Cai Weide: 170 global banks have joined the JPMorgan Chase stablecoin network, and foreign blockchain financial empires have begun to form

What is JPM Token?

First of all, we need to know that the JMP token is a stable currency, which is pegged to the US dollar one-to-one, and the stable currency is guaranteed internally by JPMorgan Chase Bank, which is completely safe and stable (if JPMorgan Chase Bank does not go bankrupt). We know that the FCA, a British regulatory unit, mentioned a week ago that they believe that stablecoins are a currency. From this point of view, what JPMorgan Chase issued is a currency.

Now at JPMorgan Chase Bank, if you need to transfer funds from one place to another, it takes 2-3 days to use the existing system, and the JPM token is actually superior to the existing system. Compared with the existing system, it is more convenient in terms of cross-border payment, and can be settled 24 hours a day, and it has no effect on whether the bank is closed or not.

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Quorum Blockchain

negative comments

After the news came out, there were polarized views. Some people strongly criticized it, while others agreed with it. The companies with criticism are as follows:

Ripple: After the news came out, Ripple published many articles, criticizing JPMorgan Chase’s stable currency, saying that it is a centralized system, and there is no innovation compared with the existing system, etc. But some people have responded to this. In fact, the Ripple system was found to be a centralized system two years ago, and it was an independent report issued by a third party after a lot of research. It is not qualified to criticize others. Ripple did not respond when it was criticized, and JPM Coin has not yet reported independently, so it is really unnecessary for Ripple to come out and criticize JPM Coin immediately. Ripple also predicts that after the release of JPM Coin, everyone will vigorously follow the Ripple system. As a centralized system, the Ripple system has no position to criticize the centralization of the alliance chain. The alliance chain is a distributed system, but its distribution is not as wide as that of the public chain. Now, some so-called next-generation public chains have very few nodes, even fewer nodes than alliance chains. Therefore, the conclusion that the alliance chain is a centralized chain is untenable.

A very important reason for Ripple’s attack on JPM Coin is because Ripple Coin is also specialized in payment. JPM Coin and Ripple have a competitive relationship. In fact, JPM Coin is robbing the Ripple Coin market.

In agreeing with JPM Coin, one of the very important points is that it is the first digital token issued by a bank in the world, which is a historic event. Even though the token can only be used by institutions within the bank, as the first digital token issued by a bank in history, it is also issued by the largest bank in the United States, so the information it represents is important.

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author analysis

The author will discuss this issue in six aspects.

• 1. JPM Coin is not a traditional digital token

• The author believes that the ideas of digital tokens and Ripple do not need to be taken seriously, because the digital currency market has always been two routes:

Traditional digital tokens: Except for Bitcoin and Ethereum, which are considered financial commodities, other digital tokens have not yet been recognized by the US government, and the US SEC will also supervise this.

Security tokens are legally compliant digital tokens that are regulated by the U.S. Securities Law.

In addition, there is a digital currency, circulation token or utility token, which has not yet been defined by the US SEC. JPM Coins are more like circulation tokens because they are neither digital tokens nor securities tokens. .

The British FCA divides tokens into digital tokens, security tokens, and stablecoins, and believes that stablecoins are currencies, and are governed and supervised by currency law. So if it is in the UK, JPM Coins will be recognized as a stable currency and regulated by the British Currency Law.

Therefore, it is meaningless to compare JPMorgan Chases stable currency with Bitcoin, because they are basically two different types of digital currencies. One is not yet legal outside, and may even be illegal in the future, while JPM Coin It is the token used to convert legal currency within the bank. JPM Coin is neither a true digital token nor a fake digital token because it is not a digital token.

Therefore, it is unnecessary to think that they are fake cryptocurrency or criticize them vigorously, because they are two completely different systems.

In July 2018, two things happened in the United States. One was that a stable currency issued by IBM was the digital dollar, and the other was that Bakkt began to launch financial products based on digital tokens. Earlier, the U.S. regulators began to introduce some regulatory policies on these matters. The three things in the United States in 2018 were to divide troops into three groups to establish a new financial system. Under this new financial system, JPMorgan Chase, the largest bank in the United States, issued a stable currency, which is of great significance.

2. JPMorgan Chase wants to build a digital economy and financial empire

When JPMorgan Chase Bank announced the news, many people said that the existing system can also make payments, including cross-border payments. I think it is completely unnecessary for JPMorgan Chase to issue stable coins now.

