Pangolin Blockchain Development Model: Suggestions for the Development of China's Blockchain Industry

Preface

After October 24, 2019, China began to set off a blockchain boom. Prior to this, China mainly issued coins and speculative coins, and then seriously planned to deploy blockchain. Therefore, the application of the entire Chinese blockchain is still in its early days. Many local governments are discussing how to lay out the blockchain, but they lack the technical personnel with real experience in the blockchain. The underlying architecture based on foreign pseudochain transformation is used. This article discusses the blockchain project development model and foreign deployment cases for reference in the development of the blockchain industry in China.

2. Three models of blockchain industry development

To develop a blockchain in China, we must strengthen basic research, improve our original innovation capabilities, and strive to keep our country at the forefront of theory, occupying the commanding heights of innovation, and gaining new industrial advantages in the emerging field of blockchain. Strengthen the research on blockchain standardization, and enhance the right of international discourse and rulemaking. These goals are challenging, but still achievable.

To achieve these goals, we propose a trilogy of blockchain development: a simple model, a deep fusion model, and a transformation model. Local governments or companies developing blockchains can consider this route.

The first step is a simple model. Deploy a chain directly on the application, such as in the financial scenario. The simple model serves two purposes: First, it promotes the attitude that local governments attach to the blockchain. Due to many misunderstandings left in the previous currency circle, such as "decentralization", "the blockchain has no new technology", "the blockchain can only issue coins for economic benefits", "the pseudo-chain is also secure", "the blockchain "Mining is needed" and "blockchain is very energy consuming". It takes time to get rid of these misunderstandings and establish a clear understanding. The second is to clear the battlefield, starting from Shanghai to clear the currency circle. China's blockchain industry has also moved from the underground economy to the formal stage in the past, which will inevitably encounter challenges. On the one hand, the illegal acts of issuing coins in the past should be stopped immediately. On the other hand, institutions that used to think that blockchain was disrupting finance also need to change their attitudes. The most important thing is to study and study the compliant blockchain technology and applications together.

Second, the deep fusion model. After understanding the compliant blockchain technology and applications, then study how to apply blockchain technology in traditional or emerging industries. The benefits and market changes that the blockchain may bring to the industry, that is, how the blockchain interacts with The deep integration of the industry will take some time. It is very important to first set up a research institute to explore the integrated development model of the entire industry + blockchain.

Third, the transformation model. What is transformation? It is that after the deep integration of the blockchain and the industry, the entire industry is transformed more quickly and efficiently, and the industry's best practices can be summed up to summarize the blockchain industry standards and be exported to the world along the "Belt and Road". Develop international standards, hold the right to speak, and lead the world. Blockchain requires supply-side reform. This is a major change, because when the industry is transformed, the industry has been transformed by the blockchain, which is a huge change.

If the project launched by the organization is directly deployed with a chain (simple model), I am afraid that it can only become a "learning" project. If the project of the simple model cannot be promoted to the deep fusion model, the prospect is worrying. If the key work listed in Table 1 is not carried out, it may always linger on the original model.

Blockchain applications are mainly business behaviors and economic activities. Ultimately, they must be profitable in order to be sustainable. To be profitable, they must be competitive. In the blockchain industry, competition is fierce. why? Because blockchain is originally running on the Internet, competition is global. So we suggest that one place focus on developing several blockchain industries, because other places may develop stronger competitors. After three years, powerful competitors will squeeze the new industries just supported.

To have global competitiveness, it is not as simple as picking up the chain of a certain big-name company in some place, building a certain blockchain industry, and setting up a blockchain alliance. It can only be prepared to adjust it later. This is actually Has happened. Some blockchain projects promoted 2 years ago have been secretly searching for alternatives. After some chains are deployed in important application areas, they are found to be pseudo-chains, and the organization feels a heavy responsibility. Others have problems in function and performance after deployment, and some cannot be upgraded after deployment. Part of the reason for these problems is that these chains themselves are used for speculation in coin speculation. In order to increase the price of the currency, the function and performance of the chain is exaggerated, and the behavior of issuing coins is often concealed. Some chains are also accused in court abroad. This is well known and will be a problem in the future.

How competitive is the local blockchain industry compared to other regional blockchain industries? For example, can you compete in the same blockchain industry in Shenzhen? Going further, can you compete with the same blockchain industry in the world as London? If it is only for the development of local industries, but a large amount of capital is invested but it is not competitive, this is a waste of resources. Therefore, it is necessary to make a strategic plan and think from the beginning that it may be global competition in the future.

Each of the three steps in the development of the blockchain requires investment, the technology of the blockchain must be improved, and the industry will change. This is a long-term project, not a short-term project.

