Gu Yanxi: So many public chains, so few applications

Many companies are now developing their own public chains. The startup team is developing the public chain, and some encrypted digital currency exchanges are also developing the public chain. I have seen an entrepreneurial team of three young people who not only developed their own public chain, but also proposed a new consensus algorithm.

However, the current public chain market has a very embarrassing situation. On the one hand, there are not many public chain products, but on the other hand, there are very few projects on the public chain. Obviously, there has been a clear disconnect between the application of blockchain products. Of course, the application of any new technology will take some time. For blockchain technology, a new technology that fundamentally changes the existing centralized technology-based computing model, its application will take longer. However, in the process of applying the current public chain products, there are still some aspects that can be improved to accelerate the application of public chain technology.

In the current society, there is no shortage of landing scenarios for blockchain applications. Many problems in the market can actually be solved by applying blockchains. The strongest part of the blockchain technology is to use the complete and true information to eliminate fraud. It is a technical way to ensure the successful completion of multi-party cooperation. From this perspective, too many problems in reality can be solved with blockchain. For example, the default aspect of personal borrowing. One of the main motivations for defaulters is because the cost of default is very low. He can defraud a lender before defrauding another fraud party.

But if everyone's credit history is recorded on the public chain without any mistakes, and any individual or institution can find this loan record, the borrower's motive for fraud is much less. For customers who have not been served by existing financial institutions, if their various loan records outside the financial institution are recorded in the blockchain, then their personal credit history is authentic. . Financial institutions can lend to them based on this credit, because in this process, the cost of credit is almost zero, and the high cost of credit is one reason why financial institutions are unwilling to make loans.

At the company level, there are also a large number of places where blockchain technology can be applied, such as joint loans for trade finance and syndicates. In the securities field, in addition to the liquidation of the blockchain technology after the transaction, the other most direct application is the financing process of the investment bank project. Due to the huge gains from the listing, in this process, it is not uncommon for individual participants to take risks and fraud in various stages of financing. One of the main areas of fraud in this process is information fraud. If blockchain technology is used to manage this process, each participant is responsible for the information they upload to the chain, and the motivation for each participant to falsify is greatly reduced. Even if someone is taking risks and making fraud, then the evidence collection in the subsequent legal proceedings is very easy, and it is easy to form a timely and fair judgment.

So why are there so many demands in reality, but why are there so few block-based applications? In this respect, there are both the places where the products usually make mistakes in the regular law, and the specific problems of the application of the blockchain technology.

1. The product does not match the market demand.

First of all, the main reason for this situation is the mismatch between product and market demand, that is, the lack of Product Market Fit. Some blockchain technology developers focus on solving the problem of blockchain technology itself, and ignore the solution to its technology. The problem in the market should be solved. Some public chain projects are always promoting how good their products are and how much TPS they can achieve. But this selling point is itself the wrong positioning.

First, the metrics for an enterprise-level technology product are not just performance, but also other aspects of stability, security, and access control. Second, the evaluation of blockchain technology in the market will first compare it with the corresponding centralized solution. In terms of performance, blockchain-based solutions are definitely not comparable to solutions based on centralized technologies. So blindly emphasizing performance simply can't convince the market to accept this product.

The best solution to blockchain technology is the trust problem in multi-party cooperation. In a real-life scenario, many of these scenarios do not require high performance. For example, the process of cooperation in trade finance is similar to the process of cooperation among various institutions in the process of corporate finance. These processes focus more on factors other than performance, such as consistency of information, access control, and ease of use. If the public chain pursues performance blindly, then it will linger with the real needs in the market.

2. Highly competitive areas

Another major mistake in the positioning of public chain products is the development of a universal public chain that competes with Ethereum. However, such product positioning is extremely unlikely to be successful. There are many problems with Ethereum, which is well known. But it has evolved over the past few years and has basically become the default public chain option in the market. Now I hope to replace Ethereum's public chain entrepreneurship projects too much. In such a highly competitive environment, the odds of winning are very small. In this respect, many public chain teams have made the wrong choice. Choose to join a highly competitive field. This is precisely a violation of the basic law of product development, that is, to avoid competition. Remember Peter Tiel's suggestion to avoid competition?

An effective way to avoid competition is to use an innovative approach to solve a problem in the market. Because innovation is not accepted by the market at the outset, there are not many competitors doing the same thing. When the innovative approach is gradually accepted by the market, this innovative product has occupied a stable position in the market. Other teams can no longer compete on the same products. In this respect, Bitcoin invented by Nakamoto is the best representative of this.

Nakamoto's original intention was to issue an electronic cash to replace the currency in the market. But he did not issue a currency in a way that directly competed with the existing currency. The financial nature of Bitcoin was not discovered by the market until many years later, and it has a large number of users and has begun to pose a huge challenge to the existing financial market. Despite the continued imitators, these imitators have been unable to challenge the status of Bitcoin.

3. Difficulties in changing group behavior

The characteristics of the blockchain technology itself also make it more difficult to be accepted by the market than other products. This is because it needs to change a group behavior rather than an individual behavior. For example, in the process of multi-party cooperation, if only one party is willing to adopt a blockchain-based solution, but other parties have no motivation, this solution cannot be promoted. Especially when some of the participants’ original idea was to use the opacity of information to make a profit for themselves.

So how can we achieve the rapid application of blockchain technology?

First of all, I think it is okay to cut into the market from a technical point of view, but it should be cut into the market from the perspective of demand, that is, from a specific problem in the market, to analyze how to use blockchain technology to solve this problem. Given the prevalence of mutual distrust and fraud in the market, it is not difficult to find such a scenario. The second is to develop or find the right blockchain under the market to further develop. The bottom layer of such blockchain technology does not necessarily require all technical indicators to be perfect. It can be satisfactorily solved as long as it can solve the problem that needs to be solved.

Looking at the current domestic market, some successful blockchain projects that have gained market welcome and capital support are not based on public-chain projects with particularly good technical performance. In fact, these projects use only the most basic blockchain technology. Distributed storage and unalterable features. But the underlying technology provides a good enough technical solution for the problem that needs to be solved, which is enough to create good business value.

The second is not to challenge the most powerful places based on centralized technology. These areas are in the areas of retail payments, stable currencies, securities and banking. The use of blockchain technology in these areas may not be large enough, but the risks and resistances encountered will be very large, so the application of blockchain technology in these areas needs to be very cautious.

Third, we must solve the existing problems in an innovative way. In this regard, Bitcoin is the best example. Among the many existing problems, the existing players in the industry do not have strong motivation to adopt the blocks due to technical, regulatory, operational habits, and costs, the time and risk required for the application to land. The application of chain technology and blockchain technology must find a place that is very innovative and easily accepted by the market.

Although the market for this initial application is not large, as long as the business and technology models for this application are highly scalable and targeted at potentially huge markets, as long as the project side does the top-level design for business and technology ( See my related article, the top-level design of the blockchain era); in addition, because this innovative approach is not necessarily widely recognized, it will not quickly attract competitors, so this method will have enough time to develop gradually. When the parties in the market finally discover the value of this innovative model, the competition with it and the suppression of it are too late. This is the successful mode of re-copying Bitcoin in essence.

Author: Valley Yancey