On March 04, 2020, India finally got the trigger for the resurgence of its crypto ecosystem.  came a stifling two years after RBI banned banks from facilitating banking services to crypto exchanges.

The RBI directive will unlock opportunities for the fledgeling Indian crypto ecosystem: The return of digital assets as an investment vehicle is just one of them. Now with the connotation of digital assets being illegal quashed, blockchain tech is legitimized in the minds of India’s developer and investor community which will lead to vigorous strides in development.Key players in the Indian Blockchain Ecosystem. Credits: 

Although the , development efforts continued in India during this regulatory crypto winter. Startups that continued to build through the lull have raised funds from notable investors, these include Nuo, Matic (Disclosure: I work with Matic Network), Instadapp etc.

Befittingly India is now seeing substantial interest from investors who want to get involved, .

Binance commands over 70% of the crypto volume and decided to build a direct pipe into the lucrative Indian market by investing in WazirX. They are now launching a $50 Mn fund to further pipe in blockchain startups in India into Binance’s ecosystem— Pranav Sharma (General Partner — )

Noted investor Tim Draper in his interview to INC42, also expressed his desire to invest in the Indian startups:

Leading investors including the likes of Polychain, Sequoia, Binance and Coinbase have invested in Indian startups during the crypto winter and seem to be returning with vigour to expand their portfolios.

The rationale for Crypto VC deals in India

Indian crypto ecosystem has remained largely subdued relative to the rest of the world in terms of its potential, largely because of the regulatory hurdles. There was little liquidity in the Indian crypto start-up space as well which means that the valuations in India are low.

With a policy framework in place, there is a strong reason to believe that valuation multiples will catch up with the rest of the world as startups become successful.

Liquid, an exchange was valued at  when the volume was around $60 million. One of India’s exchanges — CoinDCX has been doing a volume of  and is valued at around $15 million. Compared to the global 20x, the Indian exchange has a valuation to volume ratio of 1–1.5x, which is rather low. The global and distributed nature of the crypto industry means that these valuation gaps will close sooner than later. Therefore, it makes strategic sense to invest in the Indian crypto startup ecosystem.

With the shackles off after India’s regulatory watershed moment, in this post we evaluate major segments where investments will be made in India. Before we dive in, we briefly want to touch upon how the value flows in crypto, to help visualize where value accrual will happen:

How a user navigates the crypto ecosystem

Stages of value flow in Crypto:

1. Discovery
2. Acquisition
3. Deployment & Exploration
4. Exit: Off ramps

Acquisition infra will allow other value-add services to be built around existing liquidity pools — This is where value accrual will take place in the short to medium term.Over a longer horizon, Blockchain-powered Apps (DApps) will start accruing value to the Deployment & Exploration layer as they onboard more users and gain leverage. These users will be incentivized stakeholders and owners of a network where powerful communities will be created. Think —  — how on transactions and Five focus areas for Investments in the Indian Crypto Ecosystem :

1. Acquisition Infrastructure

Liquidity is king, and currently, liquidity is highly fractured as major exchanges do not share order books. Also, users do not want to bear the cognitive load of switching platforms for incremental features, thus exchanges will morph into platforms offering a diverse set of services not only to acquire but also to retain users.

Cryptocurrency exchanges have already started seeing an onslaught of activity — Binance’s acquisition of WazirX and Okex’s partnership with CoinDCX are some of the first.

Acquisition infra layer that will warrant attention from investors includes products that allow easier interfacing with both the trading and DApp layers of the ecosystem.

Let us break it down into three segments:

A) Equivalents of legacy finance products
This includes platforms that provide users with trading tools, lending and derivatives products. These products will enhance the experience of the users already on the exchange platforms and will deepen the moat for exchanges by making it less likely for the users to switch.

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Mudrex is a platform that Provides algorithmic trading using a drag and drop functionality. The platform supports integrations from leading exchanges like Binance, Coinbase Pro, Bitmex, Deribit, etc. It is backed by Y-combinator and enables traders to build and execute trading algos/strategies without having to code.

