Don’t Sleep on China’s New Blockchain Internet

U.S. national security policymakers are working aggressively to push back China’s global market advance in 5G and artificial intelligence technology. Meanwhile, the Chinese Communist Party (CCP) is progressing unfettered in a parallel technological campaign: expanding global blockchain infrastructure.

Earlier this year, Beijing launched the Blockchain-Based Service Network (BSN), a system of low-cost backend architecture on which software developers around the world can build blockchain applications—including digital assets such as cryptocurrencies. The launch happened a few months after Chinese President Xi Jinping pressed for the nation to leverage blockchain technology to complement the rising economic importance of big data and the “internet of things.” This BSN has received little attention in the U.S.—but if the network gains significant international adoption, it could give the CCP greater influence in digital commerce and complicate U.S. economic statecraft. For decades, U.S. financial authorities have benefited from the ubiquity of U.S. computer infrastructure in global business. The BSN is trying to challenge that norm.

According to the BSN website, the network’s purpose is to become the “blockchain Internet.” CCP leadership believes that blockchain technology offers a foundational infrastructure for future technological innovation and that China should set the global standards in that arena. To begin doing so, China is inviting blockchain developers to build decentralized software applications on the BSN’s Chinese-run servers, even though some of the servers are located outside China. The BSN describes itself as a “cross-cloud, cross-portal, cross-framework, global infrastructure network.” Essentially, it is the plumbing for people to run decentralized computer systems via the network.

China’s State Information Center, an entity under China’s macroeconomic planning agency, oversees the BSN. The center designs information security policies and processes economic data for the CCP. Several state-owned tech companies, such as financial services firm China UnionPay and telecom firm China Mobile, run the technical architecture, such as the network’s nodes and servers. The Chinese government argues that software developers around the world would save money by using the BSN’s computer infrastructure. The BSN charges several hundred dollars per year for server space that would cost developers tens of thousands of dollars if it were provided by Amazon Web Services (AWS) or even the private Chinese internet firm Alibaba. At the same time, the BSN uses cloud space provided by U.S. firms AWS and Google Cloud, in addition to Chinese tech firms, for building its infrastructure. But according to the BSN user manual, its services are cheaper because the network facilitates more efficient server usage by sharing computer resource space across users through a permissioned distributed ledger system. The CCP’s pitch is that the BSN uses a distributed system to take advantage of traditional server architecture and innovate beyond it.

Several popular and highly capitalized blockchain projects have taken up the BSN on its offer, integrating their “chains” with the BSN and enabling developers to create applications on the network. Some of the blockchains, such as Ethereum and Tezos, include many developers from Western nations. These blockchain protocols are more robust than Bitcoin, enabling developers to code “smart” contracts that facilitate more complex transactions and programs. In recent years, projects associated with these newer blockchains have raised hundreds of millions of dollars with the aim of creating decentralized applications and business ventures.

So why hasn’t the BSN received more attention within U.S. national security policy circles? As blockchain experts will admit, decentralized applications have yet to find much market adoption outside cryptocurrency speculation. Despite great hype around blockchain and distributed ledger technology, even die-hard cryptocurrency enthusiasts are still waiting for a decentralized “killer app” that proves the tech might “reinvent the global financial system,” as one blockchain developer who raised millions for a project, but saw his company flounder, put it.

The elusiveness of global blockchain adoption is exactly why China’s strategy deserves attention. For one, the BSN is trying to significantly Become a supporter of IT Security News and help us remove the ads.