I met Linlin @SunLilin on the X social platform. We were both obsessed with exploring Crypto Payment and saw the huge potential impact that Blockchain/Crypto could bring to the world, just like the rising sun in front of me, slowly lighting up the vast Serengeti grassland.
Lilin shared with me this article he wrote on April 9, 2023, which is reproduced here with permission.
In the brief exchange with Lilin and the words in his articles, I could see his profoundness and erudition. Lilin said that he was just repeating what others had said, and I said I would continue the relay, "There is always someone who lights up the road ahead at a certain stage. Our best choice is to follow the footsteps of many predecessors, walk at a high level, and prudently practice the power of ideas."
Blockchain technology provides a new perspective to re-examine and process the entire composition of transactions (payment-clearing-settlement). We will no longer be bound by the traditional banking/payment system. Our consciousness should change and we should think in a more fundamental way: What is Crypto Payment? How to build global payment and credit in payment through Blockchain? In the face of a global payment system, what kind of organizational form should be used for governance?
This article is like a dialogue between Lilin and Dee Hock at the intersection of time and space, pointing out the direction for those doubts and bringing the power of faith to these directions.
Below, enjoy:
At the end of 2017, I was invited to attend the SWIFT China Annual Meeting to give a special report on blockchain technology because I had previously participated in the blockchain business platform of a central securities registration agency and had communicated with SWIFT about blockchain technology. During the four-hour flight from east to west, I also reread "One From Many-Visa and Rise of Chaordic Organization", which is translated into Chinese as "Invisible VISA: A Chaotic Organization for the Future". The author is Dee Ward Hock, who participated in the establishment of VISA and served as its first CEO.
When I first joined UnionPay’s Strategy Department in 2007, I happened to translate Visa’s internal document, titled “The Power of Ideas”. At that time, the layout and thinking of the Internet/mobile payment innovation strategy were all based on the strategic comparison of Visa/American Express, and were deeply influenced by the ideas of Dee Hock’s predecessors. After rereading this book ten years later, I found that from the perspective of “decentralized” Blockchain/Crypto, many of his thoughts and expressions have transcended history so profoundly. At this time, the sunlight from the stratosphere passed through the porthole and shone between the lines of the book. I was deeply moved. I felt that if I could concentrate on doing payment and settlement well in this life, I would be willing and not ashamed of myself.
He later summed it up:
“Visa’s true and lasting success will be due to two incomparable things:
a. The quality of the partnerships with different partners;
b. The extent to which it successfully delivers services to the community as a whole and to the greater good.”
This should be regarded as the annotated version of the current so-called "community over code" fifty years ago. At that time, Visa was not yet called Visa. After years of preparation, a new global electronic payment network has gradually led to the rise of many innovative technologies and businesses such as data centers, POS terminals, and credit cards. From the perspective of historical path integrals, its historic creation and construction is far ahead of the electronic cash created by Satoshi Nakamoto/cyberpunks, not to mention the subsequent Blockchain/Crypto wave.
Just as "freedom is not passed down from generation to generation, but individuals of each generation must constantly defend and strive for it", the same is true for the exploration of most basic issues and the acquisition of common sense. Everyone knows about the new products such as KK out of control/sovereign individuals/cyber states/programmable currencies, but Dee, the founder of Visa, has been forgotten by the public and hidden in the corner of time.
Dee has successfully explored and verified many concepts and judgments in his life through the Visa network, including but not limited to:
a. What is currency? What is a currency’s “value exchange network”?
b. What is “decentralization”? What kind of organization can be called a “decentralized organization”? How to govern a decentralized organization?
These two issues are expressed today as the core characteristics of the Web3 generation, namely Crypto and DAO.
Based on the two books "The Power of Ideas" and "Mixed Order", this article has been sorted out, and some of the essence has been extracted and commented on. There is no specific sage who has completely laid the complete path, but there is always someone who lights up the road ahead at a certain stage. Our best choice is to follow the footsteps of many sages, walk at a high level, and prudently practice the power of ideas.
Note: The following paragraphs starting with "DEE" represent quotations from the original book; the paragraphs starting with "Lilin" represent my personal comments.
1. About currency
DEE: "What if most data starts moving as fast as electron pulses -- radio waves -- or even light beams? It's clear that everything seems to be moving in that direction, and the pace is accelerating. Our old perspectives are falling away, and our traditional ideas are shifting. It's like we're seeing things differently, or even with a different mindset, or something beyond both: with a different consciousness. It's incredibly exciting."
DEE: "Money will be data in the form of regular pulses of energy that will move around the world at the speed of light through countless paths across the electromagnetic spectrum, and at negligible cost. Any institution that can move, manipulate, and secure data in the form of regular pulses of energy that are universally used and trusted as a measure of equivalents and medium of exchange is a bank. We can go further and say that these inherent properties of money may lead to the creation of a new form of global currency."
