The blockchain view of Sun Guofeng, the central bank's monetary division (1): the destructive power of creativity

This article will be divided into three sections, which will introduce Sun Guofeng's latest views on blockchain, central bank digital currency and regulatory technology. The core content comes from Sun Guofeng's new work "Golden Nails – The New Coordinates of China's Financial Technology Transformation" and the representative papers previously published by the author.

Sun Guofeng is the proponent of the subversive theory “Loan Creates Money (LCM)”. He is the current director of the Monetary Policy Department of the People's Bank of China and an authoritative leader in the field of credit money. The new work "Golden Nails" reveals a lot of the latest results, including the definition of blockchain in the financial sector, the various issuance plans for the central bank's digital currency, and the discussion of regulatory technology standards. The book is clear in logic, well-documented and informative, and the author is in a high position and has information resources that ordinary people do not have. It is worthwhile for me to wait for practitioners to study hard.

As the first user to read the book on Douban, let me talk about some of the gains.

(1) blockchain, creative destructive power

From the title "blockchain: the power of creative destruction", the author first defines the blockchain as a "destructive force", and because this force destroys the old tradition and brings new possibilities, it It is also "creative."

"Golden Nails" is mainly about the transformation of China's financial technology, the positioning of blockchain in it, together with big data and artificial intelligence as the "technology" to serve "financial technology", from the sort of blockchain (fourth Chapter) is even ranked after big data (Chapter 2) and artificial intelligence (Chapter 3).

Core point of view:

1. The essence of financial technology (Fintech) is finance, and power is technology. The application of blockchain technology is part of the application of financial technology in the financial sector.

2. Interpretation of Bitcoin White Paper

Nakamoto believes that: First, the mode of processing information by means of third-party institutions has endogenous weaknesses that lack trust between points and points, and cannot completely avoid fraud. Second, the existence of intermediaries increases transaction costs and limits. The minimum feasible transaction size; third, the digital signature itself can solve the problem of electronic currency identity. If third-party support is needed to prevent double consumption, the system will lose value. Based on the above three problems, Nakamoto has built a new data structure and the basic technology of transaction information encryption transmission (ie blockchain technology), and based on the blockchain technology, created bitcoin.

3. Generalization of the nature of blockchain

The blockchain is essentially a decentralized database. At the same time, as the underlying technology of Bitcoin, the blockchain is a string of data blocks generated by cryptography. Each block contains a bitcoin network transaction. Information used to verify the validity of its information and generate the next block. Simply put, blockchain is a decentralized distributed accounting technology. The thing to do is to enable the participating parties to establish a trust relationship at the technical level.

4. Analysis of the advantages of blockchain

(1) It cannot be falsified and safer.

To protect property security, there are usually two ways: to hide it, only the owner can get it, such as gold; to declare ownership of the property, and to endorse it by law, such as real estate. The traditional security scheme is the first idea, and the blockchain is the second. With blockchain technology, anyone can share a database of recorded transactions. However, due to the clever design and supplemented by cryptography and consensus algorithms, the blockchain can not be falsified by the history of the database. Practice has proved that such a database can ensure that bitcoin with a market value of tens of billions of dollars is stable under the attack of global hackers.

(2) Heterogeneous and multi-live, high availability.

Because the normal operation of the entire system does not depend on individual nodes, each node can have a choice of underground lines for routine system maintenance, while still ensuring 7×24 hours of uninterrupted operation of the entire system.

(3) New collaboration mechanisms are more efficient.

For large-scale multilateral collaboration between companies, there are usually only two solutions before the blockchain application.

First, look for a common "superior" institution between multiple entities, and coordinate the entire organization with a common trust center. The limitation of this approach is that in some scenarios, it is difficult to find a trust center that is recognized by all market participants; for a center, coordination matters must have priority, and it is not always possible to meet all collaborations in a timely and effective manner. demand. * This limits the scope of cooperation.

Second, through the joint formation of a third-party organization, that is, all participants complete the collaboration by sharing part of the rights and jointly forming a third-party organization. The limitation of this approach is that third-party institutions tend to be independent. If the system fails to meet its profitability and management needs, third-party organizations tend to become the actual power centers of the participants. Third-party organizations will face increasing maintenance costs after they are established. * This increases the cost of cooperation.

