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On April 9, at the closing ceremony of the 2024 Hong Kong Web3 Carnival, Dr. Xiao Feng, Chairman of Wanxiang Blockchain and Chairman and CEO of HashKey Group, delivered an in-depth observation of the explosion of applications in the blockchain and Web3 industry.Dr. Xiao Feng believes that Web3 is about to usher in its “1995 Moment” and comprehensively analyzes the basic framework of the arrival of this moment and the timing of the arrival.In addition, Dr. Xiao Feng released the white paper “The First Principles of the New Economy of Web3” at this carnival.
Dr. Xiao Feng believes that blockchain has gone through the stage of “0-1” and the stage of building basic protocols and infrastructure, and it has been 15 years since Bitcoin was born.Next, blockchain will enter the stage of application explosion, that is, from “1-10”.If you want to talk about “Web3’s ‘1995 Moment'”, you need to extend the time and observe when such a great moment begins to come from the time dimension of the past two hundred years.
First, the fourth “Technological Paradigm Revolution”
In the past 200 years, there have been four important revolutions in the technological paradigm:
The first technological paradigm revolution was “mechanization”, represented by the British Industrial Revolution, which took place in the mid-18th century.
The second technological paradigm revolution was “electrification”, which took place at the end of the 19th century, and was an era of “electrification” represented by electric lights and telephones.
The third technological paradigm revolution “informatization”, which took place in the 1920s, was the emergence of computers and the Internet as representative things, called the “informatization” era.
The fourth revolution in the technological paradigm is “digitalization”, which happened at the beginning of this century. The representative things are the development of cloud technology, blockchain, and AI.The underlying technology of cloud computing is also distributed computing. The important features of the digital era are distributed, decentralized, and self-organized.
With the four revolutions of the technological paradigm, the financial paradigm and capital paradigm have also cooperated with great transformation and upgrading.
Second, the four “capital paradigm transformations”
In line with the revolution of the first technological paradigm of “mechanization”, the Main Street model characterized by consortium capital has entered the main stage of the financial market. The well-known large consortiums include Morgan Stanley, Carnegie, Rockefeller, etc., although they are no longer in history.The center of the stage, but they are all still there.Center of the historical stage With several revolutions of technological paradigms, the protagonists of financial capital are constantly changing.
With the electrification revolution at the end of the 19th century, the “Wall Street Model” featuring financial capital began to become the protagonist in the financial market, and representative companies include Goldman Sachs, Morgan Stanley, etc.
In the era of information revolution that came in the middle of the last century, the Silicon Valley model characterized by venture capital began to emerge.I once walked back and forth on the Dunes Road in Silicon Valley, counting the famous VCs and feeling how they changed finance and the financing methods of technological innovation.
The revolution in the digital technology paradigm that occurred at the beginning of this century was accompanied by a new financial capital, and the so-called crypto capital began to gradually move towards the historical stage and towards the center of the financial market.We call this model “crypto mode”, such as BTC, ETH, ICO in 2017, and crypto capital such as STO, IEO, RWA, stablecoins, etc. that are now hotly discussed.These crypto capitals have a common feature, which is the new asset class based on cryptography and distributed ledgers.
Third, the first principle of blockchain: new accounting methods
We focus our 200-year development and changes to the past decade, and then look at the paradigm revolution based on digital technology. Due to the changes in the technological paradigm, crypto assets have emerged in the capital paradigm.Crypto assets are new asset classes and capital models based on distributed ledgers and cryptography technologies.
If we look at blockchain from the fundamental, from the underlying logic, from the essential principle, from the perspective of first principles, its first principle is a new accounting method.
Human society has experienced three different accounting methods. The earliest accounting method is the single accounting method, which only records income and expenditures, and each holds its own accounts, which is a private account book.
Later, the double-entry accounting method emerged, which brought assets and liabilities into accounting on top of income and expenditure, but still recorded accounts on private books.
