This article was originally published in: Noteman (id: Notesman ), the original title "A text, through this powerful digital economy"
Speaker: Meng Yan, Associate Dean of Digital Assets Research Institute
Speaker's Note: For the commentary on the unsustainable bitcoin mining in this article, I actually said a word at the scene, that is, this derivation is completely a static derivation, just to highlight the problem itself. In fact, of course, I know that the vast miners and the Bitcoin community cannot be indifferent to this and will definitely reach a consensus and find a solution. I am very confident about the future of Bitcoin. (From Meng Yan WeChat circle)
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Content Source : On October 18, 2019, at the 87th Zhikuo Salon [Digital Economy and Digital Currency Status and Trends Discussion Conference] hosted by 苇草智酷, the Associate Dean of the Digital Assets Research Institute and the Founding Partnership of Ruixin Capital Meng Yan has made a wonderful sharing with the theme of “Nine Problems in Digital Finance”. As a partner, Note Man is reviewed and authorized by the organizer and speaker.
In the industry's dramatic development and changes, it is more critical to ask good questions. As a research institute for digital assets in the digital economy, we would like to discuss some of the important issues in the digital economy at this stage.
First, the basic framework of the digital economy
Teacher Zhu Jiaming (famous economist) believes that the digital economy is a mutation, a result of evolution, not a gradual change. Therefore, it is very different from the industrial civilization we are familiar with and the previous agricultural civilization. My personal research is still not in place for this problem, just try to list the differences that I think are more important.
1. Some characteristics of digital economy are different from industrial civilization
Industrial civilization has four characteristics: First, with production as the center, the entire society is striving to hand over resources to producers and to enterprises;
Second, the distribution of economic resources, especially the allocation of financial resources, is based on property rights and claims;
Third, the organization form of “company” is mainly used. Through the commercial law revolution hundreds of years ago, we established the company as a legal entity and realized a limited liability system;
Fourth, the currency of industrial civilization is the credit currency. It is a real virtual currency, just a string of numbers on the ledger. The development from physical currency to credit currency is to cope with the needs of trade and account period.
The digital civilization corresponds to this: First, the transaction is the center, emphasizing the efficiency of trading and low friction;
Second, corresponding to the property right, a concept called "number right" is proposed;
Third, the organizational form has changed from a past corporate organization to a self-organized organization;
Fourth, money is no longer unipolar, but a multi-level digital certificate that flows on different levels based on different needs.
2. Differences in property rights, creditor systems, and number rights systems
Existing banks generally adopt a credit currency system. Therefore, the currency circulating in society is essentially a figure on the debt side of a bank's balance sheet . Since the debt side of the bank's balance sheet is to be added with a number, a number is added to the asset side to balance it. Therefore, the balance sheet is also called the balance sheet, which is the balance sheet. That is, if you add a number to the right end, you must also add a number to the left to ensure the balance between the left and right sides. In the industrial economy era, we have only two types of assets (assets) added at the left end: property rights and claims.
The so-called property rights are measurable and tangible parts. Such as house, land, machinery and equipment, movable property or real estate. Property rights can be placed at the left end of the balance sheet. As long as the bank recognizes it, it can release the currency at the right end, that is, allocate financial resources to you.
The so-called creditor's rights are in the past long-term business activities, through the transaction records to prove that you have a relatively strong ability to pay debts. For example, if you work in a large company, future income can be expected. Therefore, the bank can release a currency for you based solely on the credit history without the mortgage of the property. At this time, the mortgage at the left end of the balance sheet is just one of your debts. This is the creditor's right. The issuance or creation of money by banks is created solely on the basis of property rights and claims. More than 20 years after the advent of the Internet, great differences have taken place. For example, last year's very popular network in the country, Red Weiya, her team centered on only 10 people, but created sales of 460 million. Li Jiaqi, ranked second, is a man who sells lipstick very well. These people are now appearing in large numbers in our lives. We can't simply understand them as net red or fan economy, because these people have knowledge, influence, professional skills, and strong social skills. However, if they are measured according to the property rights and creditor systems, they have neither real rights nor claims, so they are not supported by the corresponding financial resources. Therefore, only a few net reds emerged in the vast sea of people. In the era of industrial civilization or agricultural civilization, we will always use stocks to allocate financial resources. So how do we measure the value of people in our economy when it has begun to grow on the basis of technology, influence, knowledge and innovation? Therefore, we propose the concept of number rights.
The right of number is the right to act on the basis of contracts and agreements by relying on credible digital evidence to require other stakeholders not to cross border interests. This publicly verifiable, and trusted data, the best carrier at the moment is the blockchain. Blockchain can guarantee the credibility and validity of data through many powerful methods such as nodes, decentralization, signatures, and timestamps. Without a blockchain as an infrastructure, the authenticity and reliability of digital records will be difficult to confirm.
