China has made blockchain technology a strategic priority. The Blockchain-Based Services Network, or BSN, is part of an effort to advance its capabilities in this area.
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President of China Xi Jinping stated that his country needs to “seize the opportunities” presented by blockchain technology.
In a speech in 2019, the Chinese leader said blockchain was an “important breakthrough in the independent innovation of core technologies.” As a result of that speech, blockchain was elevated to a national priority for China, among other technologies — such as semiconductors — that the country is trying to bolster its capabilities.
Since then, without much publicity and fanfare, China has been building a platform to facilitate the implementation of blockchain technology for companies. It’s called the Blockchain-Based Services Network (BSN).
Here’s what we know so far.
Blockchain first gained fame as the underlying technology of cryptocurrencies bitcoin. It is a distributed ledger of recorded 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 dedicated computers.
Since then, there have been various definitions of what blockchain might look like. Some companies or governments may call it distributed ledger technology. Much of that stems from whether the blockchain is public or private.
Permissionless blockchains – also known as trustless or public blockchains – allow anyone to participate in and have the ability to make changes to the blockchain, as long as they are running a specific piece of software or device. body.
In contrast, licensed blockchains are typically private and only allow certain participants to participate in their use.
Advocates of the technology say that blockchain can help bring transparency and speed to often slow and expensive processes, such as cross-border money transfers.
Another important aspect of blockchain technology is the so-called smart contract. These are contracts, written in code, that execute automatically if certain conditions are met. Advocates see this as key in areas like trade finance.
Yifan He, CEO of Red Date Technology, told CNBC: “We think blockchain technology is so powerful that it will change the entire internet and almost the entire IT system architecture.
Red Date Technology is one of the founding members of China’s Blockchain-based Services Network.
“Blockchain technology in general is very important to China, as government officials see it as a low barrier to entry for the tech sector and want Chinese companies to promote the use of apps.” blockchain to solve real-world problems,” Paul Triolo, lead technology policy at consulting firm Albright Stonebridge, told CNBC.
BSN’s products are aimed at companies, especially those that operate cloud computing infrastructure. It could be a large public cloud player like Amazon or Microsoftor it could be a company running its own private cloud or intranet.
BSN bills itself as the “one-stop shop” for deploying these blockchain applications in the cloud, a process that can be expensive and time consuming.
The other appeal of the Chinese company is that it is trying to solve a difficult problem in the industry: interoperability – or making different blockchains work with each other. For example, if both banks have applications built on different blockchain platforms, they may not work together. But applications built through the BSN infrastructure will be interoperable as the company connects different blockchains.
For companies that want to use some blockchain applications in their organization, BSN’s product will allow them to do so through the cloud provider they use instead of installing a bunch of servers. new to building a blockchain product. The idea is that a business or government can use BSN’s platform to easily deploy blockchain applications without incurring high costs.
Current demand is low, according to He of Red Date, but he is optimistic about the product’s long-term future.
The CEO said: “I believe that in 10 years, all clouds will have a standard blockchain environment to handle all blockchain related applications.
However, a key point about BSN is that it does not create its own blockchain.
No cryptocurrency is pegged to BSN’s platform. That’s because China effectively banned it activities related to cryptocurrencies and make them illegal.
Jehan Chu, managing partner at Hong Kong-based Kenetic, a venture capital firm and investor in Red Date Technology, told CNBC that governments and large-scale companies do not want or need a cryptocurrency tied to their infrastructure.
“This is where the non-crypto use case comes in, and BSN provides an attractive infrastructure,” said Chu.
Non-cryptocurrency blockchains can be attractive to large companies that do not want to be exposed to the risky and volatile nature of digital currencies.
Start-up Red Date Technology, headquartered in Hong Kong, is one of the founding companies behind BSN.
But the project is also supported by entities with links to the Chinese government. This includes the State Information Center (SIC) under China’s powerful National Development and Reform Commission (NDRC).
Chinese phonea state-owned telecommunications company, is also backing the project.
BSN has ambitions to go global. However, its links to the Chinese government can pose a problem.
Mr. Triolo from Albright Stonebridge said: “Part of the reason for the interest in BSN is that it is an ambitious undertaking.
He added that the BSN “is trying to separate the International BSN part from its domestic efforts, and [trying] to stay away from the backing of the Chinese government. “
The challenge is not lost for He, CEO of Red Date Technology.
“It’s been a big, huge challenge,” he admitted when asked about his plans to go global and the perceived connection to the Chinese government.
He said the international version of the platform will be open source, allowing public domain participants to examine the code for any potential backdoors.
Meanwhile, the centralized nature of BSN’s blockchain efforts can also be a challenge globally.
Garrick Hileman, head of research at Blockchain.com, told CNBC: “There is a fundamental incompatibility between China’s ambition to support a domestic blockchain development ecosystem and the decentralized nature of China. blockchain technology.
“Unless China can somehow find a way to become comfortable with the disruptive power and centralized control inherent in blockchain adoption, China has no chance of becoming a leader.” global leader in this strategically important technology area.”
The CEO of Red Date also acknowledged that not having crypto on their platform is a challenge. He said “a lot of people aren’t interested” in the non-cryptocurrency blockchain offering.
In the last few years, the United States has engaged in a fierce technology competition.
Chinese tech companies also put a lot of emphasis on international expansion, a move backed by Beijing amid a global tech war with the United States.
“The significance of the Blockchain Service Network is that it is an effort by the Chinese government to support the development of the blockchain ecosystem on its own terms, with permission for the blockchain,” said Triolo. with regulatory approaches in different jurisdictions”.