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Trends in Blockchain & Bitcoin

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While bitcoin has continued to gain recognition as a store of value—with 2016 seeing upticks in bitcoin demand, especially amidst political unrest—many investors and industry leaders have also made investments aimed at developing bitcoin’s underlying technology, blockchain.

To download the full report, click here: https://www.cbinsights.com/research-webinar-blockchain-trends

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Trends in Blockchain & Bitcoin

  1. 1. TRENDS IN BITCOIN & BLOCKCHAIN
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  5. 5. 5See what other customers have to say at http://www.cbinsights.com/customer-love The most publicly reference-able customers of anyone in the industry A FEW OF OUR HAPPY CUSTOMERS Pat Grady Sequoia Capital, Partner “Think of the fundamental value chain of venture capital … If we play the clock forward, the finding and assessing of investments will be almost entirely done by technology, not human beings. And the company that is today positioned to be the market leader in that evolution is CB Insights." www.cbinsights.com
  6. 6. 6See what other customers have to say at http://www.cbinsights.com/customer-love www.cbinsights.com JUNE 26-28 | NEW YORK CITY, NY Join CB Insights for an exclusive gathering of the world's largest financial institutions, best fintech startups, and most active venture investors. FIND OUT MORE
  7. 7. Matthew Wong @mlcwong mwong@cbinsights.com 7 ABOUT THE PRESENTER Senior Research Analyst, CB Insights Published analysis and research has been featured in The New York Times, The Wall Street Journal, The Financial Times, Bloomberg and CNBC. Launched CB Insights insurance tech newsletter, which covers startup and tech trends in the global insurance industry and reaches 15,000+ (re)insurance execs, investors and startup founders: cbinsights.com/research-insurance-tech-newsletter Graduate of Northwestern University, magna cum laude. www.cbinsights.com Contributing researchanalyst: AriehLevi (alevi@cbinsights.com)
  8. 8. 1 2 3 4 Bitcoin & Blockchain Investment Overview Bitcoin & Blockchain Investor Overview Bitcoin & Blockchain Companies Miscellaneous / Final Thoughts 8 IN THE NEXT 25 MINUTES, WE’LL DISCUSS: www.cbinsights.com
  9. 9. BITCOIN & BLOCKCHAIN INVESTMENT OVERVIEW www.cbinsights.com 9
  10. 10. $93 $357 $524 $550 5 47 143 161 132 2012 2013 2014 2015 2016 Disclosed Funding ($M) Deals BITCOIN & BLOCKCHAIN DEALS FALL BELOW 2014 LEVELS IN 2016 In 2016, investors made 132 investments in bitcoin and blockchain companies, fewer deals than in 2014, and an 18% drop from 2015′s high of 161 investments. Dollars rose just 5%, from $524M to $550M. These numbers do not include initial coin offerings (ICOs). www.cbinsights.com 10 BITCOIN & BLOCKCHAIN GLOBAL ANNUAL FINANCING HISTORY 2012 - 2016
  11. 11. BITCOIN & BLOCKCHAIN FUNDING ENDS ON FOUR- QUARTER LOW 2015 saw a similar downward trend in funding totals, albeit one that started higher and ended lower. Q1’16 highs were buoyed largely by Series A rounds to financial services-focused blockchain companies: Digital Asset Holdings ($60M) and Blockstream ($55M). www.cbinsights.com 11 $4 $20 $10 $59 $80 $74 $61 $142 $226 $158 $96 $45 $175 $167 $121 $87 1 2 1 1 7 9 13 18 26 22 36 59 32 55 34 40 45 28 30 29 2012 2013 2014 2015 2016 Disclosed Funding ($M) Deals BITCOIN & BLOCKCHAIN GLOBAL QUARTERLY FINANCING HISTORY 2012 - 2016
