• The intensifying conflict between Russia and Ukraine has highlighted the use case around cybersecurity and Web3, industry experts say
  • Venture capitalists are going to want in on the growing space, analysts say

Increasing concern over the escalating conflict in Ukraine is likely to lead to a renewed push into decentralized finance and Web3 investments, experts say.

While crypto has always faced criticism for its bad actors, according to Jessica Rabe, co-founder of DataTrek Research, digital assets are still a necessary “decentralized way to store and transfer capital.”

“There are too many positive and lucrative opportunities with the blockchain and Web3 that venture capitalists will want to keep trying to capitalize on,” Rabe said.

Venture capital investments into blockchain startups have hit $3.8 billion so far in 2022, on pace to surpass 2021’s total of $17.9 billion, according to Crunchbase data. Crypto startups received $2.1 billion in 2020 and $2.9 billion in 2019.

“We expect VCs to keep putting money to work in the blockchain and Web3 amid the push to a decentralized internet and finance,” Rabe said. “Big Tech companies dominate today’s internet, so Web3 offers the opportunity to develop the next major online platforms and apps to drive engagement and therefore profits.”

The war in Ukraine underscores the need for decentralized solutions, according to Hunter Horsley, CEO of crypto asset manager Bitwise.

“As it pertains to Web3, I think [the conflict] is absolutely galvanizing entrepreneurs to work on building the decentralized, permissionless systems of the future,” Horsley said. “I think you’ll see more projects and likely investments in identity and media and nonprofit fundraising and DAOs, and a renewed conviction in the importance of the existing platforms like Bitcoin, Ethereum and layer-1s and DeFi.”

Cybersecurity in particular is expected to see major growth, Rabe said, “especially with hacks and cyber threats stemming from the Russia and Ukraine conflict shining a light on its importance.”

The three largest cybersecurity-focused ETFs have all increased in assets under management by more than 9% over the past five days. The Global X Cybersecurity ETF is up 11.4%.

“VCs putting more money to work in cybersecurity is positive for investors in public markets, who have taken notable interest in the space since Russia invaded Ukraine,” Rabe said.

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  • Blockworks
    Senior Reporter
    Casey Wagner is a New York-based business journalist covering regulation, legislation, digital asset investment firms, market structure, central banks and governments, and CBDCs. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies. Contact Casey via email at [email protected]