Can China Pursue Blockchain Innovation Amid Cryptocurrency Ban?
China proposes major buying spree of U.S. goods to eliminate trade gap. | Source: Shutterstock
Over the past two weeks, the government of China has effectively banned everything related to crypto trading and investment including news sites, social media accounts, events, and exchanges.
Subsequent to putting an end to virtually all communication and investment channels related to the cryptocurrency market, China has said that it will continue to accelerate blockchain development, doubling down on its $3 billion investment in the technology since the second quarter of 2018.
Centralized Blockchain Networks
Every public blockchain network is equipped with its own native cryptocurrency because every individual on the network has to be incentivized to run an operation, whether that is to mine blocks, develop blockchain-related solutions, and process transactions on the mainnet.
The blockchain can operate without a central authority because of its unique incentivization system that discourages anyone on the network to conduct an activity that does not satisfy one’s financial interest.
But, if there exists no native currency and incentivization system, then a central authority has to be in place to enforce regulations of the protocol.
Throughout the past three months, the government of China has invested more than $3 billion in blockchain-focused funds, despite its heavy crackdown on cryptocurrency publications, events, and trading.
It has encouraged local investment firms, technology conglomerates, and government agencies to do the same, pushing the commercialization of the blockchain at a large scale.
Speaking to CNBC , Beijing-based investment firm BlockVC has said that it is investing in 40 to 50 blockchain-related projects by the end of 2018, focusing on underlying technological development at a protocol level.
Xi Jinping, the president of China, and CCTV, the largest state-owned television network in the country, have consistently described the blockchain as a breakthrough technology, recently reaffirming that the blockchain will remain as one of the core technologies the country will focus on in the years to come.
Structurally, a blockchain network is run by a set of nodes that are not controlled by a central entity or authority. By rejecting cryptocurrencies and focusing solely on blockchain technology, China is leading the development of centralized blockchains that grant a certain group of people more authority over others in the protocol.
But, it remains to be seen whether the blockchain is needed to increase transparency in systems utilized by conglomerates in insurance, finance, and supply chain sectors. Many analysts have said that blockchain technology is necessary as a security system because it is capable of reducing the possibility of rogue actions by employees and bad actors in the space.
Digital signatures and cryptographic time stamps can achieve a similar result, without the implementation of blockchain technology.
Still Some Hope
China has not completely blocked all efforts of public blockchain networks and projects. Last month, the Xiongan government, responsible for building Chinese President Xi Jinping’s dream city the Xiongan New Area, asked New York-based blockchain studio ConsenSys to develop dApps that can be used within the new region.
Founded by Ethereum co-creator Joseph Lubin, ConsenSys is the biggest Ethereum-focused blockchain company in the global market with more than 900 employees that have developed applications like MetaMask to improve the usability of Ether.
The Chinese government’s decision to cooperate with Ethereum developers showed a glimpse of hope in the country’s intent to push blockchain innovation.
Featured image from Shutterstock.
