Li Lihui: Blockchain Technology Advantages and Industry Prospects

Original author: Li Lihui, former President of Bank of China

BlockBeats news, on October 27th, Li Lihui, former President of Bank of China, attended the sixth session of the 2020 The full text of the speech delivered at the Blockchain Global Summit is as follows:

We are entering the digital economy society. In the digital economy society, what is the most important? My answer: one is links, and the other is trust.

According to data from the Global Mobile Communications Association GSMA, in 2019, the scale of my country's Internet of Things links will be about 3 billion, of which the industry The link scale of the Internet of Things is about 1.3 billion, and the link scale of the Consumer Internet of Things is about 1.7 billion; by 2025, the link scale of the Internet of Things in my country will reach 7 billion, of which the link scale of the Industrial The link size of the network is about 3.2 billion.

The digitally linked economy and society has two basic characteristics: one is between people and between people and things. The space-time distance between objects and objects will approach zero. This will provide more extensive convenience, but also will bring more immediate dangers, posing a major security challenge. This requires feature recognition, spatio-temporal positioning, and identity authentication of people or objects to confirm end-to-end control and command. The second is that digital assets and capitalized digital cultural products can be directly traded, which requires confirmation of the ownership of the assets and the identity and qualifications of the parties involved in the transaction.

Therefore, we need to establish a reliable trust mechanism, 

In 2019, the Blockchain and Distributed Accounting Committee of the International Blocks are appended in order to form a distributed ledger. In the economic dimension, I understand the blockchain as a "trusted, interactive, encrypted, and shareable value chain", and believe that the blockchain has unique technical advantages to meet the needs of the digital economy and society.

First, digital trust based on technical endorsement.

Big data technology discovers credit through data mining, explores credit value, and builds digital trust.

The blockchain can establish a "technical endorsement" trust mechanism, solve trust problems through mathematical methods, and Algorithmic programs express rules, and mutual trust can be established as long as the common algorithmic programs are trusted.

The value of digital trust lies in that it can form trustworthy bonds in environments where trust is unknown or weak, saving The time and cost required for credit formation can be used to support commercial credit in a certain range and to a certain extent; a zero-time difference and zero-distance authentication tool can be established in a wide-area, high-speed network to improve the actual efficiency and operational reliability of the Internet of Things. Further analysis shows that digital trust can solve the problems of who I am and who you are, who the ownership belongs to, and who the command and control rights belong to. It has high efficiency and low-cost universal benefits.

Second, three-dimensional interaction based on distributed architecture.

The unique distributed and end-to-end architecture of blockchain can realize parallel transmission of information and information sharing, Manage parallel crossovers. Therefore, in scenarios with many counterparties, multiple transaction links, long management chains, and high degree of discreteness, it is possible to build a business structure with space-time folding and three-dimensional interaction to improve cooperation efficiency and operational efficiency.

The chained block data structure, consensus mechanism, time stamp and key technology adopted by the blockchain, It can prevent original data tampering, control the risk of data leakage, and protect privacy and data security in a three-dimensional interactive scene where multiple parties participate.  

The information technology architecture we are familiar with is centralized and locally closed. In society, market entities are independent and interactive, and the traditional credit mechanism we are familiar with is self-contained and separate. By establishing digital trust and three-dimensional interactive architecture, blockchain technology may reshape business models and improve resource allocation efficiency.

One is to build a distributed ledger system shared by financial institutions.

Financial transactions are characterized by high concurrency and multiple platforms. The application of blockchain technology can build a distributed ledger system in which large, medium and small financial institutions participate, form a technical platform for financial institutions to interconnect, realize information sharing, product sharing, and service sharing, and provide more efficient financial services. For example, in the supply chain financial scenario, the application of blockchain technology can establish a multi-party collaboration structure and trust mechanism, overcome the limitations of traditional commercial credit, and transfer core enterprise credit to more levels; business agreements can be incorporated into smart contracts to prevent Misappropriation of funds and malicious breach of contract. Blockchain + supply chain can establish an ecosystem of mutual trust, high efficiency and low cost. The trade finance blockchain platform launched by the People's Bank of China in Shenzhen can realize multi-level financing of supply chain accounts receivable, cross-border financing, supervision of international trade accounts, foreign payment tax filing forms and other business operations on the chain.

The second is to build an efficient financial supervision system.

The financial technology supervision system being piloted can quickly decouple and combine intricate data sets, which can be shared by multiple parties Regulatory data can implement consistent compliance standards, release data value through data mining, and automatically generate regulatory reports and solutions, so as to realize the whole process of financial supervision and all-round intelligence, surpassing complex processes and resource-consuming sites Supervision, reducing the cost of supervision and the cost of being regulated. In this system, technologies such as blockchain-specific distributed ledgers, smart contracts, data fidelity, and three-dimensional interaction are used for trust enhancement, cross-agency cooperation, data encryption sharing, and business process optimization.

The third is to build a cross-local public service platform.

