Exclusive report On May 27, a high-end dialogue themed on "Blockchain - the cornerstone of digital civilization" was held at the Guiyang International Ecological Conference Center. Di Gang, deputy director of the Digital Currency Research Institute of the People's Bank of China, delivered a keynote speech entitled "Blockchain Technology Empowers the Development of Trade Finance".
Di Gang believes that the market's expectations for blockchain + finance come from the existence of unprofessional intermediaries in traditional finance, which reduces capital efficiency and increases costs, making the public call for financial disintermediation. However, Di Gang pointed out that when understanding intermediaries, it is necessary to clarify the different forms of intermediaries. Not all intermediaries are inefficient, and professional intermediaries can instead provide efficiency. Blockchain plays a very important role in identifying effective intermediaries, streamlining ineffective intermediaries, and encouraging professional intermediaries.
Regarding the current early technological development of the blockchain, Di Gang said: "Blockchain awareness needs to be upgraded, and the blockchain cannot be used for the sake of the blockchain. Not all projects need the blockchain, and not all data need to be on the chain. The blockchain still has credibility issues. The blockchain needs to find the right scene and be driven by demand.”
Among them, trade finance is an application being piloted. Di Gang said that the future of trade finance blockchain is a blue ocean, but difficulties and challenges coexist.
He believes that there are three main challenges, one is "the challenge of ensuring accurate access to funds", the second is "the challenge of avoiding the exploitation of upstream and downstream by core enterprises", and the third is "the challenge of taking care of both financing and financing". Among them, how to ensure that the financing side gets the cheapest funds, and at the same time protect the financing side from risks, is the most important challenge to balance the two ends.
Di Gang revealed that since September 2018, when the "Bay Area Trade Finance Blockchain Platform" was piloted, the pilot data so far are: there are 4 applications, access to dozens of banks, and a number of patents.
secondary title
The following is the full text of Di Gang’s speech, organized by Odaily:
Dear Secretary Li, Dear Chairman Liu:
It is a great honor to be able to come here today to give you a report on "The Application of Blockchain in the Field of Trade Finance".
First, let me briefly talk about the long-standing topic of intermediaries and blockchain technology. After several years of development, blockchain technology has been discussed a lot, and it is not a new concept. Just now, I also heard from the host that I have participated in many large and small forums. In fact, you will find that every blockchain forum, everyone discusses different issues and focuses differently, but with development, it is always iterative, progressing, and everyone's understanding is always improving.
So, let's see why finance and blockchain are so closely integrated?
When the blockchain first appeared, everyone discussed the topic of "decentralization" of the blockchain. Later, everyone felt that this statement was inaccurate, and gradually changed it to "disintermediation".
Why do you say that finance and "disintermediation" are coupled? In fact, finance itself is a typical intermediary. However, some doubts and criticisms are often heard now: the "accessibility" of funds, people who really need funds, cannot get funds. Second, cost issues, high interest rates and expensive prices. Third, there is the issue of efficiency. Enterprises need life-saving funds. It is a matter of sending charcoal in a timely manner, but there are many links, low efficiency, and slow lending.
Therefore, everyone finds that finance as an intermediary has not met the expectations of ordinary people, and everyone calls for financial "disintermediation" (that is, financial disintermediation). Later, the media frequently publicized that the blockchain can "decentralize" and "disintermediate". Do you think finance and blockchain can be coupled together? Whether the blockchain will become a life-saving straw to solve this problem, everyone generally begins to have this illusion.
Everyone has a different understanding of the concept of "disintermediation". In fact, this is not a financial problem, nor is it that intermediaries should not exist, but that the chain is too long and there are too many links, and many useless and inefficient intermediaries are flooded in it. Technical means should be used to remove routine intermediaries to reduce the total cost of financing, and at the same time Let professional intermediaries get their due returns, and among them, the blockchain can identify effective intermediaries, streamline ineffective intermediaries, and motivate professional intermediaries
What is a "professional intermediary"? Licensed financial institutions that comply with regulations are professional intermediaries. Finance has the characteristics of complexity, professionalism, and risk. There are "thresholds" for finance. It needs a license, and not everyone can do finance. In this group of professional intermediaries, there are some intermediaries who take advantage of information asymmetry and use "left-handed to right-handed", which are intermediaries of the nature of "scalpers". They lengthen the business chain, increase capital costs, and reduce efficiency. It makes it impossible for those intermediaries who really do services and have value to get their due rewards. Therefore, we must effectively identify "useful intermediaries" and "useless intermediaries", "professional intermediaries" and "routine intermediaries".
