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With the current frenzy of interest in bitcoin, there is a growing number of people interested in trying to ride the “hype” and invest in blockchain. And like any investment, you should always do your research. This article is not a recommendation or endorsement for a specific token or platform.
So, if you’re looking for the latest tips from the “crypto-shills” where this tech sector seems awash, you’ll need to go back to your Telegram groups. Sorry!
Unlike many articles that take you on a happy trip to the forest before we get to the point, let’s jump right into the pins:
- Consortia or industry associations run the largest and most successful blockchain networks. They are non-profit by nature and structure and therefore are not suitable for investing.
- Many blockchain technology solutions are for new and emerging protocols. The companies that develop these protocols want your investment but are opposed to investing in stocks.
- Almost every month, we see companies announcing new blockchain patents. Patents are typically a hallmark of intellectual property worth investing. In almost all of these cases the technology is not “ pure ” blockchain, but more likely a distributed ledger technology (DLT) combined with the blockchain ethos of open source and collaboration, with the best ideas best built by one. open source community.
- Buying tokens is a means of investing in a project, but make sure you fully understand the project’s obligations towards token holders, i.e. read the fine print carefully: in many cases, tokens have ZERO rights for holders. of tokens.
- Don’t be fooled by the thousands of startups claiming “blockchain” on their pitch decks. Learn how to ask the right questions to see exactly where and how blockchain is (or, more the case right now, isn’t) essential to their business model.
The inspiration for this piece comes from the recent event I attended for Go Beyond Investing. I was on a panel (with my amazing co-panelist Flavia Richardson and moderator Ramona Liberoff) wondering if blockchain was “a critical infrastructure or just a pleasure to have”. During the discussion, I got this question: “Where do you see great blockchain investment opportunities?”
Where do I see great blockchain investment opportunities?
I do not.
“I don’t. I don’t see any investment opportunities in blockchain.” – after a pause, I continued with – “I see opportunities to invest in companies that are helping businesses integrate legacy systems with blockchain. I also see opportunities to invest with companies that are building credible businesses and solving real problems where storing information on a blockchain is critical to the company’s success. “
What do people think when they think of blockchain?
Blockchain: Ledger, Protocol or Network
Blockchain: distributed, decentralized, immutable
Blockchain: open, collaborative, transparent
During the boom and failure of Initial Coin Offerings (ICOs) in 2017 – and the subsequent whining and failure of Security Token Offerings (STOs) in 2018 and early 2019 – it has finally surfaced, both for investors. that for entrepreneurs, that using tokens to raise funds was a short-lived opportunity. An opportunity that has been mercilessly exploited by the unscrupulous few at the expense of many.
This did not stop all projects. To add some (questionable) credibility, some projects have listed their new tokens on crypto exchanges (via Initial Exchange Offerings or IEO). Currently the dominant token launch events are those focused on the DeFi wave.
In almost all cases, the hard truth is that these companies (2017 to present) did not have and did not have one or (atypically) all of the following: A credible business model, product adaptation to the market, proven team and sufficient motivation get angel, seed or venture capital investments – The rigorous “it would work in the real world and create a profit” processes would simply fail that these investment groups would subject them to.
Tokens were seen as the “easiest and softest way”. And maybe it looked like that, but with investors getting burned repeatedly during pump and dump scams, exit scams and more, there was no choice but to get regulators involved, thereby closing the token hole.
Still, there are thousands of new startups every day claiming to be the next big opportunity to invest in blockchain. It’s one of the hottest words to make your startup sexy.
Most of them never like to see me on an invitation list because I ask questions. You know, the standard business questions they don’t want to answer (and that they would have faced in the venture / angel worlds etc):
- Tell me exactly what information are you storing in a blockchain? (and which blockchain?)
- Explain to me exactly why you chose this blockchain and how does putting this information into the blockchain provide trust between counterparties?
- If your business model is to sit in the middle of a transaction, then you are centralized by nature. Why aren’t you just using a database?
Startups putting blockchains on their pitch decks never want to see my name on the invitation list.
And these are just my initial questions. It’s generally not very good for booting. However, in my experience, there are some founders who “recognize” (or perhaps wake up) the situation immediately with me and together we change course and get back to their passion: solving a particular problem for a customer who is willing to pay.
But what about Defi? Decentralized finance or DeFi has had a roller coaster in a few months of ups and downs. It was such a popular topic that I wrote a three-part series just watching DeFi (Here 1, 2, 3). Bottom line, in case you don’t want to read the articles: “DeFi is another attempt to bypass regulation and provide access to extremely complex crypto products for retail investors.” If investing in cryptocurrency is like a 3-day trip to Las Vegas, playing in the DeFi space is like playing one of the many carnival games with thousands of your hard-earned cash.
Always “follow the money” and make sure you fully understand how value is created, transferred and extracted at each stage of the market.
There are no opportunities to invest in blockchain consortia. Investing in tokens and DeFi is exceptionally complex and high-risk. If investing money in companies seeking to patent blockchain technology means a) it is not blockchain or b) the ideas are likely to be overtaken by an open source community.
So: where is the opportunity?
Direct answer: there isn’t one. Just look.
Go back to basics and invest in teams of people who can come up with an idea that fits perfectly into the product market. Blockchain (as well as artificial intelligence, machine learning, virtual / augmented reality, Internet of Things IoT and other buzzwords) are just technologies.
The real investment opportunities are with the fantastic new business models and opportunities arising from blockchain adoption. You know, just like it’s always been in the tech market.
Get in touch with us [email protected] / Twitter @igetblockchain.
Troy Norcross, co-founder Blockchain Rookies
Twitter: @troy_norcross
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