Opinion: China faces a blockchain dilemma

The Shenzhen stock market bull / Image credit: 123RF

In April, China saw perhaps its most high-profile #MeToo moment to date. Peking University undergraduate Yue Xin published an open letter detailing the harassment she faced from school authorities as she inquired about something that happened 20 years ago: Gao Yan, a literature student at PKU, committed suicide after being raped by a professor.

The letter sparked a public outcry. Government censorship of the letter and the discussion around it swiftly followed. Here’s the twist: Student activists then uploaded the letter onto the Ethereum blockchain, where it’s untouchable even by the government.

This is the first well-documented instance of the blockchain being used to evade censors in China. It’s a window into the dilemma that blockchain presents to the authorities in China, which aspires to become the global leader in tech while simultaneously imposing strict controls over information.

China’s tightrope walk

By definition, blockchain networks are transparent. Their data isn’t held on centralized servers, and they are nearly impossible to hack.

When it comes to governance, blockchain systems have tremendous potential. They could limit corruption, reinforce good behavior, ensure food safety, and eliminate all kinds of fraud. For a massive country like China, finding reliable information has often been nearly impossible, even for the country’s top government leaders. Blockchain could make that a thing of the past.

Here’s the other side of the coin, however. While the Chinese government is limited by their lack of access to information, it also benefits from opacity and control. In fact, opacity is central to its system. The ruling communist party has used their monopoly over information channels to tell their version of history. The idea was cleverly made fun of in a Simpsons episode in which the family visits Beijing and see this:

While China’s information control has been maligned by foreigners, it should be acknowledged – whether because of or in spite of it – that the approach taken by China’s rulers has excelled in ensuring stability and prosperity.

By almost any metric, life as a Chinese person today is exponentially better than it was 30 years ago. This cannot be overlooked. But as the Peking University case shows, blockchain could threaten the country’s social stability. If placed in blockchain networks, sensitive data will be available for all to see and difficult to remove.

“Nothing happened here” isn’t possible on the blockchain.

China’s committed yet cautious approach

However, because China wants to be number one in technological innovation, it will embrace the blockchain. Just expect it to introduce some caveats.

The Chinese government is moving quickly. The cities of Hangzhou and Shenzhen have announced funds to support blockchain startups, as has Fujian province, a rising tech hub. China has also become the global leader in blockchain patents, with The People’s Bank of China (PBOC) – its central bank – and tech giant Alibaba at the forefront.

A new physics