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Community Blog How Does Blockchain Link to the Future?

How Does Blockchain Link to the Future?

This article discusses the application and practice of blockchain and ways to develop the blockchain industry.

Released by Alibaba Cloud Research Center

Introduction

Thanks to the rise of blockchain technology and the gradual implementation of blockchain in various scenarios, the construction of a new generation of value networks and contract society have been accelerated, and modes of transaction, production efficiency, and interpersonal relationships have been changed in the society. Blockchain has gradually entered the industrial application stage, especially in recent years. Crucial technologies have made new progress, such as distributed storage, consensus mechanisms, smart contracts, and cryptographic algorithm. In addition, technology research has further been developed, including cross-chain and sharding. It can be expected that blockchain will gradually become a new engine for building a trust economy. The physical society, the digital world, and the financial system will be highly connected, and data and assets will flow in trust, and will stimulate the economic growth.

Blockchain Enters the Industrial Application Stage with Rapid Development

With the rising labor costs and the spread of digital infrastructure, such as network cloud computing, digitalization has rapidly swept all walks of life in recent years. The future digital trends will gradually move from the digitalization of enterprises to industrial collaboration. The core of the digitalization of industrial collaboration lies in links and trust. Moreover, the key to the digitalization of industrial collaboration is how to solve the problems of links and trust in the relationship between supply and demand.

According to the working principles of blockchain, the blockchain data structure is soundly combined with distributed storage, and the transaction results are recorded through multi-party consensus. Therefore, the technology and mechanism are trusted, consensus, and tamper-proof. The core technologies are point-to-point communication, consensus mechanisms, cryptographic algorithm, smart contracts, etc. With the continuous development of application scenarios, high performance, high privacy, and interconnectivity have become important directions and focuses of blockchain technology. The advancement of those crucial technologies is moving towards the application end.

After more than ten years of rapid development, more blockchain technologies have been widely used. Academia and enterprises continue to make more efforts in researching blockchain-related technologies. Therefore, great progress has been made in key technologies, such as distributed storage, consensus mechanisms, smart contracts, and cryptographic algorithms. Additional technology research has been developed, including cross-chain and sharding.

The maturity of technologies has accelerated the rapid integration of blockchain and more scenarios. Let's take Antchain as an example. Blockchain has been widely used in more than 50 fields, including trade finance, supply chain management, judicial records, digital copyright, food and drug traceability, transportation, tourism, government affairs and livelihood, digital government, education and vocational certification, digital logistics, public welfare certification, and medical and healthcare. Increasingly, the blockchain is closely integrated with the real economy.

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Global Blockchain Development Trends

Developed countries and regions attach importance to R&D and the platform construction of blockchain technology. For example, as an open-source project with sound development, application, and ecosystem among blockchain projects, Ethereum has been recognized by all parties in the industry in recent years, especially blockchain developers. It is more convenient to develop with its simpler design, more prominent performance, more intelligent system, and more abundant ecosystem. However, the blockchain industry in foreign countries mainly focuses on the financial field.

In recent years, exploration in the fields of supply chain and government affairs has been increasing. In 2016, Walmart, IBM, and other enterprises jointly established a blockchain pilot project for the supply chain of pork. The pilot project ensures accurate information, such as agricultural production details, batch number, factory and processing data, expiration date, storage temperature, and transportation. In 2018, the European Commission and the European Blockchain Partnership (EBP) launched the European Blockchain Service Infrastructure (EBSI), which aimed to ensure the safety and convenience of EU citizens when they use public services for cross-border transactions.

China has the following four characteristics in the current development of the blockchain industry:

1. Patent

China is one of the leaders in patent applications worldwide, focusing on the independency and controllability of underlying technologies.

By the end of 2020, the number of Chinese companies applying for patents and the number of patent applications both ranked first in the world. In China, more than 4,100 companies are applying for over 30,000 blockchain patents, accounting for 58% of the global total. Since 2018, China has seen an exponential increase in blockchain patent applications. The blockchain patent applications from 2018 to 2020 account for 90% of the total number of applications over the past ten years. Blockchain technology has been widely used to deal with trust issues between people, enterprises, and governments in the past few years and has been vigorously promoted in finance, e-commerce, manufacturing, logistics, and other industries. Blockchain enterprises (represented by Antchain) insist on independent research and development, polishing their core technologies and developing financial-level blockchain engines. Those enterprises provide scalable consensus networks, double-layer networks, efficient intelligence, and financial-level services with one billion daily transactions and one billion accounts supported by contract engines.

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2. The Application and Practice of Blockchain

The application and practice of blockchain are various.

