This chapter looks beyond cryptocurrencies to examine the wider usage and ramifications of blockchain technology in China. After introducing blockchain concepts, it examines China's regulatory environment and its efforts to promote confidence in digital exchanges. The chapter then delves into the specifics of China's technical implementations, dissecting enabling tools, new architectural frameworks, and emergent movements like the internet of things and big data. It examines the effects on businesses, communities, and individuals, paying special attention to the ethical and regulatory settings in which these shifts occur. The dialogue is backed up by real-world case studies that show how blockchain can revolutionize many different industries. This chapter is an effort to educate interested parties about the blockchain scene in China and its worldwide implications.
Top1. Introduction
Blockchain is a distributed, public, and encrypted digital ledger system that has the potential to revolutionize several industries (Puthal et al., 2018). The Bitcoin cryptocurrency inspired its creation; however, the applications of this technology go far beyond Bitcoin.
Put simply, a blockchain is a series of blocks that are linked together. The term “block” is used to describe a unit of data in a distributed ledger called a “chain.” Information regarding who is involved in transactions, such as the date, time, and amount of your most recent purchase, is stored in these blocks. Each block also includes “hashes,” or unique codes that assist to distinguish it from other blocks in the chain and add an extra layer of security (Belchior et al., 2021).
Blockchain's decentralized nature is what sets it unique from other technologies. Unlike traditional banking or transaction systems, which rely on a centralized authority like a bank or government to validate transactions, blockchains are decentralized over a network of computers, or “nodes” (Niranjanamurthy, Nithya, & Jagannatha, 2019). All participating nodes store an identical copy of the blockchain and use a consensus procedure to reach consensus before any new blocks are added. This makes the blockchain more secure because no single party can manipulate or forge the entire ledger.
One of the most important features of blockchain technology is its transparency. Although users can maintain their anonymity with encrypted identifiers, all blockchain participants can view transaction data. This openness facilitates the simple verification of transactions and increases participants' confidence in one another.
Blockchain technology also provides unprecedented safety. Each block is nearly impossible to alter thanks to the usage of cryptographic hashes. Changing information in a block after it has been added to the chain would involve altering the information in every block after it, which would be an extremely resource-intensive process (Demestichas et al., 2020).
Cryptocurrencies and the underlying technology known as blockchain share a close relationship due to the fact that blockchain was originally built to facilitate cryptocurrency transactions. Bitcoin, the first cryptocurrency, was established in 2009 and is the most prominent and pioneering illustration of this connection (Dierksmeier & Seele, 2018).
The anonymous creator(s) of Bitcoin (Satoshi Nakamoto) published the Bitcoin whitepaper, which described the notion of a decentralized digital money (Karlstrøm, 2014). The basic concept was to provide a method for conducting financial transactions between individuals or businesses without the intervention of a third party (such as a bank or government). Blockchain, a public, decentralized ledger that records all transactions across a network of computers, was chosen to facilitate this system.
The blockchain is the underlying technology that allows Bitcoin and other cryptocurrencies to function. It maintains a public and unchangeable ledger of all exchanges using these currencies. A blockchain is created when a 'block' containing a set number of transactions hits its data limit and is appended to the chain of previously appended blocks.
The amount of coins exchanged, as well as their sender and recipient addresses, are recorded in each block's metadata. In addition, a cryptographic hash function connects each block to the one before and after it, guaranteeing the continuity of the ledger and the security of the transactions (Kolb et al., 2020). Due to the interconnected nature of blockchains, altering transaction data is an incredibly high-risk endeavor, making cryptocurrencies more secure.
Digital currencies benefit from the distributed ledger system provided by blockchain technology. The creation of new currency and the validation of transactions are both decentralized. Instead, a mechanism called mining distributes these jobs across various nodes (participants) in the network (Bashir, 2020). Many people are drawn to cryptocurrencies as an alternative to conventional financial systems because of their decentralized nature, which mitigates the danger of central point failures like fraud and corruption.
The blockchain was initially developed for use with digital currencies, but its potential applications have already grown well beyond this. The widespread revolutionary potential of blockchain is currently being tested in a variety of real-world use cases, from supply chain management to voting systems.