The blockchain can simplify the "useless intermediary" through technical means, reduce the overall cost; let the "professional intermediary" get more and more reasonable returns. Blockchain will play an important role in this field, which is what we expect from blockchain. The position of the financing party and the capital party are different, and the value of "professional intermediary" is also different for them. Financiers want cheaper funds, professional intermediaries who can provide this service, and high value. However, the capital side hopes for lower risks, and professional intermediaries who can provide such services are of high value. Therefore, the demands of different positions are different.
Next, let's review the blockchain again. As I just said, blockchain is an old topic, and everyone needs to iterate and upgrade their understanding of blockchain.
First of all, the blockchain is not the same as the blockchain. The blockchain is more of a concept. The connotation and practical operation of different concepts are not the same. It is necessary to clarify the conceptual layer, logical layer, and practical layer , Your blockchain and mine seem to be conceptually different. What you are talking about is the same thing, and what I am talking about is the same thing. So many times, it is because of the different knowledge background that chickens appear. Talk about the situation with the duck. There are even some people, in order to catch up with the technological fashion, for the blockchain and the blockchain. There are still many projects that would have a better effect without the blockchain, but they insist on relying on the blockchain. After using the blockchain, not all data needs to be uploaded to the chain... So, in the blockchain In the chain project, there are all kinds of swords and slant fronts. At the same time, the threshold of the blockchain is not high. Everyone knows that the blockchain itself is open source, and you can set up a node by downloading a set from the Internet.
But, use your blockchain or use his blockchain? Blockchain still has credibility issues. This is the same as the cloud computing back then. A lot of cloud computing was built, but it was wasted there. In fact, everyone is worried. You also have cloud computing, I also have cloud computing, everyone has a set of cloud computing, who should use it? Now everyone has a set of blockchains in their hands, and this is still the problem. Therefore, the most important thing about the blockchain is its authority, and it is also necessary to identify the exact scene and be driven by demand.
Everyone finds that consortium chains are more reliable than public chains. Now there are many large and small consortium chains, but there is a lack of supervision, lack of standards, and difficulties in accessing external data, as well as problems of redundant construction and interconnection. There are still some great difficulties in the development of the blockchain, especially the development of the alliance chain. For example, in the simplest way, we build a consortium chain, with seven or eight nodes operating in it, and I stop the computer for a while, okay? Others are keeping accounts, because it doesn’t matter if there are one or two nodes in the blockchain, each node has selfishness, consumes less electricity, and invests less energy in maintenance. I always think that other people’s nodes are running, and I am one less It's okay, I'll be a little lazy today, okay? I'll turn off the machine today, okay? Everyone thinks so, this chain cannot be turned. Therefore, the entire alliance chain needs a governance mechanism.
I think what Mr. Kevin Kelly just said is very good, when he talked about digital twins and digital identities. The simplest requirement of a digital twin is that I want to make a whole digital mirror image, so who will guarantee that the mirror image I make is exactly the same as myself, without fraud or no problem? Just now, Mr. Kevin Kelly said that after I make a mirror image, it can be guaranteed to be the same as me. This is relatively simple to say, but how to ensure the same? This is a very important issue. How to ensure the consistency of on-chain and off-chain ledgers are two independent issues. In it, everyone found that the old isolated islands were removed, and new isolated islands were created. With the emergence of the blockchain, old barriers are removed and new barriers are created.
How do we solve these problems? In fact, our analysis is still related to the scene. Trade financing is a typical financial business, but this financial business is different from other financial businesses. As you can see, nearly 18 trillion US dollars of trade involves financing every year. It's a size that's growing rapidly every year.
In it, you can see large and small, there are financing parties, funding parties, financial service parties, and public service parties, involving many institutions. The more institutions involved, the more a blockchain fits its DNA. This is what we sorted out. According to the materials of the World Economic Forum, we sorted out the entire business chain of trade financing. As you can see, from the establishment of payment terms, to delivery, to fulfilling the terms, there are many links in the middle. There are many links involved in the importer's local bank, the exporter's bank, the agency bank, the customs, and the logistics company.
At the same time, there are many problems in the current trade financing, such as the problem of "non-causal financing". It is obvious that the tire factory purchases goods from the rubber factory, but under this trade background, when the rubber factory goes to finance, it takes the travel expenses to Financing, this phenomenon is also very much. There is also the problem of "multiple financing" and the monitoring and flow of bank funds. At the technical level, there are also problems of redundant construction, system fragmentation, and access to customs and taxation departments, and it is difficult to share data with other departments. There is also a lack of regulation and standards, a lack of guidance.