As of the first half of 2021, China had more than 200 blockchain applications. Among them, finance, supply chain, and e-government implement more cases, and the effects are significant. In terms of blockchain + finance, the banking industry has maintained continuous enthusiasm about and attention to blockchain technology. For example, banking and technology giants attach importance to the application of blockchain in SME financing, loan settlement, and clearing. Speaking of blockchain + supply chain, applications have been expanded to the whole industry. Blockchain technology plays an important role in the management of manufacturing supply chain, making the supply chain more efficient, transparent, and traceable. From the perspective of the application of blockchain in the supply chain, 27% of the three batches of registered blockchain-oriented companies in China are involved in the supply chain field, which is the second-largest field following the financial industry. In terms of blockchain + government affairs, with the development of blockchain technology, applications are gradually expanding from single judicial certificate to data sharing, and blockchain is increasingly favored by government departments. Among the nation, ten provinces (including Beijing, Zhejiang, and Guangdong) have already purchased blockchain + government affairs services for relevant departments.

3. Policy Support

Policy support has continuously increased, and the standardization system has gradually improved. Many organizations in China have attached great importance to the development of blockchain technology and industry and have adopted strict regulations on ICO and other behaviors. At the same time, it is necessary to promote the integration of blockchain and economic society, take blockchain as an important breakthrough to independently innovate core technologies, and accelerate the development of blockchain technology and industrial innovation. According to incomplete statistics, in recent years, more than 120 policies supporting blockchain have been issued around China, including nearly 50 exclusive support policies for blockchain. Yunnan, Beijing, Chongqing, Hunan, Guizhou, Hainan, Jiangsu, Guangxi, Guangdong, and Hebei have issued provincial-level blockchain special plans or guidance. Those policies include support for the technological research of the industry, carrier construction, transformation of technological achievement, personnel training, and industrial activities. Those policies also support the establishment and settlement of enterprises and financing, listing, operations, and other aspects after enterprises are established.

4. National Strategies

Blockchain thrives in North China, East China, South China, and Southwest China, promoting major national strategies. Those major strategies, including the coordinated development of Beijing-Tianjin-Hebei, the construction of Xiong'an New Area, comprehensive energy revolution reforms in Shanxi, the integration of the Yangtze River Delta, the Yangtze River Economic Belt, and the Guangdong-Hong Kong-Macao Greater Bay Area all reflect the innovation of governance models, the interconnectivity of interests, the exchange of values, the optimization of business environments, and other characteristics. Fortunately, blockchain technology can play its unique advantages in these major strategies. Incomplete statistics indicate China is home to more than 1,100 enterprises that have launched blockchain products or services, ranking second worldwide. Those enterprises are mainly distributed in North China, East China, South China, and Southwest China, with Beijing, Shenzhen, Shanghai, Hangzhou, and Kunming as centers. North China, East China, South China, and Southwest China have a forward-looking blockchain layout, sufficient development momentum, and solid development capability. North China boasts a large number of universities, with perfect technology, R&D systems, and strength. Moreover, the region has advantages in the application of government affairs, logistics, energy, and other fields. East China has a balanced development in technology, enterprises, applications, policies, and other aspects, with a strong financial foundation and advantages in the application of financial science and technology. Several leading enterprises in blockchain have gathered in South China, with more prominent development vitality and greater exploration. Southwest China has an outstanding determination to seize the opportunity of reform by utilizing blockchain technology. The local government introduces superior enterprises and talents and promotes the implementation of applications with unprecedented efforts, especially in Yunnan Province. Thanks to abundant application resources, such as power energy, non-ferrous metals, and characteristic agriculture, the region has more scenarios to integrate the development of blockchain technology and the real economy, enjoying significant development potential.

Suggestions for the Development of the Blockchain Industry

Blockchain technology is currently moving from unilateral development to integration, and industrial applications are gradually entering large-scale practices. With the deepening digitalization of economic and social development, the limits on data applications are gradually becoming prominent. Data ownership, privacy protection, data authenticity, data security, data sharing, and other issues will become increasingly conspicuous. Blockchain technology can effectively solve problems caused by data outbreaks and strong data application demands. Blockchain is expected to promote the reform and upgrade the trust system, so trust in the economy changes from people-based trust to machine-based trust, playing an important role in building the infrastructure of trust. In view of this, the future blockchain industry should focus on the following improvements:

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1. Strengthen Top-Level Planning and Design

The first improvement is strengthening top-level planning and design. After studying the strategic layout and policy trends of blockchain in developed countries and regions, we should accelerate the introduction of blockchain development planning based on national conditions, improve the legal and regulatory system, and comprehensively promote the innovation and development of national blockchain technology and industry. At the same time, China's blockchain industry is expected to accelerate the overall mechanism covering basic research, standards, industry, ecosystem, and other aspects. Based on reality and needs, the industry will promote the integration and optimization of the market and social resources (such as alliances and associations based on blockchain) and create a standardized, efficient, and coordinated development force for blockchain. In addition, China's blockchain industry will propel regulatory practices, such as regulatory sandbox and chain governance. Adopting an inclusive and prudent regulatory attitude, the industry is expected to weigh the risk control against the encouragement of technological innovation and enhance the flexibility of regulatory policies. Moreover, the governments will crackdown on illegal and criminal activities under the cloak of blockchain, ensuring the sound and standardized development of the industry.

