Xiao feng: from PoW to PoS, the focus of the final block chain is the realization of commercial purposes

Original title:Xiao feng: the large-scale commercial use of blockchain must be technology + economic incentive + community governance

Wendy babbitt

Xiao feng, chairman and CEO of wanxiang blockchain2019 global blockchain (hangzhou) summit forum,The lecture entitled "inside, on and outside the chain; technology, motivation and governance" divided the block chain into three parts: inside, on and outside the chain. Starting from the development of global economy in the past century, xiao feng believes that the large-scale commercial application of block chain not only needs to rely on technology, but also needs to be inspired and governed.

Here is the full text of babbitt's speech (with unaltered cuts) :

It is my great honor to have this opportunity to share with you my latest personal experience on blockchain. Thanks babbitt for the invitation.

Our topic today is very clear, "embrace the era of business". As a three-time entrepreneur, I will talk about blockchain from the perspective of business practice, not from the perspective of technology. My title is "inside, on, and out of the chain; technology, motivation, and governance", and that's what I want to talk about todayTechnology alone is not enough if blockchain is to be adapted to large-scale commercial applications. It also needs incentives and governanceIncentives and governance, in fact, end up being technology, implemented at the code level, but it's more of an institutional design, it's economics and mechanism design and so on. Therefore, first of all, some institutional design should be made to supplement the technical deficiencies. This is my opinion.

The secret of block chain governance? Start with the century-old development of the global economy

 Before I get into the subject, I would like to take a look at the global economic development over the past 100 years and the history of human society over the past 100 years. We know that between 1978 and 1982, there were three outstanding leaders in the world: deng xiaoping, Margaret thatcher and Ronald Reagan. These three people have done the same thing, which is to adopt a free market economy, and China's reform and opening up is also a free market economy. Margaret thatcher's reforms in Britain, selling all state-owned enterprises and deregulating, also went for a market economy. Reagan was the same in the United States. What was the state of the United States when Reagan came to power in the 1980s? The United States also had a very strong control over the economy, and we know that in the '80s and' 70s there was a currency called the eurodollar. At that time, the foreign exchange market must talk about the eurodollar interest rate, why the emergence of eurodollar? Because interest rates are regulated in the United States, regulated interest rates eventually form the full dollar market interest rate in Europe. I came out of an asset management company, and in the 1970s the United States created a money market fund, which came out of interest rate regulation. Deposit rates were regulated, so people turned deposits into investment vehicles, money asset funds were operating, and interest rates on investment vehicles were unregulated.

Why did this happen around 1979? You can go back even further. In the 1930s, the Soviet union's first five-year plan was 1928. What did it mean? It means that for the first time in human history, a country has to intervene in the economy and plan the development of the economy through the hand of the government. From 1930 to 1934, Roosevelt implemented the New Deal in the United States. Roosevelt also wanted to use the visible hand of the government to remedy the invisible hand of the great depression.

How did the great depression of the 1930s come about? It dates back to around 1900, when various new technologies, such as large-scale power grids, radios, and ford's assembly lines, led to dramatic improvements in efficiency. So at that time, there was a phenomenon called the Coolidge boom. Coolidge was the President of the United States around the year 16 of the last century. The pursuit of efficiency led to the great depression. After the great depression, everyone thought we can't be too efficient, so the government came. When the pursuit of fairness goes to the extreme, it is extremely inefficient. Hence, in 1979, 1998, China, the Soviet union, the United States, the United Kingdom and so on. So, people reflect again, say we want to pursue efficiency, we can't just talk about fair things. So from the start of reaganomics, the American market was doing very well until 2008, when it went too far. In fact, the financial crisis in the United States in 2008 was a pursuit of efficiency, which resulted in great inequality and disparity between the rich and the poor. It also led to the financial institutions' pursuit of profit as the only goal and the lending of money to people who were not qualified for loans, which led to the financial crisis in 2008.

Why do we look back? We can look at blockchain from this history.

The consensus algorithm is the concept of an interval. We are emphasizing decentralization, and in a sense decentralization is also emphasizing fairness. Decentralization emphasizes fairness, and centralization emphasizes efficiency to some extent, so this kind of thing is not just a block chain. For the past 100 or 200 years, the whole human society has been oscillating irreconcilably. So I said what we need to understand is that when the block chain is really launched into different business application scenarios, different business application scenarios have different requirements for fairness and efficiency. If this scenario requires extreme pursuit of fairness, then we can help it achieve in an extreme decentralized way; If he is extreme in his pursuit of efficiency, then we must help him achieve it in a centralized way, which is only for commercial purposes.

