Li Guoquan: Building the next generation Internet based on credit

Rage Comment : A year ago, "blockchain" had no Chinese translation, but a year later, "blockchain" has become a hot investment in the field of technology. Today, Singapore, known as "one of the four Asian tigers", is currently in the rising period of blockchain technology development. For example, IBM established a blockchain innovation and research and development center in Singapore some time ago, mainly to cooperate with the government and enterprises of Singapore to develop blockchain applications in the fields of network security and cognition. What considerations are behind Singapore's emphasis on the development of blockchain? Professor Li Guoquan, Vice President of the Singapore Economic Society and Professor of Singapore University of Simplicity, gave a clear answer. The article is the preface of "Blockchain Decryption: Building the Next Generation Internet Based on Credit" written by Professor Li Guoquan . Professor Li Guoquan has in-depth research on blockchain and digital assets, and has written many books. He is a leading expert in the blockchain industry in Asia.

Author: Li Guoquan

I remember that more than a year ago, when I was discussing Blockchain with my colleagues from mainland China, there seemed to be no commonly accepted Chinese translation for this word in mainland China. Now, "Blockchain" has become the hottest word in the technology field. At present, China has taken the lead in fields such as blockchain and distributed ledgers, mainly because China has a large number of talents in the fields of cryptography and financial technology (FinTech). Since I first went to China to teach a course on blockchain, in a short period of time, I have found that the government and enterprises have paid unprecedented attention to this field, and a large number of blockchain accelerators have sprung up like mushrooms after rain.

For readers who want to learn more about blockchain and distributed ledgers, this book covers various topics in this field, which can help readers further understand these related topics from a technical level. For ordinary readers, it can also be explained in simple terms. This monograph is original and comprehensive for the Chinese reader market. Almost all related concepts are discussed in this book. Moreover, it is very timely, and the topics discussed include Ethereum, distributed autonomous organizations (DAOs), and smart contracts, etc.

If P2P payments are made through a distributed network, trust is not necessary in the process. This idea is widely circulated among the original investors of Bitcoin. In fact, a non-centralized network is the most ideal. In a centralized system, each node contains different information and supports different computing power, and it is almost impossible to replace it. For a long time, replacing the traditional centralized system has only been an ideal. Bitcoin was invented by a small group of people, or one person. The reason why it has attracted so many people's attention is mainly because of its high complexity and adaptability. This makes it possible to replace the centralized system. However, even if not from a technical point of view, the name Satoshi Nakamoto itself is very interesting. It is a combination of the first pronunciations of Samsung, Toshiba, Nakamichi and Motorola. If it is directly explained in Japanese kanji, it means: Chinese people are inherently smart. This gives the name more mystery, making it so that most people have no idea who Satoshi Nakamoto is.

With the advancement of artificial intelligence technology and the improvement of computer processing power, people believe that one day, machines will dominate humans. This may be beyond the consideration of the researchers who first engaged in artificial intelligence, but now it seems that it is possible at some point in the future, and science fiction has given us a very detailed description. Therefore, the idea is that encryption technology is used to protect humans. In the 1990s, a group of people who called themselves cypherpunks were active in this field. They were influenced by the hacker tradition and libertarian ideas. They believed that privacy is still absolutely necessary in the open society of the electronic age. They do not think that centralized systems can guarantee personal privacy in the future. What they advocate is that people should defend their privacy rights and achieve this goal by writing code with such functions. Perhaps, they believe that when cyberpunk novels become reality and machines dominate the world, doing so can at least better protect human dignity to some extent. They believe that encryption and decryption will be a protracted battle of "the devil is one foot high, the road is one foot high". The outcome of this struggle will determine how much freedom humans will enjoy in the future. For them, they are willing to take certain risks for the sake of human freedom. Cypherpunks is a mashup of the words Ciphers and Cyberpunks, which has been used since September 1992. Now cypherpunks refer to a social network group that advocates the use of encryption technology to promote social change.

In 2014, I gave my first keynote speech in Silicon Valley on the important role of government in this ecosystem, and people seemed to be reluctant to listen. Singapore Management University pushed the speech through a podcast, and then the Singapore Shen Kewen Institute of Financial Economics (SKBI) held the world's first international academic conference on cryptocurrency. Many people in the distributed ledger research community began to be convinced that technology can help companies reduce costs and improve efficiency. Because we can use technology to ensure a completely trusted ecosystem without having to judge whether the other party is trustworthy. Later, I participated in a series of interviews and forums on electronic payments and financial technology, further arguing that technology has the effect of promoting inclusive society and providing low-cost basic services to groups that are not fully banked or completely unbanked. These arguments began to gain attention in the industry.

