The author of this article is Dr.Xiao Feng, President and CEO of Wanxiang Blockchain.
I’ll talk about some of my personal views from the perspective of the blockchain applications trend.
Two Technological Paths for Blockchain Applications
Some people just regard blockchain as a tool, a distributed database with chain structure, but blockchain is more than just a tool. Apart from the establishment of blockchain technology based on distributed network technology, it also includes many other things, such as cryptography, mathematical game theory, mechanism design theory of economics, organization theory and enterprise theory, etc., which have gone beyond the scope of so-called ICT (Information and Communication Technology).
Blockchain integrates many new technologies and disciplines on the basis of distributed network technology, which can produce many new business models to some extent. Therefore, it is important whether you consider blockchains as a set of technology convergence, interdisciplinary, cross-border, cross-technical lines, or just as distributed databases in ICT.
Two attitudes towards blockchain applications
There are also two attitudes towards blockchain applications. One is exaggerated as a panacea for all diseases. Obviously, this is not true. As a network technology after the Internet, blockchain can solve many problems, but it also has its own inadequacies.
Blockchain applications must have their own stages, just like Internet applications. Only when the Internet original technology and the business originated from the Internet are mature enough can there be “Internet plus”, and it is possible to convey experience and technology offline, and off-chain. If something online or on-chain has not yet been proven to be a good thing, why do the traditional industries have to use it?
Since 2008, blockchain technology has been formally engineered. Blockchain technology has been discussed in various ways before, but it became an engineering and software project on January 3, 2009. It has been 10 years since the project was implemented, during which we have some offline blockchain applications. So when we talk about supply chains, these technologies have matured over the last 10 years.
Two Results of Blockchain Applications
Blockchain applications have two results, two paths, and two directions. The consortium blockchain and private blockchain are produced later than the public blockchain. We can now basically make the observational judgment that all blockchain technologies are created, developed and mature on the public blockchain. The consortium blockchain does not bring much value to the blockchain technology, but just removes some things, such as the incentive mechanism of digital currency or Token, which finally becomes a consortium blockchain. This is neither good nor bad. Consensus is achieved just like democracy and efficiency. Of course, the most efficient ones are like Alipay or the Shanghai Stock Exchange, because only one person needs to confirm that. If not, the efficiency will be very low.
I believe that the consortium blockchain will bring about an improvement on the marginal effect of traditional industries. Whether the IMF, the BIS (Bank for International Settlement) or other international financial organizations, they’re really talking about consortium blockchains or distributed ledgers when they discuss blockchains. They concluded that blockchain technology could reduce costs. Cost reduction is for the traditional business model. You can reduce costs, improve efficiency and perfect customer experience, which is only the improvement of marginal effect.
The so-called disruptive innovation comes from the public blockchain that has economic incentive mechanism, cryptographic privacy computing, distributed ledger with tamper-resistance and traceability，some of which we may not imagine today. Just like mobile Internet, in 2007, we could not imagine that hundreds of millions of people are using WeChat today.
From the perspective of consortium blockchain and public blockchain, blockchain applications can be seen as two different governance modes. The consortium blockchain is also a centralized trust mechanism, while the governance mechanism of the public blockchain is a completely decentralized trust mechanism, which are two different applications.
Incentive mechanisms are also different. We often talk about coin blockchain and coinless blockchain which is also called the consortium blockchain. The incentive mechanism of the consortium blockchain depends on a centralized organization, even if it is multi-centralized one, to motivate participants. Blockchains enable participants and stakeholders to achieve incentive integration better than centralized incentive mechanism, which is the contribution of blockchains to economic theory, organization operation and business model. This is also the greatest contribution of using Token as an incentive mechanism, so that participants are properly provided for.
Blockchain and Digital Currency
Blockchain technology has been developing all the time and the concept of digital currency has changed a lot. We originally said that digital currency is Bitcoin or ETH. The experiment of Bitcoin as a digital currency is failure, so was the experiment of Bitcoin system as a global small and micro payment system. However, as a digital gold, Bitcoin has gained a global consensus. Bitcoin is actually an asset. It might have intended to become electronic cash, but no currency is allowed to fluctuate by 80% or 90% in a year. Because of this, the whole industry began to introduce a stable digital currency. The exchange rate of stable digital currency will not fluctuate significantly whether it is linked to the USD or other legal tenders. It is a real digital currency. In terms of payment tools, medium of exchange, value benchmarking and value storage, stable currency will replace Bitcoin in the future. But as digital gold, Bitcoin has also brought a lot of contributions to the blockchain industry.
In 2019, the substantial improvement of blockchain technology in performance, application, security, operability and scalability will be an important reason for the future popularity of stable digital currency.
The issuance of stable digital currency will go through three stages. At present, the concept of stable digital currency created by private institutions has proved technically that stable digital currency works. But then there will be banks, which can collect their customers’ money in USD and use them as a collateral to issue a stable digital currency. At this stage, they have no legal obstacles. In the final stage of the development of stable digital currency, it must be issued by the central bank whose legal digital currency is naturally stable digital currency.
It is nearly ten years since the first blockchain system was launched on January 3, 2009. If this point of time is taken as a demarcation line, the past ten years is the start-up period from 0 to 1 while the next ten years is the development period from 1 to N. Today, the blockchain bubble has burst, from the dramatic fall in currency price to the sharp drop of the valuation of many blockchain companies, which is a little similar to the bursting of the technology stock bubble in 2000.
Throughout the history of Internet development, it has been more than 20 years since the global technical standard TCP/IP was formally established in the 1990s. There were a lot of pioneers doing research on Internet technology in the 1960s and 1970s.Block chains are the same. Someone has been studying asymmetric encryption algorithms in the 1970s. From the perfection of asymmetric encryption algorithms in the 1970s to the theory of intelligent contracts in the 1980s, to cryptography, consensus algorithms and electronic cash, I call this stage the theoretical preparation period.
Now, the start-up period is coming to an end, which means that in the future, when the law becomes clearer and clearer, mainstream institutions and engineers start to enter the industry. Founders who fail to keep pace with the times, such as being unwilling to comply with laws and regulations, may be abandoned by the trends they have created. The truly profitable Internet companies are not the earliest technology geeks, nor are blockchain technologies. The true socialization, industrialization and commercialization will start from 2019, and it is not necessarily the original founders who have the right to speak.