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Blockchain: A Fintech Revolution

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While all attention has been focused on the ups and downs of Bitcoin, it’s Bitcoin’s Blockchain innovation that has generated more excitement in financial and technology communities.

“Fintech”, as financial technology is referred to in tech circles, has been on a tear lately. Global venture-capital-backed fintech companies brought in a record $16.6 billion in 2017.

Blockchain is innovative because it enables the secure sending of digital assets, without requiring trusted third parties, such as banks. Its ability to convey a shared truth that everyone agrees on without intermediaries, or centralized authority, is a major selling point.

Another significant advantage is the “smart contract,” which uses a distributed ledger that automates many of today’s tedious business processes, including compliance, claims processing, title searches and delivery verification.

The Opportunity
Global banking is a $134 trillion industry built on old-school, three-day bank transfers. Even at its slowest, a Bitcoin transfer takes just 16 hours, and, quite often, much less time.

This rich promise of disruption has attracted a host of players. As Joshua Nussbaum of Compound VC puts it, “This is by and large the fastest I’ve seen any area of technology take off in terms of new company formation.”

How big is the blockchain market? AngelList has 1,833 companies in its Blockchains Startups list, a figure that grew by 20 in just one day. 😳

The blockchain market has splintered into many subsegments, ranging from currencies to sovereignty to value exchanges to authenticity. VentureScanner currently tracks 970 Blockchain technology companies in 12 categories across 74 countries, with a combined funding total of $4.5 billion.

We already covered one fintech unicorn, Palo Alto-based Robinhood, in our Dec. 15, 2017 email update. At the time, Robinhood had 3 million members. That figure has risen to 4 million. That same spectacular growth is seen across the pond at London-based Revolut, which is growing at a staggering 7,000 users each day.

Berlin-based N26 has seen its customer base top 500,000. Both Revolut and N26 plan to enter the U.S. later this year where they will find many eager customers, including yours truly, who are tired of the fee-ridden status quo.

ICO Boom
Here’s a startling trend for you to ponder. The number of IPOs in the U.S. has cratered from 7,322 in 1996 to just 3,671 in 2017. The costs associated with going public and Wall Street’s overzealous focus on short-term profits has choked off this formerly popular startup financing route.

“The adoption of Blockchain has removed a ball and chain from fundraising.”

The adoption of Blockchain has removed a ball and chain from fundraising. Initial Coin Offerings, or ICOs, are the new IPOs.

In an ICO, a blockchain company sells tokens or coins, typically denominated in ether or bitcoin. Ether is a competing cryptocurrency offered by Ethereum. A whopping $5.6 billion was raised by ICOs in 2017 alone.

There are now more than 1,530 different crypto currencies, according to CoinMarketCap, with a new one launching just about every day.

According to TechCrunch, blockchain and related startups have raised nearly $1.3 billion in traditional venture capital worldwide over the past 14 months. By contrast, nearly $4.5 billion was raised via ICOs.

And some ICOs have been truly spectacular. On June 12, 2017, Bancor raised $153 million in less than three hours, setting an initial funding record. While aiming for less, Brave Software raised $36 million in a mind-blowing 24 seconds!

The internet has come a long way from the early days of virtual currencies when entrepreneurs like Nat Goldhaber was hawking Cybergold in the Bay Area, and Lee Stein was promoting First Virtual Holdings in San Diego (disclosure: I was an early First Virtual consultant). Prepare yourself for an astronomical ride on a financial spaceship. For some it just can’t arrive fast enough. Meanwhile, check out our curated Blockchain gallery below.

Blockchain Company Gallery

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Delivery Drones

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