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Fintech
Chinese govt says blockchain is not omnipotent, latest White Paper reveals its vulnerabilities
2018/09/14 07:47:00
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Sep 14, 2018 (China Knowledge) - In May 2018, China's president Xi Jinping has said that a new generation of information technology, represented by artificial intelligence (AI), quantum information, mobile communication, Internet and blockchain, was accelerating the breakthrough for applications.

Last month, Beijing Internet Financial Industry Association (BJIFIA) issued risk alerts on crypto-currencies, second was warning on blockchain, and it continue to strength the regulatory measures.

"Regulate virtual-currency and encourage blockchain" is becoming the domestic regulatory consensus.

Last week,China Academy of Information and Communications Technology (CAICT) released "Blockchain White Paper 2018" (White Paper), to define the concept, architecture, technical features, development routes, governance and supervision of the technology.

White Paper defines blockchain as Distributed Ledger Technology, which is a kind of bookkeeping technology, jointly maintained by multiple parties. It uses cryptography to ensure secure transmission & access as well as consistent storage of data. It is hard to tamper with and prevent denial of data.

As a new computing paradigm and collaboration model to build trust at a low cost in an insecure environment, blockchain is expected to change the application scenarios and operation rules of many industries. It is considered to be one of the indispensable technologies for the future development of digital economy and the construction of new trust systems.

At the same time, the White Paper points out that blockchain is not invincible. Its prominent features of de-centralization and non-tampering have higher application value to the riskless, high-value and easily realized scenarios.

In terms of the status quo of the development of blockchain technology, the survey data of CAICT shows that a total of 1,242 companies around the world are active in the said industry, with U.S., China and UK ranking top three. Southeast Asia, particularly Singapore, Vietnam, and Thailand; is emerging as a new power of blockchain.

From the industry classification, the number of companies engaged in cryptocurrency-related technologies and services was the largest (467 companies, accounting for 37.60%), followed by the blockchain technology and software platform development companies (201 companies, accounting for 16.18%).

From the perspective of financing for this industry, the total amount of blockchain start-up financing (non-ICO financing) reached USD 4.81 billion from 2009 to 2018. Geographically, the U.S. raised USD 2.54 billion, followed by China with USD 0.60 billion and Canada with USD 0.25 billion

Based on the global development status, White Paper reveals the following five major trends:

I. Architectural aspects:

Blockchain is unique because of its continuous evolution of the fusion of public and alliance chains. Alliance chain is an important landing mode of blockchain, but it does not have the extensibility, anonymity and community motivation of public chain. With the increasingly complex application scenarios, the architectural patterns of the public chain and the alliance chain begin to merge, and the mixed architectural patterns of the public chain at the bottom to the public and the alliance chain at the top to the enterprise begin to appear, combining with the entrance of wallet and exchange, forming a new technology ecology.

II. Deployment aspects:

Blockchain is a service to accelerate application landing. When combined with cloud computing develops Blockchain as a Service (BaaS), this reduces the deployment cost of blockchain and help its developers apply the technology to different business scenarios.

III. Performance aspects:

The demand for cross-chain and high performance is increasing day by day. For industries with complex scenarios, cross-chain technology can help realize the transfer of digital assets between multiple blockchains, such as financial pledge and asset securitization.

IV. Consensus aspects:

Consensus mechanism evolves from single to mixed mode. Common consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), Delegated Proof of Stake (DPoS), Byzantine Fault Tolerance (BFT). Currently the technology is showing a trend of switching consensus mechanisms according to scenario, and will evolve from a single consensus mechanism to a multi-class mixed consensus mechanism.

V. Contract aspect:

The current development language of intelligent contract of ecosystem is not standard enough. Generally, in the creation or addition of new contract language, pluggability, ease of use and security become the focus of development.

As a nascent technology, blockchain still faces many challenges in its development. White Paper concludes four major challenges include hidden dangers at the level of technology maturity; application scenarios are not clear; there are relatively few professionals in the industry; and relevant laws and regulations need to be improved.

Technically, performance cannot meet the requirements of high efficiency & low energy, decentralization and safety at the same time. In view of the above problems and challenges, CAICT suggests that people should objectively and rationally understand blockchain. 

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