Deputy Director of the Science and Technology Department of the Central Bank: To establish a blockchain technology financial application innovation management mechanism

Editor's Note: The original title was "Central Bank Chen Liwu: To Establish Blockchain Technology and Financial Application Innovation Management Mechanism"

Sina Finance News on December 17th, the 3rd China Internet Finance Forum 2019 was held in Beijing on the theme of "Fintech assists the construction of modern financial system". Chen Liwu, Deputy Director of the Science and Technology Department of the People's Bank of China, attended the event and delivered a speech.

Chen Liwu, Deputy Director, Science and Technology Department, People's Bank of China

Chen Liwu believes that in recent years, China's financial institutions have followed development trends, worked hard to explore, and dared to practice, and have achieved some blockchain application results. But how to make good use of blockchain technology in the financial industry still faces some challenges. Specifically, the first is the difficult balance between node scale, performance, and fault tolerance. Second, it is difficult to guarantee the consistency of information on and off the chain. Third, technical security needs to be further improved.

In response to the above-mentioned problems and bottlenecks in the application of blockchain, Chen Liwu put forward four suggestions on how to promote the application and development of blockchain technology: one is to strengthen the research on blockchain technology tracking; the other is to promote the application standards of blockchain technology in the financial field Formulation; the third is to guide the rational application of blockchain technology in the financial field; the fourth is to strengthen the industry collaboration of blockchain technology.

The following is the actual record of the speech:

Chen Liwu: Dear guests, ladies and gentlemen, good afternoon!

It is my pleasure to attend the 3rd China Internet Finance Forum in 2019. First of all, on behalf of the Science and Technology Department of the People's Bank of China, I would like to express my warm congratulations on the convening of this forum.

In October 2019, General Secretary Xi Jinping pointed out during the eighteenth collective study of the Political Bureau of the Central Committee that blockchain should be used as an important breakthrough in independent innovation of core technologies, and the development of blockchain technology and industrial innovation should be accelerated. How to use the blockchain more securely and efficiently in the financial industry is a topic we need to focus on.

Here are some ideas for you to share with you: Blockchain technology has the advantages of low-cost construction of mutual trust, data tampering, and information traceability. It plays an important role in new technological innovation and industrial transformation. For the financial industry, the rational use of blockchain technology can help reduce financial transaction costs and improve the efficiency of financial services. It is of great significance to serve the real economy, prevent and control financial risks, and deepen financial supply-side structural reforms. In terms of optimizing business processes, financial institutions based on blockchain technology can compensate for information asymmetry between the financial industry and the physical industry, establish an efficient value transfer mechanism, realize the comprehensive use of capital flow, information flow, and logistics, and increase the speed of capital settlement And utilization rate can help to resolve the problems of small and micro enterprises, private enterprises financing difficulties, expensive financing.

In terms of promoting data sharing, financial institutions can use blockchain technology to build cross-regional, cross-level, and cross-sector data sharing mechanisms on the basis of clear data ownership, open up data barriers and information islands, and achieve more data runs. The reforms in which the people ran fewer errands and ran at most once brought a better financial service experience for the people. In terms of reducing operating costs, financial institutions rely on the distributed characteristics of blockchain technology, which can transform hierarchical management into flat management, eliminate middlemen, reduce transaction record reconciliation, and help financial institutions build automation and intelligence. Management mode, reducing the complexity and cost of existing operating processes, and achieving open source and cost reduction. In terms of building a credible system, financial institutions can use the blockchain technology to generate technology-defined credit, implement technical endorsement of credit, and bridge the credit gap between transaction participants. Of course, the technology and development of credit endorsements mentioned here have not changed the nature of financial intermediation, but enriched the expression of credit media and bridges, and promoted a more complete financial credit system.

In recent years, China's financial institutions have followed development trends, worked hard to explore, and had the courage to practice, and have achieved some blockchain application results. How to make good use of blockchain technology in the financial industry still faces some challenges.

First, it is difficult to balance node size, performance, and fault tolerance. Consensus algorithm is one of the core technologies of the blockchain. At present, there is a difficult balance between the scale, performance and fault tolerance of mainstream consensus algorithms. The consensus algorithm has great advantages in fault tolerance and the number of participating nodes. It requires a large number of function calculations. The consensus cycle is longer and the performance is greatly improved. The transaction volume per second can reach thousands. The fault tolerance is relatively It is not high. After the number of nodes exceeds a certain scale, the performance also drops sharply. How to deal with the relationship between the three has become a problem that needs to be solved in the current development of blockchain technology.

