Chief Scientist of Bank of China: Blockchain technology can greatly improve bank operating efficiency

Source: Sina Finance

Editor's note: The original title was "BoC Guo Weimin: Blockchain technology can greatly improve the operating efficiency of banks"

Sina Finance News on December 17th, the 3rd China Internet Finance Forum 2019 was held in Beijing with the theme of "Fintech assisting the construction of modern financial system". Guo Weimin, chief scientist of Bank of China attended the event and gave a speech.

Guo Weimin, Chief Scientist, Bank of China

Guo Weimin believes that blockchain, especially the application of encryption technology, may become a very important infrastructure in the future digital age. Today's blockchain platforms are all running on the Internet. The Internet is not the most suitable platform for IoT and peer-to-peer network applications. In the future, the development of real IoT platforms may have more impact on blockchain applications. Great promotion, we may see blockchain switches and blockchain routers in the near future.

From Guo Weimin's point of view, the most suitable use of blockchain is management scenarios. He believes that the blockchain not only guarantees data privacy, but also enables effective application of data. It can effectively use multi-dimensional and detailed data through various transformation mechanisms. This is useful for commercial banks or governments. In terms of operating efficiency, it will be a huge improvement.

The following is the actual record of the speech:

Guo Weimin: Good afternoon, ladies and gentlemen!

From the perspective of the overall technology and development history of the blockchain, some of the earliest core blockchain technologies, including asymmetric encryption technologies, have been used in the financial industry. When we save passwords, software engineers cannot see your passwords when they open the software. They are stored after being encrypted. These technologies have been widely used in the financial industry. There is also point-to-point. Many IP phones and IP applications are point-to-point. From a purely technical perspective, the blockchain itself has no fundamental technological innovation. We can see that the real popularity of the blockchain was the birth of Bitcoin in 2008. We see that the birth of Bitcoin is the same as the tulips in the Netherlands more than 300 years ago. The tulips in the Netherlands have no meaning, but gave birth to the stock and futures markets. It got everyone's attention at the time. If you look at the history, you can see that people from all countries, mainly in Europe, went to Holland to fry tulips. In fact, it is a truth. Tulips may have promoted the prosperity of the stock market and futures market, and Bitcoin has also promoted the prosperity of the entire blockchain market. The blockchain itself is of great significance. Professor Chen, we all shared with you.

However, from the perspective of the technology itself, the blockchain is actually a new application of a combination of existing mature technologies in some fields. First of all, we believe that blockchain is not just Bitcoin, it is not just an encrypted asset, nor is it an optimized solution. It can be continuously optimized. It is definitely not a cure-all solution. And more importantly, the so-called "decentralization" is not without centers. All blockchain systems are applications at the application layer. The underlying physical layer is the Internet. The Internet runs on the telecommunications operator's communication network. All of these applications, including IP address allocation, are based on a lot of centralized management and services. Decentralization is not without centers. This concept needs to be clarified with everyone. It does not solve the problem of centralization. The various non-transparent problems can only solve a small part.

What is digital? One of the most important characteristics of digitalization is that the share of sales of physical goods is far more than the sales of digital goods. What is the real digital age? The clothing and props you buy in the virtual world cost far more than a real dress you buy in the physical world. When the digital era really arrived, how its assets are traded, including what the attributes of currency are, are actually different from today. Digital currency is not a simple transition from shells to silver coins to gold coins to banknotes. Digital currencies will get a richer definition.

There may be some situations when smart contracts are added to the currency. For example, someone is very rich and everyone does not like him, but he is rich and mobilizes a lot of social resources. In the future digital age, I will charge my dollar to him. If there are 1 million people who are unhappy with him, his assets may be reduced by 1 million. These are some new issues about currency attributes that we need to consider in the digital age. These obviously cannot be solved with traditional currency methods. The so-called digital currency way. But today when we have not entered the digital age, we discuss these applications, and its limitations are also obvious. The problem we face today is digital. Whether it is the first, second, and third industries, it is good to go online and go online. There are many pain points, and it is not a complete application of the digital age.

Blockchain, especially the application of encryption technology, we think it may become a very important infrastructure in the real digital era in the future. This infrastructure must have fundamental changes at all levels. Today's blockchain platforms are all running on the Internet. The Internet is not the most suitable platform for IoT and peer-to-peer network applications. In the future, the development of real IoT platforms may have more impact on blockchain applications. The great promotion effect may see a blockchain switch, a blockchain router, and various hardware devices in the near future. It is not just a mining machine and a hash algorithm. This is a path for the future development of the blockchain. It will be an infrastructure that can adapt to the development of the future digital era in all aspects, from the physical layer to the link layer to the switching layer to the application management layer.