On such a basis, human creativity, influence, knowledge level, professionalism, and innovation ability will be recorded in credible data in the future economic life. That "whether it is possible to create and allocate financial resources based on trusted data records" will become a more important issue. Of course, it is not just about creating money, but also about the distribution and trading of money.
Under the basic framework of the digital economy, we see that there are now two paths to entering digital finance or the digital economy. These two paths have been in combat: one is to treat the blockchain as a credible database for institutions such as finance. Provide credible digital evidence.
In a sense, the currency circle and the chain are doing the same thing. In the chain, a large number of transaction records or important evidence are stored on the blockchain, turning it into credible digital evidence. But in the end, when it comes to allocating financial resources, it is necessary to return to traditional financial institutions to allocate financial resources. This type of reform is currently only allowed in China in this way.
The other path is a drastic change.
For example, the path taken by Bitcoin and Libra (Facebook's new virtual cryptocurrency), I will not discuss with you at all, directly digitize the rights of money creation and currency allocation, so that the existence of the bank becomes a question. This fierce approach is fused with the inherent needs of the digital economy itself.
How these two paths develop in the future is a matter of considerable concern in our current research. Of course, I am promoting the card. The pass may be relatively compromised between the two routes. We believe that financial instruments and financial carriers can be multi-level, and may not necessarily replace the currency soon; but they can be in stocks, securities, ABS (Asset Backed Securities). On the level of MBS (Mortgage-Backed Security mortgage-backed securities or mortgage securitization), do some experiments first. Now the chain will be more conservative, and it is considered to be a violation of regulations, so it is only digital evidence. But I want to say that in essence everyone is doing the same thing, but the location of the choice is different. Now there are radical products and projects like Libra (Facebook's new virtual cryptocurrency) and Bitcoin, which is really good for expanding our horizons and ideas. Therefore, in this context, we have sorted out nine more important issues.
Second, the nine major problems of the digital economy
1. Possible digital currency "war"
This issue is relevant to all parties, so all countries are very concerned. Dr. Long Baiqi's article "Currency Competition and System Reconstruction under the Digital Money Tide" is an important contribution to the concept of the digital currency zone. The digital currency area refers to the area in which a certain type of digital currency is concentrated and used.
This area is different from the sovereign area, physics, and geographic area that we traditionally think is different. It is likely that a large number of digital currency areas overlap and parallel. If multiple digital currency zones are superimposed in the same place, or in the same crowd, in the same society, it actually means that these digital currencies have competed in some way in this region, even war. This environment may not be free to develop in its own, well-protected areas and scope, but directly face competition with a strong digital currency.
We are not fully discussing how to deal with such problems. At this stage, many researchers have not discussed it in the context of the game when discussing digital currency. The regulatory confrontation design in Libra (Facebook's new virtual cryptocurrency) incentive system is very smart. It has an underwriter network. For example, if you want to buy a Libra coin worth 10,000 US dollars, you may actually want to spend $11,000. .
However, the more than $1,000 was not taken away by the Libra Association, but was assigned to the underwriters group responsible for replacing your dollar with Libra. They are responsible for infiltrating the user's country and region and may be subject to exchange rate losses and exchange rate risks. Therefore, they have the right to receive this $1,000.
The problem is that the more Libra is blocked in a country or region, the more money people in this region will need to spend extra money when they need Libra. This will provide a huge incentive for the underwriters network system. This comes with the Libra system design.
In fact, this system is no stranger to us. In all areas where currency control is concerned, black market transactions have such characteristics. The more fierce the regulation, the higher the handling fee. What makes Libra different is that it doesn't need to meet you. To exchange currency, you can temporarily write a web page or run a program to complete the transaction; immediately delete the web page or program. This will greatly increase the difficulty of supervision. So in a legislative way, it is actually difficult to block the trading of Libra's type of digital currency. Digital currency can completely steal economic activities in the sovereign area. When the economic exchanges between companies can completely avoid the legal currency channel, all aspects of supervision will be bypassed.
2. Digital finance management system
Our country now faces the question: Who manages digital currency and digital finance? Traditionally, we will think that the central bank should manage it because the central bank manages finance; but the central bank does not understand the network very well, and those who understand the Internet do not necessarily understand finance; those who understand the network and understand finance will only supervise and will not promote development. Who will promote development? The Ministry of Industry and Information Technology jumped out again. This will involve many departments. Now who is in charge, how to manage it, and what institutions to establish, it has not yet been clarified at home and abroad.
3. Digital Financial Center
Some people think that "digital financial center" is a false proposition. However, since August 18th, Shenzhen, born of reform and opening up, once again shoulders the mission of reforming the “first mover” and “pathfinder”. From the “SAR” to the “first demonstration zone”, Shenzhen is also welcoming historic development opportunities. It also means that China is advancing reform and opening up at a higher starting point, higher level and higher goals, and making the country a large number of digital finance. Related companies are running to Shenzhen.
