The total value of venture capital (VC) investment into blockchain technologies and Bitcoin companies totalled $290 million in the first six months of the year, with more than 30 start-ups receiving funding in that time.
This is according to market analyst firm Juniper Research, which notes more than a third of all investment was accounted for by three companies: Circle, a social payment provider; Blockstream, a sidechain developer; and Digital Asset Holdings, a distributed ledger solutions provider.
Financial services companies around the world have been focusing on developing blockchain technology, with advocates saying it has the potential to save billions of dollars in costs and speed up transaction times.
The technology, which underpins the digital currency Bitcoin, creates a shared database in which participants can trace every transaction.
Although an earlier report by Forrester notes mainstream adoption of blockchain technology is still 10 years away, the new Juniper research highlights the increasing diversification of nascent blockchain deployments, with applications ranging from identity to asset management.
It pinpoints the banking sector as being particularly proactive, with several banks having already adopted the Ripple blockchain protocol and others piloting competing solutions.
The research claims that in areas such as transaction settlement, the introduction of a blockchain-based system would substantially reduce the risk of error and the time taken for error checking.
Furthermore, it argues that in cross-border remittance, the technology could allow new entrants to offer services at significantly lower costs to consumers.
In SA, large enterprises, especially banks, are beginning to dabble with blockchain technology, as they look to simplify their transactions. Last month, the country's big four bank Absa joined the international blockchain consortium, R3, teaming up with several local banks in an effort to develop Africa's first distributed ledger-based banking system.
Lee Naik, MD of Accenture Digital in SA, says blockchain's decentralisation and community-based assurance means it allows for faster and more secure transactions, comprehensive audit trails and greatly reduced costs, among other things.
"I'm incredibly excited about the potential applications across all industries," he notes. "Blockchain is effectively borderless, potentially enabling instant money transfers from any location. With Africa standing out as one of the largest and fastest-growing remittance markets in the world, blockchain could potentially free up billions in costly brokerage fees. Numerous start-ups and some large banks are already testing out Bitcoin and other wallet services in Kenya, Nigeria and South Africa," Naik adds.
"Blockchain isn't going to become mainstream overnight, but many companies - from small start-ups to major financial institutions - are already testing use cases in an attempt to be first to market. It's tempting to either try outrace the competition or sit back and wait until use cases are fairly established to swoop in as a best in class alternative."
However, the research cautions that if smart contracts use blockchain technology, then their contents, including, potentially, bugs or flaws, are visible to all the users of that blockchain. It cites the recent case where a flaw on the Decentralised Autonomous Organisation network was exploited by a third party, resulting in the misappropriation of crypto currency worth nearly $80 million.
"While blockchain technology offers the potential for increased speed, transparency and security across an array of verticals, there has to be rigorous and robust road testing in each unique use case before any decision is taken," says research author, Dr Windsor Holden.
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