The global cryptocurrency market has already seen more than $706 billion of its total market capitalization evaporate since hitting a peak in early January, according to research site CoinMarketCap, and those losses appear to be triggering a shakeout in the wider blockchain community in China. Many startups there are finding it increasingly difficult to gain access to capital as investors grow skeptical of the fundamental claims around digital currencies and the blockchain technology that underpins them.
With visions of a decentralized new world order, many blockchain ventures had been touting themselves with the promise of new disruptive applications that would upend industries and revolutionize economies. But in hindsight, many of those startups were either exaggerating their potential benefits or the time that would be required to achieve them.
“It is a period of disillusionment. As much as I am a believer in the long term disruptive power of blockchain, it cannot solve all the problems in the world,” says Bonnie Cheung, a venture partner at 500 Startups. “You don’t know how many times we have read proposals that claimed to solve all pain points for almost every industry.”
But ten years after the publication of Satoshi Nakamoto’s famous white paper that gave birth to the blockchain concept, there are still no killer apps or transformational platforms in terms of real-world use cases of blockchain. Even the most mature application of payment – in the form of cryptocurrencies – appears to be losing some ground. The use of bitcoin in transactions handled by major payment processors dropped nearly 80% in the year up to September, according to Chainalysis.
“What has been reported by the media that around 40% of blockchain projects have shut down is too conservative,” says He Ning, chief operating officer of QOS, a venture that aims to create the infrastructure for large-scale commercial uses of blockchain.