Decentralized Applications Fund general partner, Sam Yilmaz, warns that the crypto sector is approaching a lean period of lower interest and investment, heightening the importance of VC capital.
Speaking to Cointelegraph ahead of his speech at the free International Virtual Crypto Summit on February 26-27, Sam Yilmaz discusses where he sees Bitcoin 2.0 heading in 2015 and the investment climate in the sector.
Following 2014's record US$335 million of VC investment into Bitcoin businesses, the first two months of 2015 have seen an even higher rate, which already resulted in US$105.84 million being raised. For many, this VC investment is seen as a sign of Bitcoin entering the mainstream.
Yilmaz, however, sought to balance this optimism with a cautionary note about how he sees the market developing for the rest of the year, stating:
“I would not be surprised to see a slowdown in the rate of growth, as the appetite for crypto seems to be shrinking, especially if the BTC price is any indicator.”
The Dapps General Partner explains that he sees the declining BTC-USD exchange price as a sign of an overall decrease in interest in Bitcoin and the crypto sector as a whole from the traditional investors. Such a decline would place startups in a harder position with only the best-funded and most resilient emerging on the other side.
Pointing to the successes of Dapps funded MaidSafe as an example, Yilmaz explains that in order for the decentralized sector to further develop, “[t]he pioneers need to show success to inspire new entrepreneurs. I see MaidSafe at the forefront of the inspiring figures with two successful test nets.”
In the mid-to-long term however, successes by these leaner startups could continue to increase the levels of development and deployment of further decentralized applications. Yilmaz expanded on the role of venture capital in this field, suggesting that:
"While the rate of growth in VC deployment will likely be in sync with the bitcoin prices, I'd think that both the deployment and obviously overall exposure will continue to grow in the mid-to-long term view."
Interview with Sam Yilmaz
Cointelegraph: Are you excited to see the level of venture capital investment coming into cryptocurrencies in 2015 so far? We've seen one investor saying that even US$ 1 billion investment could be possible. How do you see the year developing?
Sam Yilmaz: It's hard to know at the moment.
It's the free market and it's natural to see spurts of growth and stalling. I'd not be surprised to see a slowdown in the rate of growth, as the appetite for crypto seems to be shrinking, especially if the BTC price is any indicator.
“I'd think that viable business models may have a harder time finding their audience and consecutive rounds of investment as Bitcoin popularity declines. The tougher ones will persist and come out stronger on the other side, with greater attention per startup in the space.”
While the rate of growth in VC deployment will likely be in sync with the bitcoin price, I'd think that both the deployment and obviously overall exposure will continue to grow in the mid-to-long term view.
Another thing to harp on about is what this fluctuating rate of deployment means for the quality of the startups. I'd think that viable business models may have a harder time finding their audience and consecutive rounds of investment as Bitcoin popularity declines. The tougher ones will persist and come out stronger on the other side, with greater attention per startup in the space.
CT: Are there areas where you think decentralization could make a really positive difference, but where we haven't yet seen any implementation?
SY: Big areas are decentralized such as computation, bandwidth, storage, transportation, trading/exchange and communication. More concepts have emerged but I think we need a renewal of spirit, as the Dapps that already have started to execute, gain traction and prove the model functional.
The pioneers need to show success to inspire new entrepreneurs. I see MaidSafe at the forefront of the inspiring figures with two successful test nets.
CT: Your background is in engineering and material sciences. How do think that influences your view of the world of decentralization and the possibilities of blockchain influenced technology?
SY: I see the thermodynamics and the kinetics of the system we are in. I see what it needs to be more stable and the way to get there alongside the kinetic barriers/road blocks in the space.
There are some clear use cases and business models out there and quite a few that have gone through my desk, which if carried out, would be immensely valuable. However, kinetics gets in the way, inhibiting the possible attainment of more Mises' equilibrium.
We are sampling different configurations on how to set up our businesses and processes, which we inevitably do as entropy dictates, we find the different pathways to go from where we are now to the "more thermodynamically stable configuration" where more needs are met in the economy.
Ultimately, decentralized applications give us the more advanced tools to more effectively communicate the economic signals. What is more valuable to use where becomes clearer. This enables more efficient use of resources.
CT: What originally led you to become interested and involved in the sector itself?
SY: The opportunity to be on the ground floor of the next wave of technical innovation.
CT: What will you focus on during your address at the International Virtual Crypto Summit being held February 26?
SY: I'll talk about what a decentralized application is, why it is valuable (thermodynamics) and some crucial elements on how they should be built (kinetics).
CT: Are there any upcoming releases or news from the Decentralized Applications Fund stable that you can share with us?
SY: Releases! We are looking forward to pioneering many applications using the blockchain for more effective mechanisms of delivering the products. We should be hearing of MaidSafe's great news soon.
International Virtual Crypto Summit
You will be able to hear more from Sam Yilmaz at this weekend's free International Virtual Crypto Summit, where he will be one of the keynote speakers alongside Bitcoin evangelist Roger Ver and CEO of Cointelegraph, Toni Lane Casserly.
As the official media partner for the summit, Cointelegraph is proud to be taking part in what looks to be one of the most inclusive and well attended crypto events to date. The virtual nature of the summit means that crypto enthusiasts and experts from around the world can take part in the event without travel costs or visa issues.
Cointelegraph is also able to offer discounted booth rates for startups, investors, authors, and corporations looking to take their spot in this global gathering. To take advantage of this exclusive offer, get in touch with our team to get your discounted rate by writing to [email protected].
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