At the 6th Shanghai New Finance Annual Conference and the 3rd Internet Finance Bund Summit on July 31, in a sub-forum dialogue on blockchain, Wanxiang Holdings Vice Chairman Xiao Feng revealed that Wanxiang Holdings has established a VC fund of US$50 million specifically for blockchain investment. So far, it has invested more than US$20 million in 23 startups worldwide, of which only one is in China.
Xiao Feng expressed his views on the development of blockchain technology at the meeting. He divided blockchain into several levels (the following is a transcript):
The bottom layer is the network layer. The only mature one is the Bitcoin blockchain. Ethereum's blockchain technology is far from complete. The concept of private chain and alliance chain below was only introduced last year. We know several well-known industry standard alliances, whether it is R3 or Hyperledger. We have not even released the code of R3, so you can know that it is far from being usable. Hyperledger is also not complete. So from the perspective of private chain and alliance chain, it will take 6-10 months for us to see a complete thing. In the public chain, Ethereum will take more than a year. Bitcoin blockchain was created by people with very clear values. Now, should we expand the capacity or not? Because there are only 7 transactions per second under the existing framework, it is impossible to use it in our financial applications. But there is a big debate about whether to expand it and how to expand it, because it was originally created by some extreme anarchists. There is no central bank, government, or any institution to manage it. You have to transform it to apply it to finance or other industries. People with values say we don't want these things. Now the debate has been going on for more than two years, and no decision has been made yet. This is the current situation, which is very immature.
On top of the Bitcoin blockchain, the second layer is called the data layer. There are already some mature applications in the data layer, because it is used as a distributed ledger or database, and there are already some applications in data recording and storage. For example, companies like Factom, the U.S. Department of Homeland Security recently gave them a large sum of money, hoping that they would use blockchain-based database technology to do some data storage. That technology is relatively mature, and this is one.
The third level is the many communication protocols of the blockchain, just like the Internet has many communication protocols, such as http. There are also many on the blockchain, such as Ethereum's smart contract, which is a general protocol. So far, the technology of smart contracts has not yet developed to the point where it can be used in our core financial production. Including its speed, even after Ethereum transfers, it can only do 1,000 or hundreds of transactions per second, which is not enough for our high-concurrency and large-scale financial transactions. In addition to this general protocol, the technology is not mature enough, at least so far, it is not enough for us to make a good and large application. There are also some other general protocols, such as the privacy protection protocol. We know that there are two public chains so far, so the account information is open to the whole network. If this kind of blockchain technology is applied to the financial system, first of all, no bank can accept that, although you don’t know the account name of my customer account, after encryption, no hacker can break it, but the account information must be public, because it needs a third party to keep accounts, so the balance of the Bitcoin account is public, and the bank obviously cannot accept this. So some people have developed some privacy protection algorithms, homomorphic encryption, ring signature and other technologies. We have also invested in one of the best American companies that provide privacy protection. However, so far, these technologies cannot be directly applied to our financial system because they are not mature and complete enough. So if you say that finance should use it immediately, it is obviously unrealistic because the technology is not enough. This is a general protocol on top of the blockchain and database. It is still under development. It is estimated that it will take 2-3 years for these to be complete and mature. Only after maturity can they be widely used in our financial system.
The fourth layer above these three layers is the various applications, which we call the application layer. Various commercial applications are developed on this layer. We see good prospects in finance, the Internet of Things, healthcare, etc. But so far, everything is still basically in the testing and trial stage. So you can see that almost all of our mainstream financial institutions have only established their own laboratories. I have also visited several laboratories, such as UBS's laboratory, which uses more than 20 financial application scenarios to test blockchain. I went there last year and the year before last. To be honest, it is still very far from application. But if you are not on the track, you are not eligible to participate in the competition when the starting gun is fired. Therefore, everyone must enter the track and make full preparations. If you don't prepare, what if the gun is fired? You will not be eligible to compete. So everyone is trying to do this. This is a general situation of global applications.
