With a series of recent blockchain initiatives – from joining one of the world’s biggest blockchain initiatives Hyperledger Project, to launching “Chained Finance” with Foxconn’s FnConn, China’s peer-to-peer lending marketplace Dianrong is getting ready for full blockchain integration across its platform. We talk to Ling Kong, Dianrong’s CTO on how big and small companies are riding the blockchain wave.
“Technologies that are solving the trust problem face a much bigger challenge compared to those solving the digital currency problem,” Kong says in his opening statement at the blockchain fireside chat at TechCrunch Shenzhen. “Blockchain is solving the trust issue for businesses.”
Blockchain is the technology that underpins cryptocurrencies such as Bitcoin. Simply put, it is a digital, decentralized ledger that keeps a record of all transactions across a peer-to-peer network. Most important, blockchain allows market participants to transfer assets on the internet without centralized, third-party intermediaries, making it the new institutionalized keeper of trust.
Private and Public Blockchains
R3 CEV, a blockchain consortium founded in 2014, counts over 70 financial firms among its members including top banks like BBVA, Credit Suisse, Bank of America and Citi. When asked what he thinks of Goldman Sachs’ exit from the powerful group in November 2016, Kong states that there is a need for confidentiality in blockchain when it comes to business.
“Say, during the two-day TechCrunch hackathon, Mobike decided to give attendees a five-kuai Starbucks coupon, with which they can bike to Starbucks to redeem – this would increase transactions between Starbucks and Mobike. If we open the deal to other members in Mobike’s blockchain consortium,” Kong says, “they will obtain all consumer profiles from the blockchain and their cost of user acquisition will be lowered.”
“However, it is impossible to make the consortium blockchain public,” Kong remarks, “If ofo also joins the consortium, it will win Mobike’s users over with more enticing discounts.” This means Mobike will lose control over its business.
“Once you make everything public, business gets out of control. Once business is out of control, the real push for blockchain cannot move on,” Kong concludes.
Blockchain purists might not be impressed by this thought, as private blockchain inevitably kills the core of the nascent technology: decentralization. But Kong provides an alternative view:
“When private blockchains grow big enough, they will come to form consortiums, the way China has risen over the past 20 years and came to join IMF and other associations.”
Blockchain Opportunities for Entrepreneurs
“If you are building a purely technology-driven blockchain startup, with the core algorithm, encryption and underlying tools, and given you are very smart, you will be able to keep going for a while,” he says. “But if you want to build a business-based blockchain startup, you need to find the business opportunity and in China, the guanxi.”
Kong gives the example of outbound tourism. To travel to Japan, people need to find a travel agency and apply for a visa through the Japanese government, which will take two weeks. If the personal information is stored on blockchain, on the other hand, all the tourists have to do is to authenticate that information on their phone. They can also process the 50k RMB income proof on their phone via a banking app. The Japanese government then receives the tourists’ information through blockchain, verifies it and approves the visa instantly without the need for a chop.
“What’s being disrupted here? The traditional travel agencies, notaries, bank tellers,” Kong comments. “There will be new infrastructure and tools replacing them, and these are the opportunities for entrepreneurs. The big companies will have their eyes on the cake they can reach – the business they can do. Not all the obsolete small businesses have the blockchain capability to catch up with the currents. This is where you, the blockchain entrepreneurs, can come into play.”