This can actually be answered, because at the beginning of 2018, the author mentioned in the Struggle Lecture How Blockchain Reconstructs the New Pattern of Financial Technology [1] that blockchain has the concepts of financial groups and empires, and a group uses a set of blockchains. According to the blockchain protocol, other commercial banks or financial institutions who want to enter this group to do business will be required to use the same blockchain technology, which will become a joint financial empire. There can be a circulating token or points in this financial empire. The more companies that participate, the bigger the financial empire will be.

Now JPMorgan Chase Bank is still an experimental system, and there are still many things that are not yet mature, but the announcement is actually to tell the relevant companies that they now have a blockchain system, and hope that other companies are willing to join this In the group, use their agreement. On February 14, 2019, Umar Farooq, blockchain director of JPMorgan Chase Bank, stated that there are now 170 global banks (global banks) willing to cooperate. The original text is More than 170 global banks have signed up for our Interbank Information Network blockchain program . It is amazing that 170 global banks want to join the JPM Coin network system, and we can see the possible size of the JPMorgan Chase banking financial empire.

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170 global banks are willing to join the blockchain payment network

We predict that other banks will issue their stablecoins in the future. Yesterday, Singapore Overseas Chinese Bank (OCBC) announced the issuance of internal OCBC oneToken.

3. The U.S. banking sector officially accepts the blockchain-based digital economy

JPMorgan Chase is the first bank in the United States to announce the use of blockchain systems for payments. What does this mean? Because payment now has many technologies, and some technologies are now more convenient than blockchain payment, but JPMorgan Chase Bank has made a high-profile publicity about the use of the blockchain system. Is this what they are trying to confuse? Im afraid not, this incident shows that Bank of America has accepted the use of blockchain in the banking system. This means a lot! How many banks are doing this today? Theyre all experimenting.

They forgot one thing. Now the data in the financial system can be changed, and the current financial system is centralized. With the blockchain, it becomes a consensus system (all parties to the transaction can see the same data), and blockchain data cannot be changed, which will result in a new financial process and system. With this trust mechanism, the internal and external supervision of the financial system is much more convenient, so that the banks internal operations, business processes, and regulatory systems will all change. All parties to the transaction have the same data, preventing fraud and greatly reducing regulatory costs. These are difficult to achieve in the current financial system. If JPMorgan Chase does not provide such a consensus service, other banks such as Citibank provide such services, and partners may change their choices.

For customers, using consensus services, they can have more information, and they can get the same information at the same time as the bank, and it is impossible for the bank to change the data behind the system. It has happened that financial institutions changed information after the event or internal staff of the bank cheated. For example, in the past few years, Wells Fargo Bank in the United States had a large number of internal staff cheating. The author also had 3 accidents in the United States, which caused the author to lose time and money, once in a bank (2 times without the author’s knowledge, the author’s account was changed), 2 times in a well-known securities firm (intentionally changed the author’s account several times), brokerage accidents It took 2 years to go to the arbitration court to resolve it. These things will be difficult to happen if the blockchain is used. Umar Farooq, director of blockchain at JPMorgan Chase Bank, also revealed the same news when he visited. He said that JPMorgan has always believed that blockchain is the way of the future.

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Umar Farooq (right) interview in New York on February 7, 2019

Not only financial institutions may cheat, but even schools that everyone respects may cheat. The author encountered a famous school in the United States that changed the students transcript many times, and the school stopped changing it until the student was ready to sue the school in the state Supreme Court. According to state law, the school has the right to change the students transcript at any time, and the student can only challenge it in the state Supreme Court. Because of such a right, even famous schools sometimes play tricks.

4. JP Morgan can’t do blockchain-based clearing yet

JPMorgan Chase Bank said it was doing payment, but it didn’t say it could do liquidation. In fact, there are only two organizations in the world that have announced liquidation. One was announced by China Tiande Technology Company in April 2017, and the other was in 2018. It was announced by foreign DTCC companies in October. Tiande Company has been publicly exhibited in Guiyang for 2 years. More than 100 units from home and abroad have visited the Beijing laboratory. Foreign countries include Google, IBM, SAP, Amazon, and domestic companies include the Peoples Bank of China, the Ministry of Industry and Information Technology, and commercial banks. Many technology companies have visited . The technology has also been published in domestic and foreign journals and conferences, and related technologies have been applied for patents at home and abroad, and the technologies are now open to the public. However, the technical white paper of the DTCC project has not yet been published, and the patent documents that have been published in the United States have not cleared the relevant technologies.

