Why Krypton Capital Chose Ukraine as a Base for Blockchain Ventures

Krypton Capital
Dec 19, 2017 · 5 min read

At Krypton Capital, our belief in blockchain technology stems from our vision to be at the leading edge of disruptive technological innovations and investment opportunities. In order to achieve our goals, we believe Ukraine is the best location to set up base and grow our operations.

Not only is Ukraine among the leaders in blockchain adoption, it is also uniquely poised to become a major global hub for cryptocurrency and blockchain ventures. Our strategic analysis and research of the country took into account different macro-environmental factors and our opinion on Ukraine’s potential and scope is presented here.

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Photo credit: Illia Cherednychenko

Ukraine has a strong IT infrastructure

Firstly, since blockchain technology is in its nascent stages, it is only practical to set up base in a region that has a proven track-record in IT. Ukraine fulfills that requirement on many accounts and is home to a sizeable population of IT professionals.

According to stats, over 36,000 tech students graduate from 400+ universities and colleges in Ukraine on an annual basis. The number of science graduates in the country also exceeds that of countries like Japan, Netherlands, Belgium, and Sweden, which are known for their leadership in technology and innovation.

This pool of talent and skills provides Ukraine a distinct advantage over others. The country’s software development industry, for example, is one of the largest in Europe, with over 100,000 IT companies providing services such as research and development, web and mobile design, quality assurance, IT consulting and more.

In terms of outsourcing volume, Ukraine comes out on top yet again; it outranks every other country in Central Eastern Europe (CEE), and stands in the top 50 in the Europe, Middle East and Africa region (EMEA).

This thriving environment has also given rise to a successful startup scene in the country, and it is estimated that there are over 2,000 startups operating in major Ukrainian cities.

The impact of Ukraine’s IT sector is visible in the global tech market as well. In 2015, Snapchat closed a $150 million purchase deal with Odessa-based startup Looksery. In addition, several popular online brands have originated in Ukraine, such as Readdle, Grammarly, PetCube, DepositPhotos, TemplateMonster, GitLab, Mobalytics, Preply, Jooble, Attendify, CleanMyMac, and InvisibleCRM.

Ukrainians are genetic crypto-anarchists

Secondly, Krypton Capital’s selection of Ukraine is driven by the revolutionary spirit of cryptocurrencies and blockchain technology. The essence of this disruption is decentralization and complete freedom for the people, be it economic or administrative. Blockchain opens up avenues that were closed in the past, but its principles were already present in the hearts and minds of the Ukrainian people.

Ukrainians are genetic crypto-anarchists; they have fought against invaders for centuries, seen the destruction of their cities, struggled under foreign control and overthrown their own government twice.

From the 13th century Mongolian invasion to the 20th century Ukrainian revolution, the people have seen the fall of Kievan Rus, stood up against the Crimean Khanate, defied the Polish-Lithuanian and Russian empires, and even gone on to form a seven-million strong anarchist state, called the the Free Territory, from 1918 to 1921. This rich history has infused the Ukrainian consciousness with a spirit of defiance and a desire for freedom.

Anarchy, for Ukrainians, was the mother of order and mentions of “control” and “government” were highly contentious. Today, in the 21st century, cryptocurrencies and blockchain technology are fighting the same battle and have the potential to truly change the notions of control and government oversight.

It has been said “Where anarchy wins, there is order”; we believe these very notions are deeply rooted in Ukrainian society. This is why the idea of cryptocurrencies and the possibilities presented by distributed ledger technology have found immediate acceptance among modern Ukrainians.

Government support is on the rise

The third factor which compelled Krypton Capital to select Ukraine was the government’s support and acceptance of Bitcoin and blockchain technology. Even though Bitcoin is not recognized as a currency in Ukraine, it is considered a commodity, and until recently, Ukraine accounted for roughly 30% of the world’s cryptocurrency mining.

Additionally, the Ukrainian government has been actively pursuing the adoption of blockchain technology, whether it is the Justice Ministry running transparent auctions of seized goods, the State Land Cadastre trialing blockchain tech or the government partnering with global blockchain company Bitfury in order to move electronic data to a blockchain platform. Other prominent government-run blockchain programs include Project e-Auction (blockchain-aided auctioning of state-owned property), and Project e-Vox (a system for blockchain-powered voting in elections).

The first ever property purchase over blockchain also took place in Ukraine, when Mark Ginsburg sold his Kiev property to TechCrunch co-founder Michael Arrington over the Ethereum blockchain for $60,000.

Propy, the blockchain startup behind the deal, entered into an agreement with the Ukrainian government in order to test a blockchain-powered platform allowing foreign investors to buy Ukrainian properties online using smart contracts.

Recently, two bills pertaining to cryptocurrencies were also presented in the Ukrainian parliament, the Verkhovna Rada. The first one proposed the legalization of cryptocurrency transactions, and the second one, titled “On Stimulation of Cryptocurrencies and Their Derivatives in Ukraine”, proposed that cryptocurrencies be recognized as financial assets.

These developments are a testament to the active participation of law makers, and consequently the people, in trying to set up a conducive environment for blockchain technology and related solutions to thrive.

Ukraine’s central bank has also taken a favorable view of DLT, revealing plans for a Cashless Economy powered by blockchain technology. In addition, there have been multiple blockchain startups and companies participating in the local scene or growing outward from within Ukraine.

Kiev can become the blockchain capital of the world

Owing to these factors, Ukraine’s capital Kiev is a strong candidate for becoming the Blockchain Capital of the world. Not only is it home to some of the country’s top blockchain ventures, such as TaaS, N-iX, DNA325 and e-Vox, it also hosts prominent blockchain events and conferences, the latest of which include the d10e in September 2017 and the Blockchain & Bitcoin Conference Kiev in early October.

We have come a long way from Bitcoin — today, the crypto space is brimming with potential and blockchain technology is opening up new possibilities for various sectors and industries. Even at this stage, however, what we are witnessing is just the beginning of this disruptive tech, and early movers stand to gain majorly as the world catches up. In light of all this, Krypton Capital believes that Ukraine is one of the strongest candidates for leading the world in the development of blockchain and cryptocurrency ventures. It has the history, the people, the resources, the talent and the governmental support — all it needs is the right leadership and investment that will help it realize this potential.

by Ilan Tzorya,
founder of Krypton Capital

About the author:
Ilan Tzorya is a seasoned venture capitalist with extensive experience, spanning 10 years, in developing and operating online media marketing, technology platforms, and financial services markets around the world.

He sees blockchain and cryptocurrencies as a revolutionary step forward, just like the invention of the wheel, the printing press, the light bulb, the private computer and the internet.

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