Inside China’s plans to protect user privacy in its smart cities

Blockchain and encryption could be used to mitigate privacy concerns in smart cities

As countries from Canada to China build smart cities, privacy protection remains a core concern, as indicated by the recent resignation of Alphabet’s Sidewalk Labs‘ privacy expert Ann Cavoukian. But applying blockchain technology and encrypted computing to smart cities’ data infrastructure can protect user privacy, according to Vincent Wang, chief innovation officer at Wanxiang Group.

“Blockchain has a nice way to manage and secure data on the distributed network,” said Wang. Combining blockchain with encrypted computing allegedly allows analysis of data without breaching individuals’ privacy. “Nobody will see your raw data. Nobody will replicate your raw data.”

Key Highlights

  • “We believe that truly great blockchain companies will be industry companies, software providers who instead of branding themselves as a blockchain company, absorb the logic of blockchain so as to reinvent mainstream solutions in their industry. They may be the SAP of the future. They may be the LinkedIn of the future. They may be the IBM the future.”
  • “Blockchain offers a great organizing principle. So down the road, you may see that the boundary between these different players are blurred. They’re all connected through a token layer. So people trade with each other or any number of things. They incentivize each other’s economic involvement in different ways and they find relevance where there was none.”
  • “China is transitioning from a manufacturing- and investment-driven economy to a consumption-driven economy. All of these [deficiencies] will be revealed and they will be viewed as great opportunities. These are opportunities that blockchain, I’m sure, will capture.”
  • “Some of industries are not even defined yet. Blockchain will redefine new boundaries of what a particular industry actually means.”

Earlier this year the Chinese automotive company announced the production of a blockchain-powered smart city in collaboration with blockchain startup PlatON.

Located in Hangzhou, Zhejiang province, the smart city dubbed “Innova City” is designed to track people’s usage of energy, transport and technology through the use of an integrated blockchain system.

“We will create a data network that does not allow the user to surrender that data. Your data can be accessed, but you do not surrender it. Your data will not be copied and replicated and stored somewhere else,” said Wang.

See related article: President Xi Jinping Endorses Developing Blockchain Technology in China

Hangzhou is a testing ground for blockchain integrated smart city, Innova City

However, the Cyberspace Administration of China (CAC) published draft regulations in 2018 for Chinese users to register the information before using blockchain related services. In March this year, CAC announced a list of approved blockchain information service providers, which included Wanxiang Blockchain, a non-profit blockchain research institute funded by Wanxiang Holdings.

While conventional smart cities use cloud systems, facial recognition and IoT technology, that data collected is centralized in the hands of companies managing those services. “This is going to be the first scaled urban project whose data infrastructure runs entirely on blockchain,” said Wang.

“With the new city, when you design the data infrastructure from scratch, you redesign the data fabric to make it immensely scalable, distributed, so there won’t be any data silos. The data domain is protected, but they are they’re also connected,” said Wang.

According to Deloitte, China has around 500 smart city pilot projects in development—the most in world.

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Full Transcript

Angie Lau: One of the interesting initiatives in China is this cooperation between industries and governments, and that is really being reflected right now in Hangzhou by the Zhejiang Province in coordination and collaboration with Wanxiang industries.

Vincent Wang is the chief innovation officer at Wanxiang Industries Holdings, and you’re cooperating with Hangzhou in something called a smart city and using blockchain innovation. It’s called Innova City. Tell us more about this.

Vincent Wang: Innova City is a major, very ambitious mega project along the river in Hangzhou. For those of you who have visited, is one of the most beautiful cities in China, it actually shares a common feature with Shanghai. Shanghai is divided up into two parts, old and new, by a river, Huangpu River. So right now we’re sitting in Pudong. Pudong represents the growth area of Shanghai, and has had that theme that for the last 20 years at least.

Hangzhou was also a city of old and new, divided up by a river called Qiantang River. And the enormous city is right on the river bank on the Pudong side of Hangzhou City. Let’s put it that way. And this is where most of the growth will be. As a matter of fact, the Innova City project is right at the heart of Hangzhou’s inner ring that defines the city proper. We see Innova City as the opportunity for multiple dimensions.

Number one, this is a mega city project that allows us to experiment a new way to build a city adjacent to industrial activities with high environmental standards. Secondly, it gives us the testing ground for a more distributed way rather than the top-down design way to look at a smart city. And thirdly, that’s the most exciting part, I keep the best for last, this is going to be the first scaled urban project whose data infrastructure runs entirely on blockchain.

Angie Lau: What does that even mean?

