Startups specialising in blockchain-based physical assets and applications – phygital products – and Decentralised Physical Infrastructure Network (DePIN) are emerging as the top favourites for venture capitals (VCs) and global investors in the UAE, an investment expert said.
UAE government’s initiatives in embracing technological advancements and creating a conducive regulatory environment is providing fertile ground for tech builders and investors across the globe, leading to many thought-leaders and notable industry figures relocating to the country, creating a ripple effect across the tech and investor ecosystem, Roderik van der Graaf, Founder of Lemniscap, a Kentucky, US-based VC operating globally, said.
The buzz around blockchain-based ventures comes amidst the surge in the development of products and assets across sectors through tokenisation – physical assets-backed crypto products for funding, including in the real estate sector in Dubai, where properties can be bought and sold using digital currencies such as Bitcoin.
“Looking ahead, we can expect to see greater levels of tokenisation in the property [real estate] and other sectors, which make blockchain-based tech ventures prime candidates for investments currently,” der Graaf told Arabian Business.
“When surveying the UAE landscape, we are particularly interested in opportunities at the intersection of blockchain and physical items – the emerging phygital space.
“We’re also very excited about ongoing developments in decentralised physical infrastructure, DePin,” he said.
DePIN is a concept that leverages blockchain technology and token incentives to facilitate the development of physical infrastructure in various sectors, including transportation, energy, and wireless networks.
The Lemniscap founder said the rising investor interest in blockchain and crypto-based startups is also because of the latest developments, including the growing excitement around Bitcoin’s potential as a programmable application layer – a move which can lead to unlocking hundreds of billions of latent capital in Bitcoin.
“Given the fragile state of the global economy, the perception of Bitcoin as a form of digital gold and a hedge against inflation also continues to gain traction.
“Everywhere you look, there is mounting evidence of crypto becoming increasingly more integrated into our society, particularly among millennials and Gen Z.”
Gaming and AI ventures
Der Graaf said ventures in gaming are another investor favourite as the sector is one of the most obvious verticals for consumer adoption in crypto.
“But it’s one of the most difficult ones to get right. The user experience is still very much impeded by the integration of blockchain, however, once this is solved, the opportunities for growth are massive,” he said.
VCs and investors are also paying close attention to ventures in the UAE, focusing on the confluence of blockchain and AI.
The Lemniscap founder said while AI applications and platforms continue to increase in popularity, blockchain technology can address key challenges in terms of decentralisation, ownership, and simply provide efficient payment rails for so-called Smart Agents.
“These Smart Agents, often seen as an evolution of chatbots, are looking to open up a whole new set of applications,” he said.
Ventures in tech-driven infrastructure and sustainability
Startups operating in tech-based infrastructure and sustainability spaces are also figuring high on the radar of VCs and investors.
“On the infrastructure front, Lemniscap is keenly focused on Zero-Knowledge Proof (ZKP) developments and associated applications, which are paving the way for scalable and privacy-conscious infrastructure that can power mainstream consumer use cases,” der Graaf said.
On ventures dealing with sustainability issues, he said companies across the industry spectrum are acknowledging the sustainability imperative, and blockchain can play a pivotal role in promoting this extremely important cause.
In this context, the Lemniscap founder cited the example of the launch of a new blockchain-powered carbon tracking and trading platform by a branch of Abu Dhabi’s Advanced Technology Research Council last year.
“Carbon credits and offsets can be reliably tracked on a blockchain, enabling companies and individuals to offset their carbon footprints more effectively and contribute to a more sustainable future.
“There are also opportunities for collaboration around carbon-neutral data centres as part of the UAE’s mission to lower emissions more broadly,” der Graaf said.
He said blockchain also opens up a new design space for incentives, which is crucial when it comes to nudging people towards sustainability.
“We have already seen some interesting experiments on that front and we expect to see more innovative incentive designs that will underpin sustainability initiatives,” the Lemniscap founder said.
Der Graaf said Lemniscap takes great pride in being able to identify emerging verticals well before they become mainstream.
“We’ve been heavily involved from an infrastructure and consumer layer perspective in areas such as DeFi, NFTs, scalability, interoperability, privacy, and Web3 in general, before they were being widely explored,” he said.
UAE will attract more tech talent
Der Graaf said wIth a very high quality of life and favourable regulatory environment, the UAE will continue to attract top Web3 and tech talent.
“In February, I made it my priority to be at the Satoshi Roundtable in Dubai, and subsequently, I attended the Token 2049 summit, where Lemniscap was able to establish many new connections and strengthen existing ties here in the region,” he said.
The Lemniscap founder said more high-quality events as well as local meetups will help grow the community from an investor and builder perspective.
“The UAE’s proactive stance on digital transformation provides a great example of the progress that can be made when bureaucratic red tape doesn’t stifle innovation,” he said.
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