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Welcome to the weekend! We made it. Hardly, I think, given how tired everyone sounds on the phone and on Twitter. But we’re still banging back the workdays, which means we can sit back and enjoy for a minute. Yes, we are talking about crypto today. To cheer!
The race to fund the future of crypto sure is expensive
I’m impressed with the Rate at which Coinbase has invested capital into other companies in the larger blockchain market. It’s a smart move since the US-listed company can cash out comparatively small sums (when stacked alongside its revenue base) and buy both ownership and access to information in startups, giving it early warning data on what’s emerging. Given that Coinbase is an obvious incumbent — and sort of gatekeeper — in the crypto market, its investments make sense.
But investments are being made and investments are being made. And it seems that the newly announced FTX fund is a bit more aggressive than what Coinbase has been managing, despite its fairly rapid cadence of trades.
FTX’s crypto fund will be worth around $2 billion and, per interviews, could only be paid out this year. That’s a wild pace of investment that might remind you of one thing how quickly a16z got its recent $2.2 billion crypto fund up and running.
A few questions:
- Why does the crypto market need so much money when its user base is pretty small compared to the larger internet?
- Why are we using so much fiat to fund crypto?
These are interrelated questions. They add up to a simple confusion on my part as to why building things that are useful in the crypto market is so difficult. Coinbase and FTX exist on the fringes of the crypto world, transporting money back and forth between the traditional economy and its possible future. That they’re investing is smart, but the amount of money they’re willing to invest, combined with what traditional venture capitalists are also throwing at blockchain startups, has me a bit confused – what is it all being spent on?
The two major blockchains are established and hardly new (Ethereum was invented in 2013 and launched in 2015; the Bitcoin white paper appeared in 2008); Stablecoins exist and have a number of good, stable players; and a bunch of capital has flowed into NFT marketplaces and a few crypto games. Some of them have even built modest player bases. But it does feel a bit focused when we compare the amount of money pouring into the space against what we can see in terms of usable results.
Institutional investor reports that a total of $32.8 billion was invested in “crypto and blockchain technology companies” last year. There might be a lot of stuff coming out soon that’s built with this money that will blow our minds, but now, well over a decade after Bitcoin said, “Hello, world,” I’m still not using any blockchain-powered apps or services today. Unless I’m tinkering with some part of the crypto world for research purposes.
And I spend more time online than I care to admit! Perhaps the new FTX fund will launch the mass-market blockchain product that isn’t just another vehicle for speculation. Let’s wait and see, I suppose.
