The rise of blockchain technology
Blockchain made its first introduction in 2008 initially designed as a host for Bitcoin cryptocurrency. However, as time progressed, blockchain technology was increasingly recognized for its unprecedented security in other industries as well, which continues to fuel its rise to this day.
There are two main views toward the blockchain industry: some claim that it’s a foundational technology that will revolutionize our global infrastructure, and some believe that it is an overrated technology that is not all that great.
According to those favoring the technology, blockchain is expected to slowly take over the world because of its transparent and impeccable security. Blockchain enables record immutability—meaning that it becomes theoretically impossible to secretly meddle with transactional records. Also, it is claimed to be efficient, fast, and easily verifiable. It is estimated that blockchain technology could help financial institutions save up to $12 billion a year.
Contracts, transactions, and the records of them are a few of the main definitive structures in the world’s financial, legal, and political systems. However, it is claimed by some that these structures fail to keep up with the fast-paced digital transformation of our global economy.
However, critics claim that ledger immutability is not always a good thing since it prevents the correction of mistakes and removal of private information, which is a data regulation right in some jurisdictions, such as the European Union.
Currently, the compound annual growth rate of the blockchain industry stands at 56.3% and by 2029 it is expected to reach a valuation of $163.83 billion. Also, around 250,000 Bitcoin transactions are done in a single day as of August 2022 and 10% of the global population owns cryptocurrency.
As Harvard Business Review puts it, the potential applications of blockchain are immeasurable since it can be implemented in almost every industry. It has the potential to eliminate the need for intermediaries like lawyers, brokers, and bankers since blockchain technology allows for immediate verification of stock ownership and transactions.
The spending on blockchain solutions rose exponentially from 2017 to 2021 as well and is expected to increase dramatically by 2024. In 2017, the spendings on blockchain solutions capped at almost $1 billion, and in 2021 it was already at $6.6 billion. However, it is estimated that the spendings will increase to nearly $19 billion by 2024.
It is clear that the topic of blockchain technology is on the rise and for that reason, we have prepared a trend report on blockchain companies to see what our data shows.
This report will cover the following aspects:
- How did the number of new blockchain companies change globally during the period 2018-2022;
- Top 3 most externally funded blockchain companies in the world and their headcount growth trends;
- The concentration of blockchain companies in different regions;
Research question
- What are the company growth trends for the blockchain sector?
Hypothesis
Blockchain companies are growing in number and headcount due to the benefits and utility of this technology.
Key insights
- The number of newly founded blockchain companies is decreasing;
- Continent-wise, since 2018, most new blockchain companies were founded in Europe;
- Country-wise, since 2018, most new blockchain companies were founded in the United States;
- The most externally funded blockchain companies of the analyzed period are from the United States;
- The most funded companies operate in FinTech or IT sectors.
Methodology and limitations
This report is based on 18,000 newly founded company profiles from one of the most popular online business platforms during the period from 2018 to 2022. However, a large number of companies may be created in other countries where our source is either not operating or not popular. For this reason, the report reflects the trends of western countries more accurately.
The extraction process was performed as follows:
- Selected over 18,000 companies around the world that had the term blockchain in their specialties field;
- Extracted historical headcount data for each of the blockchain companies and filtered the top 10 companies with the highest number of employees;
- Extracted funding data for each of the blockchain companies and filtered the top 10 most funded companies in the world.
NOTE: The year 2022 had not finished yet by the time this report was written, therefore this report only includes the data for the first half of 2022 and not the entire year. Also, this trend report focuses solely on the newly founded blockchain companies, and not all blockchain companies that exist.
Report findings
The number of newly founded blockchain companies (2018-2022)
In 2018, the number of newly founded blockchain companies was at its highest (8,112) within the research period. However, in 2019 the number dipped by 61%.
From 2019 to 2021 a more consistent trend could be seen, but in the first half of 2022, it decreased significantly again by 86.2% compared to the end of 2021. If this trend persists, the number of newly founded blockchain companies by the end of 2022 could be remarkably lower than it was in 2021. This decrease could have a more accurate explanation: the crash of the cryptocurrency market. Blockchain enables cryptocurrency, therefore it relies heavily on blockchain. 2022 has been rough in terms of economy: recession, inflation, increased interest rates and living costs. This leaves both the big investors and ordinary people with less money dedicated to investing.
Furthermore, because of the increased costs of living, people are shifting their capital to less volatile assets. Overall, cryptocurrencies have lost about $2 trillion in value as of July 2022, after reaching around $3 trillion in November 2021.
