Original Dolphin Browser founder Yang Yongzhi: Why I stopped working on blockchain last year

This article was first published on March 10, 2018, on the Chain Catcher WeChat account, by author Gong Quanyu.

1. Pessimistic in the Short Term

Chain Catcher: The official website of Abots now cannot find any blockchain-related information. In one sentence, what is your current attitude towards blockchain?

Yang Yongzhi: To summarize in one sentence, I am optimistic in the long term but pessimistic in the short term.

Chain Catcher: Why are you pessimistic in the short term?

Yang Yongzhi: The main reason is that I find it very difficult to identify application scenarios other than digital currencies.

Chain Catcher: Aren't many scenarios being implemented now?

Yang Yongzhi: Whether it's current copyright issues or others, if you cite any example, at the essence of that matter, it's something that blockchain cannot solve. For instance, if you write an article for a self-media platform, I change a few words, and a pirated version is published elsewhere, can blockchain detect that?

Also, Ant Financial is using blockchain, and IBM claimed many years ago that they would apply blockchain to supply chains. Have they really solved the problems they aimed to address and achieved their expectations? Now everyone is experimenting with a mindset of not wanting to miss out, but we need to see what the results are.

Chain Catcher: What are the reasons for the failure of scenarios to land?

Yang Yongzhi: First, blockchain is not irreplaceable. Blockchain is not a new technology; it is actually a change in technological thinking and logic. For example, cryptography, distributed computing, communication, and storage are all existing technologies. It hasn't invented a new encryption algorithm or storage method, nor has it created new wealth.

Its essence is to redistribute the value chain, reallocating most of the benefits that were previously centralized in the industrial chain. This is its greatest value. However, the inevitable problem is that solving any pain point or application scenario will have a centralized solution and a decentralized solution, and the centralized solution will always be more efficient than the decentralized one.

Second, blockchain can only solve on-chain issues. When blockchain is truly implemented, many business scenarios need to be closed-loop. You will find that many scenarios and data are offline. Even though more and more are moving online, there are still many off-chain, and the parts that can be placed on-chain are still very few. This is determined by the real world.

Third, we must first see whether regulation allows you to do this, and secondly, there are currently no clear regulatory policies for blockchain, nor is there a mechanism for review or verification. Anyone can claim that what they are doing is blockchain.

In the past, when VC financing occurred, at least someone conducted due diligence. Now, is there asset loss corresponding to ICOs? Misappropriation? Someone has to verify it, but the verification process is still centralized. Now, bad money drives out good; there are quality projects, but they are rare. You will find that those who were the earliest to engage in blockchain are now very silent.

I believe traditional logic has its reasons. After all, this is not an ideal world, and we cannot put everything on-chain.

Chain Catcher: Are these problems caused by immature technology development?

Yang Yongzhi: Everything is like this; the development of artificial intelligence is the same. It started in the 1950s and 1960s, and there have been many waves. The reason it has emerged recently is due to deep learning. Deep learning is not a theoretical algorithm; many who study mathematics or engage in theoretical research actually look down on deep learning because it is essentially brute-force cracking, relying on data and powerful computing capabilities. After many years of accumulation, computing power has become stronger, cloud computing has developed, and big data has accumulated. These two, combined with deep learning algorithms, have produced a huge chemical effect, leading to breakthroughs in many fields, such as image, voice, and translation. It requires the development of infrastructure for accumulation.

Chain Catcher: But blockchain seems not to be affected by technological bottlenecks; can't it be used and iterated simultaneously?

Yang Yongzhi: Of course, it can be used this way, but you need to understand that it is difficult to make this your killer application.

2. Real-world Resistance

Chain Catcher: Since you still recognize the long-term value of blockchain, why have you completely stopped?

Yang Yongzhi: I think first, I haven't found the right timing, and second, I haven't found an application other than digital currency. Digital currency is undoubtedly the best application of blockchain, and I affirm its potential value, but for it to develop healthily, it first needs regulatory recognition, and secondly, someone needs to regulate it.

Chain Catcher: What should the suitable timing look like?

Yang Yongzhi: First, more and more things need to be online and digital; second, in certain scenarios and fields, unreasonable and unfair situations reach a peak, leading to a backlash; third, regulation becomes increasingly standardized, at least having a sandbox mechanism.

Chain Catcher: When you founded Abots (ABC), you initially chose blockchain as your entry point.

Yang Yongzhi: Yes, as I mentioned earlier, I do not deny its long-term prospects. It is certainly a valuable and meaningful endeavor in the long run. So our company was established in 2016, A stands for AI, B for Blockchain, and C for Cloud. We chose to enter through Blockchain and then looked for a suitable application, feeling that online mutual assistance might be a good scenario, so we created Tongxin Mutual Assistance.

Chain Catcher: Why online mutual assistance?

Yang Yongzhi: As I said before, blockchain is about reconstructing the value chain, so we thought about how to solve this problem, and mutual assistance is a good way to do it. Because this market is large and has pain points and strong demand, traditional commercial insurance is unaffordable for vulnerable groups or the poor due to its high costs, as much money is taken up by the sales process, leading to a lot of ineffective spending. Mutual assistance is essentially the same principle as Alibaba's e-commerce, which eliminates the middleman.

Mutual insurance is the oldest type of insurance; it originated from this concept. For example, mutual aid organizations within teachers' unions were the earliest forms. However, this organization still relies on associations and companies for regulation, making it impossible to platformize, and its operation is traditional and offline, leading to inefficiency. We wanted to move this model online and use blockchain as its foundation.

Chain Catcher: What can blockchain do?

Yang Yongzhi: It can record all member information, compensation information, and transaction information on the blockchain, ensuring that it is open and transparent. The utility of blockchain is essentially as a ledger.

Chain Catcher: What problems did you discover during the process of creating Tongxin Mutual Assistance?

Yang Yongzhi: I believe blockchain can serve as a foundation, but if this so-called mutual assistance model cannot solve the compensation issue, then the essence of the business is still a traffic business, which is an attempt at an internet operation model, but not strictly mutual insurance.

First, we cannot obtain a license; second, users only have the right to claim compensation but no corresponding obligations. Some people keep paying, and compensation keeps occurring, but some people find they are not sick and stop paying, leaving in the community mostly those who believe they have significant health issues, which may lead to insufficient reserves for compensation on the platform. A community without obligations cannot sustain itself long-term. So I believe it still has social value, but commercially it may not.

Chain Catcher: So the addition of blockchain does not resolve the core issue?

Yang Yongzhi: Correct, it can only solve part of the problem and make modifications in certain areas, but you often find that those modifications are not in the core areas. For example, we can record when each person enters or exits the community, how much they pay, and how much they are compensated on the chain, which is fine, but we cannot know if someone is committing insurance fraud. If they were never sick, and a hospital issues a fake certificate, blockchain cannot solve that.

Even if you believe hospitals won't commit fraud, you first need to connect the data with hospitals, but in reality, each hospital is a data island. Furthermore, there is no guarantee that the data in the hospital's system won't be tampered with. Can we put the hospital's system on the blockchain? That is very difficult. This is what was previously mentioned about many smart contracts not being able to involve off-chain or offline parts.

On another note, recently everyone has become aware of blockchain, but when we were doing it before, no one knew what it was, so we needed to find a big shot to endorse it, which essentially means centralization endorsing decentralization.

Chain Catcher: What made you change your attitude towards blockchain?

Yang Yongzhi: It's still about long-term practice, receiving a lot of feedback during the process, thinking, and then practicing and reflecting again. It's like hitting a wall; as you keep hitting it, you will find that the original ideal was like this, but in the actual process of doing it, there are many problems that your original understanding did not account for.

Chain Catcher: Besides online mutual assistance, what other practices have you undertaken?

Yang Yongzhi: In fact, we have researched many issues and talked to many people. Although not all of them were practically implemented, we discovered problems during the research process and did not find particularly good solutions.

The combination of blockchain and applications is core, but the difficulty lies in the mismatch between this technology and actual scenarios, so our idea is to return to the relationship between Bitcoin and blockchain. Blockchain was tailor-made for Bitcoin, but in other scenarios, it encounters the problem of data being "unsuitable," which may be unavoidable.

Now, when we talk about transformation, it needs to combine with off-chain; in reality, there aren't that many things on-chain. Scenarios exist, but reality requires a long time for transformation. For example, applying AI in many traditional industries is easier in the U.S. than in China because, although China has a large amount of data, the accumulation of quality data is too low, while the U.S. has more developed information systems with decades of standards and quality data accumulation. So I believe that although blockchain itself has some issues that need improvement, new solutions will be proposed to address them, and its real development relies not on technological progress but on changes in social foundations.

Chain Catcher: Are there relatively promising directions at present?

Yang Yongzhi: I think in the B2B and institutional sectors, consortium chains and private chains can still solve some problems, but they are not irreplaceable, and if they cannot form a closed loop, their commercial value will be greatly discounted.

Another area is developing public foundational chains, which have scale effects, so they will definitely have value in the long term, but not everyone can create a public chain, and the world does not need that many public chains; in the end, only a few will remain.

For vertical fields, there is currently no good public chain environment, so if startups want to engage in vertical fields and scenarios, they face two questions: Do they want to make it an infrastructure, transforming from application to widespread infrastructure? Or do they want to dig deeper into this application? If they want to dig deeper, it requires relatively complete infrastructure, and if they want to do it, they must be able to endure.

Chain Catcher: Technically, you have the strength to create a public chain. Have you considered trying it?

Yang Yongzhi: How do you incentivize others to participate in a public chain? There must be an incentive mechanism. We can't issue subsidies like Didi, so issuing tokens is the best way. But once you take the tokens, this matter may cross boundaries and deteriorate, just like getting addicted to opium; I might come to like that thing and find it hard to turn back.