“For current Chinese blockchain entrepreneurs, this is the best time and the worst time.”
Focus
- The daily payment of economic life is completely dependent on the network of two commercial companies, and without a national-led network, the central bank must have a corresponding solution
- Blockchain will bring a subversive change to the business model of traditional Internet companies, which is a problem that “big factories” must face
- You still have to be patient with the blockchain, you will always be overestimated in the short term and underestimated in the long term
- If 99% of a thing is bad, then it can be judged to be bad, but the blockchain is different, the impact of 1% of high-quality projects is enough to have a disruptive effect
For current Chinese blockchain entrepreneurs, this is the best era and the worst era.
On one side are clear policies and promising markets; on the other side are tumbling bubbles and greedy human nature. As of early December 2019, a total of more than 40 blockchain-related guidelines have been issued at the national level. The central bank’s recent release of digital currency is interpreted as a signal that “blockchain entry is imminent”, but in the opinion of Da Hongfei, CEO of Distribution Technology, The blockchain has not been transmitted to the mainstream capital market, because there are basically no listed companies related to the blockchain that have a relatively large market value. He believes that some companies with a blockchain background will become more important participants in the global capital market.
Da Hongfei began to explore the application of blockchain technology in 2011 and is considered one of the main figures in the blockchain field. He is also a serial entrepreneur. In 2014, he founded China’s first open source blockchain bottom layer “Neo” (the predecessor was Xiaoyi), and in 2016 founded the blockchain core technology company Onchain Distribution Technology, engaged in blockchain bottom technology Independent research and development, participated in the domestic blockchain standard architecture specification, and is also one of the very few domestic companies that have the membership of the three major international blockchain standards.
“Core opinion leader” is another label on Da Hongfei, especially when it comes to the topic of China’s blockchain popularization, his remarks are particularly weighty. In an interview, he joked that the confidence of many people in this industry fluctuates with the “currency price”, but he is different from them. “Blockchain can have a profound impact on social productivity and the structure of the entire organization. It’s a perception in my heart. Back when I first came in, what touched you in the end, if this thing is still there, there is no need to have no confidence in this matter, it just takes a relatively long time.”
When the next huge wave came, Da Hongfei hoped he was the one who picked up the surfboard. The following is a dialogue between China Europe Business Review and Da Hongfei.
Put “Poetry and the Distance” to the ground
China Europe Business Review (hereinafter referred to as CBR): Although the blockchain industry has been developing for so many years, people outside the industry have limited understanding of the blockchain and may even hold a more skeptical attitude. Can you briefly introduce the blockchain What is the meaning and commercial value of what the distributed technology is doing?
Da Hongfei: In the digital economy, the emergence of blockchain provides a technical means to make data more credible. When the data becomes credible, it can make transnational transactions and exchanges more credible and simple, and it can make it possible for two people who don’t know each other to interact in the digital world, which is almost impossible in the past.
Our company is called Distribution Technology in Chinese, and there is another brand called Onchain. What we do is not so “poetry and distant”, relatively speaking, it is more grounded. Because China encourages the integration of blockchain with industry and the real economy, we mainly serve government and enterprises in China, and provide blockchain solutions to enterprises and local governments. The specific application scenarios cover industry, finance, and bulk. Commodities, Internet of Vehicles, digital government affairs, etc.
CBR: In terms of industrial blockchain, how does distributed technology use blockchain technology to solve industry pain points? Can you talk about application scenarios and empowerment based on cases?
Da Hongfei: In terms of government affairs applications, we recently built a blockchain platform called “Fanhua Nebula” for Tongren City, Guizhou Province. It is an underlying platform that uses blockchain technology to implement digital government governance. This platform is funded by the Tongren Municipal Government, and cooperates with the public security department to issue a digital identity certificate for Tongren citizens. The citizens can use this identity certificate to handle various affairs in the Tongren municipal affairs system.
The first landing scenario is called a shared pharmacy, which uses blockchain to register and record the circulation of medicines. For example, if a doctor gives you a prescription, the pharmacy can see it directly, and then dispens it. The shared pharmacy based on the “Fanhua Nebula” blockchain platform has been connected to the information network of more than 200 hospitals in Tongren City. Tongren has a remote location and many mountain roads. The “Fanhua Nebula” makes it much easier to buy and dispense medicines.
“Fanhua Nebula” Blockchain Platform
In terms of commercial applications, the most representative domestic application case is in the field of bulk commodity supply chain finance. We cooperated with the steel e-commerce company “Gangbao.com” under Nanjing Iron and Steel and the steel e-commerce company “Steel Bank E-commerce” under Shanghai Steel Union. Cooperation to turn the original paper warehouse receipts of steel warehouses into digital warehouse receipts-these digital warehouse receipts record the relevant data of the whole process of steel trade on the blockchain. Banks and factoring companies will also be blockchain Operation node. Because the data is reliable, it is more convenient for companies to use digital warehouse receipts for financing in the future.
