BLOCKCHAIN, a key technology powering bitcoin, goes beyond the virtual money system, promising applications across a spectrum of services like bank transactions, stock trading, charity and online financing appeals. It is even regarded a candidate technology for digital currency.

The widely discussed and debated technology is being touted as a major player in information technology and finance industries in China in the next decade, though it has yet to receive all necessary regulatory approvals.

Blockchain essentially is the technology backbone of bitcoin, providing a tamper-proof data structure for the virtual currency. In technical terms, it is a distributed database network that maintains a continuously growing list of “blocks” with data records. A block records some or all of recent transactions, and once completed, it goes into the blockchain as a permanent database. It makes transactions recordable and trackable, providing a system that is transparent, efficient and market-oriented.

Big firms including Citigroup, IBM and Deloitte are developing services based on blockchain, in areas such as bank transactions, consumer-payment management, stock exchange initial public offerings, auditing, intellectual property rights certification and even voting.

In 2017, banks are expected to spend US$1 billion in research on blockchain globally, according to research firm Magister Advisor.

“Blockchain’s applications mark the beginning of value transfer directly by the Internet itself, replacing online information exchange platforms,” said Xiao Feng, vice chairman of the Wangxiang Group and a 20-year veteran in equities and asset management.

Several dozen experts and personnel from start-ups attended the Blockchain Hackathon held recently in Shanghai. They were invited to brainstorm new applications based on blockchain. The event, sponsored by Wangxiang and Deloitte, was the first in its kind on the Chinese mainland.

China’s first blockchain industry alliance, authorized by the regulators like the Ministry of Industry and Information Technology, was founded at the beginning of February.

That same month, the governor of the People’s Bank of China talked about the possibilities of a digital currency or electronic money, which focused attention on blockchain as one of the technology options.

Beyond bitcoin

The initial and most widely known application of blockchain technology is bitcoin, the digital asset and payment system invented in 2008. Globally, it now has five million to 10 million users, with transaction volume estimated in several dozen billions of dollars.

“Blockchain has a complete system of peer-to-peer, credit and a distributed network to transfer value and assets,” Li Lin, chief executive of huobi.com, a Beijing-based bitcoin trading website, said in a recent speech at Fudan University. “Bitcoin is just the start.”

At the “hackathon” event in Shanghai, experts demonstrated various applications based on blockchain, such as a donation system for global charity organizations and an online platform for copyright registration.

All the applications depend on unique blockchain advantages such as trackability, creditable data and records, and user-friendly interfaces.

Applications also include a voting system for shareholder meeting conducted across continents and medical data storage unable to be rewritten and only accessible to global doctors when required.

There is also a network connection between cars and control centers.

Finance is one of the industries that look to reap immense benefits from the new technology.

Blockchain in finance

Banks, insurers and other financial institutions are turning their attention to the opportunities presented by blockchain technology. Some are already starting to adapt it to their sectors, speeding up and tracking transactions, and lowering costs.

Some have developed in-house digital currencies to test the technology, such as Citigroup’s citicoin. Others are pouring investment into third-party research and development, with Goldman Sachs earmarking US$50 million to Circle Internet Financial to adapt blockchain technology to handling consumer payments.

The search for blockchain applications led Japan Exchange Group Inc to tie up with IBM and the London Stock Exchange Group Plc is also working with IBM to test the technology for the distributed ledger system.

Overstock.com, a US-based online retailer for discounted goods, has won approval from the US Securities and Exchange Commission to issue a US$5 million “cryptobond” on a blockchain-based securities trading platform in July. It marks a milestone in a “transparent, easy and low-cost” share-issuing process, according to Overstock Chief Executive Patrick Byrne.

 Blockchain in China

In China, similar attempts at applying the new technology are underway in a small range of areas. Blockchain remains a bit of a “no man’s land” here due to the absence of official regulations and guidelines allowing it to be introduced into the financial system, some analysts said.

Zhou Xiaochuan, governor of the People’s Bank of China, said earlier that blockchain technology might occupy too many resources in the financial system, and he implied that the technology is only one of many options under consideration when designing an electronic money system.

Still, many remain optimistic that blockchain will be a boon to Internet finance.

“The technology is very possible in landing China in broader aspects,” said Da Hongfei, founder of Antshare, an equity-registration platform backed up by blockchain technology.

“It might be meaningless to utilize it in a mature system such as China’s payment network,” he said, “but it would add value to new areas like peer-to-peer lending or equity-based crowdfunding. In P2P, for example, lenders could track borrowers’ behavior on all platforms linked by blockchain and alarm each other if a debt went sour.”

ChinaPnR, a Shanghai-based online finance firm, also regards blockchain as a promising technology in the micro-finance sector for users who are familiar with Internet applications but not able to get loans directly from banks.

It will all take time. There are still hurdlers to surmount. Exports point out that the current technology doesn’t support trading volumes of 10 million or more, for example.