Juca said, post blockchain hotspots and make a sound!

The special host of this issue of "Ju Jia Shuo" is Dana, Marketing and Operations Director of ChainDD, and the invited sharing guest is Liu Changyong, the founder of Zhimi University.

(Slightly abridged without changing the original meaning)

The following is the transcript of the interview:

(Slightly abridged without changing the original meaning)

Moderator: 2020 is the year of the rapid rise of DeFi centralized finance. Do you think that the popularity of DeFi this year is really caused by demand?

Liu Changyong: First of all, I can answer with certainty that the popularity of DeFi is driven by real market demand, and it is an important link in a real revolutionary change, and this revolutionary change, or a new economy The emergence of the form has continued from Bitcoin to the present, and its core is four words: decentralization.

Why is decentralization so important? That’s because before the emergence of computers and the Internet, when our world economy was running, due to the slow speed of information dissemination and processing, we had to rely on some intermediaries and centers in many economic activities. In order to be able to process and coordinate information as quickly as possible, so our previous economy, the economy before the emergence of computers, I call it the material economy. The typical feature of the entire material economy is that many economic activities are centralized. Under the conditions of material production and consumption, this is the most efficient.

But in the era of information economy, computers appeared, which standardized all information into 0101, and the Internet appeared again, which connected all information through the network. In this way, the speed of information dissemination in our social economy is actually , The processing speed is very, very fast. That is to say, theoretically, in our information economy, the speed of processing information is so fast and the capacity is so high, it can be decentralized in many ways. There is no need to do one more thing, no need to go around a center. Our most typical is currency. In the past, we had to rely on a very reliable center to keep accounts for us and manage a series of things. So now we have seen on Bitcoin that currency can be automatically verified on the Internet through mutual verification between nodes to ensure its implementation. This center is not needed, thus removing the entire consuming banking system.

Therefore, in the information age, many original centers of economic operation can actually be removed. After removing these centers, efficiency will be greatly improved. Bitcoin has shown us a simple currency system on a global scale, which can operate and can be verified without so many outlets, so many buildings, so much consumption, and so many talents of the previous banking system. This saves a lot of costs and improves efficiency, so this is the meaning of decentralization. It is a new economic organization method that can bring about a huge increase in efficiency after our world economy has shifted from a material economy to an information economy.

Then this decentralization is the whole wave, you call it the blockchain, and I call it the crypto economy, because an important technological innovation that can start all this is the emergence of asymmetric cryptography. So the demonstration of the power of decentralization of the crypto economy, looking at it now, has gone through three stages:

One is the emergence of a decentralized cryptocurrency, Bitcoin. It shows us the first new economic system that can be decentralized on a global scale and greatly improve efficiency.

The second is the emergence of ICOs in 2017. Generally speaking, most ICO projects have failed, wasting a lot of resources, but one thing, it was successful, and it was also the main driving force of that bull market, that is, with the help of a centralized system, everyone can quickly Easily issue your own assets.

It can be said that the emergence of Bitcoin eliminated the center of the bank and established a decentralized currency system. Then the issuance of decentralized securities, that is, on the basis of Ethereum, we use ERC20 to issue various Tokens. This is actually a decentralized securities, which removes the center of our previous asset securities system. Any A person can easily find a Token for tens of dollars and half an hour, and it can be circulated globally, and there are many exchanges that can be listed. How difficult it is for a normal company to go public, issue shares, and circulate them. Therefore, after Bitcoin removed such a huge system as the center, then ERC20 removed the centralized securities system, and the efficiency improved a lot.

The third is DeFi, especially DEX, that is, decentralized transactions. What does it bring? It is effectively a continuation of decentralized currencies and decentralized securities. Decentralized currency, Bitcoin and Ethereum provide a value system that circulates globally, and decentralized securities, ICO, provide a system that can freely issue its own assets. Free money plus free assets, but they also require transactions. Previous transactions were all in centralized exchanges. Then the operating cost of each exchange, a large exchange, is several million, or even tens of millions, a month. A small exchange has a monthly operating cost of 300,000.

