On February 20, Dr. Xiao Feng, Chairman and CEO of HashKey Group, delivered a keynote speech titled "Block Chain: Starting from the Origin" at the Web3 Voyage event hosted by HashKey Chain. The following is the full text of the speech, which was compiled from the on-site shorthand, with some deletions that do not affect the original meaning.
Hello everyone, first of all, welcome everyone to our live meeting today.
On August 28, 2023, we held the launching ceremony of our Hong Kong Exchange HashKey Exchange at the same place, the Hong Kong Maritime Museum. Hong Kong is a port city, so we deliberately chose this symbolic place to hold the opening ceremony. Today is the second time the group has held an event here. HashKey Exchange is one wing of HashKey, and HashKey Chain is the other wing of HashKey Group. In today's speech, I will explain to you in detail why HashKey Chain is so important to us.
Blockchain: New Financial Infrastructure
Starting from the origin of blockchain, from the first principles, and from the basics, we need to examine the crypto assets, or virtual assets, which are now hotly debated. All of this is built on blockchain technology. Therefore, we must return to our original intention and explore what blockchain is.
Three Elements of Human Social Evolution
Before I start my speech, I would like to quote the research results of a Nobel Prize winner in economics. He has been studying the industrial revolution for a long time and came to the conclusion that " the industrial revolution has to wait for a financial revolution." His research results cover the first three industrial revolutions, and now we have entered the fourth industrial revolution - the era of intelligence and digitalization. He believes that all industrial revolutions rely on the support of new financial services to support the development and growth of new industrial revolutions. On the other hand, without the blessing of the financial revolution, the industrial revolution of human society may not succeed.
Many people are ashamed to admit that blockchain is the infrastructure supporting the Fourth Industrial Revolution, so we often mention the need to build "alliance chains" or "coinless blockchains." However, the past decade of practice has proven that most of these attempts do not work. We must bravely admit that blockchain, as a tool for adjusting production relations, has a core entry point in finance. If there is no financial demand, we don't need blockchain at all. This means that when humans enter the Fourth Industrial Revolution and innovate digital and intelligent production relations, a new financial revolution is indispensable. Otherwise, all this may not happen or fail.
Four "Industrial Revolutions"
The economist further pointed out that every industrial revolution is the superposition of energy revolution, industrial revolution and financial revolution, among which financial revolution is often the prerequisite.
This reminds me of research in physics: social development and scientific and technological progress are inseparable from the conversion of energy, energy and information. This conversion coincides with the energy revolution, industrial revolution and financial revolution in certain scenarios. Following this framework, we review the past three industrial revolutions:
The first time, marked by the steam engine, occurred in England;
The second one was represented by electricity and wireless communications and took place in the United States;
The third one was marked by computers, codes and the Internet, and also emerged in the United States.
Another scientist once mentioned that humans have gone through three cognitive revolutions:
The first was the invention of language to enable communication between people;
The second time was the invention of writing to record and pass on experience;
The third was the invention of codes in the last century. As a new language, codes have expanded the scope of communication, interaction and coordination in human society countless times.
Without code, there would be no AI, blockchain or the Internet. Code creates the language between humans and machines, and between machines, making informatization greatly expand the space for survival and economic activities. This also explains why the market value of listed companies can reach 3 trillion US dollars today, while the highest in the industrial economy era was only 600 billion US dollars - such as ExxonMobil and General Electric. Today, trillion-dollar companies are everywhere, and some even predict that Nvidia may reach 5 trillion or 10 trillion US dollars.
The Fourth Industrial Revolution
The fourth industrial revolution emerged at the beginning of this century, represented by blockchain, AI and cloud computing. If it was in January, I would not dare to say that it was related to China, but now it can be said that China and the United States are jointly promoting this wave. From the Internet to AI, the top ten platforms and large model research and development are almost concentrated in China and the United States, Europe and Japan are nowhere to be seen, and China has already caught this express train.
