The Seven Principles of Wealth Consensus

This article is an excerpt from the third chapter of my new book ‘ The Wealth of Quantum Era’.

In the previous part, we focused on the nature of wealth, and the quantum big data holistic being, that is, wealth is not tangible thing, but a credit resource necessary for the smooth operation of the free markets emphasized by Adam Smith, such consensus will be formed with the big data during the Quantum ontology era. This is part of the homo sapiens’ cognitive revolution, where consensuses were abstracted out from specific use value. The theme of this part is the principles and conditions for this kind of wealth consensus. Through practice, research and repeated discussions, Min He and I have concluded that there are seven principles needed for the formation of wealth consensus: the principle of private ownership of assets, the principle of value anchoring, the principle of technological advancement, the principle of massive trade, the principle of sufficient information, the principle of regulation based on universal value and the principle of decentralization.

1, The Principle of Private Ownership of Assets — — — the basis and starting point of the formation of wealth consensus

Nobel laureate Hayek has mentioned: “Protecting private property as much as possible is definitely the most important necessary condition for the continuation of human society.” [<The Fatal Conceit>by Hayek, Translated by Keli Feng/Jinhua Hu, China Social Sciences Press, 2000.9】

In other words, it must be clear who the property/wealth belongs to, and the property must be protected by adequate laws and mechanisms. Only under such social conditions can it be possible to reach a broad consensus on wealth. The reason is simple. What is the driving force behind trading if the property is not privatized? If all property belongs to one clan society and is confiscated, like how it used to be in primitive communist societies in history, would there still be a need to trade? Trading between any two people would be illegal. How do you trade things that are not yours? This situation happened in China during the Cultural Revolution decades ago. Personal exchanges could easily be charged with a crime of embezzlement of public assets because property rights were never clear. If this is the case, the so-called “invisible hand” that Adam Smith talked about cannot play a role in the market at all.

First of all, trades cannot be carried out. No trading needs are generated due to the lack of motivation. Second, do we need a wealth consensus? No. Because there is no incentive to create a consensus on trade and wealth. The entire distributed computing system can never start. This is also consistent with our observations of history. As long as a society is collective, there would be little wealth, along with difficulty to form a consensus on wealth. Many collective societies had stayed in the primitive stage of barter, where money was not even used for anything. It’s not that China hasn’t undergone that stage. You can imagine how poor the society was at that time.

China has experienced the Great Leap Forward and People’s Commune. People were producing steel day and night. The goal was to catch up with the UK and the US. At that time, wealth was understood as a thing, and that thing was public: we can certainly achieve our goal as long as we can produce things massively. Unfortunately, the end result was that not only did we fail to become rich, the entire economic system also collapsed, triggering a full-blown famine that lasted for three years. We cannot afford the same mistake for the second time.

Let’s look at a positive, real-estate related example. China entered a new age of wealth after the issuance of real estate certificates in 1998. Real estate’s value was mostly its use value at the beginning since properties can be lived in. There was a lot of rigid demand due to China’s “mother-in-law economics” (according to the Chinese cultural tradition, it is the bride groom’s responsibility in a legal marriage, as usually required by the bride’s family as well, to prepare housing for the couple to live in). But remember that the logic of real estate has developed far beyond the scope of daily necessities. Everyone knows that China’s current housing prices, or the wealth consensus that’s been reached, are the main source of wealth for Chinese families.

What is the essence of the real estate industry in China? Professor Zhiwu Chen has mentioned in his “Logic of Finance” that the authentication of house property rights began in 1998. The privatization of property is the starting point for real estate to become a consensus for future wealth. If there had not been the confirmation of rights, the prosperity of the property market would not have existed. Then the real estate capital market was formed, and massive transactions became possible. Later on, real estate developed into a tool for realizing wealth in the future. Professor Yanjing Zhao of Xiamen University proposed a more theoretical analysis. One of his most classic views is that Chinese real estate is actually a kind of stock issued by Chinese cities (we will analyze the logic of future realization of wealth in detail).

Why has everyone been continuously trading real estates properties, reaching a consensus on wealth? That’s because this is a way to realize the future wealth of the city, of economic development, of public services. How great is the gap between the collectivization and privatization of real estates? I still remembered clearly that someone was trying to sell him a two-bedroom within the Second Ring Road in Beijing in 1993. At that time, I needed a house for my new family, so I asked for the price. The price was 110,000 yuan. Everyone now knows that a two-bedroom within the Second Ring Road in Beijing will cost more than 10 million, which is a 100-fold difference.

I has read an article written by Mr. Xiaosu Meng, the “godfather” of China ’s real estate, who said that the central government at first suppressed Hainan’s real estate since it seemed like a bubble. [Meng, Xiaosu: Ten Theories of Meiqin, https://finance.sina.cn/china/cjpl/2020-02-24/detail-iimxxstf4056673.d.html]. So what is the main wealth consensus in China right now? Real estate. According to the data found by me, the current total market value of real estate in China is 65 trillion US dollars. There may be discrepancies in the data from different sources, but the order of magnitude is the same. This enormous market value is five times as much as China’s gross national product [2019 Boao Real Estate Forum. Live News: In the afternoon of August 7, Yu Shao, chief economist of Oriental Securities, pointed out in the 2019 Boao Real Estate Forum panel that the total market value of real estate in China is 65 trillion US dollars, equivalent to 450 trillion yuan (information comes from the Internet). That was almost five times GDP of the same year. China ’s GDP at the beginning of Reform and Opening-up in 1977 was 322.1 billion yuan. Even if the total value of real estate in China at that time was five times that of the same year’s GDP (which was impossible based on common sense), it was only 1/300 of the current value of wealth].

In fact, every truly advanced and civilized society of mankind is built on free markets to reach the consensus of global wealth. How is this consensus formed? First and foremost, there must be privatized property and confirmation of rights.

The topic of this book is Blockchain, which was first applied in Bitcoin. Blockchain is the underlying technology of Bitcoin. People talk a lot about Bitcoin, but I feel that many have not grasped the essence embedded in the question of why has Bitcoin become a new wealth consensus in the world? First of all, it achieved, with originality, the confirmation of rights, that is, the ownership of data can be determined, which is by private key signature. This is a huge innovation in the history of mankind. The specific breakthroughs are as follows:

1). The originally unowned data on the Internet can surprisingly be determined by the signature of the cryptographic private key. This is far from being the norm yet. The present reality is that data belongs to the various major Internet platforms. For example, if we share our videos on a streaming platform, we do not have the copyrights of our own videos. Although the name and the account are ours, the ownership of the data is not. All our data are given to the platform. Any app or program we are using on the Internet works the same way. In other words, the current Internet is a world of public ownership of data. Data are not able to create wealth for each individual due to the basic problem that it isn’t clear to whom they belong. But the invention of Bitcoin was shocking. Bitcoin had started to run and began mining since 2009, when the paper of Satoshi Nakamoto was born, followed by the open source program in 2009. Since the first block was dig out with 50 bitcoins produced, humans have entered a new era: data is starting to belong to each individual, and from there, data privatization was initiated.

In 2019,Zuckerberg also called for data privatization on Facebook. Everyone felt excited, including myself. But think about it, who started it? Zuckerberg? Absolutely not. It was Satoshi Nakamoto. It was from Bitcoin that a new era of wealth has begun for the future of humanity.

2). What did humans rely on to authenticate the rights of assets in the past? The government, courts, and lawyers — — all are centralized systems. This is more obvious in the United States. Their system is the best, which also proves that the U.S. economy and finance are the most advanced in the world and all other countries depend on it. I mostly stayed in the U.S. for the past two years. I was deeply impressed by a close inspection in New York and Boston. The system has been established for hundreds of years. From a historical perspective, the protection of human assets is the best, so the U.S. being the world’s first financial empire is no accident.

But keep in mind that this system of protection is carried out by humans. No matter whether it is the court, the government, the police, or lawyers, all rely on people to operate. If there is a violation, a lawsuit would be brought forth, then the trial, and finally the economic police enforcement. The cost of this series of processes, both in terms of time and money, is tremendous. There is no need for me to elaborate more. You would have a taste of it by trying a lawsuit in the U.S. In a lawsuit with a dispute involved, the attorney’s fee alone can be unimaginably high. Hundreds of thousands of dollars are very common. This is the cost for protecting your assets.

Unlike the traditional system, for bitcoins, once the digital assets get attributed to you, it does not rely on anyone offline to complete it. What it relies on are mathematics, cryptography, and the calculation of miners throughout the network, distributed among nearly 10,000 nodes to keep you accountable. This system in the world of Bitcoin has made no errors in the ownership of digital currencies so far. Neither was there large-scale frauds or hackers. To tell the truth, banks also protect our assets. We deposit money in it, which is also a number. This is to rely on banks to confirm our rights and protect our assets. However, the cost we pay for protecting the assets through banks is also very high, whereas Blockchain technology has drastically reduced this cost.

