An Undervalued Blockchain Market In China Is Good News For You

Why Investing In Chinese Blockchain Projects Could Be The Best Decision You Ever Make

It’s the Wild West of blockchain right now. It seems like everyday tens of new ICOs and projects come onto my radar. With 1426 projects on coinmarketcap.com (36 have been added since I began this article), the mere prospect of deciding which tokens are worth your money is daunting. I think generally people take one of three paths. Some diversify their holdings amongst the top MarketCap coins — Bitcoin, Litecoin, Dash, Ethereum — and hold. This is like the index fund equivalent of crypto investing. Their assets will likely grow with the market, hopefully seeing substantial returns. Do this if you want some exposure to crypto but don’t want it to consume your life. But most want more; the market is developing so rapidly that nearly every week there is another project that suddenly explodes in value. The FOMO is visceral as one stands on the sidelines watching a token rocket upwards. Thus, many people take the second option: hang around Reddit and Twitter reading comments and trying to catch the next proverbial lightening in a bottle. Essentially: try to get on the ship just before it leaves the station. There’s nothing wrong with that; it works sometimes. But here’s why it works: because the market is so irrational. Because the market can be so dramatically influenced by a few large voices in the industry. Those people on Reddit, they don’t know anything more than you do. That’s the truth. The reason that it’s possible to sometimes strike gold off these “shills” is because enough people are doing exactly what you’re doing. And if enough people suddenly want to purchase that token; it explodes.

It’s why John McAfee can move markets and a Jamie Dimon comment can temporarily crash Bitcoin. But the third option is where the real money is to be made. The third option is doing the leg work; reading, reading, and more reading. Looking for the undervalued and investing before everyone starts talking about it. It’s simple, but certainly not easy. And that’s why more people don’t do it.

I have discovered what I believe is an undervalued class of the market. This is the Chinese ICO market. But my objective is not for you to blindly follow my advice. Thus, in this article, I will present my argument for why I believe this market is undervalued, support the argument, and present overviews of some of the projects I feel have the most potential. I also want to provide an overview of the Chinese blockchain market; we’re familiar with many of the big players in the west: Y-Combinator, American Express, etc. When partnerships like those are announced, they hold weight. But there are Chinese equivalents that hold just as much weight, yet most in the West are not familiar with. Thus, to effectively value projects in this space, we need to fully understand the space.

Why China?

I highlighted in this article why I think the Chinese market could be the next market to see a big explosion. I’ll largely echo what I wrote.

China, from a political perspective, is situated to challenge America as the global superpower. With the 14th fastest growing GDP (6.7% compared with USA’s 1.6%), China’s GDP sits only second to the United States. As a side note, I am aware that GDP isn’t necessarily the best indicator of economic power or potential, but for our purposes, it will suffice enough to give a rough indicator of China’s economical standing within the world. Whether or not it was in American’s best interest to withdraw from the Trans-Pacific-Partnership, what is clear is that China benefited by filling the vacuum. With a massive workforce and lenient regulations, China is able to leverage new economical opportunities quickly and efficiently. Their efforts in renewable energy exemplify this. Not at all known for being environmental conscious, China now leads the world as the largest investor in renewable energy.

Additionally, China’s political structure means that development can happen fast. They can evolve quickly and lead world renewable energy efforts because they are a one-party state. There is no balance of power and need to appeal to a divided voter base delaying development as there is in America.

My belief is that blockchain will be China’s next big venture. The enacted ban on ICOs and exchanges is likely temporary. As I stated in my NEO article: China knows that blockchain is going to be extraordinarily disruptive. They demonstrated this when they released their five-year blockchain plan. China banned exchanges and ICOs because they recognize the potential of blockchain. If they didn’t understand its significance, they never would have banned it. They banned it because they want to control it; because they will control it. They banned it to flex their muscles, establish their power, and give them time to formulate a plan for how and when they will move forward. It’s very difficult to influence things when adoption has come; it’s much easier to impose early restrictions and shape the direction of the disruption.

Singapore has embraced the potential of blockchain and their progress demonstrates the potential economical impacts that adoption can have. Recognizing that blockchain and cryptocurrencies will disrupt present industries and replace jobs, Singapore looks at the disruption not so much as a loss of jobs, but as a refocusing of jobs. Some professions will suffer, but the emerging industry will ultimately benefit the economy, cut out middle men, and spur economic growth.

