Outlier Ventures has released research showing that venture capital (VC) investment in the decentralized blockchain technology is at its highest level yet.

Its State of Blockchains for Q3 2018 report suggests that the rise in investment can be attributed to both the growing maturity of the industry and as an acting replacement of the dwindling initial coin offering (ICO) model which has suffered a sharp decline.

VC investments in blockchain stood at USD 900 million in 2017, expanding massively to USD 2.85 billion this year so far – an increase of 316%. These investments are also happening more frequently during earlier stages in the funding cycle than seen in the last quarter, while the US remains the number one source of this funding. A total of 119 VC deals have been disclosed this quarter.

Aron Van Ammers, founding partner of Outlier Ventures, said the rise in VC investment is paving the way for larger institutional investors to enter the cryptocurrency industry, while the new players are also more focused on providing them with institutional-grade solutions in areas such as cryptocurrency custody.

ICOs falling

The total capital raised in ICOs dropped from USD 3.8 billion in Q1 2018 to just USD 1 billion in Q3. Due to tightening regulatory restrictions, the report suggests that legal expenses have had an impact on the move away from ICOs, predicting that unless Bitcoin sees a substantial price recovery, the ICO model of 2017 cannot viably return.

Despite the downward trend, the quarter saw significant improvements in the ”traction and complexity” of tokens before they are launched in any form, with corporates and startups still viewing them as crucial for the Web 3.0 infrastructure.

Another important finding to note in the paper is the government’s changing opinions of blockchain as they increasingly look to create hospitable environments that foster industry growth. Pointing to the UK, France and Switzerland, it is stated that governments are no longer looking to issue token bans, which may have an impact in the near future on the growth of the ICO sector.

 

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