Xu Jizhe is the founder of the Newton Project and was previously in charge of mailbox technology in the early years of Sina.com. He was the CTO of an e-commerce platform and started doing business in 3D printing, smart hardwareand other fields. In 2005, he established the Zeuux community to promote Free Software in China. In 2017, he co-founded the Elastos Project before establishing the Newton Project in 2018.
Newton(https://www.newtonproject.org/) is pioneering the Hyper Exchange Protocol (HEP) as infrastructure for the protocol-based economy. Newton firmly believes that users should be owners of their own data and that blockchain technology will transform existing organizational structures, collaboration, and incentive systems, and ultimately achieve the vision that “everyone should benefit directly from economic growth.”
On September 3, the Newton Project announced the launch of their NewChainTestNet, and simultaneously released the NewPay wallet app and NewChain Explorer. The first realistic application of Newton, NewMall, will be launched in December, whichisan e-commerce platform on which buying is mining.
In this interview, Xu Jizhe sheds more light on the subject, stating that “most tokens are in an air state (that is, just tokens in and of themselves, without any real business model or use case). Ethereum’s congestion is a reflection of its true value. Talking about only TPS makes no sense.” He also believes that one of the most interesting side-effects of the blockchain is to inspire people to not take common sense for granted.
The following is a record of the interview between Mars Finance and Xu Jizhe:
2018 is the first year of blockchain commercialization, and scam tokens will disappear even more rapidly.
Mars: In 2018, the blockchain market and investment climate have undergone tremendous change, which poses a challenge to all the projects that focused on technical development above all else, and now have to explore real business models. From the development and practices of Newton, which do you think is more important: Your technology development or exploring your business model?
Xu: In general, technology development is our project’s foundation, but our business model is the true key to producing value. Before 2018, all projects were focused on developing technical systems. There was no single project that raised the issue of commercialization, and almost no token could answer the question “Why should I use this token?”
Mars: From the phenomena you observed, does it seem that most of them are so-called “scam coins”?
Xu: I think it’s not just scam coins, but most tokens are currently “in the air.” Nobody uses these tokens for real commercial purposes – they only trade them on an exchange. I define this as the air state.
I think that all new technologies go through a period of technical exploration. But if a technology is to hit an inflection point and undergo rapid adoption, it must improve our real lives. Technologies that have achieved this include electricity, steam engines, the Internet, mobile Internet, and inevitably the blockchain.
I think 2018 is the first year of blockchain commercialization. From next year on, more and more projects will use the blockchain to solve practical problems. Of course, they’ll also integrate artificial intelligence and the Internet of Things. With the rise of projects like Newton, the market will undergo fund restructuring, which will accelerate the demise of air-state tokens.
Mars: In your opinion, isn’t this a business model based on the application of tokens in Ethereum?
Xu: Yes. I think there are four kinds of tokens right now:
- Bitcoin: Digital Gold. Its value is supported by consensus. Just like real gold, the functionality is ordinary, but the value is high and firmly supported by consensus.
- Ethereum: The Super Mint. ETH is the fuel of this mint. From this point of view, I think ETH has real functional requirements. The long-term value of ETH depends on the technological advancement of this mint.
- Scam coins: These have no value. Their motivation is “cheating.”
- Air-state currencies: These are currencies that have no business model or use case beyond being mere tokens. Many people think these have great potential, but in fact their prospects are much smaller than imagined. Worse still, if investors become believers it will cause even more trouble.
The value of Ethereum is reflected in its congestion. I hope Newton becomes congested too!
Mars: Everyone knows you can never avoid TPS when talking about a public chain project. Do you think TPS is still an indicator that makes or breaks a public chain?
Xu: I don’t agree with this view. TPS is a very general concept. When investing in Internet and mobile Internet projects, nobody cares about TPS, but rather the project’s positioning, target users, and business models. Yet the blockchain has a very strange phenomenon – it can’t not talk about TPS. Not talking about TPS could even make you look unprofessional, but I don’t think it makes sense to talk about TPS to the exclusion of everything else.
In fact, many people criticize Ethereum for being congested. But I think this perfectly reflects Ethereum’s value. Other than Bitcoin or Ethereum, is there a third blockchain on earth that claims to be congested? No! Congestion is a great indication of the value of Bitcoin and Ethereum.
