Lightspeed: Interesting aspects of cryptos

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Venture Capital funds have invested USD 17 billion in firms that operate in the crypto-assets segment in the first half of 2021.

The amount raised by the crypto-asset sector is more than the market cap of DLF, Tata Motors, and Coal India separately.

The investment is nearly equal to the total funds raised in the past years, and we still have two months left.

But, unfortunately, India has a small portion invested in the crypto space.

In 2021, Indian crypto-asset startups have attracted only USD 163 million in Venture capital funds. A large chunk came in September when Coin DCX raised USD 90 million.

The unfriendly and rigid regulatory environment made it difficult for crypto startups to attract VC funds. The 2018 circular of RBI compelled many crypto exchanges to shut down.

Lightspeed ventures have so far invested in 17 crypto and blockchain projects globally. FTX, Blockchain.com, Zerion are a few notable names. They are not so active in India because of the unfriendly regulatory environment where investing in crypto was borderline illegal. But, in 2017, Lightspeed invested in a startup called Elemential labs.

However, the regulatory environment is changing and shaping itself, making it more comfortable to take up the risk to invest in Indian crypto startups.

Lightspeed is looking to invest in pan or regional-India crypto exchanges that are highly profitable and make money by charging a trading fee of 0.1% to 0.7% per transaction and from OTC markets where the charge is high.

The crypto exchanges have added new categories for trading, like WazirX adding NFTs or an exchange token. Over time, many crypto exchanges will enter neo-bank categories in crypto–yield products, wallets, crypto banks, etc.

‘Mega exchanges’ such as Coinbase and Binance are expanding. Regional crypto exchanges will also become big with better localization.

Lightspeed is also looking forward to investing in Non-fungible trade (NFTs) and decentralized finance (DeFi). It is in talks with many promising startups, and it also regrets missing out on some good ones.

Investments in L1 and L2 solutions are also under evaluation because there is an opportunity to build up new internet here.

The type of applications of cryptos will benefit from the scalability, Web 3.0 (third generation of internet services), and decentralization.

Decentralized Finance (DeFi) is peer-to-peer finance. The main characteristics of finance are owning assets, generating yield, borrowing, and lending, which are done using protocols running on blockchains like Ethereum.

The contractual aspects of finance, like what happens during defaults are taken care of by the mathematical of blockchain technology. With the help of DeFi, one can easily lend and borrow without any paperwork in a fraction of time, which is impossible in fiat currencies. DeFi is one of the spicy parts of cryptos.

NFTs are buying and selling digital goods using crypto as currency. It digitizes art, pop culture, life experiences, and sports moments. Lightspeed had invested in CryptoKitties in 2017, where one can digitally ‘own’ and ‘breed’ kittens.

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