Blockchain Research

Explore the latest in-depth research on blockchains and digital assets by Dr. Zou Chuanwei, Chief Economist at HashKey Group.

About Dr. Zou Chuanwei

Dr. David Zou Chuanwei is the Chief Economist at HashKey Group. Between 2006 and 2019, Dr. Zou held various positions in China Investment Corporation (CIC) and Nanhu Finance Corporation. In 2015, he was a winner of the 1st Sun Yefang Prize for Financial Innovation (China’s top prize for economists) and the 5th China Soft Science Prize for his research on FinTech. In 2013, 2014, 2017 and 2021, Dr. Zou’s books were listed as the “financial books of the year” by the China Business Network. In 2019, he was named one of the “top 10 institutional economists of the year” by China Business Network. He has a Ph.D. in Economics from Tsinghua University, a Mid-Career MPA from Harvard University, an M.A. in Economics and B.S. in Statistics from Peking University.

No.237 - Web 2.0 to Web 3.0 - From Electronic to Verifiable Credentials

The current Web 2.0 has its own set of methods for privacy protection. However, the technology involved is essentially different from that of VCs under Web 3.0. In this article, a detailed analysis of the two methods at the technical level will be made.

No.236 - Research on NFT Pricing Discovery Mechanisms

The current focus of the industry’s improvement efforts is NFT financialization. One of the reasons for this endeavor not having proceeded as smoothly as the development of decentralized finance (DeFi) is the difficulty at obtaining effective and fair NFT pricing.

No. 232: NFT Liquidity Solutions and Regulation

This article outlines NFT investors’ pain points in terms of access to liquidity, as well as existing liquidity solutions, their shortcomings, and several innovative solutions proposed by Paradigm. Finally, we discuss recent regulatory developments in NFTs.

No. 230: The Web3 Architecture Prototype and Web3 Middleware

Web3 – sometimes referred to as Web 3.0 – is a vision for the next evolution of the World Wide Web. The concept of Web3 (which slightly succeeds the idea of the metaverse) started to gain popularity in the blockchain space in the fourth quarter of 2021 and is increasingly being invoked in comparisons with the metaverse.

No. 226: Change in Business Model from Web 2.0 to Web 3.0

We are still at the era of Web 2.0 today, but the trend towards Web 3.0 has emerged. The differences between Web 3.0 and Web 1.0 can be identified by comparison in multiple aspects. This article focuses on the business model, underpinned by the relationship between bits and value.

No. 212: Remarks on Digital Currency Plans in Japan, Singapore and Hong Kong

Given Hong Kong, Japan and Singapore are the Asian countries and regions outside of China representing the highest standard of digital currency, in comparing their similarities and differences in digital currency plans, we can not only understand the relationship among retail CBDC, stablecoins and e-money, but also understand the division of labor between the public sector (mainly the central bank) and the private sector in the digital currency ecosystem.

No. 204: The Economics of Metaverse

Recently, Metaverse has been a hot topic. Although there are different views on the development path and format of the Metaverse, there is no doubt that the economic system is one of its core elements. How should we understand the economics of Metaverse? This is what I am going to discuss today in four aspects – 1) scarcity and tradable value, 2) integration of the world of bits and atoms, 3) programmable value, and 4) distributed structure and spontaneous order.

No. 196: Analysis on the Programmability of Money

Programmability of money is a new topic in monetary economics under new technological conditions, covering the following aspects: 1) what does programmability mean for money? 2) what technology could support the programmability of money? In particular, does it have to be digital currencies run on smart contracts? 3) what functionalities can it achieve? and 4) what principles should be obeyed to not impair basic monetary functions (that is, medium of exchange, unit of account and storage of value)?

No. 190: DID A Brand-New Identifier Technology

In recent years, people’s attention to the privacy and security of personal data has increased much significantly. This article will discuss the issue from the perspective of identity management, mainly including four aspects: First, what are the problems remaining with traditional identity management solutions? Second, what is decentralized identifier (DID)? How to technically implement it? Third, what are the bottlenecks in the development of DID? Fourth, what kind of breakthroughs can blockchain technology and DID jointly make?