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Bank of Hodlers in building a neo bank with cryptocurrencies at its center. On the platform today, users can earn high yields by keeping their cryptocurrencies in their BOH wallet or get a crypto or INR loan with their assets. They’re working closely with banks in India to issue bank accounts and a crypto credit card to complement their cross-chain lending platform.

Provides trading tools to enable advanced order types while allowing users to connect to their accounts on leading exchanges.
Essentially you get access to tools that would not be available on your home exchange and allows you to execute your custom trading and risk management strategy without having to code.

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A service powered by Bitbns that allows users to invest in bitcoin through a SIP. Why does one use SIP? One because they don’t know which stocks to buy and two because they don’t know when to buy. So extending this type of product to digital assets makes sense. A product that allows investors to create a basket of crypto assets and invest at a user-defined frequency. This lets the investor Dollar/Rupee cost average and in turn, significantly improve returns over a long period.

Custody Solutions:
Storage and management of cryptocurrencies are still difficult for traditional investors. In India, where institutions are yet to tap into crypto markets, a locally designed and compliant custody solution is much desired but we haven’t come across any startup in India that is aiming to create such a solution.

B) Services facilitating Easier Onboarding — Fiat to Crypto Onramps/ Vernacular Platforms

Exchanges are allowing multiple options to traders to transfer fiat to convert to crypto. But a lot of users don’t necessarily fall in the trader bracket. Thus we need solutions that can offer simpler onboarding from fiat to crypto, to empower users to pay the gas fees to interact with applications on-chain and also purchase digital assets like NFT’s (ERC-721’s).India is a huge country with a diverse demographic,  and so the early movers in the digital asset segment will be handsomely rewarded as well.

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Transak is a single integration for applications to accept fiat-to-crypto deposits and withdrawals from a global user base. It provides a fiat on-ramp for the UK, Europe, and India. It does this by aggregating fiat on-ramps from around the world and abstracting away the complexity of local compliance, payment methods, and operations.

Vernacular exchange platforms:
Few exchanges have  by targeting local communities — e.g Biki in China. A similar trend is expected to be followed in India given we have .

Buyucoin gives users the option to interact in Hindi — first language of 43% of Indian populace

C) Regulatory compliant remittance company

India has one of the largest inward remittances and loses a significant portion to hefty fees. $80bn in 2018, paid $2.5bn in fees. We expect digital asset usage to reduce the fees but cutting out the middlemen.

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It is the fastest & cheapest way to send/request money to India. Incento supports 50+ countries, providing a seamless user experience to send money across borders with a few clicks.

“Business and talent are fast becoming global affairs, yet the rails that allow the two to exchange value are still stuck along domestic borders. Independent contractors act as their own forex brokers while getting paid in multiple currencies that are costly to exchange into something they can spend at home.” Bryan Dell — Consensys Tachyon

2. Infrastructure to Build

Currently, DApps are restricted to users who are early adopters of the technology. To unlock real value, we need to make it easy for users to transition smoothly from Web2.0 to Web 3.0. This starts with making the right kind of tools available to developers.Developers with a range of experiences are tinkering with DApps, some starting with their first language as Solidity and some transitioning from the Web 2.0 server world to this distributed server-less world.An experienced developer delving into building a DApp, not only has to switch their mental model from ‘computation centric’ — centralized to ‘storage-centric’- decentralized but also learn a set of completely new languages and frameworks. For a developer to be able to build friendlier dApps, it is important to have tools that enable faster turnarounds, and quicker onboardingTake into consideration interacting with a DApp, a first time user gets overwhelmed because they have to follow the following steps:Make an exchange accountTransfer fiat to buy EtherUnderstand the dynamics of gas costs and settlement timesTransfer Ether from exchange to their MetaMask accountPerform application actionsTo be able to develop friendlier DApps, the developer needs to ensure that the user doesn’t have such a formidable learning curve as a deterrent.With friendlier developer tooling more and more developers will fiddle with blockchain applications paving the way for mass adoption.

Dappkit is a platform to build, test, deploy & monitor dApps using the open-source tools that are popular and easy to use. In short, Firebase for Web3.0.

