Viewpoint | Helping National Governance, Industry Self-Discipline, and Social Credit-the transformative power contained in blockchain

Source of this article: China Discipline Inspection and Supervision News , original title "Blockchain's Transforming Power"

Author: Lvben Fu, professor of Economics and Management University of Chinese Academy of Sciences; CHEN Xiao-peng, researchers at the National Innovation Strategy Research and Development

The blockchain comprehensively utilizes computer technology such as distributed data storage, point-to-point transmission, consensus mechanism, encryption algorithm to record data. This method has two major characteristics: First, the blockchain does not rely on managers, but rely on computer clusters to independently operate reliable businesses. Second, the data records are completely public and the data cannot be tampered with.

General Secretary Xi Jinping pointed out in the 18th collective study of the Political Bureau of the CPC Central Committee: The integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation. We must regard blockchain as an important breakthrough for independent innovation of core technology, clarify the main direction of attack, increase investment, focus on conquering a batch of key core technologies, and accelerate the development of blockchain technology and industrial innovation.

As an information technology, blockchain not only at the level of productivity, but more importantly at the level of production relations, contains a huge transformative force.

What has changed on the blockchain

Blockchain has only changed the way information (data) is recorded. Why is there such a big impact? Nobel Prize winner Robert Oman's "repetitive game theory" can give the answer. Through a long-term study of repeated prisoner's dilemma games, Oman concluded that "cooperation is often an equilibrium solution for repeated games." From a theoretical analysis, the repeated "prisoner's dilemma" solves the following two problems:

First, repeating the game allows both sides of the game to understand each other's information to a greater extent, so that more private information becomes public information for both sides of the game;

Second, repetition of the game makes it possible to retaliate in a tooth-to-tooth manner. Tooth-to-tooth revenge means that one side of the game will never betray the other first, and will return the opponent's previous cooperation in the next round, but he will also take betrayal actions to punish the opponent's previous betrayal.

Give an example. If the two vendors are doing one-off trading, both parties choose to default is definitely the best choice. If the two manufacturers are a long-term partnership, on the one hand, they have enough time to retaliate against dishonesty, so that the breaching party understands that the dishonesty can only take advantage of at most once, and at the cost of long-term losses. Short-term benefits will be less than long-term benefits. On the other hand, if you express your sincerity, establish your own reputation, reduce moral hazard, and thereby obtain higher marginal benefits at a lower marginal cost, a cooperative relationship formed by repeated games based on mutual trust Will continue for a long time.

The blockchain's record of information is permanent, unchangeable, and can be retrieved throughout the network. For all members of society, the "one-time game" no longer exists, and in any case it is a multiple game. If any member still has "one-time slaughter" and "bullying" and other behaviors, it will be permanently recorded on the blockchain, thereby being isolated by the rational society. The blockchain will play a role in standardizing the behavior of both sides of the game through repeated games, so that rational economic people can reduce transaction costs and rationally allocate social resources, thereby maximizing social welfare.

Boosting national governance

General Secretary Xi Jinping emphasized in the 18th collective study of the Political Bureau of the CPC Central Committee that it is necessary to explore the application of “blockchain +” in the field of people ’s livelihood, and actively promote the use of blockchain technology in education, employment, pension, precision poverty alleviation, medical health, and commodities. The application of anti-counterfeiting, food safety, public welfare, social assistance and other fields provides people with smarter, more convenient and higher-quality public services.

Since the emergence of the "state" in human society, most of the organizational forms have been bureaucratic government agencies. They basically manage social and public affairs according to the "management-regulation" model. This model has many advantages. But there are shortcomings. In the system, each node can only passively receive instructions and information from its superior, that is, the center, without any initiative; outside the system, each center is independent and does not communicate with each other, resulting in low efficiency of the flow of information and value. In the field of people's livelihood that requires complex information transmission and multiple interest disputes, the bureaucracy appears to be inefficient. There will also be problems such as power rent-seeking due to the concentration of power and fairness crises due to opaque information.

In the field of people's livelihood, the "autonomy" of blockchain can be used to abandon the traditional "management-regulation" model and follow the "governance-service" concept, thereby reducing the cost of national governance. The so-called "autonomy" means that all nodes participating in the blockchain system follow the same consensus mechanism, without any intervention, freely exchange, record, and update data, and jointly and autonomously maintain the reliability of the entire blockchain system. And security, therefore, "autonomy" can also be called "co-governance", that is, each participant does not exist in a completely dispersed atomic type, but an organic part of the consensus mechanism.

Blockchain can be combined with current e-government "only run once". The government commissioned the development of a blockchain system to complete various function settings. During the operation period, it retired behind the scenes and provided only the necessary coordination and guidance. The rest will be mainly done by the public using the system to help themselves. For example, a large number of manual verification, approval and other operations involved in the public service process will be provided automatically, and the public can self-manage and self-service. This governance mechanism built on the blockchain can promote openness, transparency and efficiency of government affairs, thereby improving the credibility of the government.

Boost industry self-discipline

The blockchain also has an avant-garde design called the "smart contract", which means that on the basis of data that cannot be modified, the working mode of the blockchain can automatically run according to the contract that has been set. In other words, as long as the set conditions are met, the contract is automatically executed without manual intervention.

At present, in the supply chain of Chinese enterprises, there are often “mutual debts” between upstream and downstream, which cannot be settled on schedule, resulting in a reduction in the efficiency of the supply chain. Take the phenomenon of migrant workers 'arrears of wages as an example. Between the owners, contractors, labor subcontractors and migrant workers, a smart contract for migrant workers' wages is established through the blockchain, and payment will be made as soon as the conditions are met. Through technical means, you can solve the problem of arrears of wages, thereby regulating the healthy development of the entire construction industry.

In short, for an industry, if all links are on the chain, it will help enhance credibility and industry self-discipline. ADEPT (Autonomous Decentralized Peer-to-Peer Telemetry) technology has been able to complete all on-chain, laying a technical foundation for industry self-regulation.

Boost social credit

The risks of modern society are increasing, and the resulting uncertainty is more diverse. Credit is a prescription for dealing with risks. The traditional social trust mainly based on interpersonal trust is gradually developing into a systematic trust in the institutional system relying on rules and legal guarantees.

The foundation of the credit system is a variety of microeconomic subjects (natural and legal persons) with civil conduct capabilities. The short-term effects of microeconomic subject actions are a common problem. The existence of a hammer sale is due to the existence of a large amount of private information and information Asymmetry.

Blockchain technology establishes a credit information database that includes all members of the society (legal and natural persons) and exposes it to the whole society, so that the two sides of the game have more public information for each other, so that repeated games can be played longer on the basis of cooperation . This kind of information database will make the one side of the game better establish its reputation, and allow the other side of the game to better understand themselves. The credit system built on the blockchain can provide various educational backgrounds, contracts, certificates, etc. Through the blockchain record, various circular proofs of "my dad is my dad" are avoided.