No. 183: Perpetual Derivatives Contract

In 2021, White and Bankman-Fried raised the concept of perpetual option contracts and proposed their pricing formula. With the emergence of innovative derivatives in the crypto asset market, we analyse the perpetual contracts that are offered by decentralised exchanges.

No. 179: Principle of Stability in Token Economic Models

Token economic models describe the participants, the economic roles of participants, the formats and payment methods of economic activities, and the tokens used in Deco and Deco projects. The stability of token economic models is vital for the sustainable operation of Deco and Deco projects.

No. 178: Introduction to Interoperability

In a recent interview, Mark Zuckerberg brought up “interoperability” while describing the features of the Metaverse. He also emphasised that a set of standards should be defined to support developers and creators in offering “unprecedented interoperability”, allowing users to take their avatars and digital goods from one place to another seamlessly.

No. 174: Identity Management and Privacy Protection of Digital Currency from eCNY

The eCNY’s broad-sense account system is the key to understanding its features such as settlement upon payment and managed anonymity. In this article, we take a deep-dive into the system and discuss identity management and privacy protection of digital currencies.

No. 172: Discussion on the NFT Creator Economy

The “creator economy”, a hot topic among NFT applications, describes a new market that is led by creators during the process of income generation and customer relationship maintenance. Traditionally, creators rely on distribution platforms to access users, but the Creator Economy seeks to challenge this norm.

No. 170: Conditional Liquidity in AMM

Conditional liquidity does not exist in traditional finance. Why can Automated Market Making (AMM) support conditional liquidity? What impacts does conditional liquidity have on AMM and DeFi in general? Analyzing these two questions would be helpful for us to understand the fundamentals of AMM and liquidity.

No. 166: The Basel Framework and Crypto Asset Regulations

This document expands the scope of cryptoassets, defines the classification standards of cryptoassets and discusses how to treat cryptoasset exposures around the three key pillars of the Basel Framework – minimum capital requirements, supervisory review and market discipline.

No. 165: Understanding the Need for NTFs from the Evolution of the Art Market

We can see from this that the development of the current NFT market focuses more on business operation rather than technology. Even though the capacity of the bottom-layer blockchain and the NFT standard have not yet reached the production grade, products can be launched to the market with high-quality IP resources and an operating model that meets target customer’s needs.

No. 164: The Design and Regulatory Challenges of Bitcoin ETF

This article includes three sections: 1) a general introduction about ETF, as the reference for understanding Bitcoin ETF, 2) discussion on two major designs of Bitcoin ETF and the challenges they face, and 3) summary of key obstacles in obtaining SEC’s approval on Bitcoin ETF products.

No. 158: The Framework for NFT Financialization

NFT will be a key component of the blockchain application ecosystem. Particularly, NFT- based Metaverse extends blockchain’s application and user base significantly beyond crypto assets. To tackle these issues, we propose a framework for NFT financialization in this article. We will discuss how to enhance NFT’s auction mechanism and how to construct NFT price index to improve the efficiency in price discovery and NFT circulation.

No. 155: NFT's Implications on the Data Market

NFT’s success in its business model provides a new way to interact with digital assets. Digital assets, as a type of data factor, are standardized as tokens through smart contract standards such as ERC-721 and possess programmable financial or business attributes.

No. 149: Blockchain’s Application in the Carbon Emissions Trading Market

Among all tools to reduce carbon emissions, carbon emissions trading, which transacts carbon credits, is the most effective market mechanism. And carbon tax and subsidy can only be effective with fair price of carbon credits from market transactions as a reference. Carbon emissions trading will drive the research and mid-to-long-term investment in emission peak and carbon neutrality.

No. 145: Internationalization Strategy of eCNY

Although eCNY mainly serves China’s domestic goals of payment modernization at this stage, it is necessary to study eCNY’s internationalization strategy in a forward-looking approach. Firstly, study the feasibility of issuing eCNY in the offshore market based on the flexibility of eCNY design. Secondly, promote the application of eCNY in cross-border payments mainly via its wholesale component and actively participate in the Multi-CBDC Bridge project. Lastly, introduce procedures and requirements for foreign users to register eCNY wallets and relevant quota management standards to better serve their financial needs in China.

No. 143: The Development Outlook of NFT Ecosystem

As NFT gains more popularity, there is increasing discussion on topics such as NFT’s value and the sustainability of the NFT market. eBay’s announcement on supporting NFT transactions further raises questions – is NFT only a short-term phenomenon? Will it grow into a scalable ecosystem like DeFi amid incomprehension and skepticism?

No. 141: Understand Distributed Economies From DeFi

We study the business logic of Deco by analyzing such emerging issues in DeFi in this article. The conclusion is that the J-curve relationship exists between the value created and the scale of Deco. This conclusion not only enhances our understanding on Deco’s development strategy and its competition with centralized economies (Ceco), but also helps to understand Deco’s key mechanisms such as why staking always exists in DeFi and the value that can be captured by governance tokens. This article has three sections: 1) introduction, 2) Deco’s J-curve, and 3) the development strategy and key mechanisms of Deco.

No. 139: Application of Digital Currencies in Cross-border Payments

In cross-border payments, digital currencies refer to CBDC and global stablecoin that have stable value and can perform the basic functions of money (that is, medium of exchange, unit of account, and storage of value), instead of cryptocurrency such as BTC which is mainly for speculation. How should we understand CBDC and global stablecoin? Why can they be used to enhance cross-border payments? What regulatory principles and implementation strategy should we adopt when applying them in cross-border payments? We will discuss these three questions one by one in this article before sharing our suggestions on China’s policymaking.

No. 132: The Design Framework of DeFi Asset Management

Decentralized DeFi AM, together with smart contracts and token economics design, can better meet DeFi investor demand in a self-organized and self- evolving way. Recently, Yield Harvesting and Yield Farm have become popular, revealing the potential of DeFi AM. However, existing practices are driven by bottom-up market innovations, lacking systematic thinking on DeFi AM design. Hence it cannot unlock its full potential.

No. 131: Gaming and Opportunities in MEV Competition

In this article, we analyze the source of MEV, its impact on the Ethereum ecosystem and the MEV profit redistribution market. The possible future state as a result of gaming among multiple stakeholders will also be discussed. Lastly, we summarize key takeaways and potential opportunities from the analysis.

No. 128: The General Theory of AMM

Constant product automatic market makers (AMM) such as Uniswap have achieved great success in the crypto asset market. However, they are also troubled impermanent loss. Some projects attempt to enhance the Uniswap model such as introducing oracle quotations to lower impermanent loss. But there is no commonly recognized improvement plan yet.

No. 126: Innovation of Special Drawing Right in the Era of CBDC

On 23 March 2021, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) announced a possible Special Drawing Rights (SDR) allocation of US$650 billion, to address the long-term global need for reserve assets, benefit all member countries and support the global recovery from the COVID-19 crisis. The formal proposal will be presented to the Executive Board by June. Once the proposal is concurred in by the Executive Board, it would be submitted to the Board of Governors whose decision approving an SDR allocation would require support by members representing 85 percent majority of the total voting power.

No. 124: Application of Multi-CBDC Bridge in Cross-border Payments

This article will discuss these questions in four sections: the models of digital currency’s application in cross-border payments; the design of Multi-CBDC Bridge and its application in cross-border payments, the impacts of Multi-CBDC Bridge on the global CBDC ecosystem.

No. 120: Double-Layer Coupling of Public Blockchain Economy

This article analyzes double-layer coupling of public blockchain economy and the following conclusions are for both Proof of Work (PoW) and Proof of Stake (PoS) public blockchain, with a fixed scale of the bottom layer economy, there is a limit on the scale of the upper layer economy.

No. 107: DeFi Investment Return Calculation: A NAV-based Approach

In this article, we propose a calculation method based on net asset value (NAV). Note that to calculate NAV rigorously, accounting standard needs to be taken into consideration, especially the accrued investment return and the payable financing cost. For the convenience of our analysis, we skip complex balance sheet analysis, and adopt the cash- basis approach instead of the accrual one for investment return and financing cost.

No. 106: The Quantification and Hedging of Impermanent Loss

Impermanent loss is a critical issue faced by liquidity providers in automatic market making (AMM). However, there are many specious arguments about the quantification of impermanent loss. We will clarify these arguments and discuss its hedging strategy based on the quantification of impermanent loss.