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The devil whispers in our ears. It's teaching us economics. In Goethe's Faust, the emperor encounters a financial deficit, and the devil Mephistopheles makes a move. It induced the emperor to issue paper money, falsely claiming that there was enough gold and silver treasure buried in the ground for reserves. It says: "This kind of banknote, instead of gold and pearls, is very convenient and can make people's minds know." "Incredibly, a miracle happened, the city that used to be lifeless is now bustling and vibrant. The banknote "flies away and cannot be recovered; ”

There is a great deal of magic in money and finance. They are what we set free from the bottle, come at our beckon, and become our slaves. Once out of control, money and finance will run rampant, bringing disaster to the world. Mervyn King, former governor of the Bank of England, said: "The use of financial alchemy as the basis of the financial system shows that this society is not rational. ”

Mervyn King is one of the captains who has weathered the global financial turmoil, and his new book, The End of Financial Alchemy, is a reflection on the global financial crisis. There have been many books about the global financial crisis, especially during the crisis, almost all of the big names who served as senior financial officials wrote their own memoirs. In Mervyn King's view, most of these books could be subtitled: How I Saved the World. What sets "The End of Financial Alchemy" apart is that it is a profound critique of monetary and financial theory, and it is a book that can trigger a revolution in economics.

What is financial alchemy? People believe that paper money can be preserved and exchanged for purchasing power at any time, and people believe that money stored in banks can be withdrawn at any time. This is a kind of alchemy that makes something out of nothing, turning stones into gold. The foundation of financial alchemy is people's trust in money and finance, but this foundation is extremely fragile. As Walter Birchett, author of Lombardy Street, put it: "The essence of our financial system is the unprecedented trust between people." But if that trust is weakened by underlying factors, a small thing can damage mutual trust, and a big thing can almost destroy it. ”

Maintaining the stability of the currency is a very difficult task. There has been no shortage of cases of hyperinflation in history. The hyperinflation in Germany in the twenties of the twentieth century largely contributed to the rise of Nazi extremism. Many developing countries have suffered from hyperinflation. The entire 20th century is almost a history of inflation.

It is also extremely difficult to ensure the smooth functioning of the banking system. When we put money in the bank, the money is not sitting quietly in the safe, the bank has to lend the money. When banks lend money out, the original deposits become longer-term, riskier assets. Unless factories, machinery, homes and offices can be converted into cash in an instant, unless only a small percentage of depositors withdraw cash from the bank at any given point in time, our trust in the bank is nothing more than blind faith.

It is crucial to maintain the stability of the currency and the smooth functioning of the banking system. We need currency not only to facilitate transactions, but more importantly to deal with the uncertainty of the future. This requires money to be able to preserve and cash in on purchasing power in the future. Unfortunately, money doesn't do what we want it to do.

This is because the future is full of uncertainty and is inherently unpredictable, and this is precisely the blind spot of economics. Ironically, as the study of economics has become more sophisticated, there has been less and less discussion of money. As the economist Frankhahn has said, there is no place for money in the most perfect economic models. In economics textbooks, Walras's general equilibrium theory is used to describe the market economic system. In Walras's general equilibrium system, the market is cleared everywhere, and money as a medium of exchange is dispensable. But this model has very harsh assumptions, you have to assume that from the moment you are born, you can see all the potential trading needs of the day of death, and you have to assume that you can also see all the potential trading needs of all other people from birth to death. You are someone else, someone else is you, and in economic theory, you are both representative rational people, and you can all make the best choice. As a result, market prices reflect all supply and demand without omission.

Unfortunately, this is not the case. How can we predict the price of oil in 50 years? In addition to the spot market for oil, you also need a futures market for oil, but the futures price of oil is likely to be very different from the real price in the future, because it misses a lot of information about supply and demand. For example, airlines need to buy fuel, and they are big customers in the oil market. But can airlines know how much oil they will need to buy in the next 50 years? Theoretically, it would require a futures market for airline tickets. But why is there no futures market for airfares? Because no one can predict where they will need to fly on a plane one day in the future. No matter how perfect a market is, it's impossible to price in the uncertainty of the future, so households and businesses can't use the market to coordinate their future spending plans. Households and businesses face neither "hard budget constraints" nor "soft budget constraints", but "fuzzy budget constraints". People tend to drift between blind optimism and blind pessimism, and there is a high risk of under- or over-demand.

