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State of Crypto 2019
Blockchain Capital
2
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Macro Environment 4
Crypto Assets 15
Adoption 31
Regulation 43
Major Themes 51
Looking Ahead 64
Table of Contents
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2019 Snapshot
1 | Macro Environment
2019 was marked by rising global debt levels and instability. The
consequences are worrisome as quantitative easing becomes
increasingly imminent. Simultaneously, youth protestors took to
the streets fighting against political and economic inequality.
Lastly, big tech forayed further into financial services. The
unsteadiness of the macroeconomic environment, civil unrest and
influx of new monopolistic players sets the stage for bitcoin.
2 | Crypto Assets
The crypto asset market recovered in 2019, up ~56% as of 11/30.
Major token themes include the continued dominance of Tether
among stablecoins and the rise, and subsequent, fall of IEOs.
Conviction in bitcoin grew as the narrative shifted from store of
value to potential “safe haven asset.” Ethereum held its position
as the leading smart contract platform, with “Decentralized
Finance (DeFi)” emerging as the strongest use case.
3 | Adoption
Crypto assets are moving from fringe to mainstream across three
segments: retail users, institutions and now, nation states. Digital
assets continue to resonate with Gen Z / millennials. Institutional
adoption pushed forward with both financial incumbents and big
tech introducing products. Facebook’s Libra was the most radical
development. In lieu of Libra, several nations engaged with the
concept of central bank digital currencies (CBDC).
4 | Regulation
U.S. regulation remains focused on two major areas: classification
of assets and transmission of value. Major cases included the Kik
complaint, EOS settlement and an emergency restraining order
against Telegram. FinCEN provided more helpful guidance
regarding how the transmission of value via digital assets is
regulated. On a global level, many nations leaned into the
regulatory environment proposing new regulations and laws.
5 | Major Themes
DeFi was the biggest theme of 2019 with $600M+ in ETH locked
in smart contracts. Lending emerged as the leading use case with
Maker and Compound. The prime brokerage stack continues to
develop with over a dozen players tackling custody, exchange
and execution services. Gaming continues to be a focus for many
base layer protocols. Lastly, developer tools, like node
infrastructure and data analytics grew substantially.
6 | Looking Ahead
The industry is in its nascence, with a majority of the value
captured today as part of the onboarding process. Over time,
developer mindshare may shift from horizontal protocol
competition to vertical construction up the stack as Layer 1 further
ossifies. With impending regulation, widespread onramps and
new use cases, the industry has potential to explode. Our team
shares a few predictions for 2020.
4
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Macro
Environment
1
5
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Macro environment sets the stage for crypto
assets
Global macro
uncertainty
§ 2019 saw a continued flight to safety in a
yield-starved climate with signs of
imminent monetary easing
§ Bitcoin is increasingly regarded as an
uncorrelated safe-haven asset
Political unrest
§ Leaderless movements took hold across
the globe, questioning authoritarian
motives and a wide range of social and
fiscal policies
§ Big Tech dominance grew, as many
announced financial products (e.g.,
Apple Credit Card, Libra), placing a new
category of data in their hands
Big tech
dominance
MACRO
6
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Flight to safety in a yield-starved climate
Source: FRED (Federal Reserve Bank of St. Louis), Bloomberg
$0T
$2T
$4T
$6T
$8T
$10T
$12T
$14T
$16T
$18T
D
ec-09
D
ec-10
D
ec-11
D
ec-12
D
ec-13
D
ec-14
D
ec-15
D
ec-16
D
ec-17
D
ec-18
Bloomberg Barclays Global Aggregate Negative-
Yielding Debt Index
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
D
ec-09
D
ec-10
D
ec-11
D
ec-12
D
ec-13
D
ec-14
D
ec-15
D
ec-16
D
ec-17
D
ec-18
D
ec-19
10-Year Treasury Constant Maturity Minus 2-Year
Treasury Constant Maturity
§ Over the last decade, the Fed has pumped trillions of dollars into the economy, artificially inflating asset
prices
§ Global instability is on the rise, as evidenced by US-China trade tensions, slowing global growth and the
increasing prevalence of populist narratives worldwide
§ These factors (among others) have contributed to a flight to safety, and the combination of high asset values
and low fixed income yields suggests allocators are in need of alternative stores of value
MACRO
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The future spells further monetary easing
Source: Bridgewater
Notwithstanding the growing debt burden, central banks are failing to hit
inflation targets, suggesting monetary easing is imminent
MACRO
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Enter bitcoin: an uncorrelated asset
One Year Rolling Correlations (Daily Log Returns)
Source: CoinMetrics, FRED (St. Louis Fed)
-0.2
-0.1
0.0
0.1
0.2
Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19
US Dollar
-0.2
-0.1
0.0
0.1
0.2
Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19
Gold
-0.2
-0.1
0.0
0.1
0.2
Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19
VIX
-0.2
-0.1
0.0
0.1
0.2
Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19
S&P 500
MACRO
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Base money: fiat vs bitcoin production rate
Source: H/t to Crypto Voices (@crypto_voices) for the best data/analysis on base money production rates.
-10%
0%
10%
20%
30%
40%
50%
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
Fiat: Blended Supply Inflation (% CAGR)
Blended Supply Inflation (% CAGR)
All-time Compound Growth (Blended)
2179%
211%
60%
33% 15% 12% 10% 7% 4% 4% 4%
0%
10%
20%
30%
40%
50%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Bitcoin Supply Inflation (% CAGR)
§ Bitcoin’s supply inflation halves every
four years in perpetuity. The next halving
event is May 2020.
