Blockchain Ten Years: Flourishing Everywhere, What is the Reality?

Author: Zhou Ziqi (City University of Hong Kong)

In 2015, the launch of the Ethereum mainnet opened a new era of smart contracts for blockchain technology, laying the foundation for diversified application scenarios beyond Bitcoin. Since then, blockchain has no longer been just the distributed ledger technology behind Bitcoin, but has carried more expectations of "decentralization," "trustworthy collaboration," and so on.

Thanks to the natural fit between blockchain and the flow of funds, the traditional financial sector has taken the lead in focusing on and attempting to optimize processes such as fund settlement and clearing. A report from the World Economic Forum (WEF) in 2015 pointed out that institutions including Goldman Sachs, JPMorgan Chase, the London Stock Exchange Group, Wells Fargo, and State Street Bank have shown strong interest in blockchain technology, particularly exploring its applications in the settlement process. At the end of 2017, IBM announced blockchain collaboration projects covering multiple fields such as cross-border payments, education, food safety, identity verification, insurance, and shipping, and indicated that more and more industries will be directly impacted by blockchain in the future.

The fact is, as IBM stated, from 2017 to 2021, various industries have experienced a wave of "blockchain innovation frenzy." In 2018, PwC conducted a survey of 600 executives across 15 regions globally, and over 84% of respondents indicated that their companies had engaged in the blockchain space to some extent—"Everyone is talking about blockchain, and no one wants to be left behind." However, these explorations have mostly focused on "permissioned ledgers," which essentially use blockchain for data sharing and tracking within enterprises or between partners. However, limited by existing digital infrastructures and the lack of blockchain governance, the technical potential is difficult to fully unleash.

"Governance" was once one of the most disliked topics in the blockchain community, but over time, people have gradually realized that governance is not only key to promoting the mature application of blockchain but also a necessary condition (or people have given up resisting regulation). Reports released by the World Economic Forum in 2020 and the Bank for International Settlements (BIS) in 2022 both pointed out that for blockchain to enter a mature stage, continuous efforts are needed not only in technological breakthroughs but also in non-technical aspects such as standardization and regulatory frameworks.

As "governance" becomes the main theme, the application path of blockchain gradually shifts from the idealized notions of "revolution" and "disruption" to an "evolutionary integration" with existing systems. The rebellious narrative has once again been co-opted by the mainstream. After 2021, people's focus on blockchain has returned to the financial sector, specifically to "Tokenization." Tokenization refers to the transformation of traditional assets (such as currencies, bonds, stocks, etc.) into a digital form that is recorded and circulated on programmable platforms like blockchain. Unlike the rampant growth of ICOs in 2017, recent tokenization practices — such as central bank digital currencies, stablecoin legislation in Hong Kong and the United States, and RWA (real-world assets) — place greater emphasis on integrating blockchain based on the advantages of the existing financial system, while also focusing on compliance and risk control. This is indeed the "evolution" mentioned earlier, rather than a "revolution."

Over the past decade, although various industries have been eager to explore blockchain for business innovation, most applications still revolve around "transparency" and "public ledgers," lacking truly irreplaceable core functionalities. In many scenarios, blockchain serves more as a supplement to existing database technologies rather than a complete transformation. For example, supply chain traceability (such as Walmart's food traceability chain), public donation records (such as the Ant Chain public welfare platform), and some government electronic invoice systems often simply use blockchain to enhance trust endorsement rather than fundamentally reshape processes.

The development path of blockchain often gives people a sense of "scratching an itch through the boot." No one denies its value as a technological innovation, but in many industries outside of the gray market, blockchain has not effectively met core needs. Many seemingly cutting-edge attempts inevitably fall into the trap of "innovation for the sake of innovation." To this day, while people’s expectations of blockchain have spread from finance to various industries, they ultimately return to finance—after all, people realize that finance may be the area where blockchain has the most practical demand and potential for implementation.

In recent years, both the upcoming stablecoin legislation and the policy support for RWA tokenization indicate that Hong Kong is trying to find a balance between compliance and innovation to attract high-quality digital asset projects, consolidating its position as an international financial hub in offshore RMB, cross-border payments, and asset management. However, this direction is also fraught with challenges. Taking stablecoins as an example, the global market often presents a "winner-takes-all" pattern, with US dollar stablecoins dominating the retail (C-end) trading and storage for a long time. If HKD stablecoins want to break through, they need a clearer differentiated positioning and supporting ecosystem construction to fully leverage Hong Kong's unique advantages as an offshore financial center. With regulatory improvements and deeper pilot programs, if blockchain can be organically combined with the advantages of traditional financial systems under controllable risks, Hong Kong still hopes to occupy an important seat in the global digital finance landscape, truly becoming a "bridge" and a "testing ground."

Whether blockchain can break out of the awkward situation of "scratching an itch over the boot" in Hong Kong still requires time to verify, but at least the direction has become increasingly clear.