Crypto Crazy, but Make in India

Nilesh Balakrishnan
Published in
6 min readSep 6, 2021


#Crypto #Blockchain #Startups #VC #WaterBridgeVentures #India

Crypto has been all the rage over the last year. As prices of cryptocurrencies have skyrocketed, interest and momentum in the space has been overwhelming. India has been no exception with 15M+ Indians currently holding $6.6B worth of crypto assets, an order of magnitude higher than the $900M held in April ’20. A trend showing no signs of stopping anytime soon.

Nearly 12 years on from the day internet enigma Satoshi Nakamoto dropped the Bitcoin white paper, the collective global intelligentsia continues to grapple with the powerful ideology and limitless possibilities offered by the blockchain technology that powers Bitcoin.

“It’s very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though”

— Satoshi Nakamoto

And explain they did. Today, Bitcoin has a market cap of $973B with over 80% (18M) tokens currently in supply. A quick look at Bitcoin prices trends says its own story -

Bitcoin — USD Prices (1 year)

Satoshi’s code inspired a wave of innovation with cryptography, coordinated decentralization, and trust-less self-interest at the epicenter of an ecosystem of possibilities. Ethereum, a generalist blockchain that enables developers to execute code powered by blockchain tech has emerged as the poster child of this promise. Currently the second-largest cryptocurrency, market prices have been in vehement agreement with Ethereum’s market cap at $462B.

Ethereum — USD Prices (1 year)

With Moore’s law already at play and significant strides being made to make blockchain technology more environmentally efficient (see: proof of stake), crypto-powered blockchains are here to stay with much promise baked into the tech layer itself!

Blockchain Primer

On an abstract level, Blockchains ensure that compute networks execute transactions faithfully with the following features:

  1. Trust — Cryptographic guarantee that the code will work as designed
  2. Decentralization — Aligning incentives for network creators, developers, and participants
  3. Ownership — Clear traceability in terms of value add to the ecosystem

By using blockchain protocols, developers can look to leverage a powerful virtual computer that runs on a network on distributed physical hardware. Crypto-tokens form the transactional atomic unit of a blockchain ecosystem and can either be created for a specific purpose (digital tender: Bitcoin) or as an economic reward for network participants (general programmable blockchain: Ethereum) to maintain and execute computational commands.

Blockchains are an ecosystem of layers that include the following layers -

Blockchain Ecosystem Layers

From a business model perspective, each layer has different levers and inflection points. Layers 0 & 3 work like traditional business models where higher investment provides scale/moat. Layers 1 & 2 however, are multi-sided platforms with unique escape velocity defined by the number of assets in the system.

Over the last 4 years, the core infrastructure for blockchains (Layers 0 + 1) has been built out significantly and we are now seeing massive activity across Layers 2 & 3 as entrepreneurs and developers continue to look at creating new digital natives that can interact and exist across blockchain ecosystems.

Venture Capital in Crypto

Global investor interest in crypto has already seen over $17B invested in the first half of 2021 with exchanges (FTX, Coinbase), custodians (Blockfi, Bakkt), and infrastructure (Paxos) making headlines.

Blockchain technology has seen effervescent use across a multitude of sectors. Per Tracxn data, DeFi has seen the highest investment with $2.8B followed by supply chain/logistics seeing $85.7M invested. Energy ($37.2M), Media and Entertainment ($32.9M), IoT ($24.4M), and Healthcare ($16.9M) use cases also seeing investment dollars.

Crypto Universe (credit: Alexander Ruppert @Earlybird)

The last few years have seen an increasing number of VC funds active in the space. A16z launched a $2.2B dedicated Crypto fund to join the likes of Pantera Capital, Dragonfly Capital, and Jump Capital as strong blockchain optimists. Overall, the US market saw $17.5B invested across 784 deals in 2021 (so far) with investors betting on a gradual but thematic shift away from centralized platforms to their open-source decentralized avatars.

US Blockchain Funding (Tracxn Data)

In India, the story thus far has been fairly muted with an overhang of regulatory opacity preventing the mainstream enthusiastic interest one might anticipate. Per Tracxn data, 2021 saw a relatively meager $278M invested across 25 rounds into Indian blockchain companies. A majority of the investment was seen across Layers 2 & 3, with a handful of crypto exchanges and DeFi companies getting the bulk of concentrated VC investment.

India Blockchain Funding (Tracxn Data)

Technically speaking, from a regulatory standpoint it is not illegal to own crypto-assets in India today but understandably many Institutional Indian investors continue to look for definitive policy guidance. Most estimates suggest that the ‘Cryptocurrency and Regulation of Digital Currency Bill’ outlining the government’s policy framework for crypto-assets is expected before Dec 2021.

With the Reserve Bank of India (RBI) actively working on launch a Central Bank Digital Currency (CBDC) as a way to enable further financial inclusion, it seems likely that regulators will take a supportive stance and India might quickly emerge as fertile ground for blockchain innovation over the next few quarters!

WBV Areas of focus

At WaterBridge Ventures, we anticipate significant tailwinds in the sector and massive entrepreneur interest over the short term. We are excited to back entrepreneurs working to solve India-centric problems — which often tend to be symptomatic of the scale issues faced by most of the developing world!

A few of the areas we are excited about include-

  1. Next-Gen Finance: DeFi Innovation (Layer 2 & 3)
  • Finance solutions including trading and exchanges (liquidity/derivatives), Indian P2P lending, infrastructure, data & analytics
  • Spades and shovels approach (toolkits) to handle volatility and predictability for DAO/tokens
  • Crypto equivalents for basic finance operations like risk management, treasury management, tax, and accounting

2. Creators & New Media: Gaming & NFT assets (Layer 3)

  • Consumer-focused marketplaces for tokenized assets in gaming, fashion, digital art, and artist collaborations
  • Building a brand to attract demand/supply with blockchain central to the distribution and discoverability of digital assets

3. Micro ownership & Engagement: Fan Tokens (Layer 3)

  • Token ownership for fan engagement and interactivity across sport, cinema, and media celebrities
  • Building deeper engagement layers within current frameworks (e.g. tokens for IPL / Kabaddi franchises)

4. India specific primitives: Smart contracts (Layer 2)

  • Digital inclusion for the under/unbanked with strong Indian roots that help build key escape velocity in the Indian market
  • Business models tied into CBDC launch/enablement and a support ecosystem to enable greater interoperability between crypto and traditional finance networks

At WaterBridge Ventures, we are excited by this incredible tech opportunity and the many possibilities it offers. Do reach out on LinkedIn, Twitter or write in at if you’d like to brainstorm about anything crypto or have a startup idea that resonates with the views here!

With inputs from Manish Kheterpal



Nilesh Balakrishnan

Committed optimist. Startup enthusiast. Early stage VC Investor @WBridgeVentures.