But we now see that, in fact, if we develop appropriate software codes on the Ethereum ecosystem with the help of smart contracts, and put them in, it will be able to provide you with an automatic transaction service, functionally completely replacing A centralized exchange is established, and the monthly cost of a centralized exchange of several million yuan is completely unnecessary. If you think about the monthly operating expenses of a trading exchange, there are so many exchanges in the world. DEX eliminates this part of the cost, bringing the DeFi boom in the first half of this year.

So these three crazes are: Bitcoin in 2013, ERC20 in 2017, and DeFi in the first half of this year. These three times are all real innovations, and the fundamental point of innovation lies in decentralization. It is just a gradual step-by-step decentralization in the three fields of currency, securities, and trading. So this is a real demand, so this innovation is effective, not a complete gamble or a complete scam as some people say.

Moderator: The total locked positions of DeFi projects have exceeded 20 billion US dollars. At present, the growth rate of locked funds in DeFi has dropped significantly. How long do you think DeFi will continue to be popular?

Liu Changyong: Every time such a major innovation appears, it takes a period of time to settle, and many people can’t see its advantages, including the fact that Bitcoin appeared in 2009 before it became popular in 2013, and it took several years . In addition, ICO is actually the same. I remember that the issue of Token started in 2013, but it was not until the bull market in 2017 that it really became popular. This DeFi, that is, DEX, has been done at least since 2015, and it took several years to successfully reflect it in the market. After a few years of accumulation, once it is reflected in the market, everyone will follow it, and the wealth effect will bring about a greater upsurge. So we have seen the bull market of Bitcoin in 13 years, the bull market of ICO in 2017, including the bull market of DeFi in the first half of this year, all of which are very hot. Of course, there will be huge bubbles in it.

It's just because it is really innovative and has a huge increase in efficiency, so it won't die out completely after being popular. It means that it will not be so popular after being popular, but it will still continue take effect. So now the upsurge of DeFi has basically passed, but it can still continue to develop, but it is difficult for everyone to imagine earning hundreds of times and thousands of times on dex like in the first half of the year. In this round of bull market, several times and ten times are possible, but if you want another chance of hundreds of times and thousands of times, you must have a new field and another innovation.

Moderator: What problems is DeFi currently facing? Is there a chance to break through the current market bottleneck?

Liu Changyong: It should be said that after 4 or 5 years of accumulation, DeFi has become popular because some of its main problems have basically been solved. For example, security issues, some technical issues, and economic model issues have basically been resolved. There have been many failed DEXs before, such as the earliest trading system of bts, which was a decentralized trading system, but they all failed. So the reason why it became popular this time is that many people continue to discover problems and improve continuously, and finally it can be used, and it can really be used on a large scale as a formal trading system. So generally speaking, DeFi has now entered the stage of products that can be used in the market, and there are no major problems.

However, there are still several problems in its further expansion. For example, in terms of technology, DEX that can compete with centralized exchanges is mainly on Ethereum, which is a transaction between Tokens on a chain. It is more difficult to cross-chain, but transactions on the entire market The relatively large volume is the cross-chain transaction between coins with large market value. This kind of DeFi is difficult to solve now.

Another issue is security. It is a bit similar to the previous problems of Bitcoin. It does not mean that its bottom layer has a big problem, but that when people use it, there are still great security risks, which is mainly in the user segment. Then this will also be a problem.

Another biggest bottleneck is that the current DeFi is still mainly concentrated in the circle, or in the field of cryptocurrency. We say that the complete meaning of DeFi is decentralized finance. It is to decentralize traditional financial related products. But we know that in a complete economy, its finance serves other sectors of the economy, because other sectors need finance, so the financial field will appear and develop, and after it develops, it will also promote The development of other sectors of the economy, in turn, the overall progress of these economies will promote financial development, which is a virtuous circle. But our current DeFi mainly stays within the scope of the previous Token and the previous decentralized cryptocurrency.

So to put it more generally, it is mainly used to speculate in coins. It is still difficult to fully expand into the traditional financial field. This is because we are now facing a huge problem, including many people now think that the blockchain is only suitable for finance, because what we have seen is truly successful and popular. The most important thing is currency, assets, Token, and then the transaction of these Tokens. No wonder some people think it is a casino. Because it is not closely connected with other sectors of the economy, it is the demand generated in the process of currency speculation, and it is mainly for currency speculation services. So if it serves currency speculation, there is a problem. It may be largely a zero-sum game: if you earn, I lose; if I lose, you earn. So only when it is closely integrated with other sectors of the economy, it will bring about an increase in efficiency and promote the value of the economy as a whole.

