Juca said, post blockchain hotspots and make a sound!

Juca said, post blockchain hotspots and make a sound!

The guest host of this issue of "Juca Talk" is Kylin, a senior reporter of ostrich blockchain, and the invited sharing guest is Li Ming, executive director of China Digital Economy Research Institute.

The theme of this live interview is: Looking forward to 2021-the integration and development of blockchain and digital economy.

The following is the transcript of the interview: (slightly abridged without changing the original meaning)

Moderator: Will DeFi, the biggest blockchain hotspot in 2020, still have influence in 2021?

Li Ming: I am currently the dean of the Digital Economy Research Institute of the China Business Association. My main research direction is the application of digital technology in ordinary people's lives. DEFI is exploding with stronger innovation capabilities. In the next two years, DEFI will be the core application in the field of blockchain and digital currency. The development of DEFI this year has solved many infrastructure problems, such as AMM, such as various DEFI protocols. DEFI practitioners are building a relatively complete ecology. On the basis of this ecology, many new applications based on open finance are speeding up their implementation. Many applications that take a long time to take shape in centralized finance are launched in the world of DEFI, so DEFI has just completed the accumulation of the basic stage, and looks forward to more powerful development in 2021. DEFI will also bring more investment opportunities and investment methods to ordinary investors.

Moderator: Recently, well-known institutions such as Wall Street technology giants, Grayscale, and S&P have increased their holdings of Bitcoin in large quantities. What do you think of this?

Li Ming: In fact, traditional funds have been looking for reliable channels to enter the field of digital currency transactions. In the past two years, traditional funds have been trying in various ways. One is because the traditional financial system is relatively stable and the rate of return is decreasing. This logic is easy to understand. In an investment institution in the United States, if the annual income is more than 10%, and it lasts for several years, everyone will think that you are a very good institution. It is already a stable, low-risk, institutional-dominated market. On the other hand, looking at China, there are large fluctuations and imperfect supervision. One may have a 100% rate of return. Therefore, the same is true for traditional financial funds when looking at digital currencies. Although the risks are high and the returns are good, the attempts of traditional funds to enter the digital currency market have not stopped. Now Grayscale has successfully provided a safe and compliant entry channel through passive trust, so you can also see that some time ago, the mainstream currency skyrocketed, and there was a lot of pressure on the top. There are still big buy orders that can prop up the price, also because there is a steady stream of money entering the market, and mainstream digital assets are being accepted. Due to the popularity of Grayscale’s subscription, in the United States, in Hong Kong, and in Europe, several institutions similar to Grayscale are applying for digital currency passive trust licenses. Therefore, in the year before last, the price of mainstream currencies was under greater pressure. However, in the coming year, there will still be a large amount of funds entering the market, which will heat up the market. Similarly, the money coming in will bring more funds to DEFI. As DEFI continues to mature, these funds will gradually use other DEFI services from the main mainstream currency at the beginning.

Moderator: There is a view that the current international financial turmoil is intensifying, and many traditional institutions deploy Bitcoin as a safe-haven asset, and Bitcoin is often compared with gold, so is it possible for Bitcoin to surpass gold in the future? Which of the two do you think is the better asset?

Li Ming: It is true that many mainstream funds in Europe are increasing their Bitcoin holdings, and everyone has generally begun to accept BTC as a value asset and add it to asset allocation. There is the same logic as gold, but there are also differences. The same logic is based on consensus. Assets with a high degree of consensus are valuable. The trend of human assets has once again proved this point, including BTC, which is already a very important means of payment in Europe. Now when I talk about BTC with others, I think most people will say, I want it! Instead of thinking that BTC is air like four or five years ago. This is the power based on consensus, so the stronger the consensus, the greater the value, but like gold, it takes time to form a consensus. The difference is that the form is very different. Ease of use is a very important criterion. You can carry 10,000 BTC with you, but it is impossible to carry a ton of gold, right? Therefore, the ease of use and the physical form of gold itself have many restrictions, such as not easy to carry, not easy to exchange, not easy to divide, etc. Therefore, at the level of consensus, BTC, I think the logic of forming value is similar to that of gold, but because of its convenience in the form of use, it will be accepted more quickly, including possible wider applications in the future. On this point, I understand that it can be bolder. The application space of BTC is still very wide, and it may replace the storage methods of many important assets that we see now.

Moderator: Back to the digital economy, what do you think is the biggest problem facing the blockchain in the development of the digital economy?