In Mervyn King's view, the resulting imbalance between global consumption and savings was the most fundamental factor leading to the financial crisis. People don't know exactly how much their future income will be, so it's difficult to set a ceiling on what they can spend, and as a result, households' spending behavior can deviate from sustainable levels over the long term. The global financial crisis was preceded by a climax of globalization. China, India, and Russia opened their doors to join the global division of labor, the number of workers producing for globalization skyrocketed, and global trade surged, resulting in depressed prices in developed countries and ultra-low interest rates. China and Germany are typical examples of underconsumption, while the United States is a representative of overconsumption.

Low interest rates have led to higher asset prices and increased debt pressures. When interest rates are too low, financial institutions and investors begin to chase higher yields, which is known as "looking for yield by lantern". To this end, banks continue to create increasingly complex financial products. When banks lend to companies, they are limited by the total amount of money that companies want to borrow, but financial derivatives do not reflect real economic activities, and most derivatives are bought and sold as counterparty transactions between large banks and hedge funds, with no restrictions on the size of transactions, no upper limit on the size of risk exposure, and no upper limit on potential losses. When the subprime mortgage crisis first erupted, central banks didn't think it was a big deal. The total stock of subprime mortgages is about $1 trillion, and the size of the dot-com bubble is eight times higher than that of subprime mortgages. However, they all looked away. The scale of derivatives created on the basis of subordinated loans is much larger. It's like two old men playing chess in the square, and whoever wins gets 10 yuan, but behind them is surrounded by a large number of rich and bored spectators, who bet on who will win, and the bet is far more than the initial 10 yuan.

At the same time, banks are becoming more and more leveraged. Banks used to rely on their own funds for borrowing, but now they are increasingly using leveraged funds to borrow less from their own funds. Whoever doesn't does it will be eliminated from the competition in the heat of competition. This further exacerbates banks' maturity mismatch: liabilities are maturing shorter and assets are maturing longer. Another consequence of wholesale financing is that the major banks become grasshoppers on a rope, and everyone is intertwined, and if one goes wrong, it will soon affect the whole system. Over the past two or three decades, the global banking sector has grown incredibly in size, concentration and risk, not only "too big to fail" but also "too connected to fail".

It's not too late to make amends. But have we found a way to prevent the next financial crisis?

In the wake of the global financial crisis, countries are tightening regulations on financial institutions. A popular idea is to ask banks to improve their capital adequacy ratios. This requires the calculation of the risk-weighted capital adequacy ratio, that is, the assets are scored differently according to their degree of risk, and finally the number of safe assets is weighted. This approach is not only cumbersome, complex, but also misleading. How do we judge the degree of risk of various types of assets? But how can we assert that assets that seem safe today will not fail tomorrow?

In the midst of the global financial crisis, a century-old British store, North Rock Bank, was run on and went bankrupt. If you calculate the risk-weighted capital adequacy ratio, Northern Rock is the highest among the major banks in the United Kingdom, so high that it wants to lend money to others, but it is the North Rock bank that has problems. This is because, historically, residential mortgages have been considered a highly safe asset, and Northern Rock Bank's primary business is to issue residential mortgages. Mervyn King suggested that simple and intuitive indicators are more effective, and that leverage should be looked at rather than risk-weighted capital adequacy. Leverage is the ratio of capital to unweighted total assets, which may seem crude but is more accurate. If you look at the leverage ratio, the leverage ratio of Northern Rock Bank at that time was as high as 60-80 times, which should have attracted the attention of regulators. The methodology behind Mervyn King's advice is not to think about accurately calculating the uncertainty of the future, not to think that everything is fine with the results of a clever model, but to be more humble, to see the big picture, and to value experience and common sense.

Why, nearly a decade after the global financial crisis, is the world economy still weak? Because global imbalances inhibit the growth of demand, and global imbalances are accumulated over a long period of time and cannot be resolved spontaneously in the short term. The current unusually loose monetary policy is in a dilemma. In the short term, interest rates are not low enough to stimulate economic growth, but in the long run, interest rates are not high enough to prompt people to return to normal consumption and savings. Keynes was right, a society's demand for mobility can go up and down. When there is a recession, the demand for liquidity is too high, and further central bank injections are quickly hoarded, and we have fallen into the interest rate trap. In this case, lower interest rates may not necessarily encourage people to move forward their future consumption to the present, but on the contrary, people may become more anxious and lower their expectations about the future economic outlook, leading to lower investment.

