The blockchain technology that has been around for ten years has been “bringing from the virtual to the real”. After many myths, finding the “killer” application of blockchain has become a new focus. We have seen many attempts at traceability, deposit evidence, supply chain finance, justice, reconciliation, etc. Some scenes fit naturally, and some scenes are superfluous. But as an emerging technology, holding a hammer to find nails is an inevitable process. If we take ten years as the observation scale, we believe that blockchain will eventually become a new type of infrastructure in the data age. In this issue of Morning Thinking, we try to answer the following questions: What may be the “killer” application of blockchain, what old problems will be solved by blockchain, what business scenarios will be reconstructed, and what potential business models are we optimistic about And investment opportunities.
Core view
The traditional centralized system relies on the trust in the central organization, while the blockchain system relies on the trust in the algorithm.
The most imaginative scenario of blockchain: data, data, or data! Including solving the problem of data right confirmation, data circulation, and data security and privacy protection.
If the blockchain is the core artery of data circulation, then the combination of various Internet of Things, edge computing, trusted environments, etc., and the blockchain is equivalent to capillaries, continuously converging trusted data to the blockchain Arteries.
On January 3, 2009, Satoshi Nakamoto launched Bitcoin, and the blockchain entered the stage of history. In the following time, along with the myth of making riches with Bitcoin and various digital currencies, the term blockchain, as well as its core features such as decentralization, non-tamperability, and consensus mechanism, have become familiar to everyone.
Ten years later, on October 24, 2019, in this festival of programmers, the Political Bureau of the Central Committee conducted the eighteenth collective study on the development status and trends of blockchain technology. The meeting emphasized the integrated application of blockchain technology. New technological innovations and industrial reforms play an important role. The blockchain must be used as an important breakthrough for independent innovation of core technologies, and the development of blockchain technology and industrial innovation must be accelerated.
The development of blockchain in China can be roughly divided into three stages:
2009-2017 Savage Growth
2017-2019 shock differentiation
2019-present new era of blockchain
There are two key time nodes in the middle, one is the “Announcement on Preventing Token Issuance Financing Risks” issued by the seven ministries and commissions in September 2017, and the other is the “1024 Speech” in 2019. The former prompted the domestic public chain team to shift its focus. Overseas, the latter pushed the alliance chain to the center of the domestic stage. The focus of this article is the “new era” blockchain represented by the alliance chain after the “1024 Speech”.
“In Math We Trust”
In essence, the blockchain is a distributed ledger. Through a specially designed consensus algorithm and communication mechanism, it can ensure that the data of all nodes is true, complete, consistent, non-tamperable, and traceable. Therefore, blockchain is a technology that can establish data consensus among multiple subjects. Every piece of data written into the blockchain network is recognized and supervised by all network members. Various smart contracts can be set up on the blockchain, and each node can agree on the corresponding business logic, and automatically execute these contracts when the business conditions are met, minimizing the intervention of human factors and ensuring that the relevant results are on any node All are consistent and credible.
The traditional centralized system relies on the trust in the central organization, while the blockchain system relies on the trust in the algorithm, which is what Dr. Zhang Shousheng called “In Math We Trust”.
Unlike the centralized system that we are accustomed to daily, what the blockchain brings is a distributed system. Traditional centralized systems are mostly divided according to functions. The interaction within the system is very efficient, but the cross-system interaction will be relatively inefficient, because there is no credible authentication mechanism between the subject and the subject. The most common example is us The various certificates and chapters that need to be opened daily, not to mention the authenticity of these certificates and chapters and the cost of verifying the authenticity, simply running the process between different entities is a time-consuming and laborious task (The cost of trust is extremely high).
The distributed system breaks the traditional division based on functions and reshapes it into a business-driven system. Each scenario involves multiple functional subjects. Each subject joins as a node, and consensus is established between nodes and nodes through algorithms. Behind the consensus is a great reduction in the cost of trust. The underlying core technology of this distributed system is blockchain. But one thing to emphasize here is that distributed is not decentralized.
After the emergence of blockchain technology, everyone is thinking about scenarios and looking forward to finding the “killer” application of blockchain. We have also seen many attempts, such as traceability, deposit evidence, supply chain finance, justice, reconciliation, etc. Some scenes are naturally compatible, and some scenes are also superfluous. But as an emerging technology, holding a hammer to find nails is an inevitable process. So in our opinion, what is the most imaginative scenario of blockchain?
