Babbitt column | Facebook is serious about sending money, how about the bank blockchain?

On June 18, 2019, Facebook announced that it plans to issue a stable currency called “Libra”. Through Libra, it provides inclusive financial services to more than one billion people around the world. Libra makes the blockchain lake that has been slightly calmed. active. From Bitcoin to Libra, blockchain technology has gone through a decade of reincarnation, starting with finance and returning to finance.

Although the future of Libra is still inconclusive, it has given the world a broad and consistent deep reflection on the ability of blockchain technology to change the financial industry. Libra is a return to the classic goal of blockchain technology and is very strong.

The Global Times’ English-language version of Libra’s commentary pointed out that “in the era of global digital currency competition, China cannot be absent.” “With the advent of the global digital economy competition era, it is necessary for Chinese industries and regulators to conduct more on digital currencies. Dialogue, understanding and even encouraging digital currency. Otherwise, China may fall behind in the new financial landscape."

In the working meeting held by the People's Bank of China on August 2, 2019, it was also explicitly proposed to speed up the research pace of China's legal digital currency. In September 2019, the State Council issued the "Opinions on Supporting Shenzhen's Pioneering Demonstration Zone with Chinese Characteristics", which also pointed out that "support Shenzhen to carry out innovative applications such as digital currency research and mobile payment."

• Research Report | Central Bank Digital Currency Research Report (1)
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• Research Report | Central Bank Digital Currency Research Report (2)

So what is the bank doing in the decade that the blockchain has gone through? Let's take a look at the actual use cases of domestic and foreign banks.

I. Blockchain application of foreign banks

Among foreign banks, the leader in blockchain technology should be non-JPMorgan Chase. JPMorgan Chase entered the blockchain field earlier, and its Quorum platform, which is hosted by R&D, is a recognized technical representative of the Ethereum Alliance (EEA). Based on Quorum, JPMorgan Chase launched the IIN (Interbank Information Network) platform in October 2017 to achieve cross-row information interaction with the goal of SWIFT. JPMorgan Chase, Royal Bank of Canada, Australia's ANZ Bank, and Bank of New Zealand have joined the platform. By the first half of 2019, more than 200 banks have announced their participation in IIN, and IIN is scheduled to start in the third quarter of 2019.

In February 2019, according to CNBC, JPMorgan Chase will launch a test within a few months to launch the cryptocurrency JPM Coin, which is a stable currency linked to the US dollar. The program is issued to large institutional clients who have undergone regulatory review for real-time transaction settlement between wholesale payment business customers. In theory, cross-border payments can be completed in conjunction with IIN. JPMorgan Chase is the first large commercial bank in the United States to plan to issue virtual currency.

On May 27, 2019, Shinhan Bank, Korea's oldest bank, launched a loan platform that supports the blockchain, which is designed to increase the time efficiency of the process. As the second largest bank in South Korea, the bank has consistently adopted blockchain technology. Earlier, it also implemented interest rate swap transactions based on blockchain.

In June 2019, according to Finextra, a financial technology news media, the Italian Banking Association (ABI) announced that it will deploy blockchain technology and adopt blockchain technology for interbank reconciliation from March 2020. The move is part of the Spunta (meaning “check”) project, which aims to increase the transparency and efficiency of communication between banks. In October 2018, the project completed the first round of testing, validating the application of blockchain and smart contracts, and the most recent round of testing was successfully completed in February 2019. In the same month, the Italian House of Representatives approved a bill defining DLT and blockchain to clarify the technical standards that smart contracts must comply with.

On June 18, 2019, HSBC announced that it had adopted token technology in its accounts receivable infrastructure for Indian corporate customers. HSBC's Digital Receivables Tool (HSBC DART) is based on the token technology of an Australian blockchain financial technology company. HSBC has said in its report that implementing blockchain technology in foreign exchange transactions can reduce its operating costs by 25%.

At the end of July 2019, Philippine United Bank, a large commercial bank in the Philippines, launched a block-based technology-based stable currency called PHX, which is linked to the country's legal currency “peso”, backed by the bank's reserves and focused on payment. The ultimate goal of the business is to support the “Digital Financial Inclusion” advocated by the Central Bank of the Philippines. The bank has now entered into a partnership with OCBC Bank, Singapore's second-largest bank, to remit the legalized currency from Singapore to Cantilan Bank in South Surigo, Philippines, and successfully implemented the use of blockchain technology across the Philippines. The first attempt at the remittance.

