Venture capital investors have pumped $290 million into blockchain technologies and bitcoin companies in the first six months of 2016, according to Juniper Research, a digital commerce and financial technology analyst.
According to a Juniper report, The Future of Blockchain: Bitcoin, Remittance, ID Verification & Smart Contracts 2016-2021, although more than 30 start-up fintech companies received funding, more than a third of the total investment went into just three companies.
These were: Social payment provider Circle; a ‘sidechain’ developer called Blockstream; and Digital Asset Holdings, the distributed ledger technology provider created by previous J.P. Morgan exec Blythe Masters.
Juniper highlighted the banking sector as being particularly proactive in investing in blockchain technologies. The report noted that several banks have adopted the Ripple distributed technology for global settlement, and that others are working with similar competing pilot systems.
However, the research also cautioned about so called smart contracts using blockchain technology. It suggesting that, although tasks such as transaction fulfilment can be automated and instantaneous, the contents of these contracts will be visible to all users of that blockchain, including any flaws such as bugs and errors.
The author of the report Dr Windsor Holden, said: “While blockchain technology offers the potential for increased speed, transparency and security across an array of verticals, there has to be rigorous and robust road-testing in each unique use case before any decision is taken.”
The report also noted that in areas such as transaction settlement, blockchain could allow new entrants to enter and re-shape the market, offering services at a significantly lower cost.
In a second paper, Blockchain Reaction, Juniper suggested that blockchain could have a big role to play in the future of transaction settlement solutions.
While currently firms typically have independent systems for transaction processing, a single blockchain-based system “would substantially reduce the risk of error and indeed the time taken for error checking”, the report said.
It also pointed to cross-border remittance as an area in which blockchain could have an impact. The paper cited World Bank data, which said the total value of cross-border remittance in 2015 reached $582 billion, $436 billion of which was sent to emerging or developing economies.
However, the paper suggested that the high cost of remittance through standard official channels, causing money to be sent through unofficial channels instead. Blockchain could mean cost savings in this area, leading to more use of official remittance channels, and ultimately boosting economies, the paper said.
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