Lilin: This gave rise to different "alphanumeric data" currencies, as well as different "equivalent measures and exchange intermediaries". In the "Internet/mobile banking" era that we once cheered for but have long been accustomed to, banks/payment institutions acted as agents to record, keep, and transfer currencies. But Blockchain has changed everything.
DEE: "If electronic technology continues to develop, it seems obvious that the 200-year-old banking oligopoly's control over the safekeeping, lending, and exchange of money will be irrevocably destroyed. The state's monopoly on the issuance and control of money will also be eroded. It doesn't matter that banks or governments may traditionally be the liquidators of last resort - the final handlers of the vast and growing business of transferring monetary value. In the new system, the advantage will go to those organizations that are best at processing and guaranteeing the value of letters in the form of regular energy particles."
Lilin: Although Dee cannot foresee all technological creations, he still makes a great guess: the new form of infrastructure represented by Blockchain and its organization are indeed "best at processing and guaranteeing" valuable data", and "regular energy particles" appear in the form of Crypto/Token.
2. About credit cards and their business nature
DEE: "What is the nature of the credit card business we are in? Is credit really the nature of our business? When a customer hands a merchant a plastic card to pay for something, what is the essence of the transaction? Obviously, it is an expression of the merchant's willingness to sell goods to prospective customers who wish to purchase his goods. In this sense, the credit card replaces the driver's license, social security card, ID card, or other means of identification. Thus, the first major function of the credit card is to identify the seller with the buyer and the buyer with the seller."
Lilin: Dee is good at thinking about the essence of business first. Regardless of the transaction terminal, medium and form, the essence of the transaction is the "trust" and "performance" of the two parties. Behind the trust lies a series of "authorization" or "delegation", as well as "verification" for both parties. Does it sound familiar? Don't Trust, Verify It!
This leads to the second question: Why is the existing financial system "centralized"? Because institutions that can be "trusted" and are "authorized"/"entrusted" must meet certain qualifications or credentials, namely the so-called "licensed institutions". All financial games are "inter-institutional" businesses between these institutions, and institutions that cannot obtain licenses for various reasons are of course not included. Going back to the origin of each transaction, everyone will of course choose the "agent" they trust, and those who are not qualified will naturally try to subvert and innovate, which is the so-called "financial innovation".
But in fact, the financial system has long been "decentralized" and limited to institutions. In order to prevent a single institution from completely controlling all transactions and thus tampering with/forging/destroying the transactions themselves, it is necessary to decouple financial institutions. The premise or essence of decentralization is to identify the risk responsible parties of the "authorization"/"entrustment" parties and agents, and continuously decouple their transaction associations. Make "trust" more "simple" and "object-oriented". "Because of trust, it is simple"? In fact, "because of simplicity, there is trust".
DEE: "Obviously, credit cards enable buyers and sellers to exchange value securely: the merchant provides goods or services, the customer signs a sales receipt, and the receipt is stored by the merchant as proof of monetary credit. The seller receives payment in the local currency, and the buyer later pays in his own currency. So the second major function of credit cards is to serve as a guarantor of value data."
DEE: Obviously, the credit card system ensures that buyers and sellers do not have to understand each other's language, laws, currency, customs or culture to initiate the exchange mechanism. In fact, many issuing banks allow customers to pay for transactions for a period of time after the transaction (banking jargon calls it "deferred credit"), but this is just an auxiliary service, not the main function of the credit card. When a credit card is placed on a card reader and swiped, it simply creates a financial information in the form of alphanumeric data - replacing paper and pen. In this way, the third main function of the credit card is the creation and transfer of valuable data.
Lilin: Blockchain technology provides a new perspective to re-examine and process the entire composition of transactions (payment-clearing-settlement), allowing us to forget the various technical gimmicks in Layer 0/1/2 and cryptography, and the seemingly endless but old-fashioned concepts. Only by starting from the business itself can the ecosystem truly prosper. Looking back, no one will remember the complicated and sophisticated concepts of WCDMA/CDMA2000/TD-SCDMA on the eve of 3G. Everyone only cares about what time my takeaway will arrive. Although it was hard to get a ticket to the 3G conference at the China World Trade Center, it was far more than today's consensus conference and various Web3 summits.
DEE: When we abandon traditional views and challenge mechanistic models of reality, we are no longer bound by the jargon of banking and payment systems. Then we start to think in a more fundamental way, and another shift in consciousness occurs. It seems common and obvious now, but it was revelatory at the time. We are not in the credit card business. The term "credit card" comes from banking jargon, which is actually a misnomer. The card is just an instrument that carries a symbol of the exchange of monetary value. It is just a coincidence of time and circumstances that it is a plastic card. We are in the business of exchanging monetary value.