As for the foreign banking industry as a whole, it has a positive attitude towards blockchain technology. There are "coin" and no "coin" applications, and efforts are being made to use blockchain technology to some disadvantages in the traditional financial industry. make changes.

Second, the blockchain application of domestic banks

The earlier blockchain application in the domestic banking industry was the multi-party information exchange realized by the Postal Savings Bank in the asset management business through the Fabric Hyperledger in 2016, that is, the asset management party, the investment management party and the custodian. The blockchain platform is connected to improve the execution speed of instructions through smart contracts, thus improving the inefficiency of the original parties to exchange instructions by mail and telephone.

After that, domestic banks have tried various applications.

(1) ICBC

At the beginning of 2017, ICBC participated in the research on the issuance of digital currency of the central bank and the digital ticket trading platform based on the blockchain. In March of the same year, ICBC completed the construction of the prototype system of the financial product trading platform based on blockchain technology, on its platform. The client provides point-to-point financial asset transfer and transaction services; in May of the same year, ICBC's blockchain and biometrics laboratory launched the Guizhou Province's poverty alleviation fund blockchain management platform, with the support of the Guizhou Provincial Government, ICBC and Guizhou Guimin Group cooperated to realize the “transparent use” of poverty alleviation funds through the cross-chain integration and information mutual trust of the bank financial service chain and the administrative approval chain of government poverty alleviation funds, and the “transaction traceability and non-tamperable” of blockchain technology. “Precision delivery” and “efficient management”.

On November 20, 2018, ICBC successfully issued the first digital credit certificate financing. ICBC's joint core enterprise and third-party supply chain financial service platform use blockchain technology to integrate the procurement capital flow and trade flow between core enterprises and suppliers at all levels to the block alliance platform, which is equivalent to data exchange for core enterprises. Credit Rating. Any supplier in the supply chain who holds the digital evidence of the receivables can apply for financing to ICBC online. After the application for the order is approved by the ICBC Smart Credit Platform, the loan can instantly reach the enterprise account, effectively alleviating the end of the industrial chain. The financial pressure of weaker enterprises.

In May 2019, the Xiong'an New District Management Committee officially launched the Xiong'an Resettlement Fund Management Blockchain Platform, which will apply ICBC blockchain technology to realize the entire process of land acquisition and capital transfer. Chain management.

(2) Agricultural Bank

In August 2017, ABC cooperated with Fun Chain Technology to launch a blockchain-based agriculture-based Internet e-commerce financing system – “e-chain lending”. The product uses blockchain technology to provide complete e-commerce financing services to corporate customers in the e-commerce supply chain, in order to solve the long-standing problem of information asymmetry and high management cost of the agriculture-related credit business.

ABC also built a digital credit system (referred to as “small bean”) based on blockchain technology, which encourages customers to experience more key functions and services of palm silver with various rights and interests. According to statistics, by August 2018, the “Xiaodou Paradise” was on the line one year, with a cumulative participation of more than 13 million customers.

In 2018, ABC launched an enterprise annuity project that applies blockchain technology. By integrating the entire process information of the enterprise annuity business, information sharing among business participants is realized, and data processing efficiency is improved. By building a trusted alliance chain, the transaction credibility is enhanced and the processing time is shortened from 12 days to 3 days.

ABC also participated in the “Ball Group” of Xiong’an Block Chain, and cooperated with Xiong’an Group to develop a blockchain electronic billing system to support the Group’s implementation of e-banking acceptance bills in the blockchain fund management platform for new district projects. Payment and settlement of the entire chain, thus achieving comprehensive financial service innovations such as bidding management, payment settlement, and supply chain financing and integration.

(3) Bank of China

In January 2017, BOC launched the iOS version of the blockchain e-wallet (BOCwallet). The wallet address consists of 32 digits + English letters. The user can bind the bank card number of the individual in the bank; in June of the same year, the bank In cooperation with Tencent, the blockchain technology was tested. In August of the same year, BOC joined the SWIFT (Global Banking Financial Telecommunications Association) organization and global banks to join the SWIFT gpi blockchain proof of concept to promote the application of finance in the SWIFT gpi project.

