Newton founder Jizhe Xu:“The core issues to be solved by blockchain will be the creation of new organizational structures, cooperation modes and incentive mechanisms”

newtonproject on 2018.04.27

In April 3, the World Blockchain Conference 2018 was held at China National Convention Center (CNCC) in Beijing, China. The founder of Newton, Jizhe Xu attended the conference as a special guest for the launching of the World Blockchain Council and the Roundtable Forum “Is blockchain redefining business processes?”. After the conference, Mr. Xu accepted an exclusive interview. He believed that the essence of the blockchain is more than a technical issue and he said “the blockchain will not only solve the budget or efficiency problems, but also changed the organizational structures and incentive mechanisms. This might be the reason why the blockchain, Bitcoin is so difficult for most people to understand. 

Jizhe Xu, the founder of Newton, attending the launching ceremony of the World Blockchain Council

Roundtable Forum: “Is blockchain redefining business processes?”(Newton founder Jizhe Xu, first from right)

Here are the some highlights from Mr. Xu in the roundtable dialogue section “Is blockchain redefining business processes?”

“The essence of blockchain is more than a technology”

Mr. Xu said“There are still many issues to be resolved in this emerging blockchain industry especially during this bear market and unstable period. So what is the essence of the blockchain? The essence of the blockchain is more than a technology. The core issues to be solved by blockchain will be the creation of new organizational structures, cooperation modes and incentive mechanisms. This is also the reason why blockchain, Bitcoin is difficult for most people to understand. Bitcoin and the blockchain will subvert our common sense to the currency. As we know, currency is an economic circulation tool issued by the national central bank. We used to deposit money at the bank and transfer money trough the bank, but Bitcoin has completely changed these routines. Though everyone is talking about the blockchain, the first and most important thing is to realize that blockchain will change the organizational structures, cooperation modes and incentive mechanisms in our life.

For example, the corporate mode is the main organizational cooperation approach in our society. Starting a business needs many important elements, such as investment, stakeholders, employees and a co-located working place. In this case, business development can only be accomplished by intra-organizational collaboration, establishing performance evaluation mechanism, occupying the market and acquiring more users, customers and partners. With the business expansion and the increase of users, the company will run into the bottleneck, and only achieving monopoly can provide long-lasting survival and development. However, it is not easy to fulfill under traditional cooperation modes. This is because the users, customers and partners are actually the important participants in a business operation. But in a traditional corporate, they used to be treated in an adversarial way and isolated by the corporate from the cooperating perspective.

From an incentive perspective, the growth and development of a company largely depends on his supportive users and followers. But how does this company pay back to these supporters when it has gone public in New York Stock Exchange? Who has enjoyed the wealth growth brought by the growth of the company? Actually, the only beneficiaries are the shareholders of this company. So what is the essence of this traditional corporate pattern? Most people make contributions for benefiting few stakeholders. This corporate pattern was the product appeared during the first world industrial revolution and has last for ages. This pattern once has made a great contribution to human society, but it is now outdated compared with the advance of technology level. That’s why we thought the blockchain is more than a technology but will revolutionize the existing organizational structures, cooperation mode, and incentive mechanisms. So if you ask me what fundamental changes will happen to the business cooperation modes in 10 or 20 more years? I believe it will be the community economy managed by a non-profit foundation replacing the monopoly platform managed by traditional close-end company. And this will be the fundamental social problem to be solved by blockchain in the future.

“As many other blockchain projects, Newton is a value transfer protocol”

From the technical perspective, Corporate like Facebook and Google have developed a series of products which account for almost 99% of the entire technology stack. And the stakeholders may take almost 99% of the profits. However, who is the owner of these products? The answer is the company’s shareholders. With the popularization of these products, all of our data will be recorded and accumulated in these products. The intermediaries can take advantages of your information to monopolize the market, which is disturbing and terrifying. This is the current situation of information-based Internet era. Therefore, there would be a fundamental change in the value-based Internet in the future. There will be a new layer added to the existing product layer and information transfer protocol layer, which can be defined as the value transfer protocols. To a certain extent, Bitcoin can be view as the first value transfer protocols. Ethereum, Newton, which we are developing, and many other new blockchain projects can be categorized as value transfer protocols. We will have a large amount of user valuable data, which will be transferred from product layer to the protocol layer and broken down in the way of Token, and spread in the community economy. In this case, the distribution of value for each individual and our entrepreneurial opportunities will change. This is a more advanced form of organization, cooperation mode and incentive mechanism.

Innovation must come from the edge

Most traditional enterprises will fail to embrace the blockchain. For example, back to 1995 with the first time internet tide, Wangfujing Department Store should be more likely to succeed in e-commerce than Alibaba for it was having the best business resources, however it doesn’t. This is because the innovation tends to come from the edge, and each technological revolution may cause subversive impact to the core enterprises. In this sense, the major enterprises of any industry may tend to refuse these changes as they are the beneficiary of previous technology revolution.

Here are the some highlights from the official exclusive interview to Mr. Xu of this conference:

“Newton provides an infrastructure for the entire decentralized business.”

