Alipay's Double 12 review: Using blockchain to connect the hands of "shopping addicts"

Han Feng (PhD, Institute for Advanced Studies, Tsinghua University, co-founder of the Asian Digital Asset Finance Association Preparatory Group, and iCenter mentor)

Zhang Xia (PhD student at Renmin University of China)

During the just-concluded "Double 12", Alipay's reputation was very successful. According to statistics, more than 28 million people around the world participated, including 924,000 elderly people. More than 1.5 million movie tickets were purchased on Taobao! [1]

Amid the red battle table, we should also think that a large number of "shopping addicts" are forming.

What is a "shopping addict"? It refers to a group of people who overspend during the craze for online shopping discounts.

Why do "shopping addicts" emerge? It is because of the separation of consumption and investment. As we all know, the consumption behavior of ordinary consumers cannot generate added value, only investment can generate benefits, so the traditional financial consumption model is to suppress consumption and invest as much as possible, so that it is possible to gain financial freedom in the second half of life and achieve a happy life. This is the truth repeatedly explained in "Rich Dad, Poor Dad".

But unfortunately, most consumers cannot do this, and most businesses try their best not to encourage consumers to do so, which is why carnivals like Double 11 and Double 12 came into being.

As a result, there are "shopping addicts" who over-consume, have no capital to invest, cannot feel financially wealthy, often make resolutions, often regret, often "shopping", and feel miserable. This is obviously not conducive to the formation of a healthy and sustainable business environment.

But if there is some business technology and model that can combine consumers and investors into one, or at least the roles are mostly overlapping, then wouldn’t the “shopping addicts” be able to become “healing addicts”?

The "blockchain" technology, which has recently attracted widespread attention in the global financial community, has made a new "healing" financial model possible.

Blockchain technology originated from "Bitcoin". It relies on the "nodes" (commonly known as miners) of the entire network to notarize and record each transaction, stamping "timestamps" to prevent false duplicate payments, thereby establishing the "credit" of the entire network, without relying on any centralized third party. Therefore, this system first relies on P2P to establish mutual credit, which is low-cost (currently the transfer fee for each transaction is one ten-thousandth of a bitcoin, equivalent to a few cents). Second, in theory, this "credit" jumps out of the traditional model that must be backed by assets to establish credit. It is basically based on the credit established by transaction liquidity big data, with a maximum market value of 10 billion US dollars. At present, it is the lowest-cost "credit" resource in the world. Third, its security is better than any centralized management solution, because the notarized account books of the entire network are stored on thousands of nodes. It is invalid for hackers to attack or tamper with any node unless they control 51% of the computing power of the entire network's accounting, which currently costs hundreds of millions of RMB. Fourth, the transaction records of the blockchain are transparent and open to the entire network, which is completely conducive to auditing and supervision, and helps prevent risks such as financial fraud. Fifth, and most importantly, blockchain allows humans for the first time to register, trade, clear, and audit assets simultaneously on a "chain", which provides the technical possibility for us to create a business model that integrates "consumption" and "investment".

We can imagine that in the future, merchants on Taobao and Tmall will not "discount" on Double 11, but will provide consumers with a kind of blockchain points. This kind of points is generated on the blockchain formed by the joint accounting of all Taobao and Tmall merchants. It is equivalent to each merchant brand using its own assets originally used for discounts to generate a kind of "digital asset" on the blockchain, and all merchants can notarize the authenticity of assets and transfers through the blockchain. The points issued by each merchant brand each year are guaranteed to decrease every year by the blockchain cryptography protocol. Mathematically, the total amount of this merchant brand can be limited even if it is issued for 10,000 years. In this way, as long as the merchant brand does well, the business increases every year, the annual points issuance is decreasing, but the number of users is expanding, then the owners of the points in previous years will receive "automatic dividends" (the same points can be exchanged for more property), because if consumers in previous years did not immediately exchange the points with the merchant, it was equivalent to giving the merchant an "investment", so if the merchant's business develops in the future, it is reasonable for the point holders to obtain corresponding benefits.

