Investments in blockchain need to focus more on protocol and fundamental infrastructure, the founder of a famous venture capital based in China says.
"There are so many 'me too' investments in blockchain right now," says Node Capital founder and CEO Jun Du, in an interview with ZDNet. "There is a lack of logic behind these investments.
"This wouldn't happen in a mature market. So at Node Capital, we focus on projects that are developing protocol or fundamental infrastructure. This area has not developed fully and there are many potential opportunities," he said.
Blockchain continues to be the hottest trend in Asia, especially in China -- the global leader in terms of patent filing for blockchain -- where there is industry-wide debate on what the next big coin is after bitcoin and ethereum. The City of Nanjing last month announced a $1.5 billion fund that will invest in public chain projects as part of an effort to marry blockchain with traditional industries.
"Protocol is something even more fundamental than public chain," said the founder, the one-time CEO of cryptocurrency exchange Huobi, which boasts a trading volume of over $1 billion.
"For now, exchanges are seeing the biggest profits. And they have a big voice in the industry, accordingly. But the industry needs to focus more on technology companies. Wallets and technology development has huge potential and a long road map.
"Another focus on investment is application. Blockchain, when applied to that certain industry, must bring about real changes. These include copyright trading and decentralized finance," he added.
Node Capital has also been making inroads in the US. In July, at an event in Silicon Valley, the firm announced that it will invest 200,000 ETH into promising blockchain projects there.
"In Asia, there are great ideas for blockchain applications. But in terms of technology, it is very lacking," Du said. "We believe that expanding to the US will solve this problem."
Node Capital has invested in over 160 projects globally, including in cryptocurrency wallet firm Coldlar, and Zipper, which develops mobile OS for decentralized apps. So far, it has invested in over five projects worth over $100 million based in the US.
South Korea is third behind the US and Japan in terms of cryptocurrency trading volume. Due to the disproportionately high trading volume compared to its population, coin prices set in the country have been dubbed the "Kimchi Premium".
"South Korea has many coin customers, but as an investor, I want to find more blockchain developers," Du added.
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