MACRO
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Civil protests reached new heights
Youth-led protests swept the world as people fought for
democracy, financial equality and social justice
MACRO
Source: Google Images
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Bitcoin may be increasingly viewed as a
political tool, decoupling money and state
Hong Kong
Argentina
Source: LocalBitcoins, Coinshare Analysis
Venezuela
In countries with civil unrest, 2019 LocalBitcoins volumes spiked
MACRO
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Big tech continues to dominate the world
7 of the top 10 largest companies by market cap are big tech
MACRO
Source: The Visual Capitalist
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And now, big tech wants to be your bank
Payment
Applications
Credit
Money Market
Funds / Insurance
# of Users Primary Market
AliPay X X ~900M China
GooglePay X ~25M Global
WePay X X ~200M China
AmazonPay X ~310M Global
Facebook Pay
Libra
~1200M Global
Apple Pay
Apple Credit Card
~580M Global
M-Pesa X ~33M India, East Africa
Mercado Pago X ~27M South America
Big tech added payment / banking services to their platforms in
an effort to tap into new revenue opportunities
MACRO
Source: Statista
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~28% of U.S. adults had fraudulent financial
activity happen to them recently
As digital worlds become a large component of individual
identity, stakes are higher with financial privacy than ever before
MACRO
Source: Pew Research Center “Americans and Privacy” 2019
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Crypto Assets
2
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Crypto asset markets partially recovered in
2019 but remain subdued
Bitcoin
§ Bitcoin remains the market leader, with
investors positioning for the May 2020
halving; innovation up the stack continues
Ethereum
§ Ethereum shows strong fundamental
growth despite suppressed prices;
upcoming ETH 2.0 transition will be a
marquis event
Crypto asset
market
§ As a whole, crypto surged from market
cycle lows but has yet to reach new highs
New chain
launches
§ New smart contract chain launches
disappoint, with a dozen on the horizon for
2020+
Notes: All data as of 11/30/19
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Crypto asset markets recovered in 2019,
largely due to BTC and ETH
Note: Data as of 11/30/19
Source: CoinMetrics, Nomics
~$202B
Total
Market Cap
56%
YTD Market
Cap Growth
~67%
Bitcoin
Dominance
Crypto Asset Market Cap, USD
As of 11/30/19
BTC
XRP
ETH
$400B
May ‘19 Nov ‘19
MARKET
$200B
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Crypto markets rose ~$73B from 1/1/19 to 11/30/19,
of which bitcoin accounted for 93% of growth
1/1/19 11/30/19 % Change
Bitcoin $3,808 $7,556 98%
Ethereum $139 $152 9%
XRP $0.36 $0.22 (39%)
Bitcoin
Cash
$163 $218 34%
Litecoin $32 $47 47%
EOS $2.63 $2.75 5%
Binance $6.19 $15.77 155%
Bitcoin SV $91 $107 18%
Stellar $0.11 $.06 (45%)
Top 10 Crypto Asset Prices, USD
as of 11/30/19
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
Jan-19 Apr-19 Jul-19 Oct-19
ETH BNB LTC BSV EOS XRP BCH XLM BTC
Notes: Graph and table excludes Tether from Top 10, Dates as of 11/30/19
Source: CoinMetrics, onChainFX, Nomics
MARKET
§ Top 10 assets rallied in 2019, however, bitcoin
pulled away from the rest of the market
§ Binance token, BNB, led the market in terms of
performance, ending the year up 154%
§ Combined market cap of the top ten assets, as
of 11/30/19, comprises ~76% of the total crypto
asset market, compared to ~70% at year end
2018. This highlights the slight shift away from
small and mid-cap tokens in 2019
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Small-mid cap index performance highlights
bearish market trend
0
20
40
60
80
100
120
140
Jan-19 Apr-19 Jul-19 Oct-19
Bletchley Ethereum Token Index, as of 11/30/19
§ Bitwise Large Cap 10 outperformed the mid- and small-cap indices, highlighting bitcoin’s market share growth
over small- and mid-cap assets.
§ Bletchley Ethereum Token Index had strong performance towards the end of 1Q19 and 3Q19, but overall
performance flatlined by the end of the year.
Commentary
0
2000
4000
6000
8000
10000
12000
14000
16000
Jan-19 Apr-19 Jul-19 Oct-19
Bitwise Indices, as of 11/30/19
Bitwise 10 Bitwise 20 Bitwise 70
NOTES: Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Performance prior to the inception date of each Bitwise Index represents a hypothetical, back-tested, and
unaudited return-stream that does not represent the returns of an actual account. Index performance does not include the fees and expenses that are charged by the Fund. Actual returns may differ materially from hypothetical, back-
tested returns. Visit: https://www.bitwiseinvestments.com/indexes/methodology for full methodology.
ERC-20 asset market performance uses Bletchley Ethereum Token Index with the following methodology: The Bletchley Ethereum Token Index is a market cap weighted index composed of a variable number of assets that are run on
the ethereum platform. The market capitalization of each member is calculated off of the expected total supply in 2050 (pulled from OnChainFX.com) for each asset, then adjusted to reflect the publicly current available amount (float)
of each asset available today (also from OnChainFX.com). There are no limits set on the weight of any individual constituent. Ethereum itself, along with ethereum classic, are not included in this index. It is composed of every token that
is a member of the Bletchley Universe and is classified as ERC20.
