The blockchain, a kind of digital ledger of economic transactions, is characterized by decentralization, a time-stamped series of immutable records of data and collective maintenance.

In promoting new technology innovation, the blockchain technology can be an important breakthrough for China's independent innovation of core technologies. It is particularly suitable for promoting the modernization of the country's governance system and capacity.

Using the technology, government agencies and other public departments can advance coordination based on data sharing. This will benefit the public while reducing operating costs. Initial results have been achieved by introducing the blockchain technology to share administrative data and innovate in legal affairs.

The Loudi example

The local government in Loudi, a small city in Hunan Province in central China, is an example of how governments can utilize the blockchain technology. It has set up a blockchain property registration e-government platform. The platform connects the property registration system in the land and resources department, the record system on new and second-hand homes in the housing administration department, and the registration systems of the taxation department.

In November 2018, this platform issued the first property e-certificate in China, and probably in the whole world. The use of the blockchain technology helps reduce the time taken to receive a property certificate from several days to a couple of minutes. Obstacles among different departments and different levels of governments are overcome, conforming to the policy of one-stop services and improving the business environment.

Since China raised the concept of Internet Plus, various local governments have been upgrading their administration patterns. Smart governmental services are providing people-oriented services in an all-round way based on personal information. It will become a general trend to improve government services by using the blockchain technology, as proved by the e-certificate case.

The technology is also of far-reaching significance in facilitating innovation in the work of law enforcement departments. With this technology, an open mechanism can be set up for storage and sharing of information, which makes it possible to share judicial data. Information in the public security system are not fully shared because of its large volume and the low safety of information systems. Now the blockchain technology can ensure authenticity and accuracy of the shared information.

The blockchain technology serves as the foundation for big data and artificial intelligence technologies to utilize data. In the financial sector, the technology, thanks to its decentralization and disintermediation feature, can solve the problem of excessive centralization in finance. Due to information asymmetry caused by centralization, the financial market has long been facing problems such as low transaction efficiency and liquidity. Through the model created by the blockchain technology, which is tampering-resistant and traceable, the low market efficiency caused by these problems can be alleviated.

But to widely use the blockchain technology, regulation must be strengthened. Supervision must adapt to the real conditions in different stages and be adjusted accordingly. Before the blockchain industry becomes mature, forecasting and controlling possible risks is necessary to ensure sound development of the industry. With regtech, the management of regulatory processes within the financial industry through technology, efficient supervision will be realized.

The concept of regchain means supervising the blockchain industry by the use of technology, ultimately boosting sound development of the industry.

Supervision of the blockchain industry has achieved some results. The Chinese Government issued administrative regulations on blockchain information services earlier this year, the first official guideline in this field. It is an important act especially when different countries have yet to reach consensus on blockchain supervision.

Past cases show traditional supervision models are unable to control chaos in this industry, resulting in malpractices in overseas markets, making supervision even more difficult. In contrast, the regchain model will be effective in the supervision of the blockchain industry. The establishment of a science and technology-based supervision system and a credit system through regtech will help change static and passive record-based supervision to one that is dynamic and active.

Guidance from theory

The blockchain technology in China faces special problems since traditional Western concepts are not suitable to China's current conditions, while the fast-growing domestic blockchain industry urgently requires the guidance of theories. The essence of digital economy is the data economy, which can be realized via "Coken." The term "coken" combines "co" from common, and token, a ticket for payment, circulation and distribution.

Coken economics is of great significance to data. In the era of the data economy, data has a similar role to that of capital during the industrial revolution, and data collection is similar to the concentration of capital. Coken economics believes that the value of data not only lies in the openness of information, but also in sharing it. The biggest difference between digital civilization and industrial civilization is that the value of data may be higher than the value of oil, coal and capital in the digital revolution era.

Take China as an example. The country's growing data economy can become a latecomer advantage which will help maximize China's advantages in population and market size.

To address the issue of data ownership, Coken economics proposes that people should focus beyond ownership because the issue of data ownership is difficult to solve now. A probable solution is to realize the benefits of data value-sharing first.

Therefore, based on a system such as blockchain, it is possible to construct the underlying foundation of the digital economy, enabling big data transactions. Blockchain enables all parties to get returns on certain benefits in the process of data value realization. This mechanism is similar to credit, but is more advanced. The digital economy needs a new organizational structure and a new benefit distribution mechanism that can collect data and maximize its value, and the blockchain technology can provide that.

Ideal blockchain Coken should have clear logic and practical application scenarios, and contribute to the real economy. The most important point is that the distribution of resources and rights can be better accomplished in the virtual environment of digital ecology. Only in this way can the joint stock system be replaced in a sense by Coken and blockchain, and a new model based on blockchain emerge that is more efficient and with lower costs, bringing about an ultimate change in production.

Yang Dong is a research fellow with the National Academy of Development and Strategy, Renmin University of China; and Lin Yuqi is an assistant research fellow with the academy

Copyedited by Sudeshna Sarkar

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