When China has their plan, they will likely become the world’s leading country in blockchain technology. And with the capability for rapid economic development, when China opens up ICOs and blockchain development…look out.

And we’re already seeing blockchain companies and projects emerging in this space.

Ok…but what makes these projects undervalued?

I think there are two reasons that contribute to this industry being undervalued. First, I believe people both underestimate the power China will have when they enter this space, as well as doubt that China will. It’s a fair concern; however I am confident in my above analysis that China will be a big player. Thus, I think there is an opportunity here to profit from people’s fear.

However, the value of these projects transcends China as well. Many of them have significant applications in the global blockchain space, with fantastic teams and strong technology. But they have weak western marketing: terrible english websites, awful white paper translations, and limited social media presence. This in part is due to the fact that they can’t raise ICO money from within America and instead, focus on the asian markets in the beginning. But as such, most in the West are ignorant of these companies. And without sufficient published materials, it’s hard to effectively understand the projects without direct connections to their teams. However, these projects also recognize that this is limiting them and working to improve their western marketing. Think NEO before its rebrand from Antshares.

NEO is much better…

If you look at these two factors, the lack of western marketing and the fear regarding the uncertainty in China, people aren’t valuing this market effectively. Combine the fact that China will soon open up blockchain development — and I think they will — with the certainty that these companies will be improve their marketing (they’re already doing so), and I think we have an opportunity. An opportunity to be at the ground level of an undervalued market.

Who are the players in the space?

Blockchain projects develop fundamentally differently in China than in the West. In the West, ICOs are king. But to raise a significant amount of ICO money, a heavy early focus must be placed on marketing. Oftentimes, only after the successful ICO does development begin. Only after the fundraising, marketing, and development, does the project approach established investors and enterprises. It inherently puts an emphasis on marketing. That’s why a Floyd MayWeather endorsement holds so much weight.

Three ICO investments later…

In contrast, in China, fundraising functions differently. Chinese blockchains connect with powerful CEOs and traditional venture capital firms to raise money. They don’t focus primarily on ICOs to generate cash. However, as a result of this fundraising difference, less importance is placed on marketing, and more on the technology and product design. VCs care far less about marketing and much more about the underlying fundamental technology. Essentially, these projects secure the institutional support, then develop powerful products, then focus on marketing. It’s a top down approach versus a bottom up. In the US it’s about public money. In China it’s about private money. Because of this difference, the investors and backers for Chinese projects are hugely indicative of their potential.

So it’s important that you understand the following “heavy hitters” in China. These include prominent investment firms, incubators, enterprises, and platforms.

GBIC (Global Blockchain Innovative Capital)

GBIC acts as a global incubator for blockchain projects. They support their investments with human capital, marketing and PR assistance, and network and development resources. Their network includes many international investors and exchange connections. GBIC supports Nebulas, DeepBrain, IoT Chain, Aelf, Eximchain, Zeepin, and WePower.

Vitalik Buterin is a General Partner at Fenbushi — a Chinese based venture capital firm that invests into blockchain projects. Their best investments have been into TenX, Factom, SiaCoin, and ZCash.

Another powerful Singapore VC firm. They have supported TenX, Quoine, Raiden Network, and IoT Chain (see below).

FBG Capital (Fintech Blockchain Group)

FBG Capital is a Singapore based blockchain and digital asset investment firm. FBG Capital posesses serious weight in Asia’s blockchain industry. It is a significant vote of confidence to have backing from this firm. Projects they have backed include ADEX, Zilliqa, IoT Chain, Aelf, LoopRing, and Nebulas. They provide strategic value to projects. As Richard Lee of GBIC said, “their networks consist of top tier funds, exchanges, and major investors/influencers in the crypto space globally.”

BAT: Baidu — Alibaba — TenCent

These are three of the most powerful companies in China. Any backing or association with them is enormous.

One of China’s largest private investment conglomerates. They have invested into OnChain.

SequoiaDB is a prominent big data manager in China; they are designed to manage the integration, storage, and management of enterprise’s big data.

One of China’s largest mining consortiums. They have an enormous amount of investing power. They are a primary backer of Elastos.

