Editor's Note: This article comes fromInterchain Pulse (ID: HiveEcon), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Interchain Pulse (ID: HiveEcon)

, reprinted by Odaily with authorization.

Shenzhen, Guangzhou, Weihai, Beijing, Shijiazhuang, Qingdao... In the first half month of 2019, Duan Linxiao, the co-founder and chief strategy officer of Weiwei Technology, flew from one city to another without stopping. In his middle age, he spends two-thirds of this year on business trips, either to give speeches to enterprises and governments, or to promote the implementation of blockchain in the trade field.

Beginning in 2016, after he engaged in the blockchain business, he began to have a new belief and ideal: to apply blockchain to the entire process of cross-border trade and build a new credit system for the cross-border trade ecosystem.

Not only micro-technology, the reconstruction of trade by blockchain has attracted the attention of many countries or regions, and a group of giants have also participated in it. As the largest trading country in the world, China, from the central bank to private enterprises, is exploring the largest application scenario of this blockchain.

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The largest application scenario of blockchain is in trade

Trade, especially cross-border trade, is the biggest application scenario of blockchain. In Duan Linxiao’s view, human social activities can be divided into three major areas: economics, politics, and culture. Cross-border trade is the most complex social and economic activity scenario for human beings. It involves all the attributes and characteristics of human social and economic activities, including trade (commodities), logistics (services), finance (transactions), and supervision (order).

The natural attributes and characteristics of cross-border trade have caused the complexity of the entire production relationship, and the mutual trust relationship cannot be established, resulting in very high trust costs, communication costs, compliance costs, transaction costs, and regulatory costs among various entities, resulting in high trade costs. low efficiency. Coupled with the inefficiency of Swift, the global interbank clearing system, the transaction settlement efficiency is very low.

Duan Linxiao believes that every time human productivity and the ability of means of production are improved, a change in production relations will occur. In the process of development of productivity and means of production such as artificial intelligence, big data, cloud computing, and the Internet of Things, there have been developments. Bottlenecks, for example, the bottleneck encountered in the development of artificial intelligence is insufficient data samples, while the development of big data is threatened by data security, and centralized thinking makes big data unwilling to share, thus causing serious data islands... Therefore, if the relations of production do not change, productivity and means of production will face the difficulty of developing bottlenecks.

Applying the blockchain to such a complex field of cross-border trade will subversively create a new production relationship of trust mechanism, which will greatly reduce the costs of cross-border trade and greatly improve trade efficiency.

And the transaction volume of cross-border trade is enough to support the birth of a trillion-dollar market capitalization company from blockchain companies. At the end of June 2019, the World Bank officially announced its statistics and calculations of global and national economic data in 2018. Among them, the total global GDP reached 85.791 trillion US dollars. According to the "Global Trade Data and Prospects" report released by the WTO World Trade Organization, in 2018, the total amount of global cross-border trade was about 39.342 trillion US dollars, accounting for 45.86% of the global GDP. In 2018, China's total import and export volume was US$4.62 trillion (approximately 30.51 trillion yuan), a year-on-year increase of 12.6%, accounting for 11.75% of the total global trade. World No. 1 for many years in a row. Assuming that the cost of global trade is reduced by 0.1% due to the use of blockchain, it will be nearly 40 billion US dollars a year.

At present, the United States, Europe, Hong Kong, Singapore, South Korea, Japan and other trade and financial powers have begun to promote blockchain + finance, blockchain + logistics and other projects at full speed with the power of the government + enterprises. Multinational giants include JPMorgan Chase, IBM, Maersk, Facebook have already started to move. If the application of blockchain in digital currency has brought about changes in sovereign currency and monetary sovereignty; the application of blockchain in the field of cross-border trade will truly affect the global trade system reform, service system reform, and credit system reform. Changes in the monetary system and changes in organizational order.

China's advantages in the field of cross-border trade will help China influence the construction of standards for global blockchain applications and eliminate the difficulty of establishing mutual trust in global cross-border trade. Duan Linxiao said that this is an opportunity of the times that will benefit thousands of years.

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The practice of micro technology

In April this year, under the guidance of the General Administration of Customs, Tianjin Municipal Bureau of Commerce (Port Office), Tianjin Customs, Weiwei Technology, and Shenzhen Financial OneConnect jointly released the news of the trial operation of the "Tianjin Port Blockchain Verification Pilot Project". Among them, Weiwei Technology is responsible for the investment and construction of the blockchain system for the sea transportation scenario of this project, and developed the "TBC Blockchain Cross-border Trade Express" platform; Shenzhen Financial OneConnect is responsible for the construction of the blockchain system for the air transportation scenario of the project. "TBC Blockchain Cross-border Trade Express" passed the acceptance evaluation summary of the General Administration of Customs of China on August 1, 2019.

