Conversation | Libra needs to deal with three issues toward an unlicensed network

Author: Mutual chain Pulse Editorial Department

Editor's note: After the release of the Libra white paper, there are many interpretations in various aspects. On the weekend, the interchain pulse interviewed the blockchain researcher Mr. Newton. It is mainly from Libra whether it will become the world's stable currency, and what challenges Libra will encounter to build a non-licensed network to further understand Libra, which are rarely touched by current discussions. For the first time, Mr. Newton dedicated his insights in these areas.

Mr. Newton: Independent scholar, the chief of the "Conceptual Economics Tea Dialect", deepened the design of multiple projects, participated in the construction of blockchain economics, and wrote many high-quality articles that attracted extensive attention and discussion in the blockchain industry. Article: "Gold is the biggest air coin", "Money is dead, Token eternal life", "The first nautical chart to the digital New World", "The way to escape slavery: self-association – Free collaboration of free people", etc. .

Why Libra can act as the world's stable currency BTC, E T H and EOS

Interchain Pulse: Libra has discussed a lot. If you want to define Libra in one sentence, what is it?

Mr. Newton: My definition is: Libra = VISA in the 1970s and the stable currency of the World Central Bank.

Regarding Libra, everyone has various definitions of it, such as the central bank of the digital economy, the blockchain version of Alipay and so on. In fact, Libra can be viewed from three dimensions: stable currency, organizational management and payment.

It doesn't have to be said that the payment is as long as Facebook does, and its payment user volume is ten times and hundred times stronger than the average startup company.

In fact, now everyone is most concerned, the most discussed is that Libra is a stable currency, and is a stable currency issued by Facebook.

Therefore, it is necessary to dismantle my understanding of the stable currency. As early as last June, I published a keynote speech on “Stabilizing the Currency Illusion” in an offline event, which stated that “there is no stable currency”. The name of the stable currency has a big problem. As long as we look at the details a little bit, we will find that there is no stability in the currency. For example, the renminbi will fluctuate against the US dollar, and the dollar will always fluctuate relative to gold

Therefore, stability is relatively stable, not absolute stability. The stable currency in everyone's mouth now usually refers to the digital currency issued by the legal currency for anchoring. The stable currency that everyone intuitively feels is actually the stability of an asset price reflected in the use of money. For example, I spent 20 yuan on dinner last night, still spend 20 yuan today, 20 yuan tomorrow… We went to buy some daily necessities, and the price is basically unchanged. This is what people think is stable and relatively stable.

Therefore, when people pursue stable coins, the essence is to pursue the value scale.

The value scale is a very important attribute of money. From the examples of eating and daily necessities, we can also feel that the scale of value that people usually use is closely related to life and consumption. We use some daily items to make judgments. Compared with most items, it is considered to be a reasonable one. The value scale. To put it another way, the value scale is somewhat like the “index” of these items, but the extreme fluctuations of individual items can be removed from the index. In fact, the bitcoin guess I mentioned before is based on this idea, and can also be understood as a stable currency. (Mr. Newton’s own currency conjecture, see “Bitcoin is just a commemorative coin who can become a global currency?| Interlink Time Capsule” article)

There is also a very interesting point. We find a value scale through layered asset anchoring, but the world is not static. In the whole process of economic operation, new assets will appear, and new assets must not be in the original. Anchored in the system. At this time, we used a scale anchored by the underlying assets, and in turn measured the value of an underlying asset. It is a very interesting phenomenon, and it is also a point that everyone can easily go around.

In the end, what do we use to anchor, and the value scale of one's mind is closely related to which assets are the problems that need to be faced. The main assets for people's consumption are now in a period of great change. The things we used to consume are more of atomic assets. Now we are gradually moving towards bit assets, which is what the new and old worlds are talking about.

The value of the new world can be anchored by what assets. This problem is part of the previous blockchain industry where there are more discussions, more explorations, and more experiments. But after a while we found that there are still very few things in the new world. Now more assets are still the so-called old money, which accounts for an absolute majority.

