Long Chen currently serves as the Director of Luohan Academy, he is also executive provost of Hupan University of Entrepreneurship. Before that He was the chief strategy officer of Ant Financial Group. Chen received his Ph.D. in Finance from University of Toronto, and was a tenured professor at Olin Business School, Washington University. He shared his views on the logic and progress of permissioned blockchain and its relation to DeFi at the 4th Luohan Academy Frontier Dialogue.
Thanks Steve, it's my good pleasure to share my thoughts today, and the future of finance is of course is a big phrase and we know that scholars wants to be precise and focused, but I think sometimes it's worthwhile to brainstorm on some of the big picture issues. I would like to start with Campbell Harvey's conclusion in his report, in his very interesting paper. So despite the fact that Cam gave a lot of warnings, but I think he's quite enthusiastic as you can hear from him.
He said that, "Ultimately, we see DeFi as the greatest opportunity of the coming decade and looking forward to the reinvent of the finance as we know it." Now that enthusiasm reminds me of that in the past several years I went to United States and London a lot, to talk to many colleagues. And I find that when we talk about FinTech, we talk about different things. In China, FinTech has happened a lot, but without pretty much the arrival of the blockchain. But in Western world, we pay a lot of the hope on the blockchain and of course it's making a lot of progress.
So I think... And that's one of the purpose of we gathering together. To talk about what's happening in the future, because maybe together we can think a little bit different, but that's the more complete picture of what's going on. Now, because we're talking about the future of finance, perhaps we can start by talk a little bit about what are the major functions and challenges of finance. Now, we know that one of the major challenges of the past of finance is to allocate resources using the finance and investment. Another one is to, through resource allocation is to incentivize people's activities and that's always been there, but somehow, I think we have paid much more attention to it, especially since we observe how DeFi is taking off.
If we think about what's a common challenge for these tasks to be done, I think it's the lack of symmetrical information or lack of information, especially the lack of trustworthy information. So that's one problem. And the second problem is that, as in Cam, some have mentioned is that is the efficient use of the information. Sometimes information... Firstly we don't have enough information. Second, even if we do have it, it's trapped in some institutions and each time when we have to do risk assessment, we have to do it repeatedly again and again. So the result, the consequence is that most of the resources, the capacities and our activities cannot be measured in a trustworthy and efficient way, and therefore it's hard to price them, to transfer them and to treat them. So the end result is that the finance ultimately thus far have two big problems. One is that it's not very inclusive. Secondly, it doesn't really serve the real economy very well.
So my first big picture point, I'm trying to put all those different bits of the technology that is transforming finance. But my big picture point here is that actually a lot can be done by just reducing the cost of acquiring and processing information. So when we think about the digital technology, we obviously have the, besides blockchain, we have a lot of other things. We have the connectivity through the mobile internet and IoT. We have big data and we have the artificial intelligence, we have cloud computing and then have blockchain technology. But without blockchain technology we can go very far. And I'm trying to give you some examples what we experienced in China. So China is quickly transforming itself into a somewhat digitized economy and actually without materializing the impact of blockchain yet.
And the picture here, what it shows is that China's e-commerce as a percentage of the retailing and that it has taken off. Back in 2010 it was actually lagging behind many countries, but actually in the past 10 years or so China's retail sales now by the end of last year was about 27% of the retailing. If you look at the mobile payments, so back in 2011 China's mobile payment amount is about a 15 billion and the United States about 8.3 billion. So very similar, but now China is the hundreds times of that United States. So my point here is that without the blockchain, yet China has somehow transformed itself into a mobile style leading country with a lot of applications in finance without that much benefit of the blockchain yet.
Let me give you a couple of examples, one is the lending. So I'm going to use the case of the MYbank. In the past several years, MYbank has served and provided lending to more than 20 million SMEs. Half of the entrepreneurs of those are women and they provide this so-called 310 model. It takes three minutes to apply, a one second to get the funding cross and with zero personnel interference. And that is also working with more than a hundred banks to do that. So it works with financial institutions. That gives the Bengt Holmstrom the famous claim, that information is the new collateral.
So that's on the one example. Another example is something we call CreditPay. So essentially for the young people in China, three out of four do not have credit cards, but in the past several years Ant group has been able to provide credit pay to... It's like a credit, but it happens with a payment. And it has served more than 500 million users in China. I'm giving you a couple of pictures to see what's going on here. You can see that during the COVID crisis, before the COVID you can see that on the left panel, you can see for consumers, the blue bar is the ones that using the credit pay and the red bar is the one without. But you can see that the ones without were hurt most.
Right panel you can see are the merchants. They are the supply side, as you can see also is the ones that do not use the CreditPay, they hurt most. My point here is that CreditPay helps both the consumers and the suppliers, especially a lot of the SME service providers. So that's my first point, without the decentralization, without that of the blockchain, if you have the big data you have the connectivity, you can help the finance a lot and make it so much more inclusive.
China has transformed into a country with more than a billion mobile payment users without that much of the use of blockchain. Now then of course we would like to have the blockchain. Blockchain can solve the problem. I think the main information, if you have it, it becomes much more trustworthy and so it can be transferred. So you don't want this to be trapped into one institution. So I think a couple of ways to do this. One way is to use the DeFi to get around the institutions. Another way is to use the permission chain. They have the multiple institutions, but somehow they trust the agreed upon quality of the information.