3). Bitcoin created the scarcity of digital assets: 21 million coins in total. This is a precedent for the success of digital privatization for the formation of a new global wealth consensus. Similarly, the limitation in the total amount of Bitcoin is guaranteed by distributed computing, rather than by the execution of any third party or organization.

Of course, the number of Bitcoin is still monotonous with no content yet. It can be divided into eight decimal places after ten decimal points. It is a simple principle. If in a few years, the data on WeChat, on Taobao, and even the informative lecture video we’re having here today, can be attributed to each of us, then everyone’s wealth status and a potential new global wealth consensus to be reached would be inconceivable.

2. Principle of Value Anchoring

If an economic society has generated new values, it needs to reach a new consensus on wealth.

Phase 1: anchoring the naturally scarce objects

The most primitive understanding of wealth is simple. Wealth is a thing. You can have as much wealth as you can produce things. There are still many people who hold on to this original concept and think that the amount of wealth they can possess must be determined by the number of items they have. How many things to eat, use, and wear. These kinds of wealth should collectively be called atomic assets (Following the Newtonian mechanics ontology).

Why did gold and silver become a traditional wealth consensus? I have just mentioned a point that because it is a natural resource with a limited total amount, which is in line with our conventional belief that wealth is a thing which we can see and touch. Atomic assets are always limited and cannot be produced indefinitely, including houses that we will talk about later, which also depend on natural resources, such as land, and building materials, which cannot be produced indefinitely. According to the law of the conservation of matter, which we have all learned in high school, the total amount of matter and energy do not change.

If you only combine wealth as a consensus with natural resources, it will always be based on nothing but the limitation of the resources. That’s why the earliest value anchoring was on things. We don’t have to say, even in the past, that wealth is a thing. It’s more accurate to say that the value anchored by wealth is a thing. People used to believe that only things, the tangible and visible atomic assets, are valuable and that there were no other values humans could possess.

Corresponding to such assets are gold and silver since they are limited in the total amount. The Chinese transitioned to gold and silver from shells, which also used to be their consensus on wealth. It’s hard to say that shells are limited, as there are so many by the seaside, almost an unlimited supply. Although 贝(shell) has been kept as the radical in wealth-related characters, history has eventually passed that stage and moved to gold and silver as the wealth consensus. It happened because the concept of wealth was tied with the scarcity of a natural resource. (Bitcoin subsequently became a wealth consensus via confirmation of digits, but in term of the limitation in the total amount, it has obviously mimicked gold and silver)

Phase 2: Profit surplus brought about by anchoring mass production.

How did we cross phase 1 afterwards? By the Industrial Revolution. Why was the Industrial Revolution the starting point of modern civilization? The greatest invention of the Industrial Revolution is that it started to bring human production onto a large scale. Before that, almost all products were scarce, and people relied on praying for food. Both agriculture and animal husbandry was impossible to yield large production.

It was impossible to have sufficient products for people to trade, and thus modern civilization could not be established. If we compare the market economy at that time to a distributed computer, then the calculation efficiency was extremely low. How can there be large-scale computing and trade if a lack of stock is already set as premise? So most of the time there was no need for more wealth consensuses than gold and silver.

The Industrial Revolution started with the automation of energy, the steam engine, which later developed into electricity that solved the energy problem. Along came the plants, making production 24 hours and all year round. Later, fine divisions of labor and assembly lines emerged, all of which were the fruits of the Industrial Revolution. The most fundamental achievement of the Industrial Revolution was the great abundance of products, which marked the beginning of massive exchanges and the formation of global trade. It laid the foundation of modern civilization.

What is the revolutionary nature of the global consensus on wealth? Gold and silver will soon be insufficient. Because the wealth consensus generated by anchoring natural resources is far from enough for such large-scale trade, so later came the banks. What kind of technology do banks rely on to promote new consensus? It is what we call “money” that we spend everyday. The most primitive state of money was the tickets issued by the Chinese “money houses”, then the checks from European banks, and finally the actual paper bills these days. I will discuss this point in detail later.

What is the value anchor of the new wealth consensus reached in the industrial age? Production profit. Large-scale industrial production, including trade, must be profitable. It is impossible for a factory to turn around 24 hours without profit. I once heard a widespread saying, companies that do not create profits can’t be tolerated. This is the reality. If a company does not create profits at all, it’s impossible to survive in a market economy.

So behind mass production and trade must be profits. Meanwhile, it is profits that provide a new value anchor for the achievement of a new wealth consensus and is realized with banknotes as the carrier. This is the entrance into the modern industrial age. We will talk about why banks have risen and why paper currency has circulated across the world. In fact, paper money appeared in China in very ancient times, like Jiaozi in Sichuan in the Song Dynasty. Sichuan is one of my hometowns. He went back there to visit not too long ago. I actually found a place that introduces the history of Sichuan’s Jiaozi. The currency, however, soon collapsed. The banknotes issued by the later Yuan dynasty also collapsed.

How come today’s currencies issued by banks, like RMB and USD, won’t easily collapse? I personally believe that although it was an advancement in Song and Yuan to issue paper money, there was no mass industrial production, and thus no sufficient profits. Without real value support, the credit consensus could not last.

China had also issued paper money widely prior to 1949. It was called fiat currency, which also failed miserably. The KMT regime retreated from Shanghai at some point, after which the entire economy of Shanghai broke down, signifying the break-down of the credit consensus of fiat. Inflation in 1949 surged by 840 billion times [Data from the Internet: https://new.qq.com/omn /20181108/20181108A071SP.html]! Obviously a great suffering for the residents. In addition to wars, I suppose the reason why the currency system at the time was so easy to collapse is the lack of industrial profits as the real support. The level of industrial production in China was far from that in developed countries.

The Anti-Japanese War, where China had more losses than wins, was essentially a battle of wealth. The steel output of China at that time was several tens of times less than that of Japan. Although China far surpassed Japan in terms of resources and population, the global wealth consensus at that time had already passed the stage of anchoring things alone. Japan’s capacity in industrial production far exceeded China at the time, and the industrial profits as wealth provided support for Japan to attack China and even challenge the United States. (But the ability of the United States in forming wealth consensuses was way above Japan at that time, as reflected by the final result of World War II. I will analyze it below)

The industrial age made the transition from gold and silver to paper money and cheques. The world’s major legal currencies have stopped anchoring gold since the 1970s of the last century. The decoupling of the US dollar from gold announced by US president Nixon on August 15, 1971, let humanity bid farewell to the age where wealth consensus was created by anchoring the scarcity of objects. This set a milestone for the Industrial Revolution’s hundreds years of contribution to human wealth consensus.

(Song Bao added: According to the theory of the chairman of Fed branch, the issuance of paper money is supported by the analysis of product trade and profits and through bookkeeping of banks)

Phase 3: The third stage: anchoring the future value, technological innovation, the realization of future wealth

Instead of being content with mass production, history passed on to a new age. If only by mass production can a wealth consensus be reached, then China, being the world’s factory, should be the richest country in the world by now. China has produced most of the world’s products, even in the U.S., “Made In China” is seen everywhere.

In terms of the industrial scale of manufacturing, China surpassed the United States in 2010. The world’s total manufacturing output value was 10 trillion U.S. dollars, of which China accounted for 19.8%, slightly higher than did the U.S., which was 19.4%. The scale of China’s manufacturing industry since then has led the rest of the world by miles. Keep in mind that the U.S. sat tightly on the “throne” of manufacturing for 114 years, from 1895 to 2009.

From the perspective of industrial varieties, China leads in the output of more than half of the categories among over 500 kinds of global industrial products. It outputs the greatest amount of iron, cola, cement, electrolytic aluminum, chemical fertilizers, chemical fiber, automobiles, ships, televisions, and cellphones. Interestingly, with an increasing passion in gold investment by the “Chinese aunties”, China also produced 340 tons of gold in 2010, ranking first in the world.

Despite China’s numerous first places in industrial output, it is nowhere near the most wealthy country in the world. RMB accounts for only about 2% of global foreign exchange reserve. Why so? Many people are uneasy about it, saying that the US dollars, making up 80% of the global foreign exchange reserve, gained its glory from money printing. It is not that simple. The U.S. dollars could not become a global consensus via a printing machine alone.

What is the value anchor of the global wealth consensus today? There is a prevalent statement that the U.S. dollar anchors the oil trade, for which OPEC must use the dollars to trade. It sounds plausible. Oil is regarded as an industrial product, and trading oil is profitable. Does this really support the value of hundreds of billions of U.S. dollars?

