Gu Yanxi: The top design of the blockchain era

The distributed accounting technology based on blockchain will fundamentally change the current computing model of the centralization mode of the financial industry. It affects every aspect of the financial industry. The future of the financial world will be completely different from the present (see my article on the future of digital financial network ecology, a unified exchange and banking ecology , and the structure of the digital financial network ecosystem ). For a company that has a certain amount of resources and is focused on providing financial solutions using blockchain technology, it must be designed at the bottom of the blockchain technology. This is because solutions in any of the currently segmented financial sectors will inevitably involve the infrastructure of the financial market and the medium in which it flows, as well as other financial business segments.

Without such an overall design, it is possible to have a variety of software that meets specific functions such as mortgages and stable coins. There is no connection between these softwares, but the development of the business requires cooperation between these software. Therefore, it will become a nightmare for system integration, upgrade and operation and maintenance. This situation has emerged in the past traditional enterprises, but also in the recent Internet e-commerce and Internet finance companies. If it is to catch up with the company without a market affair and sufficient capital support, then the probability of the company's failure is very large.

I believe that now Java developers who have developed a decent software will adopt a basic framework called Spring. This framework provides a basic framework for a large Java software. Based on this framework, this can easily integrate various basic functions required by an enterprise-level software, including rights management, security management, log management, docking with the database, and so on. In the open source software market, if there is a solution that provides a specific function, Spring can easily integrate it, and the integration method is basically a plug-and-play mode.

The integration of these specific functions does not affect the overall stability of the software. Due to the superior functionality of this framework, it is used by almost all enterprise-level software developed in Java. However, this framework did not appear at the same time as Java first started. Java was born in the early 1990s. The emergence of Spring was in the early days of this century. Prior to the advent of Spring, a Java-based development of enterprise-level software was written by the appropriate development team. Therefore, the quality of software developed in this way is very different. Later upgrades and maintenance have become a nightmare for developers. The blockchain is at the current stage of development, just as early as Java has just emerged. Every team that wants to develop software based on blockchain technology must first choose the underlying blockchain technology they are based on such as Ethereum, EOS, Fabric or Corda. Then develop the features you want to offer, such as mortgages or forecasts, on top of the selection. On top of this, it is necessary to design and build the underlying framework. This is similar to taking the initiative to build your own Spring. For software that provides a single function, the design of the underlying framework is not that important. But for a comprehensive solution or blockchain software that wants to be very scalable, the choice and design of the underlying framework is critical.

For financial industry solutions, this solution first considers the specific issues that must be addressed, the target customer base of the service, and the more services that may be offered in the future. Only by considering the big and long-term aspects will we choose a very solid and scalable foundation to support the long-term development of the future. This is like a builder's consideration of future architecture. If he considers building a commercial complex, he will not only lay foundations and start construction for a small, independent store.

A blockchain-based solution requires not only the design of the overall framework of the technology, but also the overall design of the business, which is the choice of business strategy. If the business strategy is not right, no matter how good the blockchain technology is, it will not promote business success. Strategic choices range from traditional strategic choices to strategic decisions in the blockchain era.

In terms of traditional strategic choices, one option is the choice of upstream and downstream industries. If you take the way of upstream and downstream, it will increase the probability of company failure, and will become a closed ecology. One example of this is Facebook's Stabilized Coin Strategy for News Reports (see my two articles on Facebook's Stabilization Coin , Facebook should be an ST exchange, not a stable currency ).

If Facebook provides its own stable currency and cross-border payment service at the same time, it will form its own ecology in the production side and channel side of the product, excluding the participation of other parties. The most correct strategic choice in this regard is Starbucks' decision to encrypt digital currency (see my article Why does Bakkt's first round of investors have no Starbucks? Is Bakkt's pursuit of Starbucks worthwhile? ). It did not invest in the business of encrypting digital currencies on its own, but it also got Bakkt to integrate its digital asset payment functions into Starbucks' clients by giving away equity. And I believe that in the area of ​​encrypted digital currency payments, Starbucks has not signed an exclusive agreement with Bakkt, so it is possible to cooperate with more service providers in this regard.

One of the biggest mistakes in the blockchain business model is the mismatch between the solution and the target customer group, such as using encrypted digital assets to serve unbanked and underbanked people who are not served by banks or banking. How can such a customer group take the lead in adopting encrypted digital currency to achieve their daily needs without a bank channel? Another biggest strategic mistake is to focus on replacing the most powerful places in the center, such as using blockchain technology to solve post-trade liquidation in the securities market.

In terms of business strategy decisions that are directly related to blockchain technology, the first step is to make choices at different levels of the blockchain, which is commonly referred to as Layer 1 and Layer 2. That is to say, choose between basic technology and commercial applications. The general startup team can only choose to develop in Layer 1 or Layer 2 because of limited resources. However, for a company with a certain resource, it is very likely that it will choose to do Layer 1 and Layer 2 at the same time. This choice is the worst. It will diversify the company's limited resources and force commercial applications to be based on the underlying development. Such a choice will definitely lead to a high probability of failure. JP Morgan is able to develop Quorum and develop stable coins on it, but not every company has the resources to make such a choice.

The most successful recent in this regard is IBM's cooperation with stars. IBM did not choose to re-establish a low-level cross-border payment system based on blockchain in the cross-border payment business, but chose to cooperate with the star system. Let's play their respective strengths together. This has achieved a 1+1>2 process, both in terms of implementation capabilities and market influence. Such a strategic choice must have been learned by IBM after years of pain.

The most important business choice based on the application of blockchain technology is the application scenario. The initial reason for the blockchain technology is to solve the problem of mutual distrust, but it requires cooperation for a common goal (usually a common enemy with strong power). If you maximize the value of the blockchain, you need to look at where the situation exists in the real world. From this perspective, there are many situations in the real business community, such as the sharing of trade finance and user information among financial institutions. Only the application of blockchain technology in these scenarios is the best application of this technology, and it can be accepted by the market.

IBM's World Wire with the stellar system is a good application for this in the cross-border payment space. Compliance financial institutions in various countries cooperate to complete cross-border remittance business based on the guarantee of the underlying technology of the stellar system. Such an application successfully broke SWIFT's actual monopoly in this business. By the same token, I believe that in the field of encrypted digital assets, there will also be a financial alliance between national compliance brokers based on blockchain technology (see my article, the next financial alliance based on blockchain cross-border ).

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