For example, Shanghai’s international trade blockchain + platform has both supervision and service 10 major functional sections, 53 items Application, docking with 22 departments, covering the main links of international trade and the whole process of supervision, can provide enterprises with public services related to international trade, and extend the provision of digital financial insurance, supply chain finance and other services.

The fourth is to build an end-to-end digital currency.

The central banks of many countries have launched digital currency research and development. The Bank for International Settlements and the central banks of the United States, Europe, Japan, the United Kingdom, Canada, Switzerland, and Sweden recently published a report on "Central Bank Digital Currency, Basic Principles and Core Features". The legal digital currency in my country's pilot program adopts centralized management and indirect issuance mode, adopts the method of "loose coupling of accounts" and digital wallet, has the technical advantages of off-network transactions, and can provide the public with high security and good liquidity payment tools , making daily life easier, and it is also possible to "overflow" across borders and develop into a global digital currency.

Facebook and other co-founders are planning the digital currency Libra, trying to meet the financial compliance of the United States and other Western developed countries Standards, clearly maintain a centralized technical architecture, promise to formulate a comprehensive framework for financial compliance and network-wide risk management, establish strict standards for anti-money laundering, anti-terrorism, compliance with sanctions, and prevent illegal activities, and promise to maintain the currency hegemony of the US dollar. Once Libra is approved by the United States, it should be able to gain market access in Western countries, and it may rapidly develop into a super-sovereign digital currency. What needs to be paid attention to is that super-sovereign digital currency may subvert and reconstruct the global monetary system and traditional financial model: beyond national sovereignty, beyond the central bank, beyond commercial banks.

The application of blockchain technology has been extended to digital finance, Internet of Things, intelligent manufacturing, supply chain management, etc. field, showing a bright future for industrial development. On October 24, 2019, General Secretary Xi Jinping pointed out that the blockchain should be an important breakthrough for independent innovation of core technologies, clarify the main direction of attack, increase investment, focus on overcoming a number of key core technologies, and accelerate the promotion of blockchain technology and Industrial innovation and development. General Secretary Xi’s speech, standing at the height of the national strategy of the digital economy, pointed out the main direction, key path and basic principles of blockchain technology and industrial innovation and development.

To promote the development of blockchain technology and industrial innovation, we must grasp 4 key points.

First, break through the bottleneck of blockchain technology.

In the underlying technology, as a technology integration innovation, blockchain database, peer-to-peer network, password Basic component technologies such as learning algorithms are relatively mature, but the degree of integration is not high enough; new technologies such as consensus mechanisms and smart contracts need to be improved.

At present, no country has achieved large-scale application of blockchain technology. my country's blockchain technology research and development is committed to breaking through the bottleneck of large-scale and reliable applications in terms of privacy computing technology, authenticity supervision mechanism, smart contract technology, key technology, and diversified technology platform integration.

Second, penetrate the data island.

The Internet of Everything means the collection of data, but collection does not automatically solve the problem of data islands. It is necessary to penetrate administrative data islands to realize public data sharing; penetrate local data islands to build specialized databases.

To penetrate the data island, it is necessary to effectively protect data privacy and data security. my country's laws have stipulated the basic principles of protecting data privacy and data security, but the specific and detailed regulations need to be clarified. I personally think that the focus of legislation and law enforcement is: how to balance the rights of data owners and the interests of data holders, how to coordinate the macro stability and micro dynamics of the digital economy and society, and how to cultivate citizens' awareness and form corporate behavioral norms.

Third, master the core digital technology.

Equality in digital technology is the cornerstone of equal competition in the digital economy. Even for a large country, economic closed-loop operation generally only reduces the efficiency of economic resource allocation, increases the overall cost of economic operation, and affects the quality of national consumption. However, if it is controlled by others in key technical fields, once it encounters a large-scale blockade, it may cause economic stall and hinder the process of globalization. Therefore, not only in the field of cutting-edge hardware manufacturing, but also in the field of core software development, only by making up for our shortcomings can we truly establish an equal and mutually beneficial relationship with Western developed countries.

The key to occupying the high ground of digital technology lies in talents, innovative scientific research institutions and core enterprises led by high-end talents. Financial resources should be mobilized to increase soft investment in technological innovation. It is necessary to encourage more private teams to create a fairer and more relaxed business environment for private enterprises. It is necessary to truly motivate the national team and support state-owned enterprises to establish an incentive mechanism that conforms to the laws of the market economy and science and technology.

Fourth, speed up system innovation.

my country should base itself on the healthy development of digital finance, accelerate the construction of digital financial system, and promptly formulate blockchain financial supervision, Digital financial systems such as digital asset market supervision, digital currency supervision, and legal digital currency issuance, gradually establish and improve digital trust mechanisms.

my country's technical standards, security specifications and certification systems for blockchain have just started. It is necessary to improve the standards, security specifications and certification audit systems for blockchain technology and blockchain finance. In law, the legal definition of digital assets should be clarified, the contractual nature and validity of smart contracts should be clarified, and the responsible entities under the distributed architecture and their codes of conduct and regulatory standards should be clarified.

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