Viewpoint | The Route Choice of Digital Currency from the "Internet Standards Controversy"

Source: Surging News

Author: Qin source (The author is the financial industry practitioners)

Since the birth of Bitcoin in 2008, digital currency has quickly penetrated into people's daily communication for a little over 10 years.

In June 2019, Facebook launched a white paper on the digital currency Libra project, which is scheduled to officially land in June 2020. For a while, it seemed that there was a relatively clear timetable for digital currencies to actually enter the application. The central bank's digital currency DC / EP project has also seen a significant increase in exposure since the second half of 2019.

Summarizing and summarizing the current concepts of these digital currencies, they can be divided into two categories: official and private. As ordinary people talk about digital currencies, they often subconsciously link "digital currencies with more or less" subversion "of the existing financial system. Therefore, regarding the choice of future digital currency routes, there are virtually official and private The dispute between the two lines, and this debate and the Internet standards in the 1970s to 80s have a certain degree of similarity.

The 1970s-80s was the period when the Internet moved from the LAN era before blossoming to the Internet era that was truly interconnected. Prior to this, the Internet standards were also full of variety, including the later Internet standard TCP / IP. These standards can be regarded as folk standards. In 1981, the International Organization for Standardization (ISO) introduced the OSI (Open Systems Interconnection) standard. Although ISO is not an official organization in the strict sense, and its standards are not compulsory, it is undoubtedly more official and authoritative than those organizations including the TCP / IP standard. It is for this reason that after the OSI standard was introduced, many authorities and experts at that time gave it high hopes. OSI as an Internet standard still has a place in many textbooks.

But looking back 40 years later, to be more precise, in the 1990s, TCP / IP was established as a recognized standard for the Internet. Even more embarrassing is that the OSI standard, which claims to be technically better, never seems to have actually landed. The failure of the OSI standard can be summarized as the following reasons. First, the rise of the Internet is a self-published market, and the standards recommended by standardization organizations have no special official support compared to market standards. In fact, the United States has always been a leader in the Internet. Although TCP / IP is a folk standard, its supporters and beneficiaries are mainly American companies, which essentially represent the interests of the United States. Second, the introduction of the OSI standard is too late, and an ecosystem and interest circle have been formed around TCP / IP. As a standard, OSI does not have a strong promoter and stakeholder. Third, from the emergence to the popularity of the Internet is an application-driven process of continuous increase in penetration and continuous iteration of technology. It is more important to have an application to promote it than to be technically complete and authoritative.

Different from the Internet standard dispute, the Internet goes from 0 to 1. Bitcoin, blockchain, and digital currencies are all things from 1 to the Internet. Regulators and traditional financial institutions have a sense of the Internet and its iteration and disruption. From the perspective of the cutting-edge sharing economy and digital currency of Internet innovation in recent years, Internet innovation is increasingly advancing into the public economy. Regarding the infrastructure properties of the Internet, in particular, what kind of responsibilities and obligations should a platform company bear? How is it regulated? The public and regulatory authorities are also thinking more and more. The Internet and its innovations are facing more and more stringent regulations, and it is the general trend to assume more responsibilities and obligations.

Therefore, in the field of digital currency, which has strong public attributes and high regulatory density, it is very difficult to reproduce the rising side of emerging forces and the subversion of traditional forces. The experience of the Libra project white paper since its release is a process of constant awareness by regulators. In a sense, the regulators know that the regulation is in place, but it will help the rapid development of digital currency. The author believes that in the field of digital currencies, the competition between digital currencies launched by central banks or traditional financial institutions and digital currencies launched by new forces on the Internet should not reappear as the official OSI standards in the Internet standards battle are completely defeated by the private sector. The case of the TCP / IP standard.

However, if the central bank and traditional financial institutions promote digital currency projects, they should not take it for granted that, relying on legal coercion and the advantages of the incumbent, even if they add the first-mover advantage, they will be widely promoted and can effectively marginalize new forces. Digital currency living space.

The disruptive nature of the Internet still exists. The existing currency issuance and circulation and its corresponding financial system are essentially the product of the rise of traditional modern countries and the division of industrialization. The Internet division of labor density index is higher than the industrialization division of labor density, which is different from the relatively parallel division of labor cooperation model between the financial industry and other economic sectors in the industrial era. A large number of financial behaviors in the Internet model are embedded in usage scenarios. The Internet has become the preferred scenario for the use and derivation of many currencies, and traditional financial institutions have disadvantages relative to the new Internet forces.

In short, the digital currency field is difficult to reproduce the complete defeat of the OSI standard in the Internet standard battle, but the complete defeat of the OSI standard is still a wake-up call for the traditional financial sector.

(The author is a practitioner in the financial industry)