From Xiao Feng’s blockchain origin to the Fourth Industrial Revolution and the Token Economic Engine

Author: Will Awang

Time is coming to 2025. For people in the circle, this crypto market that has been developing for a long time (more than ten years), has traveled through several ups and downs and magnificent times. We can know every code Ticker that has remained to this day, and it has some of the heavy feeling of history.

However, the scale of crypto assets is actually only US$3 trillion, which is less than 1% compared to the traditional financial market of US$400 trillion-600 trillion. Although the Bitcoin ETF that disrupted Wall Street last year was promoted by Grayscale, it seems that it is still difficult to carry the banner of digital gold, resonate with Nasdaq, and diverge from REAL gold.

In such a crypto market that we are so eager for, is it the survivor bias? Or is it a test field for the new financial revolution?

As Dr. Xiao Feng said, if we want to answer this question, we need to start from the origin of blockchain, from the first principle, and from the basic perspective, we will examine the now hotly debated digital currency/crypto assets, crypto market, and the blockchain technology behind it.

1. Blockchain: New Financial Infrastructure

If we look at crypto assets from a single dimension, such as the US SEC, we may only distinguish these assets into commodities and securities; if we look at the crypto market from a macro perspective, it may be a sub-sector in the development of the digital economy; but if we look at blockchain from a deeper level and combine the previous industrial revolutions/technology revolutions, then blockchain as a new financial infrastructure will surely present a pattern of a great era of navigation, setting sail, and riding the wind and waves.

All this is built on blockchain technology. Therefore, we must return to our original intention and explore what blockchain is.

1.1 The first principle of blockchain

The first principle of blockchain is not a single technology, but a systematic combination of elements such as decentralization, cryptography, consensus mechanism, transparency, and incentive mechanism. Then these systematic combinations are reflected in a paper by Satoshi Nakamoto in 2008:

The Bitcoin White Paper, by combining a variety of innovative technologies and the design of social production relations, hopes to change the centralized financial system with traditional banks as the core, solve the centralized trust problems in the current financial system, and provide users with a safer, more convenient and low-cost payment method (a peer-to-peer version of electronic cash (system) would allow online payments to be sent directly from one party to another without going through a financial institution).

Bitcoin: A Peer-to-Peer Electronic Cash System

Extending from the perspective of Bitcoin, the endowment of blockchain is financial infrastructure, and its structure is initially used to solve the ultimate consistency problem of payment and clearing. Digital currencies built on blockchain can give full play to the huge advantages brought to us by digital currency and blockchain technology. These advantages are reflected in nearly instant settlement, available 24/7, low transaction costs, and the infinite possibilities brought by the programmability, interoperability, and composability of the digital currency token itself. These are all what the traditional financial payment system desires and is difficult to achieve.

Investor Will Wang gave a good summary of this: In Trustless We Trust. If I have to add a deadline, I think it is: ten thousand years.

1.2 The nature of finance

What is the essence of finance? It is a mismatch between the time and space of value. This essence remains unchanged for thousands of years. But the service methods are changing: from no bank to bank, from no central bank to central bank.

New finance based on blockchain can greatly improve financial efficiency:

A. Cross time

On the one hand, it is reflected in the Time Value of Money, which means that I will use tomorrow's money today and I will pay a time interest for tomorrow's loan. This interest rate model operates through DeFi, which will unlock the limit of traditional bank capital turnover (12 times a year) and greatly improve capital efficiency. On the other hand, it is instant settlement of value. Remittances from Hong Kong to the United States are paid in seconds through Web3 payment, with nearly zero handling fees and no reconciliation of five institutions. This is the best choice.

B. Cross-space

The most intuitive case is that in 2023, the stock god Buffett invested heavily in Japanese trading companies with high returns by issuing Japanese yen bonds with nearly "0" interest rates. However, banks, central banks and other institutions in financial services will be the stops and obstacles to global value flow. This is exactly what new finance can break through: value allocation across the world, across space. There is no saying that we go overseas in the blockchain and Web3 industries, because we are different from Day One Global.

