The proliferation of Blockchain and Blockchain companies was the beginning of an Internet of finance. If it’s implemented correctly with a uniform regulatory framework, the Blockchain technology will fundamentally reduce costs and provide real-time service. The question remains whether banks will insist on making it centralized, which will run counter to the concept of Blockchain.
- The 4 core tenets of the Blockchain
- How has Bitcoin and the early adoption of cryptocurrencies fueled the increased funding appetite?
- Who is investing in Blockchain companies?
- 3 Reasons why VCs are increasing their investment in Blockchain
- 10 Reasons why Central banks are investing in Blockchain and Distributed Ledger Technology (DLT)
The 4 core tenets of the Blockchain
The Blockchain technology has the very ability to shift the control of monetary values or information. This decentralization is what makes Blockchain very attractive as a tool not only for payment but countless other use cases.
A Blockchain is made up of interconnected computers in a system that no one controls. The system is architecturally decentralized with no infrastructural central point of failure. There is one common agreed state and the system functions as a single computer.
Transactions processed from accounts within a Blockchain and are anonymized. Maintaining anonymity in the Blockchain environment is made possible thanks to the various technologies that concern it specifically such as tumbling, also known as mixing and the utilization of so called stealth addresses. However, it doesn’t take a security specialist to know that the concept of Anonymity is not foolproof. The question still remains: what can be done to provide more anonymity and thus better protect the privacy of the Blockchain users?
3. Blockchain Transparency
Within a Blockchain, the information is transparent and anyone can join the network and, as a result, view all information on that network. The concept of transparency of information within a Blockchain is one of the biggest promises of the Blockchain technology, which provides a fully auditable and valid ledger of transactions. The transparency of the public ledger aims to address the concerns surrounding fraud and digital piracy.
Blockchains are secured through a variety of mechanisms that include advanced cryptographic techniques and mathematical models of behavior and decision-making. Blockchains also rely heavily on cryptography to achieve their data security through cryptographic hashing functions. Hashing is a process whereby an algorithm (hash function) receives an input of data of any size and returns an output (hash) that contains a predictable and fixed size (or length). These hash identifiers play a major role in ensuring Blockchain security and immutability.
How has Bitcoin and the early adoption of cryptocurrencies fueled the increased funding appetite?
To answer that question, you first have to understand the Blockchain revolution: how the technology behind bitcoin is changing money, business, and the world.
A look at the Cryptocurrency startups and Blockchain companies offers a glimpse of how far Blockchain companies and the cryptos have come over the last decade. Below is a list of the top emerging Cryptocurrencies Startups in 2020 and their associated ecosystems – including venture capital funds, private equity funds and investment banks amongst others.
List of the Top Emerging Blockchain Companies in 2020
- Ripple Labs Inc.
Comparison of the Top Emerging Blockchain Companies in 2020
On closer analysis of the global Blockchain Companies and Startups involved in the global Blockchain supply chain, you get a glimpse at the funding levels involved. The table below shows a list of the top blockchain companies and services they provide.
|Names||Headquarters||Founded||Revenue||No of Employees||Services||No of Locations|
|ScienceSoft||McKinney, Texas||1989||$25 Million||700+||Blockchain Consultation, |
Migration of legacy solutions to the Blockchain Infrastructure,
Blockchain Testing Services,
|Prolifics||Orlando, Florida.||1978||$34.77 Million||1001-5000||Cloud, Data & Analytics, DevOps, Digital Business, & Quality Assurance.||3|
|Ripple Lab||San Francisco||2012||$163.33 Million||150||Decentralized Financial Tool.||8|
|LeewayHertz||San Francisco||2007||$1 Million||250||Building Blockchain Application.||4|
|Blockchangers||Oslo, Norway||2015||1-5 MNOK||6||Blockchain Development & Consulting.|
|Techracers||Wilmington, Delaware||2012||$10 Million||51-200||Information Technology services.||2|
|Chromaway||Stockholm, Sweden||2014||$2 Million||13||Building Smart Contracts and Dapps.||2|
|OpenLedger ApS||Denmark||2014||$1.6 Million||60||Building Blockchain Solutions and Products.||1|
|Ezetech||New York, USA||2015||$2.6 Million||35||Web Development and Tech Consulting.||2|
|LimeChain||Bulgaria||2017||$1.7 Million||50||Blockchain Development and Consulting.||1|
|Chain||San Francisco USA||2014||$4 Million||40||Building Cryptographic Ledger.||1|
|Intellectsoft||Palo Alto, USA||2007||$12.2 Million||350||Distributed Ledger and Smart Contract Protocol.||1|
Who is investing in Blockchain companies?