That is to say, when decentralized finance can really serve the wider economy, it will bring greater economic dividends, and these dividends can promote its expansion to a wide range of financial sectors. In other words, the real bottleneck it faces is that it is limited to the field of cryptocurrency and crypto assets, and cannot really expand to all fields of the economy, and cannot replace traditional finance in many ways. The scale of traditional finance is really huge. Only the currency circle can truly enter the mainstream economy and truly become a new financial form that replaces traditional finance.

Moderator: In 2020, many popular projects have emerged under the DeFi wave, such as YFI, SUSHI, etc. What do you think of such projects?

Liu Changyong: Since the successful products of DeFi have indeed been tested by the market, their safety and efficiency are good, so they have relatively strong vitality. In addition, in general, we also said that DeFi has major innovations, so it can also bring about cost reduction and efficiency improvement, and it is generally promising. But one factor to consider is that because a very typical feature of the new decentralized economic form is that it is not subject to copyright and company laws, so it is very easy to copy each other, and it is also It is precisely because it is very easy to copy each other that these DeFi products have been iterated from generation to generation, and finally succeeded in this generation. Then this advantage also determines that the current DeFi products may not be the last.

That is to say, in terms of a specific product, it may be replaced by a new and better product, because the latter product can absorb its advantages, innovate some new points, and then start a new project. We have also seen that when Sushi appeared, before that, it copied UNI's model and code, but it added Token, and it took away most of Uniswap's market in a short period of time. Normal is also the advantage of the DeFi system. It is not hindered by any obstacles. As long as a system is made more efficient and useful, then the transactions will immediately flow to this new system. This also increases the competition for previous projects, but overall it is good.

So in the simplest terms, the entire DeFi has been evolving forward, and the entire ecology is supported by innovation, so it is promising. But for each project, it is actually replaceable, and there may be new projects to replace it.

Moderator: Recently, as mainstream investment institutions have entered the market and increased their holdings of BTC, does this mean that digital currency has gradually become mainstream?

Liu Changyong: It should not be said that digital currency has become the mainstream. In fact, we have seen that this round of Bitcoin has been favored by mainstream institutions and gradually began to enter this field, not because it is a currency, but mainly because it has become an asset. A new type of asset with a large enough scale, forward-looking and great room for appreciation. Therefore, it should be said that it is a digital asset, or a cryptographic asset, which has entered the mainstream world, and has entered the mainstream financial field as an asset.

Well, I have been talking about this round of bull market since last year. Of course, it is indeed a little earlier at the end of this year or after the Spring Festival next year. This is a good thing. I have always emphasized before that the bull market is coming, and this time the bull market is going to be like the previous bull market on the basis of the current scale, to achieve a 10-fold increase of the previous high point, it must require mainstream financial institutions to come in. . We have also seen that since the first half of this year, the attention of mainstream financial institutions has gradually increased, and the voices and influence of those people who are first deployed in mainstream finance have become more and more recent. This is the bull market of this round. a main feature of . In other words, this round of bull market is when mainstream finance begins to use Bitcoin as an important component of their asset allocation. This is a simple sentence to define this bull market.

Moderator: I would like to ask a question about recent hot spots. There has been another turmoil in XRP these days. Some people think that the XRP incident will lead to a collapse of the market. What do you think about this? What do you think the follow-up development of XRP will be like?

Liu Changyong: Ripple’s incident has indeed dealt a major blow to the market, especially for altcoins, except for Bitcoin. Because of Ripple's market value, it ranks third besides USDT. Then it encountered such a big problem, that is, it plummeted by about 50% in the past two days, and the impact was very large. In the past two days, we have seen that the increase of Bitcoin has far exceeded that of other currencies, which may also be related to this.

After mainstream finance came in, they actually didn't know much about the details and historical things in this field.

