As Bitcoin and Blockchain investment fast approaches $1bn, we have spent the last three months speaking with over 30 of the leading Bitcoin and Blockchain companies globally (with c. $500m of total investment), plus industry groups, financial institutions and investors, to gain detailed insight and understanding of the development of the market and the direction these fascinating technologies will take in 2016.
We are pleased to share our work and findings with you and the broader community.
You can read our report ‘Blockhain & Bitcoin in 2016: A Survey of Global Leaders’ here.
If you are interested in a personal briefing or a briefing for your firm, please feel free to contact us ([email protected]).
The key findings:
Bitcoin and Blockchain have fundamentally diverged as technology markets
- Bitcoin is the leading public crypto currency, and having achieved global scale is now quickly becoming institutionalised, notably in the delivery of consumer finance and, in certain emerging economies, SME services
- Blockchain is rapidly emerging as the next multi-billion dollar enterprise technology market, ‘crossing the chasm’ with financial institutions and their half trillion dollar IT spend
- Significantly, (non-VC) financial institutions are investing heavily in companies in both spaces, participating in over 1/3 of total funding and over half of rounds > $25m
Bitcoin has evolved quickly beyond its hacker roots, with regulators, start-ups and the Bitcoin community moving rapidly to address key risks and issues
- Regulators have moved with surprising speed and pragmatism to assist the ecosystem in its development
- Software-based approaches to AML, KYC, and proceeds of crime detection have inspired new companies focused on providing these solutions
- Through the scalingbitcoin.org initiative and workshops, the community is seeking to address technical hurdles and establish a governance process akin to the IETF
As Bitcoin matures, it is moving from a store of value and instrument for speculation to next-generation rail for delivering consumer finance applications and payment & remittance networks
- While ‘native use cases’ are lacking in North America and Europe, entrepreneurs in developing economies, particularly those with weak institutions, high inflation and/or capital controls, are adopting Bitcoin to surmount local currency challenges
- We are seeing the leading wallet providers transition into Bitcoin banks and software platforms
- A next generation of consumer payment services are emerging, featuring ‘Bitcoin inside’ but not exposing the user to the crypto currency itself
Blockchain has grown from zero to the cusp of a multi-billion dollar market in less than 24 months
- Large institutions have typically already identified portfolios of c. 10-20 projects for Blockchain evaluation
- The software market has already split into Blockhain platform providers (e.g. those providing Blockchain frameworks on which to build custom applications) and Blockchain application providers (e.g. those providing ‘end-to-end’ solutions addressing a specific business process)
- We estimate that spending by financial institutions on Blockchain projects will exceed $1bn in 2017, which will make it one of the fastest developing enterprise software markets of all time
We anticipate multiple $100m+ funding rounds in 2016, as those with strong momentum seek to claim market leadership
- Financial institutions are playing a major role, not only as users and customers but also as investors with more than 1/3 of total Bitcoin/Blockchain investment rounds including (non-venture capital) financial institution participation and over 50% participation for rounds > $25m
Europe is lagging behind in terms of established Bitcoin and Blockchain leadership, however, a few notable companies stand-out
- Bitcoin miners, BitFury and KnCMiner, the two largest miners outside of China (i.e. operators of large computational server farms that maintain the Bitcoin network)
- Two early stage private Blockchain companies: Setl.io, developer of an institutional settlement platform and Credits, developer of private Blockchain software
- Elliptic, a provider of AML, compliance and proceeds of crime detection software
- Blockchain, a leading provider of Bitcoin wallets and software
- Guardtime, a provider of military grade Blockchain infrastructure, for securing sensitive defense, telecommunications and financial services
We are happy to provide more information on any company featured in the survey or to facilitate introductions where appropriate.
If you would like to speak with us please get in touch.