I used to believe that the statement was valid. How amazing and tough are those Americans! They pretty much monopolized the global oil trade and sustained the consensus on the dollar. Later, I figured from data that global trade volume of oil and gas in 2018 was 426.8 billion US dollars [Sinopec News,http://www.ccin.com.cn/detail/149b9d928f102e71e6bf661d6f2068aa]. How can an annual volume of 426.8 billion support trillions of market value of the US dollars? This is apparently untenable.

Digital currency assets have a market value of hundreds of billions of dollars (March 2020). How heavy is the trading volume on the world’s major digital currency exchanges? I surveyed Huobi, one of the world’s largest exchanges. Its CEO Lin Li told me that their transaction volume in 2019 was 3.8 trillion U.S. dollars. By common sense, it is impossible to rely on those 400 billion in oil trade to support the dollar as a trillion-dollar wealth consensus.

I was consequently in doubt for a long time. Where did the value support of the dollar come from? Why can it print money for the world as a global wealth consensus? Hundreds of trillions of dollars, obviously a big advantage. Why does China wishing to be in this position fail? There are no countries who do not wish to have a printing machine in hand. How exactly did this wealth consensus come into being? After reading “Logic of Finance”, written by a former Yale University professor Zhiwu Chen, Is came to the correct understanding of this matter. The wealth consensus of the US mainly comes from Wall Street.

Chen talked about hundreds of years of US history in his book. It began in the east, Boston, New York, and Washington D.C. Located in New York, Wall Street was originally called “street of wall“ and was fenced. There is another book I have read called “The Great Game”, written by an American John Steele Gordon, who portrayed the history of Wall Street in a marvellous way.

Wall Street was first visited by the Dutch. What do the Dutch enjoy? They enjoy hype. The tulip bubble was the predecessor of almost all financial bubbles. It remains a derogatory term even until now. People have referred to it as the tulip bubble, rather than some other sarcastic names, as it seems inappropriate to laugh at a financial product too blatantly. Though the first group of people settling in Wall Street were Dutchmen, this financial was not something that the Dutch could complete by themselves. The developed capital markets originated in New York. This has a lot to do with the principles by which the U.S. founded the nation.

George Washington’s uprising was accompanied by moral flags, declaration of independence, and constitutional amendments, all revolved around a core theme: protecting individual freedom and rights, with a particular emphasis on private property rights. There has never been an emperor or a king in the U.S. since the founding of the country. This is rare in history. The National Convention was made from the outset, and the nation was established according to Rousseau ’s ideas and social contracts. The government has reached a supreme contract with the people, namely the Constitution, which clearly declares that personal assets are sacred and inviolable. This was really a foundation stone laid for the tower of wealth built by the United States, who is currently called “the dollar empire”, and for the major wealth consensus that the US dollar has created for the modern world. As stated by the first principle, only societies with privatized assets are able to create conditions for a broad consensus on wealth.

What were the Wall Street people going to trade next, now having sufficient protection of personal assets Bonds. Note that this is very much related to the government behaviors of America. Since the government had so determined the constitution from the start that personal assets are sacred and inviolable, the Wall Street groups dared not to occupy national resources extensively and promote public ownership even if they were to rebel. It is contrary to the Constitution, the “heavenly law”. It’s impossible to have a group occupy D.C., claiming to be the “king of the mountain” just because they fought and got the “mountain” first. The moral justice of the country would be gone. I used to be in Boston and happened to see the monument at the entrance of Harvard University. It was right there that Washington issued the first command to the Continental Army. Next to it stood two old cannons, giving visitors a sense of mission of the establishment of the United States.

Therefore, no matter who wants to set up a government in the United States, it is impossible to occupy national resources on a large scale, and even less likely to occupy citizens’ land, including houses and property. This is something that one dares not do and cannot do. However, Washington faced a real problem at that time. Wars were expensive. How to get military supplies? The earliest idea was also ​​issuing currency, “the continental currency”, but it soon collapsed 。

Figure3.1 May 24, 2018, Mr. Greenspan and me, discussing Bitcoin and the future of finance in his office in Washington D.C.

On the one hand, there were needs for wars, but the US industry was still developing. At that time, the Industrial Revolution had not spread to the US from the United Kingdom. The US was still an underdeveloped society compared to Europe and did not stand a chance to support any issued currencies by mass production profits. We will discuss this later. There was almost nothing with value to be anchored on. What was the solution? Fortunately, the first Treasury secretary was a talented financier, who came up with the idea of issuing bonds. They asked everyone to support the new country by purchasing bonds which can be purchased back with tax in the future. More importantly, he was in favor of building a security trading market in New York where everyone could trade and cash out the bonds. Be mindful here that what is the value anchor of bonds? The future of the US.(Notice, the wealth consensus began to run away from Newtonian Mechanics ontology at that time, because the future is uncertain.)

Bonds were free to trade and speculate on. They’d become valuable if the US won the battle or depreciate if lost. Anyway, a bet is a bet, and some people made money, while some lost.

Hamilton’s intention was to turn future expectations into a wealth consensus. This is called spending the future money, or realizing the future wealth. It was a new mechanism for creating wealth consensuses. It seemed to be an expedient measure at first. Perhaps Hamilton, the designer himself, did not expect that invention to enable a new mechanism to form wealth consensus for the whole world, that is, generating wealth by cashing out future gains. The two hundred years of history was described in “The Great Game”. After the mechanism first started, the speculations were quite stunned, and the system collapsed multiple times. I was reading that book in 2017, when the digital currency circle was filled with scammers. Many people discarded their ethics and conscience, made themselves look really bad just to earn the “quick and hot” money. However, these people have insulted the title “scammer”, if compared to the Wall Street groups, whose scams didn’t even spare the vice president. But in any case, this is what the US legal system initially based on, including the later emerged lawyer class. This is the starting point of the system that protects personal assets and financial contracts. Related laws have been improving since then. It laid the foundation for the ultimate formation of a strong and prosperous capital market on Wall Street and for the new wealth consensus achieved by the realization of future wealth.

It’s worth noticing that without a proper legal system, it’s highly likely that the realization of the future is just a scammers’ game, with a low threshold of deception. Thus, the core is the American system. The greatest innovation of the US is the consensus mechanism that generates wealth by realizing future gains.

Don’t underestimate the capital market’s ability to create wealth. It was by Wall Street that the major global wealth consensus was made. Professor Zhiwu Chen said that the entire financial assets of the US are almost 10 times its GDP (2006), and that financial assets constituted more than half of the wealth of many American households [Chen, Zhiwu, “Logic of Finance’’, August 1, 2009, International Culture Publishing Company]. Of course, this differs from the understanding of wealth by many Chinese people. Up to now, if you ask them what wealth is, many would still answer things, visible, tangible, and useful. The rest are all liars. If you tell them that future gains can also be realized as wealth and wealth consensus, they would immediately consider it as a bubble.

Once the head of a high-level financial institute in China had a discussion with I on Wall Street. Thinking that people on Wall Street are simply playing drum-and-pass, the head did not have high opinions of them. But I told him that the reason why they could keep the game going, according to my own observation, was that they have technological innovations. In other words, Wall Street and Silicon Valley can be regarded as the two pillars of the empire of the American wealth. With continuous innovations and entrepreneurship produced by Silicon Valley and the best universities in the world, the US continues to attract new ideas, new technologies and new companies, who would then go public on Wall Street. Even Alibaba of China had to come to the US to go public. This is actually a way to generate wealth consensus for the US and the world.

It is indeed a game of drum-and-pass, but it goes on forever unless one day human innovations end, which by far seems impossible. As long as there are new innovations, the financial system of Wall Street, where the future wealth is being realized in the capital market, will keep providing the main value support for the current global wealth consensus. Apple once reached a market value of over one trillion dollars, neither by possessing excessive lands or scarce resources like gold, nor by measuring the annual output of cellphones. The fundamental reason is that people believe in its future innovative capacity. People had faith in Jobs as a benchmark, believing in his future, thus packing the Apple corporation into a dream. It was this dream that initiated a wealth consensus in the capital market worth a trillion.

There’s a popular book called “Rich Dad, Poor Dad”. I think it has neatly illustrated the same principle in a straightforward way. From the perspective of an ordinary American, the author, Robert Kiyosaki, explained what a poor dad means. The poor dad, Kiyosaki’s biological dad, only believed that wealth is what he could see and he always worked for money(don’t care the wealth consensus). He trusted nothing but his salaries. His status wasn’t even low. He was said to be an official of the local education committee with promising income. Why would he still be a poor dad? With a credit card never paid off, he had never achieved financial freedom since he took for granted that wealth has to be now, and touchable, like his salaries. Who was the rich dad? The dad of Kiyosaki’s friend. He was respected as a mentor/godfather by Kiyosaki as he altered the author’s understanding of wealth, he believes that you must let money work for you. (Participating the wealth consensus)

When Kiyosaki was in elementary school, he worked with his good friend for his friend’s father, the rich dad. After two weeks of work, the rich dad didn’t pay him anything. At that time, the two friends were filled with anger, thinking that the rich dad was a liar. How could you trick us into working for two weeks without sparing a penny?!