As a trust machine, the blockchain is expected to become a new mode of collaboration with low cost and high efficiency, forming a new collaboration mechanism with a larger scope and lower cost.

5. Breakthroughs and challenges to traditional financial architecture

Trust is the foundation of the financial industry. To build a trust mechanism, the financial industry has developed a large number of intermediaries with centralization, including securities, insurance, exchanges, third-party payment platforms, and banks. However, the traditional intermediary agencies deal with information too much labor, and the financial information communication chain is too long, often need to pass through multiple mediation, which makes the error rate high and inefficient. How to build trust efficiently, conveniently and at low cost has become a common concern in the industry. The book then analyzes the possibility of combining traditional financial fields such as stock exchanges, banking systems, insurance industry, supply chain finance, and financial supervision with blockchains.

6. Definition of "digital currency"

At the end of 2013, the five ministries, including the People's Bank of China, issued the Notice on the Prevention of Bitcoin Risk, clearly stating that Bitcoin is not a currency but a virtual commodity. * "Digital currency" in the book refers to the digital currency issued by the central bank.

The history of currency development shows that in order to meet the ever-increasing demand for transaction size, the currency develops from the original credit currency to the government credit currency, and then develops into the bank credit currency. People's trust in the government and the central bank is the basis for the existence of credit currency.

If the credit currency realizes the first leap of money from specific items to abstract symbols, electronic information technology makes the second leap from the paper form to the paperless direction.

8. Cold thinking about "blockchain heat"

At present, the biggest crisis encountered by Bitcoin comes from technical risks rather than business risks. Even a theoretically complete algorithm can cause various errors in the implementation. Once a high-level vulnerability occurs, the foundation of the entire blockchain “building” will collapse. In addition to subjective factors, the non-subjective flaws in the engineering implementation of blockchains using so many encryption algorithms are also objective. In addition, 51% of power attack, loss of private key, low standardization, and escalation of smart contracts all restrict the further development of blockchain.

In the end, Comrade Sun Guofeng concluded that any innovation will have certain risks and opportunities. We should actively participate in the development of blockchain technology and participation rules in the event of preparation, and then grasp the right to speak. It may encounter barriers in opening up the international market and become passive due to the loss of market opportunities.

My interpretation:

1. Golden nails are a geological term that refers to the sole criterion for determining the boundaries between strata in two eras. The allusion comes from the last commemorative nail nailed to the American railway. When the golden nails come out, they are two eras. Comrade Sun Guofeng pointed out: Financial technology will become an important "golden nail" in the history of global financial industry development.

2. In 2014, Comrade Sun Guofeng published a paper entitled “Impact of Electronic Money on Credit Currency System” , which modeled the electronic currency. The definition of Bitcoin said: “No institution bears the redemption bitcoin. The responsibility, therefore, bitcoin is not a kind of credit, does not have the characteristics of credit currency. "And after careful inference, it came to the conclusion that when the residents' willingness to consume is not strong, and the willingness to invest and produce is strong, electronic money and French currency is the easiest to coexist and achieve balance." But these contents do not appear in this book.

3. Last year, I participated in a blockchain conference in the financial sector. There was a sentence stuck in the eyes of the blind man, and I was swallowed back. The political nature of Bitcoin is much larger than the financial property. In the old article "Deprivation Circles, Block Chains and Lungs" , the blockchain is introduced to bring No. This power is clearly political, not financial.

4. The discussion of blockchain in Golden Nail is a technical analysis from the perspective of Fintech. Equivalent to a specific segment of the field to explore a specific technology, can only explain the possibility of this technology in this segment. Compared with the basic knowledge of popular blockchain, the central bank's digital currency is more concerned by the currency. "Golden Nail" is also in the hope of being very sincere. I personally feel that it is the most interesting part of the book.

The central bank’s digital currency is still not issued, when it is sent, and how it is sent. What the central bank’s digital currency can do and cannot do. See the second issue of the Central Bank Digital Currency.