Text |analysys Yiguan
The White Paper on Panorama of Digital Economy condenses the accumulation of experience and data of various industries in digital economy by Analysys, and combines the actual business and future challenges of enterprises in the digital age, as well as the innovation breakthrough of digital technology and other factors, and finally starts with the development trend of digital economy and cases in various fields to help enterprises clarify their industry positioning and business development direction under the digital wave.
The White Paper on Digital Economy Panorama continues to pay attention to the field of digital assets. With the rapid iteration of emerging technologies such as big data, Internet of Things, cloud computing, artificial intelligence and 5G, China’s digital economy has ushered in vigorous development. As a permanent, tamper-proof, verifiable, trustworthy and programmable distributed ledger technology, blockchain technology provides a new paradigm for the creation, distribution, storage, transaction and use of digital assets, and realizes a major transformation from information Internet to value Internet. Blockchain technology supports the safe, transparent and credible value transfer of digital assets in the Internet and will play a vital role in the future digital economy.
Definition and characteristics of digital assets
Digital assets refer to digital resources that are owned or controlled by individuals or enterprises in cyberspace, exist in digital form and are expected to bring economic benefits.
Digital assets have the following characteristics:
1. Digital assets are owned or controlled by a clear subject.
Digital assets are owned or controlled by individuals, enterprises, countries and other subjects, who have the ownership, use and management rights of digital assets, and their rights can be guaranteed by digital technology.
2. Digital assets flow in cyberspace in digital form.
The biggest difference between digital assets and traditional assets is that traditional assets exist in actual physical space, while digital assets exist in cyberspace, so digital assets are stored and circulated in digital form.
3. Digital assets are digital resources that can bring economic benefits.
The essence of digital assets is wealth or resources that can bring economic benefits to the subject. Digital resources that have no exchange value and use value and cannot bring economic benefits cannot be recognized as digital assets.
4. Digital assets are digital assets created by the main body in social and economic activities, which are not created out of thin air, but obtained through the corresponding labor, capital and technology paid by the main body in social and economic activities, through production and purchase.
5. The value of digital assets is measurable, separable and combinable.
Digital assets can be priced and measured by accounting rules, and their values can be split and combined.
Classification and development status of digital assets
As a digital representation of value or rights, blockchain digital assets are called encrypted assets and encrypted certificates by the industry. Considering the diversity of blockchain systems, applications and digital assets, based on the typical characteristics of blockchain digital assets, digital assets can be divided into two categories: homogeneous pass and heterogeneous pass (NFT).
Classification of digital assets
1. Homogeneity certificate
Digital currency can be regarded as a virtual digital pass based on node network and digital encryption algorithm. Each pass has no particularity, but it is still essentially different from the virtual currency issued by network enterprises. Its core features are mainly reflected in three aspects: first, an open algorithm; Second, there is no issuer, and its issuance is not controlled by individuals and institutions; Thirdly, based on the algorithm, the real-time consensus mechanism has high security. Homogeneous certificate has developed rapidly since the birth of Bitcoin, and it has brought great challenges to the existing monetary system.
2. Non-homogeneous certificate
The full name of NFT is Non-Fungible Token, and the Chinese name is translated into non-homogeneous certificate (or non-homogeneous token). It is stored in the digital ledger, and a data unit generated by a specific software program of a public blockchain platform (such as "Ethereum") is recorded in the smart contract generated by the platform. As a tool for identifying the source of specific digital assets, it has the characteristics of indivisibility, irreplaceable and uniqueness. NFT usually uses a long string of English letters and numbers to connect with a specific blockchain and its smart contracts. This code is also called "hash function". Because of this feature, NFT has recently become an excellent tool to preserve and identify any electronic files. No matter whether image files, audio-visual works or even various tangible and intangible properties are virtualized and digitized, such as game props in online games or bills and works of art that map real life, they can be branded with NFT marks and become unique "blocks" for permanent preservation and verification.
Development Status of Digital Assets
The global digital asset market is booming. As one of the important innovative products of financial technology, digital currency has brought a far-reaching impact on the whole financial industry and its regulatory field. Central banks and institutional giants from all over the world have entered the field of digital assets represented by digital currency.
1. Homogeneity certificate
In terms of quantity, as of December 31st, 2021, the number was 16,223 (data source: Finbold), an increase of about 98.98% compared with 8153 in January, 2021. 8070 new Token were created throughout the year, and about 21 new cryptocurrencies were launched on the market every day on average.
In terms of the number of users, as of December 29, 2021, there were 295 million cryptocurrency users in the world, an increase of 178.30% compared with the beginning of 2021. It took only four months (February-June) for the number of users to increase from 100 million to 200 million. The main reason is the rapid rise of the counterfeit coins ShibaToken(SHIB) and Dogecoin(DOGE) in a short period of time, and the driving force of the cutting-edge technology leader Musk. In the second half of 2021, in view of the increasingly strict policies in digital currency (the major exchanges intend to repel China users), the growth rate of user scale has gradually slowed down.