What’s interesting is the amount of partnerships and collaboration within the Chinese blockchain space. The NEO Council advices dApps being developed on NEO; developers jump from project to project; OnChain and NEO work closely together. My perspective on this is that it aligns well with NEO’s vision of enabling a smart economy. The NEO Council understands that NEO can only be one component of this. Multiple applications, protocols, and platforms must exist — interconnected and interoperable; these will enable all the aspects of a smart economy including digital assets and identity. NEO understands the technology needed to enable this economy. Thus, it is proactive in supporting projects that facilitate this vision. NEO Council investments indicate to me that the project is part of the larger smart economy ecosystem; that is incredibly valuable in my opinion. OnChain, along with NEO, is committed towards developing products that support the greater ecosystem. They have an extremely powerful network and bring substantial support to the projects they back.

Explore my NEO article for more information on the OnChain-NEO ecosystem. For now, a brief explanation. NEO’s founders Da HongFei and Erik Zhang founded a company called OnChain. They’re not the same company, but their interests align and they have a partnership together. OnChain’s system, known as DNA, (Decentralized Network Architecture) aims to work with Chinese businesses and government. Neo acts as the precursor for the DNA protocol. Ultimately, DNA develops public, private, and consortium blockchains for businesses. These blockchains then link up to NEO to join the decentralized economy. Businesses then have all the benefits of both private and public blockchains.Think of Neo as the fundamental public blockchain and OnChain as its enterprise blockchain counterpart (i.e. a means for big business to operate on blockchain). Then, they can link up and get the best of both worlds.

As a competitor to NEO, QTUM is also a platform developing in the Chinese space. QTUM is a hybrid of Ethereum and Bitcoin technology, with its own technology interjected in between. QTUM takes advantage of the security of Bitcoin while utilizing a virtual machine and customizable blockchain for smart-contracts and decentralized applications much like Ethereum. Similar to NEO’s paragraph above, QTUM’s support indicates that the project is supporting a much larger ecosystem.

Roger Lim is one of the most significant advisors and investors out of China. He is a partner of NEO Global Capital, an investment fund strategically affiliated with NEO.

Who Is Undervalued?

I think NEO and QTUM will both benefit from future Chinese blockchain developments. Especially NEO in my opinion is fundamentally undervalued compared to other platforms in the space. But I’ve written about this extensively and don’t want to beat a dead horse. If you’re interested in the full NEO evaluation, refer to this.

As Brad Laurie says, the most effective way of evaluating a project is by examining the technology and protocol, then the team and partnerships, and then the applications and connection to the real world enterprise and business.

ICO January 29th — Token Symbol: CPX

Brief Summary: APEX is backed by Chinapex, a company whose AI platform assists enterprises in data collection and management. Basically, they help companies manage their customer’s data. Operating out of Shanghai, Chinapex has over 200 enterprise customers.

Why APEX Matters: APEX returns control of data to the users and consumers. Instead of user data being controlled and sold by corporations and vendors, APEX wants to enable users to control that data and be rewarded when they share it. They already have over 250 customers 32% of those will participate trial-run of APEX at launch. Assuming you‘re a user, you can interact with their application, setting prices and determining which information you want to share. This information goes to a smart contract. From there, businesses can purchase that information. The information then goes to APEX’s business platform, providing companies with advanced data analytics.

Backing: APEX is also backed by a huge range of partnerships including Microsoft Azure, Amazon Web Services, Alibaba Cloud, Oracle Cloud China, Baidu, Tencent, OnChain, and the NEO Council.

Western Competition: Basic Attention Token tries to bring control over your internet data, but that still doesn’t encompass APEX’s goals. Datum is definitely a competitor, but the fact that APEX is tied to an already powerful data management company with hundreds of enterprise customers gives them a huge advantage.

Analysis: These backings indicate serious enterprise support. APEX’s connection with OnChain and NEO highlight that both projects view APEX as a fundamental component to their vision of a smart economy.

But where would I find my Jesus Toast?

Concerns: As with many of these platforms, having a successful marketplace depends largely on how many users there are. You can’t have eBay without buyers or sellers. APEX will need to facilitate this adoption.

