Xu Jizhe — The Essence of Blockchain is to Scale Up Fair and Reasonable Distribution Mechanisms
A talk with Newton’s founder, discussing blockchain. Hello everyone, I’m Liu Qingyan. Today we are very pleased to have Newton’s founder, Jizhe Xu, who will discuss the Newton Project and how the blockchain enables e-commerce.
Q: What was your original intention in launching the Newton Project?
A: The Newton Project was conceived in early January this year. At that time, blockchain technology was developing from a primitive idea and undergoing developments and improvements, like enhancing consensus algorithms and increasing transactions per second. But to gain tangible value, technology must better a nation’s development and people’s livelihood, as well as serve the real economy and our daily lives. From this year on, if a project is to succeed, it must serve people’s daily lives. The 2018 conference will be a watershed. Before 2018, the blockchain was still in its technical exploration period. From 2018 onwards, I believe it is entering the commercialization stage. Based on this, I started the Newton Project, which has a “one size fits all public chain. While other projects like EOS are a general public chain, Newton is very well defined: It is infrastructure for the community economy. You could say that we position Newton in terms of “people” rather than “chain”.
Q: Why is Newton positioning itself as community economy infrastructure?
A: From an economic perspective, I divide economic development into three stages: The first stage is the imperial economy, while the second is the capital-driven economy, which comprises the economy of the past three hundred years. With the development of blockchain technology, I believe we will transition to the third stage: The community economy. Each of these economic stages has its own particular infrastructure. For the imperial power era, it was armies and machines, which the state relied on to manage the entire economy. In the capital-driven economy, it was laws that governed companies, contracts, and so on. The future era of the social economy needs its own infrastructure, which I believe to be the blockchain. Newton’s goal is to be this infrastructure for the community economy.
Q: In your opinion, what is the main contribution of blockchain as infrastructure that empowers the establishment of the community economy?
A: Over the past three hundred years, corporations have greatly promoted progress for society as a whole, in large part because they have optimized costs and efficiency, which is the most positive aspect of the entire social resource allocation.
Nevertheless, at the same time, they brought the problem of income inequality. We, the majority, contribute the most in this economic model, but the real winners are the minority that make up those who have the capital. In the past three centuries, capital gains have been much greater than labor gains: We all work and contribute, but we don’t benefit. With the development of computers, the internet, and mobile apps, business has optimized costs and efficiency, while making incentives ever less fair. In the era of the community economy, while costs and efficiency remain basically the same, our incentive model will change to “everyone contributes, everyone benefits”. I consider it a far-reaching goal to find a technical means to scale up a fair and reasonable incentive mechanism.
Q: What is the NewMall e-commerce platform?
A: Cloud computing was a very new concept when it was first proposed, and at the time, understanding was vague — to the point of it being an abstract concept. If we were to start a business then, we would need to buy a Dell server, contact the computer room to look for an internet data center, get an internet connection, and so on: It could take months to build the infrastructure. But now infrastructure like computing, storage, and CDN (content distribution networks) are all very convenient. Newton provides infrastructure like governance, collaboration, and incentives for the community economy. I positioned Newton’s first commercial use case in the online retail space, specifically NewMall. I recognize NewMall as a major reform and upgrade of the retail industry. Its essence is to use the technology of computers, the internet and mobile connectivity to radically reduce costs in the retail industry, while greatly improving efficiency. I proposed the concept of Chain Commerce, referred to as C-Commerce. I see this as a major upgrade to E-Commerce. In C-Commerce our concerns are not cost or efficiency, but creating a better incentive model based on the costs and efficiency we have now. In general, when you buy and sell, you become a shareholder in the company — a fairer approach than we have today. From the simplest point of view, you could say that e-commerce is our first major commercial use case. The more widely Newton technology is applied, the stronger our NEW token will be.
Q: How do we indirectly face competition with traditional e-commerce?
A: Merchants only care about two things: Operating costs and customer acquisition costs. From this perspective, merchants have two choices when it comes to online retail: Either they can find a traditional e-commerce platform, or they can go with C-Commerce on NewMall. Right now, traditional e-commerce transaction costs are about 25%. So if you have 100 million yuan in annual sales, you pay 25 million in fees. Why do traditional e-commerce platforms charge so much? Because the corporate system demands it increases profits. For Newton, we don’t have a trading agent to seek extreme profits, so we’re reducing transaction costs to about 10%, which I believe will be attractive to any merchant. For customer traffic, there are two kinds of people in the world today: Those who are on the chain, and those who are not. If we hold a certain token, we are the ones who are on the chain. The large number of people not on the chain can continue to shop as normal in physical stores or traditional e-commerce platforms. We’ll serve the group who are already on the chain. These early adopters are familiar with the blockchain and we don’t need to spend time explaining the value of blockchains and why tokens are motivating.
Q: We all know that in the past, traditional e-commerce has had similar incentives like rebates. In your opinion, what is the difference between these incentives and the NewMall incentives?
A: Rebates or store credits are not like stock equity: They don’t really carry any equity at all. NewMall uses tokens to motivate participants in its network. This involves the nature of the token itself: First of all, tokens are the third largest invention after currency and stock. With currency, we moved from exchanging things to exchanging money as a medium to trade, greatly increasing transaction speed and advancing human civilization. Secondly, although stock carries interest, it lacks currency’s liquidity. I believe tokens are the best of both worlds. You’ll find that there’s no reason to return points, because ultimately the value of a company is not its points, but its stock. The token creates a whole new continent of wealth.
Q: What is Newton’s advantages of doing NewMall?
A: Newton has several advantages in building NewMall: The first is our team. Myself, Li Shubin, Liu Jun, Guo Feng, Xu Yirong, Guo Hongchi, and everyone else. are all the big names in traditional e-commerce, with rich business experience, resources, operation experience, etc. We’ve completed integration of the entire supply chain of shoes, clothing, bags, distribution, and wine. Our team’s knowledge of blockchain, including philosophy, technology, social economy, community operations, and the future developer community, has advantages well beyond the team itself. In addition, there should be no competitive mentality in the blockchain era, because everyone needs to communicate and learn from each other. I believe that now the blockchain industry should break through the barriers of traditional entrepreneurialism.
Q: Why can’t traditional companies go into Chain Commerce?
Good question! I believe a transition would be very difficult for them, since blockchain technology is so different from the internet of the past. It’s not just about costs and efficiency, nor productivity, but the production relationship. You’ll find the transition from the internet to the mobile internet was usually quite smooth for most companies, since it’s still a tool to further enhance costs and efficiency. But the blockchain needs to be decentralized, and from a business perspective it is decentralized in three dimensions. The first is on a technical level: For example, Bitcoin doesn’t have a centralized banking system or centralized database. Instead it has 10,000 distributed ledgers. This is the thing most people think about when it comes to the decentralization of blockchain. The second dimension is decentralized organizational structures — actually the decentralization of “people”. The third dimension is more central: Decentralization of the net profits of a centralized organization through the carrier token. What can a traditional commercial monopoly organization do to decentralize its net profits? The first step is delisting, otherwise it can’t participate. This is almost impossible for them.