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China’s Blockchain hustle, hidden agenda and why the world needs to take a note

China Blockchain News

Following is an opinion.

What to expect in this article?

  • A look at a possible hidden strategy behind China’s blockchain initiative
  • Was this all well orchestrated by China from the get-go?
  • What has China done in the blockchain space so far?
  • Is China preparing itself for the post COVID world?
  • Why the world should pay attention to blockchain
  • Are the public networks like Bitcoin and Ethereum an antidote to China’s dominance?

China may have been the villain in the mainstream media and even has been the butt of the jokes about China Distancing, but behind the scenes, it is business as usual in China when it comes to Blockchain Technology Initiatives.

With all the backlash in the manufacturing space, China has been doubling down on its Blockchain hustle.

Is there a hidden strategy behind China’s blockchain endorsement?

Some speculate that China’s overzealous endorsement of blockchain technology might have a hidden agenda.

Majority of the world economies use the US dollars. It is quite expensive to decouple from the reliance of the US dollar.  Even if a country tried to do that – it will draw attention of global players as to the ‘reasons’.   

Generally a country would attempt to decouple from the dollar when they fear the US sanctions or restrictions in participating in the global economy.

China in theory could be using blockchain technology as the trojan horse to bring their digital Yuan on to the global stage.  

While the rumors become stronger by the day that China has intentionally let the world be hit with COVID by withholding information, they may be suspecting some retaliation from the US in form of sanctions that will be hit in the dollar trade and that may have fueled their move to speed up the Digital Yuan plans.

Is this all orchestrated by China?

One could perceive that this is all well orchestrated by China. 

First they take the world’s attention away by ‘letting the COVID spread like a wild-fire’.

Second, they move forward with their blockchain and Central Bank Digital Currency (CBDC, Digital Yuan) plans, even revealing that they are going to pilot it in May 2020.

Third, China has been for a long time accumulating gold to back its Yuen while the US has been printing fiat that does not have enough (if any) reserves backing its value.  With COVID, the US has been forced to print an additional $6 trillion dollars to keep the economy afloat.  This brings the US’s debt to unimaginable levels.

Fourth, China is busy building the world’s biggest public blockchain networks to bring in as many global giants as possible.  Once the technology is built and becomes a staple in the blockchain space – China could easily create utility for its Digital Yuen.

What happens when China introduces Digital Yuen that is backed by real gold and it convinces its allies to take part in commerce using Digital Yuen in place of Dollars?  

While most of the world economies might resist from taking part in this coup, China has some strong allies from Russia, Pakistan, North Korea, etc.,

Even if the US doesn’t lose its dollar dominance as a global reserve, it could still make a big dent in the US’s power to implement sanctions and other disciplinary actions with an alternative to the US dollar in Digital Yuen.

Countries that want to undermine the US sanctions might end up joining forces with China.

How far has China’s blockchain initiative come so far?

Even during the midst of this COVID pandemic, China has been moving ahead with its Blockchain initiatives.  They recently announced that they will be piloting the Central Bank Digital Currency initiative and have listed out multinational companies like McDonald’s, Starbucks as participating members.

It is clear that China is not slowing down, in fact, it is doubling down on its Blockchain initiatives.  Here are few blockchain accomplishments: 

  • Blockchain Service Network

The Blockchain-based Service Network or BSN’s whitepaper describes BSN as “a cross-cloud, cross-portal, cross-framework global infrastructure network used to deploy and operate all types of blockchain applications

BSN aims to change the existing problem of the high cost of developing and deploying blockchain applications by providing public blockchain resource environments to developers, just like the internet, thus greatly reducing costs associated with the development, deployment, operations, maintenance and regulation of blockchain applications and, thereby, accelerating the development and universal adaptation of blockchain technology.” 

BSN wants to provide a global blockchain infrastructure platform for anyone in the world to deploy their applications. The framework will allow anyone from students to large corporations to deploy their applications without great overhead.  The operating costs to deploy on BSN is estimated to be under $300 which is 20% of traditional blockchain cloud services.