We are still figuring out which sectors will benefit the most from the Blockchain technology. However, what is definitive is the fact that we can now start to define the Blockchain technology. Twenty years ago you couldn’t really define the internet either. Now you think you can because you can’t live your daily life without it. That only came about because of the increased investment and funding into all projects. Now we are starting to see the same an exponential increase in Blockchain funding.
Traditional Venture Capital and Crypto-Focused Venture Funds
A look at the top Venture Capital firms that are investing in Blockchain and cryptocurrency details the two key types of venture investors:
1. Traditional Venture Capital Funds
These are predominantly traditional venture funds many of whom are specializing in technology startups that have added a handful of Blockchain companies to their portfolios such as:
- Sequoia which invests indirectly via investments in cryptocurrency hedge funds like Polychain Capital and Metastable Capital.
- Andreessen Horowitz made early investments in Ripple and Coinbase in 2013 and has continued to invest in more than a dozen other Blockchain companies. In fact, they recently announced that rather than co-mingle Blockchain companies with their existing funds, they would create a $300 million crypto-focused fund.
2. Crypto-Focused Venture Funds
These are dedicated exclusively to cryptocurrency and Blockchain investments. Examples include:
- Digital Currency Group – has made over 60, mostly seed-stage, investments in Blockchain companies since they started in 2013.
- Pantera Capital
- Blockchain Capital
Here is a closer look at the traditional Venture Capital and Crypto-Focused Venture Funds and their investments in Blockchain companies.
|Name of the Company||Basic Information||Total Blockchain Company Investments||Top Blockchain Investments||Investment Done|
|Digital Currency Group||This is one of the big names and is based out in New York. The company is one of the most prominent VCs in the Blockchain domain||58||Ledger, Circle Basis, Blockchain Inc.||78 million dollars|
|Pantera Capital||Based out in Menlo Park, CA, this company invests in Blockchain and crypt assets||31||Blockstream, Coinbase, Blockstream, Ripple, Circle||65 million dollars|
|Blockchain Capital||This San Francisco based company solely focuses on Blockchain venture.||37||Circle, Coinbase, Blockstream, Ripple||71 million dollars|
|Andreessen Horowitz||It is also known as 16z and is one of the best and the largest VC firm||14||Basis, Harbor, Coinbase||55 million dollars|
|Node Capital||This company hails from China and invests in ICOs||22||Trip.io, Delphy, Foundation, HuoBi,||20 million dollars|
|Binary Capital||This multifaceted company works in AI, Blockchain and Crypto projects. It is based out in California and started investing in Blockchain in 2014.||32||Ledger, BlockCypher, Tezos, Coinbase||67 million dollaBoost VCrs|
|IDG Capital||It is a private equity and VC firm in the US. Apart from here, the company also has its satellite office in Bengaluru, India.||8||Mars Finance, Ripple, Circle,||31 million dollars|
|Draper Associates||It is a popular VC that invests in various other sectors apart from Blockchain . Draper makes investment in manufacturing, healthcare, technology. It first started its Blockchain in 2014.||17||Ledger, Coinbase, Factom,||25 million dollars|
|Ceyuan Ventures||It’s a fairly new VC from China which started it investment in Blockchain in 2014||6||Trip.io, Basis, Mars Finance||36 million dollars|
|Lightspeed Venture Partners||This is growing VC that has its office in California and apart from here, it has its offices in China, Israel and India.||6||Saga Foundation, Basis, Blockchain Inc., BTCC||24 million dollars|
|TechStars||The company started off its investment in VC in Chroma in 2013. The company has majorly done small investments.||37||Filament, Chainalysis ,Tok.tv||3 million dollars|
|RRE Ventures||The VC from Colorado invest in different fields like media, technology, and financial services companies.||12||Paxos, Gem, Ripple, Abra||32 million dollars|
