From Bitcoin to Libra, a blockchain in the eyes of a financial man | Babbitt Industry Welcome Class

On the evening of this Thursday (February 27), the third phase of the Babbitt Industry Orientation Class was officially launched. This course invited Mr. Hu Jie to share the theme of " Financial Structure: Can Blockchain Technology Become the Pearl of the Financial Crown? "

Hu Jie is currently a professor at Shanghai Advanced Institute of Finance (SAIF) at Shanghai Jiao Tong University. His research interests include financial technology, wealth management, financial institutions and financial markets.

He has a PhD in Finance from the Kellogg School of Business at Northwestern University. He has been a senior economist at the Federal Reserve Bank of Atlanta for many years. After returning to China, he founded a software company and two Internet companies. Former CEO of the financial sector of Xunlei Group. Since 2010, Hu Jie has taught at many universities including the Yangtze River Business School and China Europe International Business School. Currently operating a "blockchain + supply chain finance" project.

Hu Jie's lectures are very special. He often starts from the most basic concepts and grasps the essence of the problem in the mist according to the logic of the development of things. Easy-to-understand explanations, plain humorous language, and clear and fluent expressions make people sound like a spring breeze. Like a literati writer walking in the financial world, he raised a blue light in the darkness to illuminate the temple and the ends of the rivers and lakes.

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The following is a summary of the content of this course. For details, please watch the course playback: "Financial Structure: Can Blockchain Technology Become the Pearl of the Financial Crown"

From Bitcoin to algorithmic ledger

The core of finance is investment and financing, that is, the exchange of money for money. Investors give money first and receive money later, and financiers receive money first and give money later.

The core elements of a financial system are a trusted ledger and a stable currency. The failure of Bitcoin lies in "it is unstable as currency", its value lies in "as an asset, it is a limited edition digital cultural relic", and its contribution lies in "as a model, it is an algorithmic ledger".

The algorithmic ledger is the "heritage" of Bitcoin, covering three levels of consensus bookkeeping, equity tokens, and smart contracts.

Consensus bookkeeping is a replacement for traditional bookkeeping. The distributed method has its unique value.

A token is like a blank piece of paper, worthless in itself, and its price is agreed upon by the issuer. Its essence is a kind of equity certificate, that is, a carrier representing specific rights and interests, and is naturally digital in technology.

The token has the characteristics of encryption, protocol and intelligence. The use of tokens to carry equity is called equity tokenization. Production and exchange are basic economic activities. All economic exchanges are the exchange of rights and interests. The purpose of equity tokenization is to improve the efficiency of the exchange of rights and interests.

Smart contracts make rules coded, which is mainly applicable to the accounting logic directly related to the circulation of tokens. Traditional IT systems are more suitable for carrying other business logic.

In summary, the smart contract is used to realize the benefit distribution, the encrypted token is used to bear the equity expression, and the consensus bookkeeping is used to record the circulation of the token. An economic system dominated by a token business model can become a token economy.

Financial application and supervision

The emergence of blockchain technology involves the three most sensitive businesses in the financial field: securities issuance and trading, fund raising and currency issuance. The logical starting point of regulation is: weakening / eliminating information asymmetry, protecting non-professional investors, and preventing systemic risks.

Existing regulatory policies and laws and regulations are a summary of human experience. When introducing new regulatory measures, it is necessary to return to the logic of regulation. Regarding the financial application supervision involved in blockchain technology, on a logical basis, it should be treated the same as traditional financial services.

If a business activity meets the Howey Test, it is fundraising. Tokens can be used as a fundraising tool. Others give you money, and you send the token to others as proof of investment. Fund raising is very sensitive, because it is particularly easy to cheat, or it is illegal to raise funds. The use of tokens to raise funds, whether public or private, should be governed by the same principles as traditional fundraising.

Tokens can be used as securities that carry specific rights and interests . When trading on the open market, they should follow the principle of appropriateness, enforce information disclosure, prohibit insider trading, and prohibit market manipulation. These are all human experience in exchange for blood. Now those things in the securities law are bloody stories behind them.

Where regulation is lacking, there is a price bubble and Ponzi scheme in the trading of token securities. The equity carried by the token is clear, but its value varies from person to person and its price varies from market to market. Bubbles and fraud are bad, but regulatory principles should be treated the same as securities.

Currency can also be carried with tokens. Although Bitcoin is regarded as digital gold, many countries recognize the currency status of Bitcoin, but it will not become a mainstream currency. Because the core requirement for becoming a mainstream currency is stable currency value, that is, the issuance volume matches the economic growth, this problem cannot be solved for Bitcoin at present, and its anonymity is not conducive to taxation and anti-money laundering. No virtual currency can replace fiat currency for the time being.

Digital currency in chaos

What is currency? Any asset can have certain monetary attributes. Specifically, as long as it can bear the transaction medium in a certain scenario, even if it has monetary attributes, such as gold (refuge currency), cigarettes (in prison), and Q currency (in the online community). However, a good currency requires a stable currency, a wide range of applications, and a good user experience.

What is the carrier of money? The issuance and circulation of currency, and the infrastructure on which the operational level relies are the ledger. Issuing is just adding a number to an account in the ledger, and circulation is just adding or subtracting numbers between accounts.

What ledgers are there? Stone Ledger (Pacific Island Micronesia / Goodwill Type), Paper Ledger (Goodwill Type) and Electronic Ledger. Electronic ledgers include ordinary database ledgers (goodwill type) and blockchain-based distributed ledgers (algorithmic type). Most of the traditional currencies, such as USD, RMB, HKD, Alipay balances, etc., are led by goodwill. Libra and other currencies, its ledger is algorithmic.

Real digital currency must meet: first is a good currency, its issuance mechanism is not limited, then it is based on electronic ledger bookkeeping, and the final function is a transaction medium. In this sense, what can be called "digital currency" are commercial bank deposits, Libra, DC / EP, and Alipay balances.

Most of the so-called "digital currencies" in the field are actually certain specific rights and interests carried by the token, such as equity, debt, options, futures, real estate rights, degrees … Maybe it is an asset, but not currency, but It is not a digital currency.

The above is the highlights of the 30% live broadcast of the second lesson . Please watch it in the next lesson: "Practical Truth: How Blockchain Technology is Integrated into the Industrial Ecology"