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Amazon AWS: Complete business guide to the world's largest provider of cloud services

Before we spout forth a fountain of fabulous terms such as "cloud infrastructure" and "virtual machine," let's try to explain what this AWS thing does, in terms even a CEO could understand.
Up until the mid-2000s, software was a thing you installed on your hard drive. It was intellectual property that you were granted the license to use, and either the entirety of that license was paid for up front, or it was subscribed to on an annual "per-seat" basis. A corporate network (a LAN) introduced the astounding technical innovation of moving that hard drive into a room full of other hard drives; otherwise, the principal idea was not much different. (Microsoft thrived in this market.)
The first truly brilliant idea that ever happened in corporate LANs was this: An entire computer, including its processor and installed devices, could be rendered as software. Sure, this software would still run on hardware, but being rendered as software made it expendable if something went irreparably wrong. You simply restored a backup copy of the software, and resumed. This was the first virtual machine (VM).
Now you could install the applications you needed to run on the virtual machine rather than a physical machine. Being virtual meant it could run anywhere, and soon, it became possible to relocate a VM between processors without noticeably affecting how the application on the VM was running.
If a business could install a web server on a virtual machine, it could attain the freedom to run those web servers anywhere it was practical to do so, rather than from the headquarters basement. The first great cloud service providers — Amazon among them — built their business models around hosting the virtual machines that ran their web servers, and selling that hosting for a time-based fee rather than an expensive license. Customers only paid for what they used, thus making high-quality service feasible for small and medium-sized businesses for the first time.
WHAT "INFRASTRUCTURE" AND "SERVICE" MEAN IN THE PUBLIC CLOUD CONTEXT
In any global economic system, the term infrastructure refers to the layers of services and support systems upon which the more visible components of the economy are based. Amazon Web Services, as was evident from the division's original name, enables websites to be hosted remotely. Since its inception, though, AWS has grown into the world's principal provider of virtual infrastructure -- the operating systems, hypervisors, service orchestrators, monitoring functions, and support systems upon which the economy of the public cloud is based.
The Future of Everything as a Service
The Future of Everything as a Service
Software as a Service has set off a revolution in the way companies consume services on-demand. We look at how it's spreading to other IT services and transforming IT jobs.
Read More
We use the word "service" quite a bit in this article, though it's important that we use it intentionally rather than a word that just means "stuff" or "things", or the way "content" is used to refer to what you read on a website. AWS provides the following principal services:
Infrastructure-as-a-Service (IaaS). AWS sells access to VMs that are configured like real computers, only rendered as software. You manage them through the web, and you can see what their displays would produce if they were real computers with monitors attached. But web servers don't really need monitors. They can send the HTML, CSS, and JavaScript code that web browsers need to assemble webpages, and to reproduce programs that you run from browsers (for example, Google Docs). Besides flexibility, what makes IaaS a lucrative, marketable service is that customers only pay for the resources (bandwidth, storage, processing) that they use, when they use it — like commodities.
Software-as-a-Service (SaaS). On your PC, your web browser has become a rendering vehicle for applications delivered to you from a cloud provider. On your smartphone, its operating system can perform that same role, and the result can be an app whose core functionality exists in the cloud, rather than being installed on the device. In both of these cases, the software is run on the server and delivered to your device (the client). Portions of this application are executed in both places, with the internet serving as the delivery medium.
Platform-as-a-Service (PaaS). When your intention is to deliver software to your customers through the cloud, it becomes more practical to use tools that are located in the cloud to build that software effectively on-site ("cloud-native applications"). It also becomes feasible to optimize the billing model for that software -- for instance, by charging only for the customers' use of specific functions built on the cloud platform.
Object data storage. Although it's fair to say Amazon did not create the cloud, it's equally fair to say it did create the market for bulk data storage and delivery. By this, we mean not just files but the mountains of structured and unstructured data that may constitute a database, or may not yet have coalesced into a database. The impetus for this part of the cloud revolution was AWS charging for the space that data actually consumed, rather than the volumes or hard drives that contain it. Now, AWS offers a variety of data service options best suited for the different ways that customers intend to use cloud-based data.
Let's first be very clear about what a cloud platform is. You've already read more definitions of "cloud" than there are clouds (in the sky), but here, we're talking about the operating system that reformulates multiple servers into a cohesive unit. For a group of computers anywhere in the world to be one cloud, the following things have to be made feasible:
They must be able to utilize virtualization (the ability for software to perform like hardware) to pool together the computing capability of multiple processors and multiple storage devices, along with those components' network connectivity, into single, contiguous units. In other words, they must collect their resources so they can be perceived as one big computer rather than several little ones.
The workloads that run on these resource pools must not be rooted to any physical location. That is to say, their memory, databases, and processes -- however they may be contained -- must be completely portable throughout the cloud.
The resource pools that run these workloads must be capable of being provisioned through a self-service portal. This way, any customer who needs to run a process on a server may provision the virtual infrastructure (the pooled resources for processing and other functions) needed to host and support that process, by ordering it through the web.
All services must be made available on a per-use basis, usually in intervals of time consumed in the actual functioning of the service, as opposed to a one-time or renewable license.
The US National Institute of Standards and Technology (NIST) declared that any cloud service provider (CSP) to which the US Government would subscribe, must at a minimum provide these four capabilities.
If NIST had the opportunity to add a fifth component, given the vast amount of history that has taken place in the few short years of the public cloud's prominence, it would probably be support. AWS may be a public cloud, but it is also a managed service. That means it's administered to deliver particular service levels which are explicitly spelled out in the company's service-level agreements (SLA).
It surprises some to learn that an AWS account is not an Amazon account with extra privileges. It's a security account that centralizes the access you're given to AWS services, and associates that access with a billable address. Not a shipping address, like a destination for goods ordered from Amazon.com, but rather a login like the one you may use for Windows.
There are ways you can use this AWS account to launch yourself into the AWS space without much, or quite likely without any, monetary investment. For the first year of each account, AWS sets aside 750 hours of free usage per month (also known as "the entire month") of a Linux- or Windows-based t2.micro virtual machine instance, which is configured like a single-CPU PC with 1 GB of RAM. Using that instance as a virtual server, you're free to set up an instance of an Amazon RDS relational database with up to 20 GB of storage, plus another 5 GB of standard S3 object storage. (You'll see more about these basic services momentarily.)
WHERE CAN YOU LEARN HOW TO USE AWS?
From time to time, AWS convenes an online, half-day streaming conference to teach newcomers about how these services work. At the time of this writing, the next edition of the company's "AWSome Day" was scheduled for April 9, 2019, from 12:00 noon to 4:30 pm Eastern Time.
That online conference may give you a shove in the general direction of what you think you might need to know. If you have a particular business goal in mind, and you're looking for professional instruction, AWS sponsors instructional courses worldwide that are conducted in training centers with professional instructors, and streamed to registered students. For example:
Migrating to AWS teaches the principles that organizations would need to know to develop a staged migration from its existing business applications and software, to their cloud-based counterparts.
AWS Security Fundamentals introduces the best practices, methodologies, and protocols that AWS uses to secure its services, in order that organizations that may be following specific security regimens can incorporate those practices into their own methods.
AWS Technical Essentials gives an IT professional within an organization a more thorough introduction to Amazon services, and the security practices around them, with the goal being to help that admin or IT manager build and deploy those services that are best suited to achieving business objectives.
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But unlike a regular expense such as electricity or insurance, public cloud services tend to spawn more public cloud services. Although AWS clearly divides expenses into categories pertaining to storage, bandwidth usage, and compute cycle time, these categories are not the services themselves. Rather, they are the product of the services you choose, and by choosing more and incorporating more of these components into the cloud-based assets you build on the AWS platform, you "consume" these commodities at a more rapid rate.
AWS has a clear plan in mind: It draws you into an account with a tier of no-cost service with which you can comfortably experiment with building a web server, or launching a database, prior to taking those services live. Ironically, it's through this strategy of starting small and building gradually that many organizations are discovering they hadn't accounted for just how great an operational expense the public cloud could become -- particularly with respect to data consumption.
Cost control is feasible, however, if you take the time to thoroughly train yourself on the proper and strategic use of the components of the AWS platform, before you begin provisioning services on that platform. And the resources for that cost control training do exist, even on the platform itself.
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Cloud cost control becoming a leading issue for businesses
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What do Amazon's Web services do?
Selling the services that a computer performs is nearly as old a business as selling computers themselves. Certainly Amazon did not invent that either. The time-sharing systems of the 1960s made it possible for universities and institutions to recoup the enormous costs of acquiring systems, at a time before tuition revenues could have accomplished that by themselves. But at just the right time, Amazon very keenly spotted the one type of service that almost every business could utilize: the ability to run a virtual server that runs websites.
ELASTIC COMPUTE CLOUD
The product name for the first automated service that AWS performs for customers is Amazon Elastic Compute Cloud (EC2). This is the place where AWS pools its virtual resources into instances of virtual machines, and stages those instances in locations chosen by the customer to best suit its applications.
Originally, the configurations of EC2 instances mimicked those of real-world, physical servers. You chose an instance that best suited the characteristics of the server that you'd normally have purchased, installed, and maintained on your own corporate premises, to run the application you intended for it. Today, an EC2 instance can be almost fanciful, configured like no server ever manufactured anywhere in the world. Since virtual servers comprise essentially the entire web services industry now, it doesn't matter that there's no correspondence with reality. You peruse AWS' very extensive catalog, and choose the number of processors, local storage, local memory, connectivity, and bandwidth that your applications require. And if that's more than in any real server ever manufactured, so what?
You then pay for the resources that instance uses, literally on a per-second basis. If the application you've planned is very extensive, like a multi-player game, then you can reasonably estimate what your AWS costs would be for delivering that game to each player, and calculate a subscription fee you can charge that player that earns you a respectable profit.
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ELASTIC CONTAINER SERVICE
Virtual machines gave organizations a way to deliver functionality through the internet without having to change the way their applications were architected. They still "believe" they're running in a manufactured server.
In recent years, a new vehicle for packaging functionality has come about that is far better suited to cloud-based delivery. It was called the "Docker container," after the company that first developed an automated mechanism for deploying it on a cloud platform (even though its name at the time was dotCloud). Today, since so many parties have a vested interest in its success, and also because the English language has run out of words, this package is just called a container.
AWS' way to deliver applications through containers rather than virtual machines is Elastic Container Service (ECS). Here, the business model can be completely different than for EC2.
Because a containerized application (sorry, there's no other term for it) may use a variable amount of resources at any particular time, you may opt to pay only for the resources that application does use, at the time it requests them. As an analogy, think of it like this: Instead of renting a car, you lease the road, pay for the gasoline consumed with each engine revolution, the oxygen burned with each ignition of a cylinder, and the amount of carbon dioxide produced by the catalytic converter. With ECS, you're renting the bandwidth and paying for the precise volume of data consumed and the cycles required for processing, for each second of your application's operation. Amazon calls this pricing model Fargate, referring to the furthest possible point in the delivery chain where the "turnstile" is rotated and where charges may be incurred.
One very important service that emerges from the system that makes ECS possible is called Lambda, and for many classes of industry and academia, it's already significantly changing the way applications are being conceived. Lambda advances a principle called the serverless model, in which the cloud server delivers the functions that an application may require on a per-use basis only, without the need for pre-provisioning.
For instance, if you have a function that analyzes a photograph and isolates the portion of it that's likely to contain the image of a human face, you can stage that function in Amazon's cloud using the serverless model. You're not being charged for the VM or the container hosting the function, or any of the resources it requires; rather, AWS places its "turnstile" at the point where the function renders its result and terminates. So you're charged a flat fee for the transaction.
Although Amazon may not have had the idea for the serverless model, Lambda has advanced that model considerably. Now developers are reconsidering the very nature of application architecture, with the end result being that an entirely new economy may emerge around fluid components of functionality, as opposed to rigid, undecipherable monoliths.
As we mentioned before, one of Amazon's true breakthroughs was the establishment of S3, its Simple Storage Service (the word "Cloud" has since been wedged into the middle of its name). For this business model, Amazon places "turnstiles," if you will, at two points of the data exchange process: when data is uploaded, and when it's transacted by means of a retrieval call or a database query. So both input and output incur charges.
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AWS does not charge customers by the storage volume, or in any fraction of a physical device consumed by data. Instead, it creates a virtual construct called a bucket, and assigns that to an account. Essentially, this bucket is bottomless; it provides database tools and other services with a means to address the data contained within it. By default, each account may operate up to 100 buckets, though that limit may be increased upon request.
Once data is stored in one of these buckets, the way AWS monetizes its output from the bucket depends upon how that data is used. If a small amount of data is stored and retrieved not very often, AWS is happy not to charge anything at all. But if you've already deployed a web app that has multiple users, and in the course of using this app, these users all access data stored in an S3 bucket, that's likely to incur some charges. Database queries, such as retrieving billing information or statistics, will be charged very differently from downloading a video or media file.
If AWS were to charge one flat fee for data retrieval -- say, per megabyte downloaded -- then with the huge difference in scale between a spreadsheet's worth of tabular data and a 1080p video, no one would want to use AWS for media. So S3 assumes that the types of objects that you'll store in buckets will determine the way those objects will be used ("consumed") by others, and AWS establishes a fee for the method of use.
Here's where Amazon adds a third turnstile to the data model: by offering database engines capable of utilizing the data stored in S3 buckets. An AWS database engine is a specialized instance type: a VM image in which the database management system is already installed.
For relational data -- the kind that's stored in tables and queried using SQL language -- AWS offers MariaDB (open source), Microsoft SQL Server, MySQL (open source), Oracle DB, PostgreSQL (open source), and Amazon's own Aurora. Any application that can interface with a database in one of these formats, even if it wasn't written for the cloud to begin with, can be made to run with one of these services. Alternately, AWS offers DynamoDB for use with less structured key/value stores, DocumentDB for working with long-form text data such as in a content management system, and ElastiCache for dealing with high volumes of data in-memory.
Standing up a "big data" system, such as one based on the Apache Hadoop or Apache Spark framework, is typically a concentrated effort on the part of any organization. Though they both refrain from invoking the phrase, both Spark and Hadoop are operating systems, enabling servers to support clusters of coordinated data providers as their core functionality. So any effort to leverage the cloud for a big data platform must involve configuring the applications running on these platforms to recognize the cloud as their storage center.
AWS approaches this issue by enabling S3 to serve as what Hadoop and Spark engineers call a data lake -- a massive pool of not-necessarily-structured, unprocessed, unrefined data. Originally, data lakes were "formatted," to borrow an old phrase, using Hadoop's HDFS file system. Some engineers have since found S3 actually preferable to HDFS, and some go so far as to argue S3 is more cost-effective. Apache Hadoop now ships with its own S3 connector, enabling organizations that run Hadoop on-premises to leverage cloud-based S3 instead of their own on-premises storage.
In a big data framework, the operating system clusters together servers, with both their processing and local storage, as single units. So scaling out processor power means increasing storage; likewise, tending to the need for more space for data means adding CPUs. AWS' approach to stationing the entire big data framework in the cloud is not to correlate Spark or Hadoop nodes as unaltered virtual machines, but instead deploy a somewhat different framework that manages Hadoop or Spark applications, but enable S3-based data lakes to become scalable independently. AWS calls this system EMR, and it's made considerable inroads, capitalizing on Amazon's success in substituting for HDFS.
Kinesis leverages AWS' data lake components to stand up an analytics service -- one that evaluates the underlying patterns within a data stream or a time series, make respectable forecasts, and draw apparent correlations as close to real-time as possible. So if you have a data source such as a server log, machines on a manufacturing or assembly line, a financial trading system, or in the most extensive example, a video stream, Kinesis can be programmed to generate alerts and analytical messages in response to conditions that you specify.
The word "programmed" is meant rather intentionally here. Using components such as Kinesis Streams, you do write custom logic code to specify those conditions that are worthy of attention or examination. By contrast, Kinesis Data Firehose can be set up with easier-to-explain filters that can divert certain data from the main stream, based on conditions or parameters, into a location such as another S3 bucket for later analysis.
In founding the market for virtualization, VMware set about to relocate the seat of power in the data center kingdom to the hypervisor. And in drawing most of the map for the public cloud market, Amazon tried to relocate it to the EC2 instance. Both efforts have yielded success. But Kubernetes, as an open source orchestrator of container-based applications, sought to plant a bomb beneath that seat of power, by effectively democratizing the way new classes of applications were created and deployed. It was Google's idea, though with just the right dosage of benevolence, Docker would step aside, bowing graciously, and even Microsoft would contribute to the plan.
AWS' managed Kubernetes service, called EKS and launched in July 2018, represents Amazon's concession to the tides of history, at least for this round. The previous July, Amazon joined the Cloud Native Computing Foundation -- the arm of the Linux Foundation that oversees development of the Kubernetes orchestrator.
This way, EKS can provide management services over the infrastructure supporting a customer's Kubernetes deployment, comparable to what Google Cloud and Azure offer. The provisioning of clusters can happen automatically. That last sentence doesn't have much meaning unless you've read tens of thousands of pages of Kubernetes documentation, the most important sentence from which is this: You can pick a containerized application, tell EKS to run it, then EKS will configure the resources that application requires, you sign off on them, and it runs the app.
So if you have, say, an open source content management system compiled to run in containers, you just point EKS to the repository where those containers are located and say "Go." If all the world's applications could be automated in exactly this way, we would be living in a very different world.
The way VMware manages virtualized infrastructure for its vSphere customers, and the way Amazon manages its cloud infrastructure for AWS, are fundamentally different. However, the beauty of virtualization is that it's possible to configure a platform to run another platform (like the way Windows 10 runs Linux apps).
It took engineers from Amazon and VMware working together several years before they could emerge with a system allowing its NSX network virtualization layer (which enables the underlying resources of all servers in an enterprise network to be perceived as a single infrastructure) to be supported in AWS' proprietary cloud infrastructure. We don't exactly know how this works, but for now, it appears that it does work after all.
So with a product that VMware calls VMware Cloud on AWS, an existing vSphere environment may provision resources from the Amazon public cloud as necessary, including under policy-based automation rules. This way, compute power, storage, and to some extent database functionality may be brought into an enterprise network like fluids being trucked in to save an organization in crisis. And these dynamic resources may then be de-provisioned when they're no longer needed.
In recent months, Amazon has expanded its working relationship with VMware, enabling AWS for the first time to offer deploying its own server hardware on customers' premises. Certainly that's one way to bring the cloud closer to the enterprise.
AWS needed a means to compete against Microsoft's Azure Stack, which gives Azure customers the means to run Microsoft services in their own data centers the same way Azure would. That's easy enough for Microsoft, since much of Azure Stack is based on Windows Server already. Amazon's servers, by contrast, are clustered by a very unique beast entirely. AWS Outposts, as Amazon calls it, gives large enterprises a way to let that beast in through their back door, at least part-way, leasing them Amazon servers exclusively for their own use.[Source]-https://www.zdnet.com/article/amazon-aws-everything-you-should-know-about-the-largest-cloud-provide
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Link to Lawfare: https://www.lawfareblog.com/dont-sleep-chinas-new-blockchain-internet
U.S. national security policymakers are working aggressively to push back China’s global market advance in 5G and artificial intelligence technology. Meanwhile, the Chinese Communist Party (CCP) is progressing unfettered in a parallel technological campaign: expanding global blockchain infrastructure.
Earlier this year, Beijing launched the Blockchain-Based Service Network (BSN), a system of low-cost backend architecture on which software developers around the world can build blockchain applications—including digital assets such as cryptocurrencies. The launch happened a few months after Chinese President Xi Jinping pressed for the nation to leverage blockchain technology to complement the rising economic importance of big data and the “internet of things.” This BSN has received little attention in the U.S.—but if the network gains significant international adoption, it could give the CCP greater influence in digital commerce and complicate U.S. economic statecraft. For decades, U.S. financial authorities have benefited from the ubiquity of U.S. computer infrastructure in global business. The BSN is trying to challenge that norm.
According to the BSN website, the network’s purpose is to become the “blockchain Internet.” CCP leadership believes that blockchain technology offers a foundational infrastructure for future technological innovation and that China should set the global standards in that arena. To begin doing so, China is inviting blockchain developers to build decentralized software applications on the BSN’s Chinese-run servers, even though some of the servers are located outside China. The BSN describes itself as a “cross-cloud, cross-portal, cross-framework, global infrastructure network.” Essentially, it is the plumbing for people to run decentralized computer systems via the network.
China’s State Information Center, an entity under China’s macroeconomic planning agency, oversees the BSN. The center designs information security policies and processes economic data for the CCP. Several state-owned tech companies, such as financial services firm China UnionPay and telecom firm China Mobile, run the technical architecture, such as the network’s nodes and servers. The Chinese government argues that software developers around the world would save money by using the BSN’s computer infrastructure. The BSN charges several hundred dollars per year for server space that would cost developers tens of thousands of dollars if it were provided by Amazon Web Services (AWS) or even the private Chinese internet firm Alibaba. At the same time, the BSN uses cloud space provided by U.S. firms AWS and Google Cloud, in addition to Chinese tech firms, for building its infrastructure. But according to the BSN user manual, its services are cheaper because the network facilitates more efficient server usage by sharing computer resource space across users through a permissioned distributed ledger system. The CCP’s pitch is that the BSN uses a distributed system to take advantage of traditional server architecture and innovate beyond it.
Several popular and highly capitalized blockchain projects have taken up the BSN on its offer, integrating their “chains” with the BSN and enabling developers to create applications on the network. Some of the blockchains, such as Ethereum and Tezos, include many developers from Western nations. These blockchain protocols are more robust than Bitcoin, enabling developers to code “smart” contracts that facilitate more complex transactions and programs. In recent years, projects associated with these newer blockchains have raised hundreds of millions of dollars with the aim of creating decentralized applications and business ventures.
So why hasn’t the BSN received more attention within U.S. national security policy circles? As blockchain experts will admit, decentralized applications have yet to find much market adoption outside cryptocurrency speculation. Despite great hype around blockchain and distributed ledger technology, even die-hard cryptocurrency enthusiasts are still waiting for a decentralized “killer app” that proves the tech might “reinvent the global financial system,” as one blockchain developer who raised millions for a project, but saw his company flounder, put it.
The elusiveness of global blockchain adoption is exactly why China’s strategy deserves attention. For one, the BSN is trying to significantly reduce the input costs of blockchain development, which would increase cost-savings and help keep blockchain projects alive as they seek users and profitability. A similar dynamic enabled China’s outsized role in Bitcoin mining. Chinese computer processing companies dominate the Bitcoin mining industry largely because they operate in Chinese provinces where hydroelectricity is cheap, allowing them to sustain wider profit margins even when Bitcoin’s volatile price drops.
The BSN is also important because it accentuates China’s broader push toward an information-based economy and supports its strategy to dominate in financial technology and become a “cyber superpower.” In recent years, Chinese leaders have stressed that the Chinese economy must pursue “informatization,” developing programmable and “smart” business systems built on internet and device data, machine learning and analytics. Blockchain experimentation, whether it has scaled up to wide use or not, is where researchers are working on many difficult computer science challenges associated with the internet ecosystems—such as digital identity management. Research and trials with distributed ledger technology will likely unlock technological insights and breakthroughs.
An analogous situation occurred in the United States during the space race. NASA harnessed tremendous intellectual and technical capital to enable the moon landing and further space exploration. This led to a variety of spinoff inventions, from global positioning systems (GPS) to freeze-dried food and camera phones. In the same way, blockchain technology is a means to the end of greater technological sophistication.
The BSN is about not just bringing blockchain-based activity to servers in China but also expanding Chinese reach into servers outside the country. The network will have infrastructure in Hong Kong, but also in San Francisco and at locations in Australia, Brazil, France, Japan and South Africa. The CCP is not subtle about its aim to bring this international plumbing under its influence. As the BSN white paper says, “Once the BSN is deployed globally, it will become the only global infrastructure network autonomously innovated by Chinese entities and for which network access is Chinese-controlled.”
For this reason, the BSN could undermine movements for human rights and political freedom. Much of the blockchain developer community has strong libertarian leanings, promoting decentralized applications as means for “censorship resistance” and to fund protests against authoritarianism and state brutality. But ironically, the BSN’s decentralization effort is authoritarian owned. The CCP accepts the irony and has bifurcated the BSN just as it has separated Chinese use of the internet, where the government blocks many sites from users in China. The system will run with a domestic BSN portal—where developers can build only closed, “permissioned” applications and where decentralized cryptocurrencies are not allowed to function—and a global portal, which will allow “open” applications but will not be accessible to users in China. It seems unlikely, however, that the global portal will be allowed to operate freely if the CCP finds it hosting applications that greatly counter the party’s interests, like programs that would support anti-CCP protesters in Hong Kong or Uighur human rights advocates. And just as the National Basketball Association in the U.S. dares not to criticize Beijing’s repressive tactics because of the money it earns in China, it is feasible that the leaders of various blockchain projects would not voice objections to China’s human rights violations if their chains rely on Chinese infrastructure.
Looking further ahead, national security policymakers should watch out for the BSN’s potential to hinder future investigations and enforcement actions relating to digital currencies. The U.S. Department of Justice recently released a cryptocurrency enforcement framework that lays out significant national security wins against cryptocurrency-related crime—including interdicting Islamic State and al-Qaeda Bitcoin funding campaigns, disrupting North Korean hackers laundering stolen cryptocurrency, indicting ransomware operatives in Iran, charging Russian operatives using cryptocurrency in election interference activities, and breaking up fentanyl smugglers operating out of China. The Justice Department has ordered hundreds of cryptocurrency wallet assets to be seized and the U.S. Treasury’s Office of Foreign Asset Control has added dozens of cryptocurrency addresses to its sanctions list. All of these actions against illicit cryptocurrency activity are helped by the fact that digital transactions, even blockchain-based ones, currently run on the backbone of mostly U.S. infrastructure. In today’s financial crime investigations, digital evidence is key and securing it often requires accessing physical or remote servers. Most of the world’s internet activity touches the U.S. somehow. In fact, up to 70 percent of global internet traffic flows daily through data centers operating in Loudoun County, Virginia.
The national security risks of the CCP gaining dominance in any digital realm are pretty clear. In February, U.S. Attorney General William Barr warned, “If China establishes sole dominance over 5G, it will be able to dominate the opportunities arising from a stunning range of emerging technologies that will be dependent on, and interwoven with, the 5G platform.” The same reasoning should be applied to blockchain technology.
And if illicit actors begin using decentralized applications built on the BSN to harm American interests, the U.S. would find itself needing Chinese cooperation to acquire digital data evidence and intelligence on the network. Given Washington’s and Beijing’s recent tug-of-war over TikTok and data security, the U.S. may find China less than cooperative with such data requests.
The BSN is not going to upend U.S. domination of the internet anytime soon. But it indicates a new, and sensible, Chinese strategy. In areas like 5G technology and artificial intelligence, where the U.S. is highly engaged, China’s strategy has been to outdo the U.S. head-on. The BSN approach, by contrast, is to build a Chinese advantage in a space where the U.S. gives little attention.
The good news is that while China’s blockchain internet is in its infancy, the U.S. has time to follow its development and respond accordingly. The U.S. government should assess the network’s growth, identify the sorts of applications it supports, and carefully track its successes and failures. Analysts at the departments of Treasury and Commerce must become familiar with the market for decentralized apps. U.S. Cyber Command needs to map the network and understand where BSN infrastructure overlaps with U.S. servers. And software developers should think twice about investing their intellectual and financial capital into infrastructure controlled directly by the CCP. If the BSN does scale up, so will China’s digital authoritarianism.
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