“The Support and Use of Blockchain Technology Does not Mean the Approval or the Use of Virtual Currencies or the Speculation of Virtual Currencies” — People’s Daily

Although blockchain technology is usually accompanied with a cryptocurrency — an incentive mechanism, the technology innovation does not translate into the right of speculating virtual or cryptocurrency. It should prevent the use of blockchain to issue virtual currency and to speculate on cryptocurrency. At the same time, we must also see that the blockchain is still in the early stage of development, and needs to be further developed and improved in terms of safety, standards and supervision.

The Chinese Central Government Attaches Importance to Blockchain
These days, the word “blockchain” has become a hot topic for discuss globally. In the 18th collective study of the Political Bureau of the Central Committee, President Xi emphasized that “the blockchain is an important breakthrough for independent innovation of core technologies” to “accelerate the development of blockchain technology and industrial innovation”. The high-level forward-looking statement has made “blockchain” to be on the public’s reader and has become the focus of financial capital, the real economy and public opinion.

Some media have found that in the collective learning of the Central Political Bureau, the frontier of technology is an important content. From network power to big data, from media integration to blockchain, the Central Political Bureau collectively learns to aim at the forefront of technological change. Thereby demonstrating the direction, forward-looking judgment and future foresight of China’s highest decision-making level, so as usher China’s industrial transformation and rapid pace of economic transformation. The collective political study of the Central Political Bureau, with a special emphasis on the “blockchain”, opened up the imagination space for the development and application of the blockchain.

So what is a Blockchain? From a technical perspective, blockchain involves many technical aspects such as mathematics, cryptography, the Internet, and computer programming. However, from an application perspective, it used solve a wide range of technical and global problems. To put it simply, the blockchain is a decentralized distributed shared ledger and database with non-tampering, traces, traceability, collective maintenance, and transparency of the both the technology and solutions it proffers. These characteristics ensures the “honesty” and “transparency” of the blockchain, laying the foundation for creating value and trust in the blockchain. The huge application scenarios of the blockchain technology is basically based on the blockchain to solve the problem of information asymmetry, and realize the collaborative trust and concerted action among multiple subjects.

The Application of Blockchain
In order to understand how the blockchain creates trust, value and cooperation mechanisms, and deliver specific application scenarios, it is important to access the blockchain technology within individual use cases.

Deposit Certificate: The blockchain’s “non-temperable” feature provides a solution to the “certificate of deposit” problem in economic and social development. As long as the authenticity of the information and data is ensured, the blockchain can solve the problem of “storage” and “certification” of information. For example, in the field of copyright, blockchain can be used for electronic evidence for content deposit, which can help guarantee the content deposited will not be altered, and link the original platform, copyright office, judicial body and other parties through distributed ledgers, which will greatly improve the efficiency of handling infringements. Blockchain can create safe and efficient application scenarios in areas such as finance, justice, medical care, and copyright that require high data authenticity. At the same time, since the blockchain records all the transaction information, the blockchain itself can form a credit information, providing a new idea for social credit reporting.
Value Sharing: The “distributed” nature of blockchain can open up “data barriers” between departments and enable information and data sharing. Unlike the centralized data storage, the information on the blockchain is distributed to each node in the form of point-to-point broadcast, thereby leading to “actual recording” of all information sent through “whole network witness”. In the field of public service, the blockchain can be used to achieve the maintenance and utilization of government data across departments and regions, and bring better government service experience to the people. At present, there are some places to explore the real estate data on the blockchain, when buying a house, the people only need to go to the bank to run once to realize the transfer of property rights. It can be foreseen that with the “blockchain + government affairs” landing, cross-department business collaboration will become the norm, and there is no need to “prove my mom is my mother”.
Trust: The blockchain is used to form a “consensus mechanism” that can solve the problem of information asymmetry and truly realize the transition from “Internet based Internet” to “trust based Internet”. Trust is the cornerstone of the operation of the market economy and scarcity. Many problems in economic development are difficult to solve, largely because of lack of trust, high transaction costs, and high risk of default. For example, SMEs have difficulty in accessing financing, and an important reason for this is the “trust” issue. The blockchain is able to bridge the trust gap in project and business financing. It can also help to bridge trust in the supply chain sector. It can enhance the credibility of information in the upstream and downstream of the supply chain. Through the detachable electronic voucher on the chain, the flow of funds can be realized, and information flow, capital flow and logistics can be opened up to solve the financing difficulties of multi-level suppliers.

4. Collaboration: Through “smart contracts”, the blockchain can realize the collaborative trust between multiple entities, thus greatly expanding the scope and depth of human cooperation. The market economy is a complex system. Many actions involve complex actors. How to achieve efficient coordination of multiple parties is a common problem in economic development. Especially in the global context, cross-border payment, cross-border trade, and cross-border logistics are all related to export, import, transportation, and supervision of various countries. Someone made a statistic: In 2014, Maersk “Line transported avocados and roses from Africa to Europe, and the one-month cross-border transportation involved more than 200 communication interactions with more than 30 subjects”. When the blockchain is applied to global trade, all parties can cooperate and manage at the same time to ensure that all information is electronically shared in real time, thereby improving the synergy efficiency and reducing the communication cost, so that the subjects with high degree of dispersion can still cooperate effectively.

Generally, blockchain creates value by creating trust. The blockchain is able to create trust because the information and data stored in it cannot be tampered with and it is usually traceable and witnessed throughout the network, so that trust does not require endorsement by third parties and can be done automatically through a peer-to-peer process. Blockchain technology promotes cooperation because distributed data can achieve node information sharing, and smart contracts are used to coordinate the behaviours of both parties, thereby expanding the foundation of human trust. In addition to third-party guarantees and enforcement, blockchain for the first time enable human trust to be based on logic and mathematics invented by humans themselves. This is the victory of human reasoning, and it greatly enhances the ability of human cooperation.

With the deep integration of blockchain and financial capital and the economy, the value of traditional industries will flow in the digital world, and the blockchain industry ecology will be built to promote industrial transformation and upgrading. As General Secretary Xi Jinping emphasized — “seize the opportunity of blockchain technology integration, function expansion, and industry segmentation. The blockchain will promote data sharing, optimize business processes, reduce operating costs, enhance synergy efficiency, and build credibility and thereby expanding the role of the entire system. With the blockchain’s various application scenarios, the blockchain ecology will be gradually established, thereby injecting new momentum into China’s economic transformation upgrading, and achieving high-quality development”.

Blockchain is the Next Generation Cooperation Mechanism
Blockchain technology is accompanied by cryptocurrency, but blockchain technology innovation does not mean speculating or using virtual currency. However, we must understand that blockchain is still in its early stage of development, and needs to be further developed and improved in terms of safety, standards and supervision. There is nothing wrong with the general direction, but to avoid rushing and repeating blockchain solutions, it is possible to organize the creation of blockchain technology in an orderly fashion. China already has a good foundation in the blockchain sphere. Some large Chinese Internet companies have long entered into the blockchain space with their abundant talent reserves, and the application scenarios being created are very broad. Hence we believe that China is fully qualified to take the lead in this emerging space.

From a broader perspective, human beings can develop civilization because of the effective cooperation between large-scale groups. The “invisible hand” explained by Adam Smith also realized the division of labor and cooperation in human society through market mechanisms. From this point of view, the blockchain greatly expands the breadth and depth of human trust cooperation. Perhaps the blockchain is not just the next generation of Internet technology, but also the next generation of cooperation mechanisms and organizational forms.

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