Talk Takeaway: “Fintech & Blockchain in China” by Prof. He Zhiguo (University of Chicago)

I attended a talk by Prof. He Zhiguo from the Booth Business School at the University of Chicago, titled “Fintech & Blockchain in China”. The talk was recorded and I hope it will be shared online for public view later. In the meantime, here are the most interesting parts I took away:

Pig Faces & Fraud Detection in Insurance

…have nothing in common? You read the section title and stare at me with a puzzled look.

You are not alone – that’s what I thought too. But contrary to our belief, the technology of identifying the face of a pig is very valuable for insurance companies to detect fraud. (Yes, “facial recognition” does not necessarily has to mean human facial recognition.)

Here’s the trick: imagine you are an insurance company, and a farm owner comes to you to buy insurance for his pigs – he wants to secure against say diseases or other factors that may cause his pigs to fall ill or die.

As a scheming insurer, you worry about a potential fraud case – say you enter an insurance contract with the farmer for 100 pigs. Ten months later, the farmer comes back to you and argues that one of the pigs has caught an illness covered by your insurance contract – let’s call that pig Piglet X.

Now, how can you be sure that the Piglet X is one of the original 100 pigs covered by your insurance contract? How can you be sure the pig you see today is the same pig you saw ten months ago? The answer is: you cannot – unless you have technology that could reliably recognize the face of a pig!

At current technology levels, an accuracy rate of ~80% is already top of the league – with much room for improvement. When the number of pigs is large enough, a 20% error rate could mean a considerable amount for an insurer!

Understanding Bitcoin Mining: Think About Kings & Followers (a mathematical game-of-thrones)

In explaining the rules-of-the-game for Bitcoin mining, Prof. He used the analogy of a “game-of-thrones”.

In Bitcoin “mining competition”, each round has multiple miners compete for their own block of transactions to be chosen as *the* canonical block that everyone else follows. Think of each round of Bitcoin mining competition as multiple miners competing to be elected the King-of-the-Round that gets to write history – and this history would be recognized as The Universal History that everyone treats as sacred. All other versions of “history” from other miners – those who lose the fight for the throne – are treated as heresy not to be trusted.

Importantly, to be elected the King and to keep the “crown”, you must write history truthfully. If you blatantly lie (e.g., make up a transaction), you risk losing followers, i.e., your people ‘rebel’ and go after a new king. In other words, there are cryptographic / mathematical checks & balances to make sure the “King” does not get to dictate history entirely to his will.

One common critique of Bitcoin mining is that it is an Arms Race – plus a relatively inefficient arms race. With more inputs in the race (i.e., more miners and / or more computing power & energy that enter the race), the output does not grow proportionately.

Money, In Simplest Terms, Is A State-of-the-World With 3 Factors: You, Me, How Much

The concept of money, put simply, is an accounting system – it simply answers this question: who paid whom by how much?

Say I paid you $100. The ‘money’ in this case is a “state-of-the-world” with 3 variables – you, me, how much ($100).

When we say “money”, we mostly care about one of two things:

  1. Who are the transacting parties – sending vs. receiving?
  2. What is the amount transacted?

The forms of money could vary – from paper money to numbers on a ledger to digital entries with no physical form…but all forms of money have one thing in common: they (aim to) represent a state-of-the-world with 3 key factors: You (Who), Me (Who Else), How Much?

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Have comments or want to discuss more? I’d love to hear from you! Write to me at or reach me on LinkedIn. (P.S. At time of writing, I am working at a fintech / blockchain company.)

Interested in other fun events in Hong Kong? Check out this newsletter where I list out events I’m going to this month.

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Special thanks to the University of Chicago for hosting this talk, for free, at their gorgeous Hong Kong campus. The event was well-organized – shuttle buses to and from metro stations, refreshments & food, name badges for registered attendees were thoughtfully provided for. Kudos to the team!