People who have been in the currency circle of Ripple for a long time, one is very despised, and the second is very strange why it can still be ranked third. I don't like it because it is a centralized token. Although it also uses encryption technology, we call it cryptocurrency, but it is a centralized cryptocurrency. I remember that I played for a while in 2013 and 2014. After a while, I found out that it is a centralized one. It is controlled by Ripple Labs, and all its releases are pre-released. Go to the market to cash out. This centralized cryptocurrency is completely inconsistent with the decentralized reform direction I mentioned earlier.

And Ripple actually appeared in 2004. It predates Bitcoin by several years. I was in 2013 or 2014, and I wrote a Weibo, and I said, if there is no Bitcoin, then Ripple is an important innovation. But with a decentralized cryptocurrency like Bitcoin, a centralized cryptocurrency like Ripple has little value and meaning. At that time, I used a sentence called "Since Shengyu He Shengliang". That is to say, since Bitcoin will appear, there is no need for Ripple.

But what we didn't expect was that it survived the bear market in 14, 15, and 16 years. And it broke out during the 17-year bull market, it should be said that the increase far exceeded Bitcoin. Later, I learned that in 2017, domestic MLM groups and capital markets had already entered in with the help of Ripple. In other words, why did it perform so well in that bull market? An important reason is that it is a centralized cryptocurrency, and its center is a team with very traditional financial experience.

To put it simply, in the savage and primitive financial market of cryptocurrency, they are a professional team, and their experience in market value management and market value control manipulation is very good. The bull market, coupled with his professional financial knowledge and financial skills, made Ripple very beautiful indeed.

However, I later wanted to understand this matter, and I did not dare to bet on Ripple, because the reason why Bitcoin was successful, why did Satoshi Nakamoto create Bitcoin, and why did all the previous cryptocurrencies die? All but Ripple are dead. When Satoshi Nakamoto founded Bitcoin, he said that one of the important reasons why the previous cryptocurrencies were dead was that they were centralized. The monetary system and the asset system, if they are not big, once they become big, if you are centralized, you will inevitably be regulated or attacked by the traditional financial field. It is even more serious as a currency, which will directly challenge the legal currency authorities. The legal currency authorities will directly suppress you, and even simply take you away.

So to make such a currency system that is not a currency system, it must be decentralized, which is why Bitcoin appeared. Then the incident of Ripple currency that appeared this time proves this. It is really so powerful if it is not centralized. You may not attract the attention of the fiat currency authorities within one year, two years, or three years, and you may survive, but in the long run, there are risks, including USDT, which is also the same problem.

Ripple is actually more serious. It was issued in advance from the beginning, and USDT is at least mortgaged for US dollar assets and then swapped out. Ripple was created entirely out of thin air, and on a massive scale. So it is very normal for it to be targeted by U.S. financial regulators and then prosecuted, and this is also a huge consequence of its centralization.

The United States was investigating Bitcoin in 2011 and 2012, and China suppressed it in 2014, but because it is decentralized, it is like punching cotton, so there is no point of focus. You don’t know who to catch, even if Satoshi Nakamoto is still alive, it’s useless if you catch Satoshi Nakamoto. Even if V God is caught now, the short-term price of Ethereum may fluctuate, but others can still play without him, and maybe they can play better. This is a major difference between centralization and decentralization. If a field as important as currency needs a center, the country is still reliable. If you want to do a currency system that does not require a country, it must be decentralized.

So Ripple, since regulation has come, it will be very troublesome in the future. We know that there is an example of Libra. Libra is because Facebook was such a big company when it was launched, and it has alliances with so many big companies, so it has to go through the regulatory hurdle first. It was regulated before it was born, and to put it bluntly, it was emasculated by regulation, and in the end it became a compliant stablecoin. Then Ripple was small before, and no one cared about it, so it has been doing it until now. But now it should be said that it is difficult for it to develop greatly in the later stage. It is very simple. As long as you develop, the risk of encountering supervision will increase, not to mention that supervision has already paid attention to you. Therefore, I am strictly not optimistic about Ripple, and I do not recommend that you take the knife. You may want to buy the bottom when the price drops, so be careful.

In terms of time, it may take a year or two to slowly subside, but I think its prospects should be relatively clear. So in the past two days, people have been asking me which coins are truly decentralized. In fact, everyone has already realized through the incident of Ripple: Only decentralized currencies dare to use them as currencies all over the world, or they are safe.