Xiong'an New District can be described as a concentrated application area of ​​China's blockchain technology. BOC participated in the new land acquisition system, blockchain fund management system, builder information management platform, Xiong'an Group Intelligent Forest System, and Xiong'an Group bidding Development and construction work such as systems. As of March 2019, it has participated in the bidding project of 100,000 mu Miaojing dual-use forest, Rongdong intercepting flood channel, intercepting flood channel landscape forest, etc., and has accumulated 47 general contracting and subcontracting accounts to be the winning bidder. Direct connection service is available.

(4) CCB

In September 2017, CCB worked with IBM to develop and launch a “blockchain banking insurance platform” in Hong Kong to provide services for its retail and commercial banking business. In November of the same year, CCB completed the first blockchain forfeiting. The transaction, with an amount of nearly 100 million yuan, became the first bank in China to apply blockchain technology to international factoring business. The system has gradually evolved into a blockchain trade financial platform, realizing the end-to-end full-process online processing of domestic letters of credit, Forfeiting, international factoring, and logistics finance. As of the end of 2018, the cumulative transaction amount of the platform exceeded 200 billion yuan.

In 2018, CCB took the lead in setting up the service construction team of Xiong'an New District and established the China Construction Bank Hebei Xiong'an Branch in the local area. CCB is one of the participants in the Xiong'an blockchain rental application that was launched in February 2018.

On September 29, 2018, CCB built a “blockchain financial precision poverty alleviation platform” to actively promote the combination of financial technology and precision poverty alleviation, and achieve transparent use, accurate delivery and efficient supervision of precision poverty alleviation funds.

In addition to the above, CCB has also launched some blockchain projects in the fields of charity business and drug traceability.

(5) Peace

In 2016, Ma Mingzhe announced at the Executive Committee of Ping An Group that the blockchain will be the focus of the future of Ping An. In April of the same year, Ping An officially joined the R3 Distributed Ledger Alliance and was the first financial institution in China to join the alliance.

In February 2018, Ping An released the BaaS platform for the credit chain of the financial industry blockchain solution.

In September 2018, the financing platform project of the Hong Kong Monetary Authority, which was supported by Ping An, was officially launched.

(6) Weizhong Bank

In May 2016, Weizhong Bank and more than 20 institutions initiated the establishment of the Financial Blockchain Cooperation Alliance (Shenzhen) to promote the development and application of blockchain technology. Since then, members of the Golden Chain Alliance have expanded to nearly six major industries and nearly 100 institutions. In August of the same year, Weizhong Bank and Shanghai Huarui Bank launched the inter-bank reconciliation platform for micro-finance, which is also the first banking alliance chain application scenario in China.

In 2017, Weizhong Bank jointly developed the Blockchain Open Source Platform (BCOS) in conjunction with the Wanxiang Blockchain and Matrix Elements. Several member organizations of the Parallel Alloy Chain Alliance jointly developed the financial branch version of BCOS—FISCO BCOS. The large platform is now completely open source, which has promoted the formation of the domestic open source blockchain ecosystem.

In October 2017, Weizhong Bank cooperated with Guangzhou Arbitration Commission and Hangzhou Yibi Technology to build a “arbitration chain” based on blockchain technology. Through the characteristics of blockchain distributed storage and encryption algorithms, it provides true transparency for the judiciary. Retrospective real-time preservation data. In February 2018, the Guangzhou Arbitration Commission issued the first award in the industry based on the “arbitration chain”, marking the true landing of the blockchain application in the judicial field and the completion of value verification. On November 12, 2018, FISCO BCOS completed its first overseas appearance at the 2018 Singapore Financial Technology Festival.

Weizhong Bank has since focused on the construction of blockchain platform and ecological cultivation. On March 20, 2019, FISCO BCOS open source community officially released FISCO BCOS 2.0.

Due to the limited space, this article will not introduce the blockchain application of each bank one by one.

Third, on the bank's thinking on the application of blockchain

When the blockchain technology was first implemented by “Zhongben Cong”, it was indeed aimed at the transformation of the existing financial system. This is reflected in both the white paper and the Bitcoin creation block, but in the past ten years, the district Blockchain technology is still controversial, and there are few breakthroughs in landing applications.