2. Improve Standards

The second improvement is improving standards. China's blockchain industry plans to accelerate the implementation of existing international standards, focus on enriching international standard proposals for blockchain security and governance, and continue to provide more standards in international organizations, such as ISO, IEEE, and ITU. China's blockchain industry will promote the preparations for the National Blockchain and Distributed Ledger Technology Standardization Technical Committee to strengthen overall coordination. In addition, the industry is expected to formulate a national standardized roadmap and timetable for blockchain technology and application and continue to lead and standardize industrial development.

3. Accelerate Key Technology Research

The third improvement is accelerating key technology research. In addition to the establishment of carriers (such as national blockchain innovation laboratories and research centers), China's blockchain industry is expected to accelerate the evolution and upgrading of technologies (such as cryptography, consensus mechanisms, and smart contracts), promote breakthroughs in key technologies (such as cross-chain) and sharding and privacy protection, and build a national blockchain underlying platform for independent innovation. Guided by standards and oriented to interconnectivity, China's blockchain industry plans to build an independent open-source community, formulate a unified framework and principles, and establish the interconnected infrastructure of blockchain.

4. Promote the Incubation of Application

The fourth improvement is promoting the incubation of application. China's blockchain industry is expected to promote the deep integration of blockchain and the real economy. Let's take product traceability, certification, and supply chain management as breakthroughs. The industry will carry out the demonstration of specific application pilots. Moreover, the large-scale application of blockchain will be promoted in the financial field. In order to form typical cases that can be verified, replicated, and promoted, the industry is expected to carry out application demonstrations in the cross-border payment, bill management, securities issuance, insurance, supply chain finance, and digital asset fields. Besides, the application of blockchain will be accelerated in areas (such as the data sharing of government affairs) in an effort to solve the long-standing problems of data sharing and service collaboration in the government sector. Also, blockchain is expected to be applied in the livelihood field. Blockchain technology can support public services (such as document processing, business processing, medical expenses and invoice reimbursement, and notarization) and provide fair and efficient optimized solutions for the allocation of basic public resources (such as water, electricity, gas, and heating).

5. Strengthen Resource Convergence and Coordination

The fifth improvement is strengthening resource convergence and coordination. China's blockchain industry is expected to establish an investment fund mechanism for the industry and encourage venture capital and equity investment to be actively invested in the development of the blockchain industry. On top of that, the benefit distribution of blockchain scientific research results is supposed to improve. Supportive policies for talent investment and technology investment need to be formulated. Also, the industry needs to increase the proportion of income from the ownership of intellectual property rights and the transformation of scientific and technological achievements for scientific researchers, especially main contributors. Therefore, their enthusiasm for innovation and entrepreneurship will be continuously enhanced.

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Summary

In the Internet of Value era, it has become a consensus in the industry that blockchain will become a crucial component and the foundation of trust in the digital economy.

Therefore, after the transition from the trough of disillusionment to the period of steady recovery, all parties in the industry need to objectively face the difficulties of blockchain and adhere to the concept that technology makes life better in an effort to create an ecosystem that brings blockchain to life. We should actively promote the improved and effective application of blockchain in more scenarios of the new economy and new consumption.

About the Authors

An Xiaopeng, Vice President of Alibaba Research Center

As Vice President of Alibaba Research Institute, An Xiaopeng is in charge of the digital transformation of 2B enterprises. He has been engaged in technical, commercial, and public policy research in the digital transformation of enterprises in the political, enterprise, academic, and research departments. He works in multiple fields, such as enterprise digitization, industrial Internet, and intelligent manufacturing.

Wang Fengyan, Senior Expert of New Industry & New Consumption Research Center of Alibaba Research Center and Industry Research Expert of Alibaba Regional Research Center

Wang Fengyan has mainly engaged in research on macroeconomics, digital economy and business models, and financial technology. In addition, he has worked for national well-known law offices, large financial institutions, and Internet companies, served as a special researcher and industrial mentor in universities, and led and completed more than 30 projects.

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