We can also find that all the digital currencies anchored by the New World are not officially functioning. Bitcoin can be said to have failed. Ethereum and EOS can also be declared a failure. On the contrary, the traditional world's legal currency is anchored. The coin ran up. At this time, we will look back and forth at Libra, and you will find that the assets he chooses to anchor are ok, no problem.

Mutual chain pulse: Why do you think Libra anchored assets are feasible, can you elaborate on it?

Mr. Newton: I had an idea before. By making a lot of houses, a lot of fixed assets as STO, and then gradually forming a standard currency and a stable currency, it must be theoretically feasible, but it will be lacking in practicality, because now There is no such step in the development of the entire industry, and the certification of these assets will take a long time to complete.

At this time, Libra chose a very clever method. He chose the national debt, and the legal currency, as well as the legal currency of some countries with good credit, because the legal currency is a good value scale in traditional assets.

At the same time, Libra's white paper mentions liquidity, which is very important, and now the best liquidity is the legal currency and national debt.

Therefore, when we understand the idea of ​​the original functional currency and imagine him as a layer of pyramids, then Libra does not directly do it from the bottom layer, but takes the spires of the pyramids of each country. Directly set up a higher-dimensional pyramid tip.

So I think Libra is no problem to implement. At least for now, the feasibility is higher, it can be real, and it matches the value scale that people need now. Although it is said by many people to be eclecticism, in the present, it is indeed the best solution that can satisfy both "stability" and "landing".

What I am thinking of now is another question. Is it really a good transition in the future? That is, in the process of transitioning from the old world to the new world, how to complete the problem of the conversion of anchored assets.

Libra can face three major challenges in decentralization

Mutual Chain Pulse: Why Libra is VISA in the 1970s, I have seen your article "Facebook Money, China's Best Coping Strategies" . In terms of organizational governance, VISA has become centralized. Libra's goal is to be a non-permitted, decentralized organization. You have also proposed a new form of self-conformity before you. Can you think Libra can become a self-cooperation? What problems might you encounter in the process of going to complete decentralization?

Mr. Newton: After two days of thinking, I think there may be several problems.

The first problem is that many assets are difficult to decentralize themselves. Therefore, Libra is difficult to decentralize due to restrictions from asset issuers and management parties.

First of all, the issuance of money is not made out of thin air. Anchoring is usually split into two types: one is an asset and the other is credit. In the history of human currency, the early days were more anchored by assets, and now they are anchored by credit. Libra's anchored assets are national debt, and the essence of national debt is credit.

Therefore, we have to have a deeper understanding of assets. As far as the division of assets is concerned, I have talked about more, that is, to divide assets into atomic assets, bit assets, and composite assets. (Atomic assets and bit assets can be divided and explained in the "Interchain Exclusive | Mr. Newton: The Old World is the Digital New World of Assets is the Assetization of Digital" )

(Mr. Newton’s panorama of atomic assets and bit assets)

When we trade, the property is property, not the asset itself. Therefore, there are two points that need to be guaranteed. One is to ensure the one-to-one correspondence between property rights and things, and the other is to ensure that property rights are dominated by objects and can completely control items.

Based on this principle, we can draw a conclusion that for atomic assets, there is no way to completely decentralize and must rely on centralized institutions.

Only a part of the bit assets can be decentralized.

For example, "Game of Thrones" is particularly hot. The show itself is an asset, but fans may download pirated copies. When using pirated copies, there is no reduction in the acquisition of product value. The difference, this is useless even if you put it on the chain, you still need a centralized organization to defend your rights.

We will find that bitcoin is different. It copies a bitcoin from the blockchain network. It is a number and cannot be consumed, so bitcoin can be completely de-neutralized.

The underlying principle can be an abstraction. Let us judge whether an asset can be completely decentralized. One important point is to see if the user must be in the network to get the full value of it.

If it is not available on the Internet, then it can't be completely decentralized. It must rely on a centralized organization to supervise it, just like the current patent, the current copyright.

