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Venture Capital Funds and Smart Contract Networks

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Written by   1310
5 months ago

There is no certainty any technology will succeed but we can assume that every piece of technology has a purpose and if developed and promoted correctly it can achieve its grand purpose.

There is a lot of talk lately about Venture Capital (VCs) and the effect they bring in the cryptocurrency sphere.

Jack expressed his dissaproval on Web3 generalizing the open source architecture of Web3 with private entities and VC funds, claiming web3 won't ever escape their grip.

(source)

VCs and Business Incubators are funds, usually pooled funds from various sources that seek for startup businesses and provide liquidity that would cover the cost for expansion and development.

There are issues with this type of funding, though, since VCs push for either an IPO or the sale of the startup to one of the market leaders, after the startup attains a particular size or certain targets have been reached.

Such funding also exists in the crypto world, and we watch today VC-backed networks rise into market caps we didn't expect.

The example of Solana

Solana is an example of a VC-backed blockchain project. Solana and plenty of companies working inside this ecosystem have received funding cumulatively reaching $2 billion, which was enough to make this crypto asset rise into the top-5 in market cap terms.

It suddenly became trending crypto just last year, and the funding was followed by heavy advertisement and promotion in social media, YouTube, etc.

A project few knew anything about in 2020, suddenly became a top one for the cryptocurrency industry.

The funding of some crypto startups was disanalogous to the market proportions and focused on projects with certain features, those projects structured to operate as companies rather than decentralized networks.

Interestingly, VC funding skipped most of the successful PoW blockchain networks and didn't focus on the decentralization aspect.

VCs focused on startup networks that can host:

  • Web3 applications

  • Smart Contracts (Defi, NFTs)

There is a big question mark on the decentralization aspect and its significance to VCs.

Mining decentralization is a crucial factor for blockchain networks. It produces immutability, and censorship resistance to blockchain networks. The failure to achieve decentralization reduces these elements and devalues the networks. Security of a blockchain depends on various factors today, and while with PoW it is simple to understand how decentralization works, PoS networks depend on multiple stakeholders validating transactions.

Solana has centralization issues and while this was mentioned in the various source since its beginning. However, decentralization wasn't a feature VCs were interested in as it seems.

Polygon and BSC are similar to Solana networks. Polygon has received funding in several rounds with the latest deal achieved funding by Sequoia reaching $450 million.

BSC has also plenty of collaborations with VC funds and incubators around the world but mostly based its success on the overwhelming resources and the profitable model of the Binance exchange.

Most of the smart-contract networks follow Ethereum's path of success and rebrand themselves as trends change to achieve part of the market they previously avoided.

Fantom, Terra Luna, Harmony, Avalance are some examples that proceeded with a similar approach achieving various deals and multiple rounds of VC funding.

Participation in multiple blockchain conferences, between 2020-2021 was decisive in achieving such deals at a time the interest in cryptocurrencies and smart contract networks was increasing.

All these networks have a common pattern. The founders are a controlling force, the networks are centralized and we witness how they behave at times of failure, and the VCs are "pumping" the tokens' price with enormous funding for the size of these startups.

A second feature most smart networks have in common is the introduction of a native token. Instead of using a re-tokenized version of ETH, they all created a native token used on the platforms for gas (fees for each transaction).

Supposedly, all these networks were a scaling solution to Ethereum, although as we witness lately, two of the top of them (Polygon and Solana) face multiple difficulties to keep the networks up and running.

IOTA is a historic example. It was yet another over-hyped new project in 2017, although in development since 2014. IOTA was advertised as a breakthrough in the industry since it wasn’t running a network with a different format to the blockchain. “Tangle” was supposed to be fast, feeless, secure, and decentralized.

It wasn’t anything of the above, though. A wallet was hacked, money was lost, and the devs simply took down the network for two weeks until they could fix the exploit while trying to recover the lost funds.

I wasn't surprised to read that Solana and Polygon networks faced DDoS attacks that slowed down transactions and made these networks unusable on multiple occasions.

This is the price of centralization. The blockchain networks and any similar tech, since it always deals with the transfer of value, it has to be decentralized.

The word trust is so significant that Satoshi mentioned it 14 times on the whitepaper. Blockchain networks preserve their value from the trustless features they contain.

