M&As will make or break the future of the blockchain industry. Will tech giants take the leap?
Blockchain is the record-keeping technology that supports cryptocurrencies. Simply put, a blockchain is a type of database that collects information in groups or “blocks”. These blocks have a certain storage capacity which, when filled, are chained onto the previously filled block, forming a chain. Blockchain technology is an ideal system for risk-free management and transparency. Its encrypted nature allows this technology to be used for finance as digital currency, smart appliances, supply chain sensors, cross-border payments, asset management, and insurance claims processing. With the blockchain technology booming, many companies are putting up the fight to be the best and most accessible. So, how does the future look?
Mergers & Acquisitions Are The Future
When companies merge, they become one, instead of having two separate brand identities. When acquisitions are made, the bigger company buys the smaller one to gather its market share and brand name. These deals allow businesses to unite all the financial resources and assets to develop a product, reaching bigger audiences.
When a new technology is developed in the market, there will be smaller players in the market who have created a concept out of it and gathered all the resources they will need for its implementation. Obviously, they cannot compete with the bigger companies who hold bigger shares in the market while looking for disruptive technologies that they can leverage on.
In the blockchain industry, it is often the case that smaller companies develop new unused solutions while bigger companies are yet to make use of the technology. Now here is the problem – big companies lack the agility to take the technology to the next level and small companies that have the concept ready but lack resources. Hence, the need for M&A.
In the last 5-10 years, Google, Amazon, Apple, Facebook have invested heavily in every disruptive technology like AI, cloud storage, big data, IoT, etc, except for blockchain.
Why Have The Bigger Companies Neglected Blockchain?
One of the reasons can be decentralization of blockchain technology. Since its main essence is privacy and anonymity, GAFA companies who survive on collecting data and selling ads understand that blockchain opposes their business model. Big companies understand how much of a threat blockchain can be, if not managed correctly. But they’re sure interested in the technology as Facebook, AWS, and Google have their eyes on the block. This means, there might be a big blockchain merger or acquisition sooner or later.
In the blockchain world, a startup can develop an innovative concept, but bigger companies are equipped with resources which attract startups. M&As will allow these two sizes of companies to unite their recoused and work towards blockchain innovation and scale the market. Another motivating factor for such a unison is the fact that blockchain mergers and acquisitions are easy.
Because the technology is so decentralised, there will be less tedious paper documentation as they will be replaced by smart contracts that will allow business owners to pay for particular actions and results instead of sales pitches, it minimizes the risk of speculating fake data as algorithms will check the quality,and blockchain acquisition process is more transparent. Some day these acquisitions have a long way to go but it surely is a practical future. Concepts like cryptocurrencies are developing rapidly which will make bigger companies make a move, sooner or later.