A recent case abroad is a data protection privacy program in the shared car field in cooperation with the German Daimler Mobility Blockchain Factory. This project is called welcome home. Many young people in Germany don’t like to buy cars, and car sharing is a big trend in the future. When a user enters a shared car, he can connect a data wallet APP installed on the mobile phone to the car, and the car will master your travel habits, such as what music you like to listen to and how to adjust the seat. The most important thing is that after the user exits the App, these data will be protected by the encryption algorithm on the blockchain. Only the user owns the private key, which guarantees the user’s privacy.
CBR: With regard to the blockchain solutions of various industries that are currently being implemented by Distributed Technology, which industry do you prefer?
Da Hongfei: In the short to medium term, it should be the financial industry, because finance involves a lot of trust, involves a lot of clearing and settlement, and is innately compatible with the blockchain.
Take clearing and settlement as an example. The traditional financial system is based on strong supervision. The top level is the central bank, the next level is the China Banking Regulatory Commission, the China Insurance Regulatory Commission, and the Securities Regulatory Commission. The next level is separate supervision. On the blockchain, some agents risk and Counterparty risks can be resolved through technology. Both parties directly participate in the transaction, and there is no longer a need for a trusted intermediary to ensure the execution of the transaction. After these risks are eliminated, the significance of many licenses is weakened. It can now be seen that some regional equity trading centers have launched pilot projects of blockchain.
The blockchain essentially solves the problems of privacy security protection, information plasticity, transaction compliance, data authenticity, etc., directly hits the difficulties of supply chain management, and has strong applicability and application value in supply chain scenarios.
The reason Libra can’t do it is regulation
CBR: Last year, national leaders raised the blockchain as a national strategic technology. Although the 2B and 2G terminals seem to be relatively hot, they still feel that the blockchain technology is still inaccessible in daily life. What is the future of the 2C blockchain application? Look?
Da Hongfei: There are relatively few available on the 2C end. Blockchain electronic invoices can be counted as one, which can solve the problems of repeated reimbursement, copying, and forged invoices. Because the blockchain is originally an underlying technology, it can carry many 2C services, but the user of the blockchain itself may not necessarily be aware of it. It is an infrastructure.
For another example, in terms of product traceability, blockchain can record and display where the product is produced and how it flows. We have cooperated with the German LANXESS Group on a traceability project. This is a German special chemical group. It can put a smart IoT device during the transportation of hazardous chemicals. This device is sensitive to displacement, temperature, humidity, and GPS location. All are monitored, and the monitoring data is transmitted to the blockchain for recording.
CBR: What are your views on the launch of the central bank’s digital renminbi and the dystocia of Libra?
Da Hongfei: I think the main reason is that the driving force behind it is different. One is promoted by the People’s Bank of China. The digital renminbi is protected by law, and there is no reason to push it. Libra is a “cross-sovereign” digital currency led by Facebook as an enterprise. This process will be very difficult. Even if it is finally made, it may be subject to various constraints stronger than traditional banks.
CBR: In your opinion, the reason Libra can’t do it is regulation?
Da Hongfei: I don’t think there are any obstacles in terms of technology and business model. Regulation is the main reason. G7 recently issued a statement stating that a digital currency like Libra should not be launched until various countries have no clear regulatory framework measures for digital currency. The ultimate beneficiary of Libra is the Internet company, which is inconsistent with the interests of the regulator, and it is not what the regulator wants to see, but the digital renminbi does not have this problem.
CBR: What is the prospect of using digital RMB to promote RMB internationalization?
Da Hongfei: The central bank’s digital currency DC/EP digital wallet partly uses blockchain features, uses specific algorithms for encryption, does not need to be tied to bank accounts, and does not require cross-border payment and settlement networks, which will help promote the internationalization of RMB .
Another highlight of DC/EP is that it can realize “dual offline payment” like banknotes. In the future, as long as two people have installed DC/EP digital wallets, no network or signal is needed. As long as the mobile phone has electricity, two mobile phones Real-time transfers can be realized by touching each other.
CBR: Will the introduction of digital currencies by large central banks in other countries be the general trend? Why not advance so fast as China?
Da Hongfei: In the past, everyone used cash to pay. With the mobile Internet, we started to use Tencent and Ali’s payment methods. Digital payment has become very popular. Our daily economic life payment is completely dependent on the networks of two commercial companies, and there is no national-led network. What if one day, Alipay and WeChat Pay cannot be used? The central bank must have a corresponding solution.
It is us who want to reformulate the rules, not the “big factory”
CBR: In the four years since its establishment, what changes have been made in the business model and organizational structure of Distributed Technology?
