Digital currency: Don’t be fooled by the “blockchain” cover

Since the beginning of this year, the digital currency ICO market has been booming, various "altcoins" that rely on Bitcoin technology have become popular, and the risks are becoming increasingly prominent.

At present, "blockchain" has become the fastest-growing "new technology". As the large-scale application of blockchain technology in finance becomes possible, more and more people are looking forward to blockchain changing traditional finance. Governments, universities, and enterprises are enthusiastic about the development, research, and application of blockchain. In the "13th Five-Year National Informatization Plan", blockchain technology was included for the first time.

However, amid the vigorous development, issues such as blockchain security and regulatory gaps have begun to surface.

On the evening of August 21, the Shanghai Pudong Market Supervision Bureau said that it had “surprise inspected a global blockchain summit suspected of false propaganda”. This conference on digital cryptocurrency (tokens) and blockchain was “full of seats, and some elderly investors were out”, which was considered a “new trick to make money”. On August 30, the China Internet Finance Association issued a “Notice on Preventing Risks Related to Various Investment Absorption in the Name of ICO (Initial Coin Offering)”, stating that various projects raising funds in the name of ICO have grown rapidly in China recently, disrupting the social and economic order and posing a major risk.

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These "circles" of blockchain are a bit messy

"Aunties' money is at risk again," many people on the Internet joked. Although blockchain has been increasingly used in the field, and terms such as Bitcoin and Ethereum, which are based on blockchain technology, are widely known, it is not easy for ordinary investors to understand the ins and outs of blockchain.

Dong Ning, director of the Financial Technology Research Center of the Institute of New Generation Information Technology of Peking University and CEO of ChainNova, said in an interview with Science and Technology Daily that as a technology category, blockchain originated from Bitcoin, but it cannot be equated with digital currency. In the blockchain-related industries, there are "chain circles" and "currency circles", which are a bit clear-cut.

Dong Ning is one of the earliest experts in blockchain in my country. He has been engaged in blockchain research at IBM in his early years. He is the initiator of the IBM Blockchain community and the head of IT economics for IBM Greater China. Recently, he joined the newly established Peking University Financial Technology Research Center, hoping to use Peking University's academic background to deepen blockchain-related research, accelerate the application of blockchain technology, and thereby promote the industrialization of financial technology.

He said that the earliest blockchain technology was known to the public because it was very suitable for the Bitcoin scenario, but soon the various technologies included in the blockchain (encryption, consensus algorithm, etc.) have far exceeded the scope of Bitcoin and gradually developed as a distributed encrypted ledger technology. More importantly, blockchain or distributed ledger technology has been widely used in various industry application scenarios, playing a role in the transformation and upgrading of the industry. This group of companies or technology enthusiasts dedicated to the application of blockchain industry are called "chain circles".

Those who are keen on speculating on various tokens and even altcoins derived from Bitcoin often generate income in the form of exchanges and ICO projects, and are often referred to as the "cryptocurrency circle."

What is being widely criticized now is the complicated and complicated "chaos" in the "cryptocurrency circle" in recent times.

Dong Ning said that the current "cryptocurrency circle" in my country is developing rapidly, and it has become an indisputable fact that there are many chaos. He told reporters that ICO projects are mixed, and many projects have received tens of millions or even hundreds of millions of yuan worth of investment with just a white paper; on the other hand, due to the lack of relevant supervision, it is difficult to supervise the implementation of many ICO projects after the financing is completed, resulting in huge risks for investors after the investment.

ICO digital currency regulation is imminent

ICO, which has sparked a wave of criticism in society, raises funds through virtual currencies such as Bitcoin. Project leaders raise funds for projects by issuing encrypted tokens to unspecified investors.

ICO is only one letter different from the well-known IPO, but it can bypass the strict management process like IPO, so it has come into the attention of many people.

The data shows the recent ICO craze - in the first half of this year, the scale of domestic ICOs has exceeded RMB 2.6 billion, with more than 50 ICO platforms and 2 million people participating in ICOs. This craze has attracted more and more attention and also triggered a debate in the whole society about its legitimacy and the necessity of regulation.