Source: CoinMetrics, Bletchley Indices, Bitwise Investments
MARKET
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Tether continues to dominate the stablecoin
market
0%
20%
40%
60%
80%
100%
Jan-19 Apr-19 Jul-19 Oct-19
Source: CoinMetrics, onChainFX
MARKET
§ The total stablecoin market cap grew ~42% in 2019 from $3.3B to $4.7B, with Tether dominance at ~80%
§ Unhindered by controversy over reserves and a NYAG investigation, Tether continued to dominate the stablecoin
market in 2019
o In 2019, the majority of new Tether issuance shifted away from Bitcoin and onto Ethereum (USDT_ETH) —
which exacerbated congestion on the Ethereum blockchain
§ Excluding Tether, majority of the remaining growth came from USDC (+76% market cap) and Paxos (+50% market
cap)
Commentary
Stablecoin Market Dominance, as of 11/30/19 Stablecoin Transaction Value, as of 11/30/19
$0
$200
$400
$600
$800
$1,000
$1,200
Nov-16 Nov-17 Nov-18 Nov-19
Millions
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2019 saw the rise (& fall) of exchange tokens
and IEOs with Binance as the major outlier
0
5
10
15
20
25
30
35
40
45
$0
$5
$10
$15
$20
$25
$30
$35
$40
Jan-19 Apr-19 Jul-19 Oct-19
Exchange Token Price, USD as of 11/30/19 Bitfinex
Huobi
KuCoin
QASH
Binance
-100%
-50%
0%
50%
100%
150%
200%
BinanceG
ate.io
O
KExKucoin
Binance
D
ex
H
uobiG
lobal
Bibox
M
XCBitM
axBgogoBittrex
ProbitBitforex
Average IEO Returns YTD by Platform
Notes: Average returns analysis includes 95 IEOs
Source: onChainFX, CryptoRank.io
MARKET
§ 2019 saw the rise of exchange tokens: tokens issued by crypto exchanges that incentivize participants to use their
platform; some potential benefits included discounted trading fees, market making rewards and token burn
mechanisms
§ Binance pioneered the exchange token and IEO model and continues to set the pace in terms of token model
innovation
§ Initial exchange offerings (IEOs) emerged as a way for projects to raise capital through exchanges themselves with
a direct exchange listing
§ Aside from Binance, the majority of IEOs exchange platforms struggled to perform post-launch
Commentary
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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
The industry converges upon bitcoin
A decade of bitcoin
In its first decade, bitcoin’s narrative evolved from an e-money
proof of concept to powerful asset. Along the way, bitcoin went
from a retail asset to an increasingly institutionalized asset.
$1-3B transactions processed daily
Over $2 trillion in transactions processed since 2011
Over $1.6 trillion in the past 2 years alone
Proof of
concept for
e-money
Peer-to-peer
payments
Anonymous
darknet currency
Censorship-
resistant store of
value
Safe haven
asset
Digital gold
Source: CoinMetrics, ”Visions of Bitcoin” by Nic Carter and Hasufly
BITCOIN
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Bitcoin continues to have strong fundamentals
through 2019
Notes: All data as of 11/30/19
Source: CoinMetrics
Bitcoin Market Cap, 30d Trailing Avg $ USD Bitcoin Adj Transaction Volume, 30d Trailing Avg $ USD
Bitcoin Hash Rate, 30d Trailing Avg TH/s
BITCOIN
Total Fees, 30d Trailing Avg $ USD
$-
$50
$100
$150
$200
$250
$300
Jan-17 Jan-18 Jan-19
Billions
$-
$2
$4
$6
$8
$10
$12
$14
Jan-17 Jan-18 Jan-19
Millions
-
20
40
60
80
100
120
Jan-17 Jan-18 Jan-19
Millions
$-
$1
$2
$3
$4
$5
$6
$7
$8
Jan-17 Jan-18 Jan-19
Billions
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Bitcoin’s third halving set for spring 2020
§ Bitcoin’s third halving will occur in May 2020, cutting the block reward in half to 6.25 BTC
§ Bitcoin has a total supply of 21M with more than 98% of bitcoins mined by 2030, with ~86% mined as of 2019
§ Although the halving is well known in advance and theoretically should be priced in, previous halvings ostensibly
had significant impact on price
o Between the first and second halving the price increased ~55x
o Between the second and upcoming third halving, the price has increased ~12x (as of Q4 2019)
Dates
Block
Reward
Bitcoin
Issuance
Historical
Price on
Halving
Day
2009-12 50 BTC 10.5M $12.35
2012-16 25 BTC 5.25M $650.63
2016-20 12.5 BTC 2.625M --
2020-24 6.25 BTC 1.312M --
Source: Bitcoinblockhalf.com, bitcoinclock.com, Coin Metrics, Galaxy Research
Commentary
BITCOIN
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Primary focus for bitcoin continues to be
privacy and scalability
Notes: (1) Based on BitMex Schnorr Signatures research
Source: CoinMetrics, BitMex Research
Description Implications
Schnorr
Signatures
Schnorr signatures are digital
signatures that are easy to compute,
highly secure, and allow for
aggregation of multi-sig transactions
as a normal single signature.
Schnorr signature aggregation will result in scalability
enhancements, resulting in an estimated 13%1 increase
in network capacity.
Additionally, privacy on Bitcoin is increased as multi-sig
transactions become indistinguishable from
transactions with a single signer.
Taproot
Taproot upgrade is a public change
that allows for only a single public key /
signature to be published, rather than
including the additional hash needed
in the MAST structure.
By eliminating the additional hash, Taproot provides
efficiency gains. Taproot also provides privacy
enhancements by hiding unexecuted conditions and
making cooperative transactions look the same to a
third party observer.
Liquid
Liquid is a sidechain network
developed by Blockstream that offers
faster and more private transaction
settlement.
Liquid provides a venue for exchanges and traders to
settle large amounts of bitcoin in a quicker, cheaper
and more private manner. Additionally, new assets and
behaviors can be enabled through Liquid.
Lightning
Network
Lightning is a layer 2 solution using
payment channels to create a
microtransaction network layer on
bitcoin.
Lightning enables cheaper, faster and more private
payments on top of Bitcoin, opening up new use cases
such as micropayments.
BITCOIN
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Lightning network channels and capacity
demonstrate slow but steady growth
0
1000
2000
3000
4000
5000
6000
Jan-19 Apr-19 Jul-19 Oct-19
Nodes with Channels, as of 11/30/19
§ Lighting network now has 5K+ nodes, 30K channels and current network capacity is ~$6M, up 3x from Jan 2019
§ Lightning Labs improved Lightning usability, launching the mobile app and releasing light client support through
Neutrino
§ Venture funding accelerated with new tools and applications including OpenNode, Acinq, RADAR ION and Casa.
