With Bitcoin crossing USD 66,000 and Ethereum touching a sweet number of USD 3,500, it’s a natural certitude that people feel crypto and blockchain are synonymous. But they are not.
“Most of the people, unfortunately, when they think of blockchain, they think about crypto prices. We very seldom talk about real technology underneath apart from the crypto native media platforms. There is crypto where the price moves up and down, and it has its volatility and the market supply-demand; and then there is a technology behind it, that is blockchain,” said Kavita Gupta, Founder & Managing Partner, Delta Blockchain Fund.
While cryptocurrency has always been in the limelight, Gupta and DBF are betting on the underlying infrastructure. Having been an early-stage investor in Polygon, she believes that the idea of infrastructure still needs to be revived. “We still need to build the stack, which makes the adoption in a very big way easy,” she added.
Blockchain has seen a strong adoption uptick in enterprises, particularly banks. “Most of the banks today around the world, use Blockchain technology, for their cash settlement, interbank transfers and settlements for immediate verifications. A lot of banks and conglomerates are coming together, trying to use it for their export, import, and supply chain settlements. So that brings in a bigger adoption in one go,” she adds.
In April, Citi India completed Blockchain-led Letter Of Credit transactions, reducing processing time to three hours. India’s apex banking body, the Reserve Bank of India, launched the retail Central Bank Digital Currency (CBDC) having components based on blockchain technology in 2022. The IBDIC (Indian Banks’ Digital Infrastructure Company) is a consortium of eighteen banks – Axis Bank, Bank Of Baroda, Canara Bank, Federal Bank, HDFC Bank, ICICI Bank, IDBI Bank, IDFC Bank, IndusInd Bank, Indian Bank, PNB, RBL Bank, Kotak Bank, South Indian Bank, Standard Chartered Bank, SBI, Yes Bank, Union Bank of India as investors where it aims to build blockchain and other emerging technology infrastructure.
Government role
Blockchain has seen a strong uptick among various governments and conglomerates. Case in point, the Dubai government has been pushing for blockchain innovations, garnering the title of ‘Blockchain Capital’ of the world. It has created the Global Blockchain Council to bring together the private and public sectors to start ideating the use cases of blockchain. It’s not only the government which has resulted in the title. Web3 startups are playing a huge role in it. The Dubai Free Zone is home to over 500 crypto startups.
But where does Southeast Asia, particularly India, stand? Gupta feels Pakistan is already very big on crypto. The Bitcoin mining system, currency or remittances, has been built out of the need and necessity of the local currency failing. “Pakistan and SriLanka now are the adopters the way people in Venezuela, Nigeria, and Kenya started picking up crypto because they wanted some other currency to rely on instead of the local currency,” Gupta shares.
Courtesy of its strong-stable government and no coup history, India is in a different bucket, “Crypto is banned in India. The exchanges do not allow you to take money outside. But blockchain is a technology that is not curbed in the country.” Gupta sees Indian developers ruling the blockchain technology due to privacy and security inherently being a part of our coding infrastructure. Notably, Web3 has potential to create 2.2 M Indian jobs and is expected to contribute USD 1.1T to the country’s GDP by 2032.
At present, there are 450+ Web3 startups in the country, with a good over fifty per cent being blockchain startups.
The missing links
Gupta finds the benefits of blockchain are very much tangible for enterprises but the gaps linger, “There are three bigger points where I see it is taking a little longer. The first is that sometimes a lot of people are confused with Bitcoin as a price as a cryptocurrency versus all the technology which is coming out. Secondly, when enterprises build something on Polygon, do the users need to deal with the token? Can they do it in a subscription standard system? And lastly, the lack of regulations in different countries and states.”
“A lot of big companies which are global, they don’t want to go into technology thinking that they may have to change the whole program,” she adds. Gupta and Delta Blockchain Fund are betting on non-sexy aspects of Web3 which are the building blocks of the ecosystem.
The future outlook
Every bull cycle, we see valuations going through the roof and Gupta has seen it happen with two of her portfolio companies- Polygon and Starkware. “I’m hoping one or two more from our portfolio will go there. Last time we saw approximately 20 unicorns, I think the number is going to be more than doubled this time,” she shares. Recently, its portfolio company, Karma3 Labs, raised USD 4.5M in a seed round led by Galaxy and IDEO CoLab Ventures to build OpenRank, a decentralized reputation protocol.
Gupta’s father is still comfortable and inclined towards a physical bank. Gupta still uses traditional banks but does everything online. However, for her niece, the idea of a brick-and-mortar bank is an obsolete one. “For them, crypto payments, getting the rewards in crypto and investing for them are like the speculative cycle of cryptos and their NFTs as an asset is the true marketplace reality,” Gupta states.
Being a venture capitalist, Gupta was bound to be asked for advice from founders wanting to build a good and stable startup in India. “Focus on the tech. Don’t suffer the token and the bull-bear cycle. Use that cycle to go and raise for the real tech. But focus on the tech. If you have the real tech and have the adoption, your every other game will just come and fall into place. Because most seasoned and strategic VCs, like us who have been in space for a long time, can just see through it two minutes into the pitch deck. And then even if you’re building something great, the respect factor goes away. Some of the best technologies have taken two to four years to find a very perfect market fit or to even create a market around it. So, it is okay if your technology doesn’t get fit within a year,” she concludes.