Blockchain Might Help Build China’s Industrial Internet

Blockchain, News, Opinion | May 9, 2019 By:

Blockchain technology is fundamentally the automation of trust – replacement of people with machines to execute the transfer of value. Correctly implemented, blockchain technology can lower the incidence of fraud and reduces friction because whatever digital representation of value that happens on a blockchain stays on the blockchain – it cannot be altered. While the government of China has banned crypto trading, ICOs and now may want to stop the growth of crypto mining, it is embracing blockchain technology to help create its “industrial internet.”

At face value, it is clear why the Chinese government would highly value blockchain technology, especially as it can be a tool to reduce corruption. For example, the ability of a corrupt official to cheat the system becomes more difficult – if 200,000 litres of widget juice made in Wuhan were shipped to Shenzhen, an inspector in Guangzhou can’t easily skim 1,000 litres for himself and hope no one will notice downstream that the total volume is slightly off. At each step in the supply chain, the amount recorded originally on the blockchain will be verified before it is passed to the next step, and thus the skimming culprit would be easily identified.

Combining blockchain technology with other data automation technologies such as artificial intelligence (AI) and cloud computing synergistically offers even more benefits. AI is the “automation of inference,” i.e. the automation of detecting patterns and drawing conclusions. Cloud computing is the “automation of IT resource deployment,” where applications and computing power can be accessed as needed on demand.

These automation technologies are made stronger with the use of blockchain technology and vice versa. For example, in a supply chain, blockchain technology can be used to ensure provenance through the supply chain, AI can be used to optimize logistics and detect unusual patterns, while cloud computing can be used as a methodology to more efficiently execute some or all of this technology deployment. As China is the “world’s factory,” obtaining a leadership position in these “industrial internet” technologies is critical to it maintaining continued growth and increasing productivity.

It should be noted that some believe that quantum computing advances, where China has made substantial progress, threatens blockchain technology, which relies on cryptography that quantum computing is “on the verge” of rendering obsolete. While this makes for good sci-fi, the reality that quantum computers are years, if not decades away from achieving this – quantum computers rely on “quantum bits” for computation, which today number less than 100 in the most advanced computers, while hundreds of thousands or millions are needed to break these cryptographic codes. In the interim, quantum resistant cryptography is already well understood and is being integrated into the latest new blockchains – your bitcoins are safe for the foreseeable future!

Of more immediate concern is how blockchain technology can be used for both good and “less good” purposes. As the blockchain allows for full traceability of transactions, state-issued digital fiat currency recorded on a blockchain becomes a mechanism for ensuring the state knows who is transacting with whom. While traditional cryptocurrencies such as bitcoin are pseudo-anonymous and new cryptocurrencies such as Monero and Grin ensure even greater levels of user privacy, any state-run blockchain (just as will be the case with a Facebook Coin) will offer full transaction traceability. While this is largely the case in China already given the prevalence of WeChat Pay and Alipay, a blockchain based state-run currency could provide the government with even greater levels of visibility into its citizens’ lives. While we all enjoy celebrating the benefits of new technology, no one should be surprised when it is also used as a mechanism to monitor and control on a mass scale.