The Reason Behind Why The Blockchain Funding May Fall 60%
This discussion sets the stage for the reasons why the blockchain may be failing. The reasons are evident and you get to know all these reasons.
The Situation In Blockchain Technology
Indeed, blockchain the digital information building blocks in databases seen as transforming industries worldwide is quickly losing its allure as Bitcoin regains its momentum. Hence these blockchain startups come as the biggest recipients of venture capital as the Silicon Valley and Wall Street are on the track to see a 60% plunge in venture capital funding according to CB Insights per a recent Bloomberg report. According to CB Insights meanwhile, corporate interest in blockchain projects is on an even sharper decline as it may come as a surprise given announcements from major companies such as Facebook Inc that has expanded their blockchain initiatives.
Tables Turn As The Bitcoin Price Surges
Ultimately after they reach an all-time high near $ 20,000 Bitcoin plunged into a crypto war reaching lows near $ 3000 and as Bitcoin and cryptocurrency prices tumbled across the board, the venture capitalists focus their attention mainly on the promise of those underlying technology which is the ledger known as the blockchain.
Hence ironically a decline in funding into the blockchain world coincides with a rally in the price of Bitcoin which is the world’s largest cryptocurrency by market capitalization. Thereafter the digital coin made a sharp comeback surpassing $ 13,000 and falling back around $ 10,300 and despite the recent pullbacks the cryptocurrency has still nearly tripled outpacing the price gains for those rival digital coins as the Ethereum and the Ripple.
This is where the senior analyst at CB Insights Nicholas Pappageorge explains last year’s record in blockchain venture investments to the fact that it took a little bit for the enthusiasm to wear off. Hence the worse off amid the drying up of funds in the blockchain space has been maturing startups per CB Insights. Thereafter newer companies have fared better and the overall traditional venture capital investments in blockchain companies have totaled around $ 784 million via 227 deals as the pace proceeds through the year with blockchain technology startups would be on track to generate $ 1.6billion in funding reflecting an approximate 60% plunge from a record $ 4.1billion received per CB Insights.
While the fact comes that the new trend comes as a growing number of studies demonstrating that blockchain is more expensive and efficient than expected and is also vulnerable to hacking as the recent experiment by Germany’s central bank concluded that the technology is no real breakthrough as outlined and said by blockchain enthusiast who is confident that the technology will prove itself in the long run.
Here’s Explaining How Bitcoin's Shaky Reputation Is Limiting The Spread of Blockchain
It is stated that despite talk of Bitcoin’s broad acceptance in the market, the retail banks have not yet fully embraced blockchain technology and are less likely to be able to capitalize on its benefits according to new research from McKinsey & Co. Therefore there may be cryptocurrencies like Bitcoin suffering from a declining reputation following the initial crypto craze that made the retail banking sector nervous and cautious according to Matt Higgnsin an author of the report quoted in a detailed article by Bloomberg. Thereby this skepticism could be preventing banks from saving as much as $ 4 billion a year through the applications of blockchain technology to issues like cross border payments, as well as an additional $ 1billion per year in client onboarding operation costs as the blockchain could also help to curb losses associated with fraud to the tune of as much as $ 9 billion annually following the report.
Why Banks Avoid Blockchain?
There are more adventurous investment banks, governments, and even infrastructure providers having explored the numerous applications of blockchain technology, retail banks have been much slower to adopt the new tool. As of now, there are many potential reasons for this including a strict regulatory environment in the consumer finance industry per Bloomberg and the fact that there are already strong alternative payment services in the digital space such as Zelle could also be a determining factor.
What It Means?
To state the truth so long as retail banks avoid utilizing blockchain which they are missing out on billions in potential savings per McKinsey and banks with their intense focus on cost reduction could surely stand to save as much as $ 14 billion per year thanks to blockchain applications. It is here that savings like this wouldn’t even require retail banks to go all-in on using blockchain to do everything from processing payments to issuing bonds as some investment banks have done. Thereafter retail banks also have the significant challenge of convincing their customers to change their behavior a process AtakanHilal another author of the McKinsey report had described as rather difficult. Furthermore, then the retail banks would likely need to change the way they see rival firms to embrace new forms of cooperation as they work to build trust as a digital entity in a decentralized network.
Finally What's Next
There are the likes of some retail banks like Santander that have begun to explore blockchain solutions to issues like money transfers whereas retail banks remain hesitant to dive into blockchain applications. Thereafter so long as Bitcoin and other digital currencies lack a reputation for stability and security this may continue to be the case.