So the first part, let me briefly mention of the DeFi part. Now, despite a lot of the concerns some of the experts already mentioned today, I think the DeFi, it starts with the cryptocurrencies has made tremendous progress. Just some examples, you can see that many of the financial institutions that are handling the crypto assets, they have huge valuations. For example, Coinbase it's valuation has grown from 5 billion to a 100 billion. You have the PayPal started to use the Bitcoin and the Robinhood increased from 11 billion to 40 billion within half a year.
So a DeFi world indeed has made a lot of progress. So as back in 2008, we have the Bitcoin, then 2011 we have the Ethereum as the smart contract platform. On top of that we already have the stablecoin, that is to make the currency more stable and it will have the deposit and the lending of the tokens. We have the automated market makers. We also have studied the anchor, the real world asset into the tokens to enter the DeFi world. We also have enabled the real world information to pass into the smart contracts.
So a lot of progress have been made in the DeFi world, and especially what is most interesting is how they use the tokens to incentivize all stakeholders. Indeed, the whole DeFi world grown by financing itself, so I think it's really we can see how a lot of the progress has been made. Of course, it has a lot of limitation of the DeFi world. I think the one major problem is the trilemma.
Beautifully explained by Markus Brunnermeier and his papers. Basically, if you want to get around the current institutions, the cost of approving everything is so high. So it's very hard to be efficient. And it's not only the scalability issue also that we have this Oracle problem because the real world is based on the institutions. So if you want to get around those then basically you are very far from the real world. So in a sense that you are not serving the real world very well yet. You are kind of far from it. So that's a huge problem of the Defi besides its compliance issues. But I think that DeFi as I said, have already made a huge progress, especially with the digitized assets as we know for this beautiful, I'm not sure how beautiful it is, the picture, but we can see that it's already worth like $69 million.
So I think the combination of the Defi and the digitized based assets is likely to take off, but still there's a huge, real economy that there's very little trust, whereas the information that can be put into the Defi world. So that is huge, huge problem if you want to be as inclusive as Cam Harvey has hoped. So that bring us back to the progress of the Permissioned Blockchain. Now that I want to bring and introduce some experience from the AntChain, which is the permission chain powered by Ant group. It's claimed that AntChain has being used for more than 50 use cases, more than a million companies are connected using AntChain. It has more than a 100 million items to upload onto AntChain. And it has the number one accumulation of the patents of the blockchain in the world.
And now, and I don't have time, but basically it tries to provides the basic infrastructure for the Permissioned Blockchain. It has the basic technology on top of that. It has the smart contract platform. Then it can support finance, support, other daily life use cases and also for public services. Now let me give you several examples. One example is that is the Products Tracing on the e-commerce platforms to make sure they are trustworthy and so that has increased the sales by a lot. And so actually hundreds of thousands items on therem, Alibaba's e-commerce platform, the categories of products, they're on-chain and their reputation, the negative review rates actually decreased by 15%. And so somehow they are more trustworthy. And another good example is the Jurisdiction Chain. Now out of about 3,800 Jurisdiction Courts in China, about 3,200 of them now actually can use the evidence from the blockchain from Jurisdiction Chain already. Now another example-
I'm just giving you a two minute warning.
Okay I see. Almost, that's good. So then another thing is that you have Electronic signature. It's not Ant group, but it's one of the studenta I have in China. So what they do is that, this give you several numbers. So all the documents will be digitized and now it's only about 7% but we're really progressing very fast and as my student predicts, as an entrepreneur, that in three or five years, about half of the contracts, all the contracts will be digitized. And as you can see, that can be used, of course, that can be used to support financing because they represents them. And also based on the smart contracts that can be settled quickly. And finally, another interesting example is selling the movie tickets.
And now it uses the tokens and it's found that margin increase that the power, because the fans are able to, they can promote this to their friends. So you can see that the power, as we see in the Western world, in DeFi world, then you can see that the marketing expense, one yuan spending of the marketing that leads to, from three yuan to five yuan. But anyway, so let me conclude. My point here is that I see different types of digital technology, and they are all shaping the future of finance and it's happening right now. So my belief is that DeFi will integrate better with the digital world and make a lot of progress as we already know. It can also be accepted by more institutions. Those institutions can issue tokens and pitch the assets and enter into the Defi world.
So as lot of the participation, I think that's exciting. But still, whatever they do, if they want to serve the real economy well, in the real economy, trustworthy information needs to be digitized. And that probably has to be through the Permissioned Blockchain as that will also help the finance a lot. And that trustworthy information can work with the either Defi world or the transformed financial institutions including those exchanges and the funds, the one who asked Cam Harvey that "how long can we survive?" I think they are trying to make the change too. So in the end, I believe that the digital technology including blockchain are transforming finance, at least in three ways. One way is the much better connectivity collecting and processing information and that can lead to financial inclusion. It's already happening a lot tremendously in some countries like China and other places too.
And then we have the Defi and the digitized world and then we have the finance based on permissioned chain, which actually is connected much closer to the real economy. So I don't think those three groups, they conflict with each other and I don't think they replace each other. But put together, they are making finance much more inclusive, accessible and affordable. And the key is to have all the resources capacity activities measurable in an efficient and trustworthy way. The goal is to improve... The two goals we'll talk about in the beginning as to improve asset allocation and to motivate economic activities. And I think they are going to join force in some way. So let me summarize, I'm going to summarize by slightly rephrase what Cam Harvey stated. I think that's great but I want to rephrase to it a little bit from my point of view, that is finance is an information based activity and digital technology is q revolution of information. So ultimately we believe digital technology will be the greatest opportunity of the coming force to the reinvention of finance as we know. Thank you.
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