C. Value

Stable coins, synthetic US dollars or special currency are essentially a token pegged to the US dollar. Through digital currency and blockchain technology, it further highlights the essential attributes of the currency, strengthens its core functions, improves currency operation efficiency, and reduces operating costs. In addition, the tokens circulating on the blockchain can carry other assets, such as Tokenized MMF, so the transmission of this value token can also be completed instantly. Visa has always been Money Transfer, and after blockchain is available, it should be changed to Value Transfer.

Tokenization and unified account book-building a blueprint for future monetary system

Just like the essential attributes (value scales) and core functions (mediates of exchange) of money are unchanged, although they have experienced carriers or manifestations of currency such as shells, currency raising, cash, deposits, electronic currency, stablecoins. The essence of new finance remains the same. What needs to be changed is the service methods such as banks and exchanges. What needs to be considered is how to provide better financial services in a distributed, digitalized, and transcend time and space scenario.

1.3 New Financial Revolution

Compared with traditional finance, the biggest innovation of new finance is the change in accounting methods - blockchain, an open and transparent global public ledger. The changes in human accounting methods have only happened three times in thousands of years. Each time has profoundly shaped the economic form and social structure, and each breakthrough reflects the coordinated evolution of technology and civilization.

Single bookkeeping during the Sumerian period (3500 BC) enabled mankind to break through the restrictions on oral communication for the first time, promoting early trade and the formation of states, because taxation and trade were required to be recorded. There are commercial dispute clauses in the ancient Babylonian "Hamurabee Code".

Double accounting has promoted the business revolution in the Renaissance (14th-15th centuries). The Mediterranean city-state trade prosperity, Genoa fleet investment, and Medici family multinational banks all require complex financial tools, which promotes the emergence of banks and multinational corporations and the establishment of commercial credit.

What we are familiar with is the distributed accounting that was driven by Bitcoin in 2009, which led to decentralized finance, changes in trust mechanisms, and the rise of digital currencies.

This new finance, based on the transformation of distributed accounting methods, is bound to be inseparable from blockchain, smart contracts, digital wallets and programmable currencies. As the financial infrastructure ledger settlement layer, the blockchain itself is initially used to solve the problem of final consistency in payment clearing. The combination of digital currencies and smart contracts built on distributed ledgers can bring endless possibilities to new finance: near-instant settlement, 24/7 availability, low transaction costs, and the programmability, interoperability, and DeFi composability of the digital currency token itself.

As a result, new finance has shown three major changes:

First, the accounting method has changed from centralized double accounting to decentralized distributed accounting;

The second is that the account changes from a bank account to a digital wallet;

Third, the account unit has changed from legal currency to digital currency.

The most important distributed accounting is born from the digital cross-time, cross-space and cross-organizational characteristics, and is the financial foundation of the Fourth Industrial Revolution.

2. The first three industrial revolutions

Dr. Xiao Feng quoted the research results of a Nobel Prize winner in economics: "The industrial revolution has to wait for a financial revolution." The Nobel Prize winner believes that all industrial revolutions rely on the support of new financial services to support the new industrial revolution to be carried forward, developed and strengthened. On the other hand, without the support of the financial revolution, the industrial revolution in human society may not be successful. Similarly, another economist further pointed out that every industrial revolution is a superposition of energy revolution, industrial revolution and financial revolution, among which financial revolution is often the premise.

His research results cover the first three industrial revolutions, and now we have entered the fourth industrial revolution - the era of intelligence and digitalization. Let’s first look back at the previous three industrial revolutions:

The First Industrial Revolution (1860s to 1840s) was marked by a steam engine and took place in England. The British Treasury system and joint-stock banks provide financing channels for railways and factories, thus greatly improving productivity.

In "The Rise of the Western World" (1973), Douglass North pointed out that before the Industrial Revolution, Britain provided a capital accumulation and risk sharing mechanism for technological breakthroughs (such as steam engines and textile machinery) through institutional innovations such as financial system reform (such as government bond system and banking system improvement), property rights protection, and reduced transaction costs. He believes that the "industrial revolution has to wait for the financial revolution" is a summary of this stage.