If you have to be on the network, you can decentralize, for example, I mentioned Bitcoin. After you copy it out, there is no value.

Through analysis, we found that the vast majority of assets now facing, even if the proportion of bit assets is already high, but if the bit assets are chosen as the anchor of the currency, I think there is still a long way to go, because the bit assets The vast majority of them still do not decentralize.

Maybe the society will really develop to that day. At that time, it will not cost anything to eat, and it will not cost money to watch movies. Then the focus is on social value + all kinds of value in the network, maybe these things will happen, but there are still some problems in the future.

Mutual chain pulse: Why is it that it is difficult to decentralize the anchored assets themselves, so it is difficult to decentralize them?

Mr. Newton: So with Libra's current anchoring, the current anchoring is a hypothesis because it has not yet been announced. Suppose that according to the logic in its white paper, it anchors the US dollar, the euro, the Japanese yen, and a series of national sovereign legal currencies. In the process, we will find these currencies, which themselves must rely on centralized institutions. , that is, an institution like the Federal Reserve.

So many people judge that Libra is an extension of the legal currency system, not a subversion of the legal currency system, because it relies on these centralized institutions, relying on banks, can freeze Libra's reserves at any time, so it can't do it. Complete decentralization, I also agree with this judgment.

Even in the future, if it relies on real estate to do distribution, the same reason will depend on the centralized organization that manages the house.

Inter-Chain Pulse: What other problems might be encountered that prevent Libra from going completely decentralized?

Mr. Newton: The second question is that the anchoring ratio of a basket of assets is difficult to decentralize.

The question of the design of the basket is one reason why some people who study the economy have not stood up to Libra because they feel that they have not talked about the design of the basket, which means that the white paper has nothing to say.

The core question here is how is the proportion of the basket distributed? The current dollar is the most appropriate, so most of the anchoring dollars are not faulty, but what should I do when I adjust it dynamically? And we can almost 100% confirm that this basket must not be static. It must be dynamic. In the process of dynamic change, how to adjust and balance the interests of all parties is related, is it a complete democratic vote, or is there any form? Can conflicts be resolved? This is a serious problem that Libra encountered after decentralization.

The third question is about the profit-seeking nature of capital.

This is a point that I am worried about. It involves the founder's will. I believe Zuckerberg very much, but he can't live for 10,000 years. What if he is not there? Switching to the example around us, Ren Zhengfei is not in Huawei, will it be like this?

The reason I have this doubt is because the Libra white paper is the same as the one that was created when VISA was first created in the 1970s. The organizational structure is almost exactly the same, just a little fine-tuning. (For a detailed analysis of Libra's organizational structure, see "Facebook Coin, China's Best Coping Strategies" )

However, VISA later encountered problems, and his founder left VISA to retreat, so VISA became a company and went public. Until now, VISA's stocks are very beautiful, like the stairs going up, almost no decline. Although it is hard to say that it is unsuccessful from the stock price level, the vision that he originally established similar to Libra has not been realized, so I think VISA has failed.

I think VISA has changed. One important point is that the capital is profitable. What is this specific concept? There is a great article about Gaochun Capital in the last two days. I will quote it directly to help you understand.

"In the A-shares of the 1990s, a group of speculators bought a large number of liquors simultaneously after purchasing the stocks of liquor companies. When the stock price was boosted by the sales volume, they could cash out and get a premium. In the whole process, this batch of wine is stored in the wine enterprise warehouse, and it is stored intact. For Gaochun Capital, the value of post-investment management is also logical, even without the need of speculators. Under the counter, you can achieve efficient and win-win by only constructing transactions openly. As a shareholder, Gaochun earns the market value of the business. 'But if you help the company to make 20 million more profits, there will be 15 times price-earnings ratio. Wait a minute, estimate more than 3 billion '."