Moderator: Some people think that the core application of blockchain is finance. What do you think is the relationship between blockchain and finance? What applications and imagination space will blockchain have in the traditional financial field in the future?

Liu Changyong: I don't agree with this statement. They actually don't see the real significance, the real value, and the real core technology of the blockchain. Just judging from the phenomenon, seeing Bitcoin, Token, and DEX, I think it can only do this.

The core of the so-called blockchain, as long as it is called a blockchain, it is difficult to realize what its core is. If we start from the blockchain, in fact, the alliance chain has now found the core, thinking that the blockchain is a distributed ledger, so it is enough to keep accounts on it. The coinless blockchain we know now, the alliance chain is all about data and information on the chain. If you really only understand the core of the blockchain from the perspective of blockchain, it should not be finance, and information on-chain is the core. In fact, no matter whether the currency circle thinks it is just finance, or the chain circle thinks it is data and information on the chain, it is very narrow, and it does not see its revolutionary significance at all.

The so-called blockchain actually has two core technologies: one is asymmetric cryptography and the other is distributed consensus. Combining these two things together, its most important function is to provide a new social infrastructure that can run automatically in the information system and does not depend on the original social framework. That is. This asymmetric encryption plus distributed consensus, which I call "cryptographic consensus", can truly build a social system in the information world. Of course, this social system is first and foremost an economic system.

We are now accustomed to all kinds of life on the Internet, but you will find that we have to go to the original offline system in many links, we have to go to the bank, to taxation, to business, and many, many links. The execution of the online part is very fast, so once you encounter a critical matter, you have to go to the chain to handle the matter, which is very, very inefficient. Then the real core of this revolution is to eliminate the cost that we had to go offline in the previous information economy, and move the entire social and economic activities into the information world.

To put it a little deeper, it is this cryptographic consensus, or what everyone calls the blockchain, which has actually changed the organizational system of our society, first of all, the identity system of the society. The change of this identity system is first of all implemented in the currency field. We see that in the currency field, our identity has changed. When I was offline, my name was Liu Changyong. So my identity, first of all, , To connect with my physical body, what does this depend on? Rely on the police station, rely on the household registration system and so on. On the other hand, this name has to be associated with my money, what is the connection? Contact the bank.

This system of Bitcoin realizes that I use my address as my identity. So how to connect with my physical body? It's very simple, I don't need the police station to help me confirm my identity. As long as I hold the private key corresponding to this address, no one else will know this private key. Only I can show the signature of this private key, and others can verify it with this address. In this case, I am the person corresponding to this address, so there is no need for a central organization to help me determine the relationship between the name and the physical body. In addition, how much money do I have under my name? In the past, the bank came to help us confirm, but now, we don’t need a bank anymore. We have a distributed consensus system, that is, the ledger records how many bitcoins I have. Another center has been removed from my name and my assets.

Therefore, our current operating efficiency in the field of Bitcoin has improved a lot in the function of currency. In fact, this logic can be extended to many other economic activities. In this online world, we use our public key or our address as our identity, and then use our private key to confirm who is the natural person corresponding to this identity. It can be signed with a private key. Then on the other end, the public key or address corresponds to how many coins I have, what kind of authorization relationship I have with whom, who I signed a contract with, who I am a partner with, and so on. In fact, it can be recorded with distributed consensus or distributed ledger, and everyone can verify it.

The current form of the Internet is that many economic activities are carried out on the Internet and informatization, but many intermediate links are outside the information system, so our economic efficiency is very low, so now when we move everything to After the information system, coupled with smart contracts, the execution efficiency will be very high. If there is an offline part, smart contracts are really difficult to execute. You say two people, I sign a contract, and if there is a dispute, I will go to the court to deal with it. In the cryptographic consensus system, it is very safe and convenient to execute.

So now restricting the blockchain to finance is actually because we have not broken through this point. Many people don't realize how the underlying logic of Bitcoin should be promoted to other systems. The key point here is the identity system. The identity system is further expanded to other fields. This distributed ledger can not only record currency, but also record other important social relationships. I have gradually formed this understanding since the beginning of this year. Before, I always thought that the cryptographic consensus mechanism should be for finance. In fact, I later found out that it is not the case. It can be extended to the entire economic field, that is to say, in the future Centralized economy not only has currency, but also identity system, social relationship, reputation system and so on.