Second, it is difficult to guarantee the consistency of information on and off the chain. The blockchain can guarantee the authenticity, integrity and tamper-proof of the data recorded online. It involves the difficulty of covering all stages when the physical delivery of the offline team, and there may be problems of inconsistent on-chain and off-chain information. Blockchain-based technology can ensure the integrity and immutability of data on the chain and ensure the openness and transparency of business processes, but it cannot guarantee the authenticity of the data off-chain and the consistency with the data on the chain.

Third, technical security needs to be further improved. In terms of network security, blockchain technology uses a point-to-point network structure and a message broadcast mechanism. Nodes can enter and exit freely, and they are vulnerable to routing spoofing and address spoofing attacks. In terms of transactions, the decentralized model is adopted. The same block reaches different nodes at different times. The consensus algorithms and versions of different nodes are difficult to ensure consistency. In the process of reaching consensus, blockchain forks are prone to transaction risks. In terms of transaction security, no encryption measures are used. Nodes attach custom data to the block. Historical data in the blockchain cannot be changed. The viruses and Trojan horses included will be automatically transmitted to the entire network for malicious attacks.

Aiming at the above problems and bottlenecks of blockchain application, here are some suggestions on how to promote the application and development of blockchain technology:

The first is to strengthen tracking research on blockchain technology. The current blockchain technology is not yet fully mature, and there are still some technical difficulties. In response to the problems and bottlenecks faced by blockchain applications, the financial industry has increased blockchain research and personnel training, and promoted collaborative research in production, education, and research. Financial institutions, research institutes, and fintech companies have strengthened research on blockchain technology, especially the underlying blockchain technology, such as consensus algorithm storage mechanisms and encryption algorithms, to continuously improve the level of technical security and operational efficiency, and promote better blockchain technology. Meet application needs in the financial sector.

The second is to promote the development of application standards for blockchain technology in the financial field. General Secretary Xi Jinping once pointed out that standards determine quality, and what kind of quality is used, only high standards have high quality. Financial institutions should combine the characteristics of blockchain technology with the actual needs of applications in the financial field, and strengthen the construction of a standard system for blockchain applications in the financial field. Give full play to the role of standards as a guide, and coordinate and promote the construction of relevant standards and norms in blockchain technology in technical architecture, cross-chain communication, information security, privacy protection, performance evaluation, etc., and promote development with standards and development with security. The standardized application and orderly development of blockchain technology in the financial field.

The third is to guide the rational application of blockchain technology in the financial field. The application of new technologies such as blockchain can improve the efficiency of financial services and reduce the cost of services, but it may also trigger new risks. It is necessary to explore the establishment of a blockchain technology financial application innovation management mechanism, guide financial institutions to combine their own characteristics, and focus on analyzing application scenarios from the perspectives of implementation, throughput, and information protection. In the process of blockchain innovation application promotion, it is necessary to establish a risk prevention and control and compensation mechanism to ensure the feasibility, compliance and security of the application, and rationally lay out the technical application of the blockchain on the basis of ensuring safety in accordance with laws and regulations. Make it better serve financial business innovation.

The fourth is to strengthen industry collaboration on blockchain technology. In a sense, the blockchain is a technology for establishing a mutual trust mechanism between nodes based on distributed low-cost. As an important technical means to solve the problem of mutual trust between different financial institutions, the application of blockchain finance cannot be separated from the cooperation and cooperation of multiple institutions. Therefore, it is necessary to give full play to the ties and coordination role of self-regulatory organizations such as industry associations, strengthen blockchain financial applications, governance and industry collaboration, promote all parties to strengthen blockchain technology and resource sharing, achieve complementary advantages, and improve blockchain technology finance Quality and level of application.

Dear guests, ladies and gentlemen, the current financial technology is booming, and the financial industry is in a critical period of enabling digital transformation and upgrading with technology. Standing at a new historical starting point, I hope that financial institutions can keep up with the times and grasp development opportunities, and plan, manage and apply new technologies represented by blockchain, artificial intelligence, big data, cloud computing, etc. Promote the financial industry to be honest, innovative, stable and far-reaching.

Finally, I wish this forum a complete success. thank you all!