Author: Liu Honglin

This afternoon I spoke with the head of a blockchain industry fund with government background. We talked about a lot of topics, but the main theme was: "The fund has money, but it just can't invest it."

This is quite heartbreaking. After all, blockchain is a hot topic in the media, with hundreds of millions of dollars in capital market financings a common occurrence. However, when it comes to real investment in China, especially among government-backed industrial funds, the reality is completely different.

Investing overseas and issuing tokens is strictly prohibited; this is a red line. Exchanges and financial licenses are even more challenging to obtain, as the barriers to transferring funds abroad are numerous. What about investing domestically? The results are even more awkward: either consortium blockchains or IT outsourcing companies disguised as "blockchain." If you really want to invest, no one is sure.

Finally, we smiled at each other and reached a consensus: take it one step at a time ????.

But behind this smile is actually the embarrassment of the entire industry: there are many tracks that can be discussed in theory, but almost none of them work in reality.

Reliable asset management (RWA) has indeed become one of the hottest areas in the past two years. The logic seems straightforward: using blockchain technology to upload, tokenize, circulate, and split real-world assets such as project expected revenue, accounts receivable, bills, equipment leases, and carbon assets—theoretically, it can be compatible with the traditional financial system while avoiding the controversy surrounding token issuance. It seems to be a very legitimate track. There are also some exploratory cases in the industry. For example, Ant Financial and Longxin Group have tried to tokenize the revenue rights of charging piles, relying on IoT devices to collect real-time data and upload it to the blockchain. This is said to have significantly improved financing efficiency. Other institutions have experimented with asset securitization and blockchain bridging in real estate, bills, and bonds. These cases demonstrate the potential of integrating blockchain with the real economy. The problem is that most projects remain in the exploratory and pilot stages, struggling to achieve full scale. The obstacles are well known: unclear legal rights, high uncertainty in compliance and supervision, insufficient secondary market liquidity, complex valuations, weak on-chain and off-chain connections, and limited cross-border capabilities of entrepreneurial teams. These problems, combined, often stall even the most promising RWA projects. This leads to a typical reality: some projects remain stuck in the concept or sandbox stage, generating media coverage but no follow-up; others degenerate into ordinary data services or demonstration projects, losing their blockchain flavor. Even if they manage to survive, their scale is pitifully small, insufficient to attract capital, and they may even be forced to close due to tightening regulations. Consequently, RWAs can be included in reports, but rarely in financial statements.

Blockchain security and compliance are also seemingly essential needs. Regulation requires transparency and traceability, and financial institutions are allergic to risk. A single vulnerability in a smart contract could result in tens of millions in losses, while a single money laundering channel in cross-border transfers could risk licenses and potentially lead to hefty fines. It seems that any company capable of on-chain auditing, risk control, and anti-money laundering compliance will be a surefire seller. Indeed, many teams possess strong technical expertise: some can automatically scan contract code, generating vulnerability lists in minutes; others can track fund flows and help identify suspicious transactions; and some can adapt traditional anti-money laundering models to blockchain scenarios, using algorithms to flag high-risk addresses. Technically speaking, these products rival those of leading international vendors in the global market. However, strong technical capabilities don't guarantee success. Procurement from financial institutions presents a nearly insurmountable barrier to entry. When purchasing compliance tools, banks, securities firms, and insurance companies prioritize endorsements over technical support: regulatory recommendations? Partnerships with the Big Four audit firms or major IT vendors? Successful case studies within the industry. Startups often lack these resources. This creates an awkward situation: some teams have participated in various security competitions for two consecutive years, winning numerous awards, but continue to face obstacles in business. Other companies have received innovation subsidies from local governments but still cannot sign a bank contract, relying on writing research reports and running training courses to survive. This demand isn't fake, but real, yet it stands like a high wall before startups: without resources, there's no chance to showcase their capabilities; with resources, they discover the market may not be as large as they imagined. Consequently, this has become one of the most quintessential startup tracks: "The most promising, seemingly, but the most hopeless."