|Union Square Ventures||This New York-based company has invested in Blockchain but its investment have been restricted and they are not as active as other.||9||Coinbase, Cryptokitties||28 million dollars|
|General Catalyst||It’s a VC based in Cambridge and has invested in technology companies.||6||Bitwise, Circle, Bluzelle||28 million dollars|
|Liberty City Ventures||This New York-based company was founded in 2012, it made its first Blockchain investment in 2013.||5||Paxos, Libra||29 million dollars|
|500 Startups||It is an new entrant in VC and incubator fund . The company is based out in San Francisco. They have invested in around 1000 companies catering to different segments and industries.||16||Hijro, ibra Credit Network, BlockCypher||5 million dollars|
|Danhua Capital||This new entrant from Palo Alto, CA has made its impact felt in the field of VC in Blockchain.||21||Origin Protocol Hedera,Libra Credit Network, Hashgraph||20 million dollars|
|Kindred Ventures||It is an angel investor and VC which invests in early stage companies.||6||dYdX ,Radar Relay, TruStory, Rare Bits||15 million dollars|
|Sequoia Capital||It is one of the best known VC firms in California The company has invested around $12 million in Blockchain||8||Guanguan Coin, Binance||12million dollars|
|Future Perfect Ventures||Its an early stage VC from the US. The company was founded by Jalak Jobanputra.||11||Abra, Blockstream, Blockchain Inc.,||15 million dollars|
|Fenbushi Capital||The company hails fro Shanghai China. It has made investment in BTC Media in 2015 and has till now invested 20 primarily seed and Blockchain startups.||17||Token, Symbiont, Ripio Gem, Stream||12 million dollars|
|ZhenFund||Another company hailing from China which is actively investing in Blockchain. It is amongst the top 50 VCs in China.||10||Basis, BlockSeer , Silot, LIno||11 million dollars|
|First Round Capital||The company from California is an early stage investors, it has invested in Blockchain and crypto startups.||8||Gem, Rare Bits, Amino Payments,||6 million dollars|
|Limitless Crypto Investments||Founded in 2017, the company is based in Houston, TX . In a short span of 12 months it made huge investment in Blockchain.||6||Kadena LLC ,Tezos, Power Ledger||77 million dollars|
|FBG Capital||The company from Beijing China has been very active since 2017 in investing Blockchain and crypto startups.||14||Lino, Ripio, Eximchain ,Origin Protocol||30 million dollars|
|Tally Capital||This company from Chicago is solely concentrating in investing Blockchain.||9||Blockstream, Civic, MaidSafe, Blockchain Capital||35 million dollars|
|Google Ventures||It’s a VC arm of Google that is working aggressively in promoting Blockchain startups and its application.||4||Veem, Basis, Blockchain Inc.||14 million dollars|
|Polychain Capital||Hailing from CA, this company is a hybrid hedge fund/VC investing in cryptocurrencies and blockchain startups||8||Basis, CoinList ,DFINITY||40 million dollars|
|Earlybird Venture Capital||The company from berlin has its offices in Munich and Istanbul. It invests in various other industries apart from Blockchain.||5||BigChainDB, Traxpay, XAIN Group||15 million dollars|
|InBlockchain||This newcomer in VC in Blockchain has actively invested in this domain. It hails from China.||8||Trip.io, Eximchain, Lino, ONO||18 million dollars|
|Galaxy Asset Management||The from the US has recently started investing in Blockchain and has invested huge amount in Blockchain stratups.||6||NuCypher , StormX, VideoCoin||23 million dollars|
|8 Decimal Capital||This California based company usually focuses on early seed stage investment.||15||0x, Libra, BluZelle||6 million dollars|
|Mosaic Ventures||This early stage VC is actively promoting Blockchain startup in London.||6||Blockstream, Blockchain Inc||21 milliom|
|Mandra Capital||This Hong Kong based company started investing in Blockchain in 2014.||4||Overnest Inc., OKCoin, Chronicled, PINTEC||24 million dollars|
|Camp One Ventures||The company is one of the top rated investors in Blockchain and technology. It hails from California , US.||6||Mobius ,Ripple, Augmate||2 million dollars|
