The blockchain concept stocks have been on a roller coaster ride at the beginning of 2018, with a sharp rise followed by a plunge. As of the close of A-share trading on Wednesday, the blockchain index fell 5.92% in a single day, down 373 points from its high a week ago.

The blockchain concept had set off a round of fever in A-shares two years ago, when domestic securities and futures exchanges were organizing to explore the changes that blockchain might bring. Two years later, with the Bitcoin and token trend blockchain concept is making a comeback again, amidst the frenzy, the bubble is also accumulating.

Recently, many people in the “coin circle” and “chain circle” have started to revisit the “dotcom” bubble of 2000. The similarity lies in the fact that the micro Internet technological innovation was interspersed with the imagination of the technological revolution, which inflated the participants and made the short-sellers anxious.

Recently, many countries have made regulatory moves against tokens and blockchain, and China’s Shanghai and Shenzhen exchanges also made a special sounding this week to alert the market to the risks of the hotly speculated concept stocks. So, how much imagination does blockchain have? How much are these imaginations, and how much are they really worth?

There are many questions, but one thing is certain. As a technology in the service of humanity, the biggest challenge of blockchain is not from the technology itself, but from the development of real human society.

“coin fever” drives “chain tide”

Just the past two weeks, blockchain has become the common “darling” of the global market “Whether it’s the U.S. stock, Hong Kong stock or A-share market, funds are pouring into the concept stocks, blowing up wave after wave of fever.

Wind blockchain index rose rapidly and continuously after New Year’s Day, and even rose by more than 5% in a single day for three trading days. The company’s “hotspots” and investors’ “talk of blockchain” triggered the attention of regulators. on January 16, the Shanghai and Shenzhen exchanges issued separate announcements to prompt risks. The Shenzhen Stock Exchange said it had asked questions, concerns and requested suspension of trading for verification of 17 companies. The SSE said it took regulatory measures, while suggesting that the “blockchain” technology is still in the development stage, it is difficult to form a stable business, the concept of speculation signs are more obvious.

After the regulatory voice, there are still a number of concept stocks continue to rise. For example, the 16th just announced to carry out research on blockchain theory and application in the field of intelligent transportation, Jin Yili Technology, the announcement of the introduction of blockchain technology in the supply chain management and commercial factoring business Ease of seeing shares, etc.

But in the end, blockchain concept stocks dived on January 17 after a wave of swift growth.

From the viewpoint of individual stocks, more than 30 “concept stocks” took the windfall. For example, Shenzhou Taiyue, January 11 soared and stopped one after another; such as Annie shares, January 5 on a sharp increase, a week’s time share price rose nearly 50%; and then such as the new morning technology, January 8 on the rise began, since then a series of stops, the highest 16 day disk reached 51.47 yuan / share, than January 5 closing price of 30 yuan / share cumulative increase of up to 71%.

This week’s stock price adjustment, some of the concept of continuous falling stocks. 17, Annie shares, far light software, new morning technology, four-sided precision, Hanwei technology and other opening that fell, and a number of other stocks fell more than 9%.

It is worth noting that the recent trend of bitcoin is also consistent with the trend of the above concept stocks. Bitcoin plunged this week, falling by double digits to the $10,000 mark on Tuesday. the decline continued on Jan. 17, with Bitcoin (BitfinexUSD) down 19.72% to $10,570 in 24 hours.

On the U.S. stock market, listed companies in the blockchain concept also ended their rally with losses. Kodak (NYSE: KODK) announced on Jan. 9 the issuance of “Kodakcoin” after a continuous rise, had exceeded the $10 per share mark, on Jan. 16 Kodak fell 7.61%, from the opening of $8.85 per share to close at $8.50 per share.

And also ready to issue RRcoin Renren (RENN) project “flopped” after January 9 has been in a state of decline, January 16 fell more than 4.55% to close at $ 10.90 per share. Similarly, Chinese stocks CNET (NASDAQ:CNET) and Xunlei (NASDAQ:XNET) have fallen to varying degrees after their respective gains.

“This time the blockchain was once again pushed to the market wind, the main reason behind it lies in two aspects.” Huachuang strategy team analysts told First Financial, on the one hand, the overseas market blockchain concept is hot, the U.S. e-commerce giant Overstock (last year’s share price tripled), Chinese stocks Xunlei (the second half of last year’s share price quadrupled) and other introduction of blockchain technology soaring on the A-share market mapping.

