Babbitt Column | Yang Wang: A Three-point Economic Discussion on Libra

Libra is very hot and the door is full of facts. It is divided into two groups: the maximist and the minimalist. The maximists consider Libra-style technological innovation and reconstruct the commercial system. Minimalists believe that Libra has revolutionized the existing centralization system and will be defeated like a stone.

So far, is Libra a currency? Didn't Libra come after? Libra value geometry? This three questions is a three-point economic discussion for Libra.

Libra's vision is big and difficult to make money

Facebook, the main sponsor of the Libra project, may not have thought that less than six months after the release of the project white paper, the global promotion process of the Libra project will become so difficult.

After the six payment giants, including PayPal, Visa, MasterCard and Stripe, retired, Libra still has 22 global multinationals as nodes of the Libra licensing alliance chain. The vision of this project is ambitious. The white paper describes “building a simple, borderless currency and financial infrastructure for billions of people.” It became the first generation of digital currency such as Bitcoin, Litecoin and Ripple. Another influential project after the payment of the environment and the inclusive financial scene.

For digital currency, the most heated discussion among organizations is whether the digital currency such as Libra is the currency? We need to first clarify the theoretical boundaries of the currency. Generally speaking, money has three functions: payment means, accounting unit and value reserve. For the commodity currency genre, the means of payment is the basic function of the currency, and the accounting unit and the value reserve are derived from the functions of the payment instrument. The main representative of the commodity currency genre is Adam Smith, who advocates a free market economy. Therefore, in 2008, bitcoin came out, and the theoretical basis and operational mechanism advocated from the commodity currency genre of classical economics. All the general payment equivalents that people generally accept can be called currency.

However, the commodity currency genre pioneered by William Pedi started in the 17th century and has a special background of the early stage of capitalist industrialization. In the 1930s, the national currency genre represented by John Keynes became the mainstream of modern monetary theory. The national monetary school believed that the most important function of money is the accounting unit, based on the credit of the state (government), the means of payment and the value. The storage is derived from it. Therefore, each country considers the sovereign economic rights and establishes a dual currency system based on the theory of national currency genre. Based on national sovereign credit, central banks or the Ministry of Finance issue sovereign currency, and banks and other intermediaries use credit to make credit expansion, thereby further creating currency.

In modern times, the national currency genre dominates the current monetary system. Encrypted digital currencies such as Bitcoin are under strict supervision in many economies around the world, and liquidity is weakening. As the second generation of digital currency – stable currency, Libra has a great vision but is difficult to make money. Specifically, nowadays, the United States, France, Germany, Canada and other countries have clearly stated their strong supervision or strict investigation. Only Singapore is open-minded, and with the announcement of the withdrawal of PayPal, the chain reaction triggered by Libra is still In the case of the innovative digital currency in the world, the future is uncertain.

Libra revolution, coming one after another

Undoubtedly, the currencies advocated by the two major schools of commodity currency and national currency have problems in leading economic and financial activities. They are either one or the other and want to replace them. In 2008, the outbreak of the financial crisis was generally attributed to the shortcomings of the modern currency operating system, excessive currency, excessive credit, increased risk, and an unprecedented crisis in the financial market. Thus, following the economic stagflation of the 1970s and the Asian financial crisis of 1997, market participants once again questioned the modern currency operating system.

In January 2009, the Bitcoin system was launched, and everyone seemed to see the dawn, just like the era of free economy represented by Hayek. In the economic sense, the core of economic and financial activities is trading. The essence of trading is credit, the underlying technology of Bitcoin, and the unique technical attributes of blockchain. It is like a trust machine, so that the participating users of Bitcoin system have no center. No intermediary, open and transparent trading, creating credit. Specifically, from the technical point of view, Bitcoin is an excellent application of blockchain technology, and applies the credit self-governing technology such as distributed accounting, time stamp recording, workload proof and block alternate signature of blockchain technology to the extreme. At the same time, Bitcoin, as recognized as the first generation of digital currency, innovatively provides participating users with a platform-based arrangement of peer-to-peer and non-centralized self-governance, laying a solid foundation for the “coin hot” of ten years in the future. Since 2009, people have used Bitcoin for payment, transfer, securities, food, clothing, housing, education, entertainment, government, public welfare, etc., various types of Bitcoin derivatives (Rippocoin, Litecoin, etc. 6.56 million cryptocurrencies, 2017 As the spring time came to the fore, the “coin circle” community self-governing organization also followed.