|PreAngel||Hailing from Beijing China , the company primarily invests in Fintech, Blockchian and crypto.||5||LendChain , OkCoin, Sensay, Origin Protocol,||5 million dollars|
|Abstract Ventures||The company is based out in California and has invested in series B funding round for Ripple||6||TruStory ,Ripple, Harbor||9 million dollars|
|Foundation Capital||Although it’s a large VC from California but when it comes to Blockchain then have not invested much in it.||4||OpenSea , Origin Protocol, BlockCypher,||7 million dollars|
|Right Side Capital Management||Its a pre-stage VC that has invested in technology, Blockchain and crypto.||8||Airfox, Chroma, Elemetric, Hanzo||1 million dollars|
|AME Cloud Ventures||The company is based out in California and was founded by Jerry Yan, co-founder of Yahoo.||6||Blockstream, Ripple, ShoCard, BlockCypher||12 million dollars|
|1confirmation||They are amongst the newest entrant in Blockchian and has its office in California. They have started investing in Blockchain in 2017.||7||Basis, Harbor, MakerDAO, OpenSea||10 million dollars|
|Hashed||It’s a VC and Blockchain accelerator having its base in Seoul, South Korea. Since 2017, it has invested in a number of ICOs.||4||StormX, SureRemit, Origin Protocol,||20 million dollars|
|FinLab||It hails from Frankfurt, Germany and majorly invests in Financial services and fintech companies (Blockchain)||3||Iconiq Lab, Vaultoro, Abra||50 million dollars|
|Streamlined Ventures||It’s a VC based in San Francisco focused on companies in Applied AI/Data Science, Quantum Computing, Blockchain, AR/VR, and Robotics||5||PiggyBank, BlockCypher, Chronicled||2 million dollars|
|Greycroft||It’s a New York-based company that has invested in a number of seeds and Series A funding.||5||The Block ,Sensay, BitPesa,||4 million dollars|
|Tusk Ventures||It is a technology-focused VC based in New York. It has made series D investments in Circle and Coinbase.||3||Circle, Coinbase||26 million dollars|
|Catagonia||Hailing from Berlin Germany, the company has invested in a number ICOs.||3||Envion, AppCoins, HydroMiner, Basis||50 million dollars|
|Compound||This company has its office in New York and has invested in cryptocurrency wallet Gem and Blockchain platform.||4||Gem, Compound Labs, NuCypher||2 million dollars|
|Arbor Ventures||The company from Hong Kong has invested in A and series B rounds for Abra, a digital wallet startup||4||Global ID, Abra, Silot||4 million dollars|
|JAFCO Japan||This Japanese company is slowly making a strong mark in the field of Blockchain; It has done decent investment in Blockchain.||3||Tech Bureau, COMSA||27 million dollars|
Bank-driven Blockchain Funding
Banking has a lot areas that are ripe for blockchain intervention. These areas include timely clearing and settlement of cross-border payments and remittances, fraud and error reduction, lower administrative costs, trade finance, identity, the removal of paper trails, and syndicated loans.
Traditional Banking Establishment investment in Blockchain companies and Projects
1. Goldman Sachs
As explained in their microsite Goldman Sachs continues to focus on generating interest in Blockchain and its use cases by explaining the benefits of the Blockchain technology. Their main concern being security, they delve in detail on the Blockchain security: it provides a simple, secure way to establish trust for virtually any kind of transaction, helping simplify the movement of money, products or sensitive information worldwide. Additionally, Goldman Sachs has also invested in Blockchain-based startups such as Circle Internet Financial and Digital Asset Holdings, investing over $60 million to date-
2. Microsoft and Bank of America Merrill Lynch
Microsoft and BoA are working on a project to use Blockchain technology (using Microsoft’s Azure Blockchain-as-a-Service ) to make trade finance transactions faster, cheaper, safer and more transparent. Their joint venture focusses on improving trade finance processes which are costly and time-consuming. The goal is to reduce the time involved in processing transactions through digitization and automation resulting in the shortening of transaction settlement times.