On the other hand, the value of digital currencies such as Bitcoin, which was birthed based on blockchain technology, has exploded in the last year and the effect has been transmitted to the secondary market. They believe that in terms of the current valuation of Chinese blockchain concept stocks, the average PE of blockchain concept listed companies is nearly 150x, which has a certain bubbly component compared to U.S. tech companies such as Apple (18.8x), Google (37.4x) and Microsoft (31.3x).

“The biggest result of blockchain so far is the creation of the DigitalTokenEcnomic. This direction represents a very promising class of blockchain application projects. It is mainly to solve the problem that in the process of digital economy development, there exist many transaction behaviors with real demand, but these transaction behaviors are constrained by the existing rules, incentives, transaction costs or payments and other constraints and are difficult to carry out effectively.” Zhang Jialin, chairman of Beijing Capital Matching Yi Investment Advisory Co., Ltd. told First Financial that through the introduction of digital tokens, these projects have not only solved their own financing problems, but also established adapted rules and incentive mechanisms for transaction behavior, and transaction costs and payment methods have become more competitive and efficient in some specific scenarios.

A few bubbles and a few real gold

With the new technologyThe development, “speculation concept” also has more and more threshold. From bitcoin, tokens, ICO to blockchain, investors have not had time to understand the true meaning of the concept, the craze has risen, in order not to step on the empty, many investors risk quickly join the “gambling game.” The

But it should be clear that blockchain is not equal to bitcoin, tokens or Tokens, nor to ICO. there is obviously a logical problem with giving high valuations to token issuing companies or ICOs based on the imagination of blockchain disrupting the economic paradigm.

The current policy direction in China is to support blockchain technology, but there is a tendency to tighten the regulation of the digital currency derived from it. From September 2017, when the central bank and seven other ministries called a halt to ICOs, followed by the shutdown of domestic bitcoin exchanges, digital currency regulation has reached a peak; while “mining” is not explicitly prohibited, China’s attitude toward regulating bitcoin production and eliminating electricity concessions for mining farms has been largely clear, and under the high-pressure policy of increased regulation, the The mining farms, which account for 70 percent of the world’s bitcoin computing power, are planning to leave China and head overseas.

“I think blockchain technology itself is good, but we should turn our attention to the industrial upgrade and technological progress brought by blockchain technology, rather than limiting it to ‘speculative coin speculation’.” Huachuang strategy analysts told the first financial reporter.

In his opinion, the technology companies represented by Xunlei and Tencent are trying to promote the application of blockchain technology in real scenarios, which is operating from the underlying technology aspect; there is another category of listed companies introducing blockchain technology in subdivision industry scenarios, such as pharmaceutical procurement and supply, electronic invoicing, etc., which can all be considered to be in the actual development of blockchain technology. However, we should also see that there are some companies that are simply “rubbing hot spots”.

What exactly is blockchain? How many fish and how many dragons are mixed in the market now?

“In computer terms, blockchain is a decentralized distributed electronic ledger, which is a chain database with multi-point maintenance and distributed storage based on peer-to-peer network architecture, realized by using hash functions, asymmetric encryption algorithms and consensus mechanisms.” Li Li, a senior partner at Beijing Dacheng Law Firm, told the First Financial Reporter that blockchain is essentially a “credential filing cabinet” and a “ledger”.

In layman’s terms, the blockchain is an electronic filing cabinet of original credentials that is automatically maintained by multiple computers and can keep copies in multiple locations synchronously, storing all historical transaction records of the entire market. This cabinet contains neatly numbered voucher books called “blocks”, each of which contains a number of original accounting vouchers called “transaction records” bound in an orderly fashion, which are linked together by a cryptographic algorithm to ensure that the numbering of the voucher books is not scrambled. This creates a logical chain of “blocks” of vouchers that can only be added from the back and cannot be inserted, deleted or modified from the middle, extending in one direction.

For example, it can be envisaged that in the field of housing mortgage, banks, developers, home buyers and other subjects are in a blockchain system, and housing property rights, mortgages, currency ownership and loan claims related to the transaction will be registered and publicized in the blockchain ledger, in which the currency appears in the form of cryptographic digital currency, which is recognized by law to obtain the status of a mandatory payment instrument and participate in real estate transactions and financing arrangements.

“If the current domestic blockchain industry is developing in the direction of token-based development, I think it is going astray.” Li Li believes that the most promising development direction of blockchain lies in the integration of systems based on the alliance chain.

public chain, that is, allowing anonymous membership and no limit on the number, can ensure the best scalability and most thorough openness of the network, and the general public is treated equally and comes in and out at will, creating a social credit with a broad mass base.