3. About the Payment and Clearing Network
DEE: "Old Monkey Mind and I began to put these fragmented ideas together rapidly. If our business is to ensure and process the exchange of value between buyers and sellers, then when and where will the buyers and sellers trade? Because the development of modern transportation has greatly reduced time, buyers can appear anywhere and at any time, all over the world, day and night. With the development of catalog mail order and electronic markets, sellers can provide goods or services to customers anywhere and at any time without having to appear in person. Therefore, the demand for value exchange in electronic form will arise 24 hours a day, 7 days a week, at any time and anywhere in the world."
Lilin: This has been achieved in the Crypto era created by Bitcoin at a speed that is unimaginable in the past. The fundamental change in Crypto comes from the change in financial infrastructure: the clearing time has been changed from T+N to 1 second in theory, which has enabled traditional large-scale credit transactions that require the intervention of investment banks to become fast, flexible and liquid retail transactions; the concept of time has been eliminated and replaced with block height, which has infinitely broken the pricing monopoly brought about by global time zones.
The 7*24-hour trading envisioned by Dee has been fully evolved: from the global trading of the analog era, it has entered the real digital era. Its significance is similar to the transition from analog communication networks to digital communication networks. Although the signal is still not very good, LTE has shown the direction of progress. Humans only need to conceive the scenario and invest in infrastructure without thinking, and no longer need to worry about what the excess bandwidth can be used for. Although there are always people who like to worry in every era.
DEE: "The exciting insights are coming one after another. Any organization that can guarantee, transmit and process transactions in regular electronic form anywhere in the world 24 hours a day, seven days a week, will have access to a market larger than we can imagine - all the value exchanges in the world are carried out in it. The necessary technology has also been invented, and this technology will accelerate its popularization at a geometric rate while its cost decreases at a geometric rate. But there is a problem: no bank can do it, no large joint-stock company can do it, and even the country can't do it. In fact, we can't think of any existing organizational form that can do it. I intuitively estimated the financial resources of all the banks in the world, and found that the financial resources of most countries pale in comparison. Therefore, if the banks are connected, they can do it, but how? This requires an extraordinary organization to connect these extremely complex and diverse institutions and individuals in a completely new way."
Lilin: Dee's technical limitations obviously led to his over-optimism, just like physicists in the golden age claiming to have solved all physical problems. But the foresight judgment is that only an extraordinary organization can control global wide-area transactions, not any single country/institution. From the nearly 15 years of Crypto evolution history, the fundamental reason is that under the conditions of globalization, no single entity can reach such a "consensus", but Bitcoin appeared at the right opportunity.
4. Organization
DEE: "We must build a global organization that connects a large and complex system of shared theoretical and experiential learning, and unites individuals and groups of all kinds who care about the failures of the system and are committed to doing their part to improve it. This organization must self-organize according to its principles and become a successful example of mixed-order organization. Its purpose should be to develop, spread and implement new and more mixed-order organization concepts. If this global organization is carefully conceived and properly organized, it will be able to integrate into the fruits of its labor."
Lilin: "Mixed order" may give the direction for the future of DAO. Absolute "decentralization" only means the dissolution and non-existence of order. It is always necessary to clarify the subject of risk responsibility, which is the basic path to build "consensus" and achieve "republican" innovation.
DEE: "Dee racked his brains. He knew clearly that most companies adopted the rigid hierarchical system of "command and control" that he hated. Now he and his "monkey-like ideas" will put aside all of this and cut directly into the essence of the company: What is the core of the company? Dee wrote in his memoirs: "The essence of a commercial company or other organization is the concept. All institutions are nothing more than different people bringing together their talents for a common goal. An ancient and authoritative thought concretizes this concept as "community." "Community", haha, "community means a common goal."
This also means that common beliefs, common values, and common ideas and principles are the ideal genes of a company. Can these become the DNA-like cornerstones needed to create a new financial institution?
Dee saw the way forward: If we start working on common goals, common ideas and principles, where will this path lead? A few hours later, Dee went to meet his companions with a head full of ideas. He said: Today we are no longer talking about banks, money and credit cards; we are talking about ideas, principles and common goals. … Find the common ground that can unite the banks into an autonomous organization, which will develop into a data clearinghouse as Dee envisioned. In the scene Dee described, when discussing ideas and principles, he and his colleagues did not seem like four bankers talking about money and cooperative institutions. They seemed more like Thomas Jefferson, James Madison, James Monroe and Alexander Hamilton discussing the basic principles of the Declaration of Independence and the U.S. Constitution. In fact, Dee would later call their small group the "Fathers of Visa."