This book summarizes many topics related to blockchain. Based on its complete discussion, we can use the summary manuscript written by Zhou Yali, a teacher at the School of Overseas Education of Shanghai Jiao Tong University, for my opening speech in the course "Leading + Executive Frontier Talent Training Program" to summarize it:

First, the current financial system still mainly relies on strengthening centralization to solve the trust problem. In order to maintain trust, a large number of intermediaries have been created in the development of the financial industry, including custodians, third-party payment platforms, notary agencies, banks, government regulatory agencies, etc. However, intermediaries still rely on manual processing of information, and transaction information often needs to be transmitted through multiple intermediaries, resulting in a high error rate and low efficiency. In practice, authoritative agencies collect various information through a centralized data transmission system, store it in a central server, and then publish it to the public. The centralized transmission mode also makes data transmission inefficient and costly.

Secondly, blockchain is a distributed shared database that is collectively maintained based on a consensus mechanism. It has the advantages of decentralization, disintermediation, no need for a trust system, immutability, encryption security, transaction traceability, and transparency. It can effectively bypass many intermediaries, reduce communication costs, improve transaction efficiency, quickly establish trust relationships, or reach transactions when the two parties have not established a trust relationship, which is closer to the essential attributes and inherent requirements of finance.

At present, blockchain technology has moved from theoretical discussion to practical application in digital currency, credit financing, payment and clearing, digital bills, securities trading and registration and settlement, proxy voting, equity crowdfunding, cross-border transactions, insurance brokerage, etc. The common feature of the above fields is that they require high trust; moreover, the cost of traditional trust mechanisms remains high.

In addition, digital currencies represented by Bitcoin are the most successful application of blockchain technology. Compared with traditional paper money, issuing digital currencies can effectively reduce the cost of currency issuance and circulation, and improve the convenience and transparency of economic transactions. This digital currency has the characteristics of super-currency, super-border, super-sovereignty, and real-time settlement. Once the blockchain credit system is implemented globally, digital currency will naturally become a global universal payment credit similar to gold.

In addition, compared with the existing traditional payment system, blockchain payment is carried out directly between the two parties of the transaction without involving intermediaries. Even if part of the network is paralyzed, it will not affect the operation of the entire system. If a universal distributed financial transaction protocol is built based on blockchain technology to provide users with cross-border, real-time payment and settlement services in any currency, cross-border payments will become convenient, efficient and low-cost.

Blockchain technology is regarded as one of the main protocols of the next generation of value Internet. Blockchain technology will be useful in any production and life field that requires or lacks trust. From digital currency to securities and financial contracts, mutual insurance, education, rights registration, transfer, gambling, anti-counterfeiting, Internet of Things, smart contracts, and even tourism, it can also be widely used in the fields of public welfare and social governance such as identity authentication, judicial arbitration, voting, health management, artificial intelligence, and decentralized social organizations. This will greatly change or even subvert our future lives.

However, I have a different view on the commonly used term "decentralization". Because it is difficult to distinguish whether it means "abandoning centralized authorization" or establishing a "decentralized setting" when interpreting this term. The direct translation into Chinese does not seem to accurately express its inner meaning. I prefer to use "non-centralized (NotCentralised)" rather than "decentralized (DE-centralised)". In Chinese, the opposite of "centralization" should be "non-centralized", that is, "not centralized", rather than "decentralized" that abandons centralization. "Non-centralization" is not "decentralization". There can still be "mini-centralization (minicentralization)" between each node of "non-centralization". In short, it can be considered a kind of "decentralization". Recent studies have shown that if the computing power of each node in Bitcoin mining can be consistent, no node has an advantage over other nodes, "mini-centralization" will not occur. In this way, perhaps we have an ideal state: distributed system (DistributedSystem).

I hope that in future works and literature, scholars will consider adjusting the translation of existing vocabulary, otherwise it is easy to confuse important concepts. The term "decentralized system" also gives people the idea that there is no need for governance, which is incorrect. Even in a fully distributed system, there will still be "core developers", or "authorized developers" and/or "certified developers" who write the code. Then, it is up to miners and shareholders/token holders to decide whether the new governance structure or code is acceptable. Although there is no need to intervene in software downloads, core developers may still face unclear legal responsibilities if there are no new laws or governance structures to deal with these issues. In this area, is the code the law, or is the law the code? This question has not been discussed clearly. This lays the groundwork for possible legal proceedings. At the same time, as long as we can track and confirm the identity of individuals or entities in the blockchain environment, the system is not a truly anonymous system but only a P2P anonymous system. Ironically, although the emergence of blockchain is a major contribution of the cypherpunk community, complete decentralization and distribution may not really occur. Because blockchain is highly transparent, it may bring the opposite result to what we expect. A higher degree of centralization and central control may appear in the distributed ledger. However, this will not shake their determination to work hard for this. It can be said with certainty that protecting human dignity in a world dominated by machines is a noble and worthy goal. In other words, the ideal completely abandoning the centralized authorization distributed system may only exist in theory.

Trust is a rare resource. The above characteristics of blockchain complement the trust system we have built based on technology, platform and data. The title of the book "Blockchain Decrypted: Building the Next Generation Internet Based on Credit" fully reflects the evaluation of many experts on blockchain. Dr. Huang Butian's book was published very timely. Everyone should read it. I am very happy that I have the honor to write the preface for this book. I would like to extend my best wishes.