Our understanding of the nature of blockchain, currently in the digital age, its value lies in replacing the redundancy of management rules with basic redundancy. It may be difficult for us to form a consensus, but now the blockchain is very fashionable. We use the blockchain to make everyone willing to do what we did n’t agree to. In fact, if you agree to do it together, we have a more effective solution. Go do it. However, now that we use the blockchain as an entry point, these problems can be solved, which is one of the applications. Of course, transparency is very important. Just now I very much agree with Mr. Chen's point that blockchain is very important for transparent driving. Like banks, everyone now criticizes banks. In fact, banks provide a lot of financial services, which is very convenient and the cost is very low. However, what has been questioned is transparency, not only customers, but also regulation. The supervisor always asks us whether your data is accurate and how to ensure the validity, timeliness and integrity of your data, so the bank will have a very large cost to solve the regulatory requirements and customer requirements. For commercial banks, Speaking is itself a cost. If the banking system becomes transparent one day, all these problems will be solved, and 30-30% of the cost of the bank will not be used for regulatory compliance. This is actually the biggest improvement in efficiency.

At present, there are many business scenarios of the blockchain, and everyone has also shared. In fact, the most suitable use of the blockchain is the management scenario. Just as commercial banks have always had a paradox, we have to do data governance. The premise of data governance is the formulation of data standards. However, as everyone knows, if all data is standardized, the problem is the loss of details, so if To use big data, you need to know the details and many dimensions, but you also need standards. This is actually an antithetical requirement. How to unify the contradictions, the blockchain has a very good common scenario. Everyone knows that the blockchain not only guarantees data privacy, but also enables the data to be effectively applied. You do n’t need to worry about whether it is standardized or not. You can Through various transformation mechanisms, multi-dimensional detailed data is effectively used. Especially for commercial banks, between various departments, just like the government, there are data shafts. If we make good use of the blockchain mechanism, these shafts will be broken. This is for commercial banks or governments In terms of operating efficiency, it will be a huge improvement, which is why the application of blockchain is vigorously promoted at the national level. I understand more than just applications for business scenarios, but applications for management scenarios.

As mentioned earlier, blockchain is actually just a technology, and many people also hold this view. It has two sides, it brings some problems that might not be solved before, and it creates more problems. When do we need a blockchain? Maybe here is a simple Occam's razor rule. If you can solve it with mature methods, do not use new methods. If other methods are more effective, you do n’t need to use blockchain to solve them. I have listed some How to compare and judge, not one by one.

This is the current practice of the Bank of China blockchain, and it can be said that a lot has been done, not only in China, but also in Hong Kong, including other overseas institutions, especially the valuation of real estate, as well as electronic wallets, electronic bills, etc. There are many applications, etc. The ultimate purpose of each application is to explore what kind of efficiency improvement the blockchain technology itself can bring us, and what kind of pain points we could not solve before.

Judging from the path, the blockchain will be applied earlier in the wholesale business. Its complexity determines that its participants will be relatively large, but the most fundamental problem is the issue of the chain. How do you determine The contract is satisfied. Whoever has the ability to settle and execute this section is the same as the problems encountered in the traditional field. If the complexity can be convened by the blockchain method to participate in a simplified process, Optimizing efficiency is also a very effective way, and we are actively exploring the retail business.

The issues that need to be solved in the next step are legal issues, regulatory issues, coordination issues, and security issues. There are many unsolved issues at all levels. If you are interested here, continue to make certain continuous development in the field of blockchain. I I also hope that everyone can do some more original research work. Do not repeat the theories and concepts that have been said 1,000 times. In fact, we currently believe that the blockchain, especially at the bottom, needs physical layer and link layer. A lot of work done is blank, it is a long process, and I think there will be some time.

Finally, I give you an appeal. This year's focus is on green finance. I don't know if you are here. Many are involved in mining. To give a personal point of view, mining is completely meaningless, but it is a waste of resources. , Wasting the precious resources of the earth, in fact, it does not create any value to society. If you are involved in the mining industry, I also hope to reflect on it. For the future of the earth, I hope that everyone will stay away from the mining industry.

thank you all!