Vincent Wang: Traditionally, when you say a smart city, it’s based on cloud, it has a certain set of features, for example, facial recognition, smart transportation, but all these belong to the data collected from different applications. They belong to different data silos. What blockchain aims to do is, number one, as this is discussed to some detail by Dr. Ada Xiao, I just want to repeat that PlatON allows privacy and performance to be addressed at the same time.

When you are in the city of the future, when you do smart driving, when you’re doing smart renewable energy, where you want to provide better services to residents and visitors alike, you need efficiency. You must have real time [efficiency]. Otherwise, if your data is protected by data infrastructure when you drive, when your car is interacting with the infrastructure, if there is latency, a the time delay of a few milliseconds, that could be fatal. PlatON offers the best opportunity to marry confidentiality, privacy protection with performance.

This needs to be designed in from the very beginning, where true privacy, true fulfillment of privacy protection is when users and administrators don’t need to even think about it. It’s so integrated into the data fabric. That’s the first thing we want to do.

Secondly, we want to have the synergy of different systems, different application systems, different economic models, different economic entities. I will give an example later on if we have time. You can take an existing city where the data infrastructure is already in place and try to add a layer of blockchain or provide some branching out with blockchain for a particular application. But the benefits will be limited because you still need the data silos of different applications, different services, different solutions.

With the new city, when you design the data infrastructure from scratch, what you can do is to redesign the data fabric to make it immensely scalable, distributed, so there won’t be any data silos. The data domain is protected, but they are they’re also connected.

Angie Lau: Privacy is a huge issue, especially when it comes to emerging technologies. How can I be assured that my information is private to me, can’t be utilized against me or commoditized against my interests, which we’re actually seeing now in very many aspects of technology applications to the criticism of companies and all the way up to governments.

How do you as a company reassure that privacy is first and foremost going to be protected for people to engage more wholeheartedly in the technology ecosystem and infrastructure? How do you get past that perception where privacy truly is privacy? How do you reassure people about that?

Vincent Wang: Basically with distributed technologies including blockchain, but also including encrypted computing. I’ll explain why. Right now, let’s look at the problem we’re facing now. The problem we’re facing now is actually a natural consequence of us surrendering the data sovereignty to a proxy, to a large company, the Googles of the world, the Facebooks of the world for benefits.

And so we get services. If we do not surrender the data, we don’t get services. It’s not necessarily that there is a dark desire somewhere in the universe that they want to take the data sovereignty away from us. But that’s the way it is. This is the only way because all the data services are vertical. They following kind of a pyramid structure.

Individual users’ data is integrated on the upper level, and solutions and services are running on that data. And that’s the only way your data can be accessed, that is by surrendering your data out to be stored in the data infrastructure, in the database, somewhere in the cloud.

Angie Lau: Is this a concern, not only of people in China, but obviously around the world? What is the concern here in China when it comes to privacy?

Vincent Wang: I think privacy concern is fairly universal everywhere. Like everywhere else, including the US, Chinese consumers do not want to have their data abused by unknown third parties. That invisibility of where your data is going is a great concern. Now, what we want to do differently with the blockchain-enabled data infrastructure is twofold.

One, we will create a data network that does not allow the user to surrender that data. Your data can be accessed, but you do not surrender it. Your data will not be copied and replicated and stored somewhere else. So you still have your data. Let’s say that it’s stored in a digital purse of yours. Other people, if they want to trade with you, they want to have access to your data so they can help you better, they need to get your consent.

That consent doesn’t mean that you actually have to press a button. It could be a smart contract that you initiated, you signed with a third party. So you don’t need to do that manually every time. But once you grant your consent, your data will be accessed to give you a service, but only access because your data is not going anywhere, right?

Angie Lau: It’s accessed, but not owned.

Vincent Wang: Not owned. They cannot see the raw data. Nobody can see the raw data except for you. You can choose not to see the raw data either. So this way you can cut off whenever there is a violation or infringement. You can cut that relationship up overnight and there are no more consequences. That assures that there’s no data lost. There’s only a denial of data access, a granting or denial of access.

That’s the first thing we want to do. I don’t want to have a too involved the discussion here, but blockchain has a nice way to manage and secure data on the distributed network so that you can, as far as the personal data is concerned, you can have both. Secondly, encrypted computing. So we allow the computing analysis to be conducted over encrypted data. So again, this goes to the fact that nobody will see your raw data. Nobody will replicate your raw data.

Even if they tried to, that doesn’t make any sense, because once your encrypted data stored there is taken somewhere else, it just won’t be  read anymore. So this is where both these two values, the distributed data securing on the blockchain network and the encrypted computing, those are two of the primary, very important value propositions by PlatON.