Merchant products enable payments with consumer products like BitRefill, Fold and LN.Pizza. Despite the influx of
Lightning-based projects, scalable revenue-generating models remain an outstanding question
Commentary
0
200
400
600
800
1000
1200
$0
$2
$4
$6
$8
$10
$12
$14
Jan-19 Apr-19 Jul-19 Oct-19
BTC
USDMillions
Lightning Network Capacity, as of 11/30/19
Capacity USD Capacity BTC
BITCOIN
Source: Bitcoin Visuals
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Ethereum usage grew in 2019 despite
suppressed prices
Notes: Data as of 11/30/19
Source: CoinMetrics, Etherscan
Ethereum Market Cap, 30d Trailing Avg $ USD Ethereum Contract Calls, 30d Trailing Avg
Total Fees, 30d Trailing Avg $ USDEthereum Active Addresses, 30d Trailing Avg
ETHEREUM
$-
$20
$40
$60
$80
$100
$120
Jan-17 Jan-18 Jan-19
Billions
-
100
200
300
400
500
600
700
Jan-17 Jan-18 Jan-19
Thousands
$-
$1
$1
$2
$2
$3
Jan-17 Jan-18 Jan-19
Millions
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-17 Jan-18 Jan-19
Thousands
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ETH 2.0 transition is in flux; expected to take
multiple years
Source: Ethereum Foundation, Vitalik Buterin Blog, DevCon
2023+202220212020
Phase 0: Beacon Chain
Introduce new chain
and new asset (ETH 2)
First building block of
ETH 2.0
Phase 1: Shard Chains
Design and delivery of shard
chains. Focus on
construction, validation and
consensus of shard chains
Phase 2: Execution
Smart contracts
reintroduced, with
support for accounts,
contracts and other
familiar validations
Phase 3: Light Client
State Protocol
Minimized on-chain
state by moving data off
chain
§ The Ethereum Foundation has $30M of capital allocated towards supporting Eth 1.0 ($8M), Eth 2.0 research
and launch ($19M) and growing the developer ecosystem ($3M)
§ Ethereum’s planned transition to Eth 2.0 is expected to rollout over the next 3-5 years, with initial launch of
the beacon chain in Q1 of 2020
§ The transition management strategy is in flux; likely that Eth 1.0 and Eth 2.0 will exist in parallel for some time
§ The next planned iteration of Ethereum will remove the ability to execute transactions atomically, which may
compromise the overall composability of Ethereum dApps
§ There are a dozen teams working on Eth 2.0; however many look to Vitalik as a source for direction and
strategy
Estimated Planned Transition from ETH 1.0 to 2.0
Commentary
ETHEREUM
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2019 crypto asset launches largely disappoint
Source: CoinMetrics
-48%
-59%
-92%
-100%
-80%
-60%
-40%
-20%
0%
20%
0 30 60 90 120 150 180 210 240 270
Days Since Launch
Post-Launch Price Performance of New Assets
Cosmos Hashgraph Algorand
§ 2019 saw the launch of a few high-profile Proof-of-Stake chain launches, namely Cosmos ($17M+ raised)
Hashgraph ($100M+ raised) and Algorand ($60M+ raised)
§ Each of these chains struggled from a price perspective as they failed to attract significant developer or user
attention
§ Most of these projects have launched ‘ecosystem funds’ in an attempt to catalyze development activity and,
ultimately, user demand. However, past ecosystem funding efforts have tended to only be successful in
recruiting “mercenaries” collecting easy funding rather than “missionaries” with longer-term conviction
Commentary
NEW LAUNCHES
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“ETH killer” chain hasn’t emerged;15+ new
launches upcoming
Source: Various project websites
2019 Launches Upcoming Launches
§ Over the course of 2019, Bitcoin and Ethereum maintained ~70% market cap dominance of the entire crypto asset
market cap, despite a few high-profile launches
§ In the next 12 months, billions of dollars of VC capital will be unlocked and available for sale in the market as 15+
protocols go live
§ In the search for the next smart contract platform, ethereum and bitcoin are likely immediate beneficiaries of these
launches as a portion of capital shifts from new launches back to these assets
Commentary
NEW LAUNCHES
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Adoption
3
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Varying adoption across market segments
Institutional
Interest
§ Traditional institutions and big tech firms
revealed large crypto projects
§ Sophisticated infrastructure develops
further in the crypto ecosystem
Retail Users
§ Bitcoin continues to resonate with
millennials
§ Full time crypto protocol developers grew
in 2019
Nation States
§ Facebook’s Libra awakened governments
globally to digital currencies
§ China’s PBoC plans for a digital currency
came under spotlight
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Crypto assets are going from fringe to
mainstream across three major user segments
2011 2019 2030+
Fringe
Mainstream
Retail Users
Institutions
Nation States
ADOPTION
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Bitcoin is a demographic mega-trend,
resonating with millennials and Gen-Z
Notes: This survey was conducted online within the United States between April 23–25, 2019 among 2029 adults (aged 18 and over) by The Harris Poll on behalf of Blockchain
Capital via its Harris On Demand omnibus product. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring
them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online.