Industrial applications are where blockchain's promise is most readily high. New energy, carbon trading, cross-border e-commerce, and medical data—each one can boast a strategic narrative on a PowerPoint presentation: multi-stakeholder involvement, a lack of trust, and the need for transparency—blockchain's "decentralized ledger" sounds tailor-made for these scenarios. In theory, it can address the trust gap in industrial collaboration and even leverage financialization to improve efficiency and expand the market. However, in practice, the results are often quite different. Numerous attempts have been made to put carbon assets on the blockchain: building a platform, uploading some carbon reduction data, and displaying a large, real-time scrolling screen—it all seemed advanced, but once the financial subsidies ceased, the platform fizzled out. Cross-border e-commerce traceability is a familiar story. Blockchain can provide full chain verification, but databases can do the same, and at a much lower cost. Clients' most direct question is always, "Why should I pay more for 'trust'?" Medical data sharing is a favorite topic for blockchain startups. The idea is compelling: data on-chain, encrypted sharing, controllable and traceable. However, hospitals are reluctant to open up their core data, and regulatory oversight is rigid, often limiting them to just a few demonstration cases. Consequently, many projects rely on industrial park subsidies and demonstration project opportunities to secure initial funding. However, once subsidies fade, their business models become untenable: clients are unwilling to continue paying, and blockchain struggles to prove its irreplaceable nature. Ultimately, what should have been a major industry-wide success story becomes a mere "futuristic" showcase project in the exhibition hall.

Digital identity and data ownership have been a long-standing issue. Cross-border data compliance, identity verification, and the ownership of educational and medical information—nearly every one of these can be marketed as a "future imperative." The vision is that all data can be put on a blockchain for ownership verification, each person's identity encrypted, and multinational corporations and regulators seamlessly integrated—all sounding incredibly ambitious. However, the problem is that for such projects to take off, they require the cooperation of the entire ecosystem, unified standards, industry leaders taking the lead, and regulatory approval. A single startup simply can't drive such a large-scale initiative. The reality is that most teams can only survive on government projects, conducting one or two pilot projects and securing funding to sustain them for a while, but never achieving scale. I've seen teams spend two years working on "chaining education information," only to have the school itself say, "A database is enough, no need for blockchain." Ultimately, the project fell through, and the team even switched to issuing digital collectibles. Everyone understands that digital identity is a promising direction, but the problem is that it's not profitable. It's more like a public utility, with undeniable value but lacking market logic. No one is willing to pay extra for a "more trusted" identity, and without customer payments, startups struggle to survive. Consequently, it often remains in policy documents or repeatedly mentioned at industry conferences, with few truly making it onto the market.

Judicial and public services were among the earliest areas for blockchain's high hopes. Judicial evidence storage, arbitration evidence collection, and government transparency all sounded like natural fits for blockchain: evidence stored on the chain is tamper-proof, processes are transparent and traceable, and numerous intermediaries can be eliminated. Many local governments have indeed conducted pilot projects, and some courts have even held press conferences dedicated to "Blockchain Electronic Evidence." At the time, it seemed like the inevitable future. However, over the years, reality has gradually become apparent. While judicial projects do succeed, they mostly exist as supporting tools, with limited opportunities for true marketization. When courts use blockchain for evidence storage, it's often tied to notaries and third-party evidence storage platforms, thinly slicing the value chain. Transparent blockchain platforms for government affairs are more of a publicity stunt, with few truly sustainable operations. For governments, this is an attempt to improve efficiency, but it won't become a recurring necessity. For startups, it's more like a one-off project, earning a small fee and then leaving. These projects are characterized by stability but lack growth potential. They can sustain some teams, but they struggle to support the high-growth narratives desired by investors. In other words, this direction is more like a "public welfare market," with great significance but limited potential. This creates a paradox: blockchain is most easily accepted here, yet it's also the hardest place for capital to favor.

Looking back, the logic behind these initiatives is sound. RWA, security compliance, industrial applications, data rights confirmation, and judicial services—each one more serious and compliant than the last—can even be incorporated into policy documents. However, when it comes to actual implementation, the problems are always the same: customers are unwilling to pay, compliance barriers are too high, and market space is limited. Ultimately, the theory is sound, but reality is harsh.

This is the dilemma facing the fund manager today: the money is there, and policies allow for investments in projects that don't issue tokens, but truly worthy companies are few and far between. The consensus reached is to take things one step at a time, which sounds helpless, but it reflects the reality of the current situation.

But I don't think this is the end. Over the past two decades, Chinese internet startups have gone through similar phases. Initially, everyone called the internet a bubble, but e-commerce, payments, and social networking gradually emerged and became the infrastructure they are today. Blockchain may also have to go through a similarly long cycle, first with a proliferation of concepts, then with failed pilots, and finally with the emergence of real applications. I'm more excited about not the next wave of "get rich quick by issuing a coin," but startups that can integrate blockchain with real industries and truly solve problems. For example, truly reducing costs in cross-border payments, resolving trust issues in supply chain finance, and providing trusted solutions for data compliance.

These roads do seem difficult now, but if someone can find their way out, it will not only be a victory for a project, but a victory for the entire industry.