Angie Lau: How competitive is the blockchain space in China right now?

Vincent Wang: From a technology point of view, a narrow competition is not necessarily the way to go, but viability wise, we see a vibrant range of options for app developers and users. So I think that is a sign of great health. On the other hand, both the industries and the users are calling for meaningful aggregation so that you have a common platform to establish a great value system.

So I think eventually there will be convergence on a public chain with regard to a number of public chains. And we have reason to believe that with its merits, PlatON will be one of the major infrastructures out there.

Angie Lau: As you build these initiatives, it’s important to tap blockchain talent. It’s important to tap the new graduates in computer engineering, developers and coders and the like. Does that talent exist at a level that competes globally here in China?

Vincent Wang: I believe so. I think here we can draw a parallel with artificial intelligence. We see a great availability of talent here. Now with the blockchain, as a matter of fact, I believe that going forward, in order to really realize the full potential of blockchain, in the future we may not have blockchain developers.

We will have individual application developers who know their blockchain. Just like today you don’t have Internet developers any more because the technical logic of the Internet has already been absorbed into different application domains. So of course, everyone is doing Internet when they design their own code for their own solutions or for their own industries. They think that will happen to blockchain in the future.

Here, as a matter of fact, I would argue that China probably has an advantage benefiting from the fact that China is one of the first major countries that embraced blockchain and blockchain has becomes part of the Chinese lexicon as early as 2015. So when your grandmother also knows what blockchain is, that’s saying something. So that advantage that we have a new graduates who even in college already know what blockchain is… Some of them are very well trained in blockchain technology already.

That will come in handy when they do whatever IP related work later on. But even those who do not have deep training–their awareness will keep blockchain as a viable option for innovation later on in their career. So I think there is a great advantage.

Angie Lau: When you look across industries in China, do you feel like some industries are more knowledgeable about blockchain than others?

Vincent Wang: I think it could be true for two reasons. One is there are some pre perceived low-hanging fruits for blockchain applications. People inevitably speculate on what will be the low-hanging fruits for blockchain. And for example, people believe that the financial sector… Now people are more focused on supply chain finance. People working in supply chain finance are probably more aware and becoming more knowledgeable about blockchain.

The other area and I think is happening and I think it will be picking up momentum is where you would not naturally think of as a blockchain domain, but it offers great potential to rethink the technical logic of the IT technology that supports that industry. For example, provenance, food, provenance in China.

Over the years, a number of food scares have happened, and people very quickly, even though blockchain was not envisioned to be a food technology, but people very quickly realized that it has great application. But, so far, the applications are done in a way that is outside in.

But as more and more people in those industries become aware of blockchain, they will be incentivized to take blockchain to disrupt the existing data order of the food industry, and then they will become more knowledgeable. That’s where the true revolution will happen, when the value proposition, enthusiasm and deep knowledge all come together.

Angie Lau: What do you think the perception of blockchain is right now in terms of corporate enterprise in China and not only the understanding of blockchain technology, but also working with it and actively thinking about using it in their industries?

What do you think the percentage is in terms of that happening right now? Companies that are thinking about applying or already implementing blockchain?

Vincent Wang: My guess would be about 15 to 20%. That’s a very rough overall estimate, but I think that number is coming up pretty dramatically. And a matter of fact, both at PlatON and at Wanxiang Innova City and in at the Wanxiang blockchain company, we’re doing everything we can to further promote awareness. So next time we talk, hopefully the number will be 35%.

Angie Lau: 35% is still big enough of a chunk to scale blockchain and show the outcome of blockchain efficiencies. But you’ve got an enormous runway of blockchain opportunities that still were not even in saturation or maturation stage yet. How quickly do you think China’s going to get there versus other nations around the world?

Vincent Wang: I think in a number of areas, China will get there before other nations. This is related to the insight Dr. Xiao shared earlier about the lack of incumbents in, say, supply chain finance. This is why blockchain blooms in supply chain finance. I think in China, in spite of the decades of amazing economic development, the development for an economy that grows so fast, inevitably, there will be uneven development.

I would think that there are certain sectors that still do not have major incumbents like the precise US or EU counterparts. But as China is transitioning from a manufacturing- and investment-driven economy to a consumption-driven economy, all of these [deficiencies] will be revealed and they will be viewed as great opportunities.

These are opportunities that blockchain, I’m sure, will capture. I think the reason China will pick up the momentum, maybe in a number of areas ahead of other nations, is not necessarily because we’re smarter than other people. It’s just that we have the right combination of some development and development that’s not quite complete. So there are still gaps that innovation can quickly fill.

