Babbitt Column | Thinking about the meaning of blockchain from the perspective of reducing transaction costs

First, the nature of the blockchain

What is often the nature of the blockchain? There are various answers to this question. Everyone has their own understanding. Some people say that the essence of the blockchain is decentralized. Some people say that the essence of the blockchain is the currency. I have seen the simplest and direct simultaneous me. The most recognized answer comes from Chang Yu: He believes that the essence of the blockchain is to reduce transaction costs .

We know that the Internet is called the information revolution because it greatly reduces the cost of information transmission and promotes us from the paper age to the information age. Correspondingly, the blockchain makes sense because it It can greatly reduce the transaction cost, and raise many of the behaviors that we used to run the Trade and Industry Bureau, the Taxation Bureau, and the Real Estate Bureau to become a one-click transaction, and the transaction cost is greatly reduced.

In my opinion, whether it is decentralization or currency, or the commonality of the economy and asset chain, which are often mentioned, are ultimately based on the purpose of reducing transaction costs, which are all driven by the "lower transaction costs". Pushing .

The reduction of transaction costs is related to all aspects of assets. Generally, it can be improved from the aspects of asset generation, transaction and settlement.

Second, the form of assets – asset tokenization

According to statistics, there are currently tens of thousands of digital currencies on the market, and it has appeared in just a few years. If the time is longer, the number will increase by several orders of magnitude.

At the same time, the total number of stocks in the world is only how many, and this is the result of hundreds of years of development. Of course, this has something to do with the stock issuance mechanism, but the blockchain's currency-issuing process greatly simplifies this process, making it a very easy and casual thing for people to issue assets. It only takes a minute and then pays for it. With low fees or no fees at all, you can easily release an asset.

Token is a kind of equity carrier. It can represent any rights, such as the right to use, equity, points, etc. Once these rights are passed, they can be completely freely flowed, and the flow is very fast, just know The address of the other party can be instantly transferred, and the account is instantly available.

In Chang's words, this is to turn the original solid and liquid assets into gaseous assets, breaking the isolation between the original assets and assets, and such assets can pervade the entire space. It can be split indefinitely and is no longer restricted to the platform. An asset can be recharged from another exchange like the current bitcoin. Trading behavior can also occur in a two-person face-to-face transaction in a coffee shop, or it can happen thousands of miles away. Because of over-the-counter trading, asset trading becomes very flexible, just like a gas.

Through asset tokenization, the cost of issuing assets is greatly reduced.

Third, the settlement of assets – the transaction is settled

In the traditional asset field, such as China's stocks, we currently implement the T+1 system on stock exchanges, which means that you sell the stock on the same day. If the funds arrive, the next day. If you encounter a holiday, you have to postpone it. If you encounter a holiday like the Spring Festival, you may have to wait a week.

But now that the exchange technology is so developed and the banking technology is so developed, why do you still have to wait so long? Why is it not immediate?

The technical reason is because the exchange, the central securities registration and settlement company, and the bank are three different institutions. Simply consider only the exchange of stocks on the exchange, in fact, your trading time is calculated in seconds, but this second-level transaction is limited to the information level. You also need the Central Securities Depository and Clearing Authority to actually complete the transfer of ownership, and then need to complete the transfer of funds through the bank. Once it involves other institutions than the exchange, the reconciliation and settlement process between the institutions is required. This process takes time, which is why it is inefficient.

In addition to stocks, other assets are the same, the currency is the same, the efficiency of the transfer can be very high, but the clearing and settlement process is very complicated, for example, when we cross-border remittance, we can get the account in real time in China, why cross-border remittance needs so long time? Is it stuck there? It is stuck in cross-border settlement.

The blockchain represented by Bitcoin, the creative use of the UTXO system, is a very significant innovation, enabling the blockchain to achieve transaction-based settlement, which can greatly improve efficiency and reduce costs.

Take Bitcoin as an example. In the bitcoin system designed by Satoshi Satoshi, there is no concept of balance. Bitcoin uses a UTXO account system. UTXO (Unspent Transaction Outputs) is an unspent transaction output. A core concept of bitcoin transaction generation and verification. The transaction constitutes a chain structure. All legal bitcoin transactions can be traced back to the output of one or more forward transactions. The source of these chains is the mining reward, and the end is the current unspent transaction output.

Through special billing methods, assets issued based on the blockchain can have this important feature – the transaction is settled.

Originally, these complicated procedures for registering and settlement through the Central Securities Depository and Clearing Institute are required. If the blockchain is issued in the future, the blockchain has such characteristics, which can guarantee the process of stock voucher trading. On the one hand, it is the process of transaction information transfer. It is also the process of ownership transfer. Simply summarizing in one sentence is trading and settlement.

