When it comes to hot cryptocurrency markets, Austin, Texas, is not the first city that comes to mind.
But if you dig a little deeper, the Texas capital is increasingly becoming a hotbed of blockchain activity.
A prime example in Austin is Factom, a top 30 global cryptocurrency company that uses the blockchain to keep records and identities more secure. It has a valuation of around $500 million and counts the Department of Homeland Security and the Bill and Melinda Gates Foundation among its customers. Menlo Park-based Draper Associates is a lead investor in the company.
Factom co-founder and former CTO Jack Lu moved on from the startup to create a new crypto-focused company called Wanchain in late 2016. In about one year, the startup—which originated in Asia but has headquarters in Austin—quietly executed one of 2017’s largest ICOs. In the ICO for its currency, Wancoin, Wanchain raised approximately 120,000 ETH (ethereum) worth approximately $36M. Today, that ETH is worth an estimated $120 million. Wancoins will be listed on exchanges imminently in Q1 2018. Wanchain describes itself as the only distributed financial infrastructure powered by private cross-blockchain applications.
Dustin Byington, president of Wanchain, is bullish on the city’s potential in the space.
“Austin is a natural—and currently budding—hub for cryptocurrency,” he told Crunchbase News. “It has a strong tech and startup community, a big Libertarian influence which the crypto ethos is built off of, and the macro trend of companies moving to Texas because of the lack of state income tax—which could really benefit this new industry.”
It’s just one of the many perks of operating a blockchain startup out of Texas’s capital.
Austin Makes Blockchain Applicable
Marcello Milteer, a UI designer and marketer by trade, is currently working as the director of product marketing for an Austin startup that plans to break into the advertising market by giving people a chance to earn cryptocurrency for watching movie trailers and ads.
Milteer has been running a podcast on the topic of crypto since 2015. He estimates that since then, there’s been close to one million downloads of his podcasts.
“There’s been a boom of interest,” he said. “And I see no signs of it slowing down.”
“It’s fledgling but promising,” he said. “There’s lots of interesting companies and concepts sprouting, often with unique use cases versus what you see in the valley.”
In general, he said, Bay Area-based blockchain companies tend to be more focused on improving the core technology (such as scaling issues), whereas Texas companies are addressing industry-specific problems using blockchain.
Overall, Sharma believes enterprise adoption for blockchain is slow everywhere; however, he noted that once enterprise adoption becomes the norm, more companies will likely emerge in Texas and the nation as a whole.
In his opinion, the cryptocurrency bubble is both good and bad for innovation.
“It’s good in the sense that it’s highlighting blockchain as a promising new technology which people can’t ignore,” Sharma said. “But it’s also creating an artificial sense of expectation, putting off institutional investors and hurting developers through high transaction fees.”
Crypto Finds A Home In Austin
Overall, when it comes to smaller U.S. cities, Austin comes in fourth when it comes to venture funding raised by bitcoin and blockchain startups (excluding ICO funding), according to Crunchbase data. Factom is the largest recipient, having raised a total of $9.5 million since its inception in 2015.
Another Austin-based crypto startup, Wanchain (“wan” means “many” in Chinese), launched software that essentially builds off ethereum’s codebase with monero-style privacy protection and cross-chain capabilities.
Ultimately, Wanchain’s vision is to rebuild the financial services industry using digital assets. Currently, databases used in the financial industry don’t communicate well together.
“The process is very slow, manual, and expensive,” Byington said. “And the entire financial industry works off this model.”
Wanchain claims to be “the first and only platform” to place global digital assets on a single blockchain so that databases will be able to more easily communicate. The new software also adds a level of privacy previously not seen in the crypto space, according to Byington.
“With bitcoin, ledgers were fully transparent,” he said. “We solved that problem by making it private. No one’s ever done that before.”
Wanchain’s goal is to eventually enable future banking applications such as decentralized exchanges, lending platforms, and asset management tools to run as simple smart contract applications on the Wanchain platform.
Byington likens the transformation to that of the photography industry.
“Not only did the photograph essentially go away, but the camera, for the most part, has been digitized as well,” he added. “When it comes to financial services, we think the next step is to digitize banks by making them apps that run on top of networks like Wanchain. Then you create an app that governs their movement.”
The Makings Of A Crypto Hub
As further evidence that Austin has been slowly growing its crypto scene, Factom CEO Paul Snow has been organizing the Texas Bitcoin Conference annually in the city since 2014 (with the exception of one year). There were about 800 attendees at the first conference.
“There was a lot of interest from early on,” Snow said. “Although investors are still largely in California and New York, more crypto companies are choosing Austin to start because the burn rate of a company is significantly easier to manage in Austin than compared to the west or east coast.”
There’s also a crypto meetup held every Tuesday night in North Austin, which dozens of people attend. Factom, according to Snow, is unique in the crypto space because there’s “no other blockchain technology that is a pure data solution.”
“Each participant can place their records into a timeline, and it efficiently creates a business process,” he said.
Under three contracts with the Department of Homeland Security, Factom is creating a framework to secure sensors and cameras themselves, as well as creating audit trails for the pictures and data they collect.
For the Bill and Melinda Gates Foundation, Factom is building a system to manage and track medical records in Africa.
The need is acute because of the necessity of good records in treating conditions like HIV and other contagious diseases, according to Snow.
“Failure to provide good records can lead to loss of life,” he said. “And this is in an area that can potentially be very unstable from a medical service point of view.”
The company is also working with major banks and insurance companies to provide cryptographic audits for things like loan origination and claims processing.
“The real value of Factom is delivering honest, auditable systems for business processes,” according to Snow. “The blockchain is going to be one of the most revolutionary technologies this century. And Factom has a premier seat at the table.”
Looking ahead, Austin’s position as an emerging crypto market appears to be a solid one. Whether the momentum will increase or wane remains to be seen. But there’s no doubt that the local players have the knowledge and enthusiasm to realize the market’s potential.
Editorial note: Article has been updated to replace Monetha with Wancoin and correct the value of coins.