As the core technology behind bitcoin, blockchain is the focus of all disputes surrounding various cryptocurrencies. As Internet giants are about to form monopoly of data, the Internet has actually deviated from the purposes it was originally created to fulfill back in the time of TCP/IP protocols, i.e. empowering individuals and making information open to all. With a decentralized and distributed operation model featuring crowdsourcing, blockchain is highly likely to replace the TCP/IP protocols we use today and serve as the most important technological push for us to move into the era of Internet 3.0. In particular, cryptocurrencies, P2P communication, and tamper-resistant ledger will probably revolutionize the currencies, social and management systems of human society.

China is now at a critical point in its reform and opening up process and blockchain represents a rare opportunity for us to build the economic competence of the country. However, in the meantime, this technology will also pose grave challenges and new requirements for our national governance, especially in regard to national security. Blockchain, when explained in a simple way, is a distributed ledger or database that is maintained jointly at a number of different nodes. The decentralized and distributed storage of data prevents the blockchain system to collapse simply because of the failure of a few nodes. Moreover, data recorded in the ledger are validated at various nodes, so it is virtually impossible to tamper the ledger. It is therefore unprecedentedly safe and efficient. China should undoubtedly go all out to promote relevant research and application of related technologies. But at the same time, we should be aware that the technology is a double-edge sword, especially for China given the special characteristics of our Internet conditions.

We believe that in the field of national security governance, the most severe challenge will be seen in two parts, namely, public opinions on social networking sites and sovereignty over online data.  For example, on public blockchains fully controlled by individual users, sensitive information that may hamper national security (e.g. propaganda and activity information of terrorists and extremists) will be very difficult to detect and trace. Also, distributed data storage makes it hard to cover blockchain under any kind of a sovereignty structure. Given the natural bond between blockchain and the finance sector, blockchain will also play a major role in China’s efforts to guard against financial risks. Though blockchain improves to a great extent the safety and efficiency of credit, remittance and even bill operations in the banking industry, it can easily be utilized for illegal money laundering and allow for cross-border capital transfer without any regulation. Moreover, blockchain has already had its impact on securities exchange and the modern corporate system. Initial coin offerings (ICO), for example, have revolutionized the venture capital business. However, in nature, blockchain should not be blamed for the illegal fundraising and other scandals we see in ICOs. Instead, the flaw lies in delayed institutional innovation on the national level. Taking a macro perspective, we believe if China is to take an advantageous position in the global arena of blockchain, it must build outstanding capacities and even greater super computing power as soon as possible so as to be a step faster to industrialize and standardize blockchains. China does have the potential to secure a foothold in the first class here. Lastly, we believe cooperation and integration between military and civil entities will play an important role in blockchain-based national security governance of China and all relevant social organizations, research institutes, and private enterprises must take an active part in this endeavor. Government bodies should not be expected or relied on to take the lead in this process.