Recently, Suning Financial announced the online block chain blacklist sharing platform system; Australian financial intelligence agency AUSTRAC is establishing a proof-of-concept (PoC) to automate some anti-money laundering reporting on the blockchain… It is not difficult to see that the application of blockchain can play a certain role in regulating and suppressing negative behaviors in the financial industry.
On the other hand, various cryptocurrencies spawned by block chain swept the global financial market, and various stir-fry chaos emerged endlessly. From this point of view, the future development of blockchain technology will inevitably be an unavoidable fact is to govern all kinds of financial chaos.
Under the influence of supervision, technology and human nature, the financial market has always been plagued by various undesirable phenomena that are difficult to remove, which continue to baffle the participants in the market, including the regulatory authorities.
Financial market chaos: wool party, fraud, usury
The reason why blockchain is involved in the financial market is that the hot cryptocurrency such as Bitcoin is only the superficial factor, but more because the chaos of the financial market is deeply rooted, and blockchain may save it from the wild growth. So what are the irremediable messes in financial markets?
Chaos like a: the wool party with their wool into the wind. As a branch industry of Internet finance, online lending has become popular all the way. According to the MONTHLY Report of P2P online Lending Industry in January 2017, by the end of January 2017, the number of normal operating platforms in P2P online lending industry was 2,388, and by the end of October, the number of normal operating platforms had decreased to 1,975. The reason that causes net loan platform to decline year by year in addition to the arrival of strict supervision, wool party is also indispensable.
On the one hand, the Wool Party can quickly complete a large number of new user registration and transaction volume through some software and tools, bringing temporary false prosperity to the platform. On the other hand, cash out of platform activities at a very low cost, resulting in fund shortage of platform activities, server downtime, or even run away or close down.
Myth 2: Financial fraud keeps cropping up. The continuous development of the Internet not only facilitates people’s life, but also breeds the “excellent” soil of financial fraud online. There is the allegory of “the north party has a shop on the floor and the South party has a villa”. The violent North party pyramid scheme originated from the northeast and the spiritual interference south Party pyramid scheme originated from Guangxi, which has not only been continuously playing but also “advancing with The Times” constantly upgrading and gradually becoming Internet. Such as false loan type, overseas fraud type, high-yield investment and financial planning type, crowdfunding fraud and other ever-changing fraud means, such as a once famous Zubao case, Fanya Group case, fruit business case, MMM case, etc., numerous to list.
On the one hand, the information asymmetry caused by the lack of common sense of law, finance and government affairs of the deceived is used; On the other hand is to cheat money multifarious fraud tricks emerge in endlessly, such as the overwhelming push network advertising, and even advertising can hit CCTV, how to call people to prevent?
Moreover, the relevant fraud laws and regulations are not perfect enough, the punishment is not enough, the fraudsters evade the law, avoid supervision and unbridled fraud way, and the defrauded due to hard evidence caused by the loss of almost no recovery possible. Duped because of low risk and high income, follower, fraud industrialization, lack of supervision by the blind mind, and the deceiver phase is the principal of the continuous inflow of the duped.
Disorderly elephant 3: usury runs amuck secretly. Usury has been a cancer since ancient times. With economic development, people consumption idea change, many individuals, businesses, etc on the path of the loan, but due to bank loans high thresholds borrowing difficult, to the threshold low program simple folk loan, so the folk loan market is increasingly expanding, campus, microfinance loans, cash, credit, consumption credit loan institutions such as the platform, which mixed with a lot of bad properties of usury, Borrowers cannot pay the rising interest and are forcibly collected, causing casualties, suicide and other common malignant social problems.
The reason for the chaos in the financial market lies in the information asymmetry between Party A and Party B. To solve the chaos, we should start from the true transparency of information, no matter from the supervision, law or technical means.
Blockchain is expected to root out the chaos in the financial market
Recently, blockchain is quite hot, “sleepless blockchain group at three o ‘clock” into a focus, some people are optimistic, some people are bearish, opinions vary. So what exactly is a blockchain? In fact, blockchain is a kind of information storage technology that can realize information sharing, which is called decentralized, multi-node information backup. Thus, blockchain may solve the irregularities in financial markets.
First, blockchain maximizes the storage of financial information. One of the most mentioned definitions of blockchain is that information can be stored permanently and cannot be tampered with. Regardless of the application capability of blockchain technology in this regard, at least the breakthrough in technology is the size of information storage space.