  12. 12. BITCOIN & BLOCKCHAIN SAW FIRST SERIES D DEAL IN 2016 Series A deal share in the space grew to 23% in 2016 from 9% in 2015. Circle Internet Financial received the sector’s first Series D investment, in a Q2’16 $60M deal. www.cbinsights.com 12 100% 72.3% 72.0% 70.2% 54.5% 14.9% 16.8% 8.7% 22.7% 2.1% 2.1% 4.3% 6.8% 2.5% 1.5% 0.8% 10.6% 9.1% 14.3% 13.6% 2012 2013 2014 2015 2016 Seed/Angel Series A Series B Series C Series D Other BITCOIN & BLOCKCHAIN GLOBAL DEAL SHARE BY STAGE 2012 - 2016
  13. 13. GLOBAL MEDIAN AND AVERAGE EARLY-STAGE DEAL SIZES BOUNCE BACK IN Q4’16 The median early-stage bitcoin and blockchain deal size in Q4’16 rose to $2.8M, the highest median for the sector overall, with 36% of Q4’16 financings closing at Series A. Average early-stage deal size grew as well, to $4.1M, although down from its near $6M peak in Q1’16. www.cbinsights.com 13 0.59 0.11 0.98 0.75 0.74 1.50 0.56 2.80 0.96 2.18 1.61 1.30 5.96 4.14 2.18 4.10 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Median Deal Size ($M) Mean Deal Size ($M) BITCOIN & BLOCKCHAIN GLOBAL EARLY-STAGE DEAL SIZE Q1’15 – Q4’16
  14. 14. US BITCOIN & BLOCKCHAIN: $1.06B ACROSS 270 DEALS US bitcoin and blockchain companies saw a drop-off in both deals and funding in 2016 with $385M raised across 59 deals. Investment dollars fell 7% from 2015 highs. The US accounts for 54% of global bitcoin and blockchain startup deal share. www.cbinsights.com 14 $75 $213 $416 $385 5 35 84 85 59 2012 2013 2014 2015 2016 Disclosed Funding ($M) Deals US BITCOIN & BLOCKCHAIN ANNUAL FINANCING HISTORY 2012 - 2016
  15. 15. US QUARTERLY BITCOIN & BLOCKCHAIN DEAL PACE DROPS IN 2016 On a quarterly basis, companies in the US saw funding fall to just $68M in Q4’16. 14 deals closed in Q4’16 – the second- highest quarter of the year, but lower than any and all quarters in 2015. www.cbinsights.com 15 $197 $126 $62 $31 $157 $81 $79 $68 15 29 20 21 27 10 8 14 2015 Q2'15 Q3'15 Q4'15 2016 Q2'16 Q3'16 Q4'16 Disclosed Funding ($M) Deals US BITCOIN & BLOCKCHAIN QUARTERLY FINANCING HISTORY Q1’15 – Q4’16
  16. 16. EUROPEAN BITCOIN & BLOCKCHAIN DEALS AND DOLLARS FALL IN 2016 In 2016, European bitcoin and blockchain companies raised just $25M across 27 deals. www.cbinsights.com 16 EUROPE BITCOIN & BLOCKCHAIN ANNUAL FINANCING HISTORY 2012 - 2016 $11 $90 $63 $250 4 19 35 27 2012 2013 2014 2015 2016 Disclosed Funding ($M) Deals
  17. 17. EUROPEAN BITCOIN AND BLOCKCHAIN DEALS JUMP IN Q3’16, FALL IN Q4’16 Quarterly funding to European bitcoin and blockchain companies did not rise above $10M in 2016. www.cbinsights.com 17 $20 $17 $23 $3 $9 $2 $10 $5 6 14 7 8 5 3 13 6 2015 Q2'15 Q3'15 Q4'15 2016 Q2'16 Q3'16 Q4'16 Disclosed Funding ($M) Deals EUROPE BITCOIN & BLOCKCHAIN QUARTERLY FINANCING HISTORY Q1’15 – Q4’16
  18. 18. ASIA BITCOIN AND BLOCKCHAIN FUNDING RISES OVER 3X IN 2016 Asia saw 30 deals total across $119M in 2016, up from 23 deals and $37M of funding in 2015. Asia deal activity rose to an all-timeannual high in 2016, in contrast with North America and Europe, which each saw drops. www.cbinsights.com 18 ASIA BITCOIN & BLOCKCHAIN ANNUAL FINANCING HISTORY 2012 - 2016 $6 $37 $37 $1190 4 27 23 30 2012 2013 2014 2015 2016 Disclosed Funding ($M) Deals