Source: Blockchain Capital Harris Poll Survey
0%
50%
100%
Awareness Familiarity
Positive
Perception Conviction
Propensity to
Purchase
Fall 2017 Spring2019
Bitcoin sentiment in following categories…
Bitcoin resonates particularly with millennials and Gen Z (ages 18-34)
~50% strongly/somewhat agree that most people will
be using Bitcoin in the next 10 years
ADOPTION
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0%
5%
10%
15%
20%
25%
30%
35%
18-34 35-44 45-54 55-64 65+
Government Bonds
Stocks
Real Estate
Gold
As generational wealth transfer begins,
investment preferences may be a bitcoin catalyst
An estimated $15T of wealth is expected to
transfer by 2030 to younger generations…
...making their investment preferences
increasingly meaningful
$8,808
$579
$3,212
$572
$1,889
$173 $220
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
N
orth
Am
erica
Latin
Am
erica
/Caribbean
EuropeM
iddle
East
Asi
Africa
Pacific
Millions
Source: Wealth-X Consulting Firm, Blockchain Capital Harris Poll Survey
% of individuals, by age who
prefer to own $1000 of
Bitcoin over…
36
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Full Time Part Time One Time
Full time blockchain developers increased
13% from June ‘18 to June ‘19
Source: Electric Capital 1H19 Developer Report
ADOPTION
37
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Industry made leaps in terms of end user
experience and access to accelerate adoption
Exposure to new
demographics
Startups targeting new
demographics seek to
tap into familiar
ecommerce patterns
(e.g., cashback
rewards)
Increased access
Crypto payment processors
are focused on increasing
access with frictionless fiat
onramps such as ApplePay
Improved UI / UX
New wallets and
products are creating
intuitive experiences,
obfuscating confusing
user steps like address
and gas fees
ADOPTION
38
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Financial institutions make major moves as
crypto financial products mature
Traditional FIs entering the space
§ Fidelity Digital Assets rolled out their
custody offering
§ TD Ameritrade offers clients ability to invest
in bitcoin futures via ErisX
§ JPMorgan announced their enterprise
stablecoin for B2B transactions
§ Bakkt (ICE/NYSE owned) launches their
bitcoin futures to the market
Crypto FIs mature in the market
§ Anchorage, Gemini and Coinbase become
institutional qualified custodians
§ BlockFi competes in the traditional bitcoin
lending space
§ Routefire, Tagomi, Talos Trading entered the
space to provide liquidity aggregation and
tooling
Commentary
§ Five years ago, most FIs were dismissive of bitcoin and blockchain – today it feels imprudent to not have a
blockchain strategy. In many ways bitcoin is increasingly viewed as a reputationally de-risked asset
§ FI distribution channels have potential to enable access for tens of millions of new bitcoin users, as well as
mainstream adoption for the entire asset class (both retail and institutional clients)
§ Despite nascent institutional support for bitcoin, there is massive room for growth among retail and institutional
segments alike; education and awareness are necessary ingredients
ADOPTION
39
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Fintech doubles down on crypto products to
meet demographic demand
Source: Square financials, Yahoo Finance
Cash app functionality
to buy / sell bitcoin, as
well as send to family
members
Square sold more than
$125M of bitcoin in
2Q19 alone
$28B Mkt Cap
Robinhood offers
commission free crypto
trading for some US
states
Crypto assets are not
transferrable in and out
of Robinhood custody
right now
$5.6B Mkt Cap
SoFi offers crypto
trading with SoFi invest
in some states
Currently offers trading
for bitcoin, ethereum
and litecoin; it is a
closed system with
assets remaining in SoFi
$1B+ Mkt Cap
eToro offers trading for
14 assets
eToro also launched a
cryptocurrency trading
strategy for users based
on social media
sentiment regarding
various assets
$800M+ Mkt Cap
ADOPTION
Commentary
§ Given the demographic overlap, Fintech is extremely well positioned to enable crypto on-ramps and capture
demand for crypto trading
§ Square emerged as a leading platform, bringing on high profile bitcoin talent to build bitcoin products and
funding open source development
§ As more fintech players get involved, opportunity to grow the crypto retail user base expands significantly
40
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Social media giants look to launch their own
blockchains and tokens
Geography Users Project Response
Source: Statista, Libra, Calibra, Coindesk, Blockchain Capital
Global ~2.4B
Stablecoin backed by basket
of currencies
Calibra wallet for
supporting products
Libra Association to govern
Libra token
US regulators reacted extremely
negatively - questioning the intentions
of Facebook and potential harm of
Libra on the U.S. dollar
Global leaders expressed uncertainty,
instigating conversations around digital
currencies at the central bank level.
Zuckerberg claims the project will not
launch until regulators approve.
Global ~200M
The launch of TON has been halted by
an SEC emergency action in Fall 2019
Telegram raised $1.7B
to launch in-app
currency TON
Japan ~217M
LINE, a leading Southeast Asia
messenger, launches their own crypto
exchange
Project went live Sept 2019 for 80
million users in Japan with full
regulatory approval
Korea ~50M
Klaytn, Kakao’s blockchain,
went live in 2019 with a
slew of social and gaming
apps
Klaytn launched with 10+ dapps and
has been growing users ever since
ADOPTION
41
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The separation of money and state was tested
by Libra and China’s digital currency plans
Various sovereign central bank digital currency efforts rumored to be underway
Source: Wall Street Journal, Epoch Times, Reuters, The Block
ADOPTION
42
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Central bank digital currencies heavily
explored by a number of nations
ADOPTION
What is a CBDC?
A CBDC is a new form of legal tender, different from other types of money that central banks
currently issue (i.e., cash, reserves). Instead, CBDC is the equivalent of digital cash. While
proposed approaches vary, in most, the central bank plays a critical function. At a minimum,
the central bank maintains the reserves backing the digital cash. In more involved
approaches, the central bank may play a role in issuing the digital cash, as well as creating
and supporting the underpinning technology.
Why create a CBDC?
First, a CBDC offers the benefits touted by digital payments broadly. As a means of payment,
CBDC could increase liquidity and scalability for domestic transactions. Digital cash also
makes it easier to export and drive adoption of domestic currency abroad – which potentially
augments any nation’s influence on the global economy and international politics
However, some central banks may issue CBDC to surveil their citizens' digital activities and
be able to trace financial transactions more efficiently. This intent would be destructive to
financial freedom and privacy.
What efforts are
underway?
In 2019, rumors emerged that Japan, France, the EU, Ghana and Tunisia, in addition to China
are all evaluating or planning a digital currency. The U.S. is also said to be evaluating a digital
dollar and its implications.