Many of the policies we use to address the current dilemma are actually digging a big hole for the future. It is conceivable that debt levels will continue to increase under ultra-low interest rates, but the day the central bank raises interest rates, the time bomb of debt default will be detonated. Of course, this may create good conditions for the reopening of the economy, but it is also possible that the world economy will fall into a financial crisis for the second time. It is also conceivable that ultra-low interest rates will lead to higher housing prices, and the next generation of young people will be forced to borrow more money than the previous generation, and the debt burden will be heavier, and the contradictions between generations and between rich and poor will become increasingly prominent. Money is a kind of "social contract", and once this contract is nothing more than fulfillment, it will inevitably lead to more serious social problems.

When will these crises erupt? We don't know. Mervyn King said that the first law of financial crises is that unsustainable momentum can last longer than anyone expects, and the second law of financial crises is that when unsustainable momentum is broken, it occurs much faster than people expect.

That's why we know we're on the wrong path, but we don't want to stop or switch to another path. Mervyn King noted with concern that our current era resembles the situation between the two world wars. The old rules have lapsed, trust between nations has been shattered, and the shipping lanes ahead are full of reefs, but the helmsmen are hesitant to hope for a fool or a miracle. In "David Copperfield", there is a Mr. Micawber, who has repeatedly failed and is in debt, but always fantasizes about the favor of the goddess of fate. Just as he was about to be imprisoned in debt, he borrowed money from David to buy wine, and he was happy when he drank it.

The devil has not left us. We have another date with the financial devil in the future.

Outside: The impact and value of virtual currencies

There is an intrinsic relationship between Bitcoin, blockchain and digital (digital, digital) money, which are both different and inseparable.

Among them, understanding Bitcoin is the key, because Bitcoin is not only a typical representative of virtual currency, but also provides a fairly mature logical basis and technical premise for the blockchain.

Nowadays, many people are wrong to deny Bitcoin while advocating blockchain, or think that digital currency can become a new thing in its own right.

Since the birth of Bitcoin, the attitudes of governments around the world can be summarized as: little knowledge, high vigilance, love and hate. Specifically, it can be divided into three categories. The first group is countries with a positive and open attitude, such as Germany, Belgium, Brazil, and Australia, the second group has no clear attitude, does not oppose it, does not support it, and has no corresponding regulations, and there are many such countries, such as Canada, Italy, Japan, Russia, Singapore, and South Korea, and the third group warns, is indifferent, or even opposed.

In all countries, the attitude of the United States is crucial. Overall, the U.S. remains conservative, open, and cautious about Bitcoin. Back in November 2013, the U.S. Senate held a hearing on Bitcoin. After that, the U.S. Treasury Department, the Internal Revenue Service, and the U.S. Futures Commission all made their own definitions of bitcoin.

For example, the IRS ruled that Bitcoin is an asset, the U.S. Treasury Department considers Bitcoin to be a potential for innovation and growth (002001) and can be included in the regulatory framework, and the U.S. Futures Commission considers Bitcoin a tradable commodity. Against this background, and in accordance with the principle of judicial independence in the United States, it would be of great significance if a federal court intervened in Bitcoin and made a ruling on Bitcoin. This is because federal courts only hear cases that involve federal law.

This time, U.S. Federal Judge Alison Nathan accepted the case of Anthony Murgio (Anthony Murgio) for money laundering through the Bitcoin platform, and inevitably faced the legal definition of Bitcoin. Judge Nathan gave an unprecedented definition of Bitcoin: Bitcoin is money in the ordinary sense of the term. Bitcoin can be used as a means of payment, to purchase goods and services, or to buy Bitcoin directly from an exchange using a bank account. Therefore, they serve the same role as money, using them as a medium of exchange and a means of payment.