Since the beginning of this year, we have been doing this kind of related experiments, which is to use public keys and addresses as identities, and then try to go deeper into various fields of the economy. The first is the identity system, and then the authorization relationship, reputation system, storage system, etc. In short, we are trying to build a decentralized infrastructure from the financial field to other fields, so that the financial field can be integrated with other economic fields. fields to work together to promote the transformation of the Internet economy into a new economic form as a whole. This new economic form, I call it crypto-economy. This is today's topic, from decentralized finance to crypto-economy.

Moderator: De-neutral exchanges are representatives of the DeFi industry. Is it possible for DEX to surpass CEX in the future and become the mainstream of exchanges?

Liu Changyong: I think that decentralized transactions in the future can actually replace centralized transactions, not just in the current currency circle, but in fact many trading markets in the real field can gradually be decentralized, including Taobao Such a market is possible. The problem is that we want to expand from decentralized finance to other fields. The current decentralized transaction is based on the decentralized currency and the previous Token. It can only be traded within this range, and there is no credit system in it, and it cannot integrate more transaction scenarios in the real economy. Introduced, this requires a transition from decentralized finance to a cryptographic economy.

Because the efficiency of decentralized transactions is indeed much higher than that of centralized transactions. So it must be the future. It’s just that if we want to realize decentralized transactions in more fields, we need to make corresponding breakthroughs in these fields. At present, we can only focus on this aspect of currency speculation.

Moderator: This year, the epidemic has seriously affected economic development. Big cakes have always been outstanding, while copycats have performed mediocrely, which has left too many people with regrets. 2021 is coming, what would you like to tell everyone?

Liu Changyong: The severity of the epidemic has not actually affected our bull market. First of all, the bull-bear cycle of encrypted assets is relatively clear. After the bear market in 2018 and 2019, it recovered this year, and there will be a bull market from the end of this year to next year. This is determined by the laws of cryptographic assets. Instead, it is the depression of the entire world economy brought about by the severe epidemic, including fiat currencies. The outbreak of contradictions in the system, so from this perspective, the economic crisis brought about by the epidemic has a driving effect on crypto assets, and it is also a boost for mainstream financial institutions to enter on a large scale this year. According to the normal situation, they should also come in, but the impact of the epidemic made them more determined to enter this field.

The performance of other altcoins is mediocre, which is also normal, because a real bull market, whether it is the stock market or the currency market, must start with the varieties with a large market value, because if it is a real bull market , There is a larger order of magnitude of funds coming in than before, and they can only enter from large-cap varieties, and small currencies cannot enter, because the market size is too small, and it will cause violent fluctuations if it enters a little bit.

Therefore, it is natural for Bitcoin to rise first, which means that it is still in the early stage of the bull market. If when do you see all kinds of cats and dogs soaring to the sky, this is when the real bull market ends.

It is a characteristic of the first half of the bull market that the big pie leads the rise. In the middle and late stages of the bull market, the price of Bitcoin has increased to five times or ten times. At this time, big funds will also find out. It is very difficult to double the growth, and when the scale of Bitcoin is also very large, there must be a huge financial support for a 10% growth, unlike the early small amount of capital that can bring a huge growth. So in the mid-term, the relative increase of Bitcoin will inevitably decline, and then it will inevitably enter a stage of faster rise of other currencies.

I estimate that after four or five months of the year, that is, if Bitcoin increases by three or four times, the growth rate of various altcoins may gradually exceed that of Bitcoin. In the early stage, I think that the increase of Bitcoin is larger. Of course, this is only a rough idea, and it is difficult to make a complete judgment.

2021 is coming, so what I want to say is that the bull market is really here, so hold on tight. Don't toss, it's easy to lose opportunities.

Moderator: Thanks to Teacher Liu Changyong for his wonderful sharing! I hope that in 2021 everyone can earn the money they know! Juca said, speak out for the blockchain hotspots! Thank you for your attention, see you next time!