What investors should watch out for while finding a blockchain unicorn2 min read . Updated: 01 Nov 2018, 07:28 AM IST
The current crop of star valuations is at the back-end of the blockchainin trading and enabling technology infrastructure, known as mining
Remember a decade back when Indian IT entrepreneurs attracted both brides and valuations? Is blockchain going down the same aisle?
Kodak recently launched Kodak One as a cryptocurrency using blockchain technology to protect the copyright of photographs and images registered on its platform.
Its share price soared 89%.
Should we be worried by the froth? No, because it risks diverting attention from the disruptive technology powering crypto today and potentially our world tomorrow.
Beneath the froth lies the strength of blockchain to change the way we live, work, connect and transact, and that is attracting tech communities in Silicon Valley, London and India.
This is blockchain’s fundamental premise: it is the technology behind a distributed network of computers that can be used to store data securely but which, uniquely, has a single memory. That means data cannot be copied to sell the same asset again. Imagine duplicating the deeds of your house and re-selling it—common enough in India. That risk remained even with the passage from stamped paper to a digital file. Blockchain removes this risk. It is why blockchain technologists refer to it as the “trust platform".
As an investor, how can I find the blockchain unicorn? First, it’s clear that blockchain is uniquely suited to applications such as supply chains.
A second challenge for blockchain is accelerating the speed at which data can be uploaded and verified, which with each iteration is adding a new block to the chain. The faster it is, the greater the number of real world applications that can climb on to a blockchain architecture. Blockchain and fintech are often synonymous but imagine waiting 10 minutes to approve a financial transaction while the blockchain checks your credentials. Blockchain upload speeds need to increase to fulfil its full potential.
Blockchain developers are scarce and a third challenge is to retain the best talent in the face of temptations from Silicon Valley and China. A blockchain startup needs to work overtime to hire, recruit and hold onto its valued engineers. India could be the answer with its more mature ecosystem of engineers.
Finally, the commercials of blockchain are really coming into focus. The main buyers of the fundamental technologies will be companies, yet most are at an early stage of adoption. The optimist in me points to a PwC survey which found that four-fifths of 600 CEOs surveyed across fintech, retail, media and energy said they were actively looking at blockchain solutions for their business services, process or supply chain.
Walmart recently tested blockchain in its food-supply chains while IBM is rolling out its in-house hosted blockchain solutions for clients in the food industry.
The current crop of star valuations is at the back-end of the blockchain—in trading and enabling technology infrastructure, known as mining.
The first blockchain initial public offer, launched in August in London, was for a mining company, raising ₹ 225 crore. The service went live in June, yet 50,000 customers are waiting to sign up.
It is clear the technology is nascent and that we are still at the start of the adoption curve.
Yet, the urgency to continue climbing and get to market is evidenced by the valuations that a smart idea is assigned even in seed investment rounds.
As an evangelist, I say move on and don’t let the froth get in the way.
Nish Kotecha is a serial tech entrepreneur, investor and board member based in London.