They went to confront his friend’s father, questioning why he had lied and exploited them. Rich dad answered, if you remain working for others and earning salaries, holding on to the so-called income right before you, you’ll never get rich. The lesson I’m trying to teach you is this: you have to learn to invest in the future and really know how the future wealth consensus of an asset is formed.

Kiyosaki eventually internalized this theory from his rich dad and followed it his whole life. Getting paid is not important. What’s important is to realize future wealth, envisioning and utilizing the future to participate in and contribute to a new global wealth consensus being formed. This is also the case with stocks and securities. Those are the people who may achieve financial freedom. Kiyosaki and his wife made it in their late forties and wrote “Rich Dad, Poor Dad” afterwards. The book has a great influence in China as well. My mom gave me a copy of the book during the poorest phase of my life. It helped to correct my view of wealth.

The influence of the book is even greater in the US. Kiyosaki set up a wealth company specifically for educating people and changing their outlook on wealth as early as possible. They were also involved in TV shows rewarded with huge earnings. In a word, he has been teaching the readers how a wealth consensus is formed from the realization of the future. It depends on a vision, mostly high-tech these days.

At the same time, where does China’s wealth of real estate come from? I admire Professor Yanjing Zhao of Xiamen University, who has studied the topic most thoroughly. His basic view is that China’s real estate is a municipal stock, which is actually a financial instrument for realizing the future. The value is anchored in the future income through China’s urban development. This is currently the main wealth consensus of China.

3. The Principle of Massive Trade

Mr. Mingxing Xu, founder of ok.cn, mentioned to me in 2013: If a digital asset token goes up on an exchange in trading volume, then the probability of its appreciation is high.

In fact, the formation process of China’s real estate wealth consensus also proved this point. I remember that many friends went to Hainan to speculate on real estate around the year of 1992. The privatization of real estate in China was not yet completed at the time, but free trade was already permitted in Hainan Province. Large wealth bubbles were formed. The economic growth rate of Haikou City, which had just become the provincial capital in 1992, reached 83% [information from the Internet: https://baijiahao.baidu.com/s?id=1597804832718230211&wfr=spider&for=pc]. But then the government struck the Hainan real estate market almost as hard as it has been on virtual currencies since 2013. I felt that the method was similar, which is to cut off the supporting bank’s cash inflow.

Because bank loans were not allowed, Hainan real estate immediately broke down. Many of my friends and alumni, after making tens of millions (equivalent to hundreds of millions now) from the hype, suffered severe losses. Certain individuals, like the “Six Gentlemen of Vantone”( At the time, there were six talented people, different in personalities but get along with each other, somehow met in Haikou, and together they founded Vantone Real Estate.), and Shiyi Pan, the builder of Beijing SOHO, made huge fortunes. It was wise of the Six Gentlemen to retreat rapidly enough, but most others lost miserably. The early real estate consensus was still fragile and collapsed at one touch. During the Hainan real estate hype, the ownership of real estate properties were still unresolved as the issuance of certificates only began in 1998. So any newly made wealth consensus was extremely fragile. But at least it proved that a large amount of trade may possibly give rise to a broad wealth consensus.

China’s real estate is actually a strange phenomenon that has spanned several stages of wealth consensuses in history. First, it involved the scarcity of resources. Properties cannot grow casually like grass. They rely on lands, space and building materials, which were rare in the first place. Second, it has utility value. Developers build properties, which on the surface sell like industrial products and generate profits. But more essentially, real estate became a capital market after the issuance of certificates in 1998, where privatization was truly confirmed. After massive trade was made possible, real estate became a tool for Chinese citizens to realize the future wealth, leading to such a high market value today. I have seen a figure showing that Chinese families have become wealthy, where 80% of the wealth effect is due to real estate. Therefore, a common question asked during blind dates in China is, how many suites do you or your family own. Especially in first-tier cities, a family can barely own millions or tens of millions of assets from income alone. It might be possible with very few gold-collars. Ordinary families would not have that amount of book assets by earning salaries. Real estate represents the logic of the rich dad, not the poor.

It’s common knowledge now that real estate in China has long been financialized. As long as rights are confirmed, personal assets are protected, and free trade is permitted, almost anything will turn to the path of financialization. It is the same in all countries, such as Hong Kong, Japan, and the US. This is nothing special. The 65 trillion US dollars in China’s real estate has played a huge role in boosting the Chinese economy, for it ushered the Chinese into an age of forming wealth consensuses from a vision of the future. These credit resources have promoted the growth and prosperity of China’s economy significantly.

As mentioned in the previous part, and we will further prove this conclusion in later parts: the entire free market is essentially a distributed computing system, with each transaction being one calculation. Theoretically, the more abundant the credits, the better the market runs, and the more frequent and extensive trading becomes, the more refined the level of social division of labor will be, and the more developed, prosperous and innovative will the soil grow. This is the road that’s been taken by developed countries for hundreds of years. In the past 40 years of the Reform and Opening up, China has just proven it again. This is exactly the law.

Over the past 20 years, by the confirmation of rights and massive trade within real estate, and on the optimistic expectations of China’s future economic development, Chinese people have created an enormous consensus on wealth. It is seven times as large as the Chinese stock market. Wall Street’s is mainly a financial market of securities, whereas the security market in China is far from mature. As Professor Xiangshuai of Peking University has said, there is always a hand that never stops moving.

Nevertheless, no one had expected that real estate would have formed a powerful wealth consensus in China. It was not even planned by the government. With so many credit resources injected into the Chinese economy, the value anchor has been geared to the future of China’s economy. China’s economy has been booming for 20 years, over which all the annual growth rates have been around 10%. The expectation has formed a new and solid wealth consensus through extensive trade in real estate. This wealth consensus has in turn been injected into other economic levels, enabling China’s market economy to grow at a high speed, including the fast growth of China’s Internet economy, which is undoubtedly at the forefront of the world today.

It was Xiangshuai who made the point clear. She made a very interesting video which I had watched several times. The title was eye-catching, called “Moron, everything is currencies”. When you first see it, your reaction will be “What? Swear at people before anything?” What it conveys is clear. On the surface, the large trading volume looks like speculation, but it actually creates currencies of wealth. I has read a number of articles saying that the additional M2 issued by China has exceeded that of the U.S. and that crises are coming. But how come there’s not much inflation in China? Why hasn’t CYN crashed? What’s the reason that the situation of the KMT fiat in 1949 hasn’t reappeared? The fundamental cause is the value support, the new wealth consensus, which is for the most part real estate.

I highly regard Professor Xiangshuai. I got an autographed copy of her book “Money Never Sleeps” through a friend and have read it carefully. She emphasized that everything is currency. From my point of view, it’s a new wealth consensus that has been formed, equivalent to the circulation of currency in the market (according to Professor Yanjing Zhao, the currency is issued in the form of real estate bank mortgage loans).

If you own tens of millions of real estate properties, it’d be easy for you to get money. You can get a mortgage from the bank anytime. Then millions or tens of millions of cash would come out for you to spend. Is this a way of injecting new credit resources in the market? Xiangshuai has illustrated that as a financial phenomenon, China’s real estate has created tons of wealth which has in turn promoted the growth of the Internet economy later on. Mr. Xiaosu Meng has said that China’s real estate was a guarantee for its 20 years of economic prosperity, which is basically in line with the reality. Many traditional economists in China hold a natural aversion to speculations and bubbles. But to be honest, they need to understand how the current global consensus on wealth was formed since the start of Wall Street: It has relied on the financial market as a value anchor and support, where future wealth is being realized through large-scale trade in the capital market.

4. The Principle of Science and Technological Advancement

Many times in history, the emergence of new technologies has played a 0-to-1 role for the formation of a new global wealth consensus.

Taking China as an example, Chinese characters have revealed a mysterious history of China, where wealth consensus was first based on shells. But shells were not rare, so it transitioned to heavy metals, in particular, copper. Copper coins were used in China for a long period of time. The Chinese should be one of the first ethnic groups in the world to master the technology of bronze smelting.

What prompted the formation of the new wealth consensus? It was obviously the technology of smelting. Technology was not required for shell trading since one could just go to the beach and pick them up. The Chinese later mastered smelting and entered the Bronze Age. According to Mr. Ziheng Zhou, China created the world’s largest copper currency economy. This has been proved by archaeology.

