Cryptocurrencies

Two Minute Crypto – Deciphering China’s Blockchain Play – Part 1 of 5

Please click the link below to listen to the 62nd episode of my weekly crypto podcast ‘Two Minute Crypto.’ These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Consider dropping a like and or a review on iTunes or Podbean if you enjoy the podcast. Comments and critiques welcome.



External Podcast Links

https://podcasts.apple.com/au/podcast/two-minute-crypto-deciphering-chinas-blockchain-play/id1441492450?i=1000456679512

or

https://www.podbean.com/eu/pb-nethg-c74668


Transcript

Deciphering China’s Blockchain Play – Part 1 of 5

The real division is not between conservatives and revolutionaries but between authoritarians and libertarians.

― George Orwell

Welcome to Two Minute Crypto. This instalment sees the start of a 5-part series examining China’s recent shift in its public stance towards blockchain.

  • Part 1 Focuses on the rationale driving this apparent change.
  • Part 2 Outlines why, in particular, this is good for Bitcoin.
  • Part 3 Examines the long-term outlook for China-based blockchain projects.
  • Part 4 Discusses the wider implications of China’s involvement in blockchain development and implementation.
  • Part 5 Outlines the opportunities and risks that now present themselves to crypto investors.

Why blockchain and Why now?

On October 25TH President Xi publicly stated China’s desire to lead the world in both blockchain development and implementation. His endorsement was both broad and enthusiastic. In the following days and weeks, local authorities and media cemented this embrace of blockchain with the release of instructional blockchain materials, further endorsement by central bank officials, the suppression of anti-blockchain threads on social media, and the removal of crypto mining from the list of activities the ruling party would like to see eliminated.

In one sense, the move to portraying blockchain in a more positive light is very easily explained. The Central Bank of China (CBC) have long announced their plans to roll-out a state-controlled cryptocurrency. Clearly cleaning up the image of blockchain is an important prerequisite before introducing this system.

However, at a deeper level, China’s embrace of blockchain can be understood and summed up with one word – control. Ruling since 1949 the Communist Party of China (CPC) has but one core principle – continued hegemony over the Chinese nation. Each and every policy is driven by this directive. Blockchain is no exception. Indeed, blockchain is a godsend to this authoritarian regime that already exhibits great control over most aspects of society whether that be political, financial or social.

A centralized blockchain or series of blockchains will facilitate the parties’ expansion ever deeper in the lives of its citizens. The marriage of money to surveillance as facilitated by a unified blockchain database of transactions will serve to substantially deepen its level of control over the actions of the Chinese people. A state-issued cryptocurrency will be monitored and permissioned – dissent already difficult will both be easier to root out and of course, suppress.

Any domestically derived economic benefits of blockchain are simply added value – it is first and foremost a tool of control. Doubtless, China’s pending rollout of its Social Credit System will be intimately integrated with blockchain. Rewards and penalties will be easy to track, administer and iterate on. Granular control is the goal of every authoritarian regime and time and again the CCP has demonstrated its enduring focus on remaining both in power and in ever greater realized control. China’s homegrown and eminently successful companies all tow the line. Data is not in any sense private and the rights of the citizens are entirely subsumed by the ‘needs’ of the party. We-Chat, Weibo, Tencent and so on serve to prop up the regime as they routinely hand-over their customer’s data. It’s hard to overstate the extent to which this data mining has aided the CPC in retaining its reins on power.

Public announcements of economic growth and pushing the horizon for the sake of science are mere window-dressing to the identifiable purpose of blockchain in the Chinese context -control and ever more of it.

An understanding of the core philosophy that drives the Chinese Communist Party (CPC) removes much of the mystery behind its stance towards blockchain. Is it really any surprise at all the Bitcoin hasn’t been similarly embraced and endorsed?

Next week will examine this clear Chinese government distinction between blockchain and Bitcoin, highlighting the long-term positive this provides for the distributed, decentralized network this is Bitcoin.

Thanks for listening.

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