Trading on exchanges — Token Symbol: LRC — Available on Binance

Brief Summary: LoopRing is a decentralized, automated trade execution protocol that intelligently trades via a unique ring matching system. Essentially, the ring structure can link together multiple orders at once and execute them simultaneously. Imagine Bill wants to buy RLC with REQ, Abbie wants to buy REQ with POWR, and Daniel wants to buy POWR with RLC. Instead of executing these orders one by one with all the additional trading costs, LoopRing can connect the three buyers and execute the orders simultaneously.

Why LoopRing Matters: LoopRing brings liquidity and trust to blockchains. LoopRing intermediates trust between blockchains and exchanges. Because trades are executed simultaneously, there is no need to trust counter-parties. If I want to buy RLC, I don’t need to first sell ETH, then buy RLC. I can instantaneously buy RLC while selling ETH. For the bigger picture, this plays an important role for platforms, such as NEO, in creating an ecosystem where assets can be exchanged safely and efficiently.

Backing: FBG Capital, QTUM Foundation, NEO Council, SequoiaDB

Competition: LoopRing has significant competition within the industry. LoopRing is competing against other exchange protocols such as Kyber Network, 0x, and Bancor.

Analysis: FBG Capital brings legitimacy and strong support to LoopRing. QTUM and NEO see the potential of LoopRing’s protocols in bringing trust and liquidity to their respective platforms. LoopRing’s strong backing, and unique connections within China, give it an edge over its competition. Its ring technology is unique as well.

Concerns: Since updating its circulating supply on Coinmarketcap, I think the project is at too high of a valuation. 734,089,390 (circulating supply) x $1.43 (price per token) = $1,049,747,827. At over a billion dollars, I don’t believe now is the time to buy.

Trading on exchanges — Token Symbol: DBC — available on KuCoin and Huobi

Brief Overview: Today, AI development requires enormous amounts of computing power, and thus, significant money. DeepBrain uses decentralized computing power to reduce both the costs and barriers for this industry. Along with this, they support a marketplace for data sharing. Privacy is also at the forefront of their platform. DBC estimates that they could cut 70% off the cost of AI development.

Why DeepBrain Matters: DeepBrain brings application to the blockchain network in China. Most projects are committed to building the ecosystem, with less focus on specific use cases.

Backers: The biggest backing is the NEO Council and an investment from Da HongFei. Other significant VCs in the space have also invested such as Gobi Partners, GSR Ventures, and CollinStar Capital. They are also backed by GBIC.

Western Competition: Singularity remains the biggest competition for DeepBrain.

Analysis: The NEO backing is inspiring; to me it indicates that NEO is confident enough in their ecosystem and foundation to begin developing dApps. DeepBrain has strong institutional support. In comparison to Singularity, DeepBrain’s connections within the Chinese market gives them security. China utilizes their own products and projects. In my opinion, Singularity and DeepBrain are not truly in competition.

Concerns: One concern is that they won’t be able to support a viable environment for necessary development and rapid growth. Because of DeepBrain’s marketplace, they rely heavily on network effects (the value that users bring to a platform). The DeepBrain team will need to make strides in their marketing in order to facilitate those network effects. Backing by GBIC will help with this.

ICO finished; not on exchanges yet — Token Symbol: ELA

Brief Overview: Elastos is one of the most ambitious projects out of China. Elastos aims to create a new kind of decentralized Internet, powered by blockchain technology. With their platform, developers can create dApps that connect to the Elastos blockchain but don’t actually run on it — this is a massive scaling solution. In addition, users can easily obtain identities for digital content. Afraid someone is going to steal your photograph? Give it a digital identity and secure it with Elastos.

All these features are accessible from any operating system, so you can use those decentralized applications from an iPhone. But those dApps have built in protection, called the Elastos Runtime that prevents them from “directly” connecting to the internet. This helps protect against malware. Their main blockchain is secured via PoW and utilizes the computational resources of Bitcoin. When a miner “mines” a block on the Bitcoin blockchain, he simultaneously mines a block on the Elastos blockchain.

Why Elastos Matters: Elastos brings usability and scalability to the blockchain. It focuses on creating a robust ecosystem that is accessible in the same ways the internet is today. And with this platform, Elastos can enable a whole range of blockchain applications. Elastos is a key to helping NEO achieve a global vision.