Of course, this is a brilliant argument against the Lightning Network as well, a network that leans towards centralization with 99% of transactions controlled by financial hubs, with regulated KYC-enforced practices.

VCs should know by funding centralized entities, they are investing with a short-term vision.

SmartBCH is a new network, a robust smart contracts sidechain to Bitcoin Cash.

Perhaps funding can apply by investors outside the Bitcoin Cash ecosystem, although the model will not be the same as with Solana, Polygon, BSC, etc.

The aspect of decentralization should always be the focus. SmartBCH consensus is a hybrid PoW & PoS model. Even at this stage, smartBCH is more decentralized than most other smart contract networks, especially with the decentralized SHA Gate bridge release in the coming months.

While billions streamed into Solana, what are the expectations beyond short-term profit? In the blockchain field networks that occasionally suffer outages and shut down completely for hours or days, don't have a future.

The digital transfer of value must be uninterrupted and secure from attacks.

I'm sure if smartBCH gets represented by its founders in conferences it can attract quite a large funding from VCs. It can present results even at this beginning stage and can attract similar to Solana funding.

This in turn will increase the number of developers on the network and create some important infrastructure, but it may also have implications as VCs are profit-driven.

They will have to invest in BCH and stake to be part of the consensus model.

It is a process that will bring positive results, but until to a certain point. It is up to the terms of funding and the vision of the projects.

VCs will start taking profits according to their strategy and on a PoS system decision-making process can be problematic.

Can SmartBCH compete for VCs Funding?

SmartBCH today can compete against the top EVM compatible networks and soon will present SHA-Gate, a decentralized bridge that will deliver additional features and interoperability.

Venture Capital funds, usually want control and offer a direction but as Jack suggested in the aforementioned Tweet, they also demand control.

Web3 is not a technology that can be controlled, but as with everything on the internet, just 10 funds own the websites that generate 90% of the internet's traffic.

In these terms, Web3 is at the hands of VCs. However, Web3 is a window of opportunity as well. It only takes better negotiation terms, as some VCs embrace innovation and do not always demand control.

It is a double-edged sword decision, there is a risk but the good part is it doesn't affect the Bitcoin Cash network. SmartBCH is a side-product, exploring opportunities in the field of Ethereum smart contracts.

VCs are funds looking into startups and some have an approach that allows innovation to flourish without intervening in the process. These funds should be the focus instead of the highly speculative ones in case there is some kind of similar engagement.

SmartBCH has a long-term vision, one that has fewer financial incentives for smartBCH intrinsically, since by default it doesn't have a native token or a market cap.

The benefits of smartBCH are divided between Bitcoin Cash investors and miners. It is a development that has the potential to boost the price of BCH and increase its userbase and network effect.

In Conclusion: Metaverse Opportunities

(source)

While still at an early stage of the Metaverse, the hype surrounding it will calm down during the following years, since expectations will not immediately meet results.

Modern VR/AR technology is better than in previous decades and today’s internet speeds make a Metaverse viable. It will be a long process that will eventually create a virtual progressive economy parallel to the real one.

The race of controlling the Metaverse has already started with Zuckerberg simply changing Facebook’s name into Meta and claiming the Metaverse.

The Metaverse won’t just be a limited platform for gaming but a whole new range of opportunities and developments.

SmartBCH can become part of the evolution of the internet since it effectively deals with issues presented today in similar and highly regarded smart-contract networks.

SmartBCH is at a phase it explores decentralization, and soon funding opportunities may appear. Networks such as Cardano, Solana, Polkadot have already explored partnerships and agreed with several VCs.

SmartBCH did not proceed with the release of a pre-minted native token but used BCH directly. The success of smartBCH depends on Bitcoin Cash, although as a sidechain, smartBCH can only influence Bitcoin Cash positively.

Lead Image: by xresch, on Pixabay


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Comments

I think web3 will help liquidates cost of expansion and development of crypto.

$ 0.00
5 months ago

BCH I guess can compete anything.

$ 0.00
5 months ago

As I always say, your articles are very educational and that is why I try not to lose them.

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5 months ago

I have to admit until now, that you are a teacher to make works about crypto friends, your understanding is so deep about performance for me this is very easy to understand compared to me having to go to the platform, understanding in detail allows me to understand. keep it up for more crypto reviews.

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5 months ago