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China Pushes for Blockchain Dominance But Will the World Trust It?

FILE - A participant talks on his phone at the Delta Summit, a blockchain and digital innovation event, in Ta'Qali, Malta, Oct. 3, 2019.
FILE - A participant talks on his phone at the Delta Summit, a blockchain and digital innovation event, in Ta'Qali, Malta, Oct. 3, 2019.

Despite Washington’s pushback against China's ambition to lead the world in building emerging technologies such as 5G, Beijing next month will launch a global effort in developing blockchain, a distributed database that experts say could reshape businesses around the world.

Starting August 10, China will roll out the international version of its blockchain infrastructure, the Blockchain Service Network, or BSN. The network gives developers tools and access to blockchain technology through BSN’s overseas data centers so that they can build applications for businesses and smart cities.

“As the BSN takes hold in worldwide countries, it will become the only global infrastructure network that is innovated by China, whose gateway access is controlled by China,” the BSN Alliance declared in a white paper last year.

Blockchain is a kind of distributed database with trustworthy record-keeping that makes possible cryptocurrencies like bitcoin as well as new types of products like digital identification. The technology has the potential to create decentralized, more transparent digital networks.

U.S. Representative Bill Foster, a congressman who holds a doctorate in physics and is a leader of a group of American lawmakers studying the technology, has called it “a disruptive technology that will change the way we do business in almost every sector.”

Blockchain technology can create more transparent record-keeping with open-source code to create trustworthy databases. But China’s system is a more centralized alternative overseen by the BSN Alliance, a group of state-owned companies that designs its digital architecture and maintains control over the databases.

China hopes that this managed network, which it says offers cheaper costs and better interoperability over other competitors, will become the preferred option for businesses and governments trying to use the technology.

Backed by the Chinese government, BSN already is the world’s largest blockchain ecosystem that is expected to serve as the backbone for massive interconnectivity both in China and around the world. It already has more than 100 city-nodes, or physical devices running on the network, stationed on six continents. The network hopes to deploy up to 200 more by the end of this year.

A Chinese national priority

Just as the country’s aggressive international expansion in other major emerging technologies such as 5G and artificial intelligence, China declared blockchain a national technology priority in 2016. It was mentioned twice in the Chinese State Council’s 13th five-year economic plan that was released that year.

Chinese President Xi Jinping emphasized blockchain as “an important breakthrough,” and promised that China would “seize the opportunity” during his speech in October at a so-called "collective study" session held by the Political Bureau of the Communist Party of China (CPC) Central Committee.

In Xi's words, China will “take the leading position ... occupy the commanding heights of innovation, and gain new industrial advantages.” The meeting had only one agenda on the table: the current status and trends of blockchain technology.

"China is the most active major national government in the world in blockchain development. China is one of the few countries that sees blockchain as a strategic emerging technology, alongside areas such as artificial intelligence and 5G wireless," Kevin Werbach, a professor at the Wharton School, University of Pennsylvania, told VOA.

China now has more than 700 blockchain projects registered since last year with the country’s Cyberspace Administration. According to a white paper on China’s blockchain patent application released last Friday, China holds more blockchain patents than any other country in the world. Eric Jing, Chairman at China's tech giant Alibaba's Ant Financial Services, told reporters last week that users of its blockchain service are uploading 100 million digital assets a day – mostly records of transactions.

A blockchain with Chinese characteristics

BSN was born last spring while the world was struggling to deal with catastrophic social, economic, and political challenges caused by the COVID-19 pandemic. As part of Beijing's grand strategy to lead the digital transformation of the world economy, the plan is to make the network so effective and low-cost that it becomes the dominant provider for blockchain cloud computing services.

"The concerns are that more developer and customer mindshare will shift to Chinese platforms and that China will push technical standards to reflect its policy positions," said Werbach, who once served as a consultant for the CIA on a blockchain training program.

Werbach said that is why it’s essential to the Chinese blockchain system is different from the open models that emphasize decentralization.

The geopolitical implications of the technology depend on who designs and implements the technologies, argued Werbach, who has written extensively on emerging technologies such as blockchain. "China is focused more on permissioned blockchains for enterprise applications, and on Chinese platforms that build in the capability for oversight and compliance that the Chinese government requires," said Werbach in an email to VOA.

Two days after Xi’s speech last year, a blockchain initiative announced by the CCP enabled party members to pledge their loyalty to Xi, by immutably recording it on the blockchain ledger.

As Chinese leaders press the country’s engineers to forge ahead on the technology, companies overseas are sounding an alarm that the United States is ceding its role as the internet’s leading innovator.

A recent white paper co-authored by Amazon Web Services, IBM, Deloitte, and others noted that U.S. military is falling behind China and Russia in a blockchain arms race.

"While China and Russia have invested millions of dollars worth of research and development (R&D) into the technology, the policymakers of our country are still trying to understand what the technology is," said the paper that was released last May.

A report published last year by the Wharton School of the University of Pennsylvania also warned about China’s blockchain dominance: "By all counts, China is leading the world in the use and development of blockchain technology.”

"We are way behind China when it comes to blockchain technology," Chris Larsen, executive chairman of Ripple Labs Inc, a U.S.-based leading blockchain company, told The Wall Street Journal recently.

Werbach said if U.S. policymakers and companies do not compete for blockchain business, "blockchain with Chinese characteristics will become more of the norm."

On the other hand, some analysts remain skeptical that China is leading the world on technology. Larry Wortzel, a commissioner of the U.S.-China Economic and Security Review Commission of the U.S. Congress, pointed out in an email to VOA that IBM and other American companies have the technology and use it. "I do not believe the US is losing a Blockchain race,'" said Dr. Wortzel.

In the “top 50 blockchain company” list compiled by Forbes last year, Amazon was ranked number one with Ant Financial of China's Alibaba second. Among the top 5 companies, two are Americans, two are Chinese ones, and one is from England.

Martin Chorzempa, a research fellow at Peterson Institute for International Economics, told VOA that most of the money China is pouring in would be wasted. "As we can see from the recent global pushback against Huawei, especially in Australia and Europe, I do not see it as plausible that the world will adopt on Chinese blockchain infrastructure."