Hashed, the South Korean blockchain accelerator, has announced that it’s raised $120 million for its first investment fund. Founded by a team of serial entrepreneurs and engineers and led by CEO Simon Kim, the investment group – which has offices in San Francisco and Seoul – is committed to financing disruptive blockchain startups capable of playing a major role in the burgeoning ecosystem.
Kim believes that "decentralization has the power to transform not only the global economy, but the very fabric of the Internet" and the fund has already invested in a range of startups, from German scalability project Matter Labs to Kakao’s public blockchain project Klaytn. Hashed has also joined the latter’s Governance Council.
A Breakout Year for Blockchain Investment
Bitcoin finished the 2010s as the decade’s best-performing asset, and it hasn’t done badly in the first year of the 2020s, smashing through its all-time high and attracting fresh interest from a slew of institutional players. While retail FOMOs into Bitcoin, with the asset acting as a gateway drug for the industry as a whole, venture capital funds like Digital Currency Group, Pantera, Placeholder, Castle Island Ventures and Blockchain Capital are building sizeable war chests and bootstrapping the next wave of innovative startups.
In the recent past, the capital flowing through the crypto industry could be tallied in millions. Now it’s billions. In fact, smart contract network network Ethereum saw $1 trillion of value transacted in the past 12 months. With each passing year, it’s becoming more difficult to write off crypto as a cypherpunk’s wet dream, and accredited investors are belatedly sitting up and taking notice. Blockchain-oriented funds give investors the opportunity to put skin in the game and accelerate adoption of distributed ledger technologies, including those concerned with currency.
According to research firm The Block, just shy of $900 billion was invested in blockchain startups in the third quarter of the year, with 212 venture deals concluded. Investors were particularly keen to finance projects in the burgeoning decentralized finance (DeFi) sector that, prior to Bitcoin’s price rally, generated most of the crypto headlines in 2020.
This was the year of AMMs, governance tokens, yield farming, lending and derivatives, with the value locked in DeFi protocols surging from $1 billion in February to over $16 billion when we went to press. Little wonder VC funds want a slice of the pie.
Blockchain Is Bigger Than Bitcoin
With 2020 having been an uncertain year in many respects, the growth of crypto-centric venture capital funds is all the more impressive. Even the likes of JP Morgan acknowledge that investors who previously invested in gold ETFs, such as hedge funds and family offices, may be exploring cryptocurrency as an alternative to the precious metal. The list of respected investors who have expressed positive sentiments about Bitcoin is also growing.
Of course, use-cases for blockchain go beyond crypto. Some investors are less interested in assets like BTC and ETH and more keen to finance projects that utilize blockchain for some other objective: healthcare, supply chain management, e-voting, governance, insurance and digital identity.
In light of recent events, the former may represent the most fascinating field for blockchain. The global healthcare industry is expected to reach $11.9 trillion by 2022, and blockchain could help to address systemic inefficiencies related to clinical record-keeping, pharmaceutical tracing and health insurance. It could also help to eliminate waste and tackle the problem of counterfeit medication, which accounts for 10% of the $300 billion pharmaceutical industry according to the World Health Organization.
In the grand scheme of things, we are at the base of the mountain where blockchain in healthcare is concerned. Last year, Global Market Insights predicted that the value of blockchain technology in healthcare would surpass $1.6 billion by 2025. Of course, this was pre-Covid – and challenging times call for innovative solutions. Mark Treshock, blockchain solutions leader for healthcare and life sciences at IBM, believes blockchain solutions could help to track SARS-CoV2 vaccines and make sure they haven’t been compromised.
With VC funds increasingly looking to allocate capital to groundbreaking ventures, don’t be surprised to see more investment in this area in the next 18 months. Between private funds like Hashed and exchange funds like Coinbase Ventures, the era of big spending on crypto is here.