M&As will make or break the future of the blockchain industry. Will tech giants take the leap?
Blockchain is a record-keeping technology that supports cryptocurrency. Simply put, a blockchain is a type of database that collects information in groups or “blocks”. These blocks have a fixed storage capacity that, when filled, is chained to 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 in the form of digital currency, smart devices, supply chain sensors, cross-border payments, asset management and insurance claims processing. With blockchain technology booming, many companies are putting up a fight to be the best and most accessible. So, what does the future look like?
Mergers & Acquisitions Are The Future
When companies merge they become one, rather than having two separate brand identities. When acquired, the larger company buys the smaller one to gather its market share and brand name. These deals allow businesses to unify all financial resources and assets to develop a product, reaching a larger audience.
When a new technology is developed in the market, there will be small players in the market who have created a concept out of it and gathered all the resources necessary for its implementation. Obviously, they cannot compete with large companies that hold large 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 untapped solutions while larger companies have yet to use the technology. Now here’s the problem – large companies lack the agility to take the technology to the next level and small companies have the concept, but lack of resources to take the technology. Hence the need for M&A.
In the last 5-10 years Google, Amazon, Apple, Facebook have invested heavily in every disruptive technology except blockchain, AI, cloud storage, big data, IoT etc.
Why Have The Bigger Companies Neglected Blockchain?
One reason for this may be the decentralization of blockchain technology. Since its main essence is privacy and anonymity, GAFA companies that survive collecting data and selling ads understand that blockchain contradicts their business model. Big companies understand how risky the blockchain can be, if not managed properly. But they are as interested in technology as Facebook, AWS, and have their eyes on the Google block. This means a large blockchain merger or acquisition can happen sooner or later.
In the blockchain world, a startup can develop an innovative concept, but large companies are equipped with resources that attract startups. M&AS will allow companies of these two sizes to unify their usage and work towards blockchain innovation and scale the market. Another motivating factor for such cohesion is the fact that blockchain mergers and acquisitions are easy.
Because the technology is so decentralized, there will be less tedious paper documents as they will be replaced by smart contracts that will allow business owners to pay for special tasks and results rather than sales pitches, reducing the risk of speculating fake data Does because the algorithm will check the quality, and the blockchain acquisition process is more transparent. Some days these acquisitions have a long way to go, but it certainly has a viable future. Concepts such as cryptocurrency are rapidly evolving which will make a move to larger companies sooner or later.