Blockchain interest is exploding, says the author. Image: Shutterstock

Venture capitalists are betting big on the blockchain – despite the 99% failure rate.

Despite the rainy weather and low cryptocurrency prices, there was a feeling in the last Scandinavian Fintech week in Denmark that we were seeing history in the making.

Cryptos, blockchain, and fintech are attracting a huge and growing share of venture capital (VC) funds. That number reached $25.2 billion (455.9 billion rand) in 2021, up 800% since 2020. And things are just getting started.

Although the “pessimists and pessimists” want to shake off the continued decline in the price of Bitcoin, the “crypto winter” is nonetheless expected to bring in $31 billion (560.8 billion rand) in venture capital investment for 2022, According to a fintech expert. Investor and startup advisor Mike Segal.

“Venture capital is an industry that generates huge returns from 99% failure rates,” Segal said.

“To do this, the industry has developed unique ways of investing in disruptive innovation over the past 80 years.”

There is a lot to learn by exploring how VCs do it. What they are doing now is investing in technology related to cryptocurrency.

This is divided into:

  • Blockchain technology – the backbone of everything crypto.
  • NFTs (non-fungible tokens), which are much more than expensive pieces of art and are also an integral part of the metaverse.
  • Metaverse (a suite of technologies that includes virtual and augmented reality)
  • Smart contracts, and all the cool things that can be done (like executing financial transactions without human intervention).
  • Decentralized Finance (DeFi) – A growing marketplace where you can lend, borrow, earn interest and transact without having to go through a credit commission or a human agent.
  • Web3 – Using blockchain technology to store data in a decentralized manner. Our current version of the internet is Web2, owned by tech giants like Facebook and Google. Web3 is more private, as the user has their own digital footprint and will be able to monetize it.

The number of financing deals in the above technologies is expected to reach 1,842 in 2022, up from 1,312 in 2021.

Financing deals keep popping up

New venture capital deals for crypto companies continue to emerge. For example, cryptocurrency exchange FTX was reported to be in talks just a few days ago to raise $1 billion in funding, while the company is valued at a staggering $32 billion. CNBC.

Crypto data company Messari has just raised $35 million in a Series B round. The company is turning blockchain data into consolidated reports.

BlackRock, the world’s largest asset manager, launched a private fund in August to give institutional clients direct exposure to bitcoin.

Back in August, we had entered the supposed “crypto winter,” yet the world’s most influential investment management firm decided to bet on bitcoin, which itself is a bet on the unrequited appetite of institutions for this new digital asset.

metaverse

For now, the metaverse is a faraway concept – a vision that mixes reality with the digital world. Nobody knows exactly what this will look like now – are we all going to wear VR glasses? But VCs are sure of one thing: this will depend heavily on the blockchain, tokens, and NFTs.

Funding in the metaverse soared in 2021 when Facebook changed its name to Meta and announced its vision for the metaverse. By September 2022, the number of funding deals closed for startups and metaverse companies was already higher than in all of 2021.

online games

Online games have welcomed NFTs and tokens with open arms.

With NFTs, users can own completely unique items within the game. Connecting to the blockchain allows users to easily trade tokens, making it easier for developers to monetize their games.

In his presentation, Segal said that the global revenue of the online gaming market was $152 billion in 2019. For comparison, the music industry was barely a third of that at $57 billion.

Blockchain technology giants are embracing

It’s hard to find a single giant company that hasn’t dip its toes into the blockchain, crypto, metaverse, or NFT space.

Luxury jewelry maker Tiffany & Co has launched the NFT set of 250 CryptoPunks – one of the most popular NFT sets – which are attached to a real pendant.

The project sold out in 22 minutes and raised over $12.5 million in ETH. mentioned Blockworks.

It was also August, in the depths of supposedly coded winter.

Atari, Disney, Gucci, McDonald’s, Coca-Cola, Amazon, Shopify, Netflix, Google, and countless other giants are just a few of the big companies that have shown some interest in cryptocurrencies, blockchain, metaverses or NFTs.

Nike has generated more than $185.3 million in NFTs. Users buy sneakers and also have the metaverse/NFT version to prove that they are the unique owner of this pair of sneakers. Think of it as a Certificate of Authenticity.

Andreessen Horowitz

Andreessen Horowitz, one of the world’s most influential venture capital firms, raised a $4.5 billion crypto fund in May. By August, it decided that it would continue betting on cryptocurrencies, in order to “dismantle the excessive concentration of power of the big tech companies,” The Financial Times reported.

Big Tech Power probably refers to the five companies that control 43% of Internet traffic – Netflix, Google, Amazon, Meta (Facebook), Microsoft and Apple.

The Financial Times reported that the venture capital firm was “seeking to fine-tune a new investment strategy built around cryptocurrencies and digital tokens.”

Blockchain is here to stay

Sigal’s talk at Nordic Fintech Week wasn’t the only one highlighting how deeply this technology has penetrated the business world.

Sandra Rowe, CEO of the Global Blockchain Business Council, said that a quick search for “blockchain jobs” on LinkedIn yields more than 50,000 results. The same research a few years ago only came up with a few hundred.

Blockchain is something. It’s not just a fad.

Interest in him is exploding, and will not disappear. And Sigal’s final message was unmistakable: Companies that aren’t joining the bandwagon now will miss out on a massive opportunity.

R Paulo Delgado is a crypto writer who looks to the weird and human stories behind the always-cool leaps and tumbles in this new asset class.

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