It’s not easy to start up in China – at least if you are an international brand wanting to break into the market. Even large enterprises and international companies often see challenges when entering the country. It’s often too bad, considering it’s the second largest market in the world.
Take the case of Facebook, which has zero official presence in the country. Or Google, which usually utilises legal workarounds and goes through hoops just to get its services in the country.
It’s no different for startups, even those that have already established a foothold in the international market. In almost all cases, China has its equivalent services in the country that far surpass global incumbents in usage and capitalisation. Think WeChat vs. WhatsApp, Didi vs. Uber, and more.
If we go by the numbers, 98 percent of foreign startups
fail in mainland China.
A couple of years back, global content delivery network provider Cloudflare blogged
about how it established itself in China. The company cited several technical, economic, and regulatory challenges brought about by the difference in infrastructure and business environment in the country.
Also read: Didi Chuxing reshuffles its biggest business group
For example, since all network traffic essentially goes through two main service providers, the company had to work with these, as well as through resellers who were keen on bringing the business to the local setting. In addition, Cloudflare also started to work with Baidu in establishing its own branded solution.
The case for decentralisation
There’s a really good article
written by Chains founder and CEO Adam Ludwin explaining cryptocurrencies and blockchains in a way that any layman can understand it. In gist, he says that platforms like Bitcoin and Ethereum are essentially decentralised computing platforms, and that the value of the cryptocurrency – or more accurately, crypto assets – just underscore the approach wherein participants are incentivised for sharing their resources.
In this regard, the spate of startups rushing to launch their applications – usually Ethereum, due to its flexibility with smart contracts – as well as the resulting ICO fundraising campaigns to tokenise their activities, is nothing but a rush to leverage this large-scale decentralised computing platform and, of course, the resulting benefits that its speculative nature can give.
Given that such decentralised platforms are not governed by any individual company, government, regulatory agency, or group, then this means startups can easily launch their platforms and solutions across the internet-at-large without having to worry about formally dealing with governments and partner companies in locales like China.
Does this mean that a large-scale network like content delivery can be done under the radar?
One emerging example I can think of is Gladius
, a blockchain-powered startup that does exactly what Cloudflare is doing globally, but without the need for its own network of servers. The company runs its entire content delivery network off the Ethereum blockchain, and it does not own any of its points-of-presence or servers in order to optimise content delivery and fend off DDoS attacks.
Instead, Gladius is banking on individual users around the world who have excess internet bandwidth to share, which is virtually anyone who has a decent broadband connection. By sharing their resources, these users can help businesses and organisations optimise their online applications for faster delivery around the globe. It also helps fend of traffic-based attacks like DDoS.
In return, these individuals or organisations get incentive in the form of tokens, which can then be exchanged for fiat money or driven back into the blockchain to purchase services.
What’s the relevance of such a network to China? Cloudflare itself said it in the blog post – even businesses within the mainland had high demand for its CDN because they needed fast access points for customers both within and outside of the country.
One might wonder if a decentralised solution like Gladius or other blockchain products that work in a distributed manner would effectively mitigate or even nullify the effects of such a “firewall” like that of China’s. It is most likely that such a decentralised approach can result in a more rapid deployment, due to "anywhere" geoserving and the fact that virtually any home or office can be a server.
The usual business model when bringing an international startup to the mainland is deploying one’s tech and then localising it to fit the Chinese consumers’ needs. Uber did it, but they lost out to Didi Chuxing, which knew the market better. Same goes for other startups that have tried, but failed, to break into the market.
Perhaps a better business model would be to do it the other way around. Instead of bringing services to China, why not enable better access to customers in China through a decentralised platform via the blockchain?
The takeaway: Decentralisation benefits everyone
The Asian Development Bank
itself cites some ways Asian markets can potentially benefit, from subtle to big ways. It’s true that China (as well as South Korea) has effectively banned ICOs and crypto-to-fiat exchanges, and China-focused startups have started complying with these regulations. But the value of crypto assets, as well as the volume of transactions from within China has returned to pre-ban levels and has even risen farther than it was before.
This means that there is no stopping blockchain tech nor crypto assets from soon dominating the market. Governments are trying to clamp down and tighten control – understandably so, especially with the risk of fraud. However, in the end, the free markets are seen to prevail, and businesses that foster decentralised exchange of assets, value, and transactions, will benefit from more open access.
Editor’s note: e27
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