Since the "blockchain points" are notarized by the accounts of all Taobao Tmall merchants and backed by the assets originally used by the merchants for discounts, their "credit" is solid. Therefore, such credit can immediately obtain the liquidity of the entire Internet. As long as such "blockchain points" can be exchanged on Taobao, its financial significance is very large: this can immediately obtain a low-cost "credit" resource in the global market.

Of course, such "credit" has a natural flaw, that is, no merchant brand's "blockchain points" can guarantee its price stability (no matter how large its scale grows), so it cannot serve as a "value scale" in global value transfer.

At this point, central banks should naturally launch eSDR (encrypted super-sovereign currency) in a smooth manner. Its creation is just as Director Yao Yudong and Professor Yang Tao envisioned: "The utopian ideal is that in a currency operation determined by network rules with extensive public participation and a large number of nodes, the endogenous disturbance factors of money supply and demand may be reduced, and money will be introduced into macroeconomic equilibrium analysis in a completely new way." [2]

From the perspective of global economic rebalancing, this spontaneous "reshuffle" represented and driven by technological progress is a good way to restructure international finance. According to Marx's discussion on money, the emergence of money is to serve as a general equivalent. And the need for a general equivalent in human society is inherently scientific. In an economy based on barter (i.e., without a general equivalent), exchanges can occur between any two commodities. Therefore, in theory, in an economy with n kinds of commodities, it is necessary to establish several independent markets for transaction matching. In other words, the number of markets is proportional to the square of the number of commodity types. The emergence of general equivalents means that all commodities only need to establish direct markets with general equivalents, while the exchange of the other two commodities can be completed indirectly through the general equivalent as an intermediary. In this way, in an economy with n kinds of commodities (including general equivalents), only n-1 markets need to be established to realize the exchange of any two commodities. Obviously, the emergence of general equivalents simplifies the situations that need to be considered in commodity exchange, reduces market segmentation, and realizes market integration. However, using general equivalents such as gold and silver as currency is still in the early stages of finance. The number of general equivalents has become a factor limiting economic growth. Therefore, bank credit emerged to solve this problem. The banking system has achieved the creation of credit money through the modern money creation mechanism. After the emergence of credit money, there have been many cases of hyperinflation in history. The reason for this is that the credit of credit money ultimately comes down to the credit of the monetary authorities. Worldwide, credit money has once again staged the historical process of the emergence of general equivalents at the monetary level, from a loose system of multiple currencies exchanged in pairs to the Bretton Woods system with the US dollar (which was pegged to gold at the time) as the international currency. Afterwards, the Bretton Woods system repeated the problem of credit money abuse. The US dollar depreciated sharply against gold, and the Bretton Woods system collapsed. However, the international currency title of the US dollar was diluted with the establishment of the Jamaica system, but since the foreign exchange market with the US dollar as the international currency has been established, it is almost impossible to degenerate into a loose two-to-two exchange market. And from the above analysis, it can be seen that this degeneration is also against the law of history. The emergence of the euro illustrates this problem well. When the US dollar is no longer an international currency, Europe cannot degenerate into a loose two-to-two exchange pattern, so it can only choose to establish the euro. However, the establishment of the euro also has many failed lessons. The most important thing is that the Euro system established through government negotiations is an unnatural system and is fragile. The sovereign debt crisis in some European countries is a manifestation of the fragility of the Euro. Therefore, China should adopt a new approach on the road to RMB internationalization. Blockchain technology has become a good breakthrough. If blockchain technology can be applied to Taobao Tmall points, millions of Chinese merchants and hundreds of millions of consumers will have the opportunity to generate a low-cost "credit" resource, which will provide a new round of historical opportunities for the generation of general equivalents from Internet big data.

References:

【1】2015 Alipay Koubei transaction data, provided by Alipay and Koubei;

[2] Yao Yudong and Yang Tao: eSDR: Towards an ideal supranational currency innovation, Shanghai Securities News.