- China leads the blockchain space now that tech company Baidu has released Xuperchain, the first centralized virtual currency.
- China has plans to create a digital Chinese yuan.
- Let’s explore Xuperchain and blockchain 3.0.
Baidu’s releases Xuperchain public beta
Chinese Internet giant Baidu (BIDU) has successfully launched a public beta version of Xuperchain (or Superchain). It’s the first of its kind: a cryptocurrency that operates on a centralized network. According to a publication on The Block Crypto, Xuperchain will use “parallel chain technology to simplify smart contract processing.” Parallel chain technology is an upgrade from the currently used blockchain version 2.0. The Block Crypto claims that this technology will make it easier for developers to create and deploy dedicated, function-based smart contracts.
Xuperchain complies with the Chinese regulatory framework for digital currencies and holds a lot of potential, especially for enterprise solutions. Baidu’s blockchain-as-a-service offering could see a boost with Xuperchain’s release. Baidu’s customers can deploy specifically designed apps using the company’s blockchain services without the need to build their own dedicated blockchain network. The idea is similar to using cloud infrastructure services from a specialized cloud service provider to store enterprise data online. Since a business can utilize the functionality of Xuperchain without creating a whole network, it makes Baidu’s blockchain services lucrative as well as cost effective. Currently, Baidu has priced Xuperchain at 1 Chinese yuan, which is roughly $0.15.
Xuperchain and Blockchain 3.0
It looks like China has finally taken the lead in terms of blockchain technology. A post on Bitrates stated that Baidu’s Xuperchain release is a “breakthrough solution” for blockchain 3.0. The design of the Xuperchain network addresses the problem of computing, storage, and scalability in blockchain networks. Blockchain relies on miners to record and encrypt transactions. Since it works on a decentralized topology, the network is scalable upward.
Typically, all blockchain networks are as fast as the weakest node in the system. At times, this leads to problems when trying to scale up a network. But in the case of Xuperchain, master nodes deploy a core’s idle computing power to process parallel transactions. This design overcomes any latency issues and makes the Xuperchain network function much faster. According to Cointelegraph, the presence of these master nodes will make crypto mining more energy efficient.
According to The Block Crypto, the white papers for Xuperchain were made public in May 2018. The Xuperchain website claims that since 2018, Xuperchain has processed over 450 million transactions and houses approximately 3.5 million users. In terms of transaction processing speed, Xuperchain is 23x faster than Ethereum. While Ethereum is capable of executing 15 transactions per second, Xuperchain claims a peak concurrency of 353 transactions per second. A publication by Coindesk says that Baidu holds over 50 patents related to Xuperchain and the entire ownership of Xuperchain’s intellectual properties.
The digital yuan in China
In an earlier post, I mentioned that Chinese President Xi Jinping was a staunch advocate of blockchain technology. Even though the technology that powers Bitcoin is in demand, a CNBC publication claims that trading in cryptocurrency is banned in China. In my opinion, one of the reasons for Xi’s tepid outlook for Bitcoin and other cryptos is the decentralized nature of the virtual currencies. There’s a genuine threat that a peer-to-peer transactional network could create a parallel economy. This raises the question of whether the Chinese leader would accept a state-regulated cryptocurrency. The launch of Xuperchain is the obvious answer.
In August 2019, Forbes reported that China planned to unveil a new virtual currency in place of its domestic currency, the yuan. But the new virtual currency would be a centralized one, unlike all other cryptos. The People’s Bank of China would regulate and monitor the supply of the digital yuan. Another publication on Forbes claimed that the Chinese central bank would work with seven key institutions to circulate the digital yuan. These institutions will regulate the supply in the Chinese economy. Four of these institutions are banks—namely the China Construction Bank, the Industrial and Commercial Bank of China, the Bank of China, and the Agricultural Bank of China. The other three institutions are Chinese tech companies Alibaba (BABA), Tencent (TCEHY), and UnionPay.
Both Alibaba and Tencent are gearing up to improve their blockchain service offerings. In November last year, SCMP reported that Ant Financial was testing blockchain services for small and medium enterprises. Ant Financial was formerly known as Alipay, Alibaba Group’s mobile payment platform. On the other hand, Tencent is putting together a cryptocurrency research team. A post in Coindesk hints that the research team will focus on “how to use digital currencies in its payments platform.”
The US is more focused on setting the ground rules for the crypto space. US Congress plans to define digital assets in the draft bill of the Cryptocurrency Act of 2020. In September 2019, the US Commodity Futures Trading Commission approved the launch of Bakkt, the first regulated exchange for Bitcoin futures.
In comparison, China is making a lot of progress when it comes to applying blockchain solutions. Coindesk reported a month ago about a bond issuance by the Bank of China using blockchain tech. The two-year bond carries a coupon of 3.25% and has raised 20 billion yuan ($2.8 billion). Now, the Xuperchain announcement could establish Baidu as one of the market leaders in blockchain-as-a-service. Other Chinese tech companies Alibaba and Tencent are also catching up.