In-Depth Analysis of China's New Blockchain Real-Name Verification System

According to an article by Xinmei Shen and Matt Haldane forSouth China Morning Post (SCMP) on 14 December 2023, China is taking a significant step in digital identity management by experimenting with a blockchain-based real-name verification system. This system aims to allow internet users to log into online platforms without divulging personal information such as phone numbers.

The Blockchain-based Service Network (BSN) and the Ministry of Public Security’s First Research Institute jointly launched the Real-Name Decentralised Identifier (RealDID) system, as reported by SCMP. This initiative also involves officials from the National Development and Reform Commission and the National Data Administration. Anicert, a subsidiary of the research institute, is tasked with issuing, managing, and verifying user identities through its Cyber Trusted Identity (CTID) system, which is already in use by banks and other institutions for verifying Chinese identities.

SCMP notes that the project aims to eventually encompass all 1.4 billion Chinese citizens, although BSN acknowledges that scaling up will be gradual. In the initial phase, BSN expects to issue 5 million RealDIDs over the next year through various pilot projects. The system operates exclusively within China and is not accessible to IP addresses outside the mainland, maintaining a bifurcated approach similar to BSN’s other projects.

The RealDID system functions using a public key infrastructure (PKI), where users store public cryptographic keys in a RealDID document on the Yanan Chain after verification by the CTID system. This verification involves a “three-factor process” including government ID, legal name, and facial recognition. Once verified, users can create multiple public-private key pairs for use across different platforms, allowing for login with an anonymized DID address. SCMP reports that the system enables users to sign files, leaving a watermark to prove origin, while the government retains access to user identities if necessary.

As per SCMP’s article, while the national regulatory organization stores personal information, companies will not have access to this data. This development comes in the context of Chinese law requiring online accounts to be tied to real-name identification, typically a phone number

The system aims to counter the monopolization of data traffic resources by large internet platforms and mitigate data leaks, as stated by Yang Lin from the security ministry’s research institute. Yang also highlights that privacy breaches are increasingly linked to profitable activities such as online scams and cybercrime.

The SCMP article stated that BSN, in its blog post, emphasized the need for a robust mechanism to protect personal privacy data, citing it as a fundamental requirement for the next step of internet development. Apparently, the blockchain-based system is seen as pivotal in ensuring the security and compliance of personal data circulation between institutions.

The SCMP report also mentioned that officials see potential for the RealDID system to protect user data in commercial data exchange scenarios. It could enable secure and compliant data sharing and authorized use of personal data, fostering business collaboration.

BSN is an ambitious project from China, designed to create a comprehensive blockchain infrastructure platform. Launched in April 2020, it aims to bridge the gap between different blockchain networks, both within China and globally, by offering a unified, cost-effective platform for the development, deployment, and operation of blockchain applications.

Key aspects of the BSN include:

1. Diverse Blockchain Integration: The BSN integrates a variety of blockchain technologies, including public, consortium, and private chains. This allows for a more versatile and inclusive approach to blockchain application development.
2. Government Support: The BSN is backed by major Chinese state-owned enterprises and government agencies, including China Mobile, China UnionPay, and the State Information Center. This support underscores the strategic importance of blockchain technology to China’s future digital infrastructure.
3. Global Expansion Goals: Although based in China, the BSN has global aspirations. It aims to build an international network that will facilitate blockchain technology’s growth worldwide.
4. Wide Range of Applications: The BSN is designed to support an array of applications, particularly in smart cities and the digital economy. It provides a foundation for businesses and developers to build and operate decentralized applications (dApps) efficiently.
5. Compliance with Regulations: In line with China’s regulatory environment, the BSN emphasizes compliance with local laws and regulations. For its international branches, it seeks to adapt to and comply with the regulatory frameworks of other countries.
6. Interoperability and Cost-Effectiveness: A central goal of the BSN is to enable interoperability among different blockchain protocols, significantly reducing the cost and technical barriers for developers.
7. Data Privacy and Security: Given its ties with the Chinese government, there are international concerns about data privacy and security within the BSN. These concerns stem from potential government surveillance and control over data and transactions conducted on the network.

Overall, the BSN represents a major step in China’s efforts to lead in the blockchain sector. It aims to lower the entry barrier for blockchain technology adoption and foster innovation in various fields, although it faces challenges regarding global trust and acceptance due to its governmental associations.

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