“What ideas and principles did he and his companions finally arrive at?” As Dee wrote in his memoir, the four men came up with a long list:
Article 1: This organization is jointly owned by all members, and all members are completely equal. No member has control or privileges;
Article 2: All members have equal rights and obligations;
Article 3: This organization is open to all qualified members;
Article 4: Power, responsibilities and resources should be appropriately divided and shared;
Article 5: Power shall be equally enjoyed by all independent institutions;
Article 6: To the greatest extent possible, ensure that everything is voluntary;
Article 7: This organization should change naturally and should not be forced to change;
Article 8: Administrative agencies should be parallel, flexible and permanent.
Lilin: The formation of Visa certainly depends on more complex factors. But why do similar creative constructions appear again and again in modern society represented by the United States, especially Silicon Valley? (Visa’s headquarters is in SF, which is another story that can be written in another article.)
Just like why the core innovation of Crypto did not appear in the East? The reason is not due to intelligence, diligence, capital, etc., nor is it rooted in the so-called "system", let alone "human nature" in general. "Innovation" comes from a "consensus" with sufficient "legitimacy" and "legality", which is the so-called "republic". If you are unwilling to accept the long-term seemingly no progress, various invalid or even stupid arguments, quarrels, and oppositions on a time scale, but instead use the Napoleon/Gao Huan-style quick cut, you will fall into the "tyrannical" "overtaking on a curve" trap. People who prioritize the pursuit of "efficiency", no matter how smart and agile they are, and their execution ability is outstanding, once they decisively take the step of "radicalism" expansion and development, they will fatally lose the legitimacy and legitimacy of the source of innovation.
In this sense, Satoshi Nakamoto's disappearance perfectly solved the St. Martin/Washington problem, which led to the subsequent "emergence". Eastern society prioritizes achievements and wealth in this life or even in the next five or ten years, so it will forever lose the opportunity to reach the source of innovation, let alone global leadership and pricing power. This not only explains the true status and long-term positioning of Chinese society in the Crypto world, but also explains all the dreams of "independent innovation" in the past forty years. Today, the surging domestic LLMs have once again embarked on the path of Hongqi/Loongson predecessors. Of course, they have different profit models:)
DEE: If we distill their essence, their basic ideas and principles are:
"Cooperation", "partnership", "procedural democracy", "equality", "power sharing", "openness" and "trust" are the spirit of community.
Dee was happy, and he and his colleagues outlined a vision and the principles that would guide its realization: creating a democratic, self-governing banking cooperative that would work together to manage and clear credit card transactions anywhere in the world. In the short term, the cooperative would process bankcard transactions in the Americas, but in the long term, it would develop into what Dee had envisioned: the world's leading digital transaction processing system.
Dee believed that the new cooperative would not be controlled by Bank of America or any other bank. Instead, it would be a cooperative that operated on a basis of mutual trust, with people and their respective banks coming together for the common good and benefit - the greater good being their customers and the community. Others largely agreed with Dee's ideas, so there was another principle that, although not explicitly stated, was imprinted in their philosophy and principles: "independence."
Dee clearly understood that the fusion of relationship networks and expert resources (i.e. building the Visa community, rather than any hardware or software, or any metrics of transaction volume or member profits) would have a more profound impact on its ultimate goal.
On July 16, 2022, Dee passed away at the age of 93.
The story is far from over.
Even at the beginning of the story, there is another great clue that is both secret and glorious: the Italian who founded Bank of America: the legendary A.P.GIANNINI.
On July 21, 2018, I was at a meeting in San Francisco and came across 555 California Street.
The legend has gone, but the legend will never end.
In the past ten years, I have met many world-class economists, as well as a large number of leaders and experts in the Crypto industry. I found that most people have never figured out the difference between "clearing" and "settlement", and they all use "payment" as a synonym. Countless generations of people will forget the true meaning of "learning": just as we cannot talk about the evolution of science without going back to the history of science, we cannot truly understand the great significance of Crypto reform and the glorious monument on the journey without going back to the history of payment, clearing and currency.
Fortunately, my partners and I have not forgotten this point. The "power of ideas" is different from "beliefs" that need to be recharged. Only by following one's heart and not breaking the rules can one succeed. Fortunately, in the past five years, a robust, stable, and scalable public ledger infrastructure and almost all the surrounding tools/technical middleware have been completed and tested in practice.
Based on this, business-oriented payment and settlement is imminent. Just like the eve of the mobile Internet in 2005-2010, the new payment and settlement infrastructure is on the way, which means that the new globalization 2.0 and its business wave are obvious. It will be fully unveiled in 2023, which is the prelude to the new generation of global financial infrastructure.