Table 1: Comparison of three models

  Simple model Deep integration Transformation model
purpose 1. Learning experiment 2. 2. Publicity and promotion Clear the battlefield 1. Infrastructure 2. International Market 3. Heiner River 1. Industrial Finance 2. International Standards 3. Consolidating Construction Sites
technology Existing blockchain technology Next-generation blockchain technology, such as Internet Next-generation blockchain technology, a chain of interconnected networks
value low in high
risk high in High, but if stage 2 is successful, the risk becomes low
Focus 1. Design top-level system 2. Sandbox to promote industry 3. Establish ecological environment 4. Government support
  1. Define industry processes, and standards
  2. Designing Blockchain Industry Infrastructure
1. Formulate international standards and lead the world's blockchain industry 2. Establish national regulatory standards to achieve real-time digital asset transaction supervision 3. Deploy blockchain industry infrastructure
community Local or existing community National community International Community

3.U.S. Blockchain Application Cases

Three years ago, the US government started using the blockchain traceability project for manufacturing parts and components, and after a period of time, it was also associated with 3D printing. This is very important for some industries, such as aircraft parts, auto parts, precision instrument parts, etc.

The U.S. pharmaceutical supply chain management system is an important blockchain application, and its purpose is also traceability. This is a huge plan, developed by the United States Government FDA (US Food and Drug Administration) in conjunction with the Industry Association. From 2017, we started to discuss whether we need to use blockchain. After nearly a year of public discussion, it was decided to use the blockchain. The focus of the discussion is whether blockchain is considered a core technology? If blockchain is not a core technology, which one is considered a core technology? For example, can big data, artificial intelligence, the Internet of Things, and cloud computing solve the problem of tracing the source? Finally, we believe that blockchain is the core technology, because only blockchain can guarantee that data cannot be changed. While other technologies cannot solve the problem of traceability, they can only be regarded as supporting technologies, not core technologies.

After confirming that the blockchain is the core technology, and after half a year of research, the United States formulated the pharmaceutical supply chain management standard and began experiments in 2019. This standard is not a blockchain standard, but a blockchain industry application standard, including the following characteristics: 1) Has an overall application framework; 2) Has an interface definition; 3) Has a verification algorithm; 4) Has no blockchain function or performance Standards; 5) No blockchain reference architecture; 6) Actionable. The sixth "actionable standard" means that with this standard, businesses can engage in open and fair competition on the same standard. For example, if there is a verification algorithm, any organization can use the same algorithm to verify that its system can pass the test. Based on this standard, relevant companies can participate. This is different from some blockchain reference standards, which can only be referenced and cannot be acted on. And the standards are open, there are no fixed parts, innovation can be developed, and the system can be iterated in the future.

The 4th and 5th features may make people feel strange that the blockchain application standards have not yet determined the blockchain system standards!

In fact, this is very clever, because the blockchain is still developing, and it may be very different from now. This is already very clear in the author's article "From the Big Data Era to the Blockchain Era: New Thinking and New Architecture of the Internet" on February 7 this year. The chain system is very different, including the overall architecture, function, performance, and security of the system. It is not appropriate to formulate a blockchain standard now, which will affect the development of the blockchain. But the application interface, function and performance of the blockchain must be fixed.

The initial positioning of the system is in the "deep fusion model" stage, and it is ready to evolve to the "transition model". Guided by the US government agency FDA, many agencies have joined under its leadership. For details, please refer to "2018 United States" Uniform Weights and Measures "-ChainNet Pharmaceutical Supply Chain Management".

4.Government and public business are blockchain-first application scenarios

Government and public affairs are what we consider to be the most important application areas of blockchain, and also the areas that should be deployed first. Customs is an example. The US Customs began experiments in 2019. The results of the experiments are summarized in one sentence: "no defects". US Customs believes that after using blockchain:

Customs and transaction parties get information at the same time, which is much more convenient for operations; improve work efficiency and facilitate receipt processing; quickly complete business processing; reduce manual file processing by a large amount, easy data transmission; early detection of problems, easy to trace back the objects to be investigated; and importers Direct contact; easy to find past files.

The pharmaceutical supply chain management blockchain is also an important government affairs project. It is led by the US government, but it is also a private project that can be profitable and ensure the safety of people's lives. In 2012, fake drugs were discovered in the United States, and hundreds of people were killed or injured by the fake drugs. This caused the US government to pay close attention to the opening of the pharmaceutical supply chain management system, integrating pharmaceutical manufacturers, hospitals, logistics companies, pharmacies, wholesalers, insurance companies, and related financial institutions. This is the first step (deep fusion model). After completion, the supply chain finance based on this will not only guarantee the safety of life, but also generate economic value. After the establishment of this system, the insurance business is more convenient and the risk of accidents is lower. This is the second step (transition model). After nearly three years of public discussions, research, and experiments (beginning in 2017), the United States has directly entered the deep fusion model without going through a simple model.

Some people think that government affairs have no economic value. The analysis of foreign analysts is just the opposite. After the government affairs chain is opened, the economic value is the highest. For example, the above-mentioned U.S. pharmaceutical supply chain management system was originally designed to ensure the safety of life. At first glance, it seems that it is not profitable. When the supply chain management system emerges, the risks of insurance companies are reduced, and the number of false reports by health insurance institutions is reduced. Suppliers can raise funds, and the IRS can receive tax receivables, and the economic value is outstanding. It is precisely because of its huge economic value that the famous American investment company Goldman Sachs Group has invested in this project. This is an important weathervane, and the investment company has always been very keen. There are 60,000 pharmacies, thousands of large hospitals, thousands of medicines, hundreds of pharmaceutical manufacturers, and many logistics companies in the United States. In 2019, doctors in the United States alone spent more than $ 360 billion on prescription drugs, and in 2013, legislation was required. By 2023, all medicines in the United States must be authentic. The economic value of the pharmaceutical supply chain management chain is very obvious. Once this project starts to run, other countries will also join, so that the United States will take the lead in establishing international pharmaceutical supply chain management system standards, the market will be larger, and it will have global influence. This is also the great value of the currencyless blockchain application that I have been talking about, and there is no risk of speculation. Because only after the industry is deeply integrated, the value becomes prominent.

