Many countries are researching blockchain technology. Where is the Internet order?

Author : Zhou Jiangong , CEO of Shanghai First Financial Media Co., Ltd. This article is a preface to "Blockchain 2.0" with slight modifications.

Internet finance has run into trouble in China, from being a disruptor to being a somewhat destructive brat. Just because it is labeled as an Internet company does not mean it will work. The most basic integrity and risk control issues in the financial industry are still there. The industry is innovating, and so are the scammers.

No one in Europe and the United States has ever used the term "Internet finance". If everyone is talking about the same thing, they call it "financial technology" (FinTech). The European and American governments do not support "Internet finance", but many governments have actively studied and tried to promote a technology called blockchain, which is not only used in finance, banking, insurance, logistics, energy and other fields, but also in social security, medical insurance, intellectual property protection and other government services.

Blockchain originated from P2P (not that P2P), which divides the files to be downloaded into countless fragments and spreads them to different computers. These computers can each download some fragments and transfer the obtained fragments to each other. Finally, each computer can synthesize a complete file as needed. Online video companies were the first to use P2P technology in large quantities, and therefore they were also the first industries to be interested in blockchain technology. P2P technology realizes point-to-point computing, storage, and transmission between many computers, opening up distributed storage.

Just as computers in the network jointly maintain the integrity of a video file, when people trade through the network, the entire transaction process of a digital asset will be recorded in the "ledger", which is jointly maintained by computers in the network and is not in the hands of a certain organization or individual, but a distributed ledger. To quote R3 CTO Richard G Brown: "When a batch of entries is added to the ledger, the index value of the previous batch is also added, so that all participants can verify the source of all entries in the ledger. These batches are called 'blocks', and all blocks together are called 'blockchain'."

P2P was widely used to download and distribute pirated music and movies, and was criticized. The regional chain is the underlying technology of Bitcoin. Bitcoin was also regarded as a scourge by some monetary regulators because of the "Silk Road" incident. But technology is neutral. The key is who uses it and how it is used. Blockchain technology is in line with the general trend of open source and distributed Internet and software technology. These technologies bring sharing, efficiency, democratization, decentralization, and transparent trust. After the popularization of the Internet, there is a wide range of application prospects.

Here comes the question: Where is the order in this non-institutional, decentralized, and dispersed world?

Centralized order does not require a high degree of trust, while distributed order does. Trust is the most important social capital, which is accumulated over a long period of time through concepts, rules, laws, and governance. Blockchain helps to establish impersonal trust, providing a possibility for the evolution of a new type of digital economy and network order.

One of the premises of blockchain technology is the dilemma of people transmitting information and establishing trust, which is called the Byzantine Generals Problem by distributed computing mathematicians. Blockchain technology can accommodate the inability to establish trust between strangers, which is called "trustless". However, blockchain technology establishes algorithmic trust by establishing a complete database for collective verification of every transaction on the network, thus solving the problem of distrust between strangers.

This kind of trust relationship that is independent of personality and established by codes, protocols, and rules has a very wide range of application scenarios in an economy like China, where integrity is low, financial risks are high, and financial supervision levels are low. It is hailed by many financial technology experts as the next big thing in the financial industry. In a sense, it has also opened a new door for the healthy development of China's Internet finance.

Trust is not limited to finance, it is the cornerstone of the entire digital economy. What is exciting about blockchain is that it is possible to use distributed ledger technology to deal with two stubborn problems in the Chinese economy - counterfeit goods in consumption and fraud in finance.

Distributed ledger technology can also be used to clearly define and protect property rights, such as digital currency, real estate transactions, securities transactions, etc., which are areas where ownership changes frequently. How can the rights of the original creators of works that are widely circulated on the Internet be protected? Blockchain technology is feasible. The rule of law, supervision, rights, efficiency, and integrity are the inherent requirements of the service economy. If the law and code are effectively combined, blockchain can help make up for these "shortcomings" of the Chinese economy.

"Blockchain 2.0" provides a detailed analysis from the aspects of technology, application, industry, etc., showing the opportunities for entrepreneurship and innovation, but what opened my mind was a new possibility brought by blockchain technology - bringing order to the Internet.