Venture capital’s ICO gambits left Bitcoin ecosystem underfunded — Adam Back

Venture capital’s ICO gambits left Bitcoin ecosystem underfunded — Adam Back

Venture capitalists have favored ICOs in recent years, but Bitcoin-related startups are seeing renewed interest from investors.


Initial coin offerings (ICOs) may have hampered the development of the Bitcoin ecosystem, with market research reflecting a massive slant toward non-Bitcoin investments by venture capitalists (VCs) over the past five years.

Blockstream CEO Adam Back highlighted the juxtaposition between the lack of venture investment in Bitcoin (BTC) in comparison with its dominance of the total cryptocurrency market capitalization in conversation with Cointelegraph’s Joseph Hall at the Lugano Plan B Summer School in Lugano, Switzerland.

Adam Back alongside Cointelegraph’s Joseph Hall in Switzerland. Source: Cointelegraph

Back — the inventor of Hashcash, upon which Bitcoin’s proof-of-work algorithm was derived — pointed to market research published by Trammell Venture Partners that detailed VC flows into the ICO craze in the years following the launch of Ethereum and smart contract functionality.

Back said that venture capital spending on ICOs has wound down in recent years after an initial surge in attraction to “early liquidity,” saying:

“You know, buying discounted tokens, waiting for the company they invested in to do some marketing and then selling the discounted tokens on to retail investors before there’s even a product.”

Back added that ICOs had made investors a lot of money, but the phenomenon did not necessarily result in products that people can use and value getting to market because “incentives are misaligned.”

Related: What is Bitcoin, and how does it work?

Trammell Ventures’ report surveyed market data that reflects that 97% of venture capital investments over the past few years flowed into “crypto” and not Bitcoin. Back highlighted ICOs, altcoins, discounted tokens and other projects all attracting investors:

“That’s kind of shocking if you think about it, because the actual kind of real world uses stickiness. Exchange volume is the other way around, it’s 90% Bitcoin or more.”

Back said that while the Bitcoin space is being underfunded by this category of investors, builders within the ecosystem “produce more innovation and more product value” when compared with “crypto” ICOs that have attracted the lion’s share of VC spending.

The failure of FTX and implosion of decentralized finance projects like Terra/LUNA may have played a role in a shift in VC funding behavior as well. Back said that non-Bitcoin crypto products had not seen an increase in investments while Bitcoin startups were seeing renewed interest:

“Bitcoin-related startup investment, I think particularly at an early stage, had doubled in the last year. So that’s a positive.”

Meanwhile, Twitter co-founder and Bitcoin proponent Jack Dorsey donated $5 million to Bitcoin developer support nonprofit Brink.

Back’s Blockstream and Lightning Labs are attributed as significant resource contributors to the ongoing development of the Bitcoin protocol, both employing eight developers each dedicated to the preeminent cryptocurrency’s maintenance.

The interview is part of an upcoming Cointelegraph documentary about what it’s like to attend a Bitcoin School. Subscribe here ( to watch.

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