A driving force behind the scenes of China’s ambitious blockchain infrastructure project says he used to be skeptical of the technology.
“Initially I thought blockchain, especially distributed ledger technology [DLT], had no commercial value because it was too expensive,” said Yifan He, CEO of Beijing Red Date Technology. “Then, I realized we can actually build a multi-framework platform to reduce the cost for everyone.”
That realization is a core idea of the Blockchain-based Service Network (BSN), a government-supported initiative scheduled to open for global commercial use Saturday. As the only one of the three original founding companies with a specialized software background, Red Date initiated the project and has been spearheading the network’s technical design.
“I think nobody has ever heard of it. But actually, in many ways, Red Date Technology is probably the most important because they are the one who architected the BSN,” said Michael Sung, a professor at Fudan University’s Fanhai International School of Finance. “They are the one who actually created the strategy which went up to the [National] Development and Reform Commission. They made that happen.”
According to He, the three founding companies – telecom provider China Mobile, payments provider China Unionpay, and Red Date – have invested roughly 200 million yuan ($28.5 million) combined in BSN. They’ve also cut a deal to use two Amazon Web Services (AWS) data centers in China.
While a little-known company with fewer than 100 employees, Red Date is a critical player in a project with potential geopolitical ramifications, an e-commerce equivalent of China’s Belt and Road initiative. The world’s most populous country has been investing in a variety of emerging technologies, from artificial intelligence to cloud computing to big data, in hopes of not missing out on the next industrial revolution.
Before blockchains can become a game-changer, they need a stronger connective tissue, He said in a wide-ranging interview with CoinDesk.
“DLTs are essentially regional networks where they build applications in their own environment and are separate from each other,” He said. “There could be an internet environment where there are tens of thousands of interconnected DLT networks. We have come to the realization that the current DLT industry is like the Internet in 1993.”
The BSN, accordingly, is designed to make it easy for companies and software developers to build applications on top of several of these networks.
“One of our primary goals is to include as many blockchain frameworks as possible and make them accessible under one uniform standard on the BSN platform,” He said. “In that way, we can save users overhead costs to build a blockchain while being able to offer more custom services.”
Plug and play
An unpublished technical white paper obtained by CoinDesk describes how currently siloed blockchain networks could work in conjunction with each other.
“Different frameworks are not simply stacked together; rather, they are made uniform through their adaptation of cryptographic algorithms, CA [certificate authority] management, transaction SDK [software development kit] and DApp [distributed application] management SDK in accordance with Blockchain-based Service Network Framework Adaptation Standards,” the paper says.
Prepared by Red Date along with China Mobile, China Union Pay and the State Information Center of China (SIC), the document indicates developers can use a single private key to deploy and manage decentralized applications (DApps) on multiple frameworks and to realize interconnectivity and mutual communication between DApps. Within this process, each framework retains the unique features of its own smart contract and consensus mechanism.
“We envision that building an application for 80 percent of our users would be as easy as filling a form online,” He said. “They don’t even have to write their own smart contracts, all they need to do is select one of them in our system.”
According to He, the BSN is also working with the developers of Cosmos, conceived as a blockchain to connect all blockchains, and Chainlink, a network of oracles, which report real-world events to trigger payments in smart contracts.
“They will not only be two of the frameworks included in BSN but play a significant role in increasing interoperability between different systems,” He said.
BSN’s partnership with Cosmos is through IRITA, a Shanghai-based blockchain firm supported by Cosmos’ technologies such as its Tendermint consensus mechanism and Inter-Blockchain Communication Protocol (IBC). The firm claims to be the first consortium blockchain ready for production in the Cosmos ecosystem.
“We also plan to build a Hong Kong-based team to study all kinds of frameworks and adapt them into the BSN network. We will be open-source in the near future,” He said.
In the white paper, BSN addressed developers’ privacy concerns.
“Absolutely no private user data is stored on the BSN or within the platform,” the document said. “There is no API to personal private data on the empowerment platform used within portals, and personal information of all developers and DApp users is managed independently by each BSN portal.”
Within the BSN platform, it is only possible to track which portals have distributed any given DApp and how many users are using this DApp. However, there is no detailed information about the DApp’s developer and no detailed information about the DApp users, the white paper says.