The Second Industrial Revolution (late 19th and early 20th centuries) took place in the United States, represented by electricity and wireless communications. The development of capital aggregation in the US financial system (such as investment banks and stock markets) is the prerequisite for technological innovation, which provides a channel for large-scale financing of enterprises. For example, railway construction requires a large amount of long-term investment, the United States attracts domestic and foreign capital through issuing railway bonds and stocks, and investment banks (such as JP Morgan) play a key role in integrating diversified capital.

The Third Industrial Revolution (late 20th to early 21st century) was also emerging in the United States, marked by computers, code and the Internet. At that time, Silicon Valley venture capital models (such as Sequoia Capital and KPCB) became the core financing mechanism of the third industrial revolution. VC provides early funding for high-risk, high-return startup technology companies (such as Apple, Microsoft, Google) through equity investment. For example, between 1970 and 2000, the investment in the United States increased from hundreds of millions of dollars to hundreds of billions of dollars a year, directly promoting the commercialization of semiconductors, software and Internet technologies.

On this basis, the Nasdaq stock market, established in 1971, has become the main channel for technology companies to go public and raise funds with low threshold, high liquidity and inclusiveness to technology companies. For example, Microsoft (listed in 1986) and Amazon (listed in 1997) gained expansion capital through IPOs. At the same time, tools such as stock options, employee stock ownership plans (ESOP) attract talents to join innovative enterprises and bind human capital to financial capital.

III. The Fourth Industrial Revolution

If the fourth financial revolution based on blockchain has already met the basic prerequisites, then according to the argument that "the industrial revolution has to wait for a financial revolution", it is actually looking for where the fourth industrial revolution will be born.

The "Fourth Industrial Revolution" was first formally proposed by the Germans in 2013. Its core idea is to use information technology in the manufacturing field, thereby changing the traditional standardized and large-scale production and establishing a highly flexible and intelligent industrial production model. However, simply limiting intelligent information technology to the industrial field obviously does not truly realize the far-reaching impact of the technological revolution represented by AI and blockchain on human civilization.

3.1 The technological revolution in Mutou's eyes

Cathy Wood, a wood sister known as the queen of technology investment, released the research report of ARK Invest "Big Ideas 2025" at the beginning of the year, saying that although the International Monetary Fund (IMF) predicts that the global economic growth rate will be 3.1% by 2030, she believes that the annual economic growth rate should exceed 10% at that time!

ARK Invest believes that the growth and changes of the macro economy are in line with historical laws and show a ladder jump. Each jump is brought about by major technological changes.

Since the beginning of human history, the economy has stagnated for 100,000 years, and innovation (particularly writing) allowed the empire to connect the continents together, thus quadrupled the real growth rate in 1000 AD. Since then, agricultural innovation has increased population density and specialized labor, resulting in doubled growth rate in 1500 to 0.3% per year.

Since then, the first industrial revolution has swept the world, bringing the human economic growth rate to an average of 0.6% per year. The Second Industrial Revolution, marked by electrification, cars and telephones, kicked off modernization, allowing humanity to fivefold its economic growth rate to reach an average of 3% in the past 125 years.

If there is no new technological revolution, then the IMF's prediction is most likely correct, but Mutou believes that technological breakthroughs in the fields of AI, blockchain, intelligent robots, etc. may increase productivity again, which will be a major technological revolution and push economic growth to another level in the next 5 to 10 years.

www.ark-invest.com/big-ideas-2025

3.2 AI reconstructs the spatial dimension of human economic activities

I agree with the two logics that Sister Mutou said:

1. Every technological revolution will bring economic growth to a higher level;

2. AI is a major technological revolution.

This should not be controversial at the moment in 2025, so what I want to express is:

Every scientific and technological revolution or industrial revolution is essentially a technological breakthrough to reconstruct the spatial dimension of human economic activities, break through the original physical or institutional boundaries, and create a new value exchange field. This "economic space expansion" is not simply an expansion of geographical scope, but through the transformation of the technology-economic paradigm, it achieves dimensionality upgrades at three levels: the combination of production factors, the boundary of value creation and the trading rules system.