On the one hand, if financial information can be stored permanently, it can theoretically avoid the loss of information and the inability to verify the true situation of borrowers and borrowers. Secondly, information cannot be tampered with, which can avoid criminals tampering with information for their own interests, harming the other party or affecting the verification of the true situation of the other party, while expanding the information storage space can avoid such problems.
Second, blockchain decentralization and information sharing model can consolidate credit mechanism and reduce risk control costs and risks. Risk control is a crucial link for financial enterprises, which can identify potential financial risks and reduce the probability of financial risks and reduce losses when they happen. Risk controls, for example, allow lending companies to dig up wool to avoid being pulled off, and assess the creditworthiness of borrowers.
However, the cost of risk control is high and on the rise. Due to the incomplete credit investigation system, it is difficult to understand the sense of responsibility of credit repayment of borrowers. For example, the risk cost of consumer finance companies is generally between 3%-7%, and the high risk control cost will bring great pressure to small loan companies. Therefore, many small loan companies adopt crawler technology to steal the risk control data of large companies, thus resulting in the disclosure of customer privacy.
Blockchain, with its multi-node information storage technology, can realize both information sharing and decentralization, thus reducing the risk control cost of financial enterprises. Decentralization can share financial information in the database. This mode is very beneficial to small and medium-sized financial institutions, which can reduce the risk control cost of small and medium-sized financial institutions and thus reduce the risk coefficient. Suning Financial’s blockchain blacklist sharing platform for the financial industry is a good start.
The smaller the risk coefficient is, the better it can promote the benign development of the financial market, and the more it can avoid the occurrence of malignant events such as wool pulling, financial fraud and bad loan sharks. Therefore, the feasibility of blockchain in regulating the financial market is promising.
Financial market water is too deep, blockchain to carry the banner still need to work hard
Theoretically, blockchain can expand information storage space and realize decentralized information sharing, thus reducing risk control costs and risks and standardizing the financial market, but there will be obstacles in practical application.
First of all, the development of blockchain is still short, its technology is necessarily not mature, there will be many problems in practical application. In terms of storage space, technology maturity has very wide application of cloud computing and big data in storage and algorithm has very good use effect, and block chain is still in the preliminary stage of development, under the consideration of interest, cost, actual utility, financial institutions will not further, natural block chain can only be gradually explore until the mature technology.
In addition, the immutable information is one of the characteristics of blockchain, but whether it can really be immutable remains to be seen. The reason why information cannot be tampered with is that blockchain uses multiple nodes to store the same message. Tampering of a single point cannot change the information of other nodes, and the system determines the truth of information based on the principle of “the minority is subject to the majority”. In other words, if more than 50% of the node information can be tampered with at the same time, then the “immutable” feature may become an empty talk. Technology is always progressing, and it is difficult to avoid such a situation under the influence of human greed.
Recently, it emerged that Apple co-founder Steve Wozniak was swindled out of seven Bitcoins worth 440,000 yuan. Blockchain is the underlying technology of Bitcoin. Since blockchain is immutable, how could bitcoin be stolen? Can it be recovered after it is stolen? How to get it back? How reliable are its claims of digitally encrypted identifiers? This is all thought-provoking.
Secondly, information sharing among financial institutions will involve multiple interest considerations, and it will be difficult to implement if there is a conflict of interest in practical application. On the one hand, existing technologies are mainly centralized, and the coordination degree of each link has been almost optimized, while blockchain emphasizes decentralization, which means that it will subvert all links serving the centralized, and how to integrate all links needs careful consideration.
On the other hand, large financial institutions such as Ant Financial and Tencent Finance have complete risk control systems and technical means, and are also developing blockchain projects. It is reported that Tencent blockchain has entered the commercial scene exploration, Ali has also applied blockchain technology in overseas shopping goods traceability. As blockchain becomes more and more mature, it will converge to SaaS level service platform and form platform competition. Then, how to define the decentralized access interface of financial institutions?
In general, although blockchain is not as mature as previous technologies such as cloud computing and big data, there are still some difficulties in its actual implementation, and its future commercial value needs more time to be explored, but its application prospect is still very promising.
The technical means of blockchain decentralization and information sharing can theoretically reduce the cost and risk coefficient of financial risk control, consolidate the credit mechanism, play a great role in promoting the rectification of financial chaos, and also promote the benign development of financial market. At present, after continuously improving the technology from the bottom technology, overcoming obstacles to landing, deepening the application exploration of scenarios, keeping up with the pace of regulatory policies and taking solid steps, blockchain will bring many benefits to the financial industry.
Article/Liu Kuang public account, ID: Liukuang110