It is worth noting that Alison Nathan is a gay federal judge appointed by Obama in 2011 and is a federal judge in Manhattan, the financial powerhouse of the United States. Alison Nathan's ruling elevates the issue of Bitcoin to a national level, declaring that virtual currencies meet the definition of currency. The United States operates on a common law system that inherits the principle of stare decisis. Therefore, in the long run, it will have an impact on the fate of Bitcoin and virtual currencies in the United States.

As an economist, you have a deep understanding of the history of money, do you think Bitcoin is money?

It's hard to simply say yes or no. Because first of all, we need to know what money is? Since ancient times, credit has been a prerequisite for the existence of money. It is credit first, then currency. Therefore, as long as the form of credit evolves, the form of money changes with it.

In the contemporary world, fiatmoney, backed by national credit, is the main form of money. However, fiat currency is not the only form of money. In other words, credit money is not exactly national credit money. There are now at least three forms of non-state credit money that are popular around the world.

First, there are as many as 2,500 types of local currencies based on the regional credit system, also known as local currencies, supplementary currencies, community currencies or private currencies. Even according to the statistics of strict monetary definitions, there are more than 200 species, and there are more than 100 in Europe. In theory and practice, these regional currencies can function as a medium of commodity exchange and a store of value within a specific scope, and can even be used to pay taxes. Second, currencies based on the company's credit system, such as credit cards such as ER, Panyscrip, and MilitaryScrip. Third, currencies based on the value of precious metals, such as gold and silver commemorative coins.

Whether virtual currency is a currency depends on whether there is a specific credit base. Bitcoin has a short history, but it has created a unique credit system, which is no longer a tangible government, a community, a company, but a union of individuals. In this sense, Bitcoin is a form of money. Not only that, but Bitcoin has also demonstrated its full range of monetary functions. Alison Nathan's ruling on the nature of Bitcoin is based on the basic functions that Bitcoin has as a currency.

People need to change the mindset of thinking that only fiat money, which is based on national credit, is the only form of money, and then use this as a criterion to deny the fact that other forms of money exist. Actually, we can compare Bitcoin and North Korea's fiat currency. The fact that Bitcoin can be circulated on a global scale without any national support proves that Bitcoin has a credit base, and North Korea's currency is undoubtedly backed by state coercion, but people around the world will not trust it.

What do you think of the influential argument that although Bitcoin is a borderless currency, it is controlled by a small number of countries and a few companies that can make changes to Bitcoin's software and technology that ultimately destroy Bitcoin's independence?

This is ignorance and misunderstanding of the principles and technical connotations of Bitcoin. I'll just talk about two points: first, the total supply of Bitcoin is capped, its mining volume is decreasing, and the entry of miners is open. As a result, the competitive cost of extraction will continue to rise. The main manifestations are: mining machines are getting more expensive, using more and more electricity, and the time is getting longer and longer.

In the early days of Bitcoin, anyone only needs to download a software to mine Bitcoin, and then they need mining machines, and mining machines have to be constantly upgraded; people have more and more time to excavate, in the past, a person could mine a few bitcoins a day, and now a few people, dozens of people spend many days, and may not be able to mine a bitcoin. Therefore, monopoly on Bitcoin development is very difficult, almost impossible. Second, Bitcoin's biggest technical advantage also includes complete transparency of transaction information. Bitcoin is a network-wide ledger where all transaction information is recorded. This also fundamentally discourages monopolistic motives.

So, how do you explain the volatility of Bitcoin's price?

The problem now is that the stock of bitcoins is limited, the supply of new bitcoins is slow, and the demand for bitcoins is constantly expanding, resulting in the scarcity of bitcoin in the market. In such a situation, Bitcoin has become the object of speculation. As a result, a small number of companies may influence or even manipulate the price of the Bitcoin market.

You know, in today's world currency market, the exchange rate of every currency is floating and can be speculated. Bitcoin has market price fluctuations, which reflects the change in market demand for Bitcoin and also proves the monetary nature of Bitcoin.

Now, it seems that only a few people use Bitcoin, but who are they? How to explain that Bitcoin is far from being integrated into the daily life of the masses?

Yes, the use of Bitcoin now belongs to a niche behavior, belonging to those who are more familiar with Internet finance. In terms of region, it is mainly distributed in developed countries and regions, such as the United Kingdom, the United States, Japan and Hong Kong.