Already Working with prominent Web 3.0 projects like , , , , , , , etc. Also creating a  for learning Web 3.0 tech

Currently, the most adopted layer 2 solution! Matic provides developers with a scalable sidechain on Ethereum — enabling cheaper and faster transactions.

Developers deploying on Matic’s sidechains get access to a host of support services including meta-transactions, wallet integrations, oracle services, native NFT marketplaces & DEx’s. Matic has seen investments from both Binance and Coinbase ventures.

A meta transaction service that allows a third party to pay for the gas cost on the user’s behalf. Biconomy abstracts away the complexities of the onboarding as explained above and allows users to jump to Step -5mentioned above. It bridges the gaps that allow Web 2.0 users to seamlessly interact with DApps.

BlockVigil is a set of some of the most important tools bundled together in a single easy-to-use product. Building a full-stack DApp with webhooks is a matter of minutes with the tools they provide.
With a focus on entrepreneurial software developers, the tools abstract away all the intricate details of connecting the backend (that is your smart contract) with the front-end (what the user sees in their browser) to just a few clicks.
Setting up API access to a deployed smart contract and adding webhooks (eg., slack notifications for an emitted event) comes down to just uploading a file and clicking a few buttons.

MoiBit is one of the  flagship products for decentralized storage and is the decentralized storage partner of Matic, Dappkit and others. It has been used by several hackathons globally and successfully integrated by a pandemic management app called .

3. Bridging legacy finance and DeFi

State of DeFi from Although we have seen upwards of a Billion dollars locked in DeFi contracts at a point, that is a minuscule amount as compared to any other major investment asset class.India has the second-largest number of . It is undoubtedly one of those regions where the benefits of Decentralised Finance are needed. An application that can target this cohort, can help bring massive crypto adoption.Users want better, transparent services and higher returns, but while keeping the experience simple. You might get a friend interested in telling her that she can earn 8% as compared to the 3% she gets in her bank account. But getting her to take the leap after learning the complexities of crypto transactions is a tough ask.Thus we need solutions that bridge the gap between the traditional finance experience and decentralized finance. These services will tackle complications that currently hinder the adoption curve. We’ve seen some projects from India which have embarked to tackle these issues and have made their mark globally: ,  being the frontrunners.

One-stop solution for managing all DeFi protocols and making them mobile-friendly without giving away your private keys.
Composability of the building blocks of DeFi allows a lot of innovative use cases to be developed. For example, Compound, bZx, Aave all these lending protocols offer exactly the same features but different UI/UX. Thus aggregator interfaces like Frontier will play a big role in DeFi adoption by providing a Unified UX across the products.

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 (DSA) to extract the complexities between DeFi protocols, end-users, and developers to be able to seamlessly use/develop on DeFi. DSA makes it easy for the portability of assets, complex transactions with new things like Flash Loans which were not possible in the traditional financial Infrastructure.

Finets is India’s first decentralized finance (DeFi) application specialized in co-operative finance models, which enables normal people in India to participate in the decentralized world. As part of the same DeFi initiative, Aicumen has also been developing asset and local currency based DAO, to support financial inclusion through rupee-backed stablecoins (RuCoin).

INR Stablecoin
Nilesh Shah, the Managing Director of Kotak AMC suggested in  as to why and how India should monetize its massive gold stash. With blockchains, a gold-backed stablecoin denominated in INR is not a far fetched dream. Indians have to pay storage costs to their banks to store their gold. This illiquid gold can be made liquid by issuing a stablecoin which in turn can be used to lend out so that gold holders can earn interest. This will bring more liquidity in the system and financialise an otherwise illiquid asset.

We’ve seen USDT, USDC, DAI, and several other Dollar backed stablecoins. But to spur development at the grassroots level and especially to enable retails interfacing we will need a Rupee backed cryptocurrency.

Whew!!
Let’s take a pause here and take a look at what Stripe did for online payments.

