In a surprise move, the Chinese government’s primary information technology ministry has published a research paper detailing blockchain’s benefits. Although it looks at many industries, the paper highlights the financial sector for blockchain technology’s first applications.
Contributions From Many Chinese Industry and Government Sectors
The paper is titled “The Blockchain Technology and Application Development Whitepaper”. The Chinese Blockchain Technology and Industrial Development Forum produced the paper, with input from MIIT and the National Standardization Committee. They began working on a draft in August.
Several other companies and organizations also participated in the forum, including Alibaba’s Ant Finance, WeBank, Ping’an Insurance (an R3 consortium member), Wanda Finance, Onchain Solutions and Wanxiang Group.
Chinese cryptocurrency portal site BitKan said several local media outlets reported the paper’s publication. As well as finance, the research also looks at other places blockchain technology may be transformative. This list includes several non-financial sectors such as education and social welfare, supply-chain and manufacturing — even entertainment.
Echoing the reports claims, Fortune reported today on a blockchain-based system to track Chinese pork. Walmart plans to use the system, developed by Hyperledger, to improve food safety standards, The blockchain records how food moves throughout commercial networks by tracking transactions at every step.
Finance Will Benefit From Blockchain First
However the paper identifies finance as the first sector where blockchain will make its mark. This could be consumer-level, like payments and user IDs, or further up the ladder in asset management, securities, clearing and settlements.
All these sectors suffer from trust burdens that reduce efficiency and drive up costs. Utilizing blockchain would automate several cumbersome processes that humans now perform.
The paper says payments has the most pain-points, especially when dealing in small transactions. Settling these involves a lot of human intervention which adds cost for both users and companies.
The asset management sector often falls victim to fraud and its associated costs. However if equities, bonds or vouchers can be somehow digitized and placed on a blockchain, owners may transact peer-to-peer — again increasing efficiency. For clearing and settlement, blockchains can help eliminate errors and other process failures.
The whitepaper also looked at smart contracts, saying financial asset transactions are basically contracts between parties. Arrangements like fixed-income instruments, swaps and syndicated loans could be coded on more versatile blockchain platforms.
Other potential applications the paper mentions are a digitized fiat currency, “retro anti-counterfeiting”, and intellectual property in the entertainment sector.
Need For Further Standardizaton
Given the research input from China’s national standardization bodies, readers won’t be surprised that it calls for greater blockchain industry standards. While blockchain technology is still in its infancy, it needs standardization to improve security and commercial appeal.
There are five standards categories, it says. These are the Basics, Process and Methodology, Trust and Operability, Business and Application, and Information Security. It also sets an October 2017 deadline to produce these standards. The timetable consists of four steps: System Pre-Research, Standard Research, Trial and Promotion, and System Improvement.
Acknowledging Blockchain’s Economic Benefits
The paper refers only to non-Bitcoin blockchain applications. However it maintains an optimistic tone and recommends blockchain technology receive favorable policy treatment.
China, and indeed no major government will endorse Bitcoin. Despite this, research like China’s whitepaper shows governments are aware that blockchain tech in some form can bring economic benefits.
It’s a positive sign to hear China’s leaders refer to entrepreneurship and technological research, and encourage further development for this sector. China’s bitcoiners have certainly been innovative in their approach to digital currency business, and we can expect this spirit to continue no matter what the platform.
Is this a new direction for China, or do all governments now acknowledge blockchain’s benefits? Let us hear your thoughts.
News source and translation courtesy of BitKan
Images via Shutterstock, BitKan
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