This article is a part of EqualOcean's 'Blockchain, China's Story' report. Read more about it or download the sample and check out the contents.

Blockchain, one of the conceptual novelties of this century, is a technology that some people consider the next game-changer across all but a few industries. A decentralized, cryptography-based network mechanism that enables immutable data retention and secure transmission, it might be a panacea for multiple businesses. On the flip side, its rise might be lethal for incumbents that are behind the trend – ‘might’ being key here.

So far, it is arguably just another overhyped concept, the evangelists of which are building castles in the air with their vaunted blocks. Skeptical voices around blockchain abound, appearing in both academic circles and the ‘real economy.’ According to the now-infamous saying, Satoshi Nakamoto’s brainchild may be “just a slow database.”

However, there is a lot of commercial fuss in the nascent domain. A handful of countries have been trying to show how ‘tech-savvy’ they are by overhauling the regulatory frameworks, luring global blockchain entrepreneurs to come with their projects. What’s more, a litany of states are now making attempts to leverage blockchain, striving to improve the way the public sector is operating.

Many central banks, which traditionally hold an exclusive right to print money, with absolute control over monetary systems, are nervous about the new breed of digital currencies, and so are trying to come up with their own equivalents.

Not to mention the craze private equity markets have been witnessing over the past several years. Since 2018, an amount of venture capital close to USD 6 billion has been pumped into growth-stage blockchain companies globally in 553 deals of over USD 1 million. The largest non-cryptocurrency round – Hyperchain’s (it is also known as Qulian Technology) Series B – brought the Hangzhou-based firm CNY 1.5 billion (USD 214.85 million) in June 2018.

Since 2014, nearly 45% of blockchain-related venture capital deals have taken place in the United States; 24% were completed by European projects and over 11% by Chinese startups. However, due to their limited assets and capabilities, up-and-coming companies and bootstrapped entrepreneurs are not the most important players in the area. (However, EqualOcean has recently found five dozen gems among startups in China, Switzerland and Singapore.)

As mighty as the majority of governments these days, global tech corporations are investing significant amounts of capital and reallocating labor resources to brand-new blockchain projects.

More than WeChat

With a thirteen-digit number of active users in its ever-growing ecosystem, Chinese tech leviathan Tencent Holdings (0700:HKEX) has a lot of room for market experiments designed to prove a certain technology’s real value – or lack of it. Besides, the company’s employee pool of over 50,000 high-skilled workers can become a guinea pig for innovative trials of all kinds.

And it, seemingly, has become one; one of the results we see is that the company’s legal machine is running at full throttle. According to the National Intellectual Property Administration, the country’s main IP regulator, nearly 20% of blockchain-related patent applications had come from Tencent, as of the end of 2019.

Many know that WeChat, the company’s omnipresent app, is not just a messenger: it is also a platform that helps other businesses to incorporate their models into an ample digital ecosystem.

There have been some attempts by Tencent to assist other enterprises in leveraging traceability, a blockchain application that has proven itself to be substantial in improving modern supply chain management techniques. In December 2019, Russian diamond producer Alrosa and “digital transparency company” Everledger announced their joint project; WeChat was involved in it to facilitate full-cycle information provision, “from mine to consumer.” Another seemingly successful project – a blockchain-based automated invoicing (in Chinese) mechanism for Shenzhen public transport – made it more user-friendly and (an essential bonus, given the massive traffic in the city) paper-free.

Nonetheless, this is just the tip of the iceberg. As for the core competencies, Tencent has been developing a universal blockchain platform to serve clients from all the critical industries that are experiencing a disruption in the XXI century: from finance to logistics. This system, which started its history in 2017, bears the name of TrustSQL.

The business framework of TrustSQL, a 2B (to-business) blockchain supermarket, slightly resembles Ant Financial’s Blockchain-as-a-Service (BaaS) platform. Much like the Alibaba-backed fintech upstart, it comprises three layers, providing full-cycle solutions that are, to put it simply, a smart combination of the platform’s core infrastructure and auxiliary services.

Less detailed, compared to the Hangzhou-based juggernaut, it leaves more space for improvisation; as a result, the scope of its potential client base is wider (e-commerce driven, Ant Financial focuses on “on-chain retail,” “on-chain finance” and “on-chain lifestyle” when developing blockchain capabilities).

In the white book, which was issued in 2019 by Tencent Financial Technology Group (FiT) with Tencent Cloud and Tencent Research Institute, the five main advantages of TrustSQL are mentioned (though none of them are surprising). The tech corporation claims that its blockchain platform possesses:

An efficient process that is achieved by a mixture of public and private cloud technologies;

Reliable and consistent record storage based on advanced cryptographic algorithms;

User privacy and confidentiality, with continually changing transaction background information, which is encrypted as well;

Secure key management system, built on the concept of the entrusted accounts, apart from traditional multi-factor authentication;

High security threat detection capability as the entire transaction process and the data flow are visualized to make them easily trackable.

While these points sound like they were drawn from some promotional material, it is always vital what a particular firm considers its main advantages. The same can be said about the industry-level scope, as it often speaks for the market positioning (it is strange to expect a robust traceability-focused blockchain menu from a bank’s tech spinoff, for example).

A big player on the Chinese healthcare scene, Tencent steers Tencent Trusted Doctors (企鹅杏仁) – a product of a 2018 merger between the Shenzhen giant-backed Tencent Doctorwork and Shanghai-based network startup Trusted Doctors. Since then, the new company has become a unicorn, raising a staggering USD 250 million in its Series C, which saw participation from the Chinese arm of legendary Sequoia Capital.

As an investor with hundreds of startups in its global portfolio, Tencent has also taken part in multiple venture deals. Among the most recent, Elpiscience Biopharmaceuticals’ USD 100 million Series B in December 2019 and significant USD 142 million Series D carried out by Beijing database platform Medbanks – the tech behemoth was the lead investor in this funding round. Small wonder, then, that Tencent has included the industry into its blockchain sketches.

Another sphere – logistics – requires, arguably, the least technically complicated of all possible commercial blockchain applications: traceability. This is why some companies (like the abovementioned tandem of the diamond producer and business intelligence firm) have already implemented the marvels of overwhelming sensors and complex data streams.

Known for its mind-boggling scale in the Internet entertainment domain, Tencent is relatively weak when it comes to the purely physical aspects of our lives, such as transportation. In the grand battle between major Chinese tech enterprises, the firm is trailing not only its long-time rival Alibaba (BABA:NYSE) but also the likes of Meituan Dianping (3690:HKEX), a young digital omni service provider. It might explain their attempts to burst into the sector, rolling out brand-new blockchain businesses.

Many other applications are being thoroughly developed by the Chinese conglomerate at the moment. Besides this, pure blockchain-driven set of solutions that is TrustSQL platform, there are many hybrid systems that are designed to apply a variety of cutting-edge technologies that everybody’s talking about these days: advanced microdevices, the Internet of Things (IoT), deep learning algorithms (better known as Artificial Intelligence) and so on.