Many of our early investments were
consumer-Bitcoin focused, including
numerous Bitcoin wallets, exchanges and
payment-related companies. These early
entrepreneurs built the “bridges, roads and
tunnels” of the Bitcoin infrastructure.
Companies at the forefront of the industry,
such as Coinbase, have emerged as the
leading consumer-facing companies within
the Bitcoin industry, but consumer adoption
of Bitcoin as the kind of payment technology
its creators envisioned has seen slowing
growth in developed markets such as North
Most consumers in such markets have
excellent access to financial services.
Although credit cards have high fees for
merchants, they work well for consumers.
The proliferation of mobile banking services
and of bank branches, and access to global
capital markets via services such as
E*TRADE and Schwab create a high hurdle
for new payment technologies to get over
before they can gain market share and
consumer adoption. Although existing and
heavily entrenched financial services
technology is broadly serving technologically
advanced cultures, that is only one segment
of the market.
Consumer-facing financial services using
Bitcoin may have disappointed early
industry enthusiasts, but we remain bullish
on their adoption in the developing world.
There are 3 billion people in the world,
mostly in developing economies, who have
no access to the financial services that most
people in the U.S. take for granted. They
have no credit cards, bank accounts or
securities trading accounts.
Many of these consumers, though, now
have a smartphone in their pocket, giving
them unprecedented access to cutting-edge
financial services. There are nearly a million
new smartphones turned on every day. In
the same way that these consumers
leapfrogged landlines to get 4G
smartphones, they are likely to leapfrog
bank branches and plastic cards to get
mobile, ultra-low-cost, blockchain-based
Financial Firms Pivot to
Take a Second Look
The first major pivot for the Bitcoin and
blockchain industry was the realization by financial incumbents that blockchain
technology is a robust, ultra-secure
infrastructure layer for the trading and
settlement of traditional assets. Initially,
banks, brokerage firms and stock exchanges
generally weren’t interested in Bitcoin, per
se. Some of these firms were turned off by
the fact that criminal activity—namely by
the Silk Road—was associated with the early
days of Bitcoin. Other firms feared that their
traditional roles of being a financial
intermediary could be threatened if Bitcoin
were to gain broad-based adoption as a
peer-to-peer payment technology.
Increasingly, banks learned that the
blockchain can enable a better, faster,
cheaper way to trade and settle traditional
assets like stocks, bonds and commodities.
Blockchain and distributed ledger
technologies hold the promise to unify the
current fragmented approach to trade
reconciliation, where all market participants
keep their own records in differing formats.
Many of our portfolio companies (Chain,
Blockstream, AlphaPoint, PeerNova, itBit
and Ripple) have pilots or technology
trials underway with large financial firms
to address the massive opportunity of
re-architecting the way assets are traded and
settled. These trials will be completed over
the next year. If the return on investment
makes sense for these banks and brokerage
firms, we expect the trials to turn into large
commercial-scale collaborations and
integrations that produce significant
revenue for our portfolio companies.
The next pivot we are witnessing is the
reimagination of the Blockchain as a
free-to-use distributed database that can
function as an immutable record and can
track chain of custody or provenance.
Documents and business processes can be
“hashed” into the blockchain, allowing
consumers and enterprises alike the ability
to prove to regulators or customers that
their data or documents have not been
changed or tampered with. This brings up
extensive opportunities for non-financial
use cases for blockchain technology.
We have seen a flurry of entrepreneurial
activity around this expanded view of
blockchain applications in non-financial
services sectors, including these portfolio
- Stem is using blockchain technology to
better track and monetize content
created and distributed online.
- Tierion has developed a
“proof engine” that allows enterprises to
easily access the blockchain to certify any
document or business process.
- Wave is addressing the international
shipping and logistics market by
replacing a 200+ year-old piece of
financial technology—the paper-based
“bill of lading” that gives the bearer of
the paper document ownership of the
cargo on a ship.
- Stamp.io is using the blockchain to
create a digital notary service.
We also led the first ever venture capital
investment into a start-up in the Ethereum
ecosystem called Ethcore. Ethereum is in
some ways a competitor to Bitcoin, though
our view is that it is complementary.
Ethereum is also blockchain-based, but is
optimized for smart contracts, compared to
Bitcoin’s payment orientation. In addition
to some important technical differences,
Ethereum has a robust and growing base of
The blockchain technology industry
remains an exciting and fertile investment
environment. Leveraging our industryleading
position, we continue to see
fantastic deal flow. Our mission continues
to help small companies of today grow into
the blockchain behemoths of tomorrow.
Bart Stephens is a
Other partners who
thoughts to the
creation of this op-ed
are Brad Stephens
and Brock Pierce.