Some people ask whether Newton can support so many transactions in chain-commerce. What if there’s congestion? My response is that Newton’s congestion will be great news for me – that means Newton has become the world’s third most-congested blockchain! In Newton’s community and ecosystem, that means all transactions must be based on NewChain. For Newton, it’s these applications and transactions that ultimately support our token’s value. So I say that if these applications and transactions lead to congestion, that’s great news!
From this perspective, it is not enough to talk about only TPS. Blockchain is a technology that must serve life, society, and the market.
Many investors say that by next year, Newton may become a shining example of a blockchain project. I expect the value of this example to be reflected in many aspects including project positioning, operational model, and governance model.
Building community economy infrastructure, strengthening governance, collaboration, and incentives of the “iron triangle”
Mars: Newton’s NewChain is positioned as infrastructure, and e-commerce and the community will build an economy on top of that. How will this economy distribute benefits and circulate value?
Xu: Newton positions itself as infrastructure for the community economy. To achieve this, it needs global technology and facilities including software, IoT hardware, tokens, and more. I’ll explain what a community economy is: This is a phrase that I have coined, and it can be contrasted with the corporate-driven economy we live in today. The most fundamental unit of today’s business environment is the corporation. The biggest problem with this model is the Matthew Principle, which states that the many work to benefit the few. I believe that the economic model of the future should be one in which everyone contributes and everyone benefits fairly. The boundaries between corporations and the world outside will be dissolved. This is the community economy.
This economy needs three basic services, which we call the iron triangle:
- Governance: Although it’s a community economy, there’s still a need for electing a group of people to coordinate matters. This group has a boundary, but this has changed from a solid barrier to a permeable membrane.
- Collaboration: How teams (both physical and virtual) work together.
- Incentivization: Who gains tokens, and who will be rewarded or disincentivized.
We’ll build this iron triangle on a foundation of five basic technologies:
- NewChain: We currently have test networks running at a stable 5,000 TPS on over a dozen nodes in the Western USA, Japan, and Singapore, whereas projects like Ethereum and EOS could only reach 3,000 TPS in WAN.
- Decentralized storage infrastructure: From the perspective of volume, only a very few digital assets are suitable to be on-chain, while a great many should be off-chain. Newton will build infrastructure to achieve this.
- NewIoT: Newton is building many IoT devices on the chain, including sensors for video, audio, presence of toxic gases, temperature, humidity, and other data.
- NewAI: Newton has created an AI framework to aggregate and analyses distributed data. Traditional AI is based on big data, but this means handing over huge amounts of data to one party while users lose their rights and privacy. For that reason, I think the future belongs to small data. Everyone owns their own data. With a user’s approval, an AI collects the data, runs calculations, and then wipes the original data from its database.
- Atom hashing: Using the blockchain to record, analyze, and identify things in the physical world.
Basic services for governance, collaboration, and motivation can be built with these technologies. Based on these, Newton has built a layer called Hyper Exchange Protocol on which DApps can be developed.
Chain retail is the first realistic application and focuses more on the incentive model.
Mars: The blockchain brings a new way to distribute incentives, based on Newton’s concept of Chain-Commerce retail. Retail is no stranger to us, but how can we understand “Chain-Commerce “?
Xu: Chain retail is Newton’s first important commercial use case, and will be our first “model scenario.” E-commerce is concerned with cost and efficiency, while Chain-Commerce is concerned with incentive models. Newton’s idea is to convert e-commerce from a machine which has a huge monopoly on cost and efficiency to a retail platform on which everyone contributes and everyone benefits.
At present, this chain-retail project is called NewMall. There’s no giant middleman coordinating trade. NewMall will reduce transaction costs to 8-10%, compared with the 25% of traditional e-commerce giants. Newton will also contribute 8% of transaction costs to our ecosystem through our protocols, motivating those who contribute to a transaction, such as buyers, delivery staff, and so on.
Mars: If one day Chain-Commerce replaces e-commerce, there must be other factors at play. As well as the price/performance and efficiency you mentioned, there must be a new standard that shows the contrast between old and new. What is this standard?
Xu:This standard is the incentive model. Until e-commerce came on the scene, it was very difficult to establish a national monopoly. But now it’s relatively simple to achieve a domestic or even global monopoly like Alibaba, which is a very typical example. From this perspective, e-commerce is a tool that pursues cost and efficiency above everything else, and thus establishes a monopoly. The essence of Chain-Commerce is the exact opposite – that is to establish a new and more equitable incentive model while ensuring costs and efficiency support a top-notch user experience.