These factors could have contributed to the fall of newly founded blockchain companies worldwide. Also, since the entire crypto market is extremely volatile, there is no saying whether the trend will recover or continue going down.
Where are new blockchain companies founded?
As data shows, the most blockchain companies during the analyzed period in N. America were founded in the United States, capping at 3749 companies. Canada shows a significantly lower number - 591.
In Europe, the three countries with the highest number of newly founded blockchain companies are the United Kingdom (1427), France (656), and Spain (483).
In Asia, the leading country in terms of newly founded blockchain companies is India, standing at 1237 companies. The other two countries are Singapore (606) and United Arab Emirates (280).
The number of newly founded blockchain companies by region (2018-2022)
As data suggests, Europe takes the top place in terms of newly founded blockchain companies worldwide. One reason for this could be Europe’s goal to become a leader, an innovator, and a home to blockchain technology, important platforms, applications, and companies.
The European Commission even has a blockchain strategy in place, the most important parts of it being building a pan-European public services blockchain, promoting legal certainty, raising funding for research and development, and promoting blockchain for sustainability, among other factors.
The European Commission also believes that blockchain could revolutionize the way the world works and how people share information and carry out transactions online.
The number of newly founded blockchain companies in top countries of N. America, Europe, and Asia (2018-2022)
N. America
Even though the data for 2022 only accounts for the first half of the year, a downward trend is still visible. There was a slight uptrend in 2021, but looking at the entire period, 2018 was the year when a significantly higher number of blockchain companies were founded in the scope of the analyzed period.
Nevertheless, the U.S. had the highest number of newly founded blockchain companies in North America and fell significantly in recent years, whereas Canada and Mexico did not show any drastic changes.
Europe
A similar downward trend can be seen in Europe as well. The United Kingdom had the highest number of newly founded blockchain companies, followed by France and Spain, but in the first half of 2022, all three countries showed a downtrend.
Asia
The same tendencies can be seen in Asia, too. India and Singapore started out strong in 2018, but in the first half of 2022, the number of newly founded blockchain companies fell dramatically to only a fraction of the initial 2018 number.
Most externally funded blockchain companies and their sizes
These are the most funded companies in their respective regions. Almost all of them are either in the IT industry or Computer Software/Games. Figure and Fnality International are in the Financial Services industry, and BitCloudFork is in the Venture Capital & Private Equity Principals industry.
It begs the assumption that investors are more attracted to the blockchain companies that operate in the FinTech, Information Technology, and Computer Software/Games industries.
Top 3 blockchain companies in terms of outside investments and their headcount growth
As of the first half of 2022, three blockchain companies stand out in terms of headcount size:
- Figure. Residing in Charlotte, North Carolina, Figure provides financial services through blockchain technology.
- Fireblocks. Residing in New York, NY, Fireblocks provides software to manage digital asset operations.
- Forte. Residing in San Francisco, CA, Forte provides a platform for game publishers to integrate blockchain technology.
Figure showed the most consistent pace of headcount growth throughout the entire period. Fireblocks entered an exponential growth phase in the second quarter of 2021 and continued to do so for a full year. Forte, on the other hand, also entered a notable growth period in the second quarter of 2021, but not nearly enough to catch up with the other companies.
For reference, the average size of a newly founded blockchain company in the period of 2018-2022 is 56.6 (or 51-200). As a result, it’s safe to assume that these three companies achieved significantly above-average results in terms of headcount growth.
Summary
From what the data shows, it is clear that the number of newly founded blockchain companies fell drastically in the first half of 2022.
Many experts expect blockchain to revolutionize the world and anticipate that the business value added by blockchain will reach more than $3.1 trillion by 2030. However, ever since 2018, the amount of new blockchain companies has reduced significantly. Therefore, it could be argued that the existing blockchain companies are enough for now and there might be no demand for many new blockchain startups right now.
As mentioned before, it may take decades for blockchain to seep into the global financial, legal, and political infrastructure and there are many blockchain companies already that might have filled the existing demand. Perhaps in the foreseeable future, if the demand rises, there will be another boom of newly founded blockchain companies.
However, even though there are two sides to the coin, some governments seem to accept the idea of a decentralized database that blockchain offers. The European Commission, for instance, is a great example of it, which seeks to pave the way for blockchain technology in our daily lives.
The data suggests the same, too. The region that had the most newly founded blockchain companies throughout the analyzed period of 2018-2022 was Europe, but the concentration of blockchain companies was highest in the U.S.
