- By Eric Ervin, Co-founder & CEO of Blockforce Capital/Reality Shares
The US has been a pioneer and is a dominant player in Internet technology, but China has established itself as a near second. Chinese companies like Tencent, Alibaba, Weibo, Baidu, Bytedance, etc. rival large US technology firms such as Google, Amazon and Facebook. The localization of content and technology, supported by government policies, is a major contributing factor to their dominant capitalization. However, in the emerging blockchain technology space, China has established itself as the global leader, surpassing the US. This achievement has become a reality through a combination of government initiatives and a private sector focus on blockchain.
Chinese government proactive on blockchain technology
“New technologies such as Internet of Things, cloud computing, big data, artificial intelligence, machine deep learning, blockchain, and bio-genetic engineering drive the cyberspace to evolve from the Internet of Everyone to the Internet of Everything.”
Apart from strategic policy initiatives, the Chinese government has focused on the functional aspects of blockchain as well. Chinese government agencies have taken a lead at making sense of both the public and industry level blockchain projects. China's Center for Information and Industry Development regularly publishes the Global Public Blockchain Technology Assessment Index and rankings for major public blockchains like bitcoin, EOS, Ethereum, etc. These projects are evaluated based on their basic technology, applicability, and creativity. Also, starting in 2017, the China Electronics Technology Standardization Institute (CESI) -- a government-approved institution -- started conducting Standard Blockchain System Function Tests to certify the robustness of the top blockchain projects operating in China. The certification process is rigorous and is based on extensive guidelines, which are useful in a difficult landscape to navigate given the emerging nature of this technology. At this point, only 30 projects have been certified. The certification is a voluntary application and is not mandatory, but holds considerable credence in the blockchain community.
Another ambitious project by the Chinese government is to issue its own national digital currency. A senior official at the People’s Bank of China (PBOC) commented last month that the bank is getting ready to issue a new digital currency. The government started working on the project in 2014, and the PBOC currently holds more than 40 patents related to digital currencies. The Libra cryptocurrency announcement from Facebook in June appears to have influenced the central bank to make its currency issuance more broad-based. Similar to Libra, the Chinese digital currency is expected to be fully backed by reserves.
Chinese companies adopting blockchain at a fast pace
In line with the thrust from the government, Chinese firms have pioneered in the research, development and adoption of blockchain technology, faster than their US counterparts.
Per a 2019 Deloitte Blockchain survey:
- 73% of respondents in China view blockchain as a top-five strategic priority, compared to 56% in the US.
Similarly, in the 2018 survey:
- 49% of respondents in China said that blockchain technology was already used in their organizations, compared to only 14% in the US.
- 86% of respondents in China are currently investing in hiring staff with blockchain experience, compared to only 14% in the US.
The Chinese blockchain industry is thriving and is well-diversified. According to Beijing data service provider Blockdata, China led the world in new blockchain projects initiated, with 263 projects in progress and 25 percent global share as of Nov. 2018. A white paper from China's Ministry of Industry and IT notes that blockchain adoption in China is widespread across diverse industries, ranging from hardware manufacturing, platform and security services, application services, investment, media and human resources services, with more than 456 companies adopting blockchain technologies.
China has also emerged as a global leader in blockchain research, as evidenced by the number of patents filed. China leads the world in terms of the number of blockchain patents filed. Reality Shares research shows that publicly listed Chinese firms have nearly 3x the number of blockchain related patents (at 1,338) compared to those filed by US firms (442) and German firms (44), as of Aug. 2019. The number of blockchain patents held by Chinese firms represent 68% of the total global filings. The top three firms globally -- Alibaba (380), China United Network Communications (168) and Ping An Insurance (163) -- are Chinese, and the fourth, IBM (146), is domiciled in the US. Similarly, seven out of the top 10 firms globally are Chinese.
Top 10 firms by number of blockchain related patents
Reality Shares believes that blockchain technology holds immense potential for changing the way businesses operate globally, and China has clearly emerged as a leader in this space.
The Reality Shares Nasdaq Blockchain China Index seeks to identify those innovative Chinese companies driving compelling blockchain projects. The companies are selected based on a comprehensive Blockchain Score™ which looks at multiple factors including number of patents held. Companies need to earn a Blockchain Score of at least 50 to be included in the Index.