Alliance chain, i.e., the one that restricts the number of participating nodes and requires identity authentication, is conducive to maintaining system security and can significantly improve the efficiency and accuracy of consensus computing, but is less scalable, similar to a membership club or industry association, and its core business value is to save reconciliation costs and improve clearing efficiency.

“At present, from public reports, the application function of the alliance chain in the field of securitization is still emphasizing multi-party query and non-tamperability, and the obvious feature of blockchain “decentralization” is not visible,” Li Li said, “Bitcoin and tokens are typical of public chains. The most practical application of blockchain is still in the coalition chain, because the essence of blockchain is “ledger”, which registers, records and publicizes information.

In his opinion, securities, futures venues and smart contracts are two good application scenarios. In the field of securities trading venues, it can be developed by brokerage houses, funds and other trading participant institutions in cooperation with the exchange, and the system is integrated as infrastructure, and participating traders can all reduce transaction costs, improve clearing efficiency and audit efficiency.

“From the two perspectives of simulation and innovation of bookkeeping methods, the technical core of blockchain mainly includes three aspects: hash function, asymmetric encryption algorithm and consensus mechanism.” Li Li believes that there are no barriers to blockchain at the technical level. The application of blockchain is likely to be determined by all the participating subjects of an industry to determine the industry standard, a single enterprise to develop a specific technology, develop an application or develop hardware equipment, and a system integrator to integrate the system according to certain industry standards, after which blockchain technology will be introduced into practice according to the business logic and financial logic of the enterprise.

The biggest challenge, not technology

The world is algorithmic, and the philosophy of understanding the world is algorithmic. And code, which can describe any digital world. On top of such a basic logic, we can make endless imaginations about blockchain changing the world.

In 2016, Bettina Warburg, head of global operations at the Institute for the Future of the United States (BettinaWarburg), has spoken in very layman’s terms about the future of blockchain. With blockchain, a technology that can reach the problem of reducing uncertainty, to achieve value exchange. According to the research of Nobel Laureate Douglas North, in real societies, institutions are human tools to reduce uncertainty and promote economicThe lubricant that keeps the wheels of the economy running.

To reduce transaction costs, we have established banks, governments, corporations, etc. in the real world. After developing into the Internet era, we also moved such organizations and systems to the Internet. For example, Amazon, Alibaba, and other trading and payment platforms.

But in the online world we face multiple uncertainties: who we are transacting with, opaque transaction processes, and no recourse when problems arise. Blockchain technology can create a shared reality between different entities that don’t need to trust each other.

But Bettina also said that blockchain is currently better suited for early adopters who can understand it, tinker with it and find the right scenarios for its use, which may initially be better for governments or businesses.

According to a study by analysts at CRE Strategy, blockchain may include nine stages: digital currency, digital recognition, digital assets, decentralized digital exchanges, digital identity, value intermediation, smart contracts, decentralized autonomous organizations, and programmable society.

“We are still in the more low-level blockchain technology application stage, namely the digital asset and decentralized digital exchange stage, and ICO regulation can be considered as a process that must be undergone to move towards decentralized digital exchanges, and the application of digital assets and decentralized digital exchanges will continue in a more healthy regulatory environment development.” Huachuang analysts told reporters that complete popularity is still hard to imagine, and currently more scenario-based applications continue to fall into place, such as some financial institutions based on the security perspective of the development of the “Alliance Chain”, electronic invoicing, copyright protection aspects.

is based on blockchain technology to create a “shared reality” that maps the reality of society, which is the more ultimate imagination of blockchain technology. In Li Li’s opinion, this imagination is not unattainable, or at least infinitely approachable. However, the obstacle is not in the technology, but in the institutional construction of human society, involving financial, legal and other aspects of the construction of rules, reflecting the results of the comprehensive development of human society.

“Code logic is rigorous and needs to be supported by deterministic results, but realistic legal rules and accounting standards have many subjective components with vague and uncertain characteristics, which are difficult to describe circumscribed by code.” He said, for example, in the current stage of deep globalization already, the business rules, financial rules and culture of different countries and regions are very different, and the civil and commercial law system in the era of commodity economy is also very difficult to describe with a global common code logic. What’s more, as blockchain technology brings about changes in the online world, it will in turn bring about changes in the real world.

Take corporate bankruptcy for example, in the real world, when a company goes bankrupt, different creditors and investors will have different order of liquidation. But in the blockchain, at the moment of insolvency, there may be several “smart contracts” of payment obligations due. So which one should be delivered first? Should employees’ salaries and state taxes be given priority? How to implement the property recovery system in the bankruptcy law? What’s more, the bankruptcy laws of different countries are also different, and there are also differences in practice.

As Bettina said, blockchain is technology, but also a continuation of human society.