  19. 19. Q2’16 IS HIGHEST QUARTER IN PAST TWO YEARS FOR ASIAN DEALS, DOLLARS Japan-based companies closed on two large financings in Q2’16: cryptocurrency exchange bitFlyer ($27M Series C), and bitcoin trading platform Quoine ($20M Series A). Of note, Asian investors are increasingly active and well-represented in the most recent and largest bitcoin and blockchain financings. www.cbinsights.com 19 $5 $14 $10 $8 $8 $66 $31 $14 5 6 5 7 7 11 6 6 2015 Q2'15 Q3'15 Q4'15 2016 Q2'16 Q3'16 Q4'16 Disclosed Funding ($M) Deals ASIA BITCOIN & BLOCKCHAIN QUARTERLY FINANCING HISTORY Q1’15 – Q4’16
  20. 20. US DOMINATES GLOBAL DEALS AND DOLLARS, BUT DEAL SHARE IS WIDELY DISTRIBUTED US-based bitcoin and blockchain companies closed on the majority of total financings to the sector. However, 25% of deals closed in countries outside of the top eight, reflecting one of bitcoin’s core use-cases as a borderless payments solution. www.cbinsights.com 20 54% 6% 4% 2% 2% 2% 2% 2% 25% United States United Kingdom Singapore Canada Israel India South Korea Japan Other BITCOIN & BLOCKCHAIN GLOBAL DEAL SHARE BY COUNTRY 2012 - 2016
  21. 21. US LEADS FOR BLOCKCHAIN DEALS, SHRINKS AS ASIA PICKS UP Although the bulk of deal activity remains state- side, Asian deal share rose from 14% in 2015 to 23% in 2016. www.cbinsights.com 21 2.5% 4.5%8.5% 18.9% 14.3% 22.7% 2.1% 1.4% 3.7% 0.8% 8.5% 13.3% 21.7% 20.5% 78.7% 64.3% 56.5% 49.2% 2.1% 1.4% 1.2% 2.3% 2013 2014 2015 2016 Africa Asia Australia Europe North America South America BITCOIN & BLOCKCHAIN ANNUAL DEAL SHARE BY CONTINENT 2012 - 2016
  22. 22. BITCOIN & BLOCKCHAIN INVESTOR TRENDS www.cbinsights.com 22
  23. 23. FEWER INVESTORS MAKE INVESTMENTS IN BITCOIN AND BLOCKCHAIN IN 2016 Reflecting financing trends, the number of total unique bitcoin and blockchain investors fell 21% from 2015, down from 301 to 237. www.cbinsights.com 23 14 90 207 301 237 2012 2013 2014 2015 2016 # of Unique Investors BITCOIN & BLOCKCHAIN ANNUAL UNIQUE INVESTORS 2012 - 2016
  24. 24. MORE CORPORATIONS AND THEIR VENTURE ARMS ENTER THE FRAY While the number of unique VCs and angel investors fell in 2016, unique corporations and corporate venture arms rose 24%, up from 42 in 2015 to 52 in 2016. www.cbinsights.com 24 Note: Graphic is notexhaustive of total unique investors. BITCOIN & BLOCKCHAIN ANNUAL UNIQUE INVESTORS BY TYPE 2013 - 2016 39 98 104 79 2 13 42 45 78 87 52 2013 2014 2015 2016 Venture Capital Corporationand Corporate Venture Angel & Incubator
  25. 25. BLOCKCHAIN-FOCUSED VENTURE FIRMS REMAIN ON TOP The most active venture investors are largely smaller in size and blockchain-focused. www.cbinsights.com 25 Investor Rank Select Companies Digital Currency Group Circle Coinbase Blockstream Ripple Chain Axoni Bitnet Veem BitPay Colu 1 Blockchain Capital Circle Coinbase Blockstream Ripple Chain BitFury Group Bitnet BitGo Xapo Paxos 2 Draper Associates BitPesa Wyre Funderbeam Hijro Bitwage Factom Ripio Atlas HashRabbit Mirror 3 Pantera Capital Circle ChangeTip Korbit Ripple Chain Chronicled Ripio Veem Coins.ph Bitstamp 4 RRE Ventures Gem Abra Case Wallet Ripple Chain MediaChain 21 Inc BitPay Paxos 4 BITCOIN & BLOCKCHAIN MOST ACTIVE VENTURE INVESTORS 2017 YTD (3/1/2017)