The blockchain, which was released in 2009, is a distributed ledger (DLT), records digital value and network value, and is no longer accounting on private ledgers, but on open and transparent global public ledgers.Keep a book in one piece, and all stakeholders keep it in one account book.This is the first principle of blockchain, a transparent and open “global public ledger”. All Web3 innovations are based on the first principle.
Fourth, the thousand-year change of accounting methods
In the more than 5,000 years of written records in human society, there have been three iterations or innovations in accounting methods.It can be seen that the millennium change in the accounting method does have great value to human social economy.
The earliest single-lane account book was found in 3500 BC. Account books were found on a clay board unearthed in the Sumer region. The account book was used to keep accounts using single-lane account book, only remembering income and expenditures.The double bookkeeping method was born in the early 14th century in the northern city-state of the Mediterranean in Italy. Because marine trade makes trade very complicated, more complex bookkeeping methods are needed after complexity.Marine trade involves partnership, borrowing money, and taxation. The single-type accounting method is obviously unable to adapt to such a complex new marine trade.The third accounting method was more than 700 years after 1900.In 2009, with the emergence of Bitcoin and blockchain, new accounting methods were introduced, distributed accounting that recorded digital value and network value.Distributed ledgers can also be said to be an accounting system created by human digital survival needs.
The book “Digital Survival” predicts the digital migration of human society decades later. The distributed accounting method is developed for digital migration and digital survival.
Fifth, the three-layer structure of a distributed accounting system.
Any computing system has a three-layer architecture, and distributed computing system is no exception.
The distributed accounting system first has a set of accounting methods. The duplex accounting method and the distributed accounting method are both accounting methods.At the same time, there is an account system, and the double accounting method uses a bank account to record value, store value and transfer value for everyone.The Web3 era has transformed from a bank account to an encrypted account. Whether it is Bitcoin’s UTXO or Ethereum’s account system, they are all encrypted accounts.In addition to the account system, there are also accounting units.The accounting unit of the double-entry accounting method is the fiat currency of each country.When we reach the distributed accounting system, the accounting unit becomes a digital currency.
Sixth, accounting methods—the foundation of economic and social civilization
The accounting method has great value to human economy, society, politics, etc. and is the basis of economic and social civilization. Both economists have discussed that the double accounting method is the core of capitalism, the capitalist economy andIf the origin of the political system is not recorded, then the capitalist economic civilization system will not be born, and the corporate system, partnership system, financial market, etc. will not be born, including taxation.
Taxation is very important for modern countries. To collect taxes from business, you must first make clear accounts.The Italian double bookkeeping method began in 1300 and was continuously improved.Around the Ming Dynasty, China summarized the reasons for the failure of the Ming Dynasty in the “Fifteenth Year of Wanli” and mentioned that the Ming Dynasty lacked “number management” capabilities.At that time, China used the single-type accounting method and recorded the volume accounting, and its digital management capabilities were relatively less developed and perfect than those in Europe.Accounting and financial argumentation are actually two sides of the problem. The Ming Dynasty obviously lacked a good accounting basis for accounting and financial argumentation.
Seventh, the “1995 Moment” of the Internet
Back to the topic, welcome the “1995 Moment” of Web3.This concept was proposed relative to the “1995 Moment” of the Internet. Almost all the familiar large Internet platforms were born in the decade from 1995 to 2005, of course, there are some exceptions.We delved into this phenomenon and found that before 1995, it was the maturity period of the basic Internet system architecture.
Maturity is reflected in two aspects:
First, the Internet has shifted from the architecture of ARPRNet to the architecture of the World Wide Web, and established an Internet architecture TCP/IP model.
Second, in addition to the infrastructure being determined before 1995, the browser and graphics operating system that are very friendly to end users have also been gradually improved, allowing end users to use the Internet well.
The infrastructure of the Internet is certain, and the tools and means to use the Internet are perfect. Therefore, 1995-2005 was the “golden decade” of the explosion of Internet applications, and almost all large-scale Internet platforms were born at this time.