"TBC Blockchain Cross-border Trade Express" is a typical blockchain + cross-border trade blockchain comprehensive application platform. To put it simply, it is to establish standardized on-chain trade data standards, conduct data information cross-comparison and store certificates for on-chain trade, realize commodity chain confirmation, establish an enterprise digital credit asset system, and create a credible cross-border trade process. traceability system. Financial institutions can use blockchain trusted data to provide future financial loans and credits to enterprises.

According to Weiguan Technology, after the project was launched, online bank credits exceeded 100 million yuan, and online bank loans exceeded 10 million yuan. Duan Linxiao said that in the past, the bank’s loan interest rate for the company involved was as high as 15%. After the trader went to the chain through the “TBC Blockchain Cross-border Trade Express”, he could obtain an annualized loan interest rate of 9% without collateral or guarantee from the bank. Direct financing costs are reduced by up to a third. Why banks are willing to finance companies at low interest rates shows the advantages of blockchain in reducing costs.

In the field of cross-border trade, the basic composition of the ecology is composed of production + trade companies, logistics companies with different functions, financial institutions based on insurance banks, and four major business domains such as customs, taxation, inspection, and foreign exchange. Cross-border trade business can only be completed by the joint participation of more than ten or more than twenty corporate institutional roles in the four major business domains of trade, logistics, finance, and supervision. The cost of trust, communication and compliance among enterprises is very high. Cross-border trade fraud occurs from time to time, and it is difficult to recover. Duan Linxiao introduced that he had been engaged in international bulk crude oil trade, and it was because of cross-border trade fraud that caused heavy losses. After he understood and studied the characteristics of blockchain, he devoted himself to the industrial application of blockchain + cross-border trade without hesitation.

Unlike many blockchain + cross-border financial projects that have built a chain, find some cooperative companies to participate, and do press releases, Microtech does "needlework" in order to realize the credibility of the data generated on the chain.

Weiwei Technology first chose a sub-category scenario with a relatively high degree of product standardization, relatively high trade fraud, and a relatively large trade amount-parallel car import. This is also the category advantage of Tianjin Port. The amount of parallel cars imported through Tianjin Customs exceeds 70 billion yuan every year.

Weiwei Technology disassembles the cross-border trade of parallel car imports into four business domains: trade, logistics, finance, and supervision. The business is abstractly classified into ten standard links of transaction, entrustment, transportation, warehousing, customs clearance, shipping, settlement, financing, insurance, and tax payment.

There are 10 first-level classifications for key element information. Taking the key element information of a trader as an example, it contains 123 elements, including: foreign trade contracts (19), letter of credit information (5), overseas shipments (16), freight and insurance fees (7), and information on overseas customs clearance elements (14), arrival information (3), entrustment agreement for entering the zone (4), entrusting agreement for exiting the zone (18), entrustment details for entering and exiting the zone (16), vehicle sales (8), entry and exit District invoices (11), five-digit code interface (2).

For the purpose of financing for enterprises, transparent supervision by regulatory authorities, and the work of micro-technology, as of the end of December, 88 trade-related enterprises have joined the TBC blockchain cross-border trade train, and Huaxia Bank, Binhai Rural Commercial, and Zheshang Banks, Industrial and Commercial Bank of China and other financial institutions grant credit or loans to enterprises, and Tianjin Customs implements penetrating supervision of all aspects of trade. Because of the use of blockchain, the original 15 business documents already meet the reform conditions for reducing and optimizing to 8 documents.

Duan Linxiao introduced that after the successful verification of blockchain + cross-border trade in the parallel car import trade, Weiwei Technology began to expand customs areas, categories, countries, and standards in accordance with the guidance of the General Administration. The category scene began to apply cold chain frozen meat, International express mail, export of mechanical and electrical products, import of crude oil chemical products, and export of second-hand cars are analyzed and deconstructed in the category industry and ecology, and blockchain ecological construction has begun to be carried out among different customs areas and countries. "Every trade category has different processes, links, characteristics, ecology, and policies. It is necessary to sort out the pain points link by link. The starting point of empowerment is the pain point. The application of the blockchain industry is not achieved overnight. The blockchain is not simple. For a set of IT information OA system and ERP system, the application effect needs to rely on a series of processes such as pain point analysis, sorting out, business trial operation, ecological construction, customer experience, etc." Duan Linxiao said.

