The end of the pure-play?

Our weekly opinion piece and overview View this email in your browser March 12th, 2017 Mixing it up A significant funding round highlights a shift in the investment landscape. (Find out more in THE TAKEAWAY below.)      **CONSENSUS 2017** Don't miss this opportunity to JOIN our panels on business tracks, investment and policy discussions, deep technical dives and fireside chats with some of the most exciting projects being worked on right now. May 22-24, New York City  ☀️️️ REGISTER HERE ☀️️ TOP TRENDS ON COINDESK Bitcoin ETF The day of reckoning finally came, with a decision from the SEC to reject the proposed Winklevoss Bitcoin ETF. As expected, the price plunged (at one point almost reaching $1,080), but has since recovered ground. While many analysts were disappointed, several seem to believe that this is a bump rather than a block, and Tyler Winklevoss told CoinDesk that Winklevoss Capital would continue to engage with the SEC. Be sure to visit CoinDesk for more updates next week. China and bitcoin Rumblings are still emanating from China on the regulation of bitcoin exchanges. According to local sources, a central bank official has recommended the potential use of blacklists against exchanges that violate PBoC directives, while hinting that exchanges might need to get some sort of license. Meanwhile, the country's leading exchanges have indicated that their upgrades are complete and that they are ready to resume allowing customers to withdraw bitcoin, once they get the go-ahead from the regulators. Other China developments The news coming out of China wasn't just about bitcoin, though. Wanxiang Group's blockchain venture launched its own blockchain accelerator with the aim of supporting its emphasis on smart cities and the integration of technology. And the financial services arm of Foxconn, the Taiwan-based electronics manufacturer, partnered with Chinese online lending marketplace Dianrong to launch a new blockchain-based lending platform.    Blockchain trials In what could be seen as a big step forward for supply chain management, the Danish shipping giant Maersk successfully executed its first live blockchain trial, handling the paperwork and data access for a transatlantic shipment on a blockchain platform. The industry trade group for Irish fund managers tested a blockchain platform to track fund transactions and organize the data for regulators. And Singapore's central bank completed a project to develop a digital representation of the Singapore dollar for interbank settlement.   See all CoinDesk stories QUOTE OF THE WEEK "Currently, the landscape is a combination of incumbent financial institutions making incremental improvements and new startups building on top of rapidly changing infrastructure, hoping that the quicksand will harden before they run out of runway." – Joi Ito, Neha Narula and Robleh Ali, "The Blockchain Will Do to the Financial System What the Internet Did to Media", Harvard Business Review    THE TAKEAWAY  Our latest State of Blockchain report, released this week, reveals that VC funding for blockchain startups rose sharply in Q4 year-over-year, even while the annual total was virtually unchanged.   What the slides don't show is a shift in the nature of the investments that becomes even more apparent if we zoom out and include other recent financing rounds. Over the past six months, there have been over 25 investments in blockchain startups. Five have been for amounts greater than $10m. Here's the interesting part: all but one of the recent large investments have been in startups with a multi-blockchain business model, whereas a year ago, none of them were.  The latest investment, announced this week, is a $24m funding round for payments platform Align Commerce. The company has indicated that the funds will be used for a rebranding (it will now be called Veem) and an expansion of operations. While the three-year-old startup has so far focused on the bitcoin blockchain, in conversation with CoinDesk, the CEO confirmed that not only can it also use Swift messaging rails, but that the firm is actively exploring additional blockchains. If the plan goes ahead, Veem will pass from a 'pure play' to a 'multichain' service. Before that came Bitfury, which raised $30m in January. The firm started out five years ago as a bitcoin mining hardware manufacturer, moved into blockchain services, and most recently announced a land-titling joint project for which it is using both a private blockchain and bitcoin.   You can't get much more multichain than Polychain, which raised $10m late last year. The hedge fund plans to invest in blockchain tokens, with no prejudice as to the protocol.    And in October, a 10-year-old payments startup called PayCommerce raised $22m specifically to explore blockchain, meaning its business model is now a mix of centralized and decentralized systems. The only exception to the list is Axoni, a pure private blockchain service for capital markets which raised $18m in December.   Looking at the comparable data, the same period a year ago (October 2015-March 2016) saw a similar number of VC investments, four of which were greater than $10m. All of them were 'pure plays': Bitt (a bitcoin exchange in Barbados), Blockstream (a development firm focusing on the bitcoin blockchain), Digital Asset Holdings (pure private blockchain) and Align Commerce again (back then it was pure bitcoin). While not conclusive, this trend does point to a blurring of the boundaries between the different technologies. More businesses and investors seem to realize that, in such a young field, it pays to have options. For bitcoin companies, this could mean accepting that the structural problems may end up being unsurmountable, and that the technological leaps in the blockchain space offer intriguing alternatives. For fintech companies like PayCommerce, it could mean understanding that the potential is real. Business models aside, there's another interesting trend going on, which shows what could be the beginning of a significant geographical shift. Take a look at the investors in the rounds greater than $10m over the past six months. One of the investors in Veem was SBI Holdings, a Japanese investment arm. The sole investor in the BitFury round was Credit China Fintech Holdings. Asian investors were present in only one (Blockstream) of the large rounds in the same period a year ago. While the sample size is admittedly not large, the funding rounds over the coming months are likely to confirm this trend: an emphasis on business models that blend blockchains, and greater geographical diversification – all signs of a growing and maturing sector.   - Noelle MORE BACKGROUND: 6 Trends From CoinDesk's New 2017 State of Blockchain Blockchain Breakout? 2017 Will Keep Investors on the Brink 5 Things the Bitcoin and Blockchain Industry Needs to Stop Saying in 2017 Blockchain's R-Word (And 3 Other Trends for 2017) Share Tweet Beyond CoinDesk... OTHERS ARE TALKING ABOUT Maybe there's something in the air, or maybe it's to do with the hype cycle, but it was a packed week for good content... Bloomberg drew attention to the pointlessness of bitcoin vs gold price comparisons, and highlighted the increasing interest in other cryptocurrencies. Quartz debated whether or not bitcoin was "in a bubble".  Motherboard carried a good analysis of the energy consumption behind bitcoin transactions. The Wall Street Journal reported that, whaddya know, there is scant evidence that bitcoin is used to finance terrorism. And Finextra questioned whether the financial system even needs blockchains.   The Harvard Business Review went all-out on blockchain this week and published three articles worth reading. One covered the trade-off between usability and security on blockchain networks. Another touches on the potential for decentralized financial networks. And a particularly interesting one pointed out that investor enthusiasm is ahead of the technology's capabilities, which highlights the need for non-commercial development. UPCOMING EVENTS March 13-14 – The Blockchain Academy – London, England March 13-15 – RiskMinds Insurance – Amsterdam, Netherlands March 15-16 – DC Blockchain Summit – Washington, DC March 16 – Blockchain Finance & FinTech China 2017 – Shanghai, China March 17 – Blockchain UA – Kiev, Ukraine March 18-19 – Blockchain Hackathon UA – Kiev, Ukraine March 20 – Critical and Emerging Issues in Blockchain – Toronto, Canada   WHAT WE'VE BEEN UP TO   All of us at CoinDesk were so sad to hear of the passing of Jake Dienelt. Managing director at Digital Asset Group, author of our ethereum report and an all-around original, kind and funny guy, he will be sorely missed. Copyright © 2017 CoinDesk, All rights reserved. You're receiving this email because you subscribed for updates on our website. Our mailing address is: CoinDesk 636 Avenue of the Americas New York City, NY 10011 Add us to your address book Want to change how you receive these emails? 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