3. R3, Barclays, HSBC, and Co.
R3 and its partners have been fine-tuning and international an international payments system based on the Blockchain which aims to deliver a safe and secure way to speed international payments and improve cross-border business. The results from the testing phase are very encouraging. The banks involved include Barclays, BBVA, CIBC, Commerzbank, DNB, HSBC, Intesa, KBC, KB Kookmin Bank, KEB Hana Bank, Natixis, Shinhan Bank, TD Bank, US Bank, and Woori Bank.
4. Royal Bank of Canada
The Royal Bank of Canada (RBC) is experimenting with Blockchain Technology to aid the transfer of payments between its U.S. and Canadian banks. The use of the technology promises to improve the speed of payments, reduce complexity and lower costs.
5. JPMorgan, Royal Bank of Canada and Australia and New Zealand Banking Group
JPMorgan has teamed up with RBC and the Australia and New Zealand Banking Group to launch a new initiative, known as the Interbank Information Network (IIN). Developed by JPMorgan, the technology which is powered by Quorum, a variant of the Ethereum blockchain, allows secure data sharing.
6. Fujitsu and Three of Japan’s Largest Banks
Fujitsu , Mizuho Financial Group, Sumitomo Mitsui Financial Group (SMFG) and Mitsubishi UFJ Financial Group (MUFG) are involved in testing a Blockchain network aimed at person-to-person (P2P) money transfer service using Blockchain technology. After testing, Akamai and MUFG will be rolling out a Blockchain-based payment network in 2020
7. State Bank of India and BankChain
The State Bank of India (SBI) and BankChain in collaboration with Intel have been working towards introducing a safer banking system in India through the blockchain. It is aimed at enabling SBI to increase the efficiency of transactions without compromising on data and transaction security. Primechain Technologies, which operates BankChain, will deliver the blockchain solution.
8. Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore
Singapore’s central bank and financial regulator along with the Association of Banks in Singapore revealed in October that they had a new set of blockchain prototypes for decentralised inter-bank payment and settlements. They form the second part of Project Ubin, which is a collaborative project with the industry to explore the Blockchain for the clearing and settlement of payments and securities.
National Central Banks investing in Distributed ledger Technology
At the core of a central bank system is a core “Blockchain” network. Normally central banks use “permissioned” Blockchain network implementations with limited participants who must be granted access to participate in the network and view the set of transactions. In contrast, Bitcoin and Ethereum uses “permissionless” Blockchains which allows public participation and full transaction viewability.
List of central banks experimenting with Distributed Ledger Technology (DLT)
- The Bank of France has fully replaced its centralized process for the provisioning and sharing of SEPA Credit Identifiers (SCIs) with a decentralized, Blockchain-based solution (with project MADRE)
- Bank of Canada
- Bank of England
- Monetary Authority of Singapore (MAS)
- European Central Bank (ECB)
- Bank of Japan
- The Bank of Lithuania is testing Blockchain in a small-scale and real environment with the “Digital Collector Coin” to. The coin is linked to physical collector coins kept in the Bank of Lithuania’s vaults. The bank is also sponsoring a Blockchain sandbox called LBChain.
- The Bank of Thailand is experimenting with central bank digital currency (CBDC) for interbank payments and liquidity management efficiency with Project Inthanon.
- The Central Bank of Brazil is experimenting with Distributed Ledger Technology (DLT) for an interbank payments contingency and resiliency system (Project SALT) as well as a decentralized information exchange platform (Project PIER).
- The Eastern Caribbean Central Bank is experimenting with the Blockchain Technology to ascertain the suitability of a DLT-based Eastern Caribbean currency to pursue multiple goals such as advancing economic growth, payments system resilience and financial inclusion.
- The German central bank (Deutsche Bundesbank) has been experimenting with DLT for multiple purposes including for improving efficiency and reducing risk in interbank securities settlement processes with the BLOCKBASTER prototype and other efforts.