Da Hongfei: The general direction of the business model remains unchanged, focusing on providing blockchain solutions for governments and enterprises. We are gradually developing our accumulated experience into products. Compared with customized development, labor and time costs are greatly reduced.
For example, one of our products is called Distributed Digital Hub, which is the abbreviation of distributed digital hub. The bottom layer is the blockchain, the upper layer is the modules of trusted certificates and digital assets, and the upper layer is supply chain finance, bulk commodities, Six major application directions including transportation, medical and health. Among them, digital government affairs and supply chain finance are our focus. If we use rugby as an analogy, we have not yet reached the stage of “bulking up”.
The company’s organizational structure has undergone several major adjustments over the years. The current organizational structure is divided into three layers-a bit like our product-the front desk is six business units (BU); the middle desk is about twice the size of the front desk, and it is a resource pool composed of designers and engineers. When the front desk needs to grow rapidly, resources can be seconded from the middle desk according to internal agreements; the back office including the finance, legal affairs, and personnel departments are responsible for the company’s overall business, such as how many resources from the middle desk are called by the BU. To measure.
CBR: Most companies in the blockchain industry have not survived for a long time. How did distributed technology “survive”?
Da Hongfei: In the face of many temptations, we did not do anything particularly radical. Because it was established relatively early and has a certain influence in the industry, a project party invited me to be their ICO consultant, but I never agreed.
CBR: The Internet and traditional financial giants also have blockchain business, such as Ant Blockchain and Ping An OneConnect. What is the strategic difference between companies that specialize in blockchain such as Distribution Technology?
Da Hongfei: “Dachang” has its own very strong main business. Blockchain is more of a combination with the original main business. This is their advantage and burden. For traditional Internet companies, adopting blockchain actually means subverting themselves. Turn all business models into distributed, sharing the benefits to each participating node. The “big factory” itself has resistance because it touches the core profit model, such as whether Taobao is willing to let users control all the data by themselves , Or store all transaction information on Alipay in the past three years on a blockchain.
Blockchain will bring a subversive change to the business model of traditional Internet companies, which is a problem that “big factories” must face.
CBR: So in your opinion, the opportunity is actually in a company like yours?
Da Hongfei: Yes, because those institutions that benefit from the business rules established under the old technology will not be willing to transition to the new rules and will try to delay the occurrence of this matter. We will definitely want to quickly reset the rules. The change of the whole world is actually constantly re-setting the rules, right?
CBR: What will the end result of this industry be?
Da Hongfei: I can’t see what the endgame looks like. What I can see is that the entire capital market and financial market should be built on a network with blockchain as the underlying technology. I am full of confidence in this. As for which company does this network, or which company does it, it is difficult for me to judge. I hope that in the future development of this game, the distribution technology can stand at the end.
1% success will happen
CBR: When we evaluate an industry, we always say how big the market size of the industry is, but the blockchain industry rarely says that. Do you need to explain this to investors?
Da Hongfei: If you sell milk tea and coffee, investors may be very concerned about the size of the market. However, it is difficult for you to define the market size of a new technology like blockchain, and investors can understand it.
CBR: Investors care about listing and how to obtain financial returns. Does this bother you?
Da Hongfei: There will be a little bit, but it’s not troublesome. After all, it didn’t set a deadline for me. As I said before, we have not yet reached the stage where rugby “bulges out”.
CBR: In order to “pop out”, what’s worse for the distribution technology?
Da Hongfei: I think it is an industry problem. The technology has not yet developed to the explosive stage. In the short term, everyone has high hopes for the blockchain, but it often goes through a period of disappointment and then begins to fall, just like Gartner’s Hype Cycle, which is based on expectations at first, and then finds that it cannot be met. It starts to fall, and then the technology matures and gradually moves upward. You still have to be patient with the blockchain, you will always be overestimated in the short term and underestimated in the long term.
Gartner’s emerging industry curve
CBR: Do you have a desire for influence?
Da Hongfei: I ca n’t talk about desire, I just hope that my thoughts and understanding of some things, and some judgments about the future, can let more people understand or convince more people, which can help us enter the ideal faster status.
CBR: What do you want more people to understand or convince more people about?
Da Hongfei: The iconic technology of the first industrial revolution is the steam engine, the second industrial revolution is electrical technology, the third is computer and the Internet, and the fourth industrial revolution we are experiencing is a digital economy. The industrial revolution is the transition from the real economy to the digital economy. Blockchain is an iconic technology. This is the first message I want to convey and my belief.
The second message is that I hope people from traditional industries can be more tolerant when looking at blockchain technology. Switching to traditional industries, if 99% of a thing is bad, it can be judged to be bad, but the blockchain is different. The impact of 1% of high-quality projects is enough to have a disruptive effect. As William Gibson said, “The future has already arrived, but the distribution has not yet been evenly distributed.”
