If you were talking about cryptocurrency back in the day, let’s say, 4-8 years ago, you wouldn’t have found a big community to chat with.
But talk about cryptocurrencies now, and everyone has an opinion, so remember to proceed with caution, substance may vary.
The general Venture Capital space didn’t pay attention to the concept in the past for a variety of reasons, it was still a growing industry, and more participants had to yet to jump in, add more to the transaction flow and add value overall in building the market. In essence, there wasn’t a large market, hence, not enough possibility for the ability of launching a profitable venture that would provide the necessary returns for them.
Not very surprisingly, some venture capitalists still don’t believe in the viability of bitcoin and other cryptocurrencies and call it Ponzi scheme. Understanding the crypto space takes time, patience and understanding of where the world is headed, the current frictions, and how they can be overcome with emerging technologies. It seems that in general, the naysayers seem to be those that are of an older demographic and the ones who are believers are the younger generations in the venture capital firms.
Yet, the venture capitalists that watch the flows of money are seeing potential for profit. Brand name venture capitalists in the US like Sequoia Capital and Andreessen Horowitz are delving into the arena seeing and setting up for the expected significant future returns. They are watching as the decentralized industry progresses and seeing how it might affect the nature of their business.
The big believers in the crypto space think that initial coin offerings could cause radical changes to traditional financing firms including those in the age old venture capital space. In current ICO’s, the leaders of the startups sell virtual tokens in relation to a service they are seeking to flesh out on top of the blockchain. In a small percentage of cases they are selling the options to purchase these tokens. As the venture continues to grow the value of these tokens would ideally rise as well. This new funding mechanism has allowed for these new crypto oriented startups to raise a significant amount of capital without turning to players in the venture capital industry. This is a funding mechanism that is embraced by these new companies because it allows them to retain full control and ownership stake in their companies while being able to raise capital that isn’t classified as debt or equity.
Venture capitalists like Tim Draper has been seen making moves in this field with his affiliation to Tezos. Draper believes that this space might be even bigger than the internet, it might be even bigger than other business revolutions that came prior to it. He believes that this technology may have the biggest impact on society.
ICO’s have been a big deal this year as projects have used this mechanism to raise over $ 3 Billion.
The fears represented are two, the first is shared by venture capitalists, they ask, how will this change our industry and our roles in the providing capital? The second is a fear that can shared by society in general, is there a bubble in cryptocurrency, if yes, when will it burst, how will it affect me, how will affect the general economy? The biggest factor leading to the second fear is the concern over the competence of these companies and their ability to execute what they state. Many of these companies are raising money having nothing but an idea and a dream. If the get rich-quick- mindset is found among many of these startups it could pose a significant problem due to wealth erosion.
The crypto industry is developing rapidly and we’ll see how things play out in the long term.
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