What kind of technical means to use, is not decisive, is not the main, the focus is on the realization of commercial purposes. So when you want to pursue TPS 300,000 per second, please use the transaction confirmation mechanism like alipay.

Evolution of consensus algorithm: the change of block chain application driven demand

From PoW to PoS is the change driven by block chain application demand. When you say, "our business needs to be more fair," you can use PoW. From a business point of view, what fits what fits. So the consensus algorithm, the discussion goes on and on, is nothing more than an interval concept, between extreme efficiency and extreme fairness, between extreme decentralization and extreme centralization, between different business models to find different points to seek fairness. PoS is like that, you're looking for quick, you can find one of the nodes. If you develop a technology well enough, you can also pick 101 nodes, which is my view from a business application perspective. So from PoW to PoS, remember how PoS came out? PoS is because we need to do a lot of things on the public blockchain, we need to do more and more things, PoW can't support it, there are a lot of things that are not so strong for fairness, it needs to strike a balance, so PoS comes out.

You can put the PoW as we seek to use a set of mathematical method to solve the problem of efficiency and fairness, PoS mathematical components inside, but has mixed a lot of system design, and system design is to develop and implement by someone, no matter you are a random number out of specific validation, finally the vote, are you in decision making. In fact, what we are pursuing on the block chain is the same as what human society has been pursuing for the past 100 years. The underlying thing is the same. It is a law. So when the invisible hand fails, we need the visible hand to remedy it. When the visible hand fails, the invisible hand is needed to remedy it.

The bottom-up, decentralized decision-making mechanism of blockchain is more like the "market" in economics. Economic activity is organized in two ways, one by the market and the other by the firm. Blockchain brings great changes, compared to the enterprise value is not so important. But without god, markets fail sometimes, so if you look at it purely from a technical and mathematical perspective, blockchain fails sometimes. So,The technology of PoS plus the design of institutions plus the design of rules, together, may be one of the most appropriate solutions for all of our business applications.

In-chain, on-chain and off-chain: blockchain from a business application perspective

From the perspective of application, blockchain is no longer a blockchain. It is not only the public blockchain that solves the problem, so I understand it as in-chain, on-chain and off-chain.Inside the chain is a world of technology, made up of consensus algorithms, cryptography, game theory, and a decentralized technology base.The Internet is a decentralized information machine, while the blockchain is a decentralized trust machine. This is the difference between the blockchain and the Internet -- the decentralized mechanism is used in the business trust mechanism.

On the chain is the application of Dapp, which I call the distributed business world,It doesn't necessarily go completely to the center. If you say that all the businesses on the block chain will not have an interest subject, it is just anti-human, and it will not play well in the end. Blockchain must make it more convenient for people to achieve their own business purposes, blockchain can play big, so this is called chain.

Outside the chainWhat is? You also know that the real market is very much up the chain, the real assets up the chain needCentralized endorsement mechanism? You Token the real estate, you do not need hangzhou real estate bureau to prove your property rights, but when the chain to the chain, the need for Token, often need a centralized endorsement mechanism, so can not escape the centralization.

If you look at the world from business applications, not from blockchain, the Internet is a decentralized technology, the underlying technology of the Internet is decentralized. Now who needs permission to spread information? When you want to express your opinions, no one tries to stop you. This is a decentralized information machine. Blockchain is a decentralized trust machine, so the Internet does not exclude the growth of BAT on the basis of a decentralized mechanism. BAT is a monopoly business. But without such a monopoly business, where is the value of the Internet?

If we really want to make blockchain suitable for business application, it needs more than technology. It does need technology, because new technology brings many things, but it also needs something beyond technology, such as economic incentive mechanism, such as community governance mechanism. Economic incentive mechanism, community governance mechanism, the community is more with algorithm game theory, with algorithm game theory and many other methods to design a set of rules, let everyone according to this set of rules unorganized, decentralized.Therefore, these three (technology, economic incentive mechanism and community governance mechanism) should be intangible, algorithmic and coded. Only when these three are perfected at the same time, large-scale business application is possible.

As you know, last July, I helped launch a new public blockchain project, PlatON. PlatON plans to follow the idea I just described, we released a technology white paper in July last year, we will publish our own economic blue book in a little over a month, and then we will publish a governance red book within this year. All three need to be explained clearly and designed well before blockchain can run on the commercial level.

That's all for today. Thank you!

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