How Blockchain Innovation Is Spreading
Summary
- Blockchain innovation appears to be building the foundation for the future of the technologically-linked economy, a future not just limited to cryptocurrencies.
- Venture capitalists are now realizing the possibility of this as more and more money flow from venture funds into all kinds of economic opportunities for the future.
- Investors need to realize what possibilities are opening up for them and move away from the recent focus on just the narrow range of blockchain uses like cryptocurrencies.
- Investors must keep their eyes on what venture capital funds are doing, what private equity funds are doing, among others, to gain insight into what is coming that is worth investigating.
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Money is flowing into the cryptocurrency space.
Almost daily we hear of another way, "money" is trying to get into this space and spread the transition so as to assure its survival.
I have just written about how digital finance is advancing and about how organizations are doing about all they can to make the blockchain network the foundation of the future.
The crpyto-world is global and a lot of the effort to expand its presence is happening outside the major financial capitals for the world.
The consequence of this, as I have written before, is not whether this digital future is going to survive or not. The question is about how this new world is going to look.
This new digital world is going to be the future of finance, but we do not know what the ending result will be. And maybe our perspective on this development, right now, is too narrow. Maybe we need to look at these developments in a more macro-sense.
For example, former governor of the Reserve Bank of India, former Chief economist and Director of Research at the International Monetary Fund, and Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago Raghuram Rajan has argued
"most existing cryptocurrencies will soon perish."
Mr. Rajan is quoted as saying that although about 6,000 cryptocurrencies are in existence today,
"only one or two, or at most a handful, would survive."
Mr. Rajan, apparently, see quite a weeding out of these organizations before the industry settles down for the future. So, this is one possible outcome for how the evolution will end up. We'll talk to this later on.
Another Major Player
Global venture capital is now in the game.
By late November 2021, venture capitalists have invested around the world, more than $27 billion in crypto startups.
This total exceeds all that had been invested in the previous 10 years combined.
One of the ways this total was reached was that crypto companies formed their own venture capital firms and used them to expand the industry.
Ephrat Livni, the article of this article cites Coinbase Ventures, the "investment arm" of the Coinbase cryptocurrency exchange, provides four examples of what areas are being farmed.
1) Coinbase Ventures has invested in Solana, a blockchain network;
2) it has invested in a business offering crypto financial services;
3) it has invested in DeFi projects in which automated transactions are handled by code:
4) and it has invested in entities working on the digital economy of the metaverse, where users buy and sell digital goods.
The purpose?
Broader than just currencies or investment vehicles like Bitcoin.
The vision?
To use the blockchain technology, the opensource database system which serves as the foundation for the cryptocurrency efforts, to take over the lead in the evolution of the internet. So, the vision is greater than just finance.
And, to some, the vision extends to the extent that this movement would
"eventually help displace the tech giant and gatekeepers of today"
That is, this is evolving into an open source chase to take back the internet from the firms that are now dominating the internet space.
What is happening is that the blockchain technology has generated a broader movement into the future than the one just visioned by those focusing upon cryptocurrencies and financial assets for trading purposes.
Implications For The Future
This is where I see Mr. Rajan coming out.
Most of the current focus in this topic is concentrating upon the use of the bitcoin technology to build assets that can just be used for speculative purposes.
Mr. Rajan sees the cryptocurrency craze as a "bubble" situation where "A lot of cryptos have value only because there is a greater fool out there willing to buy."
This, Mr. Rajan contends is not a situation where there will be a lot of survivors.
Regulation will be one reason for this as governments get their act in order.
Mr. Rajan, however, is in favor of advancing the blockchain technology and argues that governments must see that, in one way or another, that an atmosphere is created where all the possibilities surrounding the technology will have a significant chance to be explored.
Some of the adventurers are saying that "return isn't just the primary metric" at this stage of the process.
The higher objective is to expand the opensource infrastructure. The belief is that this will truly be the foundation of whatever system succeeds in the future.
Shan Aggarwal, the head of Coinbase Ventures, states:
"We see a world where the best startups of tomorrow are all built on web3 blockchain infrastructure. That's the future we're building."
And right now that seems to be where a lot of money is flowing.
The Evolution Of The Technology
Everything seems to be pointing to a world that is more intangible in nature and which can change as a remarkable pace..
Many people are surprised, for example, at how much of the current output of the United States is in intangible products. The United States used to be dominated by tangible goods, like car manufacturers, steel producers and so on.
Not so, anymore.
Well more than half of the real GDP of the economy is now labeled as "intangible."
Furthermore, the speed of change is remarkable and companies bring their "new" intangibles to market based upon "time pacing" and not when they are fully developed.
In addition, many of the companies producing the intangible, can build enormous scale for their operations at zero- or close-to-zero-marginal cost. Scale is so important.
And scale depends upon the development of platforms and networks.
Here is where the web3 blockchain infrastructure comes into play.
Cryptocurrencies are just one part of this story, and while it is a very important part of the story, it is not the whole story
Investors must understand this and must not just get carried away with the "currency" part of the picture.
If they do, I believe that they will miss the real story and will miss many important places for them to invest.
This is not the article to say which specific investments one should make. It is a vision of a new world that will have many, many new opportunities to associate with. This is what the venture capitalists are saying to us right now.
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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