Founded in 2014, Red Date started out building “smart city” technology in China.
For example, it developed a mobile app Citizen Card for Zhangjiakou, a city with 4.5 million inhabitants in the northern Hebei province. Residents can use the all-in-one app to pay utility bills, check information about stores, keep track of transaction records and access government services without visiting an office.
“We have always been more interested in building infrastructure than the front end, for example, when we started smart city projects five years ago, the Citizen Card was issued by banks,” He said. “What we did was providing the technical support behind it.”
According to Qichacha, a database of Chinese corporate registration information, Red Date has filed seven patents and copyrighted 52 software programs. Five out of the seven patents are related to digital payments while the most recent two are blockchain-related.
“Many development teams in China like to build applications and the products are heavily driven by marketing andI think we stand out as a team that always thinks about bottom-up technical solutions,” He said.
As part of its smart city work, the firm collaborated with China Mobile and China Union Pay, two of the country’s largest conglomerates. Yifan He said he convinced them to get on board with the blockchain project.
The three companies drafted the plan to build BSN in September 2018. “We were afraid to go ahead with this plan on our own since it will be on a very big scale, so we decided to report the project to the State Information Center,” He said.
The companies already had a relationship with SIC through their smart city projects. With the authority’s blessing, they started to build the network’s technical infrastructure.
Besides sparing users from building their own infrastructure from scratch, He said the BSN has another way to lower their costs.
Building an application on a particular blockchain, even on a small scale, is highly costly. For example, if you build an application using three nodes and a consensus order, you would need four virtual machines, which are worth about 120,000 yuan ($17,000) on Alibaba, He said, adding the minimum cost for a DLT app in China ranges from $28,000 to $43,000.
“One way we can reduce the cost is that we can let customers have our services in much smaller units,” He said. “Users can pay for exactly how much they need. Only two to three percent of enterprise users would need more than 1,000 transactions per second [TPS], which allows you to make full use of the services Alibaba provides.” One virtual machine supports 1,500 TPS, according to He.
AWS and more
A key part of the vision is the so-called city nodes, data centers that provide computing power, data storage and bandwidth to support the services. The BSN has built more than 80 and is finishing up another 40, He said.
“City nodes are not nodes [in the usual sense] but a pool of resources,” He explained. “We pool a portion of resources in a ‘city node’ from its existing system and then build our frameworks and the standardized environment.”
China Mobile, one of the country’s largest telecommunication networks, will provide 90 percent of the city nodes. Notably, BSN will also use two AWS data centers in Beijing and Ningxia Autonomous Region in northern China. It will split the profit with these data centers.
“AWS has been very supportive of our project and given us a great deal for the price of their services,” He said. A representative from Amazon’s cloud-computing arm is expected to speak at the launch ceremony Saturday (which will be held online since Beijing has banned large gatherings since the coronavirus outbreak). AWS did not respond to a request for comment by press time.
BSN will leverage China Mobile’s distribution network to carry out marketing campaigns while training technical people to get used to the network. The company has tens of thousands of people and branches in many counties, He noted.
Union Pay is building the infrastructure to power payment and money transfers in BSN. Since China does not allow payment for goods or services with cryptocurrency, all the payments based on smart contracts will be made through the traditional banking system. The payments company will also develop other basic functions, such as sending text messages, as plugins.
Several of the top ten Chinese cloud technology companies have decided to use BSN to build blockchain-based services “since we offer the most cost-effective services,” He said, without naming any.
Even though it’s just launching now, He argued that BSN has already dug an economic moat around itself.
“I don’t think we’ll face competition in China,” he said. “BSN is cross-cloud, cross-framework and cross-site and it will be difficult for Alibaba, Huawei, Tencent and Baidu to build this interconnectivity.”
For example, Ant Financial could not use the framework from Tencent’s WeBank in its system. These companies won’t use their competitors’ cloud service to build applications either, He said.
There could be a few competitors outside China but He said he is not worried.
“At this point, BSN is at least two years ahead of any potential competitor,” He said. “Onboarding all the frameworks and raising money takes a lot of time.”