The current blockchain application of banks, in addition to the application of digital currency by a few foreign banks, most banks at home and abroad have no "coin" application for blockchain technology, but only highlight the blockchain tamper-proof Data hardening capability, which is the most important problem in the current blockchain application, because blockchain technology does not have strong data storage capabilities. Bitcoin, Ethereum, and Libra practice the design of minimizing data as much as possible. the way. Although the application may be "rich" and does not care about resource consumption, this is not the principle that good design should follow.

The author believes that the bank's blockchain application should think more about the following:

(1) Failure to make full use of "trust"

Blockchain is not an ideal way to store data, nor is it an ideal way to support big data applications. The blockchain plays a role in data hardening, and the data on the chain is not easy to tamper with. However, the bank does not simplify the business process and change the product form after adopting the blockchain technology. For example, the supply chain and trade financing fields are hotspots in the current blockchain application. Letters of credit, Forfaiting, and factoring are all available, but the financial products on the chain have not changed much, but only changed the business information. Delivery method.

If you think deeply, in fact, there are many financial products in the supply chain, trade finance and other fields, not because customers have more demand, customers only use one demand – capital. Different financial products are actually designed to solve the problem of information asymmetry in different scenarios. Since it is recognized that the blockchain can solve the problem of data tampering and provide "trust", then the type of financial products should be significantly reduced, because there is not so much information asymmetry that can be solved. For example, why do you need a letter of credit?

Numerous supply chain financial products may be integrated into a blockchain financial product based on key financial data and smart contracts for financial products to meet the core demands that customers have never changed. The key data of financial products include: the unique identification of Party A and Party B, the unique identification of the contract, the amount, the term, the price, the unique identification of the guarantor, the guarantee rate, the unique identifier of the collateral, the pledge value, the right to recourse, and the status of the contract.

Banks only need to adopt a simple product contract to link the information on the chain used in financial products such as warehouse receipts. When financing, repayment, etc., the relationship between the information on the chain and the participants is modified. In this way, the smart contract is also more easy to accomplish.

From the perspective of the blockchain, there should be no complicated financial products, only complex information relationships, and the value of the blockchain proves the authenticity of this complex information relationship.

(2) Heavy platform, light connection

Since the birth of the alliance chain, the enterprise-level blockchain application is basically a coalition chain form, and the alliance chain form all represents a "thick" platform application. The node deployment usually chooses cloud deployment, and the nodes are actually distributed. On the same "cloud". The blockchain application in this way not only causes the concentration of information, but also represents the concentration of governance. Except for a few nodes with voting and accounting rights, other nodes are only equivalent to clients, and are represented by a small number of nodes. In fact, there is no longer a "free" power. This is also the point where the alliance chain is often criticized. Such a platform is hardly said to be fundamentally different from a traditional distributed system.

The application of the bank, whether it is the purchase platform or the self-built platform, adopts the alliance chain form, and basically does not have the ability to expand to the public chain, so there has been a lack of "killer" applications. The technical white paper proposed by Libra balances this problem by establishing a network in the form of a coalition chain, but supports the expansion of the public chain and large-scale user deployment in a way that nodes can be built at low cost. Therefore, Libra was able to “strilate a thousand waves”.

Libra's wide-ranging attention once again illustrates the importance of “connection”. Only by gradually moving away from the “platform” design and making the blockchain easy to deploy, can it become a broader financial infrastructure and promote the development of standards as soon as possible. The development of key technologies such as operations and cross-chain.

(3) The exploration of the value network is not enough

At present, domestic banks generally lack exploration in this area. As the central bank accelerates the research on legal digital currency as one of the key tasks in the second half of 2019, CBDC is ready to go, and domestic banks need to be fully prepared for value network applications.

The change of currency pattern has a great impact on economic life, and the digital currency programmable features are not inferior to the acquisition of a new Internet technology company that has advantages in technology and customer online scene construction and control. "accelerator".

In summary, when the blockchain technology is gradually “positive”, all banks should seriously consider the possibility of representing this technical form, although in the end, it is not necessarily the blockchain that makes the bank “surprised”, but technological innovation. Subversive, has been demonstrated again by the blockchain, which is far from being a complicated implementation in the technical field.

Author: Fu Xiaoyan

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