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Blockchain

VCs Showering Cash On Security Tokens And Stablecoins

Alexander Harper
03 December, 2018
2 min read
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An existential question plaguing the industry – what is in store for the future of blockchain?

CBInsights, a data-driven technology research firm, is attempting to answer this question from a data perspective, and in a recently released 68-page report, the firm delves into its understanding of where this groundbreaking technology may be applicable in the future.

The Blockchain. CBInsights.

The Blockchain. CBInsights.

Trends in DLT

As the year turned, all the rave in the industry was the introduction of institutional and corporate money to legitimize the industry. Corporations made large investments into Distributed Ledger Technology (DLT) at a rapid pace. Big banks pursued ledger technology around financial transactions, while technology consultancies such as IBM acted as middlemen enabling DLT solutions. As well, CBInsights believes that supply chain is a promising use case for DLT, but is careful to note that a blockchain might not be the ideal solution for corporate coordination problems – consensus isn’t easy, users are sovereign, and centralization is faster.

Corporate Blockchain. CBInsights.

Corporate Blockchain. CBInsights.

Trends in Public Blockchains

In the world of cryptocurrencies, there are two types of tokens: Utility and Security. The firm’s belief is that utility tokens’ plans to reshape the web have yet to pan out, with "speculation drying up, regulators clamping down, and users failing to show up."

As developers are looking to use public blockchain and utility tokens to build a decentralized web, CBInsights asks the questions if this type of token can reorganize the web. For now, the answer is maybe. Most companies building a utility token received funding via ICOs, which were unregulated, leading to a regulatory backlash. This has led to a rise in VC funding and a drop in ICOs, but the report warns that "almost nobody is using decentralized applications" properly.

On the other side are security tokens, just one piece of a blockchain-based financial stack. The report details that investment has moved to this area but could face similar challenges to those faced by corporates in earlier attempts to tokenize financial assets. The report provides a few examples of recent capital raises and corporate ventures in security tokens stating its support that this is the future. However, it admits there are roadblocks – regulatory buy-in is still needed, ledgers will likely have to be mutable, and existing systems often work just fine.

Security Tokens. CBInsights.

Security Tokens. CBInsights.

In the face of sky-high volatility in the Bitcoin market, CBInsights discusses that even though the currency isn’t dead, it still faces high barriers to mass adoption as a peer-to-peer cash transfer system. Because of this, companies are making strides into stablecoins, which have an "algorithmic central bank" and less volatility.

Conclusions

The world of blockchain has a bright but challenged future. DLTs can reinvigorate conversations around corporate data sharing and governance. Utility token attempts to reshape the web have yet to bear fruit, though development continues with the crypto bear market flushing out bad actors. Security tokens are garnering investment interest but could face familiar obstacles seen by those earlier asset tokenization projects. Lastly, money, blockchain’s first use case, might be its best with the rise of stablecoins.

Where will the blockchain fork out next?  

Bitcoin Blockchain Cryptocurrencies Utility Token Stablecoin Security Token