From the perspective of exchanges, it can be divided into centralized exchanges and decentralized exchanges. Among them, the centralized exchange presents a super-strong situation. Among several centralized trading platforms, Binance still maintains a leading position, and its CEO Zhao Changpeng has therefore reached the top of Asia’s richest man. The transaction volume of Huobi and OKEx decreased compared with 2019. Uniswap still maintains its leading position in decentralized exchanges, but based on the characteristics of decentralized exchanges, its network congestion and unstable trading slip points are still one of the main reasons that restrict the development of decentralized exchanges.
2. Non-homogeneous certificate
After the development in recent years, the non-homogeneous certificate (NFT) has been used in the art industry for its scarcity, uniqueness and non-replicability, and has become one of the important ways to digitize assets. In 2018, NFT’s sales experienced a short-term prosperity, then entered the bottom of the bubble in 2019, the market gradually picked up in 2020, and the NFT ushered in an outbreak in 2021. In this process, the proportion of works of art in the total sales of digital collections has been increasing, and at the same time, it has promoted the continuous exploration of NFT in application scenarios. By the beginning of 2020. The NFT market size exceeds $26.9 billion.
Blockchain technology to solve the core problems of digital assets
Blockchain technology is considered to be the fifth subversive innovation of computing paradigm after mainframe, personal computer, internet and mobile social network, and the fourth milestone in the evolution history of human credit after blood credit, precious metal credit and central bank paper money credit. Its technology is the embryonic form of the next generation of cloud computing, and it is an important tool to realize the transformation from the current information Internet to the value Internet. Blockchain can be divided into three models: public chain, alliance chain and private chain on different platforms. Its technical features include: distributed data storage, point-to-point transmission, asymmetric encryption and authorization technology, consensus mechanism, intelligent contract, traceability, etc., which greatly reduces the intermediary cost in asset transactions, creates reliable transaction constraints, and solves the problems of asset anti-counterfeiting and tracking.
Confirmation of digital assets
The traditional form of asset registration is stored in a centralized database, which is vulnerable to attacks, making it difficult to guarantee the security of assets, and the data in the network is easy to be copied and disseminated, making it difficult to confirm the assets, and making it impossible for its owners to obtain reasonable economic benefits. The logic of blockchain can support the determination of digital asset ownership. Digital assets can be confirmed by using blockchain digital signature, consensus mechanism, smart contract, time stamp and other technologies, so that the owners, producers and users of assets can join the blockchain network as important nodes, establish a safe and credible identity system and responsibility division system, and record and trace the transmission, use, transaction and income of digital assets throughout the cycle, which provides a solid technical foundation for the circulation of digital assets.
Authenticity and credibility of digital assets
With the development of digital technology, traditional paper bills have gradually evolved into digital bills. At present, the main defects of digital bills are that the authenticity of bills is difficult to guarantee, the illegal trading of bills is chaotic, and the risk of default is due. Blockchain NFT technology can effectively solve the problem of ticket fraud, and at the same time establish a brand-new continuous "endorsement" mechanism between multi-party nodes, which truly reflects the transfer process of bill rights. Once the data is uploaded, all nodes in the blockchain jointly maintain the same account book, and all nodes can be used as backup nodes, which makes it impossible to conduct single-point illegal operations. At the same time, there are penalties for bad nodes in the consensus mechanism. The introduction of encryption mechanism realizes the authentication of nodes, and various encryption algorithms, such as digital signature and encryption mechanism, realize the authenticity and validity of the data in the blockchain without being tampered with, realize the multi-party trust transfer, and enable the digital bill to be split and reorganized flexibly and conveniently.
Digital assets circulation security
Blockchain can store multi-source heterogeneous digital assets on the chain through encryption algorithm, so that the data on the chain can be traded freely. After reaching a consensus through the blockchain consensus mechanism, the data will be stored in the data books of the whole network nodes, and the loss of a single point of data will not affect the integrity of the data. However, by extracting the data fingerprint through the blockchain hash algorithm and establishing the corresponding relationship between the data and the fingerprint, any form of falsification of the data will lead to the change of the data fingerprint, thus ensuring the authenticity and integrity of the digital assets. Blockchain stores data in a chain structure and adds time stamps to the data. This sequential data structure enables data operations and activities to be queried and tracked, providing an effective means for data life cycle audit and traceability. The introduction of intelligent contract can automatically execute the contract terms without the need of a third party, which is helpful for multiple participants to handle the transactions and settlement according to the pre-agreed rules, thus completing the safe circulation of digital assets.