Source: IMF, The Block, CoinDesk, Committee on Payments and Market infrastructure
Remains unclear if CBDCs will function like cash or a bank account,
but each model has widely different implications
43
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Regulation
4
44
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Regulatory landscape remains a complex and
critical area for crypto assets
Token issuance &
distribution
§ SEC announced settlements or actions for
major projects like EOS, Sia and Telegram
§ Overall, regulation of token issuance
remains unclear
Money
transmission &
B/D licensing
§ FINCEN provided clarity around the
requirements for money
transmitters
§ SEC awarded a B/D license and two
Transfer Agent licenses
Global
outlook
§ Regulators increasingly addressed
crypto assets in particular, clarifying
guidance by proposing or adopting
specific laws
45
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Two regulatory areas emerged in the U.S.:
classification of assets and transmission of value
January June Nov
TKJ No-Action
Letter
Apr 3, 2019
SEC qualifies Blockstack
and YouNow token
offerings under Reg A+
Jul 10/11, 2019
Kik complaint,
Jun 24, 2019
Volantis charged by NY US
Attorney,
Jul 25, 2019
Block.one and
Nebulous
settlements,
Sept 30, 2019
TRO against
Telegram
Oct 11, 2019
Pocketful of Quarters, Inc. No-
Action Letter
Jul 25, 2019
Gladius Network LLC
Feb 20, 2019
FinCEN provides
guidance around
crypto regulations
May 9, 2019
Bittrex Bitlicense
denied by NYDFS,
Apr 10, 2019
Wyoming passes 3
bills to boost
crypto industry
Feb 20, 2019
Veritaseum Inc. emergency
asset freeze,
Aug 12, 2019
CLASSIFICATION OF ASSETS
(Securities & Commodities Regulations)
TRANSMISSION OF VALUE
(Broker/Dealer and Money Transmission
Regulations)
OTHER
REGULATION
Source: FinCEN, SEC, Blockchain Capital Analysis
“Managed
Stablecoin” Act
Introduced
Nov 21, 2019
46
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Token issuance continues to be an uncertain
regulatory area
Source: Blockchain Capital Analysis
First, SEC suggests certain
ICOs violated securities
laws…
Projects were penalized and
forced to register tokens as
securities and / or rescind
tokens entirely
…then EOS, a $4B token sale, was
deemed an unregistered offer of
securities, with a different outcome…
EOS was penalized, with no
registration or rescission
required, seeming to indicate
the SEC deemed EOS tokens to
NOT be securities
…finally, SEC filed an
emergency restraining order
against Telegram
Telegram sold to institutional
investors and never planned a
public token sale. Their token
distribution was blocked by the
SEC restraining order
It is likely that there are true standards for decentralization and/or demonstrated use
case, but each case differs by the “facts and circumstances”
REGULATION
47
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
FinCEN provided guidance around money
transmitters
NOT Money Transmitters:
§ Non-custodial wallets
§ Decentralized exchanges
§ “software” providers
§ dApp developers
Money Transmitters:
§ Custodial wallets
§ Custodial exchanges
§ “service” providers utilizing dApps
to transmit value
REGULATION
Source: FinCEN guidance
FinCEN provides guidance offering a framework for classifying money transmitters for
business models involving “convertible virtual currencies.” The guidance suggests the
following types of designations:
48
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Regulatory Approval Implications
Blockstack and YouNow tokens
approved for a Reg A+ qualified
offering
Provides guarantees there is a legally
compliant path for token funding
and distribution
Eight projects received their NY
Bitlicense approval, including:
Tagomi, Bitstamp, LibertyX, SoFi and
Robinhood
Notoriously stringent, the NY
Bitlicense approval means projects
can expand their offerings in a key
market
Securitize approved for first ever
digital asset transfer agent
SEC recognizes a transfer agent as
an important part of the capital
market ecosystem for crypto assets
First non-custodial digital asset
broker-dealer license approved for
Harbor, with others next in line
FINRA approval may suggest a path
forward for digitally native broker -
dealers, after a long wait-and-hold
period for most applications
Positive regulatory clarity around money
transmission and regulatory approvals
REGULATION
Source: Blockstack, Securitize, Harbor
49
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Source: Comply Advantage
Crypto assets are regulated at a global level
REGULATION
50
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
However, regulation widely varies across
geographies
Major Events Stance
China
President Xi announced new initiatives to position China as a
blockchain leader
Potential for China to loosely use blockchain based technology
for a new digital yuan
Pro enterprise blockchain
use cases
Japan
Japan continues to regulate crypto exchanges, recently granting
a licenses to messaging giant LINE
Rumors that Japan may be developing a SWIFT-like network for
crypto payments
Cautious but still positive
regulatory environment
Hong Kong Hong Kong regulators determine new rules for crypto
exchanges to get licensing
Cautious but still positive
regulatory environment
UK FCA proposed crypto asset classification framework to allow
token issuers to create innovative tokens that are not securities
Cautious but still positive
regulatory environment
EU FATF proposed travel rule suggests KYC / AML will be set at a
much higher threshold for exchanges and wallets
High degree of regulation
towards the crypto
industry
India Continued ban on exchanges, harsh regulation for blockchain
projects
Negative sentiment
Source: Wall Street Journal, The Block, Coindesk
REGULATION
51
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Major Themes
5
52
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Major themes of 2019
DeFi
§ Financial infrastructure built using
protocols and smart contracts emerged
as a key use case in 2019
Prime
Brokerage
§ Prime brokerage stack continues to grow, with
sophisticated crypto players offering services
from custody and exchange to settlement and
execution
Gaming
§ Major protocols continue to push forward on
gaming plans despite any major traction
among users
Developer
Tools
§ Data, node deployment and developer tools
emerged to fill a critical gap in making
blockchain-based product development easier
53
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
The DeFi ecosystem grew rapidly over the
course of 2019
WALLETS
LENDING
STABLECOINS
DERIVATIVES PREDICTION MARKETS
EXCHANGES & LIQUIDITY
INVESTING OTHER
Source: Defi Pulse, DefiPrime
DEFI
54
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Over $600M of ETH is locked in open finance
smart contracts
Source: Defi Pulse
Total Value Locked (ETH) in “Decentralized Finance” projects
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19
Maker
Compound
Synthetix
§ ~84% of value is locked in top three projects: Maker, Compound and Synthetix.