With the development of technology, mankind also mastered the smelting technology of gold and silver, especially silver. I read an article written by Mr. Zhou, whose research showed that China’s true participation in global trade started in the Yuan dynasty, during which silver related technology matured. Because copper coins were not recognized abroad, the currency could not be widely circulated and was not found abundantly outside of China. This specific wealth consensus was only valid in the Central Plain of China at that time. In addition, policy-makers in Song Dynasty intentionally prevented the outflow of Chinese copper coins [Zhou, ZiHeng, the unification of Mongolian currency and the birth of the world economy, “Financial Review’’, 2016 №5], which failed to make full use of China’s relatively strong economic strength at that time to form a broader global wealth consensus and thereby enhancing the national power. It was defeated by Mongolian cavalry in the end. Based on Zhou’s research, only until the Yuan Dynasty did China truly depart from the stage of forming wealth consensus through copper. New technologies then pushed the world into the age of silver, where a real international trading system began to take shape.

Next came the industrial age marked by mass production, where the former way of consensing on scarcity of natural resources, like gold and silver, became insufficient. Global trade longed for a new wealth consensus. The advancing force behind the matter is technology. The logical relationship is not complicated. An American Nobel Prize laureate Friedman wrote a book called “A Monetary History of the United States” [Milton Friedman, “A Monetary History of the United States”, CITIC Publishing Group, 2014 March]. An interesting story was told in detail in one of the chapters.

The story was about the local indigenous people on Yapu Island. What was their first consensus on wealth? Rocks, which can be hundreds of kilograms. In other words, they regarded rocks as money, thinking that it was actually wealth and wealth consensus. Rocks were shipped all around, sometimes from other islands hundreds of kilometers away. No other places did the same as the circulation of large rocks was highly inconvenient. Later, the Yapu residents were also aware of the inconvenience as well as the high probability of getting lost. Once a family obtained a big rock from a distant island. It was a big fortune, and they carved it into a ball. However, the ship ran into a tsunami halfway, turned over, and the rock sank to the bottom of the sea. It was equivalent to losing a lot of money. Fortunately, when the family came back and told the villagers, the fellow villagers were understanding, saying: “we all know that you were transporting the rock. The rock sank and is gone forever. How about we write an account on everyone’s rocks as proof of your ownership of the rock, admitting that your family still possesses the wealth?” How harmonious was that society! If it’s another society, no one would acknowledge a lost fortune. It was kind of the Yapu villagers to put the account on rocks.

An even more bizarre situation occurred afterwards. Relatively recently, Germany occupied the island and turned it into their colony. The German governor found that the roads on this island were really bad, full of small trails. The social economy was certainly not developed. So the governor of Germany ordered that every household must go fix the roads. In Chinese terms: If you want to be rich, build your roads first. The governor seemed to understand this principle.

No one took his order seriously at the beginning. The governor got anxious, trying to figure out what to do. It didn’t feel reasonable to him to arrest people for this purpose. Having comprehended how “rock accounting” was operated, the governor decided to go for the opposite. Since the lost rock still existed through accounting as a wealth consensus, he could make wealth disappear through accounting as well! He set up a fine: If any household does not repair their roads, he would draw a cross sign on its rock, meaning that the rock no longer belongs to the household and may not be circulated anymore. He didn’t make the effort to take any rocks, but by putting a sign on them as a way of bookkeeping, the rocks were prevented from circulation and were subtracted from the families’ wealth.

This trick was effective. After several families got their rocks marked, other families became restless. No one wished to see their hard earned wealth to be taken. All took actions to fix roads. The governor was not merciless. He wiped the crosses from people’s rocks after the roads were fixed. Everyone was happy again. No more fines.

Note here that Friedman’s story has profound significance. How did humans progressed across wealth consensuses, from natural resources, to objects, then to bookkeeping? Bookkeeping led humans to the phase where the next consensus was reached by new technologies. The invented bookkeeping technology is now called the double-entry bookkeeping method. I saw the information from Jiaming Zhu’s article, “Accounts, Digital Management, and Dataism”. There was an Italian mathematician named Luca Pacioli during 1445 to 1517. Inspired by a Venetian businessman, he invented double-entry bookkeeping and wrote “Knowledge of Arithmetic, Geometry, Ratio, and Proportion”. This was seemingly just a mathematical invention, but perhaps he himself did not expect accounting to have opened the era of a new wealth consensus.

We have mentioned in the first part that the new wealth consensus of mankind was mainly completed by bankers, which is still the ongoing case now. Imagine that a banker owns 120 Liang(两) of gold. He could divide them into five or 20 loans and issue them out as checks. It was called the “silver tickets” in China in early times. However, the real global consensus, including Fiat, only formed upon people’s belief that banks can keep the accounts correctly. Recall that in the first part, a chairman of a Federal Reserve Branch wrote a paper [Narayana R. Kocherlakota, translated by Song Bao, The Essential Attributes of Currency (The True Meaning of the Existence of Currency — Currency is Accounting), Research Department Report 218 of Minneapolis Federal Reserve Bank, October 1996] in 1996, which made a thorough analysis. The logic was clear even with the difficult mathematical processes. In actuality, banknotes are accounting units in nature. The reason behind it is that users believe that the accounting was done correctly, thereby reaching the consensus on the wealth of banknotes.

So in industrial civilization, banknotes as the major global wealth consensus, through mass production and financial transactions, is accomplished by the technology of accounting. The origin was in Italy. Jiaming Zhu has made the point clear. The story of Yapu demonstrated the logic in a peculiar way. From the rocks to the cross, people’s belief was converted from anchoring of things to bookkeeping. It doesn’t matter whether there were rocks or not. What people ultimately settled for was accounting, be it crosses or check marks. Wealth can be produced in this way or destroyed in this way. Bookkeeping is now combined with information technology, processed by computers. Banks are where the most developed technologies are being applied. From this point of view, it is easy to understand that the announcement by Nixon in 1971 that the US dollar no longer anchors on gold was bound to happen.

Therefore, technologies have prompted the formation of new global consensuses on wealth, generation by generation. Without the global banking system — in other words, the complicated bookkeeping system — banks in various countries would have no way to issue paper money.

Now it is easier for us to understand why Bitcoin blockchain is great. What is the essence of blockchain? Bookkeeping throughout the network. Bitcoin has nearly 10,000 nodes. What is each miner doing there? They earn 12.5 Bitcoin as a reward (March, 2020) every time they dig out a block, which takes 10 minutes on average. It’s worth great money now, all because they are keeping the account correctly.

According to the rules designed by Satoshi Nakamoto, the entire network competes for the bookkeeping right (one account book is a block). Whoever solves the SHA-256 problem the fastest in the network, after being verified in correctness by the rest of the network, will be rewarded, and this accepted accounting block will be linked to the previous block. This is what “mining” means.

Comparing blockchain accounting to bank accounting, the former is distributed bookkeeping, whereas the latter is centralized. What’s the fundamental difference?

First and foremost, the cost of accounting that humans have reached a consensus on will plunge. Hongbing Gao commented on the logic of the wealth consensus banks have created, during a discussion between him and me, that they build the most expensive towers at the most expensive locations. Such locations include Beijing Financial Street, Shanghai Lujiazui, Hong Kong Central Silver, where the land prices were raised high first, followed by luxurious buildings built on top. Isn’t this contrary to the general commercial knowledge that business must first reduce costs? But banks must do this so everyone believes that the bookkeeping right banks possess is equal to wealth. Otherwise no one would believe in the bills and credit cards they issued or even deposit money there.

Why did Gao share this with me? Alibaba has found that new wealth consensuses can be reached through big data consisting of each individual’s data. The move has been launched. Although the data are still publicly owned, the discovery of this new way to wealth consensuses has been made. In fact, the nature of Alipay is that Alibaba created another accounting system where books are kept by Alibaba, who declares to everyone that no expensive buildings are needed for the bookkeeping right as long as you give your data to Alibaba. The truth of Alipay, plus WeChat payment, is that they have indeed initiated a new age where wealth consensuses are generated through data,I believe they really enter a gate of the wealth of the quantum era. Yu’ebao is an example. Blockchain is even greater. The miners who keep the blockchain account are doing the opposite to the banks. Bankers keep accounts on those financial streets. Where do the miners work? The Chinese miners have run exclusively to remote mountains and forests in China where all the ethnic minorities live. I have visited the Bitcoin mines in Ganzi, Aba, Dauchengyading, etc. They are the most remote areas with the cheapest electricity. More importantly, as Ziheng Zhou mentioned, a typical migration in the age of digital economy is the transition of accounts, from corporate accounts as the original mainstream to personal accounts. In the past, it always revolved around corporate accounts. Banks mostly served enterprises because serving individuals could not cover the cost. Most loans went to enterprises, and very few to individuals.