Admittedly, Bitcoin is far from being integrated into everyday life. This is not a complicated issue. Because, as I said earlier, money is based on faith, and credit itself is a social relation. Social relationships need to be nurtured and developed over a long period of time. If there is a flaw in Bitcoin, it is that Bitcoin has not yet been able to create a Bitcoin-based market, Bitcoin's social relations. Because for most people, it is not easy to understand Bitcoin, to get rid of the bias about Bitcoin, and it is even more difficult to use Bitcoin.

However, in my opinion, it is only a matter of time before Bitcoin becomes popular and everyday in life. I often use the concept of bitcoin in my speeches to tell the audience that other types of virtual currencies created according to the ideas of bitcoin and blockchain are no longer technically difficult and mushroom. As long as various bitcoins can continue to be generated and spread, it will eventually lead to more people participating. For the online generation, understanding, accepting, and using Bitcoin will gradually become a megatrend.

As long as there is a market for virtual currencies such as Bitcoin of a certain size and region, the benefits of Metcalfe's Law (the greater the number of users in a network, the greater the value of the entire network and each computer within that network) will occur, and virtual currencies will enter a phase of exponential expansion. It's just that we haven't yet entered such a historical inflection point. You can make an assumption: if there are 100 people in Taipei who insist on using Bitcoin, after a while, it will definitely jump to 1,000 people. It's the same as people using WeChat and Line.

What is the fundamental meaning of bitcoin or bitcoins, and are you optimistic about bitcoin?

The contemporary economy faces many problems, the most important of which is that it is difficult for the state to fundamentally solve the problem of the stability of the value base of fiat currency. This situation has only intensified after the collapse of the Burton Woods monetary system.

Taking Chinese mainland as an example, in the early 1980s, a penny was money, and 10,000 yuan was already the measure of the rich. Today, it is in yuan, and cents have lost their meaning. A dollar is a hundred times a penny. Therefore, in the past, 10,000 yuan was a rich person, but now it has to be multiplied at least a hundred times, which is 1 million.

In fact, the purchasing power of one million is also limited. In first-tier cities, 1 million yuan can only buy a house of 20 to 30 square meters. When the world financial crisis broke out in 2008, major countries implemented loose money supply policies, which not only depreciated their own currencies, but also led to the depreciation of other countries' currencies. People have to bear the consequences of currency depreciation and inflation.

In short, the greatest sorrow of modern human beings is that only by working hard can they keep their income from currency depreciation and inflation. Therefore, how to maintain the value of money is a common issue for mankind. Theoretically, the denationalization of the currency is an option. Bitcoin and other virtual currencies offer an option, an experiment.

In the history of the world economy, there have been crises again and again, and there will be crises in the future, if the world has an unpredictable and completely out of control financial and monetary crisis, bitcoin and bitcoins will probably be a major rescue plan, so do not underestimate the potential value of such a heterogeneous currency to mankind.

I have always been open and cautiously optimistic about Bitcoin, and indeed virtual currencies. Bitcoin is not a utopia, it is an experiment for humans. It is too early to draw conclusions about bitcoin and virtual currencies in one country, several countries, one period, several periods.

Recently, Overstock, a well-known online retailer in the United States, developed a blockchain platform that received approval from the U.S. Securities and Exchange Commission for a public offering of shares. The company confirmed that a securities trading platform based on the Bitcoin blockchain will be launched by the end of the year. This is an event worth noting.

Bitcoin situation in Chinese mainland

Will Chinese mainland legalize Bitcoin? Why is Chinese mainland the most hyped Bitcoin in the world?

This question cannot be answered simply. In general, I still appreciate the attitude and approach of the Chinese central bank and government towards bitcoin: it has never been declared illegal, let alone legal. In other words, it is neither said that Bitcoin is a currency, nor does it say that Bitcoin is not a currency. However, many restrictions have been made on bitcoin and relevant policies have been introduced, such as the People's Bank of China and other five ministries and commissions jointly issued the "Notice on Preventing Bitcoin Risks" on the 5th of the month, restricting the development of bitcoin in Chinese mainland.

