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Of Elizabeth Gail
Many Chinese blockchain investors found themselves in a disturbing situation after the recent disenchantment of cryptocurrency which saw the industry plummet by more than 75%.
According to the latest reports, many of them are increasingly skeptical about the feasibility of blockchain projects. They wonder if the blockchain has ever been the disruptive technology that many have proclaimed.
Credit: Reuters / Jason Lee
Investor departures in blockchain technology
Last month, the Chinese bitcoin whale Li Xiaolai announced publicly via social media that he had invested in blockchain initiatives. He is the founder of BitFund, a Chinese venture company, and is considered the largest bitcoin holder in China.
Another Chinese investor, Yang Ning, followed the example and publicly stated that he would no longer be involved in blockchain projects. He expressed his frustration at the lack of regulation and quality thresholds in the sector.
What do blockchain venture executives have to say about the situation?
According to Bonnie Cheung, a partner of 500 Startups, marketers have long advertised blockchain as a disruptive innovation in the technology sector.
In his view, the industry is going through a period of disillusionment, a situation that is not unique to the industry. He said that although blockchain may evolve in the long term, enough to overcome long-standing applications, its impact on everyday life has yet to be felt.
Furthermore, the growth and development of blockchain projects are strongly dependent on the increase in the cryptocurrency sector, which by its nature is highly volatile.
For example, the use of the blockchain on cryptocurrency payment processing platforms seems to be in decline due to the industry downturn.
He Ning, CEO of QOS, a company specializing in the development of blockchain infrastructure for businesses, also affirms this topic. Second Forbes, slammed the 40% figure quoted by the media when it highlighted the number of failed startups in the sector, stating that it was extremely inaccurate.
Following the general market trends, about 20% of startups should fail when the sector falls by 10%. Now that the market has fallen more than 70 percent in the last 12 months, these numbers should be much higher.
Credit: Depositphotos
The blockchain industry in China
China is an important player in the blockchain and cryptocurrency arenas. It currently has the highest number of blockchain development projects in the world and over 4,000 related companies. Although the Chinese leadership has traditionally been concerned about the proliferation and growth of the cryptocurrency market, it has explicitly supported the development of blockchain technologies.
According to a recent report published by Edith Yeung, head of the 500 Startups division in China, some regions of the country already provide funding for blockchain programs. The report quotes Shanghai, Henan, Guangzhou, Shanxi and Guiyang as some of the areas that have implemented this concept.
Shenzhen, in particular, has a fund of RMB 500 million (US $ 72.57 million) that specifically supports blockchain projects. Hangzhou is credited with being at the forefront of such initiatives. At the beginning of the year, the city announced the launch of a 10 billion yuan blockchain fund. Cities like Henan and Nanjing have followed the example.
It is estimated that the Chinese government has distributed about $ 6 billion in funding so far in 2018 to promote blockchain businesses. Reports reveal that over 40% of startups that received funding in early 2017 were linked to the blockchain.
The statistics on the blockchain ventures paint a sad image
According to a recent report on the Chinese market commissioned by the Chinese government, about 90% of blockchain projects are destined to fail. The report also found that the majority of cryptocurrency firms have a term of 1.22 years.
Of over 80,000 projects analyzed, only 8% of them were actively managed by the developers. The other 92% consisted mostly of abandoned or partially operational platforms and exit frauds.
Read more: OPINION: Blockchain offers Chinese consumers consolation food safety
The News Lens has been authorized to republish this article. It was originally published on CoinCentral.com here.
TNL Editor: Nick Aspinwall (@ Nick1Aspinwall)
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