How Important is Blockchain?
In March, R3 CEV, an established fintech company, brought together a group of 40 major banks, including Goldman Sachs and Barclays to test a new way to trade fixed income assets using blockchain, the technology that underpins bitcoin. There has been a lot of hype about blockchain over the past year and this development highlights how serious the world's biggest lenders are about this technology.At a recent event in NYC, The State of Blockchain, hosted by CB Insights & Capital One Labs, Matthew Wong (@mlcwong) spoke about the fintech ecosystem, the emergence of blockchain, the increased role of corporate venture capital (CVC) backing these companies, and what the future holds.On the back of the financial crisis, the fintech industry has exploded in the last five years. Since 2010, the number of unique investors in the space has risen from 220 to over 900. This group includes some companies which are not in financial services such as Google Ventures which has made 37 investments in the fintech space over the last five years.Banks such as Goldman Sachs and Citigroup are targeting fintech startups that are "unbundling" the traditional banking model, taking more and more services online and offering lower fees thanks to lower overheads. Student loan refinancing company SoFi is a good example--they now have a $4 billion valuation after Softbank's recent investment of $1 billion. $1 billion is also the total amount invested in bitcoin and blockchain startups to date, however a massive 60% of this came in 2015 alone, suggesting 2016 and beyond could see continued growth. During 2015, there was a noticeable shift from bitcoin wallets and services to those of blockchain companies, APIs, and platforms to facilitate transactions. Each of the deals in 2015 involved at least one CVC or strategic investor involved in the space (such as AXA, Mastercard, and Verizon) as opposed to solely traditional VC money, giving these companies a route to market much quicker.When examining the future of blockchain technology, it seems inevitable that it will disrupt financial services given the amount of traction already, the presence of CVC investments taking place, and deals like the one orchestrated by R3 CEV uniting the banks. However, financial services isn’t the only industry in which blockchain can make a difference. Smart contracts, illicit activities, and insurance claims are all examples of tangents where blockchain companies are garnering traction. Some not so obvious example include Verisart for verified art sales and Everledger who aim to stamp out diamond fraud using a blockchain ledger. In short, the applicability of blockchain is almost boundless, proving its worth in many industries where transactions takes place. Goldman Sachs Global Investment Research summed it up by saying, “What if I told you that blockchain could disrupt everything?” It will be interesting to see it evolve further over the course of 2016.The CB Insights' presentation is available for download here.Data sourced from CB Insights