  26. 26. SMART MONEY DEALS DROP FOR 2ND YEAR, BUT PARTICIPATE IN LARGE ROUNDS From 2012 – 2016, top brand-name VCs participatedin 45 financing rounds that totaled $740M – nearly half of all funding to the sector. www.cbinsights.com 26 $65 $168 $295 $212 11 14 12 8 2012 2013 2014 2015 2016 Disclosed Funding ($M) Deals BITCOIN & BLOCKCHAIN SMART MONEY ANNUAL FINANCING HISTORY 2012 - 2016
  27. 27. SMART MONEY INVESTORS INVEST OFTEN, AND TOGETHER 19 of the top 24 “smart money” investors financed 27 unique bitcoin and blockchain companies. The group invested 59 times, often participating in the same rounds – of which about $250M went to walletsand money services firms. www.cbinsights.com 27 BITCOIN & BLOCKCHAIN SMART MONEY INVESTMENTS 2017 YTD (3/1/2017)
  28. 28. “GET US SOME OF THAT BLOCKCHAIN”: FINANCIAL SERVICES FIRMS JOIN THE FRAY Financial services firms remain among the most active corporate investors in bitcoin and blockchain technology. www.cbinsights.com 28 EBUF PGEFBM Kvo.25 Kbo.26 Kvo.26 Kbo.27 Kvo.27 Kbo.28 FINANCIAL SERVICES FIRMS MARCH INTO BLOCKCHAIN 2017 YTD (3/1/2017)
  29. 29. BITCOIN & BLOCKCHAIN COMPANIES www.cbinsights.com 29
  30. 30. As the sector matures, blockchain companies are finding use-cases outside of money services and finance: IoT, social media, identity management, and content attribution, among others. BITCOIN & BLOCKCHAIN STARTUPS MARKET MAP BITCOIN & BLOCKCHAIN DIVERSIFIES BEYOND WALLETS, EXCHANGES
  31. 31. Countries with limited financial infrastructure and large numbers of “unbanked” citizens trend toward wallets, remittance, mobile payments. More economically developed countries trend toward trading, financial services, general blockchain development, identity. BITCOIN & BLOCKCHAIN GLOBAL COMPANIES 2017 YTD (3/1/2017), Excluding US GLOBAL PLAYERS ENTER THE MARKET IN INCREASING NUMBERS
  32. 32. Capital markets and financial services- focused companies have received numerous investments from large, multinational financial institutions. www.cbinsights.com 32 WALLETS & MONEY SERVICES CAPITAL MARKETS & FINANCIAL SERVICES MARKET MAP FOCUS: WALLETS & FINANCIAL SERVICES WALLETS AND CAPITAL MARKETS TECH HAVE RAISED OVER $720M
  33. 33. PRIVATE BLOCKCHAINS FOR CONTENT, HEALTH, AND MORE A number of companies are building private blockchains for specific industries and use-cases. This stands in contrast to companies building on public, permission-less blockchains, primarily bitcoin and ethereum. www.cbinsights.com 33 ENTERPRISE SERVICES & CRYPTOCURRENCIES IoT, IDENTITY & CONTENT MANAGEMENT MARKET MAP FOCUS: ENTERPRISE SERVICES, IDENTITY & CONTENT
  34. 34. ASIAN COMPANIES TREND TOWARD MONEY SERVICES, EXCHANGES, ENTERPRISE SERVICES A focus in China on exchanges is anticipated, given centralized Chinese cryptocurrency mining and capital controls. More surprising is Japan- based bitFlyer, which has raised $36M to operate its cryptocurrency exchange. www.cbinsights.com 34 JAPAN CHINA SINGAPORE S. KOREA TAIWAN PHILLIPINES INDIA ISRAEL GLOBAL FOCUS: ASIA 2017 YTD (3/1/2017)
  35. 35. EUROPEAN COMPANIES TREND TOWARD MINING, WALLETS, MERCHANT SERVICES BitFury is one of the largest global cryptocurrency mining companies, and has recently pushed toward private enterprise solutions and blockchain consulting services. The company has received $90M in total funding. www.cbinsights.com 35 FRANCE UNITED KINGDOM LUXEMBOURG NETHERLANDS SWITZERLAND DENMARK SWEDEN ESTONIA GERMANY GLOBAL FOCUS: EUROPE 2017 YTD (3/1/2017)
