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Why Due Diligence is as Critical as Capital When Investing in Blockchain 

In the realm of tech investments, venture capitalists act as pioneers, charting the course through emerging sectors, including blockchain technology. However, a pressing concern at the forefront of industry discussions is the pivotal role of due diligence in these investments.

Calvin Ayre, the visionary founder of Ayre Group, a global enterprise supporting real estate projects, businesses, and technologies, addresses this critical issue. He emphasises the utmost significance of conducting rigorous processes before venturing capital into blockchain initiatives.

Calvin Ayre, founder of Ayre Group
Calvin Ayre, founder of Ayre Group

As the landscape of emerging technology companies continues to grow, venture capitalists (VCs) are at the forefront fuelling this expansion. There is steady flow of investment into AI startups across the globe, and, despite the demise of ‘crypto,’ with the Securities and Exchange Commission (SEC) unveiling a barrage of charges against two of the world’s largest crypto exchanges — Coinbase and Binance — investment continues to flow into blockchain technology.

The announcement that Andreessen Horowitz will establish its first international office in London – with a key priority to educate on blockchain – finally cements the UK government’s aim to grow the UK as a science superpower, embracing Web3 powered by blockchain technology, to enable startups to flourish and grow the economy.

These businesses investing in blockchain aren’t throwing good money after bad, they’re doing it because there’s no doubt that blockchain helps businesses operate better.

Spotlight on Bitcoin

While it may sound like a no-brainer, investment in blockchain is a firm bet for VCs, and crypto regulation and the recent classification of Bitcoin as a commodity by the SEC should give the confidence required for investing in the tech. However, things are not as black and white as they seem. Due diligence into any investment into blockchain is as critical as having or raising funds in the first place.

A while back, a group of developers made fundamental changes to the original Bitcoin protocol that, among other things, artificially constrained its capacity to scale. According to a report issued earlier this year by the Buffone Law Group, the protocol that resulted from these changes—currently trading as BTC—may now meet the definition of a security.

I have first-hand experience of just this, having recently completed a CHF500million (€516million/£443million) investment to obtain a majority share in leading global provider of blockchain technology, IP licensing and consulting services nChain. Because of the lack of clarity around the various deviations from the original protocol, and the ever-evolving enforcements around digital assets, a full and exhaustive legal review was critical to the decision to invest.

Based on this review, I would provide the following advice to VCs or investors in blockchain technology:

Conducting thorough due diligence is as critical as capital when investing in blockchain. The commission of an independent legal report, such as the one carried out by Buffone Law Group, is a crucial component of this due diligence process. It ensures that investors comprehensively understand the regulatory landscape before committing their funds.

Tokens that resemble securities — including by relying on the ongoing efforts of a centralised group of developers to maintain the protocol and increase token value — but fail to register as securities will ultimately face regulatory blowback that will erase any temporary benefits gained by this attempt to evade oversight.

By contrast, Bitcoin SV features a truly static and immutable base protocol that allows the BSV token to properly qualify as a commodity. In even starker contrast, the BSV Blockchain’s unbounded capacity to scale enables the development of a vast array of applications impacting everything from real estate to health care to supply chain management. This is only possible because BSV’s locked base protocol gives developers confidence that the foundation on which they’re building won’t suddenly shift under their feet.

BSV also offers data storage capabilities that corrupted protocols such as BTC can’t hope to provide. And BSV’s ultra-low transaction fees — measured in fractions of a cent — make the BSV Blockchain the only technology capable of handling the vast volume of transactions Web3 projects will demand. In an ever-evolving regulatory landscape, the ability to function as a currency rather than a ‘number go up’ security will continue to encourage investment, foster innovation and drive adoption.

As we journey through the exciting world of blockchain innovation, let’s remember that our commitment to due diligence, regulatory compliance, and informed decision-making will be critical in this ever-expanding universe of possibilities. Following these principles, we can look forward to a future where blockchain technology transforms industries, empowers individuals, and contributes to global economic growth and stability.


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