and regulatory compliance.

But more importantly, blockchain has the potential to become a standard for defining the Internet. An industry insider told Leifeng.com (search for "Leifeng.com" WeChat account to follow) that it is a bit like a technical standard, and large companies have to make plans, otherwise they will not be able to keep up once foreign countries mature. Blockchain can be compared to the TCP/IP protocol of the Internet, just like when the Internet first appeared, many companies wanted to use their own local Internet as a universal standard.

Perhaps the following picture can more intuitively show the importance of blockchain technology:

This graphic, created by Pantera Capital, describes Bitcoin as the missing piece of the Internet puzzle, along with the well-known HTTP, DNS and other protocols. Protocols and standards are inevitable and necessary, and they are the value of the Internet.

As technology evolves, we will see more blockchain technologies emerge. Every company wants to dominate the world, but no one has an absolute advantage, and independent development cannot bring economies of scale. Will each company unify to a common standard, or will there be several incompatible technologies?