JPMorgan Chase Bank said that it does payment, and it can be seen that they have not yet developed a clearing system. The author mentioned in many places that the design of the chain of the clearing system and the payment system is different, because the delay required by the payment system is very low. But the throughput is not great. According to Queuing Theory (Queuing Theory), you cant have both! To achieve low latency throughput must be bounded. Clearing requires high throughput, and the designs of high-throughput blockchains (clearing) and low-latency blockchains (payments) are different!

For example, the inter-bank payment system of the Bank of Canada only needs to complete 1.1 transactions per second on average, and the inter-bank payment systems of the European Central Bank and the Bank of Japan do not need to complete 20 transactions per second on average , so the current blockchain system is sufficient to support the inter-bank payment system. This data is provided by the Bank of Canada, the European Central Bank, and the Bank of Japan. So now some central bank system applications can already use the blockchain. Although the blockchain system has not yet solved all the problems of the banking system, a payment system within the central bank can already use the blockchain. JPMorgan Chase Bank is working on the banks internal payment system, presumably it can support low-latency transactions, and can support the current throughput.

If the payment system needs high throughput, Tiande ABC-TBC architecture can be used to solve it. Increasing TBC can increase the payment volume, and ABC can use load balancing to increase the number of customers, so that both the transaction volume and the number of customers can increase. This is the technology used by Tiande to make blockchain liquidation in 2017. In the 2018 Blockchain No. 4 Pit (Middle) - Is Blockchain Fragmentation a Scalable Solution? [2] mentioned that to solve low latency and high throughput, only such technology is effective now. Because this problem needs to solve two different scalability problems, and the two solutions are not the same. So if you only use one solution, you will encounter another problem. Other technologies either dont have high throughput, or dont maintain Byzantine (or database) consensus protocols in key places. Without a consensus protocol, the system is not secure at all.

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On the left is one chain linking the world, and on the right is the ABC-TBC dual-chain architecture

This fish and bears paw problem is limited by the data structure (data structure), not by the algorithm. If it is an algorithm limitation, you can change the algorithm. But not this time, so the problem cannot be solved.

Without solving high throughput, blockchain liquidation cannot be done, because the amount of liquidation is larger than that of stock exchanges and futures exchanges. A clearinghouse typically handles trades from multiple exchanges. There is an old Chinese saying that soldiers and horses go first before food and grass are mobilized. In the financial blockchain system, the first is the payment system. The blockchain clearing system is more difficult to implement and will be developed later. But in the future, blockchain clearing technology will definitely be needed.

5. The positioning of the blockchain in the financial market begins to be determined

In the past, digital token supporters believed that digital tokens would subvert traditional finance and completely replace the current financial system. This has become an impossible task after the US SEC began to supervise digital tokens in July 2018. The US SEC has a huge impact on digital tokens. It can be said that the main reason for the sharp drop in the digital token market in 2018 is that the SEC began to implement supervision.

However, the United States launched a blueprint for the digital economy in July 2018, and divided into three ways: 1) Approval of the emergence of digital dollars, 2) Approval of the legal exchange of digital financial products and security tokens, 3) and the introduction of regulations on security tokens, Let U.S. companies use security tokens to raise funds and then trade them on the U.S. security token exchange, see U.S. Digital New Economic Empire and Chinas Blockchain Dream [3].

Under this blueprint, JPMorgan Chase Bank became the first American bank to issue an internal stable currency, unite 170 global banks to realize a global payment system, and establish a blockchain financial empire!

Those who criticize JPM Coin as a fake digital token have not fully understood the big blueprint, and use the original digital token world to see new economic activities. If it is said that the waves behind the Yangtze River are ahead of the waves, they are now the waves ahead. Some people say that the progress of the blockchain is 15 times faster than that of the Internet. The traditional banks, which were far behind in the past, have now become the last waves and started to walk on the blueprint of American finance.

• 6. Consortium chain (not public chain) is the development direction of blockchain

• JP Morgan uses the Quorum alliance chain instead of the original Ethereum public chain, which means:

• The mainstream of the future digital financial market is the alliance chain, not the public chain;

• The issuance of digital tokens is not necessarily related to the public chain, which the author has been mentioning in the past, and the alliance chain can also support the issuance and application of digital tokens;

• Now is the time to restructure the ecology of the blockchain world. The ecology that used to be dominated by public chains is now dominated by alliance chains.