§ Maker dominance declines to <50% of all ETH locked in smart contracts
o The DAI borrowing rate spiked over 2019, reaching 20.5% in August at its peak; since then it has
been declining
§ Defi Pulse now tracks over 20 projects in the DeFi ecosystem, with Compound, Synthetix, and Uniswap as
breakouts in 2019
Commentary
DEFI
55
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Over the course of 2019, $600M+ in DeFi
loans were originated
Source: Loanscan.io, Defi Pulse
§ Across lending platforms, $648M in loans were originated in 2019; as of Jan ‘19, only $22M in loans had
been originated, a 28x increase
§ The primary motivations for borrowers were: leverage for traders and working capital for crypto-native
companies
§ Assets are primarily stablecoins like Dai; however the introduction of multi-collateral Dai will introduce new
collateral options for loans
§ Lending products today are primarily highly overcollateralized, making them less capital efficient
§ Identity and reputation remain key outstanding ingredients for improving the capital efficiency of on-chain
lending and expanding the addressable market
Commentary
Loans Originated, USD Collateral Ratio, %
DEFI
56
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Competition for prime brokerage services
grew intense
Source: Company logos
EXCHANGES
CUSTODIANS
OTC DESKS
MARKET MAKERS
TRADE EXECUTION
LENDING
In its current state, crypto
prime brokerage services
are unbundled
Likely to see consolidation
into 2020+, as providers
move towards vertical
consolidation to offer
better pricing,
convenience and
optionality
PRIME BROKERAGE
57
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Bitcoin derivatives are improving price
discovery in the market
Source: Skew, Coindesk, CME, Bakkt
Bakkt bitcoin futures total open interest and volume,
$ USD
CME bitcoin futures total open interest and volume,
$ USD
PRIME BROKERAGE
§ Bakkt bitcoin futures launched in September, reaching ~$10M daily volumes of and $1.36M in open interest
by November
§ CME bitcoin futures saw average daily volumes of $200M and average open interest of $168M higher than
the usual
§ While CME continues to dominate Bakkt, the gap is slowly decreasing as Bakkt looks to catch up
Commentary
58
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Crypto-backed lending growth indicates
strong institutional interest
Source: Genesis Lending Quarterly Reports
Genesis Capital lending originations, $ USD
PRIME BROKERAGE
§ Growth in crypto-collateralized borrowing from centralized lending desks highlights appetite among
industry participants
§ As the industry’s largest and most liquid asset, bitcoin comprised a significant portion of Genesis Capital’s
lending and borrowing demand
§ BTC-backed cash lending to international and Asian counterparties grew significantly for Genesis Capital,
presenting an opportunity to earn attractive yields
Commentary
0
200
400
600
800
1000
4Q2018 1Q2019 2Q2019 3Q2019
Millions
59
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
The blockchain gaming ecosystem continues
to developSTUDIOSPROTOCOLINFRASTRUCTURE
MARKETPLACES
GAMES
GAMING
Source: Various project websites
60
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Ethereum remains leading protocol for games,
despite a flurry of competition
Source: Various project websites
Protocol Description Games
ETHEREUM
Leading smart contract platform, creator of ERC-721
open standard
FLOW
(DAPPER)
CryptoKitties creator’s base layer protocol for scalable
blockchain-based games
RIPPLE
(INTERLEDGER)
Payment protocol for conducting transactions across
different blockchains
EOS
DPoS chain focused on higher throughput and
scalability
LOOM
SIDECHAIN
Sidechain similar to Plasma, with gaming dapps as side
chains
STEEM Social media network using DPoS
GAMING
61
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Despite buzz, blockchain gaming activity
remains underwhelming with no hits
Among most popular live games, traction has flatlined or remained low
Crypto Kitties, Ethereum / Dapper Gods Unchained, Ethereum EOS Knights, EOS
Total usage remains low
dApps across
gaming / gambling
Average DAU for
gaming<1K <20K
Source: Dapp Radar, State of the Dapps
GAMING
0
0.2
0.4
0.6
0.8
1
1.2
Jun-18 Dec-18 Jun-19
Thousands
0
0.2
0.4
0.6
0.8
1
1.2
Jul-18 Jan-19 Jul-19
Thousands
dau volume
0
2
4
6
8
Jul-18 Jan-19 Jul-19
Thousands
62
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Developer infrastructure and tools make
building crypto products easier
DEVELOPER TOOLS
NODE INFRASTRUCTURE TESTING & TOOLS DATA & ANALYTICS
Source: Various websites
63
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Anecdotal evidence suggests demand for
developer tools appears on the rise
Source: Truffle
DEVELOPER TOOLS
64
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Looking Ahead
8
65
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Looking ahead
Predictions
Industry
Maturation
§ Crypto remains in early stages, with
a majority of user traction
congregating around onboarding
(exchanges)
§ As industry matures, expect increase
in M&A activity
§ Our team shares our bold
predictions around the regulatory
landscape, DeFi and more
66
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Zooming out on crypto shows we are in the
early stages
Bitcoin
Global Stock Market
$73T
Gold
$7.7T
Apple
$1T
Crypto assets
$.25 T
Global Money
Supply
$90T
LOOKING AHEAD
Source: CoinMetrics, Yahoo Finance, Visual Capitalist
67
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Crypto is still in the early “onboarding phase”
‘onboarding’ companies are typically exchanges and others providing