For example, in the first industrial revolution, the use of steam engines shifted production from home workshops to factories, and railways and ships expanded the scope of trade, allowing raw materials and commodities to be transported across regions. This is indeed an expansion of geographical space, and the essence is to incorporate surface resources and colonies into a single capitalist production network. During the Second Industrial Revolution, electricity and internal combustion engines brought about urbanization and the rise of multinational corporations, and economic activities were no longer local, but national and even global. The information technology of the third industrial revolution, especially the Internet, created online virtual economic space, e-commerce, digital services, etc., completely breaking geographical restrictions. The Fourth Industrial Revolution may involve AI, blockchain, and the Internet of Things, further integrating the boundaries of physical and digital spaces, and even covering the economic activities of the AI ​​Agent silicon-based world.

The greatest value of AI lies in embodied intelligence and spatial intelligence, which requires a large number of physical robots and virtual AI Agents. Investor Wang Chao has talked about before that assuming that the future is a society composed of tens of millions of AI agents, then interacting with people, machines and various interactions, Cryoto is a relatively feasible solution.

Mutoujie said: AI Agent will change the logic of people's search and shopping, and will be carried by digital wallets; digital wallets can further integrate the savings, lending, insurance, investment, consumption and other functions in traditional bank financial services. Through the innovative paradigm of AI Agent, the value chain of global e-commerce and digital consumption of downstream platforms can be moved upstream.

I also believe that programmable currencies based on blockchain-based smart contracts are competent for the value flow of AI silicon-based civilizations and are carried through Web3's digital wallet. This means that the Fourth Industrial Revolution will inevitably require new finance based on blockchain, otherwise it will become an old concept of traditional finance to reduce costs and increase efficiency.

4. Token Economic Engine

The UK supported the first industrial revolution with the credit and bond markets, the United States supported the second industrial revolution with the investment banking and capital markets, and the third industrial revolution was supported by venture capital (VC) in Silicon Valley and the emerging Nasdaq stock market. So doesn’t the fourth industrial revolution need a new financial model?

As Dr. Xiao Feng said:

Many people are ashamed to admit that blockchain is the infrastructure that supports the Fourth Industrial Revolution, so we often mention the need to build a "consortium chain" or "coin-free blockchain". But practice over the past decade has proved that most of these attempts do not work. We must bravely admit that as a tool to adjust production relations, blockchain’s core entry point is finance. Without financial demand, we don’t need blockchain at all. This means that when mankind enters the Fourth Industrial Revolution and carry out digital and intelligent production relations innovation, a new financial revolution is indispensable. Otherwise, all this may not happen or fail to succeed.

Obviously, the new financial model based on blockchain has been in place, and the token economy engine above it has begun to roar.

Although there can be many types of token classifications, from Dr. Xiao Feng’s three-token model to the five types of tokens today, and to the seven token types framework recently given by a16 z, although Online is New Onchain, all assets will be tokenized on the chain, I think that Utility Tokens (Utility Tokens) that combine project network usage rights are the key to leading the crypto market. If other token types are upgrades and transformations, then functional tokens can be an innovation.

In 2023, Dr. Xiao Feng delivered a closing speech on "Three Token Model for Web3 Applications" at the Hong Kong Web3 Carnival. I also wrote an article "Value Capture and Compliance Progress, Exploration of the Application of the Three Token Model in China" in July 2023. The discussion on functional tokens seems to be very applicable now.

Dr. Xiao Feng 2023 Hong Kong Web3 Carnival Closing Speech

Web3, based on blockchain networks, is a set of economic models based on value networks (stakeholder capitalism), emphasizing data credibility, data sovereignty and value interconnection. On the premise that all values ​​can be tokenized, value not only includes ownership, but more importantly, value is the right to use.

The right to use is non-exclusive and has multiple sharing. It can be authorized and licensed multiple times, and even achieve an infinite loop of open source and CC0, which is conducive to ordinary users participating in it and sharing value. The core of the right to use system is stakeholder capitalism, and the original organizational form may not be appropriate. Decentralized autonomous organizations (DAOs) based on open source organizations and non-profit organizations naturally fit stakeholder capitalism and has become the main organizational form of the Web3 new economic model.

Under the right to use system, all participants in a decentralized organization collaborate on a large scale as stakeholders, make their own contributions, and share organizational value. Under such a context, the ownership of shareholders represented by shareholders of centralized projects is meaningless, and what is truly valuable is the right to use the project.

The right to use cannot be staked, but can be tokenized. Combined with blockchain distributed ledger technology, the right to use can be standardized and equitable in the form of tokens, which is related to the interests of every participant in the project network. This token is called a functional token.

In this new Web3 economic model, tokens are essentially the carrier of value. Only after a deep understanding of the value nature of tokens can we design the optimal economic model for Web3 applications, realize multi-layer growth flywheels, and achieve incentives for all participants.

Web3 New Economy and Tokenization

Let’s take a look at a vivid token economy engine case - Web3 decentralized telecom operator Roam. This project can effectively solve the difficult pain points that appear in the Web2 scenario through Web3. It can be said to be a model for Web3 to deviate from virtual to real.

Roam is committed to building a global open wireless network that ensures that humans and smart devices can achieve free, seamless and secure network connections at rest or mobile. Compared with the geographical limitations of traditional telecom operators and the homogeneity of services, Roam has built a global open and free wireless network based on the inherent global advantages of blockchain by building a decentralized communication network with the OpenRoaming™ Wi-Fi framework and accessing eSIM services.

Through just over two years of construction, Roam currently has 1,729,536 nodes, 2,349,778 application users in 190 countries around the world, and conducts 500,000 network verification activities every day, making it the world's largest decentralized wireless network. In addition, Roam users can also obtain free eSIM data when building and verifying Wi-Fi nodes, making Roam a telecommunications service provider that can operate in the Internet model.

depinscan.io/projects/roam

Globally, while traditional Wi-Fi still bears more than 70% of data traffic, its aging infrastructure and privacy data security issues limit the discovery of its potential. To address these challenges, Roam has partnered with the Wi-Fi Alliance and the Wireless Broadband Alliance (WBA) to build a decentralized communication network in combination with traditional OpenRoaming™ technology and Web3's DID+VC technology. This not only reduces the high upfront cost of global network construction, but also realizes seamless login and end-to-end encryption functions similar to cellular networks.

Roam encourages users to participate in network co-construction through the Roam App, share Wi-Fi nodes or upgrade to a safer and more convenient OpenRoaming™ Wi-Fi. Not only can users enjoy seamless connections between the four million OpenRoaming™ hotspots around the world, but they can also find Roam’s self-built network nodes in less-threatening areas such as Siberia and northern Canada, thereby greatly expanding network coverage and improving user experience.

Roam has promoted the rapid development of decentralized networks through Wi-Fi+eSIM's global free access and diversified project network incentive mechanisms. Network State's ideal country needs to be built on a communication network, and Web3 decentralized telecom operators like Roam may become the digital base of the ideal country.

Combined with the narrative of the Fourth Industrial Revolution, project networks like Roam can obviously become the communication base for AI silicon-based civilizations, and can also bring the same speed of the Internet to the global transmission of value. This new economic model of Web3, which has emerged within 2 years, can be said to be a subversion of the traditional economic model of Web2, and the token economy engine is crucial.

5. Write at the end

Teacher Yang Peifang said: "Looking back on human history, the Chinese nation once dominated the era of agricultural civilization with its farming silk and fuzzy holistic philosophy; Europe and the United States also dominated the era of industrial civilization with its mechanical power and fine reduction philosophy."

So in this fourth industrial revolution, although geopolitical and other factors have caused a wave of anti-globalization, we will still be tied up by the unified account book of blockchain, and you will find that the world is really flat. Just like what a book says: "We wanted to trans-ocean planes, but we invented Zoom."

In this parallel globalized market, we can light up global momentum through the token economy engine, achieve instant transmission of global value through the blockchain settlement network, and achieve global financial inclusiveness and financial equality through new financial infrastructure. Of course, there are still many things that can be done, and there will be many things that need to be done.