Data, data, or data!
In October 2019, the Fourth Plenary Session of the 19th Central Committee of the Communist Party of China included data into factors of production for the first time. The Opinions of the Central Committee of the Communist Party of China and the State Council on Constructing a More Complete Market-based Allocation System and Mechanism of Factors, which was released on April 9, 2020, used data as a Land, labor, capital, and technology are ranked as the fifth major production factor, and it is clearly proposed to promote the open sharing of government data, enhance the value of data resources, strengthen the integration and security protection of data resources, and cultivate the data transaction market. From the institutional level, Chenshan has always regarded “data-driven industrial Internet” as the theme of our investment. How to make data promote the progress of the industry and exert greater value is a question we continue to think about.
The current status of the data industry is that valuable data is scattered in isolated islands of enterprises and government departments, and it is difficult to exchange and circulate. The ownership of a large amount of valuable data is not clear, and data security problems occur from time to time. In order to maximize the value of data, it is necessary to solve this series of problems. Blockchain may be the most suitable technical solution.
01 Solve the problem of data right confirmation
Because data is easy to replicate, it has been difficult to solve the problem of data confirmation for a long time. The simplest example is that it is difficult for us to determine who a random picture on the Internet belongs to. The unique consensus and communication mechanism of the blockchain is equivalent to that each participating node can clarify the ownership of specific data, who uploaded the data and what the ownership relationship is. This has reached a consensus among all nodes. So when a picture is uploaded to the blockchain network, its ownership has been recognized by all parties.
02 Solve data circulation problems
After the rights are confirmed, there is a problem of circulation. The data structure of the blockchain determines its traceability, and any copy, use, and circulation of data can be traced. The original data owner can firmly control the right to dispose of the data arbitrarily through a series of on-chain technical means such as signatures.
03Solve data security and privacy protection issues
Finally, blockchain can also solve the problems of data security and privacy protection. With the confirmation and credible flow of data, the problem of data leakage will be largely alleviated. All future data behaviors related to private data will require the owner’s secret key authorization. At the same time, combined with privacy computing and various encryption technologies, a series of security and privacy protection functions such as confidential data interaction, controllable anonymity, etc. can be realized on the blockchain. At the same time, as the blockchain network continues to grow and the number of nodes continues to increase, the blockchain network itself will become stronger and stronger, and its security performance will become stronger.
Data can only generate value when it is collected. This is why the policy level will emphasize strengthening data integration and cultivating the data transaction market. It can be said that blockchain provides a basis for data integration transactions.
The data scenario of the future world
Through the blockchain, data can be fully organized to build an underlying data storage, confirmation, circulation, use and protection infrastructure. On this infrastructure, our current business scenarios will be reconstructed .
01Eliminate data islands
First, passive data islands will be eliminated, and large amounts of data will be opened up. Now whether it is a government or an enterprise, a lot of IT systems have been built in the department, but the data has not been connected to each other. In many cases, the city brain and the data center are launched to solve these problems. Blockchain can be used to compare Small cost and lighter deployment to break through these passive islands. On the basis of opening up silos, the ownership of data will be thoroughly sorted out. Of course, this requires relevant policy cooperation.
02Form a data capability platform and a trading platform
On the basis of data connection, according to different data types and characteristics, some large or small data platforms will be formed based on the blockchain, and various entities will participate in the maintenance to realize the rapid flow of data. At the same time, data trading platforms will also appear, and personal data and some high-value corporate data will be able to trade. These platforms constitute the underlying foundation of a digital society.
03 Flat society driven by business scenarios
On the basis of the data capability platform, various business scenarios will be massively reconstructed based on smart contracts, and the trend of atomization is more obvious, especially the business involving cross-subject collaboration. As mentioned above, the characteristic of the distributed system represented by the blockchain is that it is scene-oriented. We will pay more attention to the business itself, instead of caring about which departments and processes need to be carried out for these businesses. A large number of simple business scenarios such as query and certification can be completely replaced by smart contracts, and more complex business processes can also become simpler and clearer due to the reduction of trust costs.
