Blockchain for Impact Investors

As investors, you have probably seen some of the companies in your portfolio or in your pipeline jumping into the blockchain craze, driven by FOMO, hype, low to no regulation or maybe a genuine intention to address a real challenge. Every article about blockchain starts by stating, half-apologetically, that blockchain is not bitcoin and that it is very different from ICOs, associated scams and so on. I will skip that part; you can read it here.

Personally, my first contact with a blockchain project was with reading the white paper of ETHLend (I already bought my first BTC and Ethereum back in 2016). I was stunned. Collateralized lending in a totally decentralized and anonymous way on the blockchain: two private wallets, one escrow wallet and an amount of coins as security. That is all that was necessary; the rest was fully ruled by a smart contract. Two years later, it seems like a bare-bones application, but back then, I glimpsed the massive potential of such use cases.

Unfortunately, most of the “serious” blockchain discussions – as you might have discovered already – remain firmly in the realm of the conceptual, around the potential and “what might be possible when such and such is there.” Hence, the gap between the hype, the “blockchain potential” on one hand and the real, ongoing projects on the other hand can be vast.

Disappointment at first is undeniable, but that might be a good reason to sober up and understand concretely what blockchain is and is not for. To put it briefly, it is a decentralized and unalterable database. Each time a broker, an intermediary validating the transaction or a third party aiming at providing “trust” in the figure (think about the venerable Big Four ), gets involved, there might be potential to use a blockchain-based solution instead. Associated with it, each instance of need for traceability of ownership, origin or identity can also provide opportunities for the blockchain.

Large-scale applications are already happening in cryptocurrencies. Bitcoin transfer takes place in a decentralized and trustless way. However, such large-scale applications might not see the light until 5 or 10 years down the road in other areas. But once you understand and embrace the concept and the possibilities of blockchain, the sky is the limit in decomposing processes and transactions happening across your business/portfolio, from paying suppliers to voting decisions. You need to learn to debunk useless blockchain projects and “utility” coins purely generated to bypass regulations, and steer the reflection instead toward where blockchain will matter most. More focus on how blockchain can best deliver value will help move it further away from hype and closer to reality.

For impact investors, I have co-designed a “Blockchain for Impact” training to precisely help them better assess the opportunities and the challenges with intense and rigorous financial and impact lenses. You can find the concept deck here. Your feedback is most welcome! ( I know, what a long intro)

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