Li Guoquan: Blockchain technology will subvert our lives in the future

Author: Li Guoquan

On June 24, 2016, with the official launch of the school’s new “Leadership + Executive Frontier Talent Training Program” project, special guest, project course professor, Professor Li Guoquan of the Sim Kee Boon Institute of Financial Economics at the Lee Kong Chian School of Business, Singapore Management University, gave the opening lecture “Financial Technology and the Future Development of Blockchain”, explaining in simple terms the “blockchain technology” that is currently highly sought after in the financial sector.

The following are some highlights:

1. The current financial system still mainly relies on strengthening centralization to solve the trust problem. In order to maintain trust, the development of the financial industry has spawned a large number of intermediaries, 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.

2. Blockchain is a collectively maintained distributed shared database established 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.

3. 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 characteristics of the above fields are high trust requirements and high costs of traditional trust mechanisms.

4. 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.

5. 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 payment will become convenient, efficient and low-cost.

6. Blockchain technology is regarded as one of the main protocols of the next generation of value Internet. Blockchain technology will be useful in any field of production and life that lacks trust. From digital currency to securities and financial contracts, mutual insurance, education, registration and transfer of power, gambling, anti-counterfeiting, Internet of Things, smart contracts, and activities such as 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, which will greatly change and even subvert our future lives.