Here’s What A Blockchain Investor Thinks About Blockchain

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With the news on May 24, 2019, of the planned launch of Facebook’s ‘GlobalCoin’ by 2020, cryptocurrency is poised to move from avant-guarde crypto traders and bitcoin miners to broader adoption by both investors, the enterprise and consumers.

In a blockchain report from Cisco in March 2019, the company reported that 10% of the world’s gross domestic product (GDP) will be tokenized assets by 2027. And, there will be more than $9 billion spent on blockchain projects by 2021.

But, despite the recent bullish crypto week which saw Bitcoin rival, Litecoin gain around 15% in a 24 hour trading period, mass adoption of blockchain is still on the horizon according to some experts.

Remington Ong is a partner at Fenbushi Capital in China. Fenbushi is a venture capital firm which only invests in blockchain-enabled companies. At Publicize Blockchain in New York on May 13, 2019, Ong said he expected to see mass adoption of blockchain within two decades.

Henry Liu, a former Facebook employee and now the managing partner of Austin-based YGC Capital, says he believes Facebook’s crypto play will threaten Bitcoin dominance and drive mass adoption. But he adds that blockchain as an industry needs to solve real problems first before we see mass adoption.

“If the only argument is stateless money and permissionless store of value, then we should all be buying Bitcoin all the way,” said Liu. “But clearly there are several use cases that can be built with blockchain and many enterprises are starting to implement them.”

Liu says YGC believes that by solving some of the old enterprise problems with blockchain, they can bring more transaction volumes to the industry than all the consumer efforts have brought in the last several years.

“For the Internet, mass adoption of social media and e-commerce came after corporations adopted the technology,” said Liu.  “We believe blockchain will be similar and we’ll let Zuck handle the consumer side since he already has two plus billion users,” said Liu.

Liu emphasizes that YGC, an enterprise blockchain investment firm, is laser-focused on solving real-world enterprise problems with all the advantages that blockchain has to offer.  “We know that blockchain can cut cost, bring faster transactions, trust and accountability to legacy systems,” added Liu.

When it comes to investment, Liu said that in 2018, YGC started to explore growth-stage blockchain startups they could bring to enterprises to solve real problems; and then they hit a roadblock.

“Most blockchain startups aren’t focusing on enterprises and enterprises can’t work directly with public protocols,” said Liu. “So, we saw a need to invest in ventures that could bridge the decentralized public blockchains that desperately need transaction volumes and Fortune 50 enterprises [..] in need of emerging tech to keep them competitive in the market.”

“We’ve seen the industry grow since 2012 and one of our portfolio companies has landed contracts with Department of Homeland Security and Gates Foundation for healthcare data, so we want to take our learnings and scale it with others,” added Liu. “We believe the opportunity to invest in SaaS built on blockchain is larger than investing in other software businesses,” said Liu.

When it comes to the public’s trust of blockchain, Liu says there are a lot of behaviors in the industry that can’t be explained, and there isn’t enough public data or transparency.

“The motivations for different parties are all [..] divided,” said Liu. “Protocols want transaction volume; many short-term investors want higher valuation and an increase in price; and, exchanges want volatility and publicity so they can drive traffic and make money when the market is up or down. All of the misaligned interest combined with a nascent industry that’s prone to manipulation lead to many institutional investors doubting that the industry is in fact of substance.”

“It’s also difficult for the industry because there haven’t been large transaction volumes moving towards public blockchain to solve practical problems,” adds Liu. “YGC is changing that. We believe the trend is shifting as familiar names are implementing and exploring public blockchain’s, and we are excited to position YGC as a leader in the space to drive the movement for enterprise adoption of public blockchains.

So what’s the most significant barrier right now outside of trust?

“We think it’s existing infrastructure not supporting the decentralized ecosystem,” said Liu. “There’s a lot of hesitation for using tokens due to regulatory concerns, not enough applications solving real problems with solid business models, and therefore not enough validations and credibility for the entire industry.”

YGC started raising capital for their first fund in 2018 and plans to distribute those funds in 2020, which they hope will fuel the growth of their current ventures focused on enterprise SaaS revenue.