You can take a look at the pain points of traditional businesses that can be solved through blockchain technology. First, information can be shared; Become something computable, and it will be fast. Here is a simple example. In the past, bank loans had an annual interest rate, but later it became a monthly interest rate. Now various Internet financial products have a daily interest rate. If the blockchain uses smart contracts and the capital operation efficiency is high, I can calculate interest by the second. In this way, we can improve the operating efficiency a lot by means of calculation.
I will also briefly make a report. I am from the Digital Currency Research Institute. On the one hand, my institute focuses on the research of legal digital currency, and on the other hand, it focuses on financial technology and has achieved some gratifying results. At the same time, we have also built a trade finance blockchain platform. In September last year, a trade finance blockchain platform was piloted in the Bay Area of Shenzhen. So far, there have been 4 businesses, connected to dozens of banks, and formed some patents.
Our platform has three goals, first, "information can be penetrated"; second, "trust can be transmitted"; third, "credibility can be shared". At the same time, we have achieved three major capabilities, "inclusive docking", "controllable sharing", and "peer-to-peer interconnection". What is "inclusive docking"? In the past, we wanted to network the two institutions to achieve point-to-point collaboration between the two systems. In fact, there are still technical difficulties. The blockchain shields these technologies, making it very convenient for us to link up, without having to consider interfaces, protocols, and rules, and can shield many technical details. "Controllable sharing" is something everyone pays close attention to now. Including this forum, there are many discussions about the privacy protection of information. Our Guiyang Big Data Expo also pays great attention to the combination of big data and blockchain, which is a future trend . How to ensure the separation of ownership and usage rights of data? Then, how can data be shared in a controlled manner? You can't take it away, but you can still use it. Therefore, it can often be seen here that everyone is discussing secure computing, homomorphic encryption, and zero-knowledge proof. Everyone is concentrating on tackling these technical points in order to achieve this goal. Another is "peer-to-peer interconnection". In the past, when management departments jointly built or networked, they often spent a lot of energy on the issues of data sovereignty and business sovereignty. This premise and assumption is given when the blockchain comes up. We are equal, and you have data as well as I have data. Everyone can rest assured that the data is the same, and there is no need to compete for this matter. A business problem, a matter that everyone struggled with, was blocked.
Why do such things, first, we are an organization engaged in technological innovation, we have applied for dozens of patents, and we researched blockchain relatively early. Second, we are neutral, we are not a commercial organization, we build a platform and provide services for everyone. Third, ensure the authority. As I said just now, the blockchain also needs labels. It depends on the authority of which blockchain to use. Therefore, when looking at a platform, whether you are fair and credible is still a tangled topic. At the same time, not all the services we provide are provided. We only provide the most basic "standards", "regulation" and "ecology".
These are some of our technological innovations, realizing the "underlying platform"; especially the realization of "regulatory probe implantation", so as to ensure that supervision can be changed from after the event to during or before the event; the realization of "self-identity" and The "privacy protection" of the zero-knowledge proof mentioned earlier, the distributed "communication and storage architecture", and the flexible "middleware" provide a lot of technical differences.
Let's look ahead, the platform we built is more like an operating system with APP STORE. how to say? In fact, each business now has its own centralized system. From the bottom up, from the system layer, to the business layer, to the interface layer, to the presentation layer, but what is the most difficult thing for him? How to deal with others. Therefore, what the central bank builds is actually an ecological platform that does not move your application. When you need to communicate with the outside world, you can interface with me, so that you can call public services and realize data sharing, business collaboration, and system interaction between us. At this time, everyone found that more interconnections should be maintained to achieve "inclusive docking" between systems, so that the original platform will not be destroyed. Therefore, we think that the blockchain platform has gradually developed from small and beautiful applications at the beginning, just like the Internet, from intranet to internet, it has continuously evolved from a small ecology to a large ecology.
In fact, our trade financing platform allows financing parties to obtain the cheapest funds; allows capital parties to obtain assets with the lowest risk; and then, trade service providers can provide good data and services. The platform considers these aspects to create an inclusive ecology. But having said so much, at present, we have been doing trade finance and blockchain, and found that this field has just started. I also agree with Director Li’s judgment on the development of blockchain just now. Trade finance is based on the blockchain platform, and the future is a blue ocean. At present, it has just started, and the Long March has just taken the first step. There are still many difficulties and challenges left by the platform. There are three main challenges, one is "the challenge of ensuring the precise access of funds", the second is "the challenge of avoiding the exploitation of upstream and downstream by core enterprises", and the third is "the protection of both financing and financing challenge". Among them, how to ensure that the financing side gets the cheapest funds, and at the same time protect the financing side from risks, is the most important challenge to balance the two ends. Okay, I will simply report to you today. If there is something wrong, please criticize and correct me. Thank you.