Nowadays many blockchain application products are similar to CryptoKitties blockchain game. In the second half of 2016, there was no such product like CryptoKitties. We found Bitcoin's transaction speed was not fast enough to be commercialized. The existing public chains still have huge room for improvement in many basic technologies. Based on this background, together with the the founder of Elastos, Rong Chen, and Feng Han, who has 17 years of technical experiences in this area, we started the Elastos project which essence is a blockchain-based operation system. So why do we start Newton project now? Newton is a decentralized e-commerce protocol. The existing commercial chain, including Ethereum, can not meet the real commercial demand. In this case, Newton, the industry application oriented protocol is proposed as an infrastructure for the entire decentralized business.

“The celebrity effect of blockchain project will gradually fade away”

The celebrity effect phenomenon of blockchain is particularly prominent in the second half of 2017 while it will gradually fade away from now on. Whether for blockchain or the classical Internet, their objectives are identical that to solve a society problems ultimately. The creativity of the blockchain will gradually return to the nature of its own commercial value and the objectives for industry development. The era which projects can finance by celebrity effect is passing away.

“Almost all blockchain projects nowadays have no business economic model”

In our country, most of the business is essentially based on intermediaries. Taking the e-commerce industry as an example, everyone is a member of the e-commerce ecosystem. For example, everyone will shop in the Alibaba. With the growing of users, a giant commercial intermediary will gradually monopolize the market. At this time, the transaction cost will increase and eventually became a “most people contribute, few people benefit” business mode, which is an outdated product generated from the first industrial revolution.

“There are two basic factors for the design of the blockchain project,one is the economic model design of token, the other is the business economic model design”

As for the design of blockchain project,
So what can blockchain do in the future? In essence, blockchain is more than a technical issue. Blockchain will change existing organizational structure, decision-making methods, cooperation modes and incentive mechanisms. Under this context, we can create a community economy which is a decentralized business managed by a non-profit foundation The design of the business will be very complex but there are two basic elements which should be attached more attention by blockchain entrepreneurs rather than the consumers. The first factor is that to make sure the economic model of token is scientific and reasonable. The second factor is that the business economic model should be taken into account. Most of our blockchain projects nowadays have no satisfying business economic model, because they have no business on these projects. And it is undeniable that most of the blockchain projects have deficiencies on its token economic model.

“The understanding of blockchain project landing will be different during the various developing stages.”

I think the blockchain technology has already landed, while the understanding of blockchain project landing will be different during the various developing stages Currently, it cannot realize the services like Uber, however, when we take a brief review of development process of Internet, we could see that there are dramatic differences between Yahoo era and today's Internet era. According to today's standards, the Internet in 1995 did not come to our daily life. Have you ever take a car by your mobile phone in 1995s or order the food? It was impossible at that time. But we have achieved all these impossibility nowadays. Why so many people think it hard to understand blockchain? Because those people tend to use stereotypes and preconceptions to understand this emerging technology, and this may lead to a misunderstanding of it. I think that the blockchain technology has already landed and with its development, the blockchain application will emerge in many fields, such as business, social networking, media, and some other fields.

“Blockchain is a basic technology for AI and IoT”

If we look back to last two years, the most prominent concept in our society is artificial intelligence. Artificial intelligence created a huge bubble that was much bigger than blockchain. Can we find anything that is intelligence in our daily life? Almost nothing. Why? In fact, one of the prerequisites for intelligence is to establish trust. For example, you need a robot to serve you at home. In addition to technological breakthroughs such as machine vision or deep analysis, the most fundamental technology is fully producing credit without authority intermediary. Only by this mechanism can robots provide assistance among people and robots without any intervention.

The current economy model is actually semi-automatic. Take shopping as an example, there are some key links during the whole shopping process need to be artificially confirmed, for instances, the sellers have to confirm shipments, the consumer have to confirm received goods and are satisfied with goods. Why do we have to make so many confirmations? That’s because trust is still lacking in the current transaction mechanism.

The blockchain happen to be the best solution of this problem as its automated credit production function, which can work without authoritative intermediaries. Based on the blockchain technology, artificial intelligence and IoT, the entire economy will change from a semi-automatic system to a fully automatic and smarter system. So I believe that the blockchain is sure to accelerate the development of artificial intelligence.

Every device needs an IP address. Now people found that IPV4 address are not enough. Then IPV6 is proposed which is so enormous that may allow each of the sand has its own address on the earth. Nowadays, we have blockchain and what change will it bring to us in the future? I think it will be that each device not only owns a IP address, but also owns a wallet address which could automatically subscribe and transfer information which each other. It just like a light bulb can pay for the electricity on its own according to how much electricity it uses. Devices can subscribe information and realize value transfer. On the basis of this idea, I think that blockchain technology is actually a basic technology for artificial intelligence and Internet of things.

The World Blockchain Conference 2018 has invited over 1,000 elites in blockchain industry, who come from over 30 countries. The conference has two parallel main venues to fully focus on blockchain “industry” and “technology”, covering the development trend of blockchain, blockchain+ game, blockchain technology application and investment, preaching blockchain , blockchain application scenarios, blockchain project roadshows and other thematic directions. Distinguished experts were invited to discuss the future development trend of blockchain and business opportunities. WBC 2018 is the largest and most influential industry ever held in China and even in the Asia Pacific region so far.

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