Xiao Feng from Wanxiang Blockchain: Digital cities may ultimately be built on blockchain

This article was published on the Wanxiang Blockchain WeChat official account, with the original title: "Wanxiang Blockchain's Xiao Feng: From Network Platforms to City Platforms - An Alternative Perspective on Urban Digitalization" Speech: Xiao Feng, Chairman and General Manager of Wanxiang Blockchain

On June 22, the "2021 Suzhou High-tech Zone Blockchain Industry Development Summit and Wanxiang Blockchain Suzhou Research Institute Launch Ceremony" was grandly held at the Shishan International Conference Center in Suzhou High-tech Zone. Xiao Feng, Chairman and General Manager of Wanxiang Blockchain, delivered a speech titled "From Network Platforms to City Platforms - An Alternative Perspective on Urban Digitalization" at the event.

The following is the full text of the speech organized based on on-site shorthand, with slight omissions.

Xiao Feng, Chairman and General Manager of Wanxiang Blockchain

Dear guests, I am very pleased to have the opportunity to share my new thoughts with you. We see that many internet companies have built an endless network platform using a series of digital technologies, to the extent that there is now a global discussion about whether to use antitrust measures to break up these platforms due to their immense power.

Sometimes, we wonder if a city can also utilize a series of digital technologies to construct a city platform, just like internet companies build network platforms. This is the question I want to explore today.

One of the themes of today’s meeting is digital transformation. First, I would like to review the formation of digital technology and the changes in business models brought about by digital technology. Over the past century, digital technology has gone through three stages of development.

The first stage was in the late 19th century, when the invention of the telegraph and telephone brought significant changes to business models; we call this period the explosion of communication technology. The second stage was in the mid-20th century, marked by the explosion of information technology, including computers and the internet. The third stage began in the early 21st century, when digital technologies such as cloud computing, big data, AI, and blockchain entered a concentrated explosion phase. This is the process of technological iteration and renewal over the past century.

The iteration of technology has led to the iteration of business. In the electrification era, many representative companies based on communication technology emerged, such as GM, Ford, and AT&T. With the explosion and maturation of information technology in the late 20th century, a new batch of companies emerged, such as Microsoft, Intel, and IBM, which had already performed well in the electrification era. There is a book titled "Who Says Elephants Can't Dance," which details IBM's transformation from a leading company in the electrification era to a leading company in the information age. By the early 21st century, with the maturation and explosion of digital technologies like cloud computing, AI, blockchain, and big data, companies like Google and Facebook emerged, growing based on digital technologies.

If we summarize the characteristics of these digital technologies, we will find that this series of digital technologies is highly disruptive.

First, digital technology completely breaks the limitations of physical space; in digital space, it is difficult to distinguish attributes such as country, region, or time.

Second, once the limitations of physical space are broken, cross-border circulation can occur without barriers; for example, an email can be freely sent to any place in the world.

Third, the higher the degree of digitalization, the lower the marginal cost of economic activities, even approaching zero. In the past, during the era of listening to music via CDs, if one person listened to a song, one CD was made; if ten thousand people listened, ten thousand CDs were needed. But in the digital age, everyone listens to music through digital software like QQ or NetEase Music, and for the platform, the marginal cost of ten thousand people listening to a song is almost zero.

Fourth, digital technology not only disrupts the concept of time and space but also reconstructs economic laws, pushing business organizations towards open source, openness, sharing, and common ownership. Blockchain will make the operation of communities more diverse; in the future, the organization and operation of economic or business activities may not necessarily need to be done in a company-like manner.

Fifth, data has unprecedentedly become a new driving force for business and economic development. Some say data is the oil of the new era, with the entire economy and business driven by data.

Sixth, the employment relationship within companies has undergone significant changes. The relationships between employees and companies, management and employees, and the organization of the economy have all changed greatly, leading to the emergence of the sharing economy. The sharing economy is primarily characterized by being an economy based on usage rights rather than ownership. New economic models such as the gig economy and outsourcing are becoming increasingly popular worldwide, especially since last year, when, influenced by the pandemic, contributing one's labor value through shared outsourcing has become more common.

According to news reports, since the outbreak of the pandemic until this month, many large companies on Wall Street in New York have only just begun to require their employees to return to the office. Previously, most Wall Street companies did not or could not require employees to return to a fixed office. This has led to the seventh change: working no longer requires a physical location; people can work in the cloud, online, or on the internet. Driven by the pandemic, this way of working will become increasingly common and long-term.

Finally, the eighth point is that digital technology has turned previously non-tradable goods into tradable goods. For example, the internet has enabled an English teacher living in New Jersey, USA, to teach English online to a child in China. Teaching positions were once non-tradable; people had to go to school to receive education. In the future, with the further maturation of virtual reality and augmented reality technologies, more non-tradable goods will become tradable.

For instance, we can allow friends in Shanghai to enjoy the beautiful scenery by Taihu Lake in Suzhou through AR or VR headsets or glasses. Currently, the champion team of the UEFA Champions League may be valued at around one billion dollars, but in the digital age, it could be worth ten billion dollars. Because through technologies like AR and VR, viewers can feel as if they are at the venue, even while sitting in their own living rooms, making it almost indistinguishable from being present at the game.

Digital technology has reorganized space, business, economic laws, and ways of working, bringing a series of disruptive changes. I summarize the digital transformation and migration into three levels:

The first level is called digital twin, which means we digitize something from the physical world or real space and map it into a digital entity, but it has a prototype in the physical world.

The second level is called digital native. Digital native refers to a digital universe that we reconstruct parallel to the physical world, where everything in the digital universe does not have a prototype in the physical world. Digital native technology is becoming increasingly mature, and more cases are emerging.

The third is the interaction between reality and virtuality, where many interactions and mutual influences occur between the real world and the virtual world, digital twin and digital native, leading to innovations in economic and business models.

Finally, I would like to summarize digital transformation and digital migration. There has been much discussion on this aspect, but one point I feel is not discussed enough is that the greatest and most core value brought by digitalization may be helping human society expand into a new space.

In the process of urban digitalization, what more valuable things can we do?

First, we can construct a digital twin of a city, breaking the limitations of physical space. For example, when we talk about Suzhou, we refer to a geographical location, a physical space. If we reconstruct a digital Suzhou in the digital universe, this digital Suzhou will not be limited by physical and geographical space, and the things that can be done in digital Suzhou will also not be limited by physical and geographical space, thus providing us with greater imaginative space.

Second, based on the digital twin, digital residents can break the so-called limitations of urban residents. We can establish a global digital entrepreneurship program in digital Suzhou, attracting global talent, and through the new characteristics of digital technology I mentioned, build a global community of entrepreneurs online, in the cloud, and on the internet. Global entrepreneurs from Finland, Norway, the USA, and other places can contribute to the development of Suzhou's digital economy without having to be physically present in Suzhou, but rather by constructing a digital entrepreneur system through a set of digital methods. On this basis, the government can also provide management and services for the digital economy, digital Suzhou, and digital entrepreneurs that break administrative jurisdiction limits, offering digital services online.

I believe that in due time, a second, third, fourth, or even fifth GDP system as large as Suzhou's will be created, and second, third, fourth, and fifth third spaces like Starbucks will also be created. Can Suzhou envision using digital technology to create a second space, a third space, or a second Suzhou, a third Suzhou, a fourth Suzhou to accommodate a larger economic total and more economic activities?

I think this question is worth exploring. We can learn from internet companies how to gain significant network effects by building their own network platforms and imagine how to help a city build a city platform through a set of digital technologies, thus achieving ecological effects greater than network effects.

A city is inherently an ecosystem. There have been articles discussing why cities generally have a much longer lifespan than companies. One reason is that cities are open ecosystems, unlike companies, which are closed systems. The lifespan of an open ecosystem will be longer.

Of course, this does not mean that cities do not experience rise and fall. The New York Times had an interesting article titled "From Kaifeng to New York." What does this title mean? More than a thousand years ago, Kaifeng was the world's central city, with a population of over one million, where people from all over the world came. At that time, it was also the capital of the Northern Song Dynasty, with thriving commerce. Today, more than a thousand years later, New York is the world's central city, where people from around the globe do business.

This shows that cities can also be replaced. In the process of the rise and fall of cities, we need to seize many opportunities.

A certain city may have previously been a center, a hub, thriving due to developed transportation conditions like river transport. But in the digital age, we may really need to reconsider: for a city in the next 100 years, should it continue to rely on its hub position, like ancient times when it was situated by water, or does it need to rely on digitalization to achieve development?

Blockchain technology is actually the cornerstone of digital technology, the steel and cement of the entire digital technology. Whether it is a digital city, digital enterprise, or digital business, it may ultimately need to be built on blockchain. Blockchain + IoT can create a trustworthy digital foundation. How to ensure the credibility of data is a significant issue. Using a centralized approach to ensure data credibility may be feasible, but this approach could be very expensive and commercially unviable.

Regarding blockchain + industrial internet, we have discussed a lot today; it can truly network and interconnect enterprises while allowing enterprise data to be shared under the protection of privacy. Smart contracts, sharing economy, gig economy, and other blockchain applications can help enterprises achieve efficient and low-cost operations. Based on blockchain's economic incentive mechanisms, business can build self-organizing, open, ecological, distributed, and vibrant economies. The distributed ledger of blockchain also makes asset digitization and digital assetization commercially feasible, providing a solid foundation for blockchain-based digital identities and digital cities, breaking the limitations of time and space. At the same time, blockchain + AI can also make urban governance very intelligent.

Today, the Wanxiang Blockchain Suzhou Research Institute has officially been established. Next, we will also officially launch the Shishan Camp. The Shishan Camp is a blockchain training camp. I will personally serve as the head teacher, gathering top teaching resources from Wanxiang Blockchain and the entire Wanxiang Blockchain ecosystem, including top blockchain experts and theoretical researchers from China and around the world, to hold a blockchain training camp in Suzhou High-tech Zone, in the Shishan Business District.

I welcome all those interested in blockchain, those hoping to participate in blockchain investment, those looking to start businesses in the blockchain field, and those interested in joining the Wanxiang Blockchain ecosystem to actively sign up for the Shishan Camp and explore the future of blockchain and digitalization together. Thank you all!