Lin Li, founder and CEO of Huobi, delivered a speech titled "The Path and Prospect of Real Economy Powered by Blockchain Technology" at Tsinghua University recently. In his speech, Li reviewed the development process of blockchain in China and abroad, and pointed out that the latest exploration is to combine traditional securities and legal tender with blockchain. In addition, he highlighted four levels of blockchain’s application based on the risks and challenges each level entails.
Level one, the distributed ledger
The distributed ledger can build credit and improve collaboration efficiency with its untamable nature. However, blockchain is worthless without the interpretation of the supreme law. Another challenge lies on how to connect online with offline and to prevent offline cheating.
Level two, the value transmission network
The value Internet is a peer-to-peer value transmission network. In the foreseeable future, the assets on the blockchain can be freely and efficiently allocated and circulated around the world. However, the first challenge is value stability, which has now been solved with hedging instruments, contracts, and stablecoin. The second is the transaction legality; transactions on the blockchain are anonymous and uncontrollable. Security is another concern where a breach in a smart contract can lead to losses.
Level three, the token incentive system
This is to make use of the openness and transparency features of blockchain and token incentive system to make systematic incentives to promote our business operation and development. The core is to mobilize relevant resources and realize community development through reasonable token incentive design.
Level four, the asset digitization
The securitized digital assets include the tokenization of securities, securitization of tokens and digitization of value assets. The US has approved two compliant US dollar stablecoins, and Li said: "The US uses digital currencies to digitize valuable assets in the blockchain industry. The US dollar stablecoin is only a small part of this, and now has only a few hundred million dollars, but we think these stablecoins will change the landscape of the blockchain in the future."
Finally, Li said that in the next year, the main focuses are token securitization and the development of stablecoin, which will bring great changes to the industry. One is on the asset side which represents inflow of more current assets, the other is on the capital side which represents inflow of more flexible global capital into the market, both are revolutionary.