In order to support this ecology, Weiwei Technology has also developed "Cross-Border Trade Ledger Chain-TLC" and "TLC BaaS" on the product side.

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Blockchain cross-border trade competition

For the huge application scenarios of tens of trillions of dollars, overseas players have also laid out early. R3 is an important technology alliance and an early player in this market. Just this month, on the 17th, R3 completed its largest trial of open account trade finance on the Corda platform. The trial, initiated by Marco Polo, founded by blockchain firms R3 and TradeIX, included more than 70 organizations from more than 25 countries. 340 participants from these organizations participated, from financial services, information technology, telecommunications, logistics, maritime industry, real estate, hospitality and automotive industries. This is also enough to see the complexity of trade finance.

In 2017, IBM promoted the application of Hyperledger Fabric in blockchain + trade finance, jointly developed with nine banks including Deutsche Bank, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, SociétéGénérale and UniCredit, and established We.trade group. Now The number of participating banks expanded to 12.

Internationally, another blockchain trade finance network comes from the Interbank Information Network (IIN), which is based on Quorum, JPMorgan’s internal blockchain platform. As of the end of the third quarter of this year, a total of 365 member countries around the world have announced to join the interbank information network. It is said that this chain network will absorb 400 members in 2019. Launched as a pilot in 2017, IIN aims to minimize pain points in the global payment process, allowing payments to reach recipients faster and with fewer steps. JPMorgan Chase believes that trade finance is an important scenario for payment.

This is consistent with Zhou Xiaochuan, the former governor of the People’s Bank of China. Zhou Xiaochuan believes that the blockchain is more suitable for transactions with a small transaction volume, so the People’s Bank of China chose two systems as pilots, one for bill transactions and the other for trade finance.

In fact, these well-known overseas projects are still in the verification stage, and many trade financing blockchain platforms in China are already in actual operation. In addition to the "TBC blockchain cross-border trade train" of Micro Technology, China also has three national teams of trade financing systems.

One is the "People's Bank of China Trade Finance Blockchain Platform", which was built and operated by the Digital Currency Research Institute and the Shenzhen Central Branch of the People's Bank of China. It went online on September 4, 2018 for trial operation. 30 banks including Bank of China, China Construction Bank, China Merchants Bank, Bank of Communications, Ping An, and Standard Chartered have already connected. As of November 15 this year, the platform has achieved more than 30,000 transactions on the chain, with more than 6,100 transactions, and the transaction volume is about 76 billion yuan.

The second is the "China Trade and Finance Cross-bank Transaction Blockchain Platform", which is led by the China Banking Association, 11 leading banks including CCB and ICBC, and 4 technology companies including Hang Seng and Nanjing Runchen. The underlying platform of trade finance of block chain technology. After successfully completing two phases of testing, the platform was officially launched at the end of December 2018.

The third is the cross-border financial blockchain service platform launched by the State Administration of Foreign Exchange. Since the pilot project was launched on March 22, 2019, as of December 15, the cross-border blockchain platform has expanded to 17 provinces (autonomous regions, Municipalities directly under the Central Government), there are more than 170 corporate banks that have voluntarily joined, more than one-third of all banks handling foreign exchange business, covering more than 5,600 bank outlets; There are a total of 1,859 enterprises, and small and medium-sized foreign trade enterprises account for more than 70%.

Either through experimental attempts or actual combat tests, both domestic and foreign blockchain trade, finance, logistics and other platforms have achieved phased results in 2019. Entering 2020, all blockchain industry application platforms will roll up their sleeves and work harder.

Duan Linxiao believes that not only is China currently the largest trading country in the world, but national development strategies such as the Belt and Road Initiative, free trade zones, and the Guangdong-Hong Kong-Macao Greater Bay are pushing China towards a more open and outward-looking economy. Weiwei Technology and its strategic investor, China Silk Road Group, are helping the realization of national strategies through blockchain + cross-border trade. The TBC blockchain cross-border trade train is also capable of establishing a new multilateral free, fair, and honest trade system in the world. New Order provides blockchain digital infrastructure service facilities. China, as the largest country in world trade, has advantages, capabilities, and responsibility to lead the transformation of the digital economy!

Attachment: How does blockchain reconstruct cross-border trade? ——Taking micro technology as an example