  36. 36. CAPITAL MARKETS & FINANCIAL SERVICES REMAIN US FOCUS Capital markets and financial services blockchain firmsremain the most well-funded US companies, working to solve issues of inter-bank communication, clearance, and settlement – among others. Notably, 21 Inc. has shifted away from mining and toward Internet of Things. www.cbinsights.com 36 Capital Market & Financial Services Cryptocurrency Mining Data Storage Wallets Merchant Services Crypto Hedge Fund ContentAttribution Internetof Things Exchanges Money Services Browsers Healthcare P2P Marketplaces Enterprise Services & Blockchain Development Note: Consortiaare notincluded. GLOBAL FOCUS: UNITED STATES 2017 YTD (3/1/2017)
  37. 37. TOP 10 2016 DEALS DOMINATED BY PAYMENTS, FINANCIAL SERVICES The top 10 bitcoin and blockchain deals in 2016 raised $345M in aggregate funding. Of the list, five are focused on blockchain as a use-case in financial services and capital markets, while four are cryptocurrency exchanges and/or trading platforms. www.cbinsights.com 37 Company Round Country Select Investors $60M (Series D // Q2’16) USA Baidu, Wanxiang Holdings,CreditEase, General Catalyst Partners, IDG Capital Partners $60M (Series A // Q1’16) USA Santander InnoVentures, DTCC,JP Morgan Chase, IBM, BNP Paribas, Goldman Sachs $55M (Series B // Q3’16) USA Standard Chartered, Google Ventures, Blockchain Capital, SBI Group,Andreessen Horowitz $55M (Series A // Q1’16) USA FuturePerfect Ventures, KhoslaVentures, Blockchain Capital, Digital Currency Group $27M (Series C // Q2’16) Japan SBI Investment,Venture Labo $23M (Series A // Q3’16) China Wanxiang Holdings,Fenbushi Capital $20M (Series A // Q2’16) Japan JAFCO Co. $18M (Series A // Q4’16) USA Goldman Sachs, Thomson Reuters,Andreessen Horowitz, F-Prime Capital $16M (Series A // Q2’16) Barbados Overstock.com $11M (Series C // Q3’16) USA Mitsubishi UFJ Capital, Sozo Ventures BITCOIN & BLOCKCHAIN TOP 10 DEALS IN 2016
  38. 38. TOP THREE MOST WELL- FUNDED STARTUPS HAVE EACH RAISED >$100M Circle, a money services and payments platform, and Coinbase, a wallet and exchange platform, took the top two spots with notable investors. Nine of the top ten most well-funded companies are headquartered in the United States. www.cbinsights.com 38 Company Total Disclosed Funding Country Select Investors $136M USA Accel Partners, Baidu, Goldman Sachs, General Catalyst, IDG Capital Partners, Pantera Capital $117M USA Andreessen Horowitz, DFJ Growth Fund,Union Square Ventures, NYSE Euronext,Y Combinator 21 Inc. $116M USA Cisco Investments, KhoslaVentures, Qualcomm Ventures, RRE Ventures, Andreessen Horowitz $94M USA Accenture, Google Ventures, Lightspeed Venture Partners, Santander InnoVentures, SBI Group $90M Netherlands Binary Capital, QueensBridge Venture Partners, ChinaCredit Limited Holdings,Blockchain Capital $76M USA AXA Strategic Ventures, Blockchain Capital, Digital Currency Group, KhoslaVentures $67M USA BNP Paribas Private Equity,Citigroup,JPMorgan Chase, PNC Financial Services, DTCC $44M USA 500 Startups, Capital One Growth Ventures, Citi Ventures, NASDAQ, RRE Ventures, Thrive Capital $40M USA Benchmark, Emergence Capital Partners, Greylock Partners, Index Ventures, Digital Currency Group $37M USA Google Ventures, Kleiner Perkins Caufield & Byers, SVB Capital Partners, NAP Ventures BITCOIN & BLOCKCHAIN TOP 10 MOST WELL-FUNDED STARTUPS
