Wang Tenghe: Blockchain will help industrial transformation and upgrading

As the underlying technology supporting digital currencies such as Bitcoin , blockchain came into being with the rise of digital currencies and is gaining momentum in the financial sector. Compared with traditional technologies, the biggest innovation of blockchain is that it provides a decentralized way to create credit. It uses a set of consensus-based mathematical algorithms to establish a "trust" network between machines , creates credit through distributed technology (rather than credit institutions), and safely stores transaction data without the need for review by any centralized institution.

With the emergence of blockchain technology, the core of modern finance - credit issues - has been better protected. Blockchain allows both parties to conduct economic activities without the need for third-party credit intermediaries, and realizes low-cost value transfer on a global scale. This means that people no longer need to run around various institutions and windows to stamp their documents endlessly to obtain "certification", nor do they need endorsements from intermediaries or banks. Even large loans can be easily obtained without third parties, because everyone's credit record is there and visible to everyone.

Blockchain has brought endless imagination to the future financial industry and many other industries. So, what can blockchain do specifically? In what aspects does its disruptive potential manifest itself? How will it redefine the world and change the economy, society and life? "How Will Blockchain Redefine the World", compiled by Tang Wenjian, Lv Wen and others, focuses on the application of blockchain in the fields of finance and the Internet of Things , and shows readers in a relatively comprehensive and in-depth manner the exciting and infinite possibilities that blockchain will bring. "The application prospects of blockchain" is undoubtedly the author's writing focus and the embodiment of the unique value of the book. In response to the active exploration and beneficial attempts of many institutions around the world that combine industry conditions with the characteristics of blockchain, the author discusses the application of blockchain in eight major fields, including finance, the Internet of Things, forecasting markets, supply chains, public services, charity, certification, and digital copyright.

The distributed structure of blockchain and the low-cost trust-building mechanism based on mathematical algorithms provide a new idea and path for solving and optimizing related problems in the financial field. The low-cost credit creation in the blockchain attribute helps to rebuild the social trust system; peer-to-peer transactions weaken the intermediary function of finance; mechanisms such as smart contracts based on blockchain will promote the process of financial intelligence; the consensus mechanism of blockchain greatly improves the transaction efficiency in the financial field; the distributed network effectively reduces the systemic risks faced by the traditional financial system; the immutability of information and the new accounting process help innovate supervision and auditing; all-round real-time supervision effectively improves the compliance of financial enterprises ... Blockchain provides a new perspective for the financial field to overlook various traditional financial businesses, and has the hope of becoming a technical reconstructor, business reconstructor, and financial ecological reconstructor in the financial field.

What is most valuable is that the author of this book, starting from some typical cases, deeply interprets the application of blockchain technology in the financial field. For example, the author introduces in great detail the examples of companies such as Bubi using blockchain to try equity registration, transfer, and clearing and settlement, highlighting the outstanding advantages of blockchain's sharing, trustworthiness, and traceability in the field of clearing and settlement: Jingu Chain has built an open and transparent private equity registration and transfer platform based on the Bubi blockchain platform, providing investors with an efficient and reliable asset circulation environment and services, and realizing the registration, certification, recording, and circulation of equity and bonds; Nasdaq has launched the Linq platform for private equity transactions using blockchain, providing companies using it with functions such as a dashboard for managing valuations, a timeline chart of equity changes, and investor personal equity certificates; Overstock has created the t0 blockchain trading platform, where securities can be traded directly on the blockchain, making transactions more transparent and secure; Goldman Sachs has developed a system for securities trading settlement using cryptocurrency based on blockchain, ensuring that transactions can be executed and settled almost instantly.

The payment sector is the first industry to be impacted by blockchain technology. To this end, the author compares the similarities and differences between traditional payment and blockchain payment, and introduces in detail Ripple, the only blockchain company that has achieved commercial application . Ripple focuses on the cross-border payment field, providing financial institutions with cross-border payment and foreign exchange market making blockchain solutions. On the basis of maintaining the different accounting systems of banks and other financial institutions, it has created a globally unified network financial transmission protocol. At the same time, major payment companies such as Paypal, Visa, Mastercard, and American Express have also explored and practiced blockchain. In comparison, the development and application of blockchain technology in China are relatively backward. How can the traditional payment industry that relies on banks cope with future challenges? It is worrying.

In addition, the author also analyzes practical cases in the financial field, such as the potential application of blockchain in Internet finance and P2P bill market, Lloyd's exploring the use of blockchain to modernize the operation process of the insurance industry, and BTCJam's establishment of a blockchain-based lending platform. Undoubtedly, as the intersection of many popular concepts at present, blockchain has created opportunities for cross-field cooperation, improved resource allocation efficiency, and helped industrial transformation and upgrading. This disruptive technology will profoundly affect multiple industries, including the financial industry, in the foreseeable future.

However, some characteristics of blockchain will also become a constraint for future applications. For example, the "mining" behavior based on the proof-of-work mechanism of blockchain attracts most of the computing power of computers around the world, which is easy to cause a lot of resource waste. The period required to reach consensus is often long. As the difficulty of "mining" increases, the production of new bitcoins will inevitably decrease. At present, this mechanism is not suitable for commercial application. The proof-of-stake mechanism of blockchain also requires nodes in the network to "mining" operations, and it cannot fundamentally solve the problem of the application of the proof-of-work mechanism in the commercial field. At the same time, it is difficult to achieve both the degree of decentralization of blockchain and the performance efficiency of the consensus mechanism. The higher the degree of decentralization, the lower the efficiency of the consensus mechanism will inevitably be. Therefore, the development of blockchain must also weigh the relationship between the storage capacity of the ledger and the processing performance. In practical applications, as the scale of the ledger increases, the threshold of the hardware resources of the participating nodes will inevitably increase. The author has a clear understanding of these issues and has sorted out the security limitations of blockchain technology, including the threat to the system when facing a 51% attack, the easy theft of private key storage, and how the consensus mechanism ensures security. His analysis is thought-provoking.

As blockchain technology has attracted widespread attention, introductory books on blockchain have sprung up like mushrooms after rain. The unique value of "How Will Blockchain Redefine the World" is that it is closer to the forefront of hot topics. The large number of practical application cases collected in it show readers the origin and development of blockchain, the economic ideas behind blockchain, the technical principles and characteristics of blockchain, the application of blockchain, and the outlook and imagination of blockchain in a simple and easy-to-understand way.

Kevin Kelly, the most famous spokesperson and observer of Cyberculture, once said that innovation often happens at the margins. Blockchain has emerged from the margins with the rise of Bitcoin, and has attracted and influenced the mainstream to this day, and is likely to become the mainstream of the next round of technological and financial development. Although the application prospects of blockchain still need to be tested by time, we have reason to believe that, at least for finance, it will enhance the vitality of the financial system, deepen the trend of "financial disintermediation", reduce financial transaction costs, and fundamentally change the ecology of the financial industry.