On December 21, 2018, "The 3rd China Financial Technology Forum and China Financial Technology Leaders and Enterprises List Release Ceremony" and the official establishment ceremony of the Institute of Financial Technology of Renmin University of China（RUC FinTech Institute）were held in the international report hall of the People's Daily. At the ceremony, the “2018 China Financial Technology Leaders and Enterprises List” was announced, and 10 leading figures and 25 leading companies were on the list.
The ceremony was co-sponsored by People's Daily's "Global People" magazine, the Institute of Financial Technology of Renmin University of China, and the International Monetary Institute (IMI) of Renmin University of China. Fang Jiangshan, deputy editor-in-chief of the People’s Daily, and Liu Yuanchun, vice president of Renmin University of China, delivered opening speeches; Zhuang Yumin, dean of the School of Finance of Renmin University of China, presided over the ceremony; Cai Esheng, former vice chairman of the China Banking Regulatory Commission and chairman of the South-South Cooperation Financial Center, Wang Guangqian, former president of the Central University of Finance and Economics, Li Lihui, former president of Bank of China and head of National Internet Finance Association of China Blockchain Research Team, Cao Tong, co-director of the Institute of Financial Technology of Renmin University of China and Chairman of Hande Fintech Holding, attended and delivered keynote speeches.
The following is a compilation of the speech by Zhu Jiang, the person in charge of the blockchain of Kingsoft Cloud.
Kingsoft Cloud is a cloud computing company that specializes in technology. In fact, we are more inclined to talk about technology finance, so today I talk about finance from the perspective of technology. I will share with you how Kingsoft Cloud has entered the supply chain finance through the blockchain.
There are three major liquidating tools in the Internet industry: game, video and advertising. The financial property of the game itself is closely integrated with the blockchain, so we first chose blockchain + game business to explore.
In 2016, I started to promote blockchain 2.0 technology represented by smart contracts, which is mainly the consortium blockchains technology. At that time, we deeply realized that the blockchain is not decentration, nor to subvert the existing centralized operation mode, but to apply it to various industries from a technical perspective and to let technology lead innovation. Everyone knows that Kingsoft Cloud is a cloud computing company that has grown up with the Chinese Internet, and there are three major liquidating tools in the Internet industry: game, video and advertising. The financial property of the game itself is closely integrated with the blockchain, so we first chose blockchain + game business to explore.
We spent about three months, gathered a lot of head vendors and established partnerships. However, with the development of the business, we found that the profit model did not match the regulatory framework. So I have always welcomed the extension of regulatory technology to the game field, to let the blockchain game business be carried out smoothly. Why is this? Let's analyze the profit model. There are two profit models for blockchain games. One is to replace the original game currency with Token. The traditional game converts fiat into game currency, which is then consumed in the game. However, the blockchain game is different. It purchases Token through fiat and generates profit through liquidity bargaining. However, due to legal regulations, this field was seriously affected last year and this year, so the Token model cannot be developed in China. Many companies have to seek an overseas compliance framework to operate. The other is to make a profit through the trading of game props. The game maker makes a profit through the trading of game props, and the player votes for the game through the trading volume of props.
In the blockchain game, the generation and trading of these props are stored and distributed through blockchain. Players and game makers know who buys the prop, who passes it, and who owns it.
Can blockchain games solve the problems of traditional games? The answer is yes. The game's official server and virtual props assets are part of the personal assets. At present, after the game server is closed, the property is not owned by the player. This is the drawback of the traditional game server. In the blockchain game, the generation and trading of these props are stored and distributed through blockchain. Players and game makers know who buys the prop, who passes it, and who owns it. So the blockchain solves this tricky problem in the game. However, there is no rule or regulation on protecting the interests of players in the trading of game props. Therefore, even the folk props trading platform with billions of transactions per year like the 5173 platform can only become the platform of traditional game currency promotion, purchase network traffic, game leveling and account trading. The current problem with blockchain games is whether regulatory technology can provide a regulatory sandbox mechanism for regulation, making it public and transparent. Whether the virtual asset transactions of blockchain games can be taxed reasonably, so that game companies, players and supervision can form multiple wins. And more importantly, whether Internet applications can be combined with blockchain technology to achieve rapid iterations and replicate experience to other areas.
We want to make the entire process more transparent through the blockchain, and clarify the source, circulation and flow of funds through penetrating regulation. These goals can be achieved with new economic and technological means led by blockchain.
Soon we began to seek integration with the financial industry by adhering to the technological advantages of “reducing costs and increasing efficiency” in the blockchain. First we went to understand the needs of business owners. They all mentioned the shortage of funds. And because these are medium, small or micro enterprises, it is difficult for them to borrow from banks. Business owners said that it is also difficult to accept other financing channels, because the company's gross profit is 20%, but the loan interest rate is as high as 10% or even 15%, so they can only solve the problem of funds through mutual loans between friends, relying on individual credit.
We went to understand the bank. Because the credit qualification information of SMEs is not within the risk control of banks, banks are more likely to lend to large core enterprises. Banks also have some problems with the lag of technology construction, such as information islands, lack of big data analysis and other capabilities, which pose certain obstacles to lending. We also went to understand the regulatory agencies. They stated that assets are divided into standard and non-standard assets. We are also thinking about the non-standard assets of supply chain finance, the issue of standardization of off-balance-sheet business, and how to combine blockchain and regulatory technology to improve the efficiency of off-balance-sheet business and on-balance-sheet business transformation. The on-balance-sheet business belongs to high-frequency trading, but the off-balance sheet asset is circulated through asset packaging and channel mode, which is greatly reduced from the entire trading frequency, including the circulation. We want to make the entire process more transparent through the blockchain, and clarify the source, circulation and flow of funds through penetrating regulation. These goals can be achieved with new economic and technological means led by blockchain. So we held the "hammer" of the blockchain and found this "nail." So how do we do it? Here are some experience and ideas for everyone to discuss:
First, establish a financial electronic data exchange standard. This year China's supply chain financial market is 15 trillion yuan. But the international market is 5 trillion US dollars, about 30 trillion yuan, which is twice as that of China. China accounts for about half of the supply chain financial market share. This situation indicates a status quo, that is, the supply chain financial market is characterized by Chinese characteristics. Overseas, there may be several months of account requirements for supply chain finance. The payer and downstream companies must comply with the contract requirements and be subject to relevant laws and regulations, so they will not deliberately delay. However, in China, various problems have caused receivables, prepayments, and pledges for too long. Therefore, the traditional supply chain factoring business may solve the account period problem within 90 to 180 days, but it cannot solve the long-term problem. Even for 90 to 180 days, the shortage of funds for SMEs is likely to be fatal. Financing efficiency remains a key factor. If the funds are not received, the employees cannot be paid in time, which may cause problems in the operation of the entire company. We are trying to break through from the enterprise side. We hope that the non-standard assets will be made into financial electronic data exchange standards through blockchain technology, and will flow in the financial asset exchange environment, which will have a huge impact on the efficiency of the entire financial market, including revenue. We believe that the blockchain can be technically guided to solve this problem.
Second, smart contracts, which mainly allow regulatory technology to achieve online and offline integration. We have mastered the autonomously controllable blockchain technology and have completed the replacement of national cryptographic algorithms, such as SM2 and SM3, in order to meet the requirements of the financial industry compliance standards. However, these are not enough. In order to solve the problem that identity and transaction cannot be tampered with, it is very necessary to introduce a certificate. In the blockchain field, the consortium blockchain technology is based on the PKI technology system, and the node is identified by a certificate. CFCA is generally accepted by the financial industry, and the traditional supply chain financial system is also based on this technology. However, in fact, many of the blockchain systems that have been on the line do not use these traditional certificates, but use the original self-built certificate system, and many systems do not use the national cryptographic algorithms, but the original ECDSA. Anyway, only when blockchain-based electronic deposits have the same legal effect as traditional electronic signatures, the efficiency of online and offline transactions can be improved, and smart contracts can fully play their role in triggering conditions. To do this, regulatory technology needs to have legal effects on the special scenarios of the blockchain and the assets on the blockchain. In this way, it can provide evidence for asset disputes.
Third, the cooperative game. What we are currently discussing is not the public blockchain, such as Bitcoin and Ethereum. Today we are talking about the consortium blockchain, usually called the “coin-free blockchain”. I started to promote consortium blockchain technology in 2016, which is far less acceptable than Bitcoin. The main reason is that there is no liquidity bargaining. The level of personal involvement determines the impact of technology. For the enterprise, there is a soul torture that whether it is rigid demand. For enterprises, the most important rigid demand for blockchain is to increase the cost of fraud and solve the problem of low credit by organizing the game. Therefore, the technology of the consortium blockchain can solve the problem of trust in the enterprise-level market application scenario, and play a role in reducing costs and increasing efficiency.
Fourth, the penetrating supervision of assets. The irreversibility and traceability of blockchain provide technical guarantees for penetrating supervision. At the same time, in order to ensure corporate data privacy, regulatory technology is actually facing some challenges. Regulators have the need to penetrate regulations, and business owners also have strong privacy requirements. Because many business owners do not want competitors to know their trading transactions, they need a technology to ensure privacy protection within the shared scope. Maybe it sounds like a false proposition, but the blockchain makes it possible. The privacy of the data is protected within the scope of sharing. Related technologies have been used in some situations, such as ring signatures and multi-ring signature techniques to hide the identity of the party. The other party does not know whether a transaction has occurred from an individual or an organization. There is also a technique called zero-knowledge proof. The prover proves to the verifier that he knows or owns a message, but the proof process cannot leak any information about the proved message to the verifier. Let me explain it with a metaphor. If someone needs to prove that he owns the house key, without revealing the key, he can let others see him coming in from the main entrance of the room and going out from the back door. Blockchain technology has begun to combine these technologies and is constantly experimenting in related fields.
These are our four thoughts about using blockchain and supply chain finance and combining them with the game industry. In fact, the entire industry is still in its infancy. Because the core of supply chain finance is to put the capital, assets and regulatory agencies on the same platform, thus promoting the trading. There must be barriers to industry ecology in this process, and supply chain finance must be related to the industry. We have Internet genes. We first implement it based on scenario finance, and then further integrate with the industry to form industrial finance. However, from the current stage of development, according to the definitions such as 1.0, 2.0, and 3.0, I believe that the supply chain finance + blockchain is still in the 1.0 stage. To reach 2.0 and 3.0 we need to learn from Ant Financial because they have already combined it with specific scenarios, such as cross-border payment. This has played an exemplary role in the industry.
Kingsoft Cloud is mainly for To B customers. We have technology platforms such as cloud computing, big data, AI and Internet of Things. We have solutions for IOT scenarios such as smart home. We pave the way for the combination of industrial finance, and give full play to the technical capabilities and advantages of the TO B. We are very confident about this, and we welcome all enterprises and experts to cooperate and negotiate.
This is the end of all my sharing today. Welcome everyone's discussion. Thank you.