“The tools available to developers were so limited that the checkout experience for end users lacked the intuitive elegance of other core user experience areas. Taken together, it was clear to Patrick and John that there was a need for a developer-friendly payment company. That was the motivation for the company that ultimately became Stripe” — “Stripe is a game changer. I’ve been using it for a few months and honestly its the best API I’ve ever used. The documentation is clear and concise. Its customized to your account so you can literally copy and paste and see the result. Just like it says, it gets out of your way. I was up and running and accepting recurring payments in less than an hour or so.” — 

If online payments having an incumbent like Paypal could be improved by such a wide margin — Imagine DeFi — which doesn’t have its ‘Paypal’ yet, there is a huge opportunity for a player to come in and provide that AHA moment to DApp devs and change the game.We are already seeing efforts made by some startups in this direction.

“Frontier is working on a new open-source product called Unifront — Stripe for DeFi, which enables building on DeFi easier for anyone. Unifront will reduce the research and development efforts to build on top of existing DeFi Protocols.” —  (Founder — Frontier)

“With the new  on InstaDApp. We’re removing the need to learn solidity in order to build complex DeFi application on top of Ethereum. They can build with normal web2 code.” —  ( Co-Founder Instadapp)

4. Developer Education & Communities

Traditionally media houses have been acquisition targets to disseminate information, to influence, or to create and spread narratives. Similarly in the open-source community platforms that provide access to developers’ mindshare will be extremely valuable. Be it DAO’s for governance, fork debates, or choosing a platform to build on — a lot of these decisions will be influenced via developer communities. did not come as a surprise to many given that Indians are the 3rd largest developer community on Github.With an effervescent student developer community and a focus on technical education, this number is only going to grow. More and more developers are opening up to the idea of a career of being a blockchain protocol + Decentralized App developer, with blockchain being the close favourite among emerging technologies alongside AI/ML.To supercharge development we need to create awareness of the tech’s potential and augment the same with simplified educational resources. Such resources, when made available to students, will unleash a huge surge in blockchain projects being undertaken by Indian Developers.

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Building a thriving blockchain developer ecosystem in India by helping communities host incredible online + in-person hackathons with their powerful hackathon platform.

It is leading the charge, to increase awareness regarding blockchain as a technology to build on by  and also .They have access to a formidable developer base of over 60,000 developers and have had over 4,000 project submissions through the hackathons organized on their platform.The genesis of  was at one of the hackathons organized by Devfolio —  (Asia’s biggest Ethereum hackathon) and  started as a hackathon project at  (India’s biggest community hackathon).

The money legos hackathon by  is especially aimed at hackers who want to tinker with DeFi!

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Building an Integrated platform for e-learning, employment & career solutions in the blockchain space with an objective is to help the community understand, experiment, expand, and grow the applications of this innovative technology. The huge gap between the supply and demand of the blockchain resources.

In conclusion:

The leading Indian blockchain startups have just raised south of ~ $30 mn in the capital and have shipped products that are well respected across the ecosystem -e.g Matic, Instadapp, Nuo, WazirX, CoinDcX. They have a combined valuation of more than $400 Mn.

The first wave of Indian startups have done well and made a dent with global players like Binance and Coinbase taking note. These projects are the ones who had to put up a fight for their survival, to establish India as a key player of the global blockchain ecosystem.

As this First wave of Blockchain startups continues to push boundaries, my estimate is that they have the potential to capture over $2 Billion over the next 2 to 3 years.

We now have resources, capital and the legal system on the right path, that are at the disposal of entrepreneurs and developers to unleash the second wave of Indian blockchain startups. It is proven that in an emerging sector that the second wave is mightier. So, if there are 10 startups in this wave, there could be even 50 or more in the coming one.For these Wave 2 projects, there are two publicly announced capital pools available:

: $ 50 million
: $ 0.5 million

Also, we now have a capital pool dedicated to educational efforts:
: $1.3 million

With these resources and the initiatives, the next wave of Indian crypto startups is set to disrupt the incumbents and create new pathways.

They will not just Build for India 🇮🇳, but the world 🌎 !

A huge shout out to , ,  who helped this piece take shape with multiple reviews and feedback. Special thanks to  for his insights and patience!

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Disclosure: I work with Matic Network which has been featured in the Infra segment of the ecosystem.

*This article has been authored in collaboration with *