Blockchain 'unicorn' expected#China Newsweek#-Sino-US

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Blockchain 'unicorn' expected

A Bitcoin coin is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. Photo: Reuters

Blockchain technology, the core technology for the digital currency bitcoin, has been considered to lead another round of revolution after steam, electricity and the Internet.

After years of development, blockchain technology has been extended from the digital currency to other fields, but because of the technological bottleneck and limits of policies, its application was still not in a large scale.

China has eyed on blockchain’s development. Though it has banned the transactions of the bitcoin earlier, it does not mean China will not apply to the new technology. The country will possibly lead in adopting the new technology.

In the 18th issue of 2018, China Newsweek magazine ran a cover story on the blockchain technology, discussing the development of the technology, application scenarios and the governance.

Below is an excerpt of the article.

Blockchain has been a hot topic in the field of financial technology nowadays, attracting lots of companies to invest and research on its applications.

Some scholars have viewed blockchain as the fifth subversive innovation of the computing paradigm after the interconnected mainframe, personal computer, internet and mobile internet.

Blockchain will possibly act like the internet to completely reshape the form of human social activities and realize the transformation from current information internet to value Internet.

As an important innovation in technology, blockchain stands as the vent of internet in 2018, attracting lots of investment, but after the trend, when people calm down, they will face the difficulties in finding the application scenarios.

“If there would be no application scenarios, the blockchain technology will lose the vitality,” said Meng Zhaoli, the head of JD Finance research institute.

When blockchain technology begins to be applied in a large scale, there will be good and bad enterprises, and some will blindly follow others and finally not receive expected benefits after spending a lot.

During the process, besides the government’s supervision role, the market will play a role in relocating the resources, and players will decide their behaviors, and finally, good projects and scenarios will possibly lead to unicorns.

Blockachain 2.0

Speaking of the blockchain, people would first remind the most widely used application -- bitcoin. Before it, basic technologies have appeared, such as P2P network technology, asymmetric encryption algorithm and database technology.

The P2P network technology is the core of blockchain. In P2P network, each node has equal computer status and same network power, and there is no centralized server. All nodes shared the computing resources, software and information through a specific software protocol.

In 2008, “Satoshi Nakamoto” published the article Bitcoin: A Peer-to-Peer Electronic Cash System that is regarded as the foundation of blockchain technology. In 2009, the online currency bitcoin was launched.

“Blockchain 1.0 is mainly used for initial coin offerings (IOC). Some companies issued their digital encrypted currencies represented by bitcoin,” said He Yiping, a Tsinghua University professor.

After bitcoin in operation for years, some financial institutions realized that bitcoin’s bottom technology, blockchain, is a very technology in distributed shared account book and point to point value transfer.

Blockchain is a technology allowing data to be shared among distributed network of computers with no need for middlemen, and the data recorded in a blockchain-based ledger can not be altered.

Around 2014, companies realized the important value of blockchain in the decentralized applications (DAPP), such as distributed ID verification, domain name system and self-governing bodies, as well as the intelligent contracts.

In 2017, Dallas- and Beijing-based mobile-app startup 5miles launched the intelligent commercial contract blockchain CyberMiles, providing customized intelligent commercial contracts for e-commerce companies.

“Based on blockchain, intelligent contracts allow both parities reaching agreements to finish payment directly, no need of third party, which dramatically reduces conflicts and costs, improves efficiency and secures the information safety and transparency,” said Liang (Lucas) Lu, founder of 5miles.

Represented by DAPP and intelligent contracts, such applications of blockchain technology have been considered as blockchain 2.0 that has turned to scenarios in real economy and made breakthroughs in applications, said He Yiping.

“More people realized blockchain will possibly bring changes to the commercial models and social relationship. Companies hope to create incentives in building blockchain, better improving efficiency in production and services,” said He, and the common sense will bring prospects for the technology.

Various scenarios

JD Finance research institute and China Academy of Information and Communications Technology (CAICT) cloud computing and big data institute jointly issued a white paper on the application of blockchain in finance on April 2.

The white paper chose 10 scenarios in finance, including asset securitization, insurance and supply chain finance to research on how the blockchain technology to improve the efficiency in the finance sector.

Zhu Peijiang, secretary general of Zhongguancun Blockchain Industry Alliance, said that blockchain is a new technological system or business mode of no need of centers and middlemen, having no worries of trust.

The advantage of reducing the cost in trading and trust ensures blockchain a bright future, said Zhu, and it can be well used in the world of virtual numbers, especially in finance sector, such as financial games and digital property.

In 2016, there were only six kinds of scenarios mature or with potentials listed by the Ministry of Industry and Information Technology in a white paper, including financial service, supply chain management, culture and entertainment, intelligent manufacturing, social welfare, education and employment.

Now, breakthroughs have been made in the blockchain applications, especially in the finance sector, such as an auto financing program issued by JD Finance and “super account book” developed by online consumer finance technology company LexinFintech Holdings Limited.

He Yiping said blockchain is widely used in various fields, such as medicare, energy, education, cultural and innovative industries, food traceability, sharing economy and supply chain management, as well as internal governance of companies.

On May 9, blockchain platform Vechain and consultancy Price Waterhouse Coopers jointly issued a report on the blockchain applications in non-finance sector, the first of its kind in the industry.

According to the report, a majority of companies adopted the blockchain technology in "anti-counterfeiting traceability", "distributed data storage", "ID verification", "data sharing" and "supply chain management".

The latest report showed that logistics, government projects and medicare have been regarded as the top three fields with great potentials.

Open and inclusive attitude needed

He Yiping said that current blockchain applications remained at some simple scenarios, no core technology breakthrough. His view was shared by Shi Hongzhe, vice president of LexinFintech.

Shi said that there are only a few famous applications such as bitcoin and ethereum, but no other killer applications, and the exploration of technology is still at an early stage.

The trials of blockchain applications mainly happened in private companies according to information made public, and some tech companies have set up special departments concentrating on the research of the applications.

“Now, many companies want to develop blockchain applications, but have not enough talents, and they have to set up labs to attracts talents and foster their technical team,” He said.

He did not think the lack of talents would curb the development of applications, but the core part is that the companies should know of the industries and the technology in depth.

An open and inclusive attitude from government is an important factor for the development of blockchain technology, He said.

In September, Chinese government banned the trading of digital currencies, and pulled the plug on the ICO projects, showing an vague attitude toward blockchain.

He said that the government banned the trading and set restricts on the ICO, but it did not set limits on the blockchain applications, and the central bank also uses blockchain technology in its digital currency.

In fact, the government has some encouraging measures and preferential tax policies, setting up special fund on innovation and industrial parks. “In general, China's block chain policy is friendly.”

Though industries have their unique angles, they have regarded policies as critical factor in the blockchain development, according to the latest report in May.

Shi Hongzhe said that the blockchain technology also has its own problems in performance and storage, and there should be unified standard to protect the data on blockchain

He Yiping said that the government could set up some technical standards, and the difficulty on making unified standard for applications should be solved by market.

Blockchain has advantages and shortcomings, and there will be a lot of work to do at the technical level before it being put into practice to support real economy, said Yao Qian, director-general of the central bank’s Institute of Digital Money.

Yao said authorities have to make laws and policies and technical standards in a pace with the development of blockchain technology to supervise and regulate the sector and prevent risks.

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