A WeChat Ban Should Be the Moment for Decentralized Tech. But It’s Not.
People from the world’s two largest economies could soon have a much harder time communicating with each other. Literally.
The U.S. may soon ban WeChat, the multi-purpose messaging app for more than 1 billion Chinese users, in addition to shutting down TikTok’s American operations. The ban could be disruptive for 19 million active WeChat users in the U.S., including Americans who regularly communicate with China. Popular messaging apps such as Telegram and Facebook’s WhatsApp are blocked in China, further limiting communication channels.
President Donald Trump’s threat highlights how governments can, by targeting centralized companies, disrupt the communication of millions of people. This should be the perfect moment for borderless, decentralized apps that can’t be easily shut down. But it’s not.
Decentralized apps use blockchain technology to store data in a distributed manner, rather than having it be controlled by a single company. But technical immaturity, legal limitations and ambiguous regulatory frameworks prevent decentralized apps from becoming serious competition for centralized platforms such as WeChat and Facebook’s Messenger, industry watchers said.
“The daily chat activities are still happening in the Web 2.0 world,” Mable Jiang, a Beijing-based principal at Multicoin Capital, a U.S. investment firm with a focus on cryptocurrencies and blockchain technology, said in an email. “The User Interface/User Experience needs to be as good as the Web 2.0-based ones, and this point in fact is the universal hurdle for any decentralized applications to be adopted.”
Decentralized technology experienced exponential growth with large investments through Initial Coin Offerings (ICOs), in which tech companies raise capital through token sales. Status, an Ethereum-based messaging company that aimed to be the answer to WhatsApp, raised over $100 million in June 2017, while Telegram, which aimed to launch Telegram Open Network (TON), a public blockchain project that could be applied to its messaging app, managed to raise a staggering $1.7 billion. Telegram later had to abort the project due to a legal dispute with the Securities and Exchange Commission (SEC).
“Decentralized technology has improved tremendously over the past three years in terms of performance and user experience,” said Jonathan Zerah, head of marketing at Status. “However, much of the technology is still in its infancy and requires much improvement to be compared to legacy systems and web2 messaging apps.”
Blockchain-based messaging apps currently have only the most basic functions such as text messaging and audio chatting, and that might not satisfy all the needs of users, said Jason Wu, CEO of Definer, a decentralized financial services startup.
“If people want to video chat, they would probably use Skype or Zoom via a Virtual Private Network (VPN), which is otherwise unavailable on decentralized messaging apps,” Wu said.
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Another reason why it is difficult for decentralized messaging apps to reach large-scale adoption is that many users on WeChat and Messenger might not view privacy, which is a top priority for decentralized apps, as their biggest concern.
Centralized messaging apps might store and analyze their users’ data to come up with new features that make the user experience more convenient. Facebook has long attracted controversy for using personal data to sell ads, and it’s well-known that WeChat messages could be accessed by Chinese authorities. But concerns about privacy have not caused users to abandon these platforms en masse.
“Many of the issues of decentralization lie in the tradeoff of security and privacy for convenience,” Zera said. “I think there needs to be better systems in place for identities and growing one’s network without sacrificing personal privacy and the privacy of their contacts.”
Popular encrypted messaging apps such as Signal and Telegram have better privacy protection, but they are not decentralized. While these companies claim they can’t read your encrypted texts, user data is stored in a centralized system and the companies have the ability to shut off their services.
Downloads of Signal and WeChat have spiked since the ban. WeChat users in the U.S. scrambled to install the latest version of the app before it is removed from the app stores, while people in China sought alternatives like Signal in case they can’t use WeChat to connect with people in the U.S.
The U.S. has not yet released specific guidelines on how to implement a WeChat ban. Some possibilities might include removal from apps stores in Apple’s IOS and Google’s Android operating system, or barring these two companies from providing access or updates to users in the U.S.
One argument for decentralized messaging apps is their technical resistance to government surveillance and censorship, as user data is encrypted and stored in a multitude of private servers.
“Centralized technology creates choke points and attack vectors for third parties to exploit,” Zera said. “They become susceptible to financial exploitation and even blatant censorship.”
However, a government can still retain a certain degree of control over decentralized apps, at least for now.
“With the current internet infrastructure available and general reliance on internet service providers (ISP), decentralized applications are not actually free from government control,” Zera said. “Oftentimes, an internet connection is still required to access decentralized applications, which are ultimately operated by centralized corporations or even governments – this has been proven in eastern Europe and other parts of the world.”
Following Belarus’ controversial presidential election result on Sunday, the country experienced a national internet outage. Major social networks and message sites including Viber, Telegram, Facebook, Twitter and Instagram were down, as were local news outlets.
A decentralized mesh network is one way to resist dapps’ reliance on the Internet.
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In a general sense, a mesh network is a local network topology that enables infrastructure devices to connect to many other nodes in which data can be routed between users in the network.
A New York-based startup, GoTenna, aims to build a mesh network of bitcoin micropayment devices that can also relay mobile communications such as text messages. The device, which resembles a cylinder-shaped game controller, can function as a bitcoin hardware wallet that transacts bitcoin without an Internet connection. The base technology for this network is the Bitcoin Lightning Network, and the app in the device is based on the Android operating system.
While it remains to be seen whether a meshnet can be adopted in a transnational scope, crypto payment technology has already been used for censorship and surveillance-resistant communications.
Some decentralized messaging apps are based on crypto payment systems, where people can use their built-in digital wallet to transact major cryptocurrencies such as bitcoin or ether. Status has an ethereum-based wallet and another decentralized messaging app Juggernaut uses the Lightning Network as its base technology and has a built-in bitcoin wallet.
These crypto-native messaging apps are partly designed to help crypto holders make transfers and payments more smoothly while securing their communications in the apps. But mass adoption will require scalable base blockchain technology.
Borderless decentralized technology still has organizations behind it, and these organizations must be incorporated in a particular country. That means a government can exercise its legal power to surveil and control these organizations, according to James Cooper, an international law professor at California Western School of Law in San Diego.
ICOs, which were a common way for decentralized tech companies to raise capital, have been heavily scrutinized by financial authorities across the globe.
The encrypted messaging company Telegram raised $1.7 billion from its ICO in late February 2018, in part to build a more decentralized messaging system. Since then the Russia-originated company has battled the SEC in the U.S.. The SEC believes most tokens are essentially securities and companies that launch ICOs have a legal obligation to register with the commission and disclose how exactly they are going to use the investment to develop their technology.
Telegram refused to disclose the information out of concern that the disclosure could potentially lead to government regulation and surveillance of its system. Telegram eventually agreed in June to stop its TON project and return money to investors, as well as pay a $18.5 million penalty to the SEC.
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From a legal perspective, decentralized messaging apps are no less vulnerable to a country’s national security law than popular apps such as WeChat and TikTok.
“Decentralization in the end is trying to skirt much of state regulation, but I would encourage people to pay attention to the rules and the laws because national security trumps all,” Cooper said.