Blockchain: Not All About the Money

If time travel were possible, many would use it to convince their younger selves to load up on Bitcoin. At its launch in 2009, one Bitcoin could be had for a fraction of a cent; in 2017, however, its value climbed from US$830 to a December high of US$19,300. 

But while the seesawing prices of Bitcoin, Ether, Ripple and their ilk grab headlines and spark gold rushes, it is the technology that underlies these cryptocurrencies—known as blockchain—that deserves the real recognition. A method that allows a permanent, encrypted record of transactions to be stored in a decentralised fashion on multiple computers, blockchain’s applications extend well beyond the realm of cryptocurrencies. 

“After the internet, the blockchain is going to be a huge democratising force which also builds trust and accountability,” says Ms Swati Chaturvedi, co-founder and CEO of San Francisco-based angel investing platform Propel(x). “It's applicable wherever there is a transaction, whether it’s in financial services, retail or government, and it’s going to have a huge impact.”

Identifying a Burning Need

Ms Chaturvedi and fellow Massachusetts Institute of Technology alumnus Mr Wang Lisheng co-founded Propel(x) in 2013, with the aim of using investment capital to make a real impact on the world. “Our speciality is in deep tech startups, which we define as companies that are founded either on a scientific discovery or on a significant engineering innovation,” Ms Chaturvedi explains. 

Propel(x) helps accredited investors discover and evaluate such startups, with the added assistance of insights from industry experts. Since 2014, its platform has helped to finance more than 50 deep tech companies in sectors such as blockchain, biotechnology, clean energy, space and information technology and communications, she says. 

Although blockchain is still a nascent technology, many new and existing companies have already jumped on the bandwagon, spawning everything from the Long Island Iced Tea Corp’s Long Blockchain pivot to Kodak’s KodakCoin virtual currency. But a blockchain-based startup that wants to grow sustainably must identify areas that truly have a burning need for the technology, says Ms Chaturvedi.

“There are already systems for managing records, so you have to find a business where this need for managing transactions in an authenticated, trustworthy way is really important. While it may be useful, it’s not as if the leaders of every business will find it imperative,” she explains. “Where blockchain technology will be most successful, and where I think a sustainable business exists, is where this need exists, desperately.”

Beyond Bitcoin 

Payments, of course, is a prime example of a niche area where trust is highly valued, thus explaining the popularity of virtual currencies like Bitcoin. But trust, accountability and privacy—all attributes of the blockchain—are also critical for a wide range of other applications, says Ms Chaturvedi. These include banking, supply chains, land titling, electronic health records and voter identities, just to name a few.  

One startup that Propel(x) helped finance is Agralogics, which uses big data analytics and blockchain technology to improve the operational efficiency of complex food ecosystems. With multiple stakeholders—such as growers, processors, regulators, banks, shippers and retailers—involved, the data in food ecosystems is increasingly fragmented and disorganised.

With blockchain, Agralogics is able not only to track the movement and sales of food, but also to trace the origins of all the ingredients that went into it. The company can also keep tabs on many other types of information, right down to what fertilisers were used to grow the ingredients, how much water went into food production and whether the food contains allergens. “Food traceability is now a big mandate. Knowing where your food came from is important, but what Agralogics is doing goes way beyond that,” says Ms Chaturvedi.

With demand for blockchain technology growing across many industries, BlockApps, another startup financed through Propel(x), was set up to offer blockchain as a service. The company provides a development environment for businesses to build and scale decentralised applications and has worked with customers in sectors such as financial services and mining, says Ms Chaturvedi. The world’s largest mining firm BHP Billiton, for example, has used BlockApps to build applications on the Ethereum blockchain that allow it to record the movements and production of minerals and ore in real time, and thus to improve its supply chain processes. 

Less Hype, More Substance

Of the challenges that blockchain startups face, market adoption looms the largest, says Ms Chaturvedi. “If there are legacy systems that exist, and there is no great need to actually transform, then market adoption is going to be slow,” she explains. 

Thus, while some entrepreneurs may feel the need to pitch grand visions, this is not necessarily what will serve them well, she adds. Investors, she says, are more likely to be interested in startups with credible teams that have already developed some traction with real (and preferably paying) customers. “The better businesses are those that start with a niche, get customers and then grow from there.”

On a broader level, blockchain companies also struggle with public perception of the technology, adds Ms Chaturvedi. “People don’t really know what blockchain is, and often confuse it with cryptocurrencies.” Efforts to educate investors and the general public—through the media, courses and case studies, for example—are thus needed to enhance understanding of blockchain solutions, she says. 

In the future, Ms Chaturvedi is keen to see more examples of blockchain technology being used to make a real difference, such as in the public sector to overcome bureaucracy and corruption, as well as during elections to authenticate votes and voter identities. 

“I’d like to see some of these [blockchain solutions] become successful at scale,” she says. “That’s when I’d feel excited that the risk has been mitigated and that these solutions are ripe for mainstreaming.”

Being one of our focus areas under our Deep Tech Nexus strategy, we believe blockchain has the potential to transform societies. As such, we have made several investments in the blockchain space, and hold blockchain-related events regularly.