  • National Internet Information Office lists 500+ companies alliance

China has disclosed names of over 500 companies that are building their blockchain projects using the BSN.  The names include brand names like Baidu, Alibaba, Tencent, etc.,

  • Other developments

  • Developing Citizen Card, Citizen Cloud Platform, Municipal Public Service Platform, Point payment through Red Date Tech 
  • China piloting Digital Yuen payment system with government offices
  • ICBC Xi Blockchain Service and ICBC Fi­nan­cial Ser­vices blockchain projects facilitate transactions for the bank’s clients
  • Enlisting companies like McDonald’s, Starbucks, etc., in testing CBDC payment systems
  • China Merchants Port to build smart port

As we can clearly see, China is clearly ahead of most of the countries in the blockchain space.  To be fair, a lot of innovation happens in the US, however, the bureaucratic pressure weighs in on the innovation and stifles the speed at which the projects could launch.

While the US has adopted the ‘do-no-harm’ strategy, it is not enough.  

The US has to bring in the necessary changes to the law in all areas of commerce to help blockchain innovation to thrive in the US.

Switzerland seems to be at the forefront of nurturing innovation in the blockchain and crypto space. However, from a mere size of commerce – China far outweighs Switzerland. For this reason, we think an alliance between Switzerland and the US in this space could help both the countries and the world in general.

Is China preparing for the Post COVID new normal?

Zoom which is rumored to have been used by China to spy on the US businesses has integrated crypto payments.  Zoom’s move to integrate crypto payments comes in the wake of people calling to ban its use in the US.  Crypto payments will help the company circumvent any payment issues from the US based payment processors.

At the macro level, deployment of BSN comes at a time when the whole world will look to conduct most of the business activities over the internet in a post COVID world.  Blockchain offers a much secure platform to conduct business virtually.

With over 100 city nodes and an open platform that mandates government and IT Telecom companies to get onboard to further strengthen its network, China might be laying the foundations of the world’s most secure blockchain platform. In spite of the moral differences, companies may be forced to use BSN to leverage its sheer security and broad network, unless the alternatives emerge soon.

Advantages of China’s Blockchain Initiatives

Irrespective of the underlying intention or undisclosed agenda, the investments and direction taken up by China in the blockchain space has some advantages.

Validates the Blockchain technology: Multiple initiatives will act as a stamp of approval for the blockchain technology itself.  While many tout the awesomeness of the blockchain technology – it will mean nothing until it is put to use in real life. China’s push in many areas will help make Blockchain a part of our everyday lives.

Forces other countries to pay attention: China’s move in the blockchain space and their speeding up of CBDC will force the countries around the world to pay attention. The US has already hinted about their plans of digital dollars. The Supreme Court of India has lifted a ban on cryptos.  

Speeds up the legal framework: Innovation cannot happen amidst legal and political uncertainty.  In order to stay competitive, countries will have to introduce a sensible blockchain legal and business framework so that the companies can move forward with their initiatives.  

Disadvantages of China’s Blockchain supremacy

Lack of transparency: Blockchain’s original intent was to promote transparency. And if history is any proof, China’s appetite for transparency is almost non-existent. There is no free google or access to information within China.  Most citizens are privy to the information that the Government deems necessary for them to know. Do we want a country as this to dominate the blockchain space?  Personally, I wouldn’t. 

Domination of Centralized systems: China can easily force companies to adopt their home-grown centralized blockchain systems. When this happens, it could seriously hamper the true spirit of blockchain innovation. We have seen that just this week, McDonald’s, Starbucks and Subway have been on the pilot program to test China’s Central Bank Digital Currency, Digital Yuan.  Whenever a government like China proposes initiatives, it generally is not posed as a ‘choice’, it is usually a mandate for the companies to adopt.  Blockchain’s original design was to promote transparency and accountability but when few people control the entire aspect of blockchain in a centralized system and when that is forced upon others – it only deteriorates the current state of affairs further.

World needs to catch up with the blockchain times

Blockchain timeWith the world wanting to boycott Chinese products because of China’s authoritarian practices and total lack of transparency, one can argue that more of those same attributes will seep into anything developed in China.  

Then a global blockchain network developed by China may cement its position as global leader in a technology that could be leading us in all aspects of our life in the coming decades.

With over 100 city nodes across China the mere size of BSN is already gigantic, and growing by the day.

Instead of countries looking to develop their own blockchain systems, they can develop a legal and business framework to use blockchain technology, specifically public networks. This way, governments around the world can help strengthen the already strong public networks like Bitcoin and Ethereum to circumvent China’s plans to dominate this space.  

And in that effort, they can keep blockchain open, transparent and available.

Thank you for reading and sharing this article. Stay safe and healthy!

Also read:
China Distancing: What does it mean for Blockchain and Crypto?

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