Private Equity and Innovations in Blockchain

Abstract

Advocates of blockchain claim widespread impact will be forthcoming shortly. However, the path of innovation in blockchain is uncharted. Investors will assess where blockchain innovation will profit first and most. The timing and impact of each blockchain innovation is a key consideration for business managers. Link, Ruhm, and Siegel (2014) suggest private equity investments forecast which innovations are likely to succeed. Previous research on private equity gives insight on why that ownership structure is especially successful. Private equity investments are collected for two periods and categorized according to basic blockchain components, basic cryptocurrency payment components, and decentralized applications, particularly applications in financial services. The results suggest investors have acted prudently, investing strongly in building blocks, payment systems and fundamental applications, showing a primary emphasis on refining blockchain and realizing standard blockchain protocols before investing in highly complex applications. Further, financial services applications dominate, suggesting investors see financial services as far and away the most likely industry for imminent deconstruction.

Blockchain in the age of industrial revolution: A systematic literature review using bibliometric analysis

“…Both Dorsey and Square's CFO cited Bitcoin's potential as the internet's intrinsic currency as the rationale for their investment. Similarly, Tesla disclosed its acquisition of over $1.5 billion worth of Bitcoins in 2021 as part of its treasury management strategy (Wolf & Domian, 2022).…”