  39. 39. Company Total Disclosed Funding Event Description $136M Pivot Circle moved away from its bitcoin exchange roots and toward a mobile payments platform. 21 Inc. $116M Pivot Originally a mining consortium,21’s war chest gives the company room to expand into IoT and a micropayments email platform – current offerings. $90M Pivot While a more subtle pivot,BitFury’s recent emphasis on blockchain consulting for enterprise clients underscores the company’s maturation from cryptocurrency mining. $32M Bankruptcy/ Asset Sale Accel Partners invested in this mining hardware producer,but poor operational management led to its closure and eventual sale for parts. $28M Pivot Changing its name from itBit (a New York-based exchange that Paxos still operates) signaled a pivot toward private blockchain and enterprise consulting. $3M Acquired Coinsetter,a notable New York-based exchange, was acquired for an undisclosed sum by Kraken. UD Closure The firm could not deliver on its promise to offer unbanked individuals cheap mobile transactions. UD Pivot Although slight,R3 pivoted toward DLT and away from “pure” blockchain with its platform,Corda, losing members in the process. BLOCKCHAIN COMPANIES PIVOTING TO PRIVATE AND MULTI-CHAIN MODEL With uncertainty around bitcoin as a viablepublic blockchain, companies have pivoted toward “chain-agnostic” models, or toward private blockchains made-to- order by enterprise customers. www.cbinsights.com 39 BITCOIN & BLOCKCHAIN NOTABLE PIVOTS, ACQUISITIONS & CLOSURES
  40. 40. ORGANIZATIONS WORK IN TANDEM TO DEVELOP SOLUTIONS Blockchain consortia have cropped up in a number of industries, as legacy firmsgrapple with understanding and integratingthe technology. R3 was one of the earliest financial consortia, although the group has lost members as it shifted to distributed ledger technology and away from “consensus” blockchain.www.cbinsights.com 40 Open Source Projects & Platforms Insurance Consortia Standards & Regulation Blockchain-as-a-Service Deloitte PwC VULCAN Healthcare Consortia Financial Services Consortia Microsoft IBM FABRIC Enterprise Consortia BLOCKCHAIN CONSORTIA, PROJECTS, BLOCKCHAIN-AS-A-SERVICE
  41. 41. R3 SEES HIGH-PROFILE EXITS, WHILE EEA LAUNCHES WITH BROADER GOALS While R3 counts an impressive list of financial institutionsas paying members, three high-profilebanks left as the consortium shifted to DLT and away from “consensus” blockchain. EEA counts some of R3’s members in its working group, as well as companies from other industries and sectors. www.cbinsights.com 41 • Announced in February 2017,EEA cuts across industries,sectors • Develop ethereum platform for enterprise business-logicsolutions Note: Graphics are notexhaustive of members in R3, EEA. • Pivot away from blockchain,to distributed ledger technology: Corda • Focused exclusively on capital markets and financial services CONSORTIA FOCUS: R3, ENTERPRISE ETHEREUM ALLIANCE SELECT MEMBERS & RECENT DEPARTURES
  42. 42. A DECENTRALIZED INTERNET FOR THE INTERNET AGE By building a robust programming language on top of its blockchain, ethereum hopes to allow developers to easily build decentralized blockchain applications. Brooklyn- based Consensys is an ethereum developer collective. However, added functionality potentially opens more avenues of attack and security risks. www.cbinsights.com 42 Decentralized Applications Smart Contracts Initial Coin Offerings (ICOs) Open Source Consumer and Enterprise A WORD ON ETHEREUM
