From Sony to Coinbase: Why the Future of Business is on the Blockchain
From Sony to Coinbase: Why the Future of Business is on the Blockchain
Blockchain Coinvestors Fund VII
Our fifth fund of funds, Blockchain Coinvestors Fund VII-A, LP and Blockchain Coinvestors Fund VII-B, (collectively, "Fund VII") has launched with our next close expected later this year. We invite accredited investors to reach out to ir@blockchaincoinvestors.com for more information on how a single investment accesses global, diversified exposure to leading early stage blockchain venture investments.
Amidst the daily grind and constant media storm, it’s easy to lose sight of the big picture. At Blockchain Coinvestors, as early-stage investors, we constantly remind ourselves to stay focused on the long term and anticipate where the next opportunity lies.
With this perspective, we encourage you to take a step back and consider the broader trends shaping the future. When we look at the landscape objectively, the accumulating evidence points toward one conclusion: now is the time to invest in the wave of blockchain innovation.
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Back in the early 1990s, the internet faced a wave of skepticism and even ridicule. The idea that every business, even non-tech ones, would one day need a website seemed absurd. Dismissed by many as a fleeting trend, the internet was seen as a playground for scams, shady deals, and the tech-obsessed.
Yet fast forward to today, and the internet has transformed from a quirky experiment to an essential infrastructure for every business. With over a trillion active websites, it’s hard to imagine a company without one. This hindsight now feels obvious, but it highlights how innovations initially underestimated can become indispensable.
This brings us to a fascinating development that caught our attention this past quarter:
Sony, a $100 billion technology company behind PlayStation, has announced plans to launch its own blockchain, called Soneium.
Why would a company like Sony, with no immediate ties to cryptocurrency, venture into blockchain? Isn’t blockchain just for crypto companies?
We believe this move provides important clues to an ongoing technological transformation. While blockchain is still in its early stages, developments like Sony’s resonate with the early rise of websites in the 90s. Just as businesses once underestimated the need for an online presence, many now overlook the potential of blockchain infrastructure to reshape operations, generate revenue, and enhance customer experience.
While not every company will build its own blockchain, Sony’s venture suggests the possibilities are vast. In this month’s Letter from London, we explore how blockchain is not just a buzzword; it’s becoming a powerful tool with real utility across industries. And as more companies discover its benefits, we expect blockchain’s growth trajectory to follow the path of the internet revolution.
'Base' Demonstrates Compelling Business Case
For those who haven’t been following closely, Coinbase—the $50 billion blockchain giant—has recently launched its own blockchain, Base, a Layer 2 solution built on Ethereum. Coinbase, a publicly traded U.S. company, has grown substantially as a platform for buying, selling, holding, and trading cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), generating over $3 billion in revenue in 2023.
When Coinbase announced Base, its new Layer 2 blockchain, the rationale wasn’t immediately clear. Layer 2 protocols like Base are designed to improve the efficiency of Layer 1 blockchains, such as Ethereum, by offloading transactions from the main chain. This reduces congestion, lowers fees, and increases transaction throughput. Although independent from Ethereum, Base remains connected to it, leveraging Ethereum’s smart contract capabilities and interoperability with Ethereum-based applications.
One of the most intriguing aspects of Base is how quickly it has become a meaningful revenue source for Coinbase. In its Q2 earnings report, Coinbase revealed that transactions on Base grew 300% quarter-over-quarter, generating $52 million—nearly 8% of Coinbase’s total quarterly revenue. In a short time, Base has emerged as the number one Layer 2 blockchain by transaction volume and the second by total value locked.
Why Are Companies Launching Their Own Blockchains?
Examining the case of Coinbase, it’s clear that there is a compelling business rationale for launching proprietary blockchains. The key benefits include:
Internalizing Revenue: With over 100 million users, why should Coinbase continue facilitating transactions on external networks or payment systems? By launching Base, Coinbase brings transaction revenue in-house, capturing a share of fees that would otherwise go to third parties.
Enhancing Customer Experience and Loyalty: Running its own blockchain allows Coinbase to build a cohesive ecosystem where its products integrate seamlessly, delivering an improved customer experience. This interoperability also encourages customer loyalty through unique rewards and incentives.
Leveraging Open-Source Innovation: By launching Base within the Ethereum ecosystem and keeping it open to developers, Coinbase taps into the global developer community. If a developer creates a successful application on Base, Coinbase benefits, allowing it to stay on the cutting edge and avoid the “innovator’s dilemma.”
In other words, Coinbase’s unique position as one of the primary on-and-off ramps to the blockchain ecosystem in the U.S., combined with its massive user base, empowers it to generate revenue that would otherwise flow to other networks, all while enhancing the user experience.
The success of Base has inspired other major crypto players to take similar steps. Kraken, the sixth-largest crypto exchange globally, recently announced a Layer 2 network based on technology from Optimism—the same provider behind Base. Similarly, Uniswap, a leading decentralized exchange, launched Unichain, its own Layer 2 solution on Ethereum.
This growing trend suggests that proprietary blockchains could become a vital strategy for major players in the crypto space, as they seek to consolidate revenue streams and foster innovation within their own ecosystems.
