What is Alibaba's strategy regarding blockchain and cryptocurrencies?
Recent interview with Jack Ma
Alibaba CEO Jack Ma talked about Bitcoin and blockchain in a recent interview. In response to a question about what he thought about Bitcoin, this is what he had to say:
Honestly, I am not that big a fan of Bitcoin. But I pay special attention to the cashless society, to blockchain technology. Bitcoin, the thing I want to know, what value, what things can Bitcoin bring to society. But, behind Bitcoin, the technology is very powerful. So, my job ... Alibaba and Alipay's job ... is to try to make sure that the world will move into a cashless society. Society can make everybody equal, make everyone inclusive to get the money they need and make sure it is sustainable, inclusive and transparent.
I hate corruption. [If] I don't have opportunity it's okay. But I don't want somebody [using] dirty ways to take away my opportunity. This is why we want a cashless society. But Bitcoin [even though] we watch it very carefully, I will not say I am a fan of Bitcoin. I am always as curious as you are and I don't think I am expert on that. I don't pretend I am. There is one thing I want to share with all of you one day when you do business, or do whatever. If you don't know, it's not shameful. But if you don't know and pretend to know, it is very shameful. I don't know about Bitcoins.
The full question and answer is here:
So in summary, Mr. Ma is saying that:
He supports a cashless society;
He does not think Bitcoin is the way to achieve a cashless society; but
He believes the underlying blockchain approach is potentially very interesting for other applications.
A cynic might point out that as the largest individual owner in Alipay, he is merely talking his book. But a realist would point out that with the rapid proliferation of Alipay and Wechat Payments, China is already well on its way to achieving this digital, cashless ideal while Bitcoin continues to be used almost exclusively for speculation or as a store of value and relatively little for legitimate payment transactions.
The question of whether Alipay’s or Bitcoin’s is the superior approach for mass payments is really a question of a centralized vs. de-centralized approach. At this juncture, my view is that a centralized approach is superior because of the high per-transaction cost of the de-centralized approach.
Alipay can enable payments as low as 0.1 RMB because the marginal cost of recording that transaction is nil. Meanwhile the cost of recording a Bitcoin transaction on the ledger is over $20 and soaring. There is also a difference in processing time — transactions on a centralized platform can be confirmed instantaneously while it can take minutes or hours to confirm Bitcoin transactions.
I understand that a ton of extremely smart people are working on improving blockchain’s fundamental scalability issue — I recommend this article for those who are interested and want to get into the latest nitty-gritty (Preethi Kasireddy: Fundamental challenges with public blockchains). And there are ways around some of the structural disadvantages of the de-centralized approach. But it’s an open question whether these will be able to be fixed to the point where the advantages outweigh the disadvantages for the specific application of digital payments.
And it is in no way pre-destined or “just a matter of time” for these fundamental issues to be solved. Remember that Moore's Law and Metcalfe's Law can drive both a centralized and de-centralized approach in equal proportion. In other words the order-of-magnitude structural gap (BTC’s theoretical 7 transactions per second vs. 256,000 tx/sec actual Alipay peak throughput on Singles Day) does not necessarily close from improvements in processing power. And Metcalfe’s Law already favors Alipay because it is already embedded in virtually every addressable node (people and businesses) in China.
I completely buy into the idea that blockchain and its de-centralized approach will be very disruptive one day. The question is where and how? It could very well be that digital payments is not the place but there are plenty of other areas in the world it can impact. Perhaps other areas where transaction throughput speed is not such a critical factor.
And that’s why I think Mr. Ma draws a major distinction between Bitcoin (and other crypto “currencies”) and the underlying blockchain technology. Indeed, he appears to be quite bullish on efforts to figure out how to apply the underlying blockchain technology and approach in different industries. Here’s a recent example of that: Alibaba Deploys Blockchain to Secure Health Data in China
This was originally published on Quora in December 2017.