Around 2013, Chinese mainland was an important area for speculation about Bitcoin, which may be a fact, the main reason is: there are many restrictions on RMB export, Bitcoin can become a medium for RMB export, and RMB can be exchanged for Bitcoin, which is equivalent to being exchanged for US dollars, euros and other international assets. That's right. The Chinese government, of course, is sensitive and has taken the necessary containment and restrictive measures.

Does Bitcoin contribute to crimes like money laundering?

The year before last, there was a case in Taiwan where a kidnapper who kidnapped a Hong Kong businessman demanded a ransom in Bitcoin. This is a very creative case in recent years in terms of criminal behavior. However, the kidnappers did not expect that the operation of Bitcoin was not widespread and mature, but provided the police with ample time to solve the case. This is not Bitcoin's fault, any currency can be used for money laundering and other crimes. For example, if someone launders money with diamonds, it is not a problem with diamonds.

To put it another way, what is the most important commonality between Bitcoin and blockchain?

The idea of blockchain is the basic idea of Bitcoin, in other words, the principle of blockchain must be deduced from the principle of Bitcoin. Specifically, the concept of blockchain is the concept of Bitcoin's ledger, which is immutable, and it challenges and subverts people's accounting system and ledger system. The technical essence of blockchain is derived from Bitcoin's encryption method, which is a system composed of complex public keys and private keys.

There are four common elements between Bitcoin and blockchain: shared accounts, smart contracts (smart contracts), effective and thorough protection of privacy, and a consensus among participants that do not need to be discussed. Among the above four elements, there is a strong interdependence.

At the heart of the four areas mentioned above are the so-called smart contracts. Therefore, blockchain can be defined as a form of intelligent contract, and the technology of blockchain needs to ensure that intelligent contracts are never harmed. Not only that, while maintaining mutual trust in smart contracts, it can also achieve mutual privacy without violating each other's privacy rights, and each participant decides how many rights can be disclosed and shared. In short, all participants in the blockchain are not passive, and all behaviors are under control.

In today's society, people face two problems: first, the monetization of property. In a peasant and industrial society, property may be a piece of land or gold, silver, housing, factories, and machinery. However, now the basic form of people's wealth is in the form of money, and they have to deposit money in commercial banks. However, how can you be sure that you are choosing a risk-free commercial bank? In other words, people's net worth and lives are actually in the hands of the financial system that cannot be controlled.

Second, people's identities now require endorsement from government agencies or commercial organizations, such as ID cards, driver's licenses, and insurance cards. The above two issues, from net worth and life to identity proof, need to establish an inseparable relationship with the state or financial institutions.

As a result, a series of problems arise. The first is the credit crisis, in which government agencies and financial institutions are bankrupt, the second is the efficiency of these institutions, the third is the cost, time and money, and the fourth is convenience. The invention and application of blockchain can effectively solve these problems. Because blockchain provides a new option, people can self-organize, can actively control privacy, can realize the supervision of their wealth through smart contracts, and at the same time get rid of the passive state of confirming their own identity, and there will no longer be a situation of how to prove that I am me.

Of course, blockchain also has positive implications for governments, enterprises, and banks. For the government, it can also use blockchain to establish a new contractual relationship with the people. For enterprises and financial institutions, blockchain can be used to maintain a more stable relationship with users, as various concerns of users in the past can be overcome.

Who is using blockchain today?

First of all, there are some large companies, large financial institutions, large multinational companies, such as IBM, etc., which are the first to come. It's easy for these companies to transform blockchain and their own businesses and traditional ways of doing business. Secondly, there is the government. Because the principle of blockchain has obvious significance for the operational efficiency of the government and for strengthening the government's control and influence.

What's the biggest meaning behind the blockchain craze right now?

The use and use of blockchain still requires technical investment and capital investment. Nowadays, there is new news about the development and application of blockchain technology almost every day, and various blockchain technology systems emerge in an endless stream, and many new generations of blockchain technology systems have emerged. The significance of this phenomenon is concentrated in three aspects:

First, economic significance. Blockchain can trigger the cost of transaction activities, reducing the amount of time, money, and manpower invested by the unit. In other words, the first thing blockchain brings is to improve efficiency, and improving efficiency is saving, and it is estimated that it can save more than 10,000 times the cost. Blockchain has also led to an increase in the proportion of microcurrency transactions. For example, Alipay and Yuebao, which are generated by Alibaba, are essentially a kind of blockchain in disguise, building a kind of contract between the people and Alibaba. Alibaba is not a bank, but it has some of the functions of a bank, representing the direction of the evolution of the financial system.