For investors, especially older investors, blockchain is a new thing, and the new model of ICO is even less understood. Investors do not have enough knowledge and information to judge project risks. Most token investors only see the huge short-term returns of digital currencies and naturally think that ICO is an opportunity to make money.

Dong Ning believes that regulatory authorities should proactively intervene early, strengthen behavioral supervision of the current chaos, conduct substantive reviews of digital currencies and ICO projects from a technical and business perspective, and prevent damage to the interests of investors. Issuers should be subject to continuous and strict information disclosure requirements, and anti-fraud and other liability clauses should be emphasized.

He mentioned that domestic relevant personnel have even considered many regulatory details, such as requiring issuers to submit detailed information disclosure materials to regulatory authorities before ICO, including project white papers, development teams (not anonymous), business models, fund use plans, project features, development goals, development strategies, risk assessments, ICO time, ICO price evaluation methods and other information that may involve the interests of investors, and ensure that such disclosed information can be publicly obtained by investors. During the progress of the project, the issuer should regularly and continuously disclose reports on the use of funds and other major facts and progress.

In fact, supervision has been put on the agenda. Not long ago, Dong Ning was invited to join the expert group of the Standard Formulation Committee of the Ministry of Industry and Information Technology's Institute of Information and Communications Technology to jointly promote regulatory standards for the trusted blockchain industry.

The latest news shows that ICO regulatory policies may be issued by the end of the year, and Beijing may conduct regulation in advance. How to regulate and whether it can be controlled is a topic of concern to everyone. Huang Zhen, a professor at the School of Law of the Central University of Finance and Economics, believes that the underlying technology that ICO and virtual currency rely on determines that it is different from traditional financial products and has a natural transnational attribute. Therefore, it is difficult to completely ban it from a technical perspective.

Dong Ning also stressed that international regulatory cooperation and coordination should be strengthened in the future. He said that with the development and maturity of decentralized exchange technology, token exchanges may also be decentralized in the future. At that time, the regulatory actions of a certain country will lose their grip, and international regulatory cooperation and coordination will become particularly important.

Blockchain shows its prowess, more time

Individuals can quickly complete online transactions without the need for traditional middlemen or third parties. This technical framework is considered the core of blockchain. In practical applications, it can not only record financial transactions, but also record almost all valuable information without worrying about tampering. Due to these inherent technical advantages, the development value of blockchain has been widely recognized.

It is precisely because of these advantages that experts are still full of confidence in the future of blockchain, despite the many problems such as the Bitcoin money laundering scandal and the suspected illegal fundraising in the ICO market.

The areas where blockchain technology is being rapidly explored and deployed include capital markets, financial services, payments and remittances, derivatives trading, credit management, government governance, sharing economy, supply chain, auditing, stock trading, the Internet of Things, insurance and healthcare, and many other areas.

It is foreseeable that after the combination of blockchain technology and traditional financial industry, future currency transactions, financial asset transactions and transfers, including personal credit records will rely on the security protection brought by blockchain technology.

Dong Ning is firmly optimistic about the development of blockchain. He founded the ChainNova brand to promote the application and implementation of blockchain technology. He aims to create end-to-end blockchain solutions for different industry scenarios. ChainNova will also cooperate with Peking University to carefully polish the underlying technology through co-construction of scientific research projects, so as to truly make the "Chinese power" of science and technology appear on the world stage.

At the same time, in order to promote the formation of a healthy blockchain ecosystem, Zhilian will also output technology education, dual-innovation incubation, technology investment methodology, etc. to allow more companies to help themselves transform and innovate through blockchain. But he also admitted that while seeing the convenience and efficiency brought by blockchain, we must also face the problem. Good technology must not only be easy to use, but also be used well to be valuable.

A year ago, when talking about the development of blockchain in my country, the relevant person in charge of the central bank once proposed that my country's blockchain should be developed slowly, and before issues such as security and supervision are resolved, it should be done slowly and steadily, without exposing all risks. Only when things are done well can it be more widely used.