Li Ming: How to cooperate with the implementation of supervision and application, this should be the biggest problem. At present, the development of the digital economy has entered a new stage, and the information efficiency is already very high. Although there is still room for further improvement, the efficiency of productivity improvement is decreasing. However, the core of the further application of the blockchain is consensus, which needs to improve execution efficiency through consensus. On the contrary, the development of the technical level is not the core issue. But to apply the consensus of the blockchain, it is necessary to further put the execution and decision-making of the original people to the consensus to deal with. How to integrate, how to determine the boundaries, how to divide the rights and responsibilities? So far, there is no good solution. Similarly, as just mentioned, how to supervise the consensus of the blockchain is not easy to solve. But as my friends said, the core of the blockchain is consensus. If the consensus cannot be well applied, the efficiency and role of the blockchain will be small. Pure technology application, moving data to the government's alliance chain is only to improve efficiency at the information level, and it will also face a situation where a lot of money is spent, but the effect is limited. Hope to see a better integration of supervision and blockchain technology.

Moderator: Now that Bitcoin has risen so high, what kind of impact will a digital currency like Bitcoin have on my country's existing monetary system?

Li Ming: The financial systems of many countries have been impacted by BTC or digital currencies. For example, many countries in South America and Eastern Europe are willing to accept digital currencies for online business settlement, rather than US dollars or local currencies. Since June, the countries with the largest increase in the purchase of mainstream currencies are in the Middle East, with Turkey bearing the brunt. All these show that the digital currency has had an impact on the local financial system, and a lot of money has been separated from the system. From this point of view, I can also understand China's financial policy and regulatory stance. In the financial game market, there are only strong and weak, and there is no right or wrong. When a weak financial system faces a powerful opponent, it will be crushed. In this regard, there is no need to take chances.

So from my point of view, the country's financial policy is at a very critical stage, how to protect itself and how to continue to innovate. Many countries will face the challenge of digital currency. A few years ago, speaking of it, you might not have imagined it. But the current digital currency is actually destroying the financial systems of many central countries, and China needs to be very careful.

In the financial systems of many small and medium-sized countries, in our country, the digital economy has become the lifeblood of the Chinese economy and has made a huge contribution to the overall GDP. Under the premise that the current overall economic situation is not optimistic, the need to promote the development of the digital economy faster is very clear. Including the 5G that is being pushed now, we also hope to build up the infrastructure first.

Moderator: Can you briefly tell us in what ways blockchain can actually empower the development of the digital economy?

Li Ming: The contribution of the blockchain to the digital economy, I understand, is mainly to further optimize production relations and improve the efficiency of the government system. Optimizing the production relationship is to use blockchain technology to make the production transaction process more transparent and promote production collaboration on a larger scale. For example, people from all over the country can participate in a certain project based on a smart contract, and transparently and automatically quantify the work contribution value and get paid. This transparent and quantifiable organizational method can make the distribution of contributions to benefits recognized by everyone, and at the same time, there is no threshold for participation, which can encourage more people to participate. Smart contracts will play a big role in future production relationships, instead of being limited to issuing coins and mining mines as we see now. The progress in this area is also very fast, and there may be relatively well-formed applications next year landing. Improving government efficiency is what the country is doing. Issuing legal currency digital currency and uploading local data to the chain are also preparations for improving government decision-making efficiency and government execution efficiency in the future.

Moderator: In 2021, will there be phenomenal applications beyond DeFi in the blockchain field?

Li Ming: I personally think that DEFI has just started and will develop faster tomorrow, but this year I also saw rapid development in NFT and basic applications. The effect driven by DEFI is obvious, so next year I understand that it should be driven by DEFI, and other related categories will develop rapidly. The more mature the DEFI, the lower the layer. Instead, it was more integration before, providing support for other similar rapid developments. One of our landing projects, Tops, is currently doing asset screening. By scanning assets on the chain, we can quickly evaluate assets and reveal risks. Among the large number of assets we scan every day, many are related to DEFI. But there are also more and more projects, distributed in various fields. DEFI provides these projects with a good bottom layer of financial services, and is also accelerating their development. For example, grt, which provides underlying data services, has attracted enough traders by launching uniswap.

Moderator: Can you tell us about the investment opportunities that we can focus on next year in the blockchain field?

Li Ming: Basic financial services will be perfected, such as decentralized perpetual contracts, which are used by very few people this year, and may explode next year. Referring to traditional finance, some major applications will continue to improve in the DEFI world. Lending and modernized transactions are available and are constantly being improved, but contracts, insurance, etc., which are not yet perfect, may grow rapidly next year. Then there is the public chain. It will take two years for ETH2.0 to go online. In the middle, such as Polkadot, BSC, etc., may have opportunities. At the same time, you can also pay attention to the core applications on a public chain. When the public chain is launched, these core applications will also be launched. This piece can participate in the application ecology on ETH. Another thing is that the underlying services need to be further improved. For example, the interface that provides data on the chain is still unstable, and numbers are often lost. However, with the development of DEFI, the demand for this area will become stronger and stronger, including decentralized storage.

Also, I am more optimistic about DAO. There will be more innovations in the practical application of NFT, and I am also trying in this regard. Ordinary investors have some simple investment logic of their own. With some patience, there is a high probability that you can make money from the market.