500 Startups is currently looking for more blockchain-based projects focused on solving interoperability and privacy issues. Bonnie Cheung, the venture partner at the firm, believes that these are two key challenges preventing the mass adoption of blockchain technology.
n April 2018, for their Seed Accelerator, they backed Metadium, a platform that provides the infrastructure for providers to develop a business on the blockchain, and Solana, a high-performance blockchain that can run over 700,000 transactions per second (tps).
In an interview with China Money Network, Cheung outlined her beliefs on the blockchain industry, the challenges it faces before mass adoption, what the best investment opportunities and significant trends in the industry, and how 500 Startups makes investment decisions when it comes to blockchain projects.
Cheung mentioned that 500 Startups is focusing on three critical areas in the blockchain industry which include scalability, inter-chain operability, and privacy.
Scalability remains a significant problem for the industry because “if you look at transaction throughput, Visa can do an average of 2,000 transactions per second,” said Cheung. “Paypal can do around 500, but Bitcoin is about seven transactions per second, and Ethereum maxes out at 50.” Cheung believes that the industry remains quite underdeveloped when it comes to the “throughput we want to see” today.
Since there isn’t a one-size-fits-all blockchain to accommodate for every need, inter-chain operability has become the firm’s second key focus. With so many different blockchains, it’s essential to be able to communicate with each of these different blockchains effectively. Although this may be difficult, there will be many opportunities that will emerge.
While many people assume cryptocurrencies provide anonymity, it’s not entirely accurate. Cheung believes that with a Bitcoin or Ethereum address, it’s easy to find out further information concerning transaction habits, transaction volume and other pieces of information made available on the public blockchain. It is for these reasons that Cheung cited privacy as the third key area of focus.
From an investment perspective, Cheung is more interested in projects that solve problems concerning inter-chain operability and privacy. While scalability is an important issue, Cheung has seen many different companies looking to tackle scalability and her “allocation for scalability projects is perhaps full.”
Cheung mentioned in the interview that when it comes to blockchain projects, one of the key standouts is the team’s technical expertise, especially in distributed networks and blockchain technology.
In comparison to 500 Startups’ early stage VC investments, when it comes to blockchain-based projects, they care a lot about the blockchain project’s community. Examples include their GitHub activities, the conversations in the community on apps like Telegram or Wechat.
Finally, the VC firm looks at the token economics of the project. They go through the whitepaper to understand how the token is set up, what the ICO looks like, the events after the ICO and how token distribution is managed.