Adam Back reveals that venture capital’s initial coin offerings (ICOs) have resulted in a lack of funding within the Bitcoin ecosystem.

The development of the Bitcoin ecosystem may have been hindered by initial coin offerings (ICOs), as market research shows that venture capitalists (VCs) have heavily invested in non-Bitcoin assets over the past five years.

During a conversation with Cointelegraph’s Joseph Hall at the Lugano Plan B Summer School in Switzerland, Blockstream CEO Adam Back pointed out the disparity between the lack of VC investment in Bitcoin (BTC) and its dominant position in the total cryptocurrency market capitalization.

Back referred to market research conducted by Trammell Venture Partners, which revealed that VCs have been pouring their funds into the ICO frenzy that followed the launch of Ethereum and smart contract functionality.

He also mentioned that spending on ICOs by venture capitalists has decreased in recent years after an initial surge, driven by the attraction of “early liquidity.” Back stated:

“You know, buying discounted tokens, waiting for the company they invested in to do some marketing and then selling the discounted tokens on to retail investors before there’s even a product.”

Back acknowledged that ICOs have made investors a lot of money, but they haven’t necessarily resulted in usable and valuable products reaching the market due to misaligned incentives.

Related: What is Bitcoin, and how does it work?

According to Trammell Ventures’ report, 97% of venture capital investments in recent years have flowed into “crypto” rather than Bitcoin. Back highlighted that ICOs, altcoins, discounted tokens, and other projects have attracted investors, which is surprising considering the real-world use and stickiness of Bitcoin. He said:

“That’s kind of shocking if you think about it because the actual kind of real-world uses stickiness. Exchange volume is the other way around, it’s 90% Bitcoin or more.”

Back stated that while this category of investors is underfunding the Bitcoin space, builders within the ecosystem are producing more innovation and product value compared to the “crypto” ICOs that have received the majority of VC spending.

The failure of FTX and the collapse of decentralized finance projects like Terra/LUNA may have influenced a shift in VC funding behavior. Back noted that non-Bitcoin crypto products have not seen an increase in investments, while Bitcoin startups are experiencing renewed interest. He said:

“Bitcoin-related startup investment, I think particularly at an early stage, had doubled in the last year. So that’s a positive.”

Meanwhile, Jack Dorsey, the co-founder of Twitter and a Bitcoin advocate, donated $5 million to the Bitcoin developer support nonprofit Brink.

Back’s Blockstream and Lightning Labs are significant contributors to the ongoing development of the Bitcoin protocol, with each employing eight dedicated developers.

This interview is part of an upcoming Cointelegraph documentary about attending a Bitcoin School. Subscribe here ( to watch.

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