Bitcoin startups raised roughly $1 billion in venture capital during 2015, the strongest year the industry had experienced. Vinay Gupta, a cypherpunk in blockchain development, predicts a much larger
Bitcoin startups raised roughly $1 billion in venture capital during 2015, the strongest year the industry had experienced. Vinay Gupta, a cypherpunk in blockchain development, predicts a much larger year ahead. On Epicenter Bitcoin, Gupta said investors will commit $10 billion to blockchain startups in 2016.
In the first part of his interview, Gupta discussed the current state of the blockchain ecosystem and his expectations for the year ahead. The first barrier he identified was a shortage of capital.
"I think, up until now, the entire field has been largely limited by available money," he said. "It's been quite hard to raise funds for projects; there's been a lot of curiosity from funders, but not very much action."
R3, a startup developing a permissioned blockchain for major banks, shifted how institutional investors viewed the technology.
"I think that R3 has kind of tipped the entire ecosystem into a different gear," Gupta said. "It's legitimized this notion that blockchains are a technology that is critically important to banking, and at that point, the money is seriously beginning to flow into the field."
Banks now view blockchain as a tool for cutting costs and streamlining money transfers. Bankers have shown less enthusiasm for Bitcoin itself—the original blockchain and its currency. Barry Silbert, founder of Digital Currency Group, expects this outlook to shift. Banks will come back to Bitcoin once they understand the benefits of an open, permissionless system, he believes.
Gupta also warned that talent will become scarce. With substantial capital flowing in, startups will expand hiring for blockchain expertise, creating demand that may outpace the supply of skilled workers.
"This is the year where we're going to go from it being scarce money and abundant talent to it being abundant money and scarce talent," Gupta said. "I don't think any of us really know how to operate in that environment. We're so used to having to bang on the doors. Now that the doors are largely auto-opening, I think we're going to have a fair amount of chaos."
Now that R3 has brought blockchain into mainstream awareness, startups with weak fundamentals may emerge, much like the dot-com bubble of the late 1990s.
When Epicenter Bitcoin co-host Brian Fabian Crain asked whether Gupta predicted a blockchain bubble similar to the dot-com crash, Gupta said it had started.
"My estimate is that we're going to see $1 billion come into the Ethereum ecosystem in 2016 alone, and the general estimates for the amount of money going into the entire blockchain ecosystem, including Bitcoin, is on the order of $10 billion," he said.
Crain expressed surprise at the numbers. Gupta backed his prediction with two major pieces of evidence.
A leaked JPMorgan report revealed the bank's plans to "aggressively pursue" blockchains, big data, and robotics. JPMorgan has allocated $9 billion for these investments, according to Business Insider India.
Gupta also pointed to Singapore's $7 billion smart cities program. The country has a strong interest in blockchain technology, he noted.
"[Singapore] is seriously interested in blockchain stuff. There's just a really, really broad-based push for large entities to get this technology into their systems," he said.
Investors and observers will watch to see how much of the predicted $10 billion reaches Bitcoin rather than other blockchain projects.
