Regulatory scrutiny is increasing, but this isn't slowing the pace of blockchain activity — if anything, it's helping the industry mature. Even as the media storm around the sector has calmed, regulators are acting more aggressively and decisively, issuing subpoenas to bad actors and providing guidance to good ones.
In other words, while the speculative hype has largely died down, engineers are building, teams are forming, and development is continuing apace. See how venture firms, corporates, regulators, and builders are shaping the future of blockchain technology. Initial coin offerings ICOs are sales of tokens by blockchain companies looking to raise funds.
According to teams holding ICOs, tokens provide access to, or utility within, a decentralized ecosystem. Tokens are scarce, and could rise in value if demand outweighs supply.
As an example, if the network in question is — say — a decentralized social network, tokens might grant access. Increasingly, the line between equity financing and ICOs is blurring. Traditional equity investors are investing in companies that plan on using tokens within their business models. Further, traditional investors are acquiring tokens outright via pre-sales, SAFT contracts described belowand regulatory-compliant offerings — something that seemed out of the question months ago.
Pre-sales are rounds held the future of blockchain technology larger, public ICOs. In some cases, pre-sales offer discounted tokens to early investors accredited and unaccredited. In others, teams sell small equity stakes in exchange for runway before an ICO. ICOs are expensive, and often incur legal, marketing, and advisory expenses. In still other cases, accredited investors buy tokens via cryptocurrency purchase agreements. Such a conversion might the future of blockchain technology years after the initial sale.
Recall that the median time between first funding and IPO for VC-backed tech companies that went public in was about 9 years. Tokens trade on exchanges often before the network launchesand provide near-immediate liquidity. As for the SAFT, a token conversion could happen within one or two years, also providing quick liquidity to venture investors. A shift toward pre-sales is borne in the data, with venture rounds trending up and pure-play ICOs trending down. In one notable example of the trend toward pre-sales, Telegram held such a large pre-sale, that it no longer has plans for a public sale.
With all this, pre-sales are a mixed bag. On the other, they shift risk onto accredited and venture investors, a good thing for consumers and regulators. As regulators continue to crack down on public ICOs, we expect this shift toward pre-sales and private sales to continue. ICO evangelists like to argue that ICOs are new financial instruments which require new legislation and regulatory agencies.
So far it looks like US regulators do not agree. Clayton said before Congress: ICOs that are securities offerings, we the future of blockchain technology regulate them like we regulate securities offerings.
These companies could now face legal repercussions. At the same time, it appears that the SEC is treating some existing cryptoassets as currencies or commodities — not securities. Industry policy organizations like Coin Center have been quick to offer educational resources around blockchain technology to legislators and regulators. On the flipside, regulatory pronouncements are also leading to some key sector shifts. Legitimate crypto companies are moving back toward venture funding and avoiding pure-play ICOs, while others are pursuing ICOs but making sure their token launches are compliant.
Other attempts at the future of blockchain technology are found in SEC filings; companies are filing them more often. Ultimately, regulation appears to be a bust for unregulated public ICOs, and a boon for most others. Expect regulators to crack down with increasing regularity on ICOs, with the future of blockchain technology fines and indictments.
At the same time, industry attempts at self-regulation are encouraging. Expect industry actors and regulatory agencies to converge on better-defined legislation and regulation. In total, pure-play venture firms invested, alongside corporations and their venture arms. Below, we dive into three trends affecting venture investment to the sector. Indeed, venture firms are increasingly investing in tokens.
Both firms have invested in cryptocurrency hedge funds as equity investors Polychain Capital and as limited partners MetaStable.
Andreessen is also reportedly preparing to launch a dedicated cryptoasset fund. Below, we show how their approaches to the sector have evolved. We highlight equity investments, investments into cryptocurrency hedge funds, and pivoting portfolio companies. CryptoKittiesfor example, is a dApp that issues crypto-collectible digital cats.
