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Central bank: don't exaggerate or superstitious about the function of blockchain

Time : 24/08/2021 Author : thkmgr Click : + -
        Chinanews Jingwei client, November 6 (Xinhua) -- on November 6, the central bank website released a report entitled "what can blockchain do and what can't blockchain do?" Working paper. The paper points out that the function of blockchain should not be exaggerated or superstitious, and the application of blockchain should be based on the actual situation. At present, the foam in the field of blockchain investment and financing is obvious, and speculation, market manipulation and even violations of laws and regulations are common. This paper studies the function of blockchain from the perspective of economics. First, based on the economic explanation of blockchain technology, this paper summarizes the "token paradigm" adopted by the current mainstream blockchain system, clarifies the two basic concepts of consensus and trust related to blockchain, and combs the functions of smart contracts.
        Secondly, according to the use of tokens in blockchain, this paper combs the main application directions of blockchain at present, then discusses the characteristics of tokens, the impact of tokens on blockchain platform projects, the governance functions of blockchain, the performance and security of blockchain system, and finally summarizes and discusses what blockchain can and cannot do. The paper points out that at present, there are few blockchain projects that are truly implemented and produce social benefits. In addition to the low physical performance of blockchain, the weakness of blockchain economic function is also an important reason. On the basis of continuous research and experiments, we should rationally and objectively evaluate what blockchain can and cannot do.
        First, do not exaggerate or superstitious about the function of blockchain. Industry practice over the years has proved that some blockchain application directions are not feasible. In particular, the modern financial system continues to absorb various technological innovations in the process of development. Technological innovation will be integrated into the financial system as long as it helps to improve the efficiency of financial resource allocation and the safety and convenience of financial transactions. So far, no technological innovation has had a disruptive impact on the financial system, and blockchain is no exception. Cryptocurrency supply is inflexible, lacks internal value support and sovereign credit guarantee, cannot effectively perform the function of money, and is impossible to subvert or replace legal tender.
        On the contrary, the anonymous feature of blockchain will increase the difficulty of implementing anti money laundering (AML) and "know your customer" (KYC) in financial transactions. However, it should also be noted that some national conditions in China provide opportunities to practice blockchain, such as the digital bill trading platform, which helps to alleviate the problem of the decentralization of China's bill market. Second, blockchain applications should be based on the actual situation, and should not stick to some overly idealistic purposes. For example, it is very difficult to replace system and trust with science and technology. In many scenarios, it is even Utopia. For another example, decentralization and centralization have their own applicable scenarios, and there is no difference between good and bad. In reality, complete decentralization and complete centralization are rare.
        Many blockchain projects start from the purpose of decentralization, but in the later stage, more or less centralized elements are introduced, otherwise they cannot be implemented. For example, when information outside the blockchain is written into the blockchain, it often needs a trusted centralized organization, and complete decentralization is impossible. Third, the foam in blockchain investment and financing is obvious at present, and speculation, market manipulation and even violations of laws and regulations are common, especially the token projects involving public offering transactions. Relevant government departments should strengthen supervision and prevent financial risks. (Zhongxin Jingwei APP).
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