This is a speech delivered by Dr. Xiao Feng, CEO and President of Wanxiang Blockchain, at Blockchain Technology and Application Summit and The Fourth China Blockchain Development Contest Achievement Conference on July 31st, 2020, where Dr. Xiao elaborated on the features and influence of the three phases of blockchain application and forecast the future of the distributed economy based on blockchain.
From my point of view, the application of blockchain will go through three phases.
Blockchain Application 1.0: Used As a Tool
In Blockchain Application 1.0 that could be dated back to six or seven years ago, or even earlier, the blockchain technology was mainly used as a tool for storage and provenance.
Blockchain Application 2.0: Reconstruct Relations of Production
At present, we are entering Blockchain Application 2.0 where the blockchain technology is reconstructing relations of production and creating innovative business models like the distributed economy.
When it comes to the evolution of business models, Platform Strategy divides business organizations into three groups: unilateral platforms, bilateral platforms multilateral platforms.
Unilateral platforms, born in the early stage of the industrial revolution, makes profits by manufacturing standardized products in larges scales to cut cost and selling the standardized products to as many clients as possible.GE is a good example of this kind of companies.
Bilateral platforms, represented by Uber and Didi Taxi, came with the Internet while multilateral platforms were born by innovating the bilateral platforms with the blockchain technology. That is to say, we are trying to reconstruct the bilateral relations into a point-to-point distributed network that empowers more business transactions and is open to multiplayers. We believe that the blockchain technology has great potentials in building a distributed economy based on the multilateral platforms and we have seen such changes happening in the industrial Internet and the IoT.
The concept of the industrial Internet was coined by a researcher of GE and it is called Industry 4.0 in Germany. Whatever the name is, this concept has yet to make the expected progress and achievements come true.
For one thing, the industrial Internet is not simply about intelligentizing production and manufacturing processes but to build industry and supply chain networks that will involve many participants.
For another, the mission of the industrial Internet is to intelligentize industrial manufacturing and enterprises. A single company lacks sophisticated and multidimensional data to run its AI algorithms and make its manufacturing or service more intelligent. In this connection, companies need to resort to other data sources or promote data sharing among companies in the same industry.
However, before promoting data sharing among different companies, it is imperative to guarantee data reliability and privacy. Fake data and privacy leaking will cause the intelligentization of the industrial manufacturing great troubles. We believe all enterprises are desperate to train their AI algorithms with more data. With problems of data privacy, reliability and security being unsolved, existing technical solutions can hardly enable enterprises to reach this goal.
That being said, blockchain is a cost-efficient solution to guarantee data security, reliability and privacy. Together with privacy computing and cryptographic techniques, blockchain can also be a feasible solution to data protection and collaborative computing at a cost that is affordable for various businesses. It is true that we already have some mechanisms to protect data security and privacy. But these mechanisms may not work well in cross-company and cross-industry scenarios. For example, the widely employed centralized data management system stores the data of all participants in a data center, which naturally causes concerns of privacy leaking.
Blockchain Application 3.0: Facilitate Value Allocation and Exchange of Digital Assets
As central banks are working on digital currencies and multilateral platforms are becoming more and more dynamic, we will come to Blockchain Application 3.0 featured by value allocation and exchange of digital assets on blockchain. In this phase, we will see the digitization of assets and the capitalization of data giving birth to a new economic system for all participants.
Blockchain Application 3.0 requires such sophisticated conditions like legal digital currencies issued by central banks, smart contracts and national or international standards for smart contracts.
When these conditions are met, we will see a significate change that enables us to evaluate individuals’ contribution automatically and allocate the value created by individuals with smart contracts. This change has been happening in the global capital market since about two years ago, indicated by the shift from the shareholder capitalism to the stakeholder capitalism. Stakeholders may not be connected by shares or even know each other. It is just like the relationship on public blockchains where nodes may not know each other and need no permission to join the network.
I believe blockchain application will eventually enter the age of intelligent economies created by the blockchain technology. We are looking forward to the arrival of that age. But at the moment, we are still in Blockchain Application 2.0, where we are polishing up the technology and trying to reconstruct all kinds of platforms, networks and systems into open source economies that are shared and governed by all with the distributed technology.
Tesla has remained its core technologies open source, from the battery technology at the beginning and the automatic driving technology that has been recently announced open source on Twitter. It is fair to say that Musk redefined automobiles with digital technologies and redefined the digital economy by keeping the core technologies of Tesla an open source.
As an infrastructure of the digital economy, blockchain can help to build a boundless distributed economy featured by open source and a high degree of scalability. But it requires us to work collaboratively to make this distributed economy come true.