2018 China Blockchain Industry Report: Blockchain Industry’s Back To Rationality After ICO Bubble Burst
2018 China Blockchain Industry Report was recently released by Jingdata, a financial data service provider run by 36Kr which is a new media aimed at serving innovative tech companies. The report provides a 49-page analysis of China blockchain industry mainly in six parts introducing
- What is blockchain
- How blockchain projects get financing, ICO / VC
- In which stage the blockchain industry has been
- Real blockchain projects in China
- How to tell good blockchain projects
- Challenge and development
In terms of financing from VC, the year of 2017 sees a big rise in financing amount totaled CNY 1.2 billion and the number of VC-financed projects increases to 54. It is worth noting that just in the first month of 2018, the financing amount has surpassed that of the whole year of 2016 reaching up to CNY 680 million. The right bar graph shows the financing rounds of blockchain projects, the proportion of strategic investment is gradually increasing.
Year 2016 has seen more than 100 blockchain projects emerging and 70 in 2017. According to a survey conducted by 8BTC News, Beijing, Shanghai, ShenZhen and Hangzhou are the top 4 cities home to blockchain projects in China.
ICO are favored surpassing VC
Bar graph of blockchain projects’ ICO/VC financing
ICO boom outburst in Q3 of 2017, whose financing amount surpassed VC for the first time and ever since sees great surge.
ICO- Shorten the financing chain and that encourages risk-taking
Before the emergence of ICO, traditional VC need to investigate the business pattern, leading team and technology of a project. And it takes at least 5 years for a VC-financed project to get listed from the seed round and angel round all the way to A/B/C round. The advent of ICO makes it possible for a project to get financing in one step, greatly shortening the process and time with financing amount dozens even hundreds of times more than traditional VC.
In order to prevent outlaws from using the Ponzi scheme to defraud the wealth of the public, the Chinese government has imposed bans on ICOs. But it may pose threat to issues as capital outflow and brain drain.
Blockchain’s well developing, applications spring up
Startups mainly focus their ambition on three layers show below,
- Underlying technology and infrastructure- fundamental protocol, anonymous application, blockchain hardware…
- General application and technology expansion- smart contract, mining service, Baas, Security traceability…
- Vertical industry application- involved in industries of finance, digital currency, entertainment, supply chain, health care, law, energy, welfare, social networking…
The blockchain mania also draws great interest of listed companies to have a share in it. In late 2017, many listed companies were simply releasing announcements with the keyword “blockchain” in their business and their stocks were going crazy. The report pointed out that a common feature of those high-spirited listed companies is their main business is not performing well, in this context, it’s taking advantage of the hotspot more than making real actions on blockchain technology.
Tech giants BAT make early try
- Baidu-BaaS (Blockchain as a Service), applied for financial business such as asset securitization and asset transaction, supporting for 50 billion worth asset
- Alibaba- Ant Blockchain, applied for fields in supply chain, finance, public welfare and health care
- Tencent- TrustSQL, applied for fields in finance, public welfare, law and logistics.
Who will be the BAT of blockchain industry?
In the views of many investors, the revolutionary blockchain has the power to strike a blow to the tech giants as BAT. Newly-emerged blockchain startups committed to underlying protocols such as NEO, Qtum and Wanxiang Blockchain are all the potential candidates.
Four dimensions to assess a blockchain project
As the ICO projects are now in chaos, investors should assess projects carefully. Four questions should be considered,
- Is it necessary for this project to have blockchain technology? What core value can blockchain bring to this project?
- The comprehensive capability of developing team?
- What’s the comment from Key Opinion Leaders on this project, and its community?
- Its commercial value? A real solution to the need of the market and a bright future?
Four significant trends of blockchain industry
- Propaganda war of blockchain is unavoidable with more experts and businessmen flooding in.
- Changeover of industry logic. Unlike Internet+, Blockchain is not a cure-all technology. Blockchain+ all fields is impossible.
- Technology integration. Blockchain, AI and IoT (Internet of things) are technologies most likely to be integrated to solve technical difficulties and reduce costs.
- Upgrade of public chain, alliance chain and private chain. By the end of 2017, the main underlying technology protocols in China mainly run on the public chain of Ethereum. In the wake of ICO bubble burst, big companies may turn to alliance chain or private chain for solutions.
As for the development of ICO, the report believes that the long-term impact of ICO on the industry should be dialectically viewed. By the end of 2017, the ICO market has been filled with excessive bubbles, and a lot of speculators have poured into the market which was not perfect. It causes great economic loss to the public also has a negative impact on the blockchain technology. In the wake of the cryptocurrency market correction, the blockchain industry will gradually come back to rationality and regain confidence.