Reports & Analysis

China’s quest to become the world’s leading power of the Blockchain amid differences with the United States


A Chinese-backed Blockchain infrastructure project aims to become the leading provider of Internet services for decentralized applications (dapp). However, in addition to being a pioneer, this project also faces several geopolitical risks. Just as this project, called the Blockchain Services Network (BSN), is trying to expand around the world, China’s relationship with the United States is becoming increasingly strained. The Blockchain BSN project is supported by the Chinese government; However, few people notice the support of American companies active in the field of technology of this network. In this article from Digital Currency, using an essay Published on the Quin Desk website, we examine the potential geopolitical challenges facing the BSN network.

Amazon Web Services (AWS), Microsoft, and Google are among the leading cloud service providers for BSN project data centers outside China.

Given the US government’s hostile stance on Chinese technology development, these collaborations are significant and controversial. The Trump administration plans to ban American citizens from using the Chinese social networking app Tik Tok. The US Congress also passed a $ 1 billion bill to establish institutions to build and operate suburban telecommunications systems to eliminate the services of Chinese company Huawei. In addition, the US Department of Commerce banned companies conducting semiconductor components from supplying electronic chips to Huawei.

China seeks to become the world's leading power of the Blockchain in the shadow of its differences with the United States

At a July 29 anti-monopoly hearing in the US House of Representatives, Facebook CEO Mark Zuckerberg called the China-US tech rivalry a zero-sum game. Zuckerberg stated:

China is building its own national version of the Internet that focuses on completely different ideas and exports them to other countries.

This stressful environment can create potential problems for the BSN project. Paul Triolo, CEO of Eurasia Group, explained:

China is striving to take the lead in dominating the Blockchain. This may put the BSN project in the spotlight amid competition between the United States and China. Washington may take such a position and take the BSN project under a magnifying glass.

According to Trilo, the US-China rivalry over technology has been going on for decades; But the focus has shifted from search engines and social media to more fundamental levels of technology, such as telecommunications equipment provided by Huawei.

In late July (early August), tensions between the United States and China escalated and the US government closed the Chinese consulate in Houston. In response, the Chinese government closed the US consulate in Chengdu. In a recent speech, US Secretary of State Mike Pompeo explicitly stated that the US-China relationship had failed.

It is unclear whether these tensions will subside in the near future, even if a new president is elected. “Trillo said:

Even if a new administration is to be established in the United States, such as Joseph Biden, the former vice president and Democratic presidential candidate, US-China relations, especially on technology, must be scrutinized.

According to Graham Webster, an active member of China’s digital economy in New America, an American think tank focused on public policy issues, there is a serious risk that even harmless technologies for national security Also be banned for enforcing political laws.

To date, Amazon, Google, and Microsoft have refrained from commenting.

Restraint and control

One way to curb the growth and development of international services for Chinese tech companies is to put pressure on their server providers.

The United States has warned Taiwan Semiconductor Manufacturing Corporation (TSMC) that it will not be allowed to use American tools if it continues to work with Huawei to produce electronic chips for the Chinese company. Chinese company Huawei called the US move a “fatal and damaging decision.”

Given that the main hosts of BSN’s international data centers are American companies, the project may face a similar fate to Huawei.

The Chinese network does not build or own any of the data centers on which it has built its technical infrastructure. China Mobile Telecommunications Company provides 90% of the internal data centers of the BSN project. Also, according to statistics released by the BSN project, most of the project’s international data centers are also provided by Amazon Web Services, given the scale of Amazon’s cloud computing operations worldwide.

The BSN project pays these cloud service providers to use their servers and integrate these servers with their software.

In addition, Amazon Web Hosting has taken over two BSN network data centers in China. The network also uses several different data centers around the world built on Microsoft’s cloud computing platform and Google’s cloud computing platform. Google Cloud has a data center in Tokyo, Microsoft has a data center in Johannesburg, South Africa, and Amazon Web Services has two data centers in Paris and California for the BSN project.

