Blockchain VC Funding Grows With Deployments
Blockchain and other "crypto-currency" technologies are gathering momentum as investors continue to pour money into digital transaction approaches while banks shift from pilot projects to production deployments.
According to estimates by U.K. market analyst Juniper Research, venture capitalists invested $290 million in blockchain technologies and Bitcoin companies during the first six months of this year. The researcher said more than 30 startups were funded, with three companies accounting for more than one-third of VC funding during the first half of 2016.
The trio includes the social payment provider Circle, which according to the website CrunchBase completed a Series D funding round in June that totaled $60 million. Investors include Goldman Sachs (NYSE: GS), Chinese search engine giant Baidu (NASDAQ: BIDU), and Breyer Capital. A recent estimate pegged the startup's market value at $480 million.
Blockstream, a Montreal-based developer of sidechains, or blockchains that are interoperable with each other and Bitcoin, completed a Series A round in February totaling $55 million. The early round funding included a long list of investors such as Khosla Ventures. The startup recently acquired a pair of Bitcoin Wallet software providers as it beefs up its sidechains technology development.
The third market leader during the first half, according to Juniper Research, was Digital Asset Holdings, a developer of distributed ledger platforms. The New York-based startup has so far raised $67.2 million to two funding rounds this year, according to CrunchBase. Investors include large U.S. banks and financial services firms along with IBM (NYSE: IBM) and the Depository Trust & Clearing Corp.
Juniper Research said the first-half investments underscore "the increasing diversification of nascent blockchain deployments, with applications ranging from identity to asset management." The researcher stressed that the banking sector has moved quickly to embrace and scale the technology, noting that several large banks have adopted a distributed blockchain payment protocol called "Ripple" while others have launched pilot projects using competing solutions.
The company behind Ripple claims that 12 of the top 50 global banks are using its cross-border payment platform, with a growing number moving from pilot projects to commercial deployments.
While adoption of blockchain technology continues to grow, the market researcher noted that bugs and flaws in financial instruments like smart contracts would be visible to all who use that blockchain. "While blockchain technology offers the potential for increased speed, transparency and security across an array of verticals, there has to be rigorous and robust road testing in each unique use case before any decision is taken," warned Windsor Holden of Juniper Research.
Meanwhile, companies in the financial and technology sectors are flocking to a growing list of blockchain standards initiatives that include the Linux Foundation's Hyperledger Project and the Blockchain Alliance formed by the Washington-based Chamber of Digital Commerce. The former seeks to scale blockchain technology via open standards for distributed ledgers. The Blockchain Alliance includes startups and software developers focused on security and standards and preventing fraud on future blockchain infrastructure.
Alliance members IBM and French banking partners Crédit Mutuel Arkéa recently completed a blockchain pilot project described as an "operational permissioned blockchain network" for viewing customer identities.