The Chinese consortium BSN (Blockchain Service Network), intends to cover China with a common infrastructure on which to offer low-cost Blockchain-as-a-Service solutions to the entire economy.

Briefly, blockchain technologies (more properly DLT, distributed recording technologies) allow multiple organizations to share data in a secure and reliable way, without these remaining the exclusive property of those who produced them.
Alongside the many positives, the problems of these new technologies are the high initial investment and the difficulty of having to choose from numerous standards that are not very compatible with each other.

Blockchain Service Network

BSN, the blockchain service network, was launched in China on April 25: it is a consortium strongly desired by the Chinese government, based on a license agreement, whose founders are China Mobile Communications Corporation (telephony services), China UnionPay Co. Ltd. (payments and credit cards), and Beijing Red Date Technology Co. (technical partner).

Behind the three founders, there is the real inspirer, the State Information Center (Government Agency for Information Technology applications) which also appears among the authors of the initiative's white paper. The consortium, to which 400 companies and 600 developers have joined so far, also includes banks and vendors of services such as Baidu Cloud and China Cloud, the Chinese representation of Amazon Web Services (AWS).

The founding partners make no secret of their intention to achieve a monopoly position in blockchain solutions. Even the nickname of ChinaChain indicates a specific international vocation of the initiative.

Permissionless and permissioned blockchain

Both permissionless and permissioned blockchain will coexist within this consortium infrastructure.

The permissionless segment (public blockchain) is open to everyone, in particular to small and medium-sized companies that can rent a node at attractive prices (between 150 and 300 dollars a month).

The permissioned segment, intended for large companies, banks and state agencies, will allow connection to the network of federated blockchains (mentioned in the white paper as blockchain alliances) and traditional private blockchains. In a blockchain federation, multiple organizations agree to share only some (but not all) data, as happens in a joint venture between companies. Vice versa, the data of a private blockchain can only be accessed through a specific authorization.

The NCP (public city node)

The basic element of the network is the PCN (public city node), a computer system exclusively dedicated to hosting blockchain nodes. Currently, the network brings together around 80 NCPs in mainland China, and another 40 will join in a short time. In addition, seven NCPs located abroad are planned to facilitate the connection to companies that want to operate on the Chinese market (France, Australia, Brazil, Singapore, Japan, South Africa and California).

The stated goal is to reach 200 knots by the end of 2020, which seems difficult but not impossible. Each NCP will be managed by a different supplier: the Beijing node is managed by Baidu, the Shanghai node by China Mobile, others will be managed by AWS. Within a PCN, small and medium-sized companies will be able to rent blockchain nodes starting from a minimum of 10 transactions per second.

In practice, NCP managers will enjoy an undisputed local monopoly, but will be forced to harmonize their operating procedures, so as to ensure the overall functioning of the network. This urban segmentation of blockchain infrastructures may seem strange but it is a consequence of the size of Chinese cities and (above all) of the role of local authorities in political equilibrium.

Not surprisingly, the first announcement of the project was made by Tang Sisi, deputy director of the Center for the Development of Smart Cities at the Forum for urban governance and innovation. Even in Europe, the synergies between blockchains, smart cities and the utilities sector are a field to be explored.

The political role

At a political level, the effort to consolidate heterogeneous lines of development around a common goal is evident. Taking for granted that each telephone company and each bank wants to have its own private blockchain, the BSN was created to impose a form of coordination from above, so as to prevent incompatible solutions from spreading.

The project initially involves making extremely different blockchain solutions coexist (Ethereum, Corda / R3, Hyperledger Fabric), with various interface technologies (Cosmos and Chainlink). At the development level, a software interface common to the different platforms will be defined, in order to facilitate the growth of a generation of developers able to use the new infrastructure. But it is likely that at the end of this initial period, the solutions that will have survived will be very few.

To get an idea of the size and timing of such a project, the only example available is that of the evolution of RTGS systems (real-time gross settlement systems) in Europe. The first version of the system, called TARGET, was introduced in January 1999, to convey monetary transfers between the central banks of the Eurozone. Since numerous heterogeneous payment systems must coexist, its functioning was affected by numerous coordination problems between the individual banking institutions. The migration of TARGET to TARGET2 services alone took 7 months, ending in May 2008.

At first glance, this is an unprecedented effort. But the Chinese have demonstrated on several occasions their ability to develop empirical and effective solutions. For example, it is known that the complexity of an organization also depends on the number of time zones on which it extends.

Europe is spread over 3 time zones, while the US covers six and Russia eleven. Geographically, China would cover six time zones, but the problem was solved by imposing a single time zone across the country, not to adopt summer time and to follow Beijing time, 8 hours ahead of London time. And in certain technical decisions the hand of the central government is clearly felt: some solutions currently in use in the western world are prohibited by law and replaced by local variants (in particular, encryption algorithms and digital certificates).

The real objective of the initiative is to evangelize the SME (small-and-medium enterprise) segment of the Chinese economy, encouraging small and medium-sized companies to create and test applications based on a blockchain with a national dimension.

Among other things, the BSN consortium will require banks to approach a public blockchain for the first time and this should reassure companies about the future of their investment. This could stimulate the emergence, in the local area, of small payment systems (think of the experience of Cooperative Banks) that allow efficient use of liquidity.

What ABIE says

Chinese experience shows that encouraging the formation of consortia is a winning strategy for spreading the blockchain in the corporate world. ABIE (Blockchain Association, Companies and Bodies), an aggregate partner of Confindustria Digitale, has long supported the need to form consortium and federated blockchains in Europe to encourage the development of new projects.