Now, no matter how to give your shareholders how to return the proceeds, it is through the structure of Libra, to give the commission to the founders, such as fees, interest, etc., these benefits can be compared with 15 times, 20 times the leverage ? This is the charm of capital, and it is completely in line with the demands of rational economic people. So how to prevent this from happening, this is a big question mark for me.

And for other projects in the general economics, we must also pay attention to this, and to meet the demands of capital from the structure, rather than blindly talking about feelings.

Mutual chain pulse: Can you make a summary of the above mentioned problems? And Libra is different from Bitcoin, Ethereum, USDT and other native blockchain projects. Libra is a traditional company's trader. If it succeeds, can it provide an experience for traditional enterprise blockchain transformation?

Mr. Newton: First, the asset itself is difficult to decentralize. This is the bottom issue, so it is difficult for Libra to leave the centralization organization. The second is how to design the proportion of assets in the basket, how to ensure that the value scale of the design is neutral. The third is how to keep the return on capital and avoid being kidnapped by capital.

In addition, the organizational structure of Libra and VISA must be able to be integrated into other industries. It is more suitable for organizations with many centralizations in some industries. No one can monopolize. At this time, everyone can build a platform together. For example, I have recommended this architecture with the insurance industry.

However, I must also say that the theory is feasible and does not mean that it is practical and feasible. In the process of our true contact with the enterprise, it will be extremely difficult to discover our own lives. One of the reasons why Facebook includes such a big sensation is that it is done by Facebook. Just as many people have mentioned that the white paper says that there is no innovation, just piece together, but it doesn't matter. Facebook is the most important thing to do. Not all Facebook-level companies are willing to do this.

Mutual chain pulse: There are still many people discussing the regulatory issues facing Libra, and what impact might it have on his subsequent development?

Mr. Newton: Basically, I think the mainstream circle has reached a consensus. Although I don't know the details of compliance, because I am not an expert in legal affairs, but there will be a very intuitive judgment, that is, Facebook, must have done a lot of communication and negotiation behind the scenes. Since the beginning of last year, Zuckerberg has decided to do this. It took a year and a half to prepare, and he has so many excellent teams that bring together experts from all walks of life.

And he is not a grasshopper entrepreneur, but a head of the 100 billion empire, he must have a total trade-off, I am convinced. In this case, he said that he did not pass through the various parties. First of all, I did not believe it.

The best way is to participate

Inter-Chain Pulse: You have been involved in the recent article "Facebook Coin, China's Best Coping Strategies" and participated in the Libra network, but some people are only participating through Singapore companies, and domestic companies seem to be hard to participate. among them.

Mr. Newton: The Chinese government can't do too much now, but companies must do it now and move through overseas institutions. As you said, you can join Libra in Singapore, so we don't understand China, it can be understood as Chinese.

Libra has written such a wonderful vision. You don't try it. How do you know if he will follow the white paper? If he follows the white paper, why do you want to do it again? It doesn't make sense. This is already the best. It can attract all the material resources and all the intellectual resources. It is harder for you to do better than him.

And it's open. If one day something goes wrong, can we make a hard fork?

As a commercial organization, if you walk on the road from full security, you should walk on two legs at the same time. One leg is to quickly apply for registration and join Libra. One leg is against Libra, and one is also initiated. This is no problem. Like the Mastercard of the year, their sponsors are also one of the founding members of VISA.

So I am very encouraged, and now I have to join, and the sooner the better.

You have to try it quickly. If it really gives you a limit, it is also very good, and it proves that it has a problem. If there is a problem, it will not move. Then let us prove that he tells the world that this cost is low for us, so why not do it.

Interchain Pulse: If Libra follows the white paper and everyone joins Libra, will Libra become the only stable currency in the world?

Mr. Newton: Actually, I have already described it roughly, and it will not be unique.

When credit cards became popular, there were also multiple organizations, and there were also open institutions like VISA, but in the end, not only did VISA survive, but also Mastercard. My understanding of the stable currency, the understanding of the functional currency, I think there is not only one in the future. There should be several, which can form mutual checks and balances, but not too much.

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