Ive seen this statement a few times in the past week or so where people have been saying something along the lines of “Venture Capitalists would have just been better off investing in the bitcoin currency than investing in a business”. While the majority of the companies that did invest in bitcoin companies would have just been better off investing in the currency if we look at what we have today, we have to realize that the backend options and solutions might not have been there had they not invested.
Venture capital is a strange type of investing, basically you invest in 100 companies and you only expect one or two to pay off in the long run. However those one or two companies that ultimately succeed will have returns that are astronomical. So in many ways much of the early bitcoin investment was expected to fail. The real benefit of the investment was that many of the companies either brought experience to the industry and work that other companies could later build upon successfully.
With the internet we saw this happen all the time, most notably with web browsers. Netscape, which would ultimately disappear into obscurity, set the standard for many early web browsers options that we have to this day. They might not have benefitted financially , but that investment into netscape helped the industry as a whole. That is why any investment, even if it is under something stupid that we know wont work, does provide some sort of benefit to the space. How big the benefit is depends completely on the idea, but I would still say that marginally there is always a small benefit for the industry even if it just proves that the idea cant work.
So lets revisit the statement that I mentioned in the beginning. Perhaps if we look at things today and where we are in bitcoin/cryptocurrency land we could say they would have been better off buying the currency, but this misses one crucial point. The price that the currencies are at now, might have never gotten this high without investments into businesses that ultimately failed or succeeded. If there was no backend like payment processors, exchanges, storage solutions ect. many would have never entered the space just out of lack of ease.
The venture capitalists who have many failed projects probably wish they would have hedged their bets, but their financial sacrifice has helped all of us who don’t have millions of dollars to invest in fledgling companies. They probably didn’t know it at the time, but their investment that lost them money ended up benefitting everyone. That is why I think it is extremely important that bitcoin and crypto in general continues to keep getting venture capital funding.
I think in the short term we have seen venture capital slow down for decentralized solutions, with much of the companies getting funded being not true blockchains. Many of the companies now are using buzzwords like blockchain to get funding that isn’t going to help the crypto space because they either don’t plan on using crypto or their blockchains will be private. Hopefully this trend ends soon because I would like to see more companies come into the bitcoin space that offer niche markets.
So ultimately you could say that these companies would have been better off investing in the currency, but honestly Im glad they didn’t. I think we all benefitted from them funding companies that might have went defunct, but added something to the crypto space.
hindsight is always 20/20. IF, only IF, one knew that bitcoin was going to go from pennies to be around $2,000, of course, one would pour all his money into it. But that is a big IF.
I am a VC, and I actually know we have limitations on our funds. VC funds are legally bound by their investment nature and investors' (LPs') mandate and are NOT ALLOWED in buying securities/currencies (including cryptocurrencies). That's the job of trading funds or hedges funds.
Your last point is valid.
to some the truth will hurt much more that a lie
I'm sure they invested plenty in the cryptocurrency in addition to investing in the companies. Good read though!
muy bien tu publicacion
Great explanation. I not understand why those venture capitalist did not invest in bitcoin directly but into developers in the crypto space.
Honestly I sometimes think about if this is how the first investors felt when the stock market first opened and then I realize this is actually even better!
Yes Now Bitcoin and some other cryptocurrencies are become more profitable for all and big companies are also planning to invest in digital coins and it will totally change the digital world trending and it will increase the price and also the value and supply of crypto currencies and in near future more wonderful(good news) events are coming.
i want to cash my crypto out to open a business but im afraid ill miss out. i know this feeling exactly
In my opinion Bitcoin will fail. Can you trust a currency that is reliant on vulnerable technology?? With the creation of a number of new competing cryptocurrencies being developed and eventually diluting the market. If a cyber attack occurred would your Bitcoin be safe. Would you intrust thousands of dollars to the system? How long before Government infiltrate this technology and causes it to fail? Why would Government do that? Because central banks will not tolerate a currency that they do not have complete control over, thats why. If they cause a failure in the system, then people will lose confidence in them, unless of course the federal government comes to the rescue and offers to insure the currency FDICA baby. Look what they did to Precious metals. The feds found a way to manipulate it and fix it. The banks simply print and sell enough paper contracts to dilute the market. Some say that there are up to 200 hundred paper contracts per ounce of gold. The silver and gold markets are easily moved by the simple push of a computer key. They must regulate it in order to keep the value of the dollar intact. The same is true with cryto. If they let the market run, paper currencies would diminish in value. Is it possible that the cryptocurrency was ordained by the central banks as a trail to see if people would buy into this type of monetary system? But for now enjoy the wealth it has created, just don't think they will let the party continue.
How can they stop it
These are words of Konstantinos Karagiannis
CTO, Security Consulting, Americas, BT.
But is it safe?
My RSA 2017 talk, “Hacking Blockchain”, includes a fair amount of time explaining historic and current attacks faced by all implementations of the technology. A lot of these attacks are old school, focusing on supporting technology and not on the blockchain itself.
Consider attacks against credentials used at an online cryptocurrency exchange. Such exchanges act as hot wallets, or storage of funds available for transacting online at any time. Traditional authentication hacking of these sites can lead to illegal transactions. Some attacks are even more creative, such as the ability to force a cold or offline wallet to become hot and therefore a target for fraudulent transactions.
The major issue I cover, though, is the inherent flaw on page one of Satoshi’s paper. That elegant if pesky line about “computationally impractical to reverse” transactions. You see, the crypto behind cryptocurrency is actually public key. We are likely less than three years away from this being completely hackable by a quantum computer.
Facing reality.
Fantasy? Hardly. Labs around the world have already proven that quantum computers can run Shor’s Algorithm and almost instantly find the private key of a public key pair even 4,096 bits long. Because of how public key works in most blockchain implementations, including Bitcoin, this would mean any time a transaction occurs, a quantum computer has everything it needs to obtain a user’s private key. Spend a single cryptocoin, and any entity with a quantum computer can download that currency’s blockchain, see your transaction, and in a few moments spend the rest of your funds.
The threat seems even worse if you consider blockchains designed to prove ownership of land or other critical identity-related transactions. A private key attack here can lead to an irreversible type of identity theft, at least within that blockchain ecosystem.
The NSA has already warned against the use of non-quantum-safe encryption. Its’ time to realise we may be rushing towards putting everything on a digital house of cards rather than an unbreakable chain. Let’s fix blockchain’s inherent flaws now, before it’s too late.
If you want to see our Blockchain demo in person, why not visit Innovation 2017, our technology and innovation exhibition taking place in June.
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The currency is nothing by itself. It relies heavily on the infrastructure. It would be physically impossible to just invest in bitcoin and not the associated wallets, mining, exchanges that give birth to the currency valuation.
hmmmm... interesting. Thanks for sharing!!!
BITCOIN: $1k invested in 2010 is now worth $18.7m
I wonder if the huge bubble is going to burst soon.
All new tech will go thru bubble phases
Great perspective on this. I also sometimes suffer from non-buyer's remorse but it's healthy to look at it this way.
Bitcoin had such a bad reputation with drug trafficking, etc, which kept many investors away...too bad for them. Their loss.
Beyond the crypto currency value, the technology has a wide impact. Few yours down the line, I wouldn't be surprised there are new application companies on top of ether worth much more than bitcoin and ether
I see stock traders ask where they can get exposure to bitcoin all the time. I tell them get some bitcoin, you're probably better off that way.
Well explained, glad I decided to follow you :)
Amen to the risk takers!