For financial assets such as stocks and currencies, if settlement problems can be solved, the existing efficiency will be greatly improved, just as Nasdaq intends to adopt blockchain technology – old technology can be permanently abandoned, new Technology is about to increase efficiency by a new level.

This feature makes blockchain assets greatly reduce the time cost of capital and the opportunity cost of waiting.

Fourth, the transfer of assets – to the center, to the intermediary

At present, in our business society, there are intermediaries everywhere, and there are centers everywhere, which means that there are barriers everywhere, hindering the confirmation and transfer of assets.

For example, when we use currency to trade, you need to transfer and clear through the bank in the country, and you need to clear the bank through the international clearing organization.

For example, if you need a loan, you need to go through a bank letter. Without a bank credit, you will have a hard time borrowing money. After the rise of online lending, you have to make online loans, you need sesame credits and so on. These are all intermediaries.

For example, if the company wants to raise funds, it usually needs to pass the IPO. You need to change the system first, and all the financial indicators are submitted to the application materials after the listing. After the trial meeting and the follow-up series of processes, you will be able to go public.

Such examples abound in real life. In most cases, we are unable to conduct direct transactions with our counterparties. We need a series of intermediate procedures such as approval, approval, and registration.

At present, we have entered the era of information Internet. The flow of information can be very efficient, but there are still many things that are very inefficient. They are all hindered by too many centers and intermediaries. These centers and intermediaries have increased the middle. The link hinders the direct transaction of assets, which makes the transaction greatly reduced in terms of time, process, and cost.

All data based on the blockchain is open and transparent, and can be called directly. In addition, the blockchain has a big feature that is open source, and anyone can participate without permission. It is equivalent to using a blockchain system to replace all the centralized organizations in the traditional business society, or to integrate them together, and the blockchain itself is not controlled by any third party, so it can be intelligent The contract is automated.

With one less center and one less intermediary, the commission fee is a few percentage points. The key is to realize smart contracting as much as possible, and the transaction efficiency is greatly improved.

5. Trading of assets – peer-to-peer transactions

In the future, when blockchain technology matures and assets are generally distributed or mapped in the chain, it is possible to achieve direct peer-to-peer transactions between assets and assets. A peer-to-peer transaction is the most direct transaction, the lowest cost transaction, the least constrained transaction, and a truly marketable transaction.

The significance of peer-to-peer trading is very significant. It can trade directly across all barriers, from small to large, between companies and companies, between centers and centers, between countries and countries.

In commercial transactions, the word peer-to-peer is relative to third-party intermediaries. When you need a third-party intermediary, whether it requires third-party review, approval, publicity, or other, as long as you rely on a specific third party, then you are not peer-to-peer; when you are peer-to-peer, you do not need to rely on Specific third party.

When we need a third party, it is more accurate to say that a third party is required to provide us with trust; when we don't need a third party, it is more accurate to say that we do not need the trust provided by a third party. What is trust? Trust is to ensure that things will be executed according to the agreement. If there is an agreement, it must be enforced. If the parties do not participate, the third party will enforce it. In order to ensure absolute trust, we will give third-party centralized organizations a certain right, and most of our data is in the hands of centralization, they also have the ability to maintain our trust.

Centralized institutions are prone to centralization problems. For example, centralization agencies will do evil—centralized institutions that manage money will be over-represented, and centralized organizations that manage data will have privacy leaks—this is inevitable. Things, such as cross-center cooperation will be very troublesome and so on.

The blockchain is created by a workload that creates a trusted environment created by computing power that is not controlled by any third party and that is not destroyed by any third party. In this environment, the problem of traditional centralization is solved: the data is stored in a third party that is not controlled by either party, and the trading rules are intelligently contracted. Once the two parties reach an agreement, the things agreed through the smart contract will be automatically executed. of.

With the development of blockchains, there are more and more things that can be done directly from point to point. Even people can do anything point-by-point through smart contracts and remove all obstacles, thus creating a lot of freedom. This freedom will bring With a lot of opportunities, there will be a lot of transactions that we don't know now, and these deals will bring us a lot of wealth.

Peer-to-peer transactions can greatly reduce the transaction cost of assets.


The Internet can greatly reduce the cost of information transmission, causing a big explosion of information, transferring information from paper to the Internet, and leading us into the era of information Internet;

Blockchain can greatly reduce the cost of asset transactions, causing a big explosion of assets, and assets are also transferred from paper (various certificates) to the Internet, leading us into the era of value Internet.

Author: Monte Carlo