Will Bitcoin blockchain reconstruct Internet finance?

Bitcoin is still controversial, but the technology behind it, blockchain, is expected to become a disruptive force in the financial sector. Yesterday (January 5), the Global Sharing Finance 100 Forum (GSF100) announced the establishment of the "China Blockchain Research Alliance", which aims to establish a research and exchange platform for blockchain technology, create a policy communication platform, and clarify the positioning of blockchain technology in the existing regulatory model and monetary policy operations.

◎Reporter Zhu Dandan

     Bitcoin remains controversial, but the technology behind it, blockchain, is expected to become a disruptive force in the financial sector.

     Yesterday (January 5), the Global Shared Finance 100 Forum (GSF100) announced the establishment of the "China Blockchain Research Alliance", aiming to establish a research and exchange platform for blockchain technology, create a policy communication platform, and clarify the positioning of blockchain technology in the existing regulatory model and monetary policy operations.

     "In our country, blockchain is a brand-new concept and theory, and people's cognition, research and practice have just started. It still needs active participation and positive interaction from theoretical researchers, network technicians, financial practitioners, and government regulatory departments." Wang Yongli, senior vice president of LeTV Holdings (Beijing) and CEO of LeTV Finance, said that the establishment of the alliance aims to gather elite forces, strengthen cooperation with all sectors of society, and vigorously promote the knowledge dissemination, technology research and application practice of blockchain in my country.

     Wang Yongli further pointed out that blockchain technology is now regarded as one of the basic protocols for the next generation of global credit authentication and value Internet, and its importance to my country's financial industry and financial system cannot be ignored.

     In addition, some professionals also stated that the application of blockchain technology in commercial banks still faces many challenges in gaining recognition from regulators and the market; at the same time, the security of blockchain itself has yet to be verified.

Experts: Internet finance may change in the next five years

     Data blockchain technology has been regarded as one of the basic protocols of the next generation of value Internet, and its importance to my country's financial industry and financial system cannot be ignored.

     Yesterday, the GSF100 Joint Forum governing units (China Wanxiang Holdings Co., Ltd., Xiamen International Financial Technology Co., Ltd., China Insurance Asset Management Association, Baoshang Bank Co., Ltd., and Yingkou Bank Co., Ltd.) jointly initiated the establishment of the "China Blockchain Research Alliance", which will explore the market application platform of blockchain technology, promote the regularization and standardization of specific application rules, and carry out project implementation and roadshows.

     "The alliance is open and will focus on the following aspects in the future: integrating research forces to conduct theoretical research; providing policy advice and linking it with supervision and systems; implementing theoretical policies into practice to promote innovation in application projects, promote the application of blockchain technology in reality, and resolve contradictions in the existing financial system; and popularize knowledge and promote the maturity of blockchain culture." said Yang Tao, assistant director of the Institute of Finance at the Chinese Academy of Social Sciences.

     Yang Tao further analyzed and pointed out that blockchain technology is not a "revolutionary" that came out of thin air. It is a logical process with its historical theory. The core is to lead and cover a series of new rules supported by new technologies, so that it can be better integrated into the mainstream and improve the shortcomings of the existing system and rules. At the same time, it builds a shared and win-win financial development ecosystem that is conducive to the supervision of traditional financial institutions, new financial organizations, enterprises and consumers.

     Wang Yongli also said that blockchain is of great significance to financial institutions and financial innovation. First, it reduces the trust risk of the system; second, on the blockchain, the process of transaction confirmation is the process of clearing, settlement and auditing, which can save a lot of manpower and material resources compared to the traditional operation mode of financial institutions; third, blockchain technology has a flexible architecture, and can be divided into public chain, private chain and alliance chain according to different application scenarios and user needs; then, blockchain technology is a favorable tool for realizing shared finance, etc.

     Xiao Feng, Vice Chairman and Executive Director of China Wanxiang Holdings Co., Ltd., also pointed out that blockchain has the potential to reconstruct the technical architecture of the traditional financial industry and may change Internet finance in the next five years. "'Internet +' is not an APP, but a blockchain; the real 'Internet +' is to use such a blockchain technology and Internet technology to truly transform the core production system of traditional financial institutions, and at the same time, to build financial enterprises on the Internet."

Still facing challenges in regulation and market recognition  

In fact, recently, many overseas financial institutions and commercial organizations have begun to experiment with using blockchain technology to improve their business models.

     The reporter of "Daily Economic News" noticed that since 2015, many large multinational financial groups have entered the blockchain field in the form of venture capital. For example, Goldman Sachs teamed up with other investment companies to inject 50 million US dollars into the Bitcoin company Circle; the distributed ledger startup R3CEV, an alliance of more than 20 banks, is developing blockchain technology architecture.

     “Commercial banks have two advantages in developing blockchain: one is the advantage of regulatory costs, that is, compared with startups with tight funds, commercial banks can better absorb the huge costs of dealing with regulators and obtaining and maintaining relevant licenses; the second is the advantage of consumer trust, that is, for most consumers who do not understand blockchain technology, the long-term accumulated reputation of established commercial banks can reduce their concerns about using these financial innovation products.” A relevant person from the People’s Bank of China’s Americas Representative Office said in a recent article.

     TABB Research, a research institute, predicted in a report that blockchain technology could be used to track joint loans by the second quarter of 2016, but it may take longer to apply it to other areas. For example, it would take up to five years of research and development to use the technology in derivative financial products, and it may take another 10 years to process stock transactions.

Although blockchain technology has broad application prospects in commercial banks, it also faces considerable difficulties. "This requires, on the one hand, attaching great importance to the huge changes brought about by blockchain technology and rules, and on the other hand, looking rationally at the risks and challenges it faces," said Yang Tao.

     The above-mentioned person from the People's Bank of China's Americas Representative Office also analyzed and pointed out that from the perspective of practical progress, most of the applications of blockchain technology in commercial banks are still in the process of conception and testing, and there is still a long way to go before they can be used in life and production. In addition, there are many difficulties in gaining recognition from regulatory authorities and the market. For example, development is constrained by the current system, and the cost of integrating the technology into the existing banking system is high; at the technical level, blockchain still needs to solve many problems such as network security and capacity.

A researcher also admitted to the reporter of "Daily Economic News" that the application scenarios and business models of blockchain technology still need further exploration, and people's understanding and acceptance of blockchain applications in the future remains to be seen.

Background knowledge:

     Blockchain: It was first introduced to support the formation and circulation of Bitcoin. It is a new decentralized protocol that can securely store various transaction data. The information cannot be forged or tampered with. It can automatically execute smart contracts without the need for review by any centralized organization.

     However, there is another view that blockchain is a technology that uses a decentralized consensus mechanism to maintain a complete, distributed, and tamper-proof ledger database, which enables participants in the blockchain to achieve a unified ledger system without establishing a trust relationship.