04Digital Sovereign Currency: Game Changer
Digital Sovereign Currency (DCEP) may become Game Changer. Blockchain was once called a value network because it can transmit trust. Before DCEP appeared, the blockchain highway was mainly data running, and with the appearance of DCEP, this road will begin to run in the future. Various digital assets. In October 2020, the central bank tested the first batch of digital currency red envelopes in Shenzhen. Citizens who received the red envelopes can spend at designated merchants, and digital currencies that have not been used over the expiry date will be recovered. Here is a key feature of DCEP: conditional payment. Only when certain conditions are met, DCEP can be a circulated and real currency. The future digital currency will be a programmable currency, combined with smart contracts, on the trusted value network of the blockchain, it can be said that the imagination of DCEP is unlimited.
Three types of potential business models
Since blockchain is an infrastructure-level technology, there are three potential business models: “paid road repairs”, “free road repairs, paid use” and “contracted roadside service areas”.
01Toll road repair
This model is best understood, and what you make is money for infrastructure. In April 2020, the National Development and Reform Commission included the blockchain in the scope of new infrastructure. Whether it is a government or an enterprise, most of the blockchain is still in the stage of road construction and bridge construction, so this is also the focus of various blockchain companies. Things being done.
02 Collect tolls
This type of model requires a strong industry appeal, so that everyone is willing to put data on your platform, earn money for data circulation, and receive tolls for every data call, and with the continuous accumulation of network effects , The scale and volume may increase exponentially.
03Service Area
This type of model is still at a relatively early stage. It is well understood that there is no business in the service area before the road is repaired. But it should also be noted that whether it is a security service such as code review, security, and smart contract review, or a lower-level service such as cross-chain, contract writing and deployment, and low-code contract platform, as the construction progresses and data flows The increase will generate huge demand.
In addition, the blockchain solves the credible circulation of data on the chain. How to ensure the authenticity of the data before the chain requires the combination of other technologies, such as the Internet of Things. If the blockchain is the core artery of data circulation, then the combination of various Internet of Things, edge computing, trusted environments, etc., and the blockchain is equivalent to capillaries, continuously converging trusted data into blocks Chain artery.
From the perspective of the industrial structure, blockchain is one of the few emerging technologies where we have not been too far behind by the world’s top level, and even in some areas, we are already at the forefront of the world. Looking at this track with a telescope of ten years, we believe that blockchain will be an infrastructure-level opportunity that may be comparable to cloud computing.
We are optimistic about investment opportunities
In the blockchain field, we seek two types of investment opportunities:
One type is the opportunity for projects to be replicated in large numbers. This type of opportunity requires the market itself to be large enough, and a relatively standard product can be quickly replicated among multiple customers;
One type is projects with obvious network effects, or the boundaries can be continuously expanded, whether it is the addition of new nodes or the upgrade and maintenance of old nodes, there will be a lot of high-frequency demand.
Of course, these two types of opportunities are based on the same premise, that is, the core production and business scenarios that blockchain products must cut into, both the business itself and the entire system are rapidly and continuously iterating.
Blockchain is not a technology that can improve efficiency by a single point of breakthrough. It itself more embodies a kind of thinking and methodology: how to use technical means to better establish a more efficient collaborative relationship between different subjects. What we are looking for is to use the blockchain as the starting point to leverage digital transformation and business process reengineering scenarios. On the basis of a single point of efficiency improvement empowered by IT technology, cross-subject collaboration and efficiency can be higher.
From the appearance and popularization of desktop computers in the 1970s and 1980s, to the appearance of the Internet in the 1990s, and to the past decade of mobile Internet and cloud computing, we can clearly see how IT technology digitizes our production step by step. In all aspects of life, we can also experience the explosive growth of data and the chaos in data usage and protection brought about by growth.
Now that IT technology has reached a new intersection, information technology has improved the efficiency of a single point to a certain extent, but the efficiency improvement of cross-subject collaboration is often not a pure technical problem. How to properly store a large amount of data has become a problem that every government and enterprise is thinking about, and individuals’ demands for data and privacy have become increasingly strong. The blockchain technology provides a possible answer.
We expect that data will become the driving force for the advancement of individuals, enterprises or governments, and the circulation and use of data will also be in a completely secure environment. Blockchain is the infrastructure to create such an ideal digital society.
