Use of blockchain is hailed as the next innovation frontier

Cutting-edge digital technology behind cryptocurrencies has transformative potential, say analysts

As the virtual currency bitcoin has gradually become a household name, there has been much discussion about the potential of blockchain, the digital technology that underpins such cryptocurrencies, emerging as the next frontier of innovation.

Blockchain's hallmark is decentralization. Data can be shared among a distributed network of computers with no need for middlemen. Once recorded in a blockchain-based ledger, data is hard to tamper with.

"In the next three years, blockchain technology is forecast to be widely adopted in sectors such as product traceability, copyright protection, bill verification, precision marketing, energy and healthcare in China," says Yu Jianing, director of the Institute of Industrial Economics at the Ministry of Industry and Information Technology.

"Blockchain has the potential to transform the way that individuals and organizations interact, the way that businesses collaborate with one another, the transparency of processes and data, and, ultimately, the productivity and sustainability of our economy," says Steve Lark, partner of Deloitte Technology Consulting, in a recent report. "It can be used across the entire value chain, benefiting businesses and consumers alike."

So far, a complete value chain for the blockchain sector has emerged in China, ranging from hardware manufacturing and security to application services, investment, media and human resources, according to a white paper released by the ministry's information center.

China had more than 450 blockchain tech companies as of March, according to the white paper, and they are exploring ways to apply blockchain in a wide array of areas.

Some startups hope the technology can help transform the intellectual property industry. With blockchain technology, online content such as novels and musical compositions can be copyrighted as soon as the owner creates them. Reprinting or citations are allowed only with the owner's approval; lacking such approval, those who infringe on copyrights can be sued.

Chinese startups Beijing Banquanjia Tech Co and Yuanben Blockchain Co are at the forefront of creating such solutions.

Blockchain technology could also see widespread adoption in intelligent industries, according to Wang Feiyue, director of the State Key Lab-oratory for Management and Control of Complex Systems of the Chinese Academy of Sciences.

Wang says blockchain technology could lay a solid foundation for the development of automation and intelligent industries, in terms of data security and trust.

He says smart contracts - the coding on the blockchain that allows transactions to take place - can help deal with the uncertainty and complexity of the real world, while enhancing reliability and efficiency.

The year 2017 marked the peak year for blockchain development in China, with 178 new companies in the sector. Investors flocked into the market, with nearly 100 equity stock investment deals in that year alone, a record in recent years. Between January and March this year, there were more than 65 equity investment deals.

Besides startup companies, tech giants such as Alibaba Group Holding Ltd are exploring blockchain's potential uses. Alibaba's Ant Financial Service Group announced in April last year that it would open up its blockchain-powered charity platform, Ant Love, to more organizations. It allows parties to better track information on donation history, project disclosures and governance rules.

Li Bin, assistant director of the China Information Technology Security Evaluation Center, says the gradual adoption of blockchain technology across diverse sectors will truly realize cross-industry digital collaboration. It could reduce operational costs while further improving efficiency, Li adds.

"At the same time, such technology can help establish a reliable platform for government supervision of food safety. The quality of life of Chinese and even global consumers can be improved," Li says.

Still, blockchain technology is in its nascent stage. A report from Deloitte says a return on any investment and the full value of implementing a blockchain strategy might not be felt for a number of years, given that the technology is in the early stages and expertise is limited.

Yuan Peizhang, product manager of Beijing Chilun Yichuang Technology Co Ltd, says the blockchain technology in itself is not a problem, but companies could use it as a gimmick to commit fraud.

"Most people lack basic understanding of this new technology, as hardly any courses on it can be found in higher-education institutions," Yuan says. "Many companies are using the blockchain concept as a gimmick, but what they actually do has nothing to do with blockchain."

To further drive the sustainable development of blockchain, the central authorities have expedited the creation of guidelines and standards for the technology.

In December, the Standardization Administration of China approved a project to establish the country's first national industry standards for blockchain technology.

The standards are expected as soon as the end of 2019, according to Economic Information Daily, citing Li Ming, director of the blockchain research institute at the Ministry of Industry and Information Technology. The standards will cover operations and applications, processing and methodology, and information security.

jingshuiyu@chinadaily.com.cn

(China Daily Africa Weekly 07/06/2018 page30)