Another example is OpenBazaarwhich is building a decentralized marketplace. OpenBazaar has received repeat capital from both investors. Turning to Andreessen Horowitz, the firm has more definitively shifted its strategy in the sector over time. The firm participated in multiple rounds to Earn fka 21which was first a bitcoin mining company, and popular exchange Coinbase. Andreessen subsequently invested in enterprise use cases, in rounds to Axoni and Ripple.
Dfinity hopes to be an Ethereum competitor, and Orchid is, effectively, working on a private, the future of blockchain technology internet. Given the class of names getting involved, this trend will likely continue.
Regulations have also given rise to a new class of companies building security tokens platforms. Security tokens are exactly what they sound like; securities on a blockchain.
A security token could digitally represent any number of real-world assets, the future of blockchain technology real estate or vehicular title, the future of blockchain technology shares of a company. These are markedly different than utility tokens, which represent access to, or utility within, a given network. Most importantly, security tokens are subject to securities regulations.
Such code might execute without the use of a traditional middleman, like a bank. Another advantage is liquidity. Easier trading reduces friction, which correlates to increased liquidity. One company working on this is Harbor.
Another company operating in this sphere is Polymath. All said, security tokens appear to less legally ambiguous than ICOs, especially amid regulatory inquiries. Proposed use cases for cryptocurrencies have yet to see material user traction. These range from decentralized payment networks to user-controlled social networks to prediction markets. Many of the most profitable and well-funded blockchain companies have profited from speculation, but not use. These include exchanges, like Coinbase, or base-layer protocols, like Ethereum.
Exchanges are aware of rampant speculation, and are the future of blockchain technology for real use the future of blockchain technology via venture investment.
Coinbase recently launched its venture arm, Coinbase Ventures. The future of blockchain technology protocols are still building the future of blockchain technology platforms. Much of the money will go toward incentivizing developers to build on top of the Dfinity protocol.
Companies are also becoming more acquisitive. Poloniex is one of the largest global exchanges, by trading volume. Then, on April 13, Coinbase acquired dApp browser and cryptocurrency wallet Cipher.
Earn has gone through multiple iterations. The company was first a bitcoin miner, then a chip manufacturer, and finally a social network where users got paid in cryptocurrency to answer emails. Still, the the future of blockchain technology shows that Coinbase is gambling on sector use cases beyond speculation. The future of blockchain technology with regulatory considerations, we expect companies flush with capital will continue to invest in new and exciting use cases.
Teams suddenly flush with cash will spend it on developing their respective ecosystems. Among other things, this indicates that corporates and analysts are, at the very least, talking about this technology with real interest. Firms across verticals have referenced the technology on earnings calls, from Nasdaq to FedEx.
Some companies even pivoted from their core products to adopt the technology, with often suspect stock price jumps to boot. The recent spike, though, was unsurprising. Other firms have exhibited a more sustained focus. Companies with the highest mentions of blockchain on earnings calls since are: Overstock is going all in.
Overstock announced that it would accept bitcoin payments in September In Augustit announced that it would accept other cryptocurrencies like ethereum and litecoin. Accepting cryptocurrencies puts Overstock in a select group; cryptocurrencies still see limited transactional use, especially among top e-commerce merchants. On the other side is Medici Ventures, which has a number of investments in blockchain and fintech.
The company tested the technology in its Nasdaq Private Markets NPM product, but earnings call transcripts and other data points suggest lagging deployment. In the following quarters, Nasdaq mentioned blockchain the future of blockchain technology often alongside NPM. Launched inthe NFF helps clients integrate business processes, like clearance and settlement, with new technologies. NFF is part of a broader Nasdaq shift toward fintech. All this perhaps indicates limited traction and deployment, or a complete strategic shift toward its NFF product.
In the same breath, Nasdaq is taking a more considered view of cryptocurrencies, and cryptocurrency trading. With all this, talk is still cheap.
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