Blockchain: A new exploration of the rules and technologies of the online world

Editor's note: This article is the preface written by Mr. Wang Yongli, CEO of LeTV Finance, for "Blockchain: From Digital Currency to Credit Society" (CITIC Press). The author believes that blockchain technology represented by Bitcoin has opened up a new technology and rule system that has little connection with traditional society (offline) and is completely applied to the Internet world (online), such as Internet user identity verification, wealth confirmation, transaction records, notarization verification, etc. The exploration and attempt may change the operating rules of the Internet world and improve the efficiency and cost of transaction confirmation and funds settlement.

Wang Yongli

CEO of LeEco Finance, former Vice President of Bank of China

In recent years, "blockchain" has become a rapidly heating up and increasingly popular concept in the global Internet field, especially in the financial Internet sector. In China, blockchain has attracted more and more attention and exploration.
The earliest appearance of "blockchain" was "Bitcoin" released in early 2009. Blockchain has become the basic protocol and technical application for the launch, recording and circulation of Bitcoin. Although Bitcoin has been controversial since its launch and is still not considered as "currency" by governments and monetary authorities, the blockchain technology used by Bitcoin has received widespread attention, including from governments and monetary authorities.

Why has blockchain become a rapidly growing hot technology and topic?

Perhaps the most important of these is that Bitcoin, which was launched based on blockchain technology, has opened up the exploration and experimentation of a completely new technology and rules system that has little to do with traditional society (offline) and is completely applied to the online world (online), including Internet user identity authentication, wealth confirmation, transaction records, and notarization verification. This provides people with optional paths and unlimited imagination to adapt to the development of the Internet society.

Judging from its application in Bitcoin, blockchain is intuitively speaking, the combination of encryption technology and Internet technology to form a new set of data block (BLOCK) establishment, Bitcoin configuration, Internet user identity verification, Bitcoin (value) confirmation formed by mining, Bitcoin transaction records, and Bitcoin cross-block flow (value transfer) extended encryption (adding factors such as block and transaction time identification) registration and verification, etc., including block connection (Blockchain), full encryption, mutual authentication Internet protocol rules and accounting (Ledger) system.

Precisely because Bitcoin is not a substitute for offline legal tender, but is issued and managed by non-legal monetary authorities, it is a new, decentralized network currency (virtual currency) that mainly imitates the model of gold and is completely protected and supported by Internet basic protocols and strict encryption technology. It has also formed a new set of monetary rules and systems that are different from and not subject to the laws of real society, and can be bought, sold or exchanged with legal tender.

Bitcoin has been launched for more than 8 years, and there has been no record of funds or user information being stolen. Its security has been verified, and its efficiency and cost of fund settlement also have obvious advantages. This has led to people's confidence in the blockchain technology used by Bitcoin, and people have become increasingly aware that although blockchain is a technology and protocol pioneered and applied by Bitcoin, it is not the same as Bitcoin, and its application will never be limited to Bitcoin. The application of blockchain can be decentralized or centralized; it can be a public chain model or a private chain model. Therefore, after Bitcoin, blockchain technology is also constantly developing and innovating, and constantly exploring new application areas.

The reason why blockchain is highly valued by more and more people is that the development and widespread application of the Internet have led to more and more economic exchanges and trading activities being transferred to the Internet. The online world (or online society) is rapidly expanding, enriching and activating, and online transactions must solve the efficiency and security protection issues of the parties' identity verification, value verification, transaction records, inspection and verification, etc., and require strict intermediaries and agreements (rules or constitutions). In this regard, traditional thinking and customary practices are to follow the development trajectory of offline transactions to online transactions, and push the prevailing rules and practices of the real (offline) society to the online (network) society, but in practice it is becoming increasingly difficult to adapt to the needs of online transactions.

For example, for the identity verification of the parties involved, the natural choice is to use the information of the identity documents protected by the laws of various countries as the basis, and then add account or transaction passwords, as well as biometric identification such as facial recognition, iris, and fingerprints, to conduct identity verification for online transactions. However, this method will first make the identity information of citizens in the cross-border interconnected online world subject to the administrative jurisdiction of the real society. At the same time, the collection and verification of non-digital, multiple identity information will greatly increase costs and reduce efficiency.

Furthermore, in the real world, all economic activities involving fund settlement, except for direct cash transactions, require the parties to open accounts in banks and other institutions first, and conduct fund settlement through the account opening institutions. However, due to various reasons, even within a country, it is impossible to require all citizens to open accounts in one account opening institution (including its branches), and it is even more impossible to do so across countries. This means that transactions between parties who have opened accounts in different institutions must be completed through settlement between their account opening institutions. If this model is implemented in the online world, it will seriously affect the efficiency and cost of transaction confirmation and fund settlement.

In addition, in the real world, the pricing and settlement of transactions inevitably involve currency, and currency is legal tender protected by national or regional sovereignty. In the context of cross-border Internet interconnection and cross-border development of Internet transactions, the pricing of transactions and the settlement of funds also involve currency issues. The operation of multiple currencies will also greatly increase the cost and risk of settlement.

Therefore, the development of the online world and online transactions urgently requires innovations in identity authentication, value verification, currency pricing, transaction confirmation and recording, account management and verification, etc. Blockchain technology provides very important inspiration and practice for this.

Of course, the application of Bitcoin is an extreme example. The original Bitcoin cannot be directly converted from legal currency, but can only be obtained through "mining" in the online world. Therefore, Bitcoin can completely set aside the offline social rules and use blockchain technology to form a new set of game rules, which are extended from online to offline. In the real world, whether online or offline transactions, the main body is people (including legal persons), and the management of their wealth or value should not be completely divided, but must be connected and integrated. Therefore, O2O is necessary. This requires the application of blockchain to not only study and solve the problems of the online world, but also study and solve the connection and integration problems between the online world and the real society. This will bring more challenges and risks, and also require more people, greater power, and more in-depth discussions and innovations. It is also possible that blockchain technology will be replaced by more advanced and perfect technologies in the future, but the historical value of blockchain will be indelible!

In order to popularize the knowledge of blockchain, guide the research of blockchain, and promote the application of blockchain, a group of experts and scholars in my country who have made great achievements in the theoretical research and application practice of blockchain have recently sorted out their experience and achievements and compiled and published the book "Blockchain: From Digital Currency to Credit Society", which is very worthy of careful reading. Of course, as a brand-new technology and concept, the research and exploration of blockchain has just begun. I hope that the book "Blockchain: From Digital Currency to Credit Society" can become a "stepping stone" for everyone to learn and study blockchain, and I also hope that the author can continue to launch new achievements and works!