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Chinese explanatory blockchain: what is BSN?

China has made blockchain technology a strategic priority. The blockchain-based service network, or BSN, is part of its efforts to expand its capabilities in the sector.

Yuitira Chino | Moment | Getty Images

Chinese President Xi Jinping said his country needed to “take advantage of the opportunities provided by blockchain technology.”

In his speech in 2019, the Chinese leader said that the blockchain is “an important breakthrough in the independent innovation of basic technologies.” As a result of this speech, the blockchain has been made a national priority for China, among other technologies – such as semiconductors – in which the country is trying to increase its capabilities.

Since then, without much publicity or fanfare, China has been creating a platform that aims to facilitate the deployment of blockchain technology for companies. This is called a blockchain-based service network (BSN).

That’s what we know so far.

First, what is a blockchain?

Blockchain first became known as the core cryptocurrency technology bitcoin. It is a distributed activity log that records transactions in the bitcoin network.

It is decentralized, and no entity owns or manages it. Instead, it is supported by a network of participants working on specialized computers.

Since then, there have been many different definitions of what a blockchain might look like. Some companies or governments may call this distributed book technology. Much depends on whether the blockchain is public or private.

We believe that blockchain technology is so powerful that it will change the entire Internet and almost the entire IT system architecture.

Yifan He

CEO of Red Date Technology

Unlicensed blockchains – also known as untrusted or public blockchains – allow anyone to join and potentially make changes to the blockchain while they are running on specific software or device.

In contrast, allowed blockchains are usually private and allow only certain participants to participate in their use.

Why use a blockchain?

Proponents of the technology say blockchain can help provide transparency and speed to typically slow and expensive processes such as cross-border remittances.

Another important aspect of blockchain technology is the so-called smart contracts. These are contracts written in codes that are executed automatically when certain conditions are met. Proponents see them as key in areas such as trade finance.

“We believe that blockchain technology is so powerful that it will change the entire Internet and almost the entire architecture of the IT system,” said Ifan Hae, CEO of Red Date Technology.

Red Date Technology is one of the founding members of the Chinese blockchain-based service network.

“Blockchain technology in general is very important for China, because government officials see it as a low barrier to entry into the technology sector and want Chinese companies to push for the use of blockchain applications to solve real-world problems,” – Paul Triola, technology policy . head of consulting firm Albright Stonebridge, CNBC reported.

What can the Chinese BSN do?

The BSN product is targeted at companies, particularly those working with cloud computing infrastructure. It could be a large public cloud player such as Amazon or Microsoft, or it could be a firm that manages its own private cloud or intranet.

BSN advertises itself as a “one-stop shop” for deploying these blockchain applications in the cloud, a process that could otherwise be expensive and time consuming.

Another point of selling the Chinese firm is that it is trying to solve a complex problem in the industry: compatibility – or make different blockchains work with each other. For example, if both banks had applications built on different blockchain platforms, they may not work with each other. But applications built with the BSN infrastructure will be compatible as the company connects different blockchains.

For companies that want to use multiple blockchain applications in their organization, the BSN product will allow them to do so through the cloud provider they use, rather than installing a bunch of new servers to create a blockchain product. The idea is that a business or government can use the BSN platform to easily deploy blockchain applications at no great cost.

According to Red Date He, demand is now low, but it is set for the long-term future of the product.

“I believe that in 10 years all the clouds will have a standard blockchain environment to handle all blockchain-related applications,” the CEO said.

However, one of the key points about BSN is that it does not create its own blockchain.

There is no cryptocurrency for the BSN platform. This is because China has actually banned cryptocurrency-related activities and made them illegal.

Jehan Chu, managing partner of Hong Kong-based Kenetic, a venture company and investor in Red Date Technology, told CNBC that governments and large companies do not want and do not need cryptocurrency attached to their infrastructure.

“Here comes the option of using no crypto, and BSN offers an attractive infrastructure,” Chu said.

Blockchains without a crypt can be attractive to large firms that do not want to be exposed to the risky and volatile nature of digital currencies.

Who is behind BSN?

The startup Red Date Technology, headquartered in Hong Kong, is one of the founding companies of BSN.

But the project is also supported by organizations that have ties to the Chinese government. This includes the State Information Center (SIC) under the powerful Chinese National Development and Reform Commission (NDRC).

China Mobile, the state-owned telecommunications company, also supports the project.

The challenge of reaching the global level

BSN has ambitions to enter the world market. However, his ties to the Chinese government may make this difficult.

“Part of the interest in BSN is that it’s such an ambitious affair. This ambition also means that it has come under close scrutiny because of its connection to the Chinese government, ”said the Triola of Albright Stonebridge.

He added that BSN is trying to separate part of BSN International from domestic efforts, and [trying] to distance itself from the support of the Chinese government ”.

He, the CEO of Red Date Technology, has not lost the problem.

“This is a huge, huge challenge,” he admitted when asked about his plan to reach the world level and his ties to the Chinese government.

He said the international version of the platform would be open source, which would allow open access participants to check the code for any potential backdoors.

Learn more about technology and crypto from CNBC Pro

Meanwhile, the centralized nature of BSN’s blockchain efforts could also become a global problem.

“There is a fundamental incompatibility between China’s stated ambitions to support the blockchain’s domestic ecosystem and the decentralized nature of blockchain technology,” said Garik Hilleman, head of research at Blockchain.com.

“If China fails to find a way to come to terms with the destructive power and loss of centralized control inherent in the adoption of the blockchain, then China has no chance of becoming a world leader in this strategically important technology sector.”

The Red Date CEO also acknowledged that the lack of a crypto on their platform is a problem. He said “many people are not interested” in the non-crypto-blockchain proposal.

Blockchain against China’s ambitions

For the past few years, the U.S. has been waging a fierce technical rivalry.

China has focused on what it calls “borderline” technologies, including quantum computing and semiconductors. Blockchain is another important area.

Chinese technology companies are also paying close attention to international expansion, which supports Beijing in the context of the global technology battle with the US.

“The significance of the blockchain service network is that it is an attempt by the Chinese government to support the development of blockchain ecosystems on its own terms, given regulatory approaches in different jurisdictions,” Triolo said.

Chinese explanatory blockchain: what is BSN?

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