On April 27, director of the Digital Currency Institute at the People’s Bank of China (PBoC), Yao Qian admitted that although blockchain has advantages, its shortcomings should be eliminated to “become the financial infrastructure of the future.”
Qian talked about the shortcomings of blockchain technology after listing several of its advantages like reliability, security, smart contracts and peer-to-peer aspects. He said, “Because the blockchain technology initially served Bitcoin at an early stage, it has obvious shortcomings in some respects.”
According to Qian, blockchain is suffering from two main issues: a space for improvement in the sector of data confidentiality and management and a weak scaling potential. He further said that it is extremely difficult to correct a mistake in a public chain as it cannot be closed. “Once a problem arises, especially a security hole, it will be fatal,” he said.
He advised that a central governor can be empowered to ease out the problems informed. The head of PBoC’s cryptocurrency research institute added, “For example, in a multi-center system such as a coalition chain, upgrading the blockchain bottom by shutting down the system, or emergency intervention, data recovery, etc., are available methods when necessary, and they help to control risks and correct mistakes.”
In order to defend his argument, Qian reminded about the DAO hacking attack of 2016 when almost $60 million was stolen in ethereum coins.
He stressed that such incidences could only be eliminated by forming a centralized management mechanism which will also remove confusion and suspicion. He said that blockchain belongs to the public as it serves the public interest. He continued, “Blocking should not belong to anyone, let alone a small share of the super-rich.”
Last year, Qian had a slightly different agenda as he welcomed the creation of a state-backed national cryptocurrency and despised bitcoin.
He acknowledged digital currency as, “In contrast to the private currency represented by Bitcoin, their source of value is currently the most speculative factor, and the worthless anchorage of Bitcoin necessarily determines that it is difficult to become a real currency.”
Meanwhile, China has become one of the leaders in the use of blockchain technology. As of now, China has the largest number of blockchain patents in the world, and the Chinese government has recently funded another $1.6 billion Blockchain fund to finance more projects in the cryptocurrency space.
At that time Huang Zhen, Finance and Economics professor in People’s Bank of China (PBoC) researcher and Central University stated, “The sovereign state is still the fundamental player in global politics, and carries with it the characteristics of the world financial system. Cryptocurrencies and other virtual currencies attempt to challenge the sovereign state’s right to issue currency, requiring the nationalization of currency issuance. China has a clear understanding of digital forms of money and is actively engaging in relevant work. The central bank has set up a research group and a digital money research institute to explore the digitization of sovereign money.” China is a huge market for blockchain technology, and its current stance can change the outlook of many countries around the world.