Babbitt column | Gu Yanxi: the beginning of Libra, the end of the public chain

In a previous analysis of the public chain ( so many public chains, so few applications ), I pointed out that the large number of public chains is now one of the main reasons for the application of the blockchain. Developers don't want an application to be re-developed on multiple public chains. Therefore, the public chain that is now widely used in the market is still Ethereum. The large number of public chains is now a reason that hinders the further development of blockchain and encrypted digital assets. Libra's launch provides a great opportunity to address the current state of the separated public chain.

Libra consists of three basic components: Libra Stabilizer, Libra Blockchain and Libra Association. The most important part of the market for Libra today is the Libra Stabilizer. But I think the Libra Stabilizer is just a Trojan horse, and the real hidden threat is the Libra blockchain. According to Libra's white paper, Labra will provide a simple financial infrastructure. But this underlying blockchain is definitely not limited to the simplest financial product that supports currency. Smart contracts on this chain can be used to customize more complex financial products such as stocks and accounts receivable. The circulation of financial products supported by this chain is not limited to the banking industry ( commercial banks, the victims of the blockchain era ), but also the securities industry ( Libra's sideline against the securities industry ). So the Libra blockchain will fundamentally change the foundations of the current banking and securities industries. This subversive effect on the current financial market is far greater than a stable currency.

Facebook has made a very big mistake in the project management of Libra ( Libra project research analysis report ). In the project management's progressive and big-bomb project management methods, Libra actually adopts the big-bang project management method. The biggest problem with this type of project management is that the risk is too high, so the probability of project failure is very high. Since the announcement of Libra's news on June 18th, the various regulations and challenges it has encountered have shown that Libra has begun to experience a process that is full of risks. Progressive project management is actually more suitable for projects like Libra. In addition, the process of Facebook's own growth is also a gradual process.

In Libra's project management plan, if a progressive project management approach is adopted, the Libra blockchain can be launched first, and then the Libra stable currency is gradually introduced. If the Libra blockchain is widely adopted globally, the Libra stable currency launched on it will be easier to promote globally. The various resistances that Libra stabilized coins encounter during the promotion process will therefore become smaller. In the current actual progress of the project, the main network of the Libra blockchain is expected to go online next year. I think the launch of the Libra blockchain is likely to have a very big impact on the existing public chain market. Of course, the premise is that the Libra Association has full openness to allow more developers, institutions and users in the community to participate.

After the Libra blockchain is brought online, there are many applications and products that go online on the chain before the Libra Stabilizer. If Facebook uses its client for its social network users to use this chain, it will certainly attract many developers to develop various applications for this chain. For developers of blockchain applications, they will definitely choose the blockchain that supports the most users first. If the Libra blockchain can bring together a large number of users, this will definitely become the first choice for developers. After all, Ethereum has too many problems, and blockchain developers have long hoped for a public chain with superior performance and access to many users. The Libra blockchain is likely to be such a choice. The logic of the developers is the same as the logic of the mobile operating system and the earlier computer operating system that the original developers chose to support.

In various types of applications on the public chain, various products in open finance will be the first to be applied. Although the current number of digital assets is still very small and the amount of transactions that can be generated is very small, the advantages of open finance are already very obvious. As the number of digital assets continues to increase and the volume of transactions continues to increase, there will be more and more open financial applications. After all, distributed finance has a strong advantage in terms of cost, efficiency and flexibility compared to the current centralized financial services. Therefore, their promotion and adoption will certainly happen. At present, the application of various types of open finance has been in the process of continuous development. For example, the Ethereum locked in MakerDAO continues to grow. One reason for limiting the widespread use of open finance is the lack of infrastructure. This includes the underlying blockchain and the stable currency above it. After the introduction of the Libra blockchain, even if the Libra stable currency has not yet been launched, it is still likely to become the first choice for distributed financial developers. A possible scenario is that the stable currency generated on this chain by another coinage is first circulated on the chain, such as a stable currency based on a legal currency mortgage and linked to a certain currency. Such a stable currency is more likely to be introduced than the Libra stable currency. Then such a blockchain and the stable currency running on it provide distributed finance with the infrastructure services it needs for its applications. Such a financial ecosystem can be gradually established.

After such an ecology is established, I believe that the first application must not be mainstream financial services such as cross-border payments and daily retail payables, and not between financial institutions. The first application must be an encrypted digital asset exchange.

At present, many public chains are also a headache for encrypted digital asset exchanges. It needs to support a large number of public chains and various digital financial products issued on top of them. The operation and maintenance costs of the exchange are therefore very high. This is like a high-speed railway station that needs to support high-speed rails of different rail sizes to enter the train station. But what is embarrassing is that there are not many passengers on each train. Therefore, the exchange also hopes that there are only a few public chains in the market. This will be more conducive to the generation and trading of digital financial products. Some exchanges even started to develop the public chain directly. But the market's acceptance of such a public chain is very doubtful.

The global nature of encrypted digital currency transactions and the current low number of tradable digital financial products have led to intense competition between exchanges. These exchanges therefore have a very strong incentive to improve their competitive advantage. The application of distributed finance can help these exchanges improve transaction efficiency, reduce transaction costs, ensure the security of transaction users' funds and reduce the market risk of trading user funds. More importantly, these exchanges do not have the various burdens of mainstream stock exchanges. Therefore, they must be the first adopters of distributed finance. The use of various distributed financial applications on the Libra chain by these exchanges will increase the appeal of the Libra blockchain to developers and users, while naturally reducing the attractiveness of other public chains in the market. Other public chains that have been insisted on will therefore be difficult to continue.

Author: Valley Yancey