Economist Ba Shusong: The Application Value of Blockchain Technology in the Financial Field

In the Chinese financial system, after a period of exploration, the attitude of the regulators to the blockchain has a clear policy tone: On the one hand, resolutely crack down on the name of virtual currency, cryptocurrency, first-time token issuance (ICO), etc. Illegal fund raising activities. On the other hand, affirming the potential of blockchain technology as an emerging technology, encourages and regulates the development of blockchain technology. Then, under the background of policy-driven and financial institutions' desire to empower their own business through technical means, what application value can blockchain technology bring to the financial industry is a problem that we need to explore further.

Value 1: Strengthening the relationship of trust by changing the "self-certification" to the "other card"

 

The development of financial business cannot be separated from the understanding of micro-entities in the economic society. One of the most common ways to conduct research on objects is the collection of written materials. For example, when a financial institution approves a credit line for a company, it needs to know the income and operating cash flow of the company. Under the existing operation mode, the financial institution will collect financial statements, orders, contracts, and invoices from the enterprise. Materials such as shippers, bank lines, etc., and then use these materials to verify the information in the financial statements. However, in fact, both the financial statements and supporting materials are provided by the loan applicants, that is, the loan companies need to provide a series of physical evidence materials for self-incrimination, which is what we call "self-certification." Therefore, in the self-certified business model, financial institutions need to test the authenticity of these materials before using materials to verify the financial statements, so that operating costs and operational risks remain high.

The application of blockchain technology can revolutionize this business model. The decentralized ledger of the blockchain synchronizes the business data of each business participant (hereinafter referred to as "data chaining"), and generally sets the data-winding rules to be completed by the source of the business and Responsible for the authenticity of the data, such as the order information is chained by the buyer, the invoice data is chained by the seller, the freight data is chained by the logistics company, the bank water is banked, etc., and the source information is available on the chain. Complete automatic cross-validation. We focus on the above tasks of verifying the financial report. The task of verifying the recurring revenue in the financial report can finally be disassembled to verify the income of each sales business. When the financial institution needs to verify the income of a transaction, the order can be used. The amount of invoices and inflows is directly cross-validated. Further, cross-validation can also be performed by multiplying the unit price on the invoice with the number of items in the shipping data.

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Value 2: Ecological integration, achieving cross-ecological win-win

 

Each blockchain network can be regarded as a sub-ecological system. These sub-ecologies are usually based on the scope of business and geographical scope, but they are not independent, but will be associated with other sub-ecologies. Interactions occur and eventually merge into the upper, larger ecosystem. The above-mentioned inter-ecological integration can be realized through the cross-chain technology of the blockchain, so that the data can be opened at the bottom layer to catalyze more meaningful data applications. For example, the two sub-ecologies of domestic market supervision business and supply chain finance business will eventually be integrated into the big ecology of domestic trade. The interaction between them can bring greater value to the business of both parties. It can even explain that financial institutions solve a difficult problem that can be solved through other kinds of scientific and technological means: avoiding the related transactions of empty transformation. In the market supervision business, it is necessary to trace the circulation and manufacture of goods, so that the entire supply chain information from raw materials to final sales can be precipitated on the chain, which can explain the fact that financial institutions are dealing with each other in a subtle transaction. A related transaction in transformation, because if a batch of goods is put into production or is finally consumed after being sold, then it can be determined that the business has a high probability that the business is not an open transaction. At the same time, the possibility of financial institutions providing financing for chain enterprises will also help to increase the enthusiasm of various enterprises, thus indicating that regulators can obtain regulatory information more effectively. The more sub-ecology a company is in, the more latitudes that can be used to portray the enterprise through a cross-chain approach, indicating that financial institutions are more comprehensive in completing KYC and KYB.

Blockchain technology has always been hailed as a kind of trust machine, but in the past, the elaboration of trust relationship has stayed at the technical level. In fact, blockchain technology can also be combined with financial business scenarios. At the business level, financial institutions are better able to identify or evade risks, indicating that enterprises can better prove their qualifications, and ultimately explain the parties to the financial business to achieve a trust relationship. Business Cooperation.

Author: Ba, chief economist of the Hong Kong Chinese Finance Association

Source: Hong Kong China Financial Association

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