Why It Makes Sense To Invest In Commercial Blockchain
We invest in commercial blockchain. Here is why it makes sense:
Blockchain is toxic. It has just the right level of complexity and hype about it to be a very dangerous investment. People either don’t understand it or only very superficially. Despite this, or perhaps because of this, many have invested billions in the various derivations of blockchain, most infamously in the now much despised ICOs.
You could point out that ICOs were speculative, and you would be right. Most people have bought the next ‘coin z’ hoping for an easy gain. This was possible thanks to the inefficiency of the nascent crypto-markets. Wild price swings when the coins hit an exchange, and momentary price surges caused by speculative trading could have led to a nice profit for the investor.
The bubble has popped. We are in the late stage of a deep recession. Coined crypto-winter, the severe crypto-market drop, which is now exceeding 90% has been much deeper than the dot-com crash. With prices continuing on a crushing downward trend and with no end in sight, people are beginning to question whether there ever was any value in this phenomenon called blockchain.
But, as the dumb money continues to flow out of the crypto-space, a cynic (or a long-term investor for that matter) would tell you that now is the time to buy. Many crypto-enthusiasts insist that crypto-winter is little more than a cleansing exercise. To cite one example, Mike Novogratz, the ex-hedge fund manager sees ‘healthy progress being made’ in the crypto ecosystem. He reiterates his conviction in crypto every time he is on the air. It wouldn’t be the first time Novogratz has timed the market.
There might be something to the arguments that the crypto-winter has not deterred development. Think of it this way: money has been raised, and exuberance disappeared, which gives to those who really mean it the time and space to work.
Could it be that now is the time to reconsider blockchain as an investment opportunity?
Just blockchain. No magic.
Let’s revisit why blockchain became so over-hyped in the first place. Blockchain is nothing more than an “open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. Much like the ‘UBER-like’ companies have done during the post-2007 start-up era, blockchain gives the promise to remove the middlemen from transactions, but in a more profound way. To put it vulgarly, there will be driver-rider, not driver-UBER-rider.
Still, all of this must sound to you very abstract because it is. There are very few real applications for blockchain aside from Bitcoin. But things may be about to change. The ‘adults’ are finally entering the room. A report issued by LinkedIn states that blockchain-related job listings have seen a 33-times increase in a year, and one of the most active recruiters is IBM. Corporate budgets (read more accountable and more focused) are finally being put into work to develop real commercial blockchain applications.
As Ashley Lannquist, Blockchain Project Lead at Berkeley points out, most Fortune 500 companies have been exploring potential use for blockchain for some time now. But, the extent of activity (both announced and silent) and the level of hiring implies that blockchain is ceasing to be a just a tool for positive PR, as companies convert their PoCs into real tools. It is also tempting to make the prediction that when one considers all the PoCs and pilot programs out there, they all point to a pervasive adoption in the future.
The blockchain ‘killer-App’.
Walmart’s food tracking platform shows that blockchain can have a real-world application that can be relevant now. The company is on-boarding first suppliers to upload their data on-chain. Certainly, supply chain seems to be one of the most obvious uses cases for commercial blockchain use. Many other giants of the food industry (Nestle and Unilever) and beyond (Maersk in shipping) are known to cooperate with IBM to develop real blockchain tracking solutions.
But, that is just one of its many potential applications in a business. No one knows what will be blockchain’s ‘killer App’; that ‘one best’ product or a service built on top of it. One thing is becoming clearer, though. As the phantasmagory around blockchain disappears, what remains left are genuine projects to find real applications for a technology that might prove to be transformative. History shows that it is very likely that the ‘killer App’ won’t be developed from within a large corporation, but in some startup with a passionate team of people and a great idea.
The key for anyone wanting to invest in the commercial blockchain is diversification.
Fund > self-invest.
For those legitimate investors in the blockchain, who might have suffered painful losses in the crypto-winter, one thing should be clear: ICOs were never a good long-term bet on the future of blockchain. Each with its own idiosyncratic risks, and often damned from the very beginning by the sheer inability of the project’s team, ICOs were little more than a novel form of crowdfunding for immature projects.
Blockchain is a wide-ranging phenomenon. It is conceivable that it could transform a whole variety of industries. New blockchain startups are emerging every day, but choosing the ones that are worth investing in is a complex task on several levels: it requires analysis from technological AND business perspective.
It is an irony that as ICOs, once poised to eliminate the need for Venture Capital, are coming to an end, it is the VCs that may be the best investment vehicle to bet on the future of blockchain.
What is bardiventures.
bardiventures is a tokenized VC fund on a mission to open the exciting world of venture capital to a much larger audience of investors.
bardicredit, the initiator of bardiventures, and the turnkey fund tokenization consultancy, is a member of the Alternative Investment Management Association (AIMA), a global association of hedge funds, private equity and VC funds with more than $2 trillion under management.