What is Blockchain from an Investor’s Point of View?

By Kapil Gauhar

With the circulating news of the planned launch of Facebook’s ‘GlobalCoin’ by next year, Cryptocurrency is bound to move from crypto traders and bitcoin miners to broader mass adoption by investors, enterprise and consumers.

In a blockchain report from Cisco published in March 2019, the company reported that nearly 10% of the world’s GDP would be tokenised assets by 2027. And, that there will be more than $9 billion spent on blockchain related projects by 2021.

But, in spite of the recent bullish cryptocurrency week that saw Bitcoin rival, Litecoin, gaining around 15% in a 24 hour trading period, mass adoption of the technology is still on the horizon as per some experts.

Remington Ong is a partner at a venture capital firm, Fenbushi Capital, that only invests in blockchain-enabled companies in China. At Publicize Blockchain in New York held on May 13, 2019, Remington Ong said that he expected to see blockchain’s mass adoption within the period of two decades.

Henry Liu, who is a former Facebook employee and currently the managing partner of Austin-based YGC Capital, says that he believes Facebook’s cryptocurrency play is most likely to threaten Bitcoin dominance and drive mass adoption. But, he also adds that blockchain as an industry should solve real issues first before we see its mass adoption.

Liu said –

“If the only argument is stateless money and permissionless store of value, then we should all be buying Bitcoin all the way. But clearly, there are several use cases that can be built with blockchain and many enterprises are starting to implement them.”

He says that YGC believes that they can bring more transaction volumes to the industry than all the customer efforts have brought all together in the last several years, only by solving some of the old enterprise problems.

Liu said –

“For the Internet, mass adoption of social media and e-commerce came after corporations adopted the technology. We believe blockchain will be similar and we’ll let Zuck handle the consumer side since he already has two plus billion users.”

Liu is emphasising that an enterprise blockchain investment firm, YGC, laser-focused on solving real-world enterprise issues with all the benefits that blockchain has to offer.

He added –

“We know that blockchain can cut cost, bring faster transactions, trust and accountability to legacy systems.”

Whenever it comes to the investment part, Liu said that YGC, in 2018, began to explore growth-stage blockchain startups which they could bring to enterprises aiming to solve real issues; and then they hit a roadblock.

Liu said –

“Most blockchain startups aren’t focusing on enterprises and enterprises can’t work directly with public protocols. So, we saw a need to invest in ventures that could bridge the decentralised public blockchains that desperately need transaction volumes and Fortune 50 enterprises [..] in need of emerging tech to keep them competitive in the market.”

Liu added –

“We’ve seen the industry grow since 2012 and one of our portfolio companies has landed contracts with Department of Homeland Security and Gates Foundation for healthcare data, so we want to take our learnings and scale it with others. We believe the opportunity to invest in SaaS built on blockchain in larger than investing in other software businesses.”

Whenever it is about the public’s trust of blockchain, Liu says that there are as many behaviours in the industry which can’t be illustrated, and there is not adequate public data or transparency.

Liu said –

“The motivations for different parties are all [..] divided. Protocols want transaction volume; many short-term investors want higher valuation and an increase in price; and, exchanges want volatility and publicity so they can drive traffic and make money when the market is up or down. All of the misaligned interest combined with a nascent industry that’s prone to manipulation lead to many institutional investors doubting that the industry is in fact of substance.”

Liu adds –

“It’s also difficult for the industry because there haven’t been large transaction volumes moving towards public blockchain to solve practical problems. YGC is changing that. We believe the trend is shifting as familiar names are implementing and exploring public blockchain’s, and we are excited to position YGC as a leader in the space to drive the movement for enterprise adoption of public blockchains.”

So what’s the most noteworthy boundary for blockchain right now outside of trust?

Liu said –

“We think it’s existing infrastructure not supporting the decentralised ecosystem. There’s a lot of hesitation for using tokens due to regulatory concerns, not enough applications solving real problems with solid business models, and therefore not enough validations and credibility for the entire industry.”

YGC began to raise capital for their first fund last year. They have plans to distribute those fonds in by next year hoping to fuel the growth of their existing ventures focused on enterprise SaaS revenue.