Backing: Elastos is backed and funded by Bitmain. They are also partnered with Antpool. These are two of China’s biggest mining companies. They are partnered with the NEO Council as well.

Competition: Elastos is creating an all in one solution. Ethereum would need many collaborative dApps to realize Elastos’ potential. While there are many platforms for dApp creation and a new kind of internet (EOS, AION, Cardano) Elastos’ positioning in the East keeps them out of direct competition. But Elastos already has a working main blockchain. They are years in development. That is enormous.

Analysis: Elastos is a bold project. Frequently with projects of this magnitude, it’s a massive if. If they can deliver. If they know what they’re doing. But Elastos already has a working mainchain. And their partnerships with Chinese mining giants ensure that they already have use of the computation power for the platform. The interoperability with NEO also brings enormous value to both platforms.

Concerns: The question that needs to be asked is how many platforms can the blockchain world support? Elastos certainly faces tough competition. I do think they are offering a solution not many others are.

Nebulas

Trading on exchanges — Token Symbol: NAS — Available on Huobi

Brief Overview: While coming out of China, Nebulas focuses more on the West and thus, suffers less from the advertising hurdles facing other regional projects. Nebulas features a ranking algorithm that can effectively assign value to blockchain projects and contracts and allow users to search for them. Nebulas has its own VM and supports dApp development. An efficient upgrade system allows for rapid scalability. It is fully compatible with Ethereum smart contracts. They have an accredited team behind them.

Why Nebulas Matters: Nebulas is commonly referred to as the Google for Blockchain. And with their blockchain search engine, that seems appropriate. But the real genius in Nebulas is how they utilize their ranking algorithm. To rank items in a search engine, there needs to be some established value system. Some way of judging one blockchain project, dApp, or protocol from another. Nebulas has designed a value system for blockchain. This value system enables Nebulas to effectively “value” users and accounts and reward them accordingly. Combine this with dApps, smart contracts, and other advanced features and Nebulas is a serious competitor among third generation blockchain projects.

Backers: FBG Capital, GBIC, and 500 Startups (a powerful VC investing and incubating firm).

Competition: Nebulas faces significant competition from other third generation platforms such as EOS, Cardano, and AION. However, what Nebulas is attempting to accomplish puts them in a different league.

Analysis: With backing from FBG and 500 Startups, Nebulas looks poised to be a serious contender in the third generation blockchain market. I also wouldn’t be surprised to see some time of collaboration with Ethereum or another platform to bring Nebulas’ ranking system onboard.

Concerns: As with any platform in this market, the competition is a concern. However, I am confident that Nebulas’ technology is truly special.

Trading on exchanges — Token Symbol: ITC — Available on Huobi

Brief Overview: IoT Chain aims to be the Chinese platform for the Internet of Things (IoT)— Think IOTA in the West. IoT Chain uses DAG technology to support the enormous transaction load anticipated from the Internet of Things. However, unlike IOTA, ITC utilizes Delegated Proof of State (IoT Chain called PBFT) to reach consensus. To increase scaling, small pieces of the DAG are broken up and individually governed by this dPOS.

Why IoT Chain Matters: China will likely be a leader of the Internet of Things revolution. The token that integrates well with enterprises and facilitates adoption will rival IOTA’s success.

Backers: IoT Chain has investments from Link Capital and FBG Capital. They are working with enterprises in China including eight energy and technology companies. IoT Chain is also supported by GBIC.

Competition: IoT Chain doesn’t have any competition yet within the Chinese market. From the West, IoT Chain is competing with IOTA and other DAG protocols like Raiblocks (XRB).

Analysis: IoT Chain has strong technology, big enterprise backing, and significant institutional investments. They already have a working prototype. Currently it is only available on smaller exchanges and thus, its market is limited. I think it has significant room to grow and a chance to spear head the IoT market in China.

Concerns: I have some of the same concerns with IoT Chain as I do with IOTA, specifically that a central coordinator must oversee the network. A DAG system with lots of microtransactions can operate without a central coordinator; until that point, a central coordinator most oversee the network. In addition, IoT Chain’s western and english marketing have been brutal. However, they have a white paper revision coming soon and have partnered with GBIC which shows promise.