onramps to crypto - as such, it’s no surprise that in the current onboarding
phase exchanges have been most profitable companies to-date
Internet Companies
Crypto Companies
Onboarding Phase
2010s 2030s
1980s 2010s
As the number of people ‘onboarded’ into crypto grows, we can expect
more mainstream applications of programmable money to emerge
Opportunities beyond Onboarding
LOOKING AHEAD
68
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Today, protocol development is largely focused
on horizontal competition
Present State: Horizontal Competition
$133B MKT
CAP
$16B MKT CAP$1.8B MKT CAP LAUNCHED
MAJORITY REMAIN UNLAUNCHED
$900M $69M
$822M
LOOKING AHEAD
Source: CoinMetrics
69
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Developer momentum may shift from
horizontal competition to vertical construction
Future State: Vertical Construction
As layer 1 further ossifies, development may shift towards vertical
construction for a few base layer chains
LOOKING AHEAD
70
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
As industry reaches inflection point, M&A
activity is expected to increase
M&A activity has primarily been
limited to internal players…
…but incumbents are quickly
devising their blockchain strategies
M&A activity expected to increase as incumbents lean in and companies
demonstrate ability to generate stable cash flows and growth
LOOKING AHEAD
71
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
Blockchain Capital’s bold 2020 predictions
LOOKING AHEAD
1. A crypto company is acquired for more than $500m
2. Value locked in DeFi hits $5B
3. In the face of competition from China, Libra will receive the green light for a dollar-backed
stablecoin
4. A federal judge rules against the SEC in a crypto case
5. Not a single 2020 L1 network launch achieves "top 10” status, as defined by network value
6. USDC sees 300%+ growth (as measured by transaction value, issuance, market cap and
trading volume)
7. Demand for Bitcoin transactions drives fees to exceed $100, catalyzing scaling up the stack
8. FinCEN / FATF hold stablecoins to a stricter standard than paper cash by requiring broad
application of the travel rule
9. KYC / AML becomes the primary regulatory battleground for DeFi
10. Privacy coins are de-listed from major exchanges
11. Bitcoin price blows past all-time high
72
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
About Blockchain Capital
Bart Stephens
Co-Founder &
Managing
Partner
Brad Stephens
Co-Founder and
Managing
Partner
Spencer Bogart
General Partner
INVESTMENT TEAM
H. Joshua Rivera
General Counsel
& Chief
Compliance
Officer
Kinjal Shah
Senior Associate
Jimmy Song
Bitcoin Fellow
Ben Davenport
Venture Partner
Derek Hsue
Analyst
Aleks Larsen
Associate
AT A GLANCE
§ 80+ portfolio companies
§ $300M+ in assets under
management
§ 9 dedicated investment
professionals
§ 4 funds to date
PORTFOLIO SNAPSHOT
73
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICEFOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
THE INFORMATION PRESENTED IN THIS DOCUMENT HAS BEEN DEVELOPED INTERNALLY AND/OR OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE; HOWEVER,
BLOCKCHAIN CAPITAL DOES NOT GUARANTEE THE ACCURACY, ADEQUACY OR COMPLETENESS OF SUCH INFORMATION. BLOCKCHAIN CAPITAL IS NOT UNDER ANY
OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. PREDICTIONS, OPINIONS, AND OTHER INFORMATION CONTAINED IN THIS ARTICLE
ARE SUBJECT TO CHANGE CONTINUALLY AND WITHOUT NOTICE OF ANY KIND AND MAY NO LONGER BE TRUE AFTER THE DATE INDICATED. ANY FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE THEY ARE MADE AND ARE SUBJECT TO NUMEROUS ASSUMPTIONS, RISKS AND UNCERTAINTIES, WHICH CHANGE OVER TIME.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN FORWARD-LOOKING STATEMENTS.
EXAMPLES OF PORTFOLIO COMPANIES ARE PURELY FOR ILLUSTRATIVE PURPOSES. THIS LIST IS ONLY PARTIAL, AND READERS SHOULD NOT ASSUME THAT THE
INVESTMENTS IDENTIFIED WERE OR WILL BE PROFITABLE OR ARE REPRESENTATIVE OF INVESTMENTS BY BLOCKCHAIN CAPITAL’S ADVISED FUNDS. THERE IS NO
GUARANTEE THAT ANY FUND WILL ACHIEVE THE SAME EXPOSURE TO, OR QUALITY OF, INVESTMENTS HELD BY ANY EXISTING FUND.
THIS MATERIAL IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY; IT IS NEITHER A PROSPECTUS NOR AN ADVERTISEMENT, AND NO OFFERING IS BEING MADE TO THE PUBLIC. RECIPIENTS OF THIS DOCUMENT ARE NOT TO
CONSTRUE IT AS INVESTMENT, LEGAL, OR TAX ADVICE AND IT IS NOT INTENDED TO PROVIDE THE BASIS FOR ANY EVALUATION OF ANY INVESTMENT. BLOCKCHAIN
CAPITAL DOES NOT PROVIDE INVESTMENT ADVICE TO INVESTORS AND NO COMMUNICATION, THROUGH THIS DOCUMENT OR IN ANY OTHER MEDIUM, SHOULD BE
CONSTRUED AS A RECOMMENDATION FOR ANY SECURITY. VENTURE INVESTING INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR SOPHISTICATED AND
QUALIFIED ACCREDITED INVESTORS.
Disclaimer
74
FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICEFOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE
@blockchaincap
contact@blockchaincapital.com
Thank you!

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Blockchain Capital's 2019 Year in Review

  • 1. 1 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICEFOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE State of Crypto 2019 Blockchain Capital
  • 2. 2 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Macro Environment 4 Crypto Assets 15 Adoption 31 Regulation 43 Major Themes 51 Looking Ahead 64 Table of Contents
  • 3. 3 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE 2019 Snapshot 1 | Macro Environment 2019 was marked by rising global debt levels and instability. The consequences are worrisome as quantitative easing becomes increasingly imminent. Simultