Viewpoint | Blockchain's "shock" in the financial field is not as big as expected

Source: Shallot Blockchain

Author: Yanyao Ping

"The financial system will change a lot because of the blockchain, but it will never be subversive. "

Recently participating in the "Break the Boundary. Fusion-Blockchain and Digital Finance Summit Forum", Heping He, the principal of the China Financial Research Center of Tsinghua University, stated clearly when talking about the impact of blockchain on the financial landscape, " I do n’t think centralized The financial system will be disrupted by distribution . "

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Li Feng, the person in charge of Du Xiaoman's financial blockchain who participated in the discussion, also expressed a similar view, thinking that the impact of the blockchain on the financial system is just a bold prospect. " It is too early or too late to use the word " shock " now. It can only be said that currently we see that the blockchain has produced some 'stimulus' to existing (financial) applications. "

As we all know, the development of blockchain over the past ten years has always maintained close links with the financial field.

From the earliest origins of digital currencies and the early application of asset transactions, to the emergence and rapid expansion of later IC0 illegal financing, and to the exploration of stable digital currencies such as fiat digital currencies and Libra, all are closely related to finance.

In the past two years, relying on the development of alliance chain technology, the domestic financial industry (especially the banking industry) has become a very active and active field of blockchain application practice. Major banks and related financial institutions are doing relevant exploration.

There is no doubt that the development of blockchain technology has brought major challenges and opportunities to the financial industry, but there are two voices in the market for the possible consequences of this challenge:

• One believes that blockchain technology will eventually be integrated into traditional financial services, realize digital transformation and information upgrades, and play an auxiliary role in improving business efficiency and reducing operating costs;
• Another is that new technologies such as blockchain will completely subvert traditional financial services and form a new financial structure.

In this regard, we believe that front-line practitioners in the "blockchain + finance" application area have the most say.

Recently at the "Break the World. Fusion" Blockchain and Digital Finance Summit Forum (one of the tenth China Finance and Innovation Development Forum series of activities), from the central bank, China Banknotes Blockchain Research Institute, Weizhong Bank, Everbright Bank Leaders of blockchain technology and products from companies such as, Tencent, Baidu, and Zhongan Technology have focused on topics such as the depth and breadth of the current impact of blockchain on finance, and the potential and practical difficulties of blockchain + finance. discuss.

Scallion specially extracted the essence of content, so that practitioners can timely understand the large-scale financial institutions and Internet giants' phased summary and pre-judgment of blockchain + financial applications.

Blockchain + financial cases are frequent. How much is the "shock" of finance by the blockchain?

In the past two years, due to the rise of alliance chain technology in China, more substantial progress has been made in the exploration and application of blockchain in various fields of the financial industry.

For example, the central bank promoted the creation of a blockchain-based digital bill platform, the “Forfaiting Trading Platform” jointly launched by Bank of China, Minsheng Bank, and CITIC Bank, and the “China-Europe e-Single Link” cross-border blockchain Platform and the trade finance blockchain platform released by the Central Bank's Digital Currency Research Institute.

The implementation of blockchain technology in the financial field seems to show signs of rapid advancement, with an increasingly wide range of applications and increasing business scale.

As a result, more and more people believe that blockchain will revolutionize the financial industry and disrupt the existing financial system and financial model.

However, Li Feng, head of Du Xiaoman's financial blockchain, believes that talking about the "shock" of the blockchain to the financial system can only be regarded as a bold prospect.

He said that using the word "shock" is a bit "premature" or "too big". It can only be said that the blockchain has produced some "stimulus" to the existing financial industry, and everyone has reacted somewhat, not as before That indifferent.

"Although we have seen that To B and To G both release a lot of budgets, but look at this matter in the opposite direction and be calm. Perhaps these budgets can allow the blockchain to obtain short-term respite in accordance with the existing model … we see these budget Many applications will be added, and there are many cases in the industry, but what is the value of these cases? Has it really produced a continuous driving force for the development of the industry? "

Professor He Ping, principal of the China Finance Research Center of Tsinghua University, also emphasized that "I do not think that a centralized financial system will be overturned by this distributed system." He believes that the application of blockchain in financial and other scenarios is not "from 0 to 1", but "from 1 to 2".

He Ping suggested that the application of blockchain in the financial field should be more about adding the elements of blockchain to the existing centralized payment system or financial system to empower and increase the price of traditional finance, rather than to overthrow it. .

"Whether it is supply chain finance, asset securitization or insurance applications, it is necessary to add the elements of the blockchain to the existing centralized basic system, find the pain points that cannot be solved by the centralized system, or do If the problem is not good enough, introduce blockchain to solve it. "

In He Ping's view, blockchain may change the financial system in three main ways.

1. The first is to change the payment system. The existing payment system has been affected by Bitcoin and other public chain cryptocurrencies. In the future, some encrypted digital currencies, tokens / points / other new names may also appear on the alliance chain to affect the existing payment system, which is bound to affect the future The international monetary system has had a very large impact.
2. The second is to change the credit system. Credit is the core foundation of finance, and blockchain will bring about changes in the entire social credit system. It is possible to reconstruct the entire credit system from the aspects of distributed credit generation, distributed credit transfer, distributed credit supervision, and distributed credit evaluation.
3. Finally, change management of the financial system. The core content of financial system management is actually controlling moral hazard and asymmetric information. In the future, it may be distributed management based on the distributed method of the blockchain, so the management of the entire financial system, including the supervision of financial institutions by the supervisory layer, will change.

However, he emphasized that "this change will never be subversion, and I don't think that a centralized financial system will be subverted by this distributed system."

In addition, Du Xiaoman Financial Li Feng also agrees that if you think boldly, the blockchain may have some great changes in the financial industry in the future.

First of all, the blockchain aims to establish distributed trust. At present, there are already some new businesses and models based on the blockchain in the financial field. The growth of this new business may have some changes in the existing financial industry, and as a result, some new forests and new cakes have grown.

In addition, the use of blockchain as a new tool may be able to solve some of the problems existing in the financial industry. For example, in some business scenarios, the traditional absolute centralization model may not work, and the use of blockchain to achieve collaborative governance and process opening may work better.

It is worth emphasizing that Li Feng believes that the current blow to the blockchain is very large, but the actual effect or effect is not so great, so he believes that "maybe the main battlefield of the blockchain is not here" .

The success of Bitcoin shows that the blockchain is doing very well in this scenario without contacting physical users, so Li Feng believes that in the future, if the digital scene of the entire society is sufficient and prosperous, the digital and virtual scene may be Where blockchain works.

He said, for example, maybe ten years from now, everyone will wear 100 IoT devices, and each device involves some transaction functions, which will generate transaction behavior …

And all of these, the existing infrastructure is obviously unable to support it, and a new technology is inevitably needed to support this set of commercial platforms, a new set of financial infrastructure is built, and then the traditional infrastructure will be slowly eroded.

This is the "big cake" that Li Feng is optimistic about and looks forward to digging, but he thinks it may be slow. "What we see is that digital is developing, but not so fast."

Blockchain + finance implementation: difficulties

From the results of on-site discussions, guests generally believed that although the number of cases of blockchain in the financial field has increased, they have not formed the so-called "shock" impact on existing financial services, at least not yet felt any changes. Approaching.

Taken together, Shallot believes that there may be two reasons for this.

On the one hand, the application of domestic blockchains in the financial field is basically in the form of alliance chains. However, from the perspective of technology and applications, the current alliance chain is not yet mature, and the application naturally cannot play its role.

At the forum, Fan Ruibin, deputy general manager of Weizhong Bank's distributed business technology development department, also summarized the current status of the development of the alliance chain. Weizhong Bank is one of the earliest institutions in China to start building the underlying framework of the alliance chain. At present, many domestic financial applications are built on its underlying architecture.

On the other hand, the existing financial institutions and Internet giants are still in the "exploration" and "trial" stages of blockchain + financial applications. They have also encountered many difficulties and have no signs of large-scale advancement.

The forum guests shared their thoughts and problems in promoting the implementation of blockchain financial applications.

According to Fan Hongyue, the head of blockchain engineering research and development of ZhongAn Technology, ZhongAn Technology has mainly tried two modules.

• The first piece is the application of electronic warranty. That is, the electronic insurance policy is put on the blockchain, and the characteristics of the blockchain are used to deposit and trace back applications. In the future, this application may become evidence in regulators, courts and similar institutions.
• Second, I tried an application in the field of tokens. Initiated an insurance asset agreement, which aims to help users pull all insurance assets, that is, to centralize all insurance types insured on different platforms, and break the data silos between insurance institutions.

The specific implementation is to provide a standard template / channel by initiating an insurance asset agreement, allowing individual insurance to be unified on the blockchain according to the asset form defined by the operation. According to the overall insurance asset information of each user, it can be combined with finance , Hospitals and other institutions to analyze the status of personal assets.

Fan Hongyue admits that they encountered three big problems in the whole process of exploration and implementation.

• The first is the question of data credibility. It is not enough for insurance companies to unilaterally place insurance policies on the blockchain. Other users do not have sufficient reasons to believe the authenticity of this data. "Because in fact, in the process of building network data, labor is the most unreliable factor." In response to this, Fan Hongyue believes that new technologies such as the Internet of Things need to be combined, and machine-to-machine-to-method is combined.
• The second is the problem of data standardization. The connection of data depends on the data channel, but if the data is not standardized, this cannot be achieved. Even if the data is shared, it is not known what the other party's data is.
• The third issue is data privacy protection. No matter from the media public opinion or the audience itself, they can feel that the current voice for the privacy needs of users is getting higher and higher, and more and more attention is being paid. How to combine cryptography technology to achieve user-controlled privacy protection is also a major problem.

In addition, how to extrapolate such an insurance asset agreement standard, other insurance institutions face customer competition with each other, how to join and cooperate at the same time … these are the difficulties that promote the application of this application.

Zhang Zuoyi, Product Manager of the Blockchain Department of JD Innovation and Technology Business Department, discussed the key points to promote the application of blockchain in the financial field from the perspective of business practice. He believes that the "three steps" need to be completed.

• The first step is to complete digitalization. Only with digital information can we do information on-chain and some innovative work on a series of chains.
• The second step is the training of talents. Zhang Zuoyi thinks this is more difficult. According to him, JD.com is the original JD Finance. At present, it mainly deals with industrial digitization and digital finance. From the past 3-4 years, this team has completed a complete set of blockchain delivery system from the blockchain kernel engine, to the peripheral BAAS services, to the upper-layer applications …

In the process of promoting the implementation of blockchain financial applications, he believes that the very difficult point is that the team must understand both the blockchain technology and the logic of the specific financial business. "In this way, business needs can be dug in The characteristics of the blockchain are incorporated. "

Because such applications need to form a collaborative network with various participants, they often need to talk to all parties about what the previous process looked like and what they can become after the blockchain, so as to promote implementation. Zhang Zuoyi believes that This is the biggest difficulty. "Technology does not generate value by itself, only by combining specific businesses and products can it generate value."

• In the third step, he also pointed out that the entire implementation process also relies heavily on Jingdong's own resource endowment. Not only the underlying blockchain technology is required, but also some financial industry resources. For example, in the case of asset securitization, the resources of Jingdong Baitiao are issued, which is equivalent to taking part of Jingdong's own assets for securitization transactions.

"With the technology, the right talent, and a point where the value can be generated sustainably, a series of combinations can make it possible," Zhang Zuoyi concluded.

The future of blockchain + financial applications: how to go forward next?

Although at present, the blockchain has not released great energy, the practitioners present still show great expectations for the future application of the blockchain, and put forward the points of follow-up industry efforts from their respective perspectives.

"Although the blockchain is currently only trading in coins, we are very convinced that it can achieve other functions," said Zhang Zuoyi of Jingdong Mathematics. He combined with Jingdong's own practical experience to give two suggestions to promote the block The application of the chain "is a two-wheeled thing".

• The first is to look for scenes that really generate value, so that we can survive and live the better.
• Second, after finding the scene, use the scene to improve technology, train talents and teams, and then precipitate some service capabilities and technical capabilities, as well as the perspective, depth and breadth of the problem. Through such a "double wheel", it is in Summarizing the precipitation during the use, and then improving the comprehensive ability to form a virtuous circle will make the team go further.

Du Xiaoman Finance Li Feng emphasized that "it should be based on encouraging innovation, encouraging research on technology … to prevent it from building on false prosperity."

Li Feng believes that when all the bottom layers prosper and the technology is perfected, they will then be used to generate business value and form the so-called standard case. It is a natural thing to achieve self-blooding and reproducibility in business.

An Qianlong, founding partner of AlphaCoin Fund, believes that the future of blockchain in the global financial field should be comprehensive and multi-layered.

In his view, the impact of blockchain technology on the current financial structure may first be driven by the national level at the national level. Blockchain basic projects like DCEP start, followed by head blockchain technology companies and The cooperation between traditional financial institutions and giant Internet companies; in the end, new startups and small companies in sub-sectors should emerge in every vertical industry.

An Qianlong said that from the perspective of investors, they are more concerned about small innovative companies in the segmentation field, and believe that they can run out of new giant companies in the segmentation direction of this new type of financial technology segmentation industry.

Developed up to now, the blockchain has made many attempts in various industries. Fan Hongyue, the head of blockchain engineering research and development at ZhongAn Technology, believes that there is a problem that is worthy of in-depth consideration at the moment, " We found that the current blockchain is far from the past, so is the future blockchain as it is now? Blockchain? "

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