Sony’s Bold Move into Blockchain
Against the backdrop of companies like Coinbase launching proprietary blockchains, Sony has announced the development of its own platform, Soneium. Led by Sony Block Solution Labs Pte. Ltd., a Singapore-based subsidiary, this ambitious initiative marks a strategic pivot for Sony, a company traditionally known for consumer electronics, entertainment, and gaming.
So, why is Sony diving into blockchain? The answer parallels Coinbase’s rationale for Base, aligned with Sony’s unique position as a diversified tech giant with valuable intellectual property spanning multiple industries. Soneium is envisioned as a blockchain platform that will integrate and enhance Sony’s offerings in entertainment, gaming, and electronics.
Imagine a future where every PlayStation game’s infrastructure is built on a Soneium. By embedding in-game economies directly on its blockchain, Sony could fundamentally reshape the gaming landscape and transform Soneium into a powerful revenue engine.
The strategic rationale behind Sony’s blockchain launch can be identified by 3 main points:
Revenue Generation: By developing its own blockchain platform, Sony positions itself to capitalize on the expanding Web3 market. As blockchain adoption accelerates, Sony stands to unlock new revenue streams through transaction fees, partnerships with third-party developers, and the creation of blockchain-powered products and services.
Customer Engagement and Loyalty: Web3 technology presents Sony with opportunities to offer innovative customer rewards within the Soneium ecosystem. By creating a seamless, blockchain-enabled environment, Sony can enhance customer engagement and foster loyalty through tokenized rewards and immersive experiences across its entertainment platforms.
Innovation and Competitiveness: With an open-source approach, Soneium invites global developers to build on Sony’s platform. If a developer creates a successful application, Sony directly benefits, enabling it to stay at the forefront of technological innovation and avoid stagnation.
With a global footprint of 900 million Sony devices, supported by a rich ecosystem of movies, music, and the PlayStation Network, Sony is positioned to bring blockchain technology into everyday life. Leveraging its assets and distribution channels, Soneium will explore services that integrate seamlessly with Sony’s products, creating new opportunities across its business sectors.
In essence, by launching its own blockchain, Sony aims to drive revenue, improve customer experience, and foster innovation—compelling reasons to build products on blockchain infrastructure.
The View From London
While it hasn’t made major headlines, Sony—one of the world’s most influential tech companies—has made a bold move into blockchain with the launch of Soneium. This step exemplifies a broader trend: leading companies across industries are increasingly recognizing the vast potential of hosting their own blockchains.
When stepping back to look at these market developments, two key takeaways emerge:
Ethereum Virtual Machine (EVM) Dominance: The EVM continues to establish itself as the blockchain industry’s standard, with major institutions like BlackRock launching products on Ethereum. Coinbase, Kraken, and Uniswap are just the latest in a series of prominent players building on this platform, reinforcing Ethereum’s position as the leading hub for innovation. Now, with Sony launching an EVM-compatible blockchain, venture capitalists should take note of Ethereum’s expanding ecosystem as it solidifies its dominance in the sector.
Massive Revenue Potential for Established Enterprises: Whether in crypto or beyond, companies that host their own blockchain effectively create their own transaction networks. This enables them to internalize transaction fees and streamline operations once outsourced to traditional financial intermediaries or other networks. The success of Coinbase’s Layer 2 blockchain, Base, underscores just how profitable this strategy can be.
We see this as just the beginning. With publicly traded companies like Sony and Coinbase recognizing the value of having a blockchain, it’s easy to imagine others following suit. Why wouldn’t Apple, with billions of users, launch a blockchain to power Apple Pay and bypass traditional payment networks like Visa and Mastercard?
While small businesses, like local bakeries, might not need a blockchain today (just as they didn’t need websites years ago), it’s increasingly clear that large corporations are leaving substantial revenue and growth opportunities on the table by relying on traditional infrastructure. As blockchain innovation accelerates, more companies will seize this opportunity to modernize their financial and operational infrastructure, fostering innovation and capturing value in the process.
Already in 2024, we’ve seen BlackRock make a strong entrance into the blockchain space, and now Sony—operating in a completely different industry—has followed.
Adoption is well underway, for those paying attention.
For us as early-stage venture investors, the best practice is always to place capital ahead of powerful tailwinds that are strengthening and blowing in favor of the investments we make. It could not be a better time to be a Blockchain venture investor and we encourage you to reach out and ask for our Fund VII materials by contacting our team at ir@blockchaincoinvestors.com.
Thank you for reading.
Mitch Mechigian
Partner, London
About Blockchain Coinvestors
Blockchain Coinvestors is the best way to invest in blockchain businesses. Our vision is that digital monies, commodities, and assets are inevitable and all of the world’s financial infrastructure must be upgraded. Our mission is to provide broad coverage of early stage blockchain investments and access to emerging blockchain unicorns. Blockchain Coinvestors’ investment strategies are now in their 10th year and are backed by 400+ investors globally. To date we have invested in 40+ pure play blockchain venture capital funds in the Americas, Asia, and Europe and in a combined portfolio of 1,250+ blockchain companies and projects including 95 blockchain unicorns. Blockchain Coinvestors’ first fund of funds ranks in the top decile amongst all funds in its category on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in London, New York, Grand Cayman, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.
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