Which Blockchain Companies Are Worth Investing In?

The current situation is somewhat awkward.

This afternoon, I had a discussion with the head of a blockchain industry fund with government backing. We covered many topics, but the main point can be summarized in one sentence: "The fund has capital, but it simply cannot deploy it."

This statement is quite striking. After all, blockchain is portrayed in the media as a major trend, with capital markets frequently seeing financing cases worth hundreds of millions of dollars. However, when it comes to actual investment within China, especially for industry funds with official backgrounds, the reality is entirely different.

Investing overseas is out of the question for projects involving token issuance; this is a red line. Exchanges and entities requiring financial licenses are even more off-limits, with significant hurdles surrounding cross-border data transfer and capital outflows. What about investing domestically? The result is even more awkward: projects are either based on consortium chains or are merely IT outsourcing companies rebranded with a "blockchain" shell. No one feels confident about injecting substantial capital into such ventures.

In the end, we shared a laugh and reached a consensus: let's take it one step at a time 😂.

However, behind this laughter lies the awkwardness of the entire industry: while there are numerous theoretically viable sectors, almost none are feasible in practice.

Real-world assets (RWA) have indeed become one of the hottest directions in recent years.The logic seems sound: tokenize, circulate, and fractionalize real-world assets such as projected project revenues, accounts receivable, bills, equipment leases, and carbon assets using blockchain technology. Theoretically, this approach can integrate with the traditional financial system while avoiding controversies associated with token issuance, making it appear to be a highly legitimate sector. The industry has seen some exploratory cases. For instance, Ant Digital Technologies and Longshine Corporation attempted to tokenize the revenue rights of charging piles, relying on IoT devices to collect data in real-time and record it on-chain, reportedly significantly improving financing efficiency. Other institutions have attempted to combine asset securitization with blockchain bridging in areas such as real estate, bills, and bonds. These cases demonstrate the potential for integrating blockchain with the real economy. The problem is that most projects remain in the exploration and pilot stages, struggling to achieve true scale. The obstacles are well understood: unclear legal ownership rights, high uncertainty in compliance regulation, insufficient liquidity in secondary markets, complex valuations, fragile connections between on-chain and off-chain data, and limited cross-disciplinary capabilities of startup teams. These issues often stall promising RWA projects midway. Consequently, typical outcomes emerge: some projects remain permanently in the concept or sandbox phase, gaining media coverage but no follow-through; others devolve into ordinary data services or demonstration projects, with the blockchain element becoming increasingly diluted; and even those that survive remain insignificantly small, failing to attract capital and potentially facing regulatory tightening that forces them to shut down. Thus,RWA can be included in reports, but rarely makes it into financial statements.

Blockchain security and compliance also appear to be clear-cut necessities. Regulators demand transparency and traceability, financial institutions are highly risk-averse, a single vulnerability in a smart contract could result in losses worth tens of millions, and a single money laundering channel in cross-border transfers could lead to license risks and hefty fines. It sounds like any company capable of providing on-chain audits, risk control, and anti-money laundering compliance would easily find buyers. In fact, there are indeed many teams with strong technical capabilities: some can perform automated scans of contract code, generating vulnerability lists within minutes; others can track fund flows to help identify suspicious transactions; and some have adapted traditional anti-money laundering models to blockchain scenarios, using algorithms to flag high-risk addresses. From a purely technical standpoint, these products are competitive with leading international vendors in the global market. However, strong technology does not guarantee business success. Procurement by financial institutions presents an almost insurmountable barrier based on established relationships. When banks, securities firms, and insurance companies purchase compliance tools, their primary consideration is not technology but endorsement: Is it recommended by regulators? Is there cooperation with the Big Four accounting firms or large IT vendors? Are there successful case studies within the industry? Startups often lack these resources. This leads to an awkward situation: some teams participate in various security competitions for two consecutive years, winning awards repeatedly, yet face constant setbacks in business development; some companies receive innovation subsidies from local governments but still fail to sign contracts with any bank, surviving only by writing research reports and conducting training courses. This is not a pseudo-demand but a genuine need; however, it stands like a high wall before startups: without resources, there is no opportunity even to present their solutions; with resources, they may discover that the market itself is not as large as imagined. Thus, it has become one of the most typical sectors in the startup world that "appears most reliable but leads to despair upon execution."

Industrial applications are the scenario where blockchain is most often expected to deliver results.New energy, carbon trading, cross-border e-commerce, and medical data—each can be framed in presentations as a strategic narrative: multiple parties involved, lack of trust, and a need for public transparency make blockchain's "decentralized ledger" seem tailor-made for these scenarios. Theoretically, it can address trust gaps in industrial collaboration and even add financial layers to improve efficiency and expand markets. However, the reality often differs significantly. There have been numerous attempts to record carbon assets on-chain: building a platform, recording some carbon reduction data, and displaying a real-time scrolling screen looks advanced, but once fiscal subsidies stop, the platform collapses. Cross-border e-commerce traceability is another old story; while blockchain can provide full-chain verifiability, databases can do the same at a lower cost. The most direct question from clients is always: "Why should I pay extra for 'trust'?" Medical data sharing is another favorite topic for blockchain startup teams. The idea is appealing: data recorded on-chain, encrypted sharing, and controllable traceability. However, hospitals are unwilling to open up core data, and regulations are strict, leaving most projects limited to a few demonstration cases. Many projects rely on industrial park subsidies and demonstration project opportunities to secure initial resources. But once subsidies decline, the business model reveals its true nature: clients are unwilling to pay continuously, and blockchain struggles to prove it is "indispensable." Ultimately, applications intended to be major industrial stories devolve into demonstration projects that "look futuristic" in exhibition halls.

Digital identity and data ownership rights have been touted for years.Cross-border data compliance, identity verification, and the confirmation of rights for educational and medical information can almost all be packaged as "future necessities." The envisioned scenario is that all data can be recorded on-chain to establish ownership, every individual's identity has encrypted credentials, and multinational corporations and regulatory bodies can seamlessly connect—a concept that sounds highly sophisticated. However, for such projects to succeed, the entire ecosystem must cooperate, requiring unified standards, adoption by industry leaders, and regulatory recognition. A startup cannot drive such a large-scale transformation. In reality, most teams survive on government projects, conducting one or two pilots and securing some funding, allowing them to last for a while but never achieving scale. I have seen teams spend two years developing "educational information on-chain" solutions, only for schools to say, "A database is sufficient; there is no need for blockchain." The project eventually fizzled out, and the team even pivoted to issuing digital collectibles. Everyone understands that the digital identity direction has merit, but the problem is that it is not profitable. It resembles a public utility: its value is undeniable, but it lacks a market-driven logic. No one is willing to pay extra for a "more trustworthy" identity, and without customer payments, startups struggle to survive. Thus, it often remains confined to policy documents or is repeatedly mentioned at industry conferences, with virtually no successful commercial implementations.

Judicial and public services were among the earliest scenarios where blockchain was expected to make an impact.Judicial evidence preservation, arbitration evidence collection, and government transparency seem to be the most natural soil for blockchain: evidence recorded on-chain is immutable, processes are transparent and traceable, and numerous intermediate steps can be reduced. Many local governments have indeed conducted pilots, and some courts have even held special press conferences on "blockchain electronic evidence," which at the time seemed like the inevitable direction of the future. However, after several years, reality has gradually emerged. Judicial projects can indeed be implemented, but mostly exist as auxiliary tools, with very limited opportunities for true marketization. When courts use blockchain for evidence preservation, it is often bundled with notary offices and third-party evidence preservation platforms, resulting in a thin value chain. Blockchain platforms for government transparency are more often promotional highlights, with very few sustaining long-term operations. For the government, this is an attempt to improve efficiency but not a continuous, necessity-driven expenditure; for startups, it resembles a one-off engineering project, earning some service fees before ending. Its characteristic is stability but lack of growth potential; it can sustain some teams but hardly supports the high-growth narratives desired by capital. In other words, this direction is more like a "public interest market," significant in meaning but limited in imaginative space. Thus, it exists as a contradiction: blockchain is most easily accepted here, yet it is also the area least favored by capital.

Looking back, the logic behind these sectors is actually sound. RWA, security and compliance, industrial applications, data ownership rights, and judicial services are all increasingly legitimate and compliant, even suitable for inclusion in policy documents. However, when it comes to actual implementation, the problems are always the same: clients are unwilling to pay, compliance thresholds are too high, and market space is limited. Ultimately, while the theory is correct, the reality is harsh.

This is the dilemma faced by the fund manager mentioned earlier: the capital is available, and policies allow investment in projects that do not involve token issuance, but truly worthy companies are rare. The consensus to "take it one step at a time" sounds helpless, but it accurately reflects the current situation.

However, I do not believe this is the endgame. Over the past twenty years, internet entrepreneurship in China experienced a similar phase. Initially, everyone said the internet was a bubble, but e-commerce, payments, and social networking gradually emerged and today serve as infrastructure. Blockchain may need to undergo a similar long cycle, starting with conceptual stacking, followed by pilot failures, before finally settling into genuine applications. What I look forward to is not the next wave of myths about "getting rich through token issuance," but rather startup teams that can integrate blockchain with real industries and truly solve problems. For example, genuinely reducing costs in cross-border payments, resolving trust issues in supply chain finance, or providing trusted solutions for data compliance.

These paths indeed appear difficult now, but if someone can succeed, it will be not just a victory for a single project, but a victory for the entire industry.

Finally, I would like to add through this article: If you are an entrepreneur in the Web3 industry, working on a legitimate non-token-issuing commercial project with financing needs, you may contact Lawyer Hong Lin for referrals.