However, the Fourth Industrial Revolution must be supported by a financial revolution. The UK relied on credit and bond markets, the US relied on investment banks and capital markets, and the third relied on venture capital (VC) to give birth to Silicon Valley and China's Internet platforms. Doesn't the Fourth Industrial Revolution need a new financial model?
The greatest value of AI lies in embodied intelligence and spatial intelligence, which requires a large number of robots. What currency is used for payment between robots and between humans? US dollars or RMB? Only programmable currency based on smart contracts can do the job. This means that the fourth industrial revolution will inevitably call for a new financial revolution, otherwise its potential will be greatly reduced.
The Fourth "Financial Revolution"
The Fourth Industrial Revolution is inseparable from blockchain, smart contracts, digital wallets and programmable currencies. Blockchain is an open and transparent global public ledger. Human computing methods have only changed three times in the past millennium: single-entry bookkeeping in the Sumerian period, double-entry bookkeeping in Italy in 1300 AD, and distributed bookkeeping brought by Bitcoin in 2009. Distributed bookkeeping was born out of the cross-time, cross-space and cross-organizational characteristics of digital existence, and is the financial foundation of the Fourth Industrial Revolution.
Compared with traditional finance, new finance has three major changes:
First, the calculation method changes from double-entry accounting to distributed accounting;
Second, the account changes from a bank account to a digital wallet;
Third, the accounting unit has changed from legal tender to digital currency. This has given rise to crypto assets, a new asset class based on distributed encryption algorithms and ledgers.
The first principles of blockchain
What is the first principle of finance? It is the mismatch of value across time and space, and this essence has remained unchanged for thousands of years. But the service mode is changing: from no banks to banks, from no central bank to central banks. Some people say that the essence of finance remains unchanged, but banks and exchanges are just tools. Digital activities span time and space, and payments have become a point-to-point, distributed, and self-organizing network. Remittances from Hong Kong to the United States arrive in a few minutes without the need for reconciliation by five institutions. Which method is more in line with human nature? Isn't it a better choice to arrive in seconds and have nearly zero handling fees?
The essence of finance
DeFi (decentralized finance) on the blockchain has a very high rate of return, 10%-20%, or even 30%-40%. The traditional financial community often says that returns over 7% may be a scam, accusing DeFi of being a Ponzi scheme. After years of thinking, I concluded that standardized DeFi projects provide risk-free returns, with lower leverage than banks (bank capital adequacy ratio is only 12%), but achieve high returns due to over-collateralization. The core lies in the efficiency of capital turnover - banks can turn over 12 times a year, which is the limit, while DeFi can reach 10,000 times, and flash loans can even be completed in seconds. This efficiency improvement is the charm of new finance.
Digital Native to Digital Twin
Let's talk about a few hot topics, the first of which is RWA (real world assets). Ten years ago, stablecoins (such as USDT in 2015) started the currency tokenization, and the transaction volume in 2024 reached 16 trillion US dollars, with a scale of only 300 billion US dollars, which is much more efficient than the 300 trillion US dollars transaction volume of traditional finance. From 2024, the tokenization of financial assets will rise, and US asset management companies will mint fund shares on the public chain, and the scale will exceed stablecoins. The third wave is the tokenization of physical assets, which needs to solve the oracle problem and realize the digital twin from offline to on-chain.
Five types of tokens
There are many types of tokens, and different types of tokens have different functions. They can be divided into five categories in total: payment type (such as stablecoins), reserve type (such as Bitcoin), functional type (such as Ethereum ETH), securities type (such as ETF shares) and meme coins (such as tokens issued by Trump).
Finally, I want to say that we have to welcome the new era from "off-chain to on-chain". In 2025, this trend will come, driven by US legislation and the promotion of the president. After the United States grants legitimacy and compliance to the crypto industry, other countries will follow suit, and Hong Kong has already legislated first. Subsequently, global financial institutions will enter the crypto field in a big way, build a new payment and settlement system based on blockchain, or issue new financial assets based on the token economy. "On-chain" will truly enter a period of explosive growth.
That’s all I have to share. Thank you everyone.