Will not be having an ICO; not yet on exchanges — Token Symbol: ONT

Brief Overview: Ontology is the link between blockchain and business. Their parent company, OnChain is already well connected with Chinese enterprises and government (read more about that here). Ontology creates a range of advanced applications so that businesses can create private chains, maintain control over their information, interconnect with other private chains and the larger Ontology network, and connect into public chains like NEO. Services like customizable private chains with optional features, digital identity (ONT ID), and advanced trust issuance systems (entities can issue trust to other entities and all that can be traced backwards to the initial issuer) make Ontology an extremely ambitious project.

Why Ontology Matters: Ontology is the trust network for NEO and other public blockchains. NEO is built on the premise of supporting a smart economy, of connecting with enterprise and enabling an interconnected world, all based on the security of blockchain. Ontology, utilizing the NEO VM, provides the other key component to this vision: Programmable Trust. Without Ontology, NEO is just another public blockchain.

Backers: Ontology is a project from OnChain. OnChain was the first Chinese blockchain company to join Hyperledger, is a strategic partner of Microsoft China on multiple projects, worked with the Japanese Ministry of Economy, Trade and Industry, Voted as KPMG’s top 50 Fintech Company in China, partnered with Alibaba to provide an email certification service for Ali Cloud, received an investment from Fosun Group, and has collaborated with a Chinese regional government. In addition, Ontology is backed by the NEO Council.

Competition: I have not seen anything to the scale that NEO and Ontology are enabling.

Analysis: As I said, with their backing and partnership with NEO, it is clear that Ontology is a huge key to NEO’s success. They compliment each other perfectly. NEO provides the foundation, connecting all the components of the network together. Ontology provides an on-boarding platform for businesses and governments that want to connect into the greater blockchain network.

Concerns: As far as blockchain projects go, this is one of the safest in my opinion. The key will be to see if they can truly continue to on-board enterprises.

ICO on January 16th— Token Symbol: MAN

Brief Overview: MatrixChain integrates AI with blockchain. MatrixChain uses AI in some unique ways that ultimately, simplify the user experience. AI can audit smart contracts and code to ensure that loopholes and bugs aren’t present. Users can just input the specifications for the smart contract in simple scripting language; the AI then converts the specifications into smart contracts. But this is not a simple task; the AI needs to infer from the specifications what the purpose of the smart contract is, and then enable it. AI will also optimize the blockchain protocol according to environmental and usage inputs. Essentially, the blockchain will be continuously optimizing to account for actual usage, without hard forks.

MatrixChain uses a hybrid PoW and delegated PoS protocol. The blockchain is broken into different pieces where mining and consensus happen separately to increase scalability (think sharding). But unlike other PoW models, The computing nodes aren’t just solving pointless algorithms. Miners perform Markov Chain Monte Carlo (MCMC) computation — if your brain went dead reading that, hold on. MCMC computation is really important for solving certain algorithms. Even a simple explanation is above the scope of this article, but recognize that MCMC is critical for real world, big data applications. As such, Matrix mining is actually useful for solving real world problems.

Why MatrixChain Matters: Artificial Intelligence and Blockchain are two of the most revolutionary developments of recent years. I personally have been looking for an elegant combination of the two. I think MatrixChain provides this.

The Future of AI?

Backers: MatrixChain is backed by the Chinese Association for Artificial Intelligence, partnered with HyperLedger, and has received investments from Torque Capital Partners, a blockchain VC and incubator.

Competition: While projects like DeepBrain Chain and Singularity are utilizing the blockchain as a decentralized marketplace connecting AI developers with computational resources, I’m not aware of any project competing directly with MatrixChain’s AI integration. However, considering MatrixChain is a platform for smart contracts and dApp development, it is in competition with other platforms like EOS, Ethereum, and Cardano,

Analysis: While the competition among blockchain platforms is stiff, identifying platforms with new technological implementations like Nebulas’ ranking algorithm is important. MatrixChain’s use of AI falls under this umbrella as well. I believe that AI will be hugely advantageous for blockchains. MatrixChain is spearheading this advancement.

Concerns: Without a strong technical background, it is difficult for me to comment on the hurdles related to integrating AI and blockchain. However, I am sure that there are many, and as with human error in relation to coding (Parity Wallet catastrophe and the DAO hack), mistakes are costly.