An Intro to the Blockchain Services Network (BSN)

Background

On April 25 the Blockchain Service Network (BSN) Commercial Launch Conference was held in Beijing. Hosted by the National Information Center and co-organized by telecoms giant China Mobile, payments processor China UnionPay and the BSN Development Alliance. The conference marked the official entry of the Blockchain Service Network (BSN) into the commercial stage and the open beta of the international version. The BSN claims its design and construction concept are derived from the internet: where the internet is formed by the connection of all data centers using the TCP/IP protocol, while BSN is formed by the connection of data centers using a set of blockchain operating environment protocols. Just as with the internet, the BSN is a cross-cloud, cross-portal, cross-framework global infrastructure network. The goal seems to be the creation of a public infrastructure similar to that of the internet. From the whitepaper: “Just as websites deployed on the internet can mutually interact and communicate, all DApps on the BSN can also interchange data regardless of differences in their underlying frameworks.”

BSN is essentially an attempt at providing infrastructure to lower barriers to entry, increase interconnectivity of distributed networks, and ultimately to engage stakeholders ranging from cities, to companies, to developers, to users, all on one service platform. In Western parlance (although it does not translate perfectly), this could be thought as a kind of public private partnership (PPP) with various Chinese government entities, state-owned enterprises (SOEs), and private companies in cooperation. This project is important to China for several reasons. It shows leadership in emerging technologies and could act as infrastructure for integration of technologies related to IoT, 5G, AI, and big data, while establishing a beachhead in the development of tech standards.

Details, cost savings

A main attraction of BSN to SMEs and individuals is the cost savings achieved by sharing resources and the ability for users to choose the number of nodes they need, thus allowing developers the opportunity to purchase resources at a rate as low as 10 transactions per second (TPS) to as high as over 500 TPS as standard. For higher TPS requirements a developer can contact the BSN operating and maintenance center (NOC) for a customized deployment. According to BSN research of current mainstream Chines cloud service providers, the lowest annual cost to build a traditional three-peer consortium blockchain LAN-style environment is approx RMB 100,000. Through BSN, one application requires RMB 2000 to 3000 per year to form an operational chain a saving of 97–98%. Being a centralized blockchain network which has pros and cons. While TPS will be larger than a decentralized network, the immutability and transparency benefits suffer and SMEs whom require a trustless record with guaranteed immutability may have second thoughts.

Participants

There are three main direct participants according to the whitepaper:

  • Cloud service providers who install free BSN public city node (PSN) software, make their cloud service resources (CPU, storage and bandwidth) accessible through the BSN and carry out sales through the BSN.
  • Blockchain framework providers (specially designated consortium blockchains) that, in accordance with the BSN’s framework adaptation standards, make adaptations and then deploy them on the BSN so that developers can select the adapted frameworks to deploy applications.
  • Portal operators that can use the BSN with existing cloud service portals or developers’ portals to create Blockchain as a Service (BaaS) platforms quickly and at low cost and can then provide BSN-based blockchain application development, deployment and operating services to their own developers.

Compliance

While the network claims to be fully open for anyone to join, this is on condition of compliance with BSN protocol standards. In theory, any cloud service provider, framework provider or portal operator can voluntarily join or remove themselves from the BSN. The question remains what will these standards specifically require and what happens when they are violated? In the international version of the whitepaper, a chapter ends with a “Team China” pat on the back: “Once the BSN is deployed globally, it will become the only global infrastructure network autonomously innovated by Chinese entities.” It is worth noting however is the discrepancy in this section with the Chinese version, which appends to this sentence (translated): “…and for which network access is Chinese-controlled.” Whether this is a typo or an intentional omission we can only speculate.

Encryption

It is unclear at this stage how much control the BSN Dev Alliance has over user activities. If for example, it’s possible for a Chinese user to access a smart contract created by an overseas node containing sensitive information on the Chinese government, will that node be kicked out of the network? Other risks include the possibility that the shared cryptography algorithms users are forced to adopt may be contain a backdoor or a set of root keys available to the government. As pointed out in a this article by Vipin Bharathan, the network specially uses the elliptic curve based SM2/SM3 algorithms which may contain a backdoor.

This is true for any company in China. If any foreign company wants to develop or release a product in China, they need to report their use of any encryption technology to the Office of State Commercial Cryptography Administration (OSCCA) to gain approval. SM2, SM3, and SM4 are cryptographic standards published by OSCCA and are authorized to be used in China. To comply with Chinese cryptography laws organizations and companies may have to replace standard cryptographic algorithms in their systems. with Chinese cryptographic algorithms, such as SM2, SM3, and SM4. While there is no evidence at the moment of any backdoors in the algorithms, many users are wary of trusting government promoted cryptographic algorithms since the NSA was suspected of planting a backdoor in the NIST SP800–90 Dual Ec Prng pseudorandom number generator. This would obviously have serious implications for user privacy.

Global Impact and Stakeholders

It remains to be seen how willing other governments and countries will be in signing up for this network as trust in Chinese technology has been in a downward trend overseas for the past year or two, with many countries voicing opposition to China’s dominance of 5G rollout. However, the network has already attracted big names in the private sector with cloud providers under BSN’s multi-cloud management services already including AWS, Microsoft Azure, Google Cloud, Baidu Cloud, China Unicom, China Telecom and China Mobile. The scale of the BSN is huge, with nodes connecting 128 cities across mainland China, rolling out to 200 over the next year and to all 451 prefecture-level cities thereafter. The network will also have nodes in 7 places outside China: Paris, Sydney, San Paulo, Singapore, Tokyo, Johannesburg and California (no city specified.). Including a large number of state-owned entities from the beginning, e.g. China mobile, was a smart move from an adoption standpoint and is a very good way to onboard users across China in a short timescale.

Interoperability

While the BSN itself is a permissioned chain forked from Hyperledger Fabric, it will allow interoperability with public chains and other decentralized platforms and at launch will be interoperable with major blockchain platforms and frameworks e.g. HL Fabric, Ethereum, EOS, WeBank’s FISCO BCOS and Baidu’s Xuperchain. As pointed out by our good friend Shuyao Kong at Decrypt; from a technical standpoint, creating a network capable of such widescale interoperability between frameworks is no small task. It will be interesting to see how it is implemented. From an economics standpoint, with each area currently being monopolized by a different cloud provider (e.g. Beijing having Baidu Cloud only), product development and price competition may be hindered in the beginning. However, the whitepaper states that “Blockchain developers can use any set of public city nodes globally through any BSN portal to purchase cloud resources in rate-charging standards of transactions per second (TPS).” It appears that monopolies have been spread out to limit initial competition while the technology is rolled out while allowing for natural price competition as nodes are advertised to users at a later stage.

Outline of Technical Structure

We have done a basic outline of the technical structure of BSN below:

Conclusion

In conclusion, the announcement of BSN is a major milestone for the industry and has set itself some lofty goals. On its launch the network will become the largest blockchain ecosystem in the world and, like DCEP has done for CBDCs, may serve as a shot in the arm for institutional and government adoption of blockchain around the globe. We see this as yet another instance of the west caught asleep at the wheel as China storms ahead and tries to shape the future of blockchain. The most important questions that remain are what will this future look like? And how are governments around the world going to respond? Users will weigh the pros vs cons of the BSN themselves and we look forward to seeing how the network is received over the coming months.

Sources / Further Reading

A team of former consulting, Wall Street, private equity, government, and corporate veterans accelerating the blockchain revolution