In foreign countries, Singapore, Europe and Malta are already on this road. But will digital financial centers exist like offshore financial centers in the traditional economy? Or is it supposed that the global digital economy should be integrated? Just like the Currency Exchange, it is only registered in Malta. But if there is a financial center, what is the nature? What kind of design? Will it help local economic development?
4. Stabilizing coins
This is the teacher Zhu Jiaming deliberately asked me to add. There are still a lot of problems in the stabilization of coins, and we are generally adopting a stable currency model of centralized asset collateral. USDT, TUSD, GUSD, including Libra, are all used this way. (Note: all are a stable currency)
It is not separated from property rights, or even closer, with legal currency as collateral. We should issue new stable coins based on the number of rights, but it seems that it is difficult to achieve low volatility and it is difficult to stabilize. It includes Dai, which was released under the famous Maker Dao project on Ethereum. Its currency is used for arbitrage and is rarely used elsewhere. As for the central bank, which was once highly anticipated, it is now a full-line retreat. After the project including Basecoin (bitcoin company) melted $160 million, it was stopped by the Securities and Futures Commission and all the coins were refunded. So until now, we haven't found a way to actually issue a stable digital currency with a license as a collateral.
5. Central Bank Digital Currency
The central bank issued a stable currency, but it also has its problems: limited circulation, monopolizing the right to evaluate the logarithmic right.
Equivalent to whether we enter the digital economy, or whether the central bank and commercial banks should evaluate the number of rights, which is equivalent to giving the financial resources, the privilege of creating money, or handing it over to a few people. But at least for a long time, this is still acceptable. Just from the final form, since the digital evidence on the blockchain is clear and credible, why not allow everyone to share the coinage rights?
6. Decentralized digital currency sustainability issues
Most people have confidence in Bitcoin, but Bitcoin also faces a problem that must be solved, that is, the problem of halving in four years. A halving of four years means that the cost of mining will double in the static. The mining cost of a bitcoin is now $7,000, and the mining cost is $14,000 when it is halved in April or May next year. If the price of Bitcoin is still at this level, most miners will die next year or retreat. Such a story will be repeated every four years. Let us deduce:
After 40 years, the mining cost of a bitcoin will rise to 7 million US dollars;
After 80 years, it will become 7.7 billion US dollars;
The mining cost of the last cycle of Bitcoin in 2136-2140 will reach 80 trillion US dollars.
In this case, all the gross national product in the world today will be added together, and only a few bitcoins can be minted in the future. Such a prospect is clearly unsustainable, and the Bitcoin community will sooner or later reach a consensus that a new program will emerge at a certain point in time. Even the most mature coins like Bitcoin have such problems, let alone Ethereum, EOS. Therefore, even if it is decentralized digital currency, there are still many problems.
7. Digital identity
A few days ago, Libra's head David Marcus complained on Twitter that everyone was going to find him about Libra's problems. In fact, he should go to the Libra Alliance. He hopes that by 2020, everyone will go to the Libra Alliance, and then they can concentrate on the team to do the Calibra (Facebook blockchain project). We all think digital currency is important, but DavidMarcus seems to think that Calibra is more important than Libra. Calibra appears to be a wallet on the surface, essentially a digital identity (DID) entry. Before you can participate in a game like Libra, you must register your digital identity in the Calibra system. Facebook knows that digital accounts or digital identity resources may be the most important resource in the future digital economy, so Facebook can take out the digital currency so that everyone can earn the money; but the digital identity must be firmly held in this resource. In your own hands.
In China, digital identity is managed by the Ministry of Public Security. As for how we should deal with it is also a problem. Incidentally, in the future, individuals may have their own digital identity in multiple systems. In other words, we have many other digital identities besides the ID card. Interestingly, these digital identities are also competing or fighting.
8. As a certificate of self-organized management tools
The general economics is my old business. I want to emphasize the concept of self-organizing. As mentioned earlier, Wei Ya, Li Jiaqi, and many other net reds have huge traffic on the Internet and created huge economic value. However, when they collaborate, they have completely separated from the commercial legal entity formed in the industrial economy era. a set of practices. Philip Kotler also mentioned in China a few days ago, "In a few years, you only need to master a marketing skill, that is, word of mouth marketing. Its effect and importance far exceed all other marketing methods. "In fact, it is a fan on the Internet, or word of mouth marketing. Mr. Newton He Baohui (Deputy Dean of the Digital Assets Research Institute, the pseudonym Mr. Newton) wrote an article last year about the self-organizing organization "Freedom of Freedom," which I think is the key to cracking the problem. I believe that free people come together, and the way they work together must be done through the pass, because the pass is the best tool.
9. The regulatory system for digital financial markets
All the problems mentioned above must always be out of supervision. There must always be institutions to let everyone do things according to the law. Teacher Yang Dong of the National People's Congress said: "The chain chain is used to manage the blockchain." It sounds very reasonable, but in terms of technology, there are a lot of problems in technology, system and law. In the future, many laws may be enforced by code. This situation will bring about a drastic change in supervision.
Regarding the digital economy, it is probably the above nine issues. Thank you all.