Dr. Cao Feng: Blockchain reconstructs big data and changes everything

I was previously the chief scientist of Internet finance at IBM China Research Institute and the head of the IBM Man vs. Machine project in China. The biggest news this morning was the brain-like computer released by IBM. Dharmendra, the chief scientist of this project, is my former colleague. "Change the architecture of von Neumann computer system" was a sentence he wrote when he proposed the project ten years ago. After ten years of hard work, it has finally become a reality today. As we all know, the existing computer systems, whether the most complex mainframes, personal computers, or the tablets and mobile phones we use, are all based on the von Neumann architecture. Therefore, the emergence of brain-like computers is a very important event in today's scientific community, and blockchain may be even more interesting in the future.

R3CEV Alliance is a topic that cannot be avoided in discussions related to blockchain. Few people may notice what the abbreviation of CEV in R3CEV is. C stands for encryption, E stands for exchange, and V stands for investment, which is its goal. Last year, more than 1 billion US dollars were invested in this globally. More and more financial and technology companies such as Goldman Sachs, Morgan, IBM, and Microsoft are investing in blockchain projects. China is also following up quickly. The central bank has set digital currency as a strategic goal, and Governor Zhou Xiaochuan has repeatedly mentioned this this year. In January this year, the China Blockchain Research Alliance was established, further setting off a trend of blockchain research in the national financial industry. "It is obvious that the current state is the same as the Internet 25 years ago." Although blockchain is still in its early stages, we can predict that the explosion of blockchain applications may change our lives more deeply than the Internet.

When talking about blockchain, we inevitably have to talk about Bitcoin. Just now, a guest mentioned that Bitcoin can be infinitely divided, which is a relatively easy-to-understand statement. The smallest unit of Bitcoin is called 1 Satoshi, which is equal to one hundred millionth of a Bitcoin. Even so, considering that there will be a total of 21 million Bitcoins, the multiplied volume is far greater than the world's GDP of 7.8 trillion US dollars in 2014, so there are infinite possibilities. I will not discuss Bitcoin today. Blockchain is the core technology of Bitcoin. Based on blockchain technology, the Bitcoin system has achieved seven years of stable operation without downtime, withstood countless cyber attacks, and has no dedicated maintenance. As we all know, my country's financial system invests a lot in IT every year. But Bitcoin has done it easily, and it mainly relies on blockchain technology.

In the short few months since R3CEV was established in September 2015, 42 major global banks and financial institutions have participated, with a combined market value of more than $600 billion. 60% of these institutions are global systemically important financial institutions (SIFIs). While we see such a good prospect, we must also calm down and look at the challenges facing blockchain.

I think the challenges mainly come from two aspects. On the one hand, it comes from the challenges of traditional business. Everyone has a perceptual understanding of blockchain, which is a distributed ledger system. The traditional digital ledger is a database system, which has been widely used in various fields. It takes time to change it. Just like Uber or Didi, although they are in full swing, taxi companies still exist.

Another aspect comes from technology. You may imagine that blockchain is ubiquitous and highly interconnected. But in fact, blockchain is still in the state of an old-fashioned telephone. This is the latest computing peak chart of a famous blockchain application that I posted last night. In the past 6 months, the peak transaction volume per day is 35K, which means that on average, there is not even one transaction per second. The number of transactions per second is one of the technical challenges facing blockchain technology. But we are very happy to see that this matter will soon make some breakthroughs. Relevant teams at home and abroad are doing relatively basic research and development. Blockchain can quickly change from an old-fashioned telephone to a new interconnected state.

Back to the blockchain itself, why has it suddenly become so popular? The starting point was a debate held at the British Library in October 2014. At that time, Bitcoin was being hit by central banks of various countries, so a large number of European and American experts gathered at the British Library to discuss where Bitcoin would go. In the end, a very interesting conclusion was drawn: Bitcoin is considered a fashion. If Bitcoin has no problems from a fashion perspective, we will not discuss its merits and demerits. Another sentence in the conclusion is very important: Blockchain technology is interesting. At this conference, everyone brought blockchain technology from the backstage of Bitcoin to the front stage for the first time. Why is blockchain technology so interesting? Today I will try to give you some interpretation and analysis in this regard.

In my opinion, first, blockchain will reconstruct big data in the future. Everything, from the manual means of obtaining information starting from the Napoleonic Wars, to the development of databases in the middle, to now everyone has a mobile phone. And from IBM Deep Blue computer defeating chess masters to the recent AlphaGo defeating Go champion Lee Sedol. We will find that all artificial intelligence, innovation and value come from data and information. Where data and information are, value and innovation will arise. If a large amount of data exists in the blockchain in the future, then all applications and innovations will be based on the blockchain. Blockchain will reconstruct big data and become the entrance to everything. Analysis and mining based on these block data will further reduce all costs. People who understand data analysis know that when we do data mining and data analysis, 80% of the time cost or energy cost is spent on collecting and cleaning effective data. Once we have blockchain, this cost will be greatly reduced.

Second, blockchain will greatly reduce credit costs. Banks can now establish good credit because they have beautiful buildings, are located in very central geographical locations, and can maintain the stability and unforgeability of currency credit through national laws and weapons. If we use blockchain technology, due to its unforgeability and non-double-spending characteristics, we can easily establish credit.

Third, the existing financial system has a very important principle called the separation of money and accounts. In the blockchain, money and accounts are combined into one, and it achieves this goal through an interesting and sophisticated data structure. The blockchain can achieve real-time settlement of accounts without the need for post-audit.

Blockchain can be divided into public and private chains. In view of China's reality, we may move more towards the direction of private chains. Blockchain has a wide range of applications. Any records involving interactions can be considered for developing related applications based on blockchain technology. The financial system built on blockchain as the underlying technology can reduce operating costs through peer-to-peer transactions, improve payment/rights confirmation efficiency, and meet regulatory and customer requirements for data records.

From the development history of computers, it is a trend that long-term separation will eventually lead to integration, and long-term integration will eventually lead to separation. The first generation of computers was a large system, with one computer in each room, which was a typical centralized process. Later, when we entered the PC era, everyone had a computer on their desk, from integration to separation. The current trend is cloud computing, which turns the process of separation into integration again. In the future, cloud computing may give way to blockchain, and once again turn from integration to separation.

In response to today's theme, blockchain may become the cornerstone of the sharing economy or shared finance. Because it can realize P2P in the true sense. At present, the development of blockchain is transitioning from currency to contract stage. In the future, more and more smart devices, equipment, and computer systems will adopt the data organization method of blockchain. By then, blockchain will really rise to the governance level, thus greatly changing life and our entire world. Finally, I will end my speech with BANK3.0. We at Hande Jinchuang hope to make some real blockchain innovations in banking and finance. Thank you!