Responsible innovation is important, and one should consider its contribution to society and the economy.
Could you briefly introduce yourself?
Hello everyone, I am Meng Yan, co-founder of Solv Protocol and co-author of the ERC-3525 token standard. Currently, I am mainly responsible for the development of the ERC-3525 ecosystem, focusing on research areas including on-chain structured finance, programmable payment networks, digital certificates, and account abstraction.
Since joining the blockchain industry in 2015, I have been involved in disseminating blockchain knowledge, training, and consulting. In 2020, I founded Solv. In 2019, I was honored to be recognized as one of the top ten blockchain education instructors in China. At that time, I focused on promoting and researching token economics, achieving some small accomplishments.
I am widely recognized in the Chinese blockchain community for proposing to translate the English word "token" into "通证" and advocating for in-depth research on token economics. I established the theoretical framework for token economics early on, thus gaining a certain influence in the industry. I have also been invited to renowned Chinese universities such as Tsinghua and Peking University to exchange knowledge and deliver lectures to students.
Could you share your experiences of entering the blockchain industry?
I believe I have had three experiences of entering the industry. The first was in 2015 when I was working at IBM. That year, IBM underwent significant changes as Arvind Krishna, an Indian technical expert, replaced the esteemed John Kelly III as the head of IBM's technology and research. He quickly announced the inclusion of blockchain in IBM's global technology strategy, which greatly impacted me. I was intrigued by this bold reform, as it could be seen as a critique of the previous strategy. Why the urgent change in strategy? This decision piqued my interest, leading me to delve into blockchain and become deeply fascinated by it. I originally worked as one of China's earliest smartphone software development engineers, later transitioning to the field of corporate strategic communication and studying politics, economics, and finance. Combining my technical background with this knowledge, I found blockchain and digital currency to be highly compatible with my interests, even though it was initially just a hobby or professional direction. I aspired to work in the blockchain industry, so I spent my spare time studying cryptography courses from Stanford and the University of Maryland, as well as professional courses on Bitcoin and cryptocurrency from Princeton University.
In April 2017, I had my second experience of entering the industry, deciding to leave IBM to focus on blockchain and AI-related work. Initially, I dabbled in both fields, but by August 2017, I decided to fully concentrate on blockchain. In the initial years, I mainly engaged in dissemination, advocacy, training, and consulting work, and continued to achieve good results until 2020.
During the pandemic, I had rare breathing space to carefully consider my next steps. In my previous work, I often traveled for business, with meetings almost every week, leaving little time for contemplation and exploration of new things. However, in 2020, I had time to reflect and realized that I should create something new. So, in October 2022, I co-founded a new project called Solv with my partners. This marked my third experience of entering the industry, as previously in the blockchain field, I mainly engaged in advocacy and related work, but this time I decided to fully immerse myself in the blockchain industry. This decision made me feel the shift in roles, requiring additional courage and determination. Initially, our project aimed to create a new type of financial application NFT, named "Financial NFT." We realized that existing token standards such as ERC-20 and ERC-721 could not meet our needs for financial NFTs. Therefore, we decided to develop a new token standard ourselves. Thus, in October 2022, we put in 23 months of effort, until September 2022, our token standard finally obtained approval from the Ethereum community and core developers, becoming an industry standard and named ERC-3525.
Key points: My first entry into the industry began in 2015 while working at IBM, where the company underwent significant changes and incorporated blockchain into its global technology strategy. This sparked my deep interest, leading me to study and learn about blockchain, with the desire to transition into the field. In 2017, I left IBM to focus solely on blockchain work, and continued to develop in this field. Finally, in October 2022, I co-founded the Solv project, dedicated to creating new financial NFTs and developing the new token standard ERC-3525, which received approval from the Ethereum community and core developers, marking my third full immersion into the blockchain industry.
Could you provide a detailed explanation of ERC-3425 and Solv?