Second, social significance. Blockchain will reorganize the market, reorganize society, and reorganize the relationship with users. Blockchain will also facilitate the self-organization of members of society. The participants of the blockchain must be free and not compulsory. We can imagine that if one day, people realize their needs through various forms of blockchain, which means the formation of a new social operation system. At least, theoretically possible.

Third, political significance. Blockchain has shown value in transforming democratic institutions, such as providing technical support for direct democracy.

Why can blockchain technology in Chinese mainland be able to dominate the world, and how is this done?

First of all, China's aggressiveness towards blockchain. This enterprising spirit comes from the great power mentality. China's Internet development is a typical late-mover advantage model. China clearly wants to be a leader in the development of blockchain.

Secondly, China's financial community has a strong sensitivity to blockchain, and under the initiative of the People's Bank of China, it hopes to use blockchain technology as one of the new financial means, so it is going all out to promote it.

Third, China has sufficient human resources to develop and apply blockchain.

Fourth, in China, there are already quite a few institutions and enterprises that have done work with the characteristics of blockchain without knowing the principles and technologies of blockchain. When they are understood as blockchains, these products are effectively improved. Alibaba is a typical example.

Will there be any problems?

Two problems: first, blockchain cult, thinking that blockchain is omnipotent. Second, the movement of blockchain development and the duplication of work cause great waste. In fact, today's blockchain is already a kind of reality, which has long existed in the cloud, and the most important work now is how to apply blockchain, which many people have not figured out.

At present, people are starting to talk about and pay attention to digital currencies. What is the difference between this digital currency and electronic money, and how do you understand the relationship with Bitcoin and blockchain?

In order to answer this question, it is necessary to correct a common misconception that digital currencies are electronic money. Actually, electronic money is an old concept. Nowadays, the currencies of all countries in the world are basically electronic. Withdrawing and depositing money from bank ATMs on the street is an application of electronic money, and the use of credit cards is also an application of electronic money. In the 21st century, it is technically easy to digitize paper money. In the Nordic countries, money has been largely electronic, and paper money is no longer needed.

The digital currency we are talking about now is not the electronic currency that has been generalized, but mainly refers to encrypted virtual currencies, such as Bitcoin. This virtual currency does not have the status of a fiat currency backed by government credit. In addition, the emergence of government-led fiat digital currency, the biggest feature of which is to absorb and transform the principles and technologies of virtual currency and blockchain represented by Bitcoin, and combine traditional fiat currency and virtual currency, as well as blockchain.

The problem is that traditional fiat currencies need a central bank, a center, and seigniorage, while virtual currencies are non-central and non-central by nature, and they exclude seigniorage. For example, fiat digital currencies need to change the flattening and decentralization of virtual currencies and blockchains to stratification, centralization, or partial centralization. In short, the future of fiat digital currencies depends on whether the technological transformation of the existing virtual currencies can be realized, as long as their benefits are discarded, and innovation is realized. Therefore, legal digital currency is facing comprehensive challenges in principle, technology and method, and there is considerable difficulty. It is foreseeable that even if fiat digital currency achieves the previous principle and technical breakthrough, the symbiosis period between fiat digital currency and traditional currency will be quite long.

How is this fiat digital currency progressing?

In general, fiat digital currencies are still in their infancy around the world. In the United States, there are still different voices on the Federal Reserve's regulatory model of non-governmental digital currencies, and fiat digital currencies are not on the agenda. Most countries in the euro area are generally cautious about the central bank's development of legal digital currency, and tend to promote the development of non-government digital currency through the market to avoid government monopoly of digital currency. Among them, the Netherlands has the most attention to digital currencies, and the Dutch central bank has launched a tested dnbcoin after two years of research.