Nonetheless, the Internet economy has begun to shift its focus to personal accounts in the age of data today. Even more crucially, Blockchain kick-started an accounting book centered on personal accounts, a distributed account where the whole world can be trusted. Note that Bitcoin pivots on private individual accounts. There’s no concept of enterprise, let alone national enterprise. Everyone can download a wallet and be a personal account. In theory, there’s a future possibility to attribute rights to your data. The cost of account keeping has dropped sharply.

Therefore, a new age has come. Blockchain and all kinds of new technologies are booming, which will continue to facilitate the confirmation of private data. Data will be protected and turned into personal assets. A new kind of global wealth consensus will be reached based on quantum big data holistic being. I firmly believe that things will develop along the line of such logic, which is the focus of this book.

The sharp decline in the cost of distributed bookkeeping has opened the world for a new consensus on wealth. Digital currency, represented by Bitcoin and Ethereum, has formed a brand-new wealth consensus in just ten years, in total 100 million US dollars (as of April 2020). This is to convert the formation mechanism of the wealth consensus, from the realization of future benefits to the realization of a vision and holistic relationship partly.

Now that the curtain has been opened, what is the logic of the coming industrial development? In the last several bull markets, the vision of Bitcoin in 2013 was to issue currency in the decentralized way, which had intrigued a battalion of geeks. The smart contract of Ethereum in 2017 envisioned that the economic contract can automatically keep the account going, disabling the intervention from centralized institutions, so that the invisible hand according to Adam Smith can run without barriers. I suppose that the most eye-catching vision for the future is the extensive data assetization on the blockchain.

Why are data public on the Internet today? That’s because there’s no way to protect everyone’s data on the Internet. If we use a platform for live broadcast, the data would be handed over to the platform. The TCP/IP behind the entire Internet does not offer protections to our data. The underlying principle makes it impossible in the first place.

That’s why the father of the Internet, Tim Berners Lee, and Rong Chen, have both proposed the concept of the second generation of the Internet.

Chen studied operating systems at the University of Illinois for 7 years. More than 20 years ago, when he was still working for Microsoft, he discovered that the Internet by that time, including the Windows operating system, offered zero protection to private data. Data would be taken anytime a user uses an application.

Subsequently, he proposed a concept: “Online means no calculations; Calculations must be offline”. That is, you should not allow any APP to go online by itself or to take your data. After recurring discussions with him in 2016 and 2017, I finally made sense of the logic. As long as the second generation of the Internet can protect users’ data, along with the blockchain which attributes the ownership of data to users, who can trade extensively, then the accumulation of everyone’s data will truly become a new global wealth consensus. This is the mission of Elastos, the business Chen has been running for years.

Elastos is no longer the only one that carries the banner of the second-generation Internet. The US Blockstack project, the first SEC-compliant project to issue digital currency, is also pursuing the same mission. Engaging in DID (decentralized personal identity), Blockstack aims to give roots to data personalization and let data be stored, giving private data assets a “bank”. Even Zuckerberg has shouted out a similar slogan, revealing to us a glimpse of the future’s mainstream.

Indeed, when ICOs were launched in 2017, many air coins were issued. What we need to study long-term is the internal logic of its development. Where is the weather vane of this industry pointing to? In August last year, Zhijun Zhang, the Chief Security Architect of the World Bank, Long Wang, vice president of Tencent Cloud,, as well as me, altogether launched a data capitalization campaign in Shenzhen, specifically targeting this vane.

If China’s economy is to usher in another golden period, I believe that a new consensus on wealth must firstly be reached in order to inject new credit resources into the market. Where does this come from? I think that Blockchain is highly likely to provide huge opportunities in the future. As analyzed before, Blockchain has created an era where 1). data can be personalized, 2). personal data is protected by the second-generation Internet, and 3). data assets can be traded in large volume on Blockchain with low cost.

It will be problematic if China anchors its future wealth consensus mainly on real estate. Real estate is not the same as innovations. This drum-and-pass is theoretically unsustainable. Both Hong Kong and Japan had experienced and terminated the game since it had caused serious social problems. Japan’s real estate wealth collapsed in the 1990s, followed by a long period of sluggish, and even stagnated economy. Because the wealth of real estate depends on naturally scarce resources such as land and building materials, it cannot be passed on forever. More significantly, if a wealth consensus can only be reached through real estate, innovations would in many ways be severely inhibited.

The reasoning is simple. If we can get rich merely by purchasing houses, we will simply wait for it to appreciate in value and to create more consensuses on wealth. There would be no need to innovate. I once had a house in Beijing and Shanghai respectively. On the other hand, I also started a business that he had run for many years until 2013. The business was neither successful nor profitable. But the houses made him money. I used to regret having started the business. He would have made more money by simply lying and sleeping in the houses he bought around 2000 than working so hard on a business. If the society is generally in such a state, where young people all have the same psychology, waiting for their parents to buy them real estate properties so they can sit and wait for the properties to appreciate and for real estate to continuously produce more and newer wealth consensuses for them, then what driving force for innovation is still left in this society?

Similarly, Hong Kong is a rich and developed society. Real estate has also created enormous wealth for them, but innovation in Hong Kong is barren. Have you heard of any big innovative company or Internet company originated in Hong Kong? Barely. Same thing happened to Japan. The wealth in real estate in Japan in the 1980s and 1990s was said to be enough to buy the United States. However, the innovations in the U.S. arises one after another, whereas Japan’s vast consensus on the real estate wealth perished. If you go look around in Japan, you’ll find out that there is already a discrepancy between Japan and the U.S. or China, at least in the aspect of the Internet economy.

In contrast, the wealth consensus of Wall Street is different. It mainly relies on innovations. Because the U.S. possesses Silicon Valley and the world’s best universities, it has formed an innovative system. The world’s most talented young people continue to go study and work in the U.S. Many of them end up immigrating, like the Indian elites, in particular, most of whom choose to stay in the U.S. There have been endless emergence of high-tech companies, including the earliest paper from Satoshi Nakomoto on Bitcoin, of which the research team might have also started in the U.S. Although Nakomoto has disappeared now, the kind of innovation he has left for human beings will have a huge impact on the future.

Thus, China is now facing a crucial transformation period. An article by Xiaosu Meng has commented, which I also agrees on, that China’s traditional real estate wealth has almost come to an end in its function of boosting the economy. Many people even predict that China’s real estate will collapse, that is, this very wealth consensus will collapse.

However, Meng believes that real estate in China’s rural areas still has opportunities to create wealth consensuses. The data in his article [Meng, Xiaosu, Ten theories of Meiqin] exhibits that the length of time during which the economic growth rate is maintained at more than 8% is 43 years for South Korea, 48 years for Taiwan, but only 33 years for Mainland China. He argues that one of the reasons is that the potential of China’s real estate in producing wealth consensus has yet been fully realized. Is this possible? I voted for yes, but it needs to make full use of Blockchain technology.

Qian Yao, former director of Central Bank Digital Currency Research Institute of China, once wrote: Blockchain, as a credible technology, approved and endorsed by various parties, is a technological prototype of a new generation of financial infrastructure. It is able to give credit support to low-level entities not yet reached by financial institutions, increase mutual cooperation, and reduce trading cost. These are of great significance to the nation’s economic development and financial supervision.” [Yao, Qian, “Digital Assets and Digital Finance”, Primary Financial Research Institute, 2019.09.17]. “New FMI based on the blockchain technology will carry all kinds of assets, including traditional financial assets such as stocks, debt securities, derivatives, and asset-backed securities. It will also activate a wide range of marginal assets that are currently “dormant”. “[Yao, Qian, “Blockchain-based new Financial Market Infrastructure” , “China Finance”, №23, 2019]

It is exactly because of the aforementioned decentralized bookkeeping technology of blockchain that the cost of large-scale trade is approaching zero. If we can register on blockchain the rights of rural lands and properties that are not currently in circulation, then, as analyzed by Fei Yin, a friend of I’s, the huge liquidity will help form a new wealth consensus of hundreds of millions. This is the credit endorsement for low-level entities. This is to let the Chinese peasants truly participate in the construction of a new wealth consensus and become wealthy, which is genuine poverty alleviation.

5. The Principle of Sufficient Information

This point was also first raised by Zhiwu Chen of Yale. I believe that his “Logic of Finance” is the abc book of finance for many people in China, including I himself.

He discussed an important principle for the realization of future gains, which is that the information must be sufficient, open and transparent, as well as symmetric.

