THE UTILIZATION OF WEB3 NATIVE RESOURCES TO CREATE A CENTRALIZED BASE OF AUTHORITARIAN POWER.

• Author: Harsono, Hugh

INTRODUCTION

Technology has evolved greatly throughout time, with each specific piece of technology being born out of a specific purpose. From the evolution of books to iPads, or from precious metals to digital currencies today, the benefits of technological evolution help to better iterate each specific technology from one lifecycle to the next. The evolution of the World Wide Web truly helped revolutionize the way information is communicated throughout the globe, creating a whole new outlook for how people view and interact with one another.

The world of Web3, which has become a catch-all term for the next evolution of the Internet, promises even more for individuals in the digital age. The ability to have a more decentralized internet experience, the chance to participate in self-governance mechanisms like decentralized autonomous organizations (DAOs), and the truly near-instantaneous nature of block-chain immutability for transaction verification are just some of the few promises that Web3 can provide. Further benefits include increased financial inclusion to traditionally unbanked populations, access to digitally-enabled tools and resources, and much more.

However, in the People's Republic of China (PRC), the reality of Web3 may be significantly different from what the rest of the world envisions Web3 to be. The Chinese government has always kept a firm grip on the internet's capabilities, with the PRC's notorious "Great Firewall" helping to censor the Internet while conducting surveillance on users within China and throughout the world. (1) This has provided the Chinese government a head start in curbing activities in the Web3 world. The case studies of the Blockchain Service Network (BSN) and the digital yuan central bank digital currency (CBDC) serve to highlight how Web3-native resources are being leveraged for increasing control of Chinese citizens and others, despite the promised benefits of Web3 that such technologies offer. These case-studies will help provide a glimpse into a PRC vision of Web3, a system that exercises increasing authoritarian control over individuals and groups that disagree with any belief core to the Chinese government.

WEB3 IN CHINA

The Internet in China has long been defined by the Great Firewall, the combination of both legislative policies and technologies to regulate the Internet domestically. This has resulted in a significant preference for domestically-based companies for a long period of time, with international companies like Google, LinkedIn, and Yahoo pulling their services due to censorship concerns that have resulted in an "increasingly challenging business and legal environment" in years past. (2)

The domestic control that the PRC has wielded over Web2, the current generation of the internet, resulted in the Web3 movement in China gaining significant momentum early-on, with this being most clearly exemplified through China's previous status as the world's biggest crypto mining hub. Individuals and groups within the PRC accounted for nearly 75% of the total processing power of the Bitcoin network at its peak. (3) While popular demand among private citizens for Web3 tools and its associated apps continues to rise even to this day, the Chinese government has also embraced opportunities to participate in Web3, albeit only under its own terms, much akin to the way the Great Firewall creates the PRC's vision of Web2.

This determination to shape Web3 into a tool to benefit the Chinese government can be seen early on in the PRC's first official document on blockchain technology, released in October 2016, (4) which was published by the Ministry of Industry and Information Technology. This whitepaper specifically highlighted a distinct need to standardize blockchain terminologies and information security. This paper was followed by another released three years later, in January 2019, by the Cyberspace Administration of China, which is the central internet regulatory and control agency for the PRC. The setting of clear standards by PRC organizations already familiar with Internet control is a clear highlighting of the PRC desire to shape the way that Chinese citizens interact with Web3.

The Cyberspace Administration of China's Blockchain information Management Regulations laid out basic content and registration rules for organizations offering blockchain functionality as a service. The Blockchain Service Network (BSN) officially launched in April 2020, (5) playing a critical role in centralizing blockchain infrastructure within China, and potentially abroad, by placing previous legislative and policy-oriented actions directly into practice. Just one year later, the PRC banned cryptocurrency usage and mining in September 2021. (6) However, further examples of blockchain development under the PRC's conditionality took place in December 2021, when PRC officials released a shortlist of blockchain-based pilot units to start practical trials in sectors ranging from manufacturing to energy and also to finance. (7) This indication to participate in an exclusively PRC-centered vision of Web3 becomes clear through these actions.

The internal standardization of blockchain-based practices relating to Web3 development can also be seen in the example of non-fungible tokens (NFTs). NFTs, popularized through art collectibles such as the Bored Ape Yacht Club and CryptoPunks, (8) have also gained popularity in China, in parallel to the rest of the world, though interestingly enough not under the moniker of "NFTs". Instead, the term "NFT" itself has become implicitly banned in China, with He Yifan, the CEO of BSN's technical architect Red Date Technology, stating in October 2021 that the BSN's version of an NFT, termed "Distributed Digital Certificate" (DCC), is "almost the only way to access Chinese markets that complies with local regulations," (9) highlighting the impending legal and regulatory framework supporting a Chinese version and definition of an NFT. He's statement on digital collectibles follows the general sentiment of the PRC when it comes to the traditional Web3 definition of NFTs, with PRC state media specifically criticizing NFTs as an emerging technology, (10) including statements released in September 2021 to this effect aligning with the timing of the PRC's cryptocurrency ban. (11) The implicit bias against the world's definition of an "NFT" and in favor of the PRC's vision of an NFT has even come to a head in private enterprises, with technology conglomerates like Alibaba and Tencent actively refusing to utilize the term "NFT" and instead re-terming their NFT projects to be known as "digital collectibles." (12)

In this example, NFTs can provide an excellent use-case demonstrating the PRC's interest in creating a Web3 in its own vision, with the PRC refusing to utilize the term NFT and instead utilizing the monikers of "digital collectibles" and "DCC." This highlights how the PRC is still keen in creating Web3 in its own view, with the PRC rejecting the internationally-recognized definition of an "NFT" and simply relabeling the NFT concept into its own terms, establishing itself as the standard terminology setter within China. Rejecting the term "NFT" also serves as a rejection of "Western" international standards. In conclusion, the PRC has a very specific vision of Web3, with blockchain, NFTs, CBDCs, and other technologies paving the way for the PRC to implement this perspective on the digital future.

CHINA'S BLOCKCHAIN-BASED SERVICE NETWORK

The Blockchain-based Service Network's self-stated objective is to be a "cross-cloud, cross-portal, cross-framework global infrastructure network used to deploy and operate all types of blockchain applications." (13) Understanding the BSN, its potential value proposition, and its role in China's technology stack will enable a more cohesive view of how the BSN structures how Web3-native resources like blockchain can be used to create a centralized base of authoritarian power.

The BSN's Origins

A blockchain functions as a shared and unchangeable digital record of all transactions. (14) When a transaction is recorded on a blockchain, it is time stamped and encrypted onto a "block." These blocks are put together into an infinite virtual "chain," with the...