- The Hong Kong Monetary Authority has continued to conduct research and experiments on multiple use cases including trade finance, digital identity management and KYC/AML processes.
- The Saudi Arabian Monetary Authority is conducting Project Aber with the United Arab Emirates to pilot DLT for interbank payments and settlements between Saudi Arabia and the UAE.
- The South African Reserve Bank is exploring CBDC for domestic interbank payment and settlement efficiency with Project Khokha.
- The Swedish central bank (Sveriges Riksbank) is investigating a Blockchain-based “e-krona” to serve as an alternative form of central bank-issued money as cash usage in the country declines.
3 Reasons why VCs are increasing their investment in Blockchain
1. Massive returns from early investment
The increased investment in Early-stage funding aided primarily due to immpressive returns from early investments especially in Bitcoin and Ethereum. An estimated 75% of all deal-flow funding has been focused on early-stage rounds.
2. A clear focus on use cases and convergence applications
There has been an increased focus on AI, Fintech, data analytics and ownership which has resulted in increased clarity for investors. Another sector that has contributed to funding flow is Self-sovereign identity due to recent data breach and exploitation scandals.
3. Location-Based funding spikes
Funding follow-ups for Blockchain companies have mainly been location-based. Blockchain-friendly regions such as San Francisco, New York and Los Angeles enjoyed the most funding. Other regions in Europe and Asia ( especially China) have also seen an increase increase in funding due to the increased flexibility and openness towards the Blockchain technology.
10 Reasons why Central banks are investing in Blockchain and Distributed Ledger Technology (DLT)
1. Payment system resiliency and contingency
The use of DLT in a primary or back-up domestic interbank payment and settlement system to provide safety and continuity from threats, including technical or network failure, natural disaster, cybercrime, and other threats.
2. Retail central bank digital currency (CBDC)
Central bank-issued digital currency that is operated and settled in a peer-to-peer and decentralized manner with no intermediaries and is widely available for consumer use. CBDC can serve as a complement or substitute for physical cash and alternative to traditional bank deposits.
3. Wholesale central bank digital currency (CBDC)
Central bank-issued digital currency that is operated and settled in a peer-to-peer and decentralized manner no intermediaries and is available only for commercial banks and clearing houses for use in the wholesale interbank market.
4. Know-your-customer and anti-money-laundering
Digital KYC/AML processes that leverage DLT to track and share relevant customer payment and identity information to streamline processes. May connect to a digital national identity platform or plug into pre-existing e-KYC or AML systems.
5. Information exchange and data sharing
The use of distributed or decentralized databases will help central banks create alternative systems for information and data sharing between or within related government or private sector institutions.
6. Improvements in Trade finance
The employment of a decentralized database and functionality will enable central banks to engage in faster, more efficient and more inclusive trade financing.
7. Cash money supply chain
The ordering, depositing or movement of funds, and regulatory reporting could be simplified by the use of DLT for issuing, tracking and managing the delivery and movement of cash from production facilities to the central bank and commercial bank branches.
8. Customer SEPA Creditor Identifier (SCI) provisioning
DLT will offer faster, streamlined and decentralized system for identity provisioning and sharing. The Blockchain-based decentralized sharing repository for SEPA credit identifiers will be managed by the central bank and commercial banks in the SEPA debiting scheme. The best example is the Bank of France’s Project MADRE implementation.
9. Interbank securities settlement
DLT can help central banks achieve “delivery versus payment” interbank systems where two parties trading an asset, such as a security for cash, can conduct the payment for and delivery of the asset simultaneously. This is primarily facilitated through a focused application of Blockchain-based digital currency, including CBDC, enabling the rapid interbank clearing and settlement of securities for cash.
10. Bond issuance and lifecycle management
The use of DLT in the bond auction, issuance, or other lifecycle processes to reduce costs and increase efficiency. May be applied to bonds issued and managed by sovereign states, international organizations or government agencies. Central banks or government regulators could be “observer nodes” to monitor activity where relevant.
Blockchain companies References: