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Chinese Internet Trends May Spell Trouble For “Disruptive” Crypto Payments

The China Internet Report 2018published on Tuesday by ABC News, examines the massive size and growing influence of the internet in a country where penetration is still only at 50 percent. This metric is more impressive when seen in the light of the unprecedented growth in rural internet use – from just 7 percent in 2007 to 35 percent in 2017 or 156 million new users — that’s about half the population of the United States. Rural users are gaining access to information and content in a way unimaginable just one generation ago, with 78 million reading a top news app at least once a month and over 175 million viewers of short clip video apps.

According to the report, Bitmain is currently the most well-funded blockchain startup in China, raising $450 million USD. Bitmain is followed by Hyperchain, which raised $230 million USD, and Canaan, at $47 million USD.

Among the most active blockchain investors in China are: Fenbushi Capital, which has backed TenX, Zcash, Abra, Circle, and Factom; Qianfang Capital, which has invested in Vechain, IOTA and Tezos, and INBlockchain, which has backed Qtum and WanChain.

The number one difference between China and the US in internet usage is the vastly more widespread system of mobile payments in the former – there are 11 times as many in China, with a penetration rate of 37 percent of the population compared to just 15 percent in the US.

China counts more than three times as many smartphone users as the world’s largest economy; Chinese users are far more at home on mobile devices than their US counterparts. While 89 percent of Americans use the internet in one way or another, just 72 percent report having used it on a mobile device. Compare that to 55 percent of Chinese who use the internet, of these, 53 percent use mobile devices.

In spite of the widespread use of the internet, government regulators still often take a heavy hand when controlling free speech and the spread of undesirable information or trends through Chinese web services. In addition to bans on initial coin offerings (ICOs) and cryptocurrency exchanges, a variety of companies — including 17 quiz apps, Quorum style question and answer sites, and news aggregators — have all been directly targeted by the government with outright bans or instructions to severely restrict the content being viewed and distributed on their platforms.

Since Chinese regulators are controlling both the content and the medium of accessing the internet, US companies have largely shied away from large-scale operations in the country, resulting in a number of Chinese counterparts filling these spaces, becoming powerful corporations in their own right. Google finds a counterpart in Baidusites like Taobao and JD crowd out Ebay and Amazon;  global rideshare giants Uber and Lyft are passed over for DiDi  and verticals, from music, video, social media, gaming, and even dating, are all dominated by local Chinese developers and businesses. These are not small companies. The three largest Chinese firms — Alibaba, Tencent, and Ant Financial — have market caps of $492 billion USD, $480 billion USD, and $150 billion USD, respectively.

In contrast to the U.S is the huge popularity, in China, of services like Pinduoduo, allowing groups of users to get discounts on products if a large enough group of friends commit to buying a particular product, and Xiaohongshu where users can post pictures and promote their favorite brands and products. These types of platforms are accelerating the mobile payment trend in a country where social apps, like WeChat, form the focal point for hundreds of millions of relationships. These services already deeply integrate simple, rapid payment options for little or no cost to users. With many of the promises of cryptocurrency already being realized natively within applications with widespread network effects, it may be difficult for blockchain technology to make inroads in China until powerful decentralized applications truly start to alter the fabric of society.

  • Chinese Internet Trends May Spell Trouble For “Disruptive” Crypto Payments – July 13, 2018
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  • McAfee Labs Report 6x Increase in Crypto Mining Malware Incidents in Q1 2018 – June 29, 2018
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  • Morgan Stanley Offers Insight Into Bitcoin, Cryptocurrency and Blockchain – June 7, 2018
  • Empower’s Speedy Financial App Integrates Major Crypto Exchanges – June 6, 2018
  • Huobi Launches HB10 Crypto Index Tracking Product – June 5, 2018
  • Singapore’s DREP and Quarkchain to Accelerate Scaling and Interoperability – June 4, 2018
  • Bittrex Rolls out Fiat Currency Trading for Corporate Customers – June 4, 2018
  • Deutsche Börse Lays Out Blockchain and Technology Focus in 2020 Strategy – June 1, 2018
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  • Swytch Announces Crowdsale Dates, Joins Energy Web Foundation – May 31, 2018
  • EOS Mainnet Move: 174+ Block Producer Candidates Vie for Election – May 31, 2018
  • Swiss Crowdfunding Grows By Leaps And Bounds, Raising 3X Last Year’s Totals – May 29, 2018
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  • Stratis Announces Alpha Release of Smart Contracts in C# – May 21, 2018
  • Pan-African FinTech Firm Cellulant Raises $47.5 Million, Scales up Blockchain Division – May 18, 2018
  • Deloitte Showcases Blockchain Projects at Consensus 2018 – May 17, 2018
  • ConsenSys Teams up with Amazon to Deliver Streamlined Access to Blockchain – May 17, 2018
  • Coinify to Broker Funds Raised in Blockshipping ICO – May 17, 2018
  • Deloitte Survey Numbers Demonstrate Executive Faith in Blockchain – May 16, 2018
  • Flyingcarpet Counts Coconuts in Papua New Guinea in ‘World First’ Demo – May 15, 2018
  • Devcash Blockchain Clocks in at 2.5 Million Transactions per Second – May 15, 2018
  • Verv Partners with Ocean Protocol for Improved Consumer Energy Data – May 15, 2018
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  • Shyft Whitepaper Outlines New Standards for Regulatory Compliance – May 14, 2018
  • Stratis Announces Zero Fee Platform for Launching ICOs – May 11, 2018
  • CG Blockchain Closes $31 Million Public Sale for Crypto Terminal – May 11, 2018
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