There are still many challenges in the development of digital assets based on blockchain.
Blockchain technology and application security still need to be improved.
The application of blockchain technology can promote the security level and sharing level of digital economy, and then better empower the stable development of digital economy. However, at present, the application of blockchain technology still fails to meet the three requirements of high efficiency, low energy consumption, decentralization and security, and the transaction throughput on the chain is not high, making it difficult to carry out high-frequency sub-services continuously.
1. The scalability of blockchain is limited
In the blockchain, transaction queuing and data synchronization seriously affect the processing performance of the system. With the increase of data and nodes, the performance of the system will be further reduced, thus affecting the scalability of the blockchain. The existing consensus mechanism is difficult to meet the requirements of high throughput and low latency in large-scale network nodes.
2. There are still deficiencies in security and privacy protection.
Blockchain uses internationally accepted core constructions such as cryptographic algorithms, virtual machines and smart contracts, which are not completely autonomous and controllable, and will increase the risk of attack. A large number of complex cryptographic algorithms such as zero-knowledge proof and group signature will greatly reduce the reading and writing ability of blockchain data, which will make the original blockchain system with low processing efficiency worse.
3. Blockchain technology has the problem of circular execution of smart contracts.
Smart contracts have self-circulation characteristics similar to high-frequency trading, which will significantly amplify price fluctuations. Blockchain data information cannot be modified after it is written, which leads to the inability to return it after the transaction and poor flexibility.
Applications in the digital economy still face the following challenges.
1. Lack of typical innovative applications of blockchain that can be promoted on a large scale.
At present, the application of blockchain technology has been extended to many digital economic fields, such as digital finance, Internet of Things, intelligent manufacturing, supply chain finance, digital asset trading, etc. However, due to the complexity of the scenarios involved and the limitation of the maturity of blockchain technology, it is difficult to land the application scenarios of blockchain in agriculture, manufacturing and other fields, and there is a lack of typical innovative applications that can be promoted on a large scale.
2. It is difficult to integrate and innovate blockchain with other digital technologies.
New infrastructure is the foundation of the development of digital economy, and blockchain is an important part of it. Integration and innovation with other digital technologies is the key to promote the high-quality development of digital economy. However, at present, various technologies are still in the stage of continuous maturity, and only small functions can be integrated, and there are difficulties in deep integration.
3. The blockchain application supervision mechanism needs to be improved.
The immature blockchain supervision system is not conducive to the overall development of blockchain industry and digital economy. At present, countries around the world have not produced the best or best blockchain supervision experience, and the differences in supervision policies among countries are not conducive to the worldwide exchange and cooperation of blockchain technology. Blockchain technology has certain regulatory loopholes in the supervision of digital economy. Blockchain technology has the characteristics of distribution, good confidentiality and low cost. In the process of digital economy transactions, it is difficult for the regulatory authorities to monitor real-name customers and capital flows, which increases the security risks of blockchain application in the digital economy.
Case Analysis of Blockchain Empowering Digital Assets
Typical case 1: ABS project management platform of China Merchants Bank Credit Card Center
The credit card center of China Merchants Bank built an ABS project management platform to solve the problems of opaque information, low operational efficiency, weak risk control ability and difficult pricing in the process of asset securitization. In terms of data, by recording the application materials and the status of securities and financial products on the blockchain, bond investors can clearly see the whole process of the project from generation to release, ensuring the credibility of assets. In terms of process, a multi-center online securities management platform is built through blockchain and multi-participants to realize efficient business collaboration, shorten product release cycle and improve business operation efficiency. In terms of reconciliation, the blockchain naturally has the advantages of reconciliation-free and efficient reconciliation, eliminating the third-party credit, time cost and capital consumption of reconciliation between different institutions at present, effectively improving the efficiency of capital settlement, and at the same time, each institution has maintained relatively independent business autonomy, achieving a balance between efficiency and flexibility. In terms of supervision, blockchain completely records the whole process information of the underlying assets and projects, which can enhance the penetration of assets and facilitate data statistics and regulatory review.
Typical Case 2: China Trade and Finance Blockchain Platform
The blockchain platform for inter-bank trade and finance transactions in China is planned by the China Banking Association and jointly initiated by a number of banks. The platform makes use of the technical characteristics of blockchain, such as openness, transparency, non-tampering, high sharing and traceability, to realize the complete electronization of inter-bank transactions and the credible transmission of inter-bank information, shape the financial trust system, and jointly build a trade and financial ecosystem. The platform was officially put into operation on December 29, 2018. ICBC and China Merchants Bank completed the first cross-bank domestic letter of credit chain verification, and then successively carried out business cooperation such as forfaiting, letter of guarantee factoring and syndicated loans.