Although Peter Thiel may be controversial for his outspoken political views that often clash with those of Silicon Valley type, his acumen for investing and picking winning startup ideas is rarely in doubt.
Long before the cryptocurrency phenomenon spread like wildfire, Thiel was already famous for his investment picks. His $500,000 angel investment in Facebook turned into a post-IPO fortune, and he has had a hand in big names like SpaceX, AirBnB, and payment processor Stripe. Moreover, Thiel has gone on record stating his belief in bitcoin’s explosive growth. Thus, the PayPal co-founder’s recent move to support Block.one, the developer behind EOS which raised a record $4 billion during its offering, should come as no surprise to industry enthusiasts.
His bullish attitude towards the sector has seen him strategically invest across the blockchain ecosystem over the past few years, allocating noteworthy sums from his Founders Fund towards Tagomi and Harbor. He has also been open about his desire to bring big investors into the blockchain sphere. However, the latest allocation to EOS could reflect a serious directional change in strategy, and investors should take note. With a promise to build a better, more scalable protocol for blockchain, EOS has found itself the center of attention in an often bitcoin-centric universe.
Shifting Ecosystem Momentum
Thiel’s decision to invest in Block.one, the company responsible for developing EOSIO, represents a sharp departure from his other blockchain-based investments to date. Joining high-profile investors like Mike Novogratz, Bitmain Technologies, and Moore Capital Management, Thiel’s latest allocation represents the changing mindset and gradual maturation of blockchain as a widely applicable technology platform for other ideas to flourish.
The investment announcement shows a growing trend in the sector. Serious investors are seeking out those projects that can provide more than a simple solution to a problem. This is clearly evidenced by the most well-funded and VC-backed blockchain projects. Cryptocurrencies continue to command the top spot in terms of attention, but the rest of the field is rounded out by companies building enterprise software, projects focused on improved mining, and those developing better crypto payment solutions.
EOS, one of the most promising projects (as well as one of the most well-funded) is building more than a narrow solution. Instead, the EOSIO ecosystem is a protocol—much like Ethereum—and not an application. The difference is more than semantic; the former is about building solutions that are meant to improve blockchain functionality, while the latter are simply programs that provide a specific function. In this sense, projects like the Lightning network stand out, as their goal is to upgrade the ecosystem and provide broader functionality.
Why Protocols Present The Smarter Path Towards Success
Investors seeking out companies that offer broader protocols or use cases as opposed to narrow applications is not news. Such is the case of Ripple, a cryptocurrency designed specifically to settle cross-border transactions and large payments between parties. The company counts major multinationals such as Accenture, Santander Bank’s investment branch, and BlockChain Capital among its investors. Similarly, The Elephant, a smaller but promising platform that is building a secondary market to tokenize equity in private companies, recently announced a partnership with Eastmore Group, a prominent institutional investor. Eastmore has joined the Elephant STO as the first institutional investor.
Eastmore joining the Elephant platform reveals an interesting - and perhaps entirely innocuous - tidbit that ties it to Peter Thiel’s crypto moves as it offers investment opportunities in shares of unicorn companies such as Palantir Technologies, a company Thiel founded in 2003 to apply software similar to PayPal's fraud recognition systems to reduce terrorism while preserving civil liberties.
The Elephant, a secondary market platform, has shares of unicorn companies including Palantir Technologies, IronSource, Outbrain, BlaBlaCar, and Gett.
Taking Thiel’s Cues
While newer entrants into the ecosystem may not be able to reap the same sort of returns as earlier investors, the shifting blockchain landscape might signal a significant transformation in terms of attitudes towards investing. With more institutional investors entering the field, few of these investors are likely to try and hit a home run in cryptocurrencies. Rather, they will likely echo Thiel’s moves towards embracing protocols over products.
As the only viable path towards greater adoption in a field that is encountering difficulties in terms of accessibility and scalability, projects like EOS represent the next logical leap forward. While greater institutional and accredited investor participation seems like a foregone conclusion, the investment tsunami that it potentially represents may not find its way to highly capitalized coins, but instead the protocols that deliver the most applicable solutions. The only question that remains is, what will be the next EOS? Early investors like Thiel will undoubtedly be rewarded, while laggards and later adopters will see their potential returns diminished by a belated entrance.