  43. 43. A NEW METHOD FOR EARLY CAPITAL INVESTMENTS From a legal perspective, questions remain regarding the exact nature of an ICO – investment offering, or pre-sale? ICOs have gained real popularity; companies have received over $250M of funding via ICOs since 2015 (including the failedDAO project). www.cbinsights.com 43 Organization seeks liquidity and cash flow, but wants to avoid a traditional venture transaction In contrast, ICOs could provide: Immediate access to broader capital markets Transparency Lower financing costs, and cheaper cost of equity The organization offers a “presale” for its network in an Initial Coin Offering Tokens are distributed in ICO to interested parties Tokens may rise or fall in value, depending on the success of the network Tokens act as both equity in, and access to, the network A WORD ON INITIAL COIN OFFERINGS (ICOs)
  44. 44. TOKENS REPRESENT EQUITY AND UTILITY Proponents of bitcoin and blockchain technology more generally point to token incentivizationas a prime feature: a token could represent ownership of, and accessibility to, the network in question. A feedback loop of speculation and usage might occur, drivingup the token’s value. www.cbinsights.com 44 “The passion of Bitcoin users stems from the fact that they don’t just use the product but they also have an ownership stake in the product and directly benefit financially from its success. Utility plus ownership fosters a user base who also become passionate engineers, marketers and salespeople. A decentralized global ledger is useful, but we wouldn’t be talking about Bitcoin if it was just a decentralized global ledger.” “Many of the established rules about building businesses and investing in innovation don't apply to this new model and today we probably have more questions than answers.” Nick Tomaino, Runa Capital The Token Economy March 14, 2017 Joel Monegro, USV Fat Protocols August 8, 2016 TWO CENTS ON TOKENS Source: http://www.usv.com/blog/fat-protocols Source: https://thecontrol.co/the-token-economy-81becd26b9de#.egxfzyzk8
  45. 45. Initial Coin Offering Total Raised Date Closed Description $8.6M 11/11/2016 Distributed,P2P computing platform,where rented CPU enables a “supercomputer”. $5.4M 2/14/2017 Working with hirers, laborers toward better processes by denoting labor in tokens. $5.3M 10/1/2015 Token-based prediction market. Uses the crowd to determine outcome of an event. $2.9M 2/15/2017 Distributed asset management for hedge funds, investment professionals,among others. $2M 1/6/2017 Decentralized platform for DAO creation, management. $2M 11/20/2016 Cryptocurrency supporting anonymous transactions, “delayed-proof-of-work” consensus. $2M 2/28/2017 Digital asset “colored coins” exchange built on the bitcoin network. $1.6M 12/15/2016 Gambling platform employing smart contracts and built on the ethereum network. COMPANIES EMPLOY ICO FOR ARRAY OF USE-CASES Challenges in independent evaluation of ICOs remain, as unaccredited investors deploy capital to – potentially – unproven executives lacking viable market-ready products. Notably, ethereum also held an ICO raising $18M to set up its non-profit organization. www.cbinsights.com 45 NOTABLE INITIAL COIN OFFERINGS
  46. 46. MISCELLANEOUS / FINAL THOUGHTS www.cbinsights.com 46