Because the wealth consensus to be realized is of the future, this credit establishment is fragile. The gains are usually in ten or twenty years, so why should we be unafraid to trust it? What makes us believe that there won’t be default? Another important aspect is the full disclosure of information, which requires sufficient press freedom and independent media in society.

There’s a classic story in history. It is the famous movie “The Post” led by Meryl Streep. The story roughly goes like this: The Washington Post was at first a local newspaper without much impact. The boss, the pillar of the company, suddenly committed suicide in 1963, leaving the business unattended. It was a family business. The only one who could possibly take over was his wife (starred by Streep). However, the lady, having been a housewife most of the time, had no related training at all. However, her family owned most shares of the company, so she had no choice but to take over the newspaper.

She was extremely capable, very good at listening to different voices. Those men in the board of directors were all elites. As a woman sitting there, she looked vulnerable. But by listening to everyone’s opinions thoroughly, she often came to a correct conclusion or a wise decision. This was a kind of leadership that shouldn’t be underestimated. Oftentimes this kind of leader will succeed. Another example is Bei Liu, a famous figure in Chinese history. Bei Liu excelled at listening, especially to Liang Zhuge. He did not appear to be dominated, but he succeeded。 He became one of the powers in the tripartite confrontations. 【Guanzhong Lou,<Romance of Three Kingdoms>,14th century,Yuan Dynasty, China】

The point of the movie was a process, that is, how the Washington Post grew from a local newspaper into a renowned media giant nationwide and worldwide. They overcame a series of big challenges in this growth process. The most crucial one was the disclosure of the Pentagon’s confidential documents regarding the Vietnam War. The Washington Post decided to disclose those top secrets right after they obtained the documents. For newspaper media, as long as they catch one sensational, insider piece of news, they will rise to fame and shock the world. Just like Fang Fang’s diary that emerged in the 2020 Covid-19 pandemic situation. It hit the headline with simple but genuine phrases that described the closed-up Wuhan, expressed sincere humanistic care and demonstrated the brilliance of universal values. It hit 3 billions views, setting a new historical record.

The Washington Post also happened to stand on the cusp of the storm because the Vietnam War was absolutely the headline in the U.S. at that time. If we review the history, it seemed America was betting its national fate on the Vietnam War. The Washington Post obtained the insider information regarding the terrible result of the American side on the battlefield, which the high officials were fully aware of. There was no hope of winning, but they were hiding the reality, watching the young soldiers die group after group, just for the sake of the country’s “face”. The Washington Post was found out by National Defence as it was about to disclose the news. It was like an exploded bomb. The movie went on with a call to Washington by the US National Defence, who told that the New York Times had been blacklisted for the same reason, and that if the Washington Post continues their actions, it would be a crime, and all related parties will face lawsuits and even imprisonment. The reasoning was that the disclosure of the documents is a threat to national security. The title of the crime sounded big enough, didn’t it?!

The lady starred by Streep called for a board meeting with all the elite members. If the situation was not properly handled, and if the company lost the lawsuit, this newspaper would be over. The investors would suffer great loss. The chief editor and the chairman of the board might even go to jail. Then the Chief Editor spoke out the famous line: The best way to protect the freedom of publishing is to publish.

And that was exactly what they did. The newspaper ignited a nationwide wave of protests. It was like poking a honeycomb. The lawsuit went to the Supreme Court of Justice. After an arduous process of repeated wrestlings, the spirit of the Constitution reflected by the publishing freedom eventually got upheld. The judgement was a 6-to-3 win. The Washington Post leapt to a leading press in America. This story sent a meaningful message.

What was the message of the movie? It was with great risk to keep America’s independence of media and the openness and transparency of public opinion. Many people have risked their lives for this mission. Think about it, what the press was against is the National Defence of the U.S., even the president, equipped with all the power, money, and weapons. The lady portrayed by Streep was just a widow who used to be a housewife, even though backed by the board members, there was still a great disparity in strength between the two. The U.S., however, still became who it is right now.

Why has such an America become a financial empire? Back to Professor Zhiwu Chen’s point of view, it is precisely because the U.S. has adhered to the freedom of press and public opinion that it has ensured the Wall Street financial market to achieve the major global wealth consensus through future profits after so many years. The anchor of value here is the future vision, future innovation, of more than 100 trillion dollars.

Chen has remarked that open media protected by law is a necessary institutional mechanism for the development of market economy. Without voluntary supervision of the media, the market economy will encounter problems when it develops to a certain stage, including the closing of the market. Chen also cited a sample that covers 60 countries or regions, proving that there is a noteworthy positive correlation between the security market’s level of development, GDP per capita, efficiency of government, and the degree of the publishing freedom in the news media. [Chen, Zhiwu, Chapter 16 of “Logic of Wealth 2”: “Open News Media is a Necessary Institutional Mechanism of a Market Economy”, September 1, 2015, Northwestern Polytechnical University Press]

Therefore, we can roughly draw the following conclusion from Prof Chen’s analysis. The discrepancy in wealth consensus between the Shanghai Stock Exchange (four trillion U.S. dollars in market value in 2019) and the New York Stock Exchange (thirty trillion U.S. dollars in market value in 2019) is primarily due to their gap in press freedom. We know that the GDP difference between China and the U.S. has not been this much since a long time ago.

It took NYSE over 200 years to reach the current amount of wealth consensus, while Bitcoin is highly possible to reach 1/10 of the wealth consensus formed by NYSE by 2021, spanning only 12 years. A key reason for this rapidity is that blockchain technology underlying Bitcoin is a transparent and open account system that protects personal privacy.

From my own experience, he has realized that Blockchain is naturally a world with open and transparent information: transparent accounting across the whole network. Taking Bitcoin as an example, every transaction is publicly recorded by nearly ten thousands nodes. Such a mechanism has recovered huge capital losses for me several times.

The first case was around September, 2014. There were two big names in the Chinese digital currency circle at the time, the well-known “rage prince Gong”, and “Gulu”, the founder of bihu.com, who also has a PhD from overseas. One time they asked me to meet them in Shanghai all of a sudden for some important discussion. Shanghai was not part of I’s itinerary. The original plan was to go to Hangzhou. They said that the discussion was regarding Alibaba, which was organizing an event on its global shopping platform. Always excited about Alibaba, I changed my plan. I still could not settle in Shanghai, so I asked the two gentlemen, who insisted on my presence for the discussion, to meet in Hongqiao. I allotted two hours for them at Hongqiao railway station.

We only stayed for a short while In Hongqiao. We met in KFC. rage prince Gong also brought a senior of his, known as the “first beauty of the currency circle”.

What did they want to chat about? It was about BitShares (BTS), which I had never heard about before. So rage prince started to introduce BTS, saying it was a big deal now. Who was the founder of BTS? The eminent ByteMaster (BM), an expert in disruptive innovations. The people he gathered were all gurus in the Chinese currency circle. Xiaolai Li also invested 500,000 US dollars for him as an angel investor. He also hired Bo Shen, and then “Buwei Lv’’(God father of Chinese first emperor) behind Ethereum Vitalik as his CEO. The team was set up in Los Angeles. rage prince Gong was the one to carry the banner of the China domestic market. I did not know these later stories until later, when XiaoLai Li invited me for a hotpot and elaborated the background further.

2014 was the beginning of the bear market for Bitcoin. It plunged from the peak of over 8,000 CNY to 2,000. Quite miserable. It was similar to the bear market two years ago (2018, 2019), and even worse. Nonetheless, BTS suddenly emerged at that time and attracted a big crew, like the recent wave of EOS(2018). BTS rose to fame in the entire currency circle, not only in China, but also across the world.

In the meantime, there was another pal in Hangzhou specializing in Hayek, named Huanping Song, who faded from the circle later. He also told me that BTS was absolutely groundbreaking. There are two points about BTS’s innovation which caused it to last until today: First, DPoS, the mechanism which many public chains, including Elastos, have adopted. Even Ethereum might adopt it. Second, the concept of stable coins, of which the biggest name is MakerDAO. ByteMaster is a highly creative person. These financial concepts had refreshed the whole circle. People felt that Bitcoin was already incredible, but they were constantly being entertained by new concepts.

So what did rage prince want from me? I was more representative of the academic circle, being able to write articles and frequently giving speeches in universities. Rage prince Gong, I, and some others also compiled the first Bitcoin book in China in 2015. So, they decided to pull me into BTS for moulding public opinion. I was impressed by the vivid speech of rage prince Gong, who was one of the few people with a solid theory of finance in the currency circle. I admired him very much. It is said that he was also a mentee of Bo Shen. His speaking was eloquent and closely reasoned.

