Industry insiders urge rational attitude on nascent sector
Chinese industry insiders sent out mixed messages on Tuesday concerning blockchain technology and urged caution on speculative activities in the capital market.
Blockchain became a trendy word on Chinese social media platforms including WeChat and Weibo during the weeklong Chinese new year holidays, and it is being favored by investors in the capital market.
Almost all the companies related to blockchain technology listed on the A-share market gained strongly on Tuesday, after the official newspaper People's Daily published an article on blockchain development in China on Monday.
Blockchain was described in the article as a set of decentralized and public accounting books that could keep track of digital currency transactions. The technology is making data much safer and more transparent, which can be important in sectors such as finance and e-commerce, according to the People's Daily report.
"The paper is trying to convince the public that blockchain will essentially help industries develop, and to clear up the misunderstanding that the technology is simply equal to Bitcoin," Liu Dingding, a veteran expert on the internet, told the Global Times on Tuesday.
Some Chinese people have blind faith in this rising technology, and others may fear its future. "The paper represents the Chinese authorities' hopes to better educate the public about the two sides of the coin," he said.
Blockchain is becoming a trendy word in China, like artificial intelligence (AI), and it will attract much attention in the next few years.
"Forget about AI, 2018 will be the year of blockchain," said Wang Jianzong, AI senior director of Ping An Group.
He noted that it is likely to take more than two years to expect real application scenarios for blockchain technology, which will generate tremendous value to traditional industries.
The global blockchain market is forecast to grow at an annual compound growth of 71.46 percent from 2017 to 2022 to $4.4 billion, market consultancy Research and Markets said in a report released in November 2017.
Some Chinese internet companies have already tapped into blockchain technology. Cainiao, a logistics affiliate of Alibaba Group Holding, has recently launched an information-tracking system on imports that uses the technology, the company said in a statement sent to the Global Times on Tuesday.
Based on encrypted algorithms, it can prevent tampering with shipping records and solve problems of transactions in scenarios that lack trust.
JD.com Inc is also launching blockchain accelerator, which is likely to be integrated into mainstream use as the key to a new age of cost effectiveness and customer satisfaction.
Also, the Xiongan New Area,North China's Hebei Province, launched the first blockchain-based home rental program during the Spring Festival holidays, with the aim of ensuring the authenticity of houseowners and tenants, according to the media reports.
However, only one successful application of blockchain so far is issuing initial coin offerings (ICOs), in spite of its decade-long development, Zhao Yao, contract research fellow at the Institute of Finance and Banking at the Chinese Academy of Social Sciences, told the Global Times on Tuesday.
"The current blockchain structure and technology is only suitable for low-frequency transactions … online payments and transactions require much higher speed," he said.
Chinese authorities banned ICOs in September 2017, because they were considered to be a kind of unauthorized and illegal public fundraising, according to the Xinhua News Agency.
"It's hard to separate blockchain from ICOs, to some extent when we talk about incentive compatible," Zhao said, noting the application scenarios are very limited so far.
The frenzy about the technology partially came out of the chase for Bitcoin as well as other tokens, as the prices of these virtual currencies remain relatively high, Liu noted.
On Monday, the price of a single Bitcoin was $10,266, up 7 percent on day-to-day basis, according to investopedia.com.
Still, the Chinese government has embraced the development of blockchain, as policymakers are eager to set the framework and standards that will accelerate industry adoption of blockchain technology, Layla Dong, founder of industry information provider Blockshine Communication, said in an article published on the World Economic Forum's website in January.
However, they also have to protect and educate investors amid the nascent and unregulated cryptocurrency ecosystem.
"Policymakers should be aware of this irrational attitude toward blockchain in China, as well as some speculative activities in the capital market," Zhao said, noting that the technology has not matured to reach market expectations.