ERC-3525 is a new type of token standard. Tokens created based on this standard are known as semi-fungible tokens (SFT), which correspond to NFTs. Initially, we planned to create financial NFTs, but during the development process, we found many areas for improvement, gradually forming the standard for SFT. It underwent four major revisions and finally became an industry standard in its fourth version.
So, what exactly does ERC-3525 do? In simple terms, ERC-3525 is used to represent digital promissory notes, a term that exists in Chinese but does not have a direct equivalent in English. Digital promissory notes are extremely common in daily life and business, including invoices, receipts, bills, promissory notes, IOUs, lease contracts, and some non-financial notes such as vouchers, coupons, discounts, and membership cards. They are even more prevalent in the financial and business fields, such as commercial and bank acceptance bills, bills of lading, warehouse receipts, delivery orders, letters of credit, and even cash and stocks can be considered as a form of promissory note. There are also more complex structured assets such as options, futures, asset-backed securities, CDOs, MBS, and more.
In late 2020, we discovered that there was no standard in the entire blockchain industry to represent digital promissory notes. Therefore, we decided to develop a new token standard, ERC-3525, also known as SFT, for expressing digital promissory notes. This standard has the following features: First, unlike ERC-20, it is visual and similar to NFTs, with the ability to display rich information. ERC-3525 can better express complex financial promissory note information, such as maturity dates, interest rates, and interest payment schedules, making it more intuitive and artistic. Second, it is divisible, mergeable, and computable. Like NFTs, it can also display a lot of information, but unlike NFTs, ERC-3525 has the feature of being freely divisible. For example, you can split a bond with a face value of 1000 into one with a face value of 700 and another with a face value of 300, which is beneficial for financial calculations and transactions. Third, it is a container that can package various other assets. You can package different types of assets such as Bitcoin, Ethereum, BNB, etc., into the same ERC-3525, enhancing its inclusiveness and packaging capabilities. As a container, it can independently receive and process asset transfers without the need for a wallet or smart contract. The final advantage is its composability, as it can combine multiple ERC-3525 into a larger composition, further increasing its application flexibility and diversity. ERC-3525 is a very flexible token standard that can package other assets and combine with other ERC-3525 to form larger structured and financial assets. This makes it a very powerful industry-level token protocol, especially adept at expressing and handling promissory notes and other complex financial assets.
As the technical inventor of the Solv team, we can see that the application space for this protocol is almost limitless. However, we cannot develop all applications at once. We need to choose a clear direction and create one or two exemplary products to showcase the advantages and characteristics of ERC-3525. By setting an example, we aim to attract more partners and developers to use ERC-3525 to develop various applications, whether in gaming, finance, or social aspects. We hope that our products are not just superficial, but truly help solve problems and create valuable applications. Our goal is to provide truly valuable applications in the market, contributing to the overall development of the blockchain ecosystem.
In the Solv team, we have developed three products, with the first two being exploratory in nature. Currently, we are mainly focused on an active fund management platform. Active funds are managed by a fund manager (human, robot, or algorithm), and investors (including institutions and retail investors) can purchase fund shares to invest with the fund manager. After receiving funds, the fund manager can actively invest and manage finances, distributing profits to investors, similar to traditional funds.
However, in the blockchain industry, active funds have some security issues, such as improper behavior by the fund manager leading to investor losses. To address these issues, we have built a robust risk control system to ensure that the fund manager complies with risk control requirements while operating the fund, safeguarding the safety and interests of investors.
In traditional industries, funds are usually divided into two categories: decentralized passive funds and active funds. In the blockchain space, decentralized passive funds are managed by algorithms, and investors can collateralize their funds (such as Bitcoin, Ethereum, or USDC, etc.) in Compound. The algorithm will then calculate profits based on pre-set rules and automatically distribute them to investors. The returns on such funds are usually not high, with a few tenths of a percent being common. Recently, there has been an issue of inverted US Treasury bond yields, further lowering the returns on these funds. Active funds, on the other hand, are actively managed by a human or quantitative algorithm to seek higher returns. However, these funds have some security risks, such as improper behavior by the fund manager, absconding, or engaging in irregular trading, which may lead to investor losses. To address these issues, a comprehensive risk control system is needed to ensure that the fund manager uses strategies to achieve higher returns while also ensuring the security and risk control of the fund. Transparency and monitoring are crucial in this process, and there needs to be emergency measures in place, such as redemption or liquidation.
The product launched by the Solv team is an active fund, which went live on March 20, 2023. Through our robust risk control system, we allow quant teams, market makers, and skilled investment managers to issue funds on our platform and raise funds from institutions or retail investors. These fund managers can achieve higher returns through active investment strategies, while we subject them to strict risk control and monitoring to ensure the safety of funds and protect investor interests. Due to the successful establishment of our risk control and security system, our product has achieved significant results in the DeFi protocol during the bear market and should be able to rank in the top ten.
Key points: We have developed a new token standard ERC-3525, abbreviated as SFT, for expressing digital promissory notes. The standard features visualization, divisibility, mergeability, computability, containerization, and composability. We are currently focused on a product called "active fund," ensuring investor safety and interests through a robust risk control system. Our product has achieved significant results in the blockchain industry, ranking in the top ten in the DeFi protocol.
What is your most memorable experience in Web3?
My views on blockchain and digital assets are closely related to my personal experiences. I focus on innovation, considering innovation and entrepreneurship as value investments, and being very cautious about speculation. This view is mainly the result of two experiences.
First, after joining the blockchain industry, I experienced a surge and then a loss. At that time, I invested in Ethereum and caught a major appreciation in early 2017. I thought that if it continued to rise, I would achieve financial freedom.
However, the ICO boom in 2017 left me in a state of euphoria. I invested in many projects, some of which were from entrepreneurs with prestigious backgrounds, teams from Google, Tencent, and some mysterious hacker teams. Some projects even received endorsements from well-known industry leaders. Like many others, I blindly supported these projects, and as a result, I lost all the money I had earned through Bitcoin and Ethereum in five to six investments. From this, I realized that diversifying investments during a bear market does not guarantee that there will be profitable projects. Even assets as resilient as Bitcoin and Ethereum experience fluctuations, and those with impressive backgrounds do not necessarily understand blockchain better or take the industry more seriously than I do. Although they may have deeper technical backgrounds and even success in the Web2 field, high-quality projects in the blockchain and Web3 fields have unique characteristics, focusing more on community building and requiring an open community, rather than placing too much emphasis on the backgrounds of investors or founders, especially educational backgrounds. Instead, it is crucial to accurately assess the speculative mindset of the other party. Upon reflection, I found that many such founders were not as persistent and dedicated to the blockchain industry as I was. They took advantage of the industry's popularity to make a quick profit, then abandoned it due to a lack of persistence and a deep understanding of the industry, essentially behaving as speculative entrepreneurs. Conversely, many successful project teams do not have impressive educational backgrounds but possess strong practical abilities, deep understanding, and a firm commitment to decentralization. This is the root of creating value.
Secondly, over the years, I have made friends from all walks of life in the crypto community and observed their experiences. Although I cannot mention specific individuals or events, after long-term observation, I have a deep feeling that few people can leave the gambling table or consistently profit in the trading market. Although some people may make huge profits in the short term, such as by catching a couple of meme coins or leveraging to gain high returns, they often boast about their ideas when they are successful, which are often destructive to values, but at that time, they are indeed in a triumphant and influential position, affecting many people and causing a distortion of values. However, in the long run, most of these people will not be the ultimate winners. They may go bankrupt in the market's drastic fluctuations, end up in jail, or live in exile, or more likely, gradually lose all their money and exit the stage. I used to envy those who made huge profits, but eight years of observation made me understand that speculation, especially unscrupulous speculation and market manipulation, is a game of raising snakes, and the vast majority of people will lose their minds in the market's drastic fluctuations, gradually lose their rationality and bottom line, and enter a game of mutual harm. This is not the industry I want to be involved in.
So, I have undergone a significant change in my investment and wealth views. On the one hand, at this time, I read some classic books on value investing, which sparked my thinking. Buffett has a very important concept, the so-called circle of competence. Buffett believes that within this circle of competence, it is possible to beat the market. Building this circle of competence requires long-term accumulation and learning to establish sufficient knowledge and belief.
So, I started to stay away from speculation and focus more on innovation and entrepreneurship. I believe that through innovation, not only can I create value for the entire industry and community, but I can also build my circle of competence, which is the basis for discussing luck. Through persistent efforts and deep understanding, I believe I can achieve more success in this industry. Therefore, I now devote more of my energy to innovation and entrepreneurship, considering it as my way of value investment, believing it will be a reliable path to wealth growth.
Now, I believe that one reaps what they sow. Fortune comes from luck, while real wealth comes from one's own efforts and sweat. In fact, contrary to the views of the vast majority in this industry, I adhere to my beliefs. Many people believe that the blockchain industry is all about gambling and speculation, and mock me as a bookworm, a pedant. However, I pay little attention to these remarks. I have chosen a path that suits my personality and beliefs, creating truly useful and valuable things for this industry and community through innovation and solid work, while building my circle of competence for investment. In this industry, people with views like mine may be relatively few. But I have unwavering confidence in my beliefs and demonstrate them through practical actions.
Which race tracks do you think have the potential for development in the future of Web3?
The DeFi and public chain tracks are directions that I am very optimistic about. In particular, L2 and ZK, I believe have tremendous prospects at the infrastructure level. ZK can achieve optional and controllable privacy protection while achieving almost unrestricted performance expansion, which is a key technology for the future mainstream applications of blockchain.
The second race track I am optimistic about is account abstraction, also known as smart contract wallets. This technology can make it simple, convenient, and fun to use digital assets and Web3 applications in the future, similar to using regular mobile apps, reducing the difficulty for ordinary users to use blockchain and digital assets. This will attract billions of ordinary users to participate in the revolution of the blockchain industry, which I believe is a very promising track.
The third race track I am optimistic about is RWA. This track involves mapping real-world assets to the blockchain, turning them into programmable digital assets, achieving regulation and liquidity. Through blockchain technology, these traditional offline assets can become more convenient, collateralizable, and tradable. I believe that in the future, trillions of dollars of real-world assets will exist in the form of digital assets, making it the largest, most sustainable, and most impactful direction in the industry.
As for the Web3 social track, although I believe it also has huge potential, I have not yet seen an ideal solution. I hope to see someone provide a convincing design architecture that can reshape the internet's account system, traffic system, information sharing, and privacy protection. Although this track may develop in the future, I believe it may not appear quickly. Currently, there is a lack of theoretical and academic research results in this area, requiring more time and effort to achieve.
What are your future layouts?
My current focus is on the RWA track, because our 3525, as a form of digital promissory note, has rich application potential not only in the field of encryption and digital assets but also in Web3 and pure digital asset fields, as well as in areas such as gaming. Especially in the RWA field, we have incubated a company specializing in providing a digital invoice solution for issuing real-world assets for central bank digital currencies and programmable stablecoins. This company has successfully entered the top 14 projects in the pilot project of the Australian central bank digital currency and received high praise. Of course, I am also very interested in the securitization of government bonds, focusing on how to achieve the tokenization of government bonds in a compliant manner. This includes combining government bonds with stablecoins to make them more efficient with the support of 3525 technology.
The second focus is on digital certificates and programmable currency. I have always believed that payments are the number one application scenario for blockchain. Musk once said that as long as blockchain can solve the payment problem, it will be super useful. Blockchain payments, I believe, have two advantages: borderless real-time settlement and programmability. The former is now widely used, but it needs to enter the real economy and daily payments in conjunction with the progress of CBDC and RWA, while the latter is the most powerful weapon for blockchain payments. We are also researching how to use 3525 technology to express various qualification certificates, such as tickets, business licenses, permits, and qualifications. Even digital assets like invoices are, to some extent, a form of certificate. I believe that ERC-3525, combined with digital certificates, can be one of the best solutions to achieve a secure, open, and programmable currency system.
The third focus is on account abstraction. We are exploring how to combine 3525 technology with 6551 technology to develop the next generation of smart contract wallets, providing richer functionality and stronger capabilities.
The fourth direction is in the environmental protection field, involving carbon emission control, waste plastic management, and garbage classification and recycling. These are areas that require strong support in the real economy, and blockchain and 3525 technology provide very suitable solutions. These directions allow us to use 3525 technology in the expression and management of real-world assets, which is a very meaningful application scenario.
Key points: My current focus is on the RWA track, incubating a company to provide a digital invoice solution for issuing real-world assets for central bank digital currencies and stablecoins. Additionally, I am interested in the applications of digital certificates, programmable currency, account abstraction, and environmental protection. These directions have great prospects for expressing and managing real-world assets using ERC-3525 technology.
What are your thoughts on attracting newcomers?
When it comes to bringing in newcomers, I am more concerned about how to bring high-quality users and funds/assets into this industry. In my opinion, there are two main aspects to this. One is responsibility. Some people, including some regulatory agencies, hope that the entire blockchain industry can innovate responsibly. This statement may sound harsh to many, and they may not be willing to accept it, but I believe it is a very correct proposition. It is about innovating responsibly, considering the purpose of your actions. Are you trying to exploit the greed and ugliness in human nature, or are you using the weaknesses of human nature, or are you promoting the strengths of human nature and making contributions to society and the economy? This includes making contributions to organizations. I know this sounds very idealistic, but it is my genuine belief.
Actually, if you had talked to me about this three years ago, I wouldn't have said these things because at that time, my understanding of this matter was not at this level. Now, I genuinely believe that there are many people who show their claws and talk to you about making money quickly, making you feel that they are genuine, not pretentious, not talking about high-sounding things. Many people sell this kind of persona and criticize those who talk about values as hypocrites. Then they tell you, "I'm just very simple, I'm here to help you make money." Many inexperienced people feel that this kind of person is sincere and naturally develop a sense of trust. But in my years of observation, I have found that these people are basically scammers. I have hardly seen anyone who does this kind of thing achieve very good results because they have lost themselves in the first place.
Returning to the topic, I still believe that we need to bring in higher-quality users, institutions, and funds. From this perspective, I think the value proposition of Web3, which aims to return everyone's accounts, data, and social relationships to their own hands, is a just concept. We are doing RWA to enhance asset liquidity, allowing small and medium-sized enterprises and individuals to access financial benefits without relying on intermediaries such as banks. These are very just and positive goals, and we should strive to do these things well, attracting high-quality users, institutions, and funds into this industry for its healthy and sustainable growth.
I want to emphasize once again that those who show their claws and seem to take pleasure in righting wrongs often do not have good outcomes. I have seen many such people, and I have envied them and even thought of heading in their direction, but in the end, I realized that their outcomes were not optimistic. Some ended up in poverty, hiding and evading, and some even ended up in jail. I do not envy such a life, so I have chosen a more responsible, healthy, and sustainable development path, not because I have particularly high moral standards, but based on my observations of the industry, this is the right direction, a hopeful and sustainable direction.
Ultimately, our goal is to enhance asset liquidity, drive social and economic development, provide more opportunities for small and medium-sized enterprises and individuals, and ensure that everyone can access their rightful financial benefits. We hope to attract more responsible, visionary, high-quality users and funds to collectively promote the development and progress of the entire industry.
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