Mars: Imagine that users will get incentives by using NewMall. In the past, consumers drift away once they’ve finished with the convenience, services, and goods through consumption. How will users have long-term benefits from NewMall?
Xu: There are two major differences between e-commerce and Chain-Commerce:
- When traditional e-commerce subsidizes users, users get some incentives, but the premise of this benefit is the loss of others. This so-called benefit is merely an illusion. However, NewMall’s benefits are created by our incentive mechanism and are truly valuable.
- NewMall users own the data they generate, and they can manage it with their own private key. In fact, in the short run, your data is very small and has no value at all. But when you add up the data of one million people, that’s big data. I think there’s still a reasonable need to analyze data, but there are two conditions: 1) Data analysis must be based on privacy protection, and 2) Data security and data leaks are not allowed.
Mars: Is NewMall the only retail platform in Newton’s ecosystem? Can anyone open a store on NewMall?
Xu:Of course they can. The whole process is just like in existing e-commerce, including uploading goods, and adding and managing inventory. The difference is that users receive NEW incentives for shopping, and merchants buy NEW to acquire business resources.
Mars: If Newton engages in the e-commerce industry, its TPS will be tested by the real market.
Xu: Yes: But what does 5,000 TPS really mean? Visa’s global payment clearing center only achieves 2,000 TPS. If 5,000 TPS can run at the system’s peak capacity, the daily transaction volume is already 432 million. The daily trading scale is astronomical. I think that’s enough for the next year, and technology is constantly improving. Still, I really hope that NewChain will get congested. As an aside, I think the most interesting side-effect of the blockchain is to inspire people to not take common sense for granted, and you will find that a lot of common sense is untenable.
The blockchain must bring new experiences, and the design of the economic model must match its essence.
Mars: I just saw that Newton wants to do even more than Ethereum. In fact, if you want to build on an ecosystem level, it’s impossible for Newton to go it alone. How do you assemble other forces, and is there a roadmap for the project?
Xu: First, we need to make it clear that Newton’s position is providing community economy infrastructure. Throughout the ecosystem, NewChain, NewNet, and NewIoT are all developed by people. Of course, nobody develops everything from scratch, and we’ve learned from so many existing open-source technologies. Based on Newton’s current progress, there’s no problem with us splitting into five separate projects according to market conditions.
Right now, NewMall is under development, and we’ve also signed a strategic cooperation agreement with a top-ranking state-owned grain group. In future, cryptocurrency transfers can be done directly via NFC. One of our ideas is using NewID and NFC to track when staff leave our office and then pay their daily salary with smart contracts before they get into the elevator to go home. This is just one of the real-world use cases on our minds.
Mars: Can you introduce the design of Newton’s token economy model?
Xu: Newton’s token economy model is in line with the very nature of the blockchain. The essence of the blockchain is the “cash printer” model. First providing a huge value reserve for the future development as fuel, and then using this fuel to generate more tokens. In the early days, a blockchain project’s digital assets had to be very small because there was no need for too many tokens to represent the value. But still, tokens represent a certain value. The initial value is supported by scarcity: There is no value without that.
Therefore, a good token economic model must use a mechanism to release more than half of its tokens over a long period of time, rather than selling them all immediately. This is part of the thinking of Newton’s economic model.
Mars: Before WeChat, you didn’t even know that you would have so many friends, but it was just this kind of thing that created the business value of WeChat – the relationship of dealing with the new world. Supposing the Internet is a parallel world that creates a lot of value, do you think this kind of great value will appear in the blockchain world?
Xu: I think there are three aspects to consider:
- Beyond the changes blockchain brings, human constants will always remain. These are the needs for communication, security, happiness, and the pursuit of leisure and excitement. I think these are relatively long-term and stable internal needs of human beings which support the external changes brought by the blockchain.
- The blockchain will inevitably bring new experiences. If we don’t create new experiences it will all be for nothing. And these new experiences will most certainly be different from those of the Internet and mobile Internet eras.
- The blockchain is an innovation that is different from all prior technological iterations. The past three industrial revolutions realized mechanization, scaling up, and automation of production. What is the essence behind this? The essence is the scale of cost and efficiency, such as electricity scaling up the cost and efficiency of light, and the Internet doing the same for connectivity. What is the essence behind the blockchain? It is the use of certainty to scale up fairness and justice in the world. Certainty creates prosperity, and prosperity has no limits. Certainty minimizes the bad sides of human uncertainty and exerts the good.
Find out more on https://www.newtonproject.org/
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