Eighth, Web3’s “1995 Moment” (I)
When will the “1995 Moment” of Web3 happen?The development history of Web3 has two major support: one is blockchain and the other is AI.
The earliest blockchain “Bitcoin Network” was born in 2009, and the earliest AI was born more than 60 years ago. However, it was not until AlphaGo appeared in 2014 that people realized that deep learning may be a new path to the development of AI.The first half of the 2010s was also the two pillars of Web3 – blockchain and AI, which began to undergo a period of phased transformation.
In 2015, the hot topic discussed in the blockchain circle was “the relationship between blockchain and AI”. Everyone came to the conclusion that “AI is the revolution of productivity, while blockchain is the revolution of production relations”. These two complement each other.of.
Ninth, Web3’s “1995 Moment” (II)
As time goes to 2024, we find that the two pillars of Web3: blockchain and AI have arrived at the critical moment of the ultimate solution in 2024.Blockchain has always had an “impossible triangle”. If you only do things on the L1 basic public chain, directly deploy contracts, and directly deploy applications, then your scalability and performance cannot support large-scale applications.At the same time, gas fees and costs do not support large-scale applications.
The blockchain solves the “impossible triangle” of the basic public chain through Ethereum sharding. The basic public chain L1 chain is only responsible for decentralization and security, and the scalability and performance are solved through layered solutions.Today, Vitalik also talked about solving scalability and performance issues through L2 and even future L3.This proves that the basic architecture and ultimate technical solution of blockchain are confirmed here.
At the same time, AI is the same. The AlphaGo deep learning model in 2014 has moved to the current neural network model. The AI technology architecture has basically established the AI technology architecture through a general multimodal large model.
Only when the two technical architectures mature in 2024 can we expect that the “1995 Moment” of Web3 will be exactly from this year to the next ten years. 2024-2034 should be the “1995 Moment” of Web3, which is alsoThe best moment for innovation in Web3 applications.
A large number of disruptive innovations at the application level should only support application innovation after both basic architectures are determined.
Tenth, disruptive innovation
When it comes to Web3 application innovation, what is the disruptive innovation of the Web3 platform?Everyone says that blockchain is a value network and the Internet is an information network.From the underlying logic of disruptive innovation, the disruptive innovation of the Internet platform, no matter you are e-commerce, social networking, Didi Taxi, or Meituan Takeout, in fact, what you do is the same thing, from the bottom and the most essentialIn the first principle, it is all about matching information, collecting information, collecting data, accurately portraying, and efficient matching.
The most essential thing about disruptive innovation of the Internet platform is “information matching”, while the most essential thing about disruptive innovation of the Web3 platform is “value matching”, creating a virtual world and a digital native world.
In the digital native world, through distributed ledgers, all participants have data sovereignty in their hands and are no longer deprived of the platform. Everyone can have their own data sovereignty, and the rights to these data can be carried away.
Then share the value and share the value in Token’s economic model, and share the value. Through the stakeholder economic system, everyone can create value and share value, rather than your value being deprived of by others.
I think from the underlying logic of disruptive innovation, the Web3 platform is engaged in value matching.
11. Web3 disruptive innovation principle
From the underlying logic, I personally believe that disruptive innovation in Web3 may need to follow the following five principles:
(1) From the edge to the core.From nothing to something, from zero to one, instead of transforming popular products in the Internet era or subverting a hot product.Instead, we must start from the edge and slowly grow, and then become the core thing in the Web3 world.
(2) From native to twin.Never go in the wrong direction, don’t go from twin to native. Digital native things are the basis of disruptive innovation, and only then can disruptive innovation be produced.Any method of using digital twins is to improve marginal effects, and is obviously not an innovation in disruptive business models.
(3) Go from nature to explicitness.I often encounter people saying that WeChat is very popular, so I want to use blockchain to use AI to make decentralized WeChat.Decentralized WeChat does not exist, socialization is human nature, and it has been like this for thousands of years.WeChat is the Internet era that uses information matching to meet the essential social or social needs of others in nature.In the world of Web3, there will definitely be no social tools/social networks like WeChat, but use some new tools, new means and new models to meet everyone’s social needs. Don’t put these two relationships into consideration.Reversed.
(4) Innovate Web3 from the first principles. The so-called first principles are to create a new business model that matches value on an open and transparent global ledger.
(5) In addition to the basic architecture, the “1995 Moment” of the Internet has matured, and the browser and operating system are also very friendly to the terminal, so that more people can use the Internet.I believe that Web3 is now also interchanging terminal-friendly tools such as “browsers” and “graphic operating systems” in the Internet era.
Mr. Jiang once mentioned earlier that the operating system in the AI era may not be a graphical operating system, but a natural language operating system.So, the operating system of Web3 may be based on natural language, which is original, terminal-friendly tool innovation starting from native, starting from the edge, and starting from nature.I believe that the graphics operating system is indeed a product of the information Internet era, and the natural language operating system may be the product of innovation in the Web3 era.
Twelve, the technical architecture of innovative Web3 application
Innovation at the application level must be based on the modules and protocol stacks built in the past decade to carry out the application innovation of Web3.What have we done in the past ten years?There is a distributed network and Web3.0. We have built a distributed ledger – blockchain on the distributed network.A set of distributed finance, DeFi, is also built on the distributed ledger.
On this basis, all Web3 application innovations are based on such a network and on such accounting systems, and Web3 innovations are carried out on the financial support system, so it is called distributed business.
Thirteen, Economic Model of Web3 Application Innovation
In my closing speech at the 2023 Hong Kong Web3 Carnival, I talked about the blockchain application economic model.The economic model of blockchain application is different from the economic model of blockchain infrastructure.Blockchain infrastructure such as Bitcoin and Ethereum are basically a single token economic model because it is the basic protocol.But after the application protocol comes out, it can design much more economic models and tools than the basic protocol.
I proposed the “three token model” at that time, and I won’t talk about it in detail today.The “three token model” mainly refers to three tokens: one is functional tokens, which are tokenization of usage rights; the other is securities tokens, which are tokenization of ownership; the third is NFT, which are digital goods and digital productsTokenization of services.
All Web3 application innovations may use one, two or three tokens to build your economic model, and there is much more and much greater room for innovation than technical protocols.
Fourteenth, the integration and interconnection of Web3 application innovation
The bridge between traditional finance and Crypto finance is not only a prerequisite for Web3 technology innovation, but also a result of Web3 application innovation.The integration and interconnection of the two is the future trend.
There are now at least five bridges helping the traditional financial market and the Web3 financial market/Crypto financial market to connect with each other.
First, crypto asset ETFs.
Second, fiat currency stablecoin.There were no compliant and legal fiat currency stablecoins before, but now Hong Kong and Singapore have begun to produce fiat currency stablecoins.
Third, STO.This afternoon there is a lot of discussion about the compliance and legal tokenization of STO equity.
Fourth, RWA, tokenization of traditional financial assets.HSBC Bank in Hong Kong has tokenized gold, and BlackRock in the United States has tokenized US Treasury funds. These are all RWAs, building bridges to enable traditional finance and Crypto finance to connect with each other.
Fifth, licensed exchanges.The compliance of exchanges is a major trend, and licensed, compliant and regulated exchanges can also connect traditional finance, traditional investors, crypto markets, and crypto asset investments well.
Licensed, compliant, regulated exchanges play two roles:
(1) Investment and transactions of crypto assets;
(2) Exchange of fiat currency and digital currency.For example, in Coinbase, a large number of USDCs are issued through trading platforms, which completes the exchange of fiat currency and digital currency.
The above may be the overall framework for complete Web3 application innovation for the next decade.