In the UK, the Bank of England has discussed the feasibility of a fiat digital currency issued by a central bank. In Switzerland, in 2015, a multi-functional virtual currency based on blockchain technology, with settlement functions, can be linked to central bank accounts, and can also be traded on the trading platform of financial institutions. Australia has a more positive attitude towards digital currencies. In Asia, South Korea's Supreme Court in 2010 had confirmed that virtual currencies are equivalent to real currencies. In October, the 12th FinTechDemoDay was held in Seoul, and the Korean Financial Services Commission (NCIALSERVICESMISSION) announced that the department would lay the foundation for a system for the popularization of digital currencies.

Compared with Western countries, the Chinese government attaches great importance to the development of fiat digital currencies, and has invested a lot of human and financial resources. The People's Bank of China believes that in the future, there will be a new field between the two poles of decentralization and centralization, and through different types of blockchain systems in this field, different market and social needs can be met, so it is a historical trend to promote legal digital currency to society. On January 20, 2016, China's central bank made it clear that it would strive to issue its own digital currency as soon as possible. However, after all, China's economy is huge, and there are serious imbalances in economic sectors and regions. It will take several years for China to achieve a fiat digital currency. Therefore, the People's Bank of China proposed that the bill market could become the initial experimental site for fiat digital currency.

In any case, China is likely to have an unexpected breakthrough in terms of fiat digital currency. I'm very concerned about this.

Andrey Sharov, Vice President of Sberbank, said: "Blockchain will make banks disappear in a decade, is this an exaggeration?

Theoretically not exaggerated, technically feasible. Because a country can finally realize the central bank to directly manage the finance and currency of the entire country through blockchain technology. However, such an idea would be met with a variety of non-technical and social opposition. For example, it is almost impossible for the rich and powerful to accept that their wealth is completely transparent, that every transaction is clearly recorded and cannot be changed, making embezzlement impossible. Of course, for ordinary people (603883, stock bar), it doesn't matter, they don't have much money, they are not afraid of others watching, who likes to watch whom.

Why is Taiwan's e-finance far behind Chinese mainland and not optimistic about the future, and what is the key?

Around 2013, several conditions appeared in China at the same time: first, it jumped from the email era and the computer era and directly entered the smartphone era; second, Alibaba has created a third-party payment platform; and third, the platform retail mode and market scale are combined. In this way, e-commerce and e-finance have such a dramatic effect as explosive. Such a situation may not be repeated by other countries, including Taiwan.

With the rapid growth of e-finance in the mainland, the government obviously did not play any role, but the spontaneous behavior of the people?

In Chinese mainland, the government is tolerant of all kinds of financial innovations, in general, in the initial stages. For example, without the tolerance of the number of third-party payments created by Alibaba, today's situation would not be possible. Of course, after a period of observation by the government, it tends to adopt gradually stricter regulations and regulations. How effective it is needs to be analyzed.

Taiwan's financial sector is overly conservative

In recent years, Taiwan has obviously been excessively conservative and cautious in the financial field, and has rarely given the people more freedom space. However, there is still something strange about Taiwan, although the regulations are strict, it is a place where financial fraud is developed.

Compared with the rapid development of e-finance in mainland China, what suggestions do you have for Taiwan?

If we must answer, the most important suggestions are three points: First, Taiwan's financial and banking system needs to be reformed. For example, in terms of opening a bank account, Taiwan is still the same as it was a few decades ago, it is very troublesome, especially to prepare seals, including withdrawing money, which is not a practice in the world and is very outdated. Another example is the fact that Taiwan has a large concentration of bank branches, which used to be a sign of a well-developed banking industry. However, changing the standard is the reason for the backwardness of Taiwan's Internet finance.

Second, Taiwan needs to think about how to achieve financial liberalization, attract foreign capital inflows, and stimulate Taiwan's economic development. Peng Huai-nan, the governor of Taiwan's central bank, has a strong sense of financial regulation. Third, the public should be allowed to discuss the monetary policy of the Central Bank of Taiwan. In the past 20 to 30 years, Taiwan itself and Taiwan's external economic environment have changed dramatically, but there has been no significant adjustment in Taiwan's monetary policy structure. Taiwan needs to assess Taiwan's monetary policy systematically, not piecemeal. The public of a society does not care about the monetary policy that is closely related to it, or the atmosphere of the society does not allow the people to pay attention to and discuss the monetary policy, such people and society are very immature. (To be continued.) Mobile phone users, please browse and read, a better reading experience.