Both customs and pharmaceutical projects are organized by the government, have no "decentralized" thinking, and are deeply integrated with the industry. The medicine chain also has the function of protecting patients. The customs chain and smuggling and counterfeit goods are fighting directly, which is beneficial to the country and the people.

5. Blockchain-based epidemic prevention system

At the time of this new coronavirus outbreak, many people are thinking about how to use the blockchain for epidemic prevention. In fact, the epidemic reporting system has been developed and deployed in China, but it has not used blockchain technology, and this time it did not work. You can use the following list of questions to check to see if your plan has continued vitality. The list is derived from Table 1:

1) Is there a top-level institutional design? This project needs a long-term plan, and finally becomes a transformation project. In theory, it has the most cutting-edge technology, has an innovative commanding height, and can establish international standards.

2) Is there sufficient motivation for the active participation of relevant parties such as government agencies, enterprises, universities, and funds? The project is beneficial to all parties involved, and it can play the role of the blockchain in “promoting data sharing, optimizing business processes, reducing operating costs, improving collaboration efficiency, and building a trusted system”.

3) Is there a plan to establish an ecosystem? Which government departments, enterprises, financial institutions, universities? It can "strengthen the building of a talent team, establish a comprehensive talent training system, and create a variety of high-level talent training platforms", and "open up the innovation chain, application chain, value chain, and build a blockchain industry ecosystem."

4) Is there any relevant legal support? Whether to establish an industrial sandbox to check blockchain projects? It can "strengthen industry self-discipline", or "implement security responsibilities, implement the rule of law network into blockchain management, and promote the secure and orderly development of blockchain."

5) Is there a compliant blockchain technology and plans for future technology upgrades? Will not use the issued chain or pseudo-chain technology? It can "make the blockchain technology play a greater role in building a network power, developing a digital economy, and helping economic and social development."

6) Is there sufficient infrastructure support now? Or plans to build a new industry infrastructure? It can make "China has a good foundation in the field of blockchain. We must accelerate the development of blockchain technology and industrial innovation and actively promote the development of the integration of blockchain and economy and society."

The blockchain project has encountered great difficulties in the past few years, and we do not need to go through it again. The fifth question "needs new technology". Like the large-scale pharmaceutical supply chain management blockchain project in the United States, two new technologies are needed: 1) a new consensus mechanism (penetrating consensus); 2) an inter-chain network (blockchain) Internet technology. These are yet to be developed, which was mentioned in the author's April 2019 article.

We cannot block the blockchain for the sake of the blockchain. If we do not solve the pain points of the industry and there is no technological breakthrough, this system will definitely encounter difficulties in the future. At the same time, a lot of business model research needs to be done, because blockchain projects need to be profitable, and as a major breakthrough in China's development, we export our blockchain technology and industry standards to the outside world, allowing it to truly go abroad and open many markets worldwide.

The new coronavirus COVID-19 is said to be caused by humans' desire to eat and eat game. Every third Saturday in February is World Pangolin Day, and 2020 is today World Pangolin Day. On Pangolin Day, we hope that due to the abuse of the virus, people can notice the survival difficulties of pangolins, because pangolins are very easy to kill, and more than 100,000 pangolins are killed every year in smuggled goods. As a result, pangolins are endangered in many parts of the world. In China, it is a second-level protected animal. Because of its sharp decrease, it should actually be classified as a first-level protected animal. Pangolins are mammals with a mild temperament and shyness and slow movements. Sometimes pangolin mothers can be seen carrying small pangolins in the wild. Sometimes in order to protect young children, the mother sacrificed herself to cover the young children, because the young children's nails did not grow up, so the gentle and cute mammals should not disappear from the earth. Starting from Pangolin Day 2020, let's protect the pangolin. The results of our blockchain development model will also be named as pangolin to commemorate it.

Author:

Cai Weide

Director of Beihang Digital Society and Blockchain Lab, Chief Scientist of Tiande Technology, Leader of Major Projects of Ministry of Science and Technology, Dean of China Information Industry Blockchain Research Institute, Blockchain Internet Lab of National Big Data (Guizhou) Comprehensive Experimental Zone Director, Dean of Tianmin (Qingdao) International Sandbox Research Institute, Honorary Dean of CCID (Qingdao) Blockchain Research Institute, Chairman of China Asia Economic Development Association Blockchain Industry Specialized Committee Committee director

Jiang Xiaofang

Doctoral candidate of Beihang Computer School, Chartered Financial Analyst (CFA), Founding Member of Beijing Financial Analyst Association