The other side of the angel is the devil. The quick and convenient convenience of Bitcoin at the level of payment transfer is quickly used by criminal organizations for criminal activities such as money laundering, fraud, and terrorist financing. Synchronously, multinational governments have also introduced a regulatory bill for digital cryptocurrencies represented by Bitcoin, which has included bitcoin in the negative list of transactions. Since the Second World War, global economic growth has accelerated, and dividends on capital, manpower, land, and technology have been highlighted, especially with the innovation of emerging Internet technologies such as blockchain, big data, and artificial intelligence. Innovation is always endless. The blockchain technology that emerged in 2009 has been hidden under the ray of Bitcoin, Ethereum and Ripple. It has been innovated in the blockchain technology structure of the public chain. At the same time, the chain of business alliances represented by stable currencies such as JPM COIN, Libra and USC Token have sprung up. In particular, after the countries listed the blockchain as a national science and technology innovation strategy, the alliance chain built the value of the Internet technology once. Become the industry's first choice.

Hicks' neutral technology progress perspective Libra

Hicks mentioned in the economic growth cycle theory of 1932 that technological progress has led to a simultaneous increase in the efficiency of both capital and labor, namely the marginal production of labor (dY/dL) and the marginal production of capital (dY/dK). The ratio remains the same, and the output grows.

We say that the public-chain and alliance chains, which are designed by Bitcoin, Ethereum, Libra and other sidechain technologies, are based on the Hicks Neutral Technology Progressive Perspective. In fact, Driven by commercial organizations such as Facebook, Libra is of great commercial value and promotes economic growth to some extent. In particular, the inclusive financial business needs of 2.8 billion global users, 1,000 transaction speeds per second, licensed alliance chain architecture, plans for 100 global multinational business organizations, and the unique 3f + 1 node LibraBFT consensus algorithm for Byzantine fault tolerance and The RUST development language is highly compatible with the payment transaction scenario. For the public chain such as Bitcoin, Libra's technical system is more suitable for detonating the value Internet revolution.

Returning to digital cryptocurrencies such as Libra, the underlying technology blockchain has set off a revolution in the value of the Internet. In Fried Freedom, Paul Friedman once emphasized that the pricing mechanism is the core of the market. Coincidentally, the blockchain upgraded the value transfer process based on the first generation of Internet-information Internet technology. The pricing mechanism is better transmitted to users by means of peer-to-peer accounting and decentralized secure and secure transactions. In 1937, Coase officially proposed the concept of transaction cost in "The Nature of Enterprise". He believed that the emergence of enterprises reduced the degree of information asymmetry and allowed products and service information to be smoothly and cost-effectively delivered to users. This theory also created new Institutional economics genre. The era has changed, especially the emergence of modern commercial banks. The intermediary property has emerged in the transaction, which has reduced transaction costs and the emergence of the Internet platform economy, which has further reduced transaction costs. It goes without saying that people are always dissatisfied with the need to supplement the cost of efficiency. The blockchain was born in 2009, providing a natural solution for value Internet innovation. The blockchain 2.0 smart contract is used for cross-border integration in legal, financial, logistics, medical, food and other scenarios. At the time, people began to think about how to identify multiple Ponzi white paper blockchain projects.

After many rounds of strict supervision and market clearing, the original Qingyuan, the stars are the original. The blockchain 1.0 digital currency and the 2.0 smart contract are further integrated and evolved. The release of the stable currency project represented by Libra will undoubtedly give the blockchain innovators a reassurance. Further, Libra's technology innovation speed has not been strictly regulated, and the Libra developer community has been enthusiastic. In just 7 weeks, 34 projects were entered, including 10 wallets and 11 blockchains. , 2 IDEs, 1 API, and 11 clients. Accumulative records of more than 51,000 transactions, a total of seven deployed nodes, 2020 is expected to complete the deployment of the main network 100 nodes and the implementation of the core feature set.

Innovation and supervision will always be the “seesaw” effect. The blockchain innovation is long and difficult, and it is even harder as the Libra project enters an abnormal state. However, as a science and technology, blockchain itself is used to upgrade social production relations and build credit value circulation. Since China, Singapore, the United States and other countries have increased the innovation of blockchain technology, the blockchain era of compliance, normalization and globalization will come.