Yao Yudong talks about the dilemma of Bitcoin and closely following blockchain technology

On August 21 , at the "China Blockchain Industry Conference" co-organized by the Global Shared Finance 100 Forum and Contemporary Financier magazine, Yao Yudong, director of the Financial Research Institute of the People's Bank of China , said that Bitcoin is basically successful in payment, but whether it can be used as a future currency is controversial. At the same time, he also proposed a new idea, called the dilemma of Bitcoin.

Yao Yudong said that our team recently proposed a new theory of money demand, which has three motivations for money demand : transaction motivation, precautionary motivation, and liquidity motivation. We simulated the transaction demand, and the money demand is the square of the number of transaction entities, or the square of the total economic volume. If this theory is applied to Bitcoin, Bitcoin will face a dilemma.

"Bitcoin or similar digital currencies, if there is no limit and they are widely used, will appreciate rapidly because the more people use them, the more demand there will be, and hoarding will occur."

Yao Yudong said, "If you look at the Bitcoin website, you will see that the rate of one block every 10 minutes is shocking. It is just a cross-border transfer, which is the hoarding effect. After hoarding, it cannot meet people's transaction needs. This is a dilemma of Bitcoin. If there is no limit, who will believe in Bitcoin? It does not have the credit of the central bank. Therefore, similar Bitcoin dilemmas will hinder such a digital asset, or currency, from meeting human transaction needs in the future."

Yao Yudong believes that from the emergence of blockchain technology in 2008 to today, its application may not be relatively mature until after 2018. So it is not something that can be rushed. The evolution speed may be fast, but not that fast.

How do we face the problem of blockchain? Yao Yudong uses philosophical ideas. If we assume that blockchain is a technological revolution, we will make two kinds of mistakes when testing this hypothesis. The first kind of mistake is that it is indeed a combination of technologies, but when we judge it, we think it is a bubble. This is the first kind of mistake. The second kind of mistake is that if the blockchain hypothesis is false and not a technological revolution, we will judge it as a technological revolution.

Yao Yudong said that the key is that when you are testing, we cannot avoid two kinds of mistakes. The key is to find the balance point and the cost of the two mistakes.

The first cost is that if it is really a technological revolution, it may be disruptive in the future, as many experts say, or it may be like the latest blockchain report issued by the World Economic Forum, not going to the edge, but to the center of finance. If it is true, but we think it is a bubble, we will not take action, and we may miss the technological revolution. This cost is very heavy, and it may be born with the Internet and die with the blockchain.

The second mistake is that if it is not a revolution, we think it is a revolution, it is a bubble. We think it is a revolution, we make a lot of efforts, and may invest a lot of money in starting a business, but in the end, we get nothing. The price we pay is a lot of cost.

Which one has a greater cost? Yao Yudong believes that the first one may have a higher cost, so in this case, its strategy should be to track closely and follow up closely. The cost of not taking action may be greater than the cost of taking action. Action is not to rush in hastily, but to track closely. We should update according to the latest situation, discover according to its cases, or update our beliefs and judgments according to the latest research results. This is its philosophy.