  47. 47. TOP DIGITAL CURRENCIES FIGHT SIMILAR BATTLES Bitcoin’s 1MB block size has caused high fees and congestion, and divided the bitcoin community along largely political lines. Ethereum faces issues of widespread adoption, which would increase demand for its currency and associated network infrastructure. www.cbinsights.com 47 Challenges Opportunities ”THE PERFECT STORM”: Artificial intelligence, big data, internet of things, and cryptocurrencies COST SAVINGS: Blockchains allow for automation and optimization of back-office processes, among others NOVEL USE-CASES: By cutting out middlemen via consensus, difficult problems can be addressed with novel “consensus” solutions ADOPTION: More nodes participating in consensus allows for more effective public blockchains SCALING: The bitcoin network has been unable to scale beyond its 1MB block size, causing congestion, delays, and high fees REGULATION: Governments and regulatory bodies are grappling with how best to govern and control wholly decentralized cryptocurrencies BITCOIN & ETHEREUM: CHALLENGES, OPPORTUNITIES
  48. 48. WINKLEVOSS ETF REJECTED 48 “Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated. Therefore, as the Exchange has not entered into, and would currently be unable to enter into, the type of surveillance-sharing agreement that has been in place with respect to all previously approved commodity-trust ETPs — agreements that help address concerns about the potential for fraudulent or manipulative acts and practices in this market — the Commission does not find the proposed rule change to be consistent with the Exchange Act.” Securities and Exchange Commission SEC, Order Disapproving a Proposed Rule Change March 10, 2017 #regtech www.cbinsights.com
  49. 49. Bitcoin rose over 200% since last year, from around $400 to a high of about $1,300. However, the currency’s price has moved sharply in both directions following the rejection of the Winklevoss ETF and fears of a contentious hard fork as the network struggles to scale. 49 BITCOIN VOLATILE AMIDST CONCERNS OVER HARD FORK
  50. 50. 50 Ethereum has climbed from $15 in February to an all-timehigh of nearly $44 in mid-March. Developers and enterprises have embraced the cryptocurrency for its use-cases as blockchain infrastructure, and speculators note the cryptocurrency’s scalability and cooperative community. ETHEREUM JUMPS TO NEW HIGHS
  51. 51. 51See what other customers have to say at http://www.cbinsights.com/customer-love #smartgov www.cbinsights.com JUNE 26-28 | NEW YORK CITY, NY Join CB Insights for an exclusive gathering of the world's largest financial institutions, best fintech startups, and most active venture investors.
  52. 52. Matthew Wong @mlcwong mwong@cbinsights.com 52 ABOUT THE PRESENTER Senior Research Analyst, CB Insights Published analysis and research has been featured in The New York Times, The Wall Street Journal, The Financial Times, Bloomberg and CNBC. Launched CB Insights insurance tech newsletter, which covers startup and tech trends in the global insurance industry and reaches 14,000+ (re)insurance execs, investors and startup founders: cbinsights.com/research-insurance-tech-newsletter Graduate of Northwestern University, magna cum laude. #smartgov www.cbinsights.com Contributing researchanalyst: AriehLevi (alevi@cbinsights.com)
  53. 53. CBINSIGHTS.COM @ cbinsights +1(212)292-3148

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