Dumb Money is Hurting the Blockchain

Yesterday at the CB Insights Future of Fintech Conference, Union Square Ventures partner Fred Wilson delivered a very thoughtful analysis about the state and adoption of the blockchain. In Fred’s typically unique perspective, the explosion of early stage and corporate financing for blockchain technologies in hurting the ecosystem. From angel investors to early stage venture funds dedicated to the blockchain to the venture arms of financial institutions, everyone seems to want to own a piece of the blockchain ecosystem. Using Fred’s own words “the dumb money has shown up for the blockchain”.

After watching Fred’s sessionI was thinking on the implications of a crowded blockchain startup ecosystem from the technology perspective and how it can affect the evolution of blockchain technologies. Here are some minor observations:

· Vertical blockchain solutions are evolving faster than platforms: The rush in early stage financing is causing blockchain vertical solutions to evolve faster than the underlying blockchain platforms. As a result, many of these companies are building their own proprietary infrastructure.

· There are many implementations of the blockchain being created: Ethereum, IBM’s Hyperledger, Microsoft’s Project Bletchey are some of the recent implementation of the blockchain. This phenomenon is causing a significant level of fragmentation in the blockchain space.

· There are no winners in the blockchain platform space and incumbents are quickly catching up: None of the blockchain platform and infrastructure startups have become a clear winner in the space and that has opened the door for incumbents like IBM. Microsoft and Amazon to enter the space and become increasingly relevant.

· Other than bitcoin, we are still missing the killer app for the blockchain: Despite the rush in early stage financing and number startups in the blockchain ecosystem, we are still missing another killer app that emulates the success of bitcoin. A blockchain solution that get mainstream adoption is a needed catalyst for establishing the blockchain as a relevant technology trend for the next decade.

· Blockchain platform are still missing many important building blocks: Important infrastructure areas such as testing, security, monitoring, etc are still missing in very early stages. This is a problem if we consider than most blockchain solution are likely to be missing many of those aspects.

CEO of IntoTheBlock, Chief Scientist at Invector Labs, I write The Sequence Newsletter, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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