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Dilemma of Consortium Blockchain Projects In China

10 July, Xinyada (SH:600571) announced that the company is selling 5.7201% of Hyperchain’s share at the price of 85.802023 million yuan. The company acquired Hyperchain’s share in September 2016 with 5 million yuan. It is estimated that the deal will bring about 80.8 million yuan profit to the company.

Compared with the various and ambiguous public blockchain projects, consortium blockchain is less known to the outsiders. However, the reality is somewhat cruel. Caijing reviewed the development consortium blockchain projects both at home and abroad and found them in a difficult situation. The consortium blockchain organization is represented by R3 and Hyperledger Fabric abroad and by Hyperchain, Bubi and Jingtum.
According to industry insiders, consortium blockchain such as Hyperledger Fabric has a lot of members and it is difficult to balance interests among them. As the organization is not incentivzed by tokens, technical progress is very slow. These members have to pay a lot of membership fees every year, but they don’t get the technical support they deserve. According to the official website of the Hyperledger, premier membership requires an annual fee of $250,000 and general members is between $5,000 and $50,000 based on the size of the company.

Hyperchain is the leading company in consortium blockchain. In June 2018, the company closed 1.5 Billion Yuan B-round funding, the largest single funding among Chinese blockchain startups. However, the company doesn’t look good on numbers. In 2017, the company realized revenue of 1.864 million yuan and net profit of minus 152.174 million yuan.
Li Wei, CEO of Hyperchain, gave his answer. Hyperchain didn’t issue tokens as the company is not in pursuit of short-term profits. Meanwhile, blockchain startups requires lots of upfront expenditure on technology and human resources. That’s why the number is not very good. Li Wei then added that with the addition of more enterprises and the upgrading of technology, profit is a matter of time. This is also an important factor for investors to value 1.5 billion.
Another example is Bubi blockchain . Apart from the news of its A round funding of 100 million and the launch of its public blockchain BUMO, there isn’t much progress on consortium blockchain development.
Consortium blockchains are weak in profitability and therefore difficult to sustain. Huang Yanqing, COO of Jingtum, said that the reason why the public blockchain projects are closer to “money” as they issue tokens. Consortium blockchain targets enterprise demands and far away from the general investors.  Due to the speculation demand, the “tokenless” blockchain is undoubtedly less attractive.
Another restraint of consortium blockchain is the performance. Huang Yanqing, CEO of Jingtum Blockchain, said that according to the existing technology model, there is indeed a limit on the number of nodes in the consortium blockchain. At present, Jingtum can theoretically support 250 nodes, and TPS is stable between 2000 and 3000. If the node exceeds this number, performance and stability will decrease.
Li Wei also mentioned that 1 million TPS is unrealistic. The ideal TPS for on Hyperchain platform can be 10,000. When the contract is more complicated, it is about 3000-5000, and the number of nodes is about 100-200.

Speaking of the future, Jingtum is more favorable with “walking with both legs”. The Company is actively seeking enterprise and government customers as they used to do. On the other hand, they are also exploring public consortium blockchain, which integrates the merits of both consortium blockchain and permissionless blockchain.


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