Lei Zhiyong: Blockchain technology should remain rational in the short term and positive in the long term

     Recently, the word blockchain has been repeated in the circle of friends, news, and research reports of various securities companies. It has a high exposure rate. So what exactly is blockchain? If we want to give a strict definition, blockchain is a technical solution that collectively maintains a reliable database in a decentralized and trustless way.

Obviously, the definition of blockchain is a bit confusing. The following is a more popular description to help you understand blockchain in 5 minutes. In the traditional financial model, there is a third-party institution, such as a bank, to provide credit endorsement for each transaction, that is, to provide a credible account book so that each transaction can be traced. For example, when Company A pays Company B, the account will be reflected in the balance change of the bank account between the two companies. The bank provides endorsement for the credibility and traceability of the transaction. The above traditional practices also have some significant defects: high cost (banks charge handling fees and management fees), low efficiency (many businesses need to be completed every other day or even every few days), and if the bank's "account book" is "hacked" and tampered with, the real information will be lost.

In 2008, Satoshi Nakamoto proposed the concept of Bitcoin: a decentralized, collectively collaborative network currency system without a third party. In this system, the right to record currency transactions is no longer monopolized by third-party credit institutions, but everyone can compete for this right. The standard of competition is the so-called "proof of work": whoever first calculates a random number with the first X bits all 0 will record the account. After the winner has recorded the account, he will send a copy of this page of the account book to every participant in the entire network. According to the agreement, everyone must "copy" it intactly. Of course, this "copying" is done without seeing the original text of the account book and in an encrypted state. After recording everything, a "seal" is stamped on this page of the account book, which is the legendary hash. Once the record is tampered with, the hash will become different. When everyone compares it, they will find that the tampered page of the account book is different, and then it will be ruthlessly abandoned by the system. In the above process, a page of the account book is a block, which records the changes in the data of the entire account book during this period of time. Then, after the bookkeeper sends the results to every node in the system, every node in the entire system has exactly the same account page that can guarantee authenticity. Next, the next bookkeeper is born and records the account after the original account book. The account pages are linked (chained) together, and a complete account book appears, which is a distributed accounting and decentralized blockchain system.

So what are the benefits of doing this? First of all, the system is extremely secure. The rights of each node in the system are equal, and no node will "monopolize" the right to record accounts, which ensures fairness, and even if some nodes are destroyed, it will not affect the operation of the entire system. Secondly, the data in each ledger in the system is exactly the same, which means that tampering with the data of a single node is meaningless. Unless a 51% attack is launched - hacking more than 51% of the nodes, but the cost of doing so is very high, and it is basically not worth the loss.

It is this technology that has ensured that Bitcoin has been running very well for more than seven years without any centralized supervision, without any crashes, bad debts or data mismatches. The second is efficient settlement. The technology and mechanism of blockchain make its settlement instantaneous, that is, each transaction is T+0, which saves time and cost and greatly improves work efficiency for many financial businesses.

Recently, blockchain has gradually shown a wide range of application prospects and has begun to be applied to other fields besides Bitcoin. For example, 43 of the world's top banks (including HSBC, Citigroup, Deutsche Bank, etc.) have joined the R3 organization to formulate international blockchain banking standards. They want to skip the SWIFT system and achieve global real-time clearing. Microsoft will also provide technical support for this. Nasdaq has completed the first equity transaction based on the blockchain platform. Overstock has been approved by the SEC (US Securities and Exchange Commission) to issue stocks through blockchain. The governments of the United Kingdom, Australia and other countries have attached great importance to this trend, established expert teams to study blockchain technology, and invested in blockchain-related companies. The Chinese government has also begun to take action. The central bank held a digital currency seminar on January 20, saying that it would strive to issue digital currency as soon as possible, which may use blockchain technology. In the future, blockchain is expected to touch the underlying architecture of the financial industry and innovate the infrastructure of financial institutions including commercial banks. After an in-depth discussion of the mechanism and advantages of blockchain, it can be found that the disruption of blockchain technology to the industry is by no means limited to finance. IBM claims that blockchain is the best solution for the "Internet of Things". In addition, blockchain technology is expected to be applied in the fields of law, retail, Internet of Things, and medical care, so that these industries no longer rely on third parties to establish credit and information sharing, and improve the operating efficiency and overall level of the entire industry. Currently, blockchain has just begun to be explored, but there may be many application scenarios in the future. The current capital market has begun to chase blockchain concept stocks, and many theme concept targets have emerged. As the old saying goes: "Technology is always overestimated in the short term, but underestimated in the long term."

Our capital market should remain rational in the short term in pursuing conceptual themes of new technologies, but in the long term we must actively embrace in-depth research.