I just want to add that we believe that truly great blockchain companies will be industry companies, software providers who instead of branding themselves as a blockchain company, they take blockchain, absorb the logic of blockchain so as to reinvent mainstream solutions in their industry. They may be the SAP of the future. They may be the LinkedIn of the future. They may be the IBM the future.

Angie Lau: Dare I say the Forkast of the future?

Vincent Wang: Forkast is the future.

Angie Lau: At Forkast we are forecasting the future. I think ultimately when you take a look at what’s happening in Asia, and I will expand beyond China, is that there is really an enormous potential for growth. Exactly as you said, it is not a saturated market, it is not a mature market, it is a developing market.

In the development of it comes this opportunity where technology can leapfrog and really create new industries where none have existed before. And so there is a lack of incumbents in the space because the space has not yet been defined until right now, and may not yet be defined until technology defines it.

Back to Innova City, what are you working on that looks so different from anything that we have seen in infrastructure today, in government today, in corporate structure today? Give me your top three highlights of something you’re working on there that we’ve never seen before.

Vincent Wang: First of all, I want to sincerely compliment you on the insight that you just shared with us, that maybe some of the industries are not even defined yet. Blockchain will redefine new boundaries of what a particular industry actually means. I think that’s a great insight.

I would apply that insight onto the smart city that we’re building. If you look at smart cities today, let’s take that renewable energy, for example, you have different players. You have individual users, household users. And you have the grid operator and you have the sometimes upgraded community operators which have a stake in that as well, and you have exchange energy exchanges. How do you define renewable energy? Basically, there are all these different silos, different segments. So it’s not quite like a pyramid. But data is going everywhere willy-nilly, there’s not a very clean way to organize it.

When that happens, the challenge often is there’s no good business model because it’s just too confusing. It’s not clear who’s paying whom for what. Blockchain offers a great organizing principle. So down the road, you may see that the boundary between these different players are blurred. They’re all connected through a token layer. So people trade with each other or any number of things. They incentivize each other’s economic involvement in different ways and they find relevance where there was none.

For example, you take your car home, you have different ways to get your car battery replenished. For example, your residential community may offer a service to physically do that for you. Or, with autonomous driving it’s easier, but before autonomous driving, someone would just come out of a trusted blockchain network, take your car, service it and then return it. The gate permission would be granted, the parking space permission would be granted.

But you wouldn’t need to know [what’s happening], because everything is running on like a lubrication fluid, running on the level of a token. And you see the settlement. You see the token deducted or granted to your household. That’s all you need to do, all you need to do is provide the right infrastructure. You have the right solar panel, you invest in the energy storage unit, you make the investment, then it is done. Someone will take that, take your asset at the resource and compensate you fairly and seamlessly.

Angie Lau: So this is really a redefinition of socio-economic relationships because right now, I trust you or I trust your brand or I trust your reputation, I trust your reviews, I do my due diligence, I do my research. Until that point happens that I establish trust with you, I then decide to engage in a business relationship with you.

That’s really how the world currently exists, right? We do business with the companies, the brands, the people that we trust. Once those relationships falter, we then go to another company that hopefully can maintain our trust, ergo, go consumer loyalty. But you’re talking about a completely different system.

What it seems like you’re talking about is that the system itself will create that layer of trust so that you don’t have to vet every single person who’s participating in that system, because that system establishes that trust and demands and commands that trust from those who are servicing that system.

Vincent Wang: Absolutely, you got it exactly right, the system is acting as everybody’s proxy. And so if you make your solar panel available to a third party or fourth party, would that party be, your client or your customer or your solution provider? It’s not clear, because they’re getting something already from servicing you.

So this is like quantum theory, which is that when you go to a sufficiently minuscule level, energy and mass are confused. So they converge together. Likewise when the service, when energy becomes virtually distributed, who’s the provider, who is the benefactor, who is the beneficiary, who needs to be compensated for what? That is also blurred.

In its place is a system, as you said, that handles all this trading secured by blockchain, and the quality of the execution is ensured by artificial intelligence on the edge and monitored probably by the cloud or by additional infrastructure that again are based on these two basic building blocks, AI and blockchain.

Angie Lau: I think for the first time in many of these conversations, I truly see a forecast to what the future could look like. And it sounds like it’s being tested right now in Hangzhou. So thank you so much for sharing that, and I can’t wait to see more.

Vincent Wang: And thank you very much. You have provided me with at least two great insights. Thank you.

Angie Lau: I’m glad. Very good reciprocation. Thank you, Vincent.