What impressed me the most was not his praises of BTS, but his criticism on Bitcoin. He illustrated with sound arguments that the price of bitcoins has dropped below miners’ mining cost. What did this mean? It implied that in order to pay for electricity, miners had to sell newly mined bitcoins to the market, which alone was a big enough force to smash the bitcoin’s price to below 1000 yuan. Note that his prophecy actually came true three months later. Bitcoin’s price fell to less than 1000 yuan in January, 2015. This shows that the prince was forward-looking. He did hold to-some-extent correct principles.

Of course, his intention was to show me that Bitcoin was hopeless. His senior held the same position. She had used to focus on writing Bitcoin market analysis but later stopped, claiming publicly that she was no longer optimistic about Bitcoin. What did they turn to? They started holding BTS’s flag, telling me how brilliant it was, and that with BM being the founder, BTS was the hope of the future. I at that time was only a blank piece of paper in the currency circle and had made all the newbie’s mistakes. After their speeches, I spent all his credit card balance, though not much, on BTS.

The price then was only around 0.3 YUAN. It used to peak at over 0.5 YUAN but then dropped back. I downloaded the BTS wallet after the purchase and began to see how assets were issued in it, how stable coins were created, etc. I soon discovered that I was fooled. I had never encountered a wallet so difficult to use. Terrible software system. I started to search online for BTS information, only to discover that I was indeed fooled. After sleeping on it for two nights, I sold all BTS in hand. This operation has been proven to be insightful. The loss was only about 3,000 RMB. Otherwise the loss could have been at least several tens of times of the investment, and no correct operations would have followed.

I stopped following BTS after the sell. The price of BTS ended up with a free fall. Not a surprise because they were trying to create a new concept without a strong software system, plus the bear market came afterwards. Everyone has been used to the bear market in the past two years. What was the price it had fallen to? Less than 0.02 YUAN. I felt lucky. For the first time I found that I had the qualities of a financier who cannot be misled easily.

Later, because I continued to have opportunities to converse with the digital currency gurus in Shanghai, such as “Uncle Da”, Tony Tao, and “Early Summer Tiger”, who kept bringing BTS up. Looking back, BTS was simply a game of stable coins, issuing assets. They told me that the 2016 software system had become easy to use. ByteMaster also withdrew. “Juxie” from Shanghai was elected as a member of the director board. I asked myself, does this indicate that BTS is getting on track? (The next step history shows that’s true, It’s the first light of dawn of DeFi.)Would it have real value? Is it the case that it’s an opportunity now that the market price has hit the bottom? I then wechatted rage prince Gong to confirm whether the price had truly hit the bottom or not. His answer was that it had been severely underestimated. I believed him this time. With not much money in hand, but since it was so cheap, I immediately bought several millions units at less than 0.02 YUAN per coin. It wasn’t too much money spent, so I just left it there, having neglected it since then.

2017 finally welcomed a bull market. One day I took a casual look at the Bit Time platform (Founder Tianwei Huang) and saw that BTS was worth 2.5 YUAN! How many times was the growth?! I’m sure you can feel my excitement. But I had forgotten the username and password. There was no way to find it since it had been left behind for over a year. I panicked and quickly got in touch with Juxie to see if he could find technical expertise to solve my problem. There were millions of coins in my wallet after all. So Juxie immediately gathered a group of people, including BTS technical experts, promising they would help me out. They asked if I could remember even just one of the usernames or password. Otherwise It would leave them nowhere to start. I thought really hard about it. A bizarre username suddenly dwelled on me, so I told them to try that one. Thinking back, I should really thank God for using that particular bizarre name. They searched in the BTS network and found a match. They did have an account with the same username, within which there were millions of coins. No doubt, that was my wallet. I asked the team to take out the coins for me so I could redeem them.

Then they asked for the password. I said I’ve forgotten the password. They said then it can’t be taken out without the password. I asked if they could violently break it down for me. They said that would be super difficult, so please provide at least some clue. That was really a suffocating night for me. They told me to perhaps think more the next day and that they would also discuss possible solutions for my case. Staring at the wallet, I contemplated the password with great effort. You can imagine the feeling of having millions of dollars in front of you, yet still one step away from owning it. Then a time stamp on the top right corner of the wallet suddenly got my attention. It indicated the creation date of the wallet. I had a habit of writing down the password as soon as I created it. It would be hopeful if I could find a password written down around that time. I totally forgot where I might have recorded it. I started to search on my computer for all the documents created or modified around that date. I actually found it, though there was nothing else in the document but a strange string of characters. I felt it probably was the password. The experts tried it, and that was it! A huge “phew” for me!

The world of Blockchain led me to understand how important it is to keep information open and transparent. If my account had been in the hand of a third party, who might choose to not be responsible for the loss, there would have been nothing I could do. But this is something we can grasp in our own hands. Therefore, without a word, I converted all these BTS into bitcoins on btc38.com, altogether 200 BTC at the time, which I remembered vividly. Those 200 BTC are expected to worth many million U.S. dollars by the end of 2021.

It is having an increasingly deeper realization that there are no fewer scams in the currency circle than that in other industries. But why are more and more people coming in to hold crypto digital assets? The transparency of transaction information on blockchain plays a significant role.

6， The principle of decentralization

According to the development history of the global wealth consensus, especially the detailed historical materials in Chinese Currency Economy Over The Past 2000 Years written by Jiaming Zhu, whether it is the early shells or the later gold/silver, most of the wealth consensuses in this world formed through decentralized computing system of the free market. Both the double-entry bookkeeping of banks and the legal currency endorsed by national sovereignty have only a relatively short history.

As explained in the last chapter, the concept of wealth is essentially the global credit consensus. In fact, history has already proven that it is the distributed computing mechanism of the free market that avoided the risk caused by the intermediary malefactors’ attack and made it easier for our humans to reach a consensus. We will make a detailed explanation in Chapter 5 that Hayek-style free market is essentially equivalent to a Maxwell demon distributed computing system.

The development history of blockchain digital currency proves this point even more. The founder of Bitcoin, Satoshi Nakamoto, chose to disappear years ago, which didn’t affect the establishment of the Bitcoin global credit consensus. Many people even think that the disappearance of Satoshi Nakamoto is of great significance to the Bitcoin’s global consensus.

Recently, the popular DeFi projects in the crypto space have also proven this: if the project is based on a thorough distributed computing system, open source, transparent, without any token reserve and central authority, it is more easier to form a global consensus resonance in the market.

7 The Principle of adaptation to Universal Value and Government Supervision

Professor Xiang Shuai of Peking University succinctly stated in her book: as the wealth consensus gradually unanchored the scarcity of natural resources in the second half of the last century, the history of plundering wealth through violence and wars has gradually come to an end. Since World War II, the European and American countries that are in the territory of global mainstream wealth consensus have never broken out large-scale wars. [Xiang Shuai, “Money Never Sleeps-Undercurrents and Financial Logic in the Capital World”, CITIC Publishing House, 2017] This shows that humans have gradually realized that using peaceful means to reach consensus is more effective than plundering resources/land by violence . Therefore, the pursuit of peace, fraternity, freedom, and equality has gradually become the so-called “universal value” that is generally accepted by all countries and nations.

Besides, as government supervision is a necessary public service for the normal operation of our human society, the wealth consensus also requires the protection and maintenance of government public services to be consolidated while it needs to conform to universal values. Historically, wealth consensus reached by the capital market or the banks experienced very fragile and easily collapsed periods at the beginning. The government that subsequently realized the importance of this wealth consensus to the entire society and the market and thus continuously improved the regulatory and legal system. In this way, the wealth consensuses gradually consolidated (the government even established a central bank to directly issue legal currency). China’s consensus on real estate assets originated in Hainan in 1990, but it was extremely fragile at that time. A very extreme statement is that only the Six Vantones including Lun Feng made a fortune. It was not until 1998 that the government began to issue deeds and established corresponding real estate asset protection and transaction regulations, as well as corresponding banking services and transaction markets, which eventually enabled the real estate wealth consensus in China to achieve great success. As of now, it stands at around $65 trillion. Although this credit consensus does not encourage innovation and is difficult to internationalize (this is the biggest gap from the Wall Street wealth consensus in the United States), it still makes a huge contribution to the prosperity of China’s market economy. Therefore, whether the government can scientifically supervise affects the future development of the data wealth consensus powered by blockchain and whether it can become a stable wealth consensus.

Exactly due to the fact that the environmental conditions for implementing the aforementioned seven principles are becoming more available and mature, humans are constantly reaching new wealth consensus worldwide. From the early anchoring on object, shells, gold and silver, to the bookkeeping of credits and bills, to the realization of future gains based on ever-innovating technologies, then to the great invention of the distributed computation system on blockchains, humans are entering into a stage where wealth consensus are reached through visions, communities, and data. The adequacy of credits enables trading across the global free markets to be more developed, pushing human division of labor and civilization to a higher level.