The world of blockchain technology has seen its fair share of investments throughout the years. Just last year, in 2015, a new record for VC funding was noted. But the recent charts by WeUseCoins seems to indicate the blockchain investment bubble is about to burst.
It is not entirely surprising the year 2016 may see a dip in blockchain investments. Other areas of technology are dealing with a similar retreat, and the looming economic crisis will not help matters improve anytime soon. To put this into perspective, the first quarter of 2016 has seen $160.7m USD invested in blockchain technology so far.
Compare that number to the total amount of funding in 2015; there is still a long way to go. One could argue 2015 was an excellent year for VC funding, with $488m being raised. The second quarter of 2016 only saw US$40m invested. If the current trend continues, the total amount of funding will barely surpass the $350m mark.
The big question is why this sudden decline is taking place right now. Multiple factors are to blame, including the human desire to look for greener pastures. In the world of technology, that means looking for the “next big thing,” regardless of how the previous investment turned out.
A second driving factor is how implementing blockchain in the financial world may not offer a first-mover advantage. Unlike what was assumed at first, there is no need to be ahead of the competition through this technology. A proper understanding of the blockchain must be acquired before building potential solutions and services.
Speaking of understanding the technology, smart contracts are another double-edged sword. While there are many benefits attributed to this technology, the viability of a smart contract may be vastly overestimated. The recent theft of funds belonging to The DAO certainly doesn’t help.
Investment Future Still Positive
While all of these factors are explaining the decline in investments, the blockchain is far from obsolete. The Bitcoin network is seeing more success than ever before. However, the financial world does not want the Bitcoin blockchain, as they favor private solutions. Whether or not that will be the right decision, remains to be seen.
Moreover, it is important to keep in mind a lot of funds has been invested in blockchain companies to date. Dwindling investment numbers are no direct concern at this stage. That is, assuming the funded companies can bring something credible to the table in the coming months. Just targeting the financial sector may not be enough to bring this technology to the masses.
What are your thoughts on dwindling investment numbers for the blockchain industry? Let us know in the comments below!
Images courtesy of Shutterstock, Sprinklebit
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