China has given strategic priority to blockchain technology. The blockchain-based service network, or BSN, is part of an effort to enhance its capabilities in this sector.
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Chinese President Xi Jinping has announced that his country must “seize the opportunities” presented by blockchain technology.
In a speech in 2019, the Chinese leader said the blockchain was “an important breakthrough in the independent innovation of core technologies.” As a result of that speech, blockchain was promoted as a national priority for China, among other technologies – such as semiconductors – that the country is trying to increase its power.
Since then, without much hype and fanfare, China has been building a platform aimed at facilitating the installation of blockchain technology for companies. This is called a blockchain-based service network (BSN).
Here is what we know so far.
First, what is a blockchain?
Blockchain first gained popularity as the underlying technology of cryptocurrency Bitcoin. It is a distributed record of activity that records transactions on the Bitcoin network.
It is decentralized and no single entity owns or operates it. Instead, it is maintained by a network of participants running special computers.
Since then, there have been various definitions of what a blockchain might look like. Some companies or governments may refer to it as distributed laser technology. Much of this stems from whether the blockchain is public or private.
Unauthorized blockchain – also known as untrustworthy or universal blockchain – allows anyone to join and potentially switch to blockchain, unless they are running a specific software or device.
In contrast, approved blockchains typically allow private and only certain participants to be involved in their use.
Why use blockchain?
Proponents of the technology say blockchain can help bring transparency and speed to generally slow and expensive processes, such as cross-border money transfers.
Another important aspect of blockchain technology is the so-called smart contract. These are written agreements in the code, which are automatically executed if certain conditions are met. Proponents of her case have been working to make the actual transcript of this statement available online.
“We think blockchain technology is so powerful that it will change the architecture of the entire Internet and almost all IT systems,” Ifan Hey, CEO of RedDate Technology, told CNBC.
Red Date Technology is one of the founding members of China’s blockchain-based service network.
“Blockchain technology in general is very important to China, because government officials see it as a small barrier to entry into the technology sector, and Chinese companies want to push the envelope to use blockchain applications to solve real-world problems,” said Paul Triolo, Technology Policy. The consulting firm, led by Albright Stonebridge, told CNBC.
What can China’s BSN do?
BSN’s product targets companies, especially those that operate cloud computing infrastructure. It could be a big public cloud player like Amazon or Microsoft, or it could be a firm that runs its own private cloud or intranet.
BSN calls itself a “one-stop shop” for placing these blockchain applications in the cloud, a process that could otherwise be costly and time consuming.
Another selling point of the Chinese firm is that it is trying to solve a difficult problem in the industry: interoperability – or different blockchains working with each other. For example, if both banks have applications that were built on different blockchain platforms, they may not be able to work with each other. But applications created through the BSN infrastructure will be interactive as the company bridges various blockchains.
For companies that want to use a number of blockchain applications in their organization, BSN’s products allow them to do so through cloud vendors instead of installing a bunch of new servers to create their blockchain products. The idea is that a business or government can easily install blockchain applications using BSN’s platform, without the high cost.
Demand is low now, according to Red Date’s Hee, but he is optimistic about the product’s long-term future.
“I believe that in 10 years there will be an ideal blockchain environment for managing all blockchain-related applications across the cloud,” the CEO said.
One key thing about BSN is that it does not create its own blockchain.
There is no cryptocurrency attached to the BSN platform. Because China has effectively banned and outlawed cryptocurrency-related activities.
Jehan Chu, managing partner of Hong Kong-based Kinetic, a venture capital firm and investor in Red Debt Technology, told CNBC that the government and large companies do not want or need a cryptocurrency linked to their infrastructure.
“This is where non-crypto comes into play and BSN offers a mandatory infrastructure,” Chu said.
Non-crypto blockchains can be attractive to large companies that do not want to come into contact with the risky and volatile nature of digital currency.
Who is behind BSN?
Start-up Red Debt Technology, headquartered in Hong Kong, is one of the founding companies behind BSN.
However, the project is also supported by companies affiliated with the Chinese government. These include the State Information Center (SIC) under China’s powerful National Development and Reform Commission (NDRC).
China Mobile, a state-owned telecommunications company, is also supporting the project.
The challenge of going global
BSN has ambitions to go global. However, its connections with the Chinese government could make it difficult.
“Part of BSN’s interest is that it is such an ambitious initiative. This ambition also means that it has come under heavy scrutiny because of the Chinese government’s connections,” said Trilolo from Albright Stonebridge.
He added that BSN “is trying to separate the BSN international part from the domestic effort, and [trying] To stay away from the support of the Chinese government. “
He, the CEO of Red Debt Technology, did not miss the challenge.
“This is a huge, huge challenge,” he admitted when asked about his plans to go global and his perception of being involved with the Chinese government.
He said the international version of the platform would be open-source, allowing participants in the public domain to inspect the code for any possible backdoor.
Meanwhile, the focused nature of BSN’s blockchain efforts could also be a global challenge.
“There is a fundamental discrepancy between China’s ambition to support a domestic blockchain development ecosystem and the decentralized nature of blockchain technology,” Garrick Hillman, head of research at Blockchain.com, told CNBC.
“Unless China finds a way to get comfortable with the disruptive power and loss of centralized control underlying blockchain adoption, China is unlikely to become a global leader in this strategically important technology sector.”
The CEO of RedDate admits that not having crypto on their platform is a challenge. He says “a lot of people aren’t interested” in the non-crypto blockchain offer.
Blockchain vs. China’s ambition
Over the past few years, the United States has engaged in a fierce technological competition.
China has focused on “frontier” technologies, including quantum computing and semiconductors. Blockchain is another area of importance.
Chinese technology companies have also emphasized international expansion, a move backed by Beijing in the wake of the global technology war with the United States.
“The significance of the blockchain service network is that it is an effort by the Chinese government to assist in the development of blockchain ecosystems on its own terms, including allowances for regulatory procedures in various jurisdictions,” Triolo said.