OPINION: VCs Limit Blockchain Investments
Nothing should raise a red flag quicker than a technology startup claiming, “But this time is different.”
It happened in the 19th Century with the advent of railroads, and it happened again in the 20th Century will the arrival of the Internet and World Wide Web.
Blockchain is different and likely will affect every economic transaction on the planet by providing a way to trust anonymous transactions without having a third-party intermediary to vouch for each counter-party.
Venture capital firms appear to be conservative in their blockchain investments, according to two recent research reports.
According to one report published by analyst firm Juniper Research, venture-capital firms have invested approximately $290 million in more than 30 startups so far in 2016.
Of these investments, only Circle Internet’s $60-million round of Series-D funding as well as Digital Asset Holding’s and Blockstream’s respective $60-million and $55-million Series-A funding managed to be in top 30 largest fintech investments, noted the authors of a published KMPG white paper on venture-capital investments in fintech.
The remaining investments hovered around $1 million per transaction.
In comparison, venture-capital firms invested roughly $7.4 billion across the fintech sector over the same period, the authors added.
Blockchain technology only represents less than 4% of all fintech investments made by venture-capital firms so far this year.
These trends likely will not change before the end of the year as the investment community tries to determine Brexit’s consequences and who will be the next president of the United States.
From a technical perspective, it is still a nascent technology that relatively few people truly understand and are capable of delivering a viable proof-of-concept.
No one is sure how long it will take to expand the pool of blockchain developers and analysts. But the with intellectual challenges of a new technology combined with ungodly salary premiums, it’s doubtful it will take that long.
Once firms deliver their proof-of-concepts in the next few quarters, however, venture-capital investment into blockchain should truly take off.
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The proof of concept uses smart contracts from Digital Asset and DLT from VMware.
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Pyth is built on a blockchain to handle receipt and distribution of fast-moving data.
Interoperability with current capital markets infrastructure is a challenge.