Blockchain Startups Tackle China’s Fraud Problem

Last week, we talked about the general landscape of blockchain startups in China (see link). The prospect for them in the near term still looks grim and lots of dumb money are chasing the idea of finance, which in fact not many ordinary people can fully grasp its arcane mechanism behind. But one area of use cases, which should be less difficult to understand, is supply chain, often claims to tackle the problem of transparency, traceability, and fraud.

In the western media, startups like Everledger or Provenance, are capturing our attention by their pilot projects in tracking diamond or tuna fish.

In China when we are constantly plagued by fake product issue, from food to condom, many consider the blockchain technology should have huge potentials in putting itself into proper usage. Myriad startups have announced to harness the technology to spin on the problem. For instance, a local startup Vechain has gained substantial traction or maybe reputation in terms of forging the A-level partnerships in the country.

Or much niche player like Dropchain, combating food fraud by focusing only on alcohole and olive oil category at the moment.

Or one startup even hopes to go beyond the supply chain and build a blockchain based e-commerce verification platform.

Nevertheless, the concept remains rather an elusive buzz. The pain is there, while the panacea might be far from ready.

According to one interesting article (see link):

  • The blockchain is basically DLT (decentralized ledger technologies) a ledger that’s distributed across a network of computers, which records all changes for users to see; more like a giant Excel spreadsheet which is shared across many different computers
  • Small contracts are small, automated programs that run on top of a blockchain, which allows diverse applications besides currency trading
  • Challenge for blockchain developers: Its computations required are so complicated that building something which millions of people can use takes lots of processing power and time.

Also add one more wrinkle, based on one interview from Bonnie Cheung, Partner at 500 Startups, one of the most active seed investment companies globally and an active investor in blockchain projects, she commented that from her experience meeting with blockchain-solution startups, many failed to tackle the core issue of facilitating transactions between unknown individuals without the need of a trusted intermediary. “They are only digitalizing documents and there is no difference from some of the enterprise systems in use,” Cheung said. 

Over the past two years, we have seen some big brands experimented the idea of blockchain, and most of them tend to collaborate with tech giant such as IBM, not startup.  In 2017 at least 10 large companies team with IBM on blockchain for supply chain safety pilot(see link), although we have no clear idea of the follow-up results.

In China, critics thought eventually the holy grail of blockchain for supply chain belongs to the internet conglomerate as well, either Alibaba or Tencent. It is said Alibaba is championing the movement, becoming the most patented company in the world of blockchain technology (see link). It has adopted blockchain to fight food fraud, secure medical data and track cross-border shipments.

So can small startups still get a piece of cake of this?

By: Cecilia Wu