China seeks to become the world's leading power of the Blockchain in the shadow of its differences with the United States

If the data center is physically close to decentralized application developers, they can access BSN services faster and easier. Therefore, BSN data centers outside China are critical to providing Internet services to the global Blockchain community.

“Graham Webster said:

If I were this Chinese company, I would be cautious about setting up a system that is heavily dependent on receiving ongoing services from American companies. Anyone intending to use the international version of the Chinese network should consider the risk that a data center in the United States may cut off service to the BSN for geopolitical reasons.

One of the motivations for the United States to prevent the expansion of Chinese tech companies around the world is security concerns.

According to James Mulnevon, China’s blockchain technology provides people with an unusual level of security and integration in a structured way. However, there is controversy over the localization of data and cloud services. Mullenon, director of information integration at SOS International, an intelligence company affiliated with the Department of Defense in Washington, D.C. “Supports U.S. government agencies,” he said.

The world is clearly becoming a splinter with national borders and domestic laws. This overturns the previous notion of technology globalization.

Internet splinters are fragmented, divided into different sections in different areas.

Webster also said that cloud service providers serve a wide range of customers, and it is not possible to say exactly what cyber security concerns would arise if services were provided to Chinese companies.

There is no serious threat at the moment

To date, the international expansion of the BSN has not posed a particular problem for US lawmakers. Maybe it’s because the project is relatively new, or maybe it’s because only a handful of Washington lawmakers are able to understand how the project works and its goals.

Triolo explained in this regard:

The fact that BSN, unlike other emerging technologies such as 5G and artificial intelligence, has not been challenged by American policymakers is due to a lack of understanding of China’s blockchain technology.

The US government intends to ban the services of Chinese cloud service companies inside the United States. However, the issue of American companies hosting applications related to Chinese companies has not yet been resolved.

Last May, the US Federal Communications Commission (FCC) banned Chinese telecommunications services from China. According to James Mollenon, the US move is a warning to Chinese businesses trying to launch cloud-based networks in the United States; They must be aware of the geopolitical dangers. Mullen added:

I will be very cautious about large investments in this type of transnational cloud network; Because at the moment, the legal authorities do not have a good view of these projects.

Concerned judicial authorities will only be reassured if the network is unable to provide data to the government, even if the Chinese government requests disclosure of BSN nodes outside China.

Mullenon said the Chinese government’s view on diplomatic immunity was too broad. He explained:

The Chinese government certainly believes that Chinese companies abroad are subject to Chinese law, even if they are established outside China.

On paper, the Chinese government wants to receive information and data from Chinese companies, such as the BSN support company, no matter where the company operates. This is a request from the government to receive the data stored in the network data centers outside China. However, Red Date Technology, the architect of the BSN Technical Framework, claims that under the BSN technical structure, the network does not have access to user data.

Reddit CEO Yifan He said in an interview that the BSN technical framework fully protects the privacy of its users’ data and acts like an intermediary for better communication between developers and data centers. With these data centers, developers can run nodes and launch applications of their choice. He even invited skeptics to test the network code themselves to make sure.

The Chinese government’s relationship with the project BSN

The BSN Development Association is run by the China Government Information Center (SIC). The China Government Information Center is a public body overseen by the National Development and Reform Commission (NDRC), China’s most important economic planning commission. China MobilePay and China UnionPay also play a key role in creating this network.

China's quest to become the world's leading power of the Blockchain amid differences with the United States

It is not uncommon for a state-owned company to approve, support, and direct actions to build large, blockchain-based infrastructure. In addition, we see that the top two technology giants in China support this network. However, unlike China’s national digital currency project, it seems that larger government agencies such as the People’s Bank of China and the Ministry of Information Technology and Industry (MIIT) are not yet involved in the BSN project.

The exact nature of the relationship between the Chinese government and the BSN is not yet clear. However, given the government’s connection to the project, its dependence on US cloud service providers may face strong opposition from the Chinese side.

A report by the Eurasia Group, published in May, states:

No foreign company has the right to participate in the board of BSN. According to official documents, Beijing intends to operate the BSN project as an international infrastructure network established independently by Chinese institutions.

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