Blockchain skepticism

A consumer takes a photo with a Lenovo smartphone. File photo: VCG

Some Chinese smartphone makers have recently unveiled what they are calling “blockchain smartphones,” a buzzword that such companies use to lure investors.

Chinese tech firm Lenovo unveiled its latest flagship smartphone S5 on March 20, which, according to a statement the company send to the Global Times, is the world’s first blockchain smartphone.

The smartphone has an encrypted secure zone, which can ensure online payments are much safer, Chang Cheng, vice president of Lenovo, was quoted as saying in media reports.

But Lenovo is not the only Chinese smartphone manufacturer that has its eye on emerging technologies like blockchain.

Based in Shenzhen, South China’s Guangdong Province, Sugar Communication Technology Co announced in January that it would carry out strategic cooperation with blockchain-focused platform the Ethereum Fog Foundation to issue what they believed would be the world’s first mobile phone built on blockchain technology.

Two months later in March, Chinese consumer electronics company Sichuan Changhong Electric Co based in Southwest China’s Sichuan Province unveiled its first smartphone built on blockchain technology, with the aim of further strengthening the safety of user information.

Blockchain has become one of the most hyped technologies in recent months.

The technology is a distributed ledger, which enables permanent and immutable transparent recording data, according to a study published by New York-based management consulting firm McKinsey & Co in April 2017.

Huawei Technologies Ltd, one of the world’s top smartphone vendors, is also reportedly mulling over a blockchain-ready smartphone.

The company is apparently considering developing a mobile phone designed for running blockchain-based apps, Bloomberg reported on March 22.

And it is now reportedly in discussion with Switzerland-based blockchain firm Sirin Labs to license its operating system, with those plans likely to bring the technology closer to the mass market.

“Huawei always keeps an eye on cutting-edge technologies and communicates actively with other tech companies,” a spokesperson from the company told the Global Times. “Whether a certain technology can be applied to our product depends on how mature the technology is,” she said.

However, for some industry analysts, the most prominent use of blockchain is in Bitcoin, which became a global sensation in 2017.

Overhyped

As a major tech company, Lenevo should invest more in its research and development rather than focusing on blockchain just because it’s trendy, Liu Dingding, a veteran internet analyst, told the Global Times.

“The only widespread use of blockchain we’ve seen so far is initial coin offerings. Even companies like Alibaba are still applying for patents for this technology… It will take a long time for it to be applied in real scenarios,” Liu said.

During the early stages of the internet’s development, many companies claimed to be internet firms but ended up becoming “bubbles,” Jing Xiandong, CEO of Ant Financial, the financial arm of Chinese tech giant Alibaba, said on Saturday during the 2018 China Development Forum held in Beijing.

“We have not yet seen any valuable application scenarios for this technology,” he said, noting that many people are still skeptical about it and that the bubble will burst in the near future like the dotcom crash in the late 1990s and early 2000s.

Some smartphone analysts also said that the so-called “blockchain smartphone” is not the future of electronic devices but instead just a buzzword.

“I don’t see how it’s necessary for blockchain to be implemented into a phone,” Zhao Yao, contract research fellow at the Institute of Finance and Banking under the Chinese Academy of Social Sciences, told the Global Times. “The technology can be used in scenarios like online transactions and clearance, which have nothing to do with smartphone vendors.”

Also, the major technology bottleneck here is that blockchain technology can also be applied in low-frequency transactions, Zhao noted. “While Alipay [Alibaba’s online payment platform] can process 300,000 transactions per second, blockchain-powered technology can only process about a dozen transactions per second,” he said, noting that the technology is not mass market-ready yet.

“Using the word ‘blockchain’ is a way for smartphone vendors to attract public attention, as part of their marketing efforts,” Liu said.

China’s smartphone market declined 4.9 percent in 2017, the International Data Corporation said in a report released in February. The minor upgrades that Chinese smartphone companies made to their offerings were not enough to encourage consumers to splurge on new models, resulting in a general slowdown in the market, the report noted.

Besides challenges on the technology side, questions remain on the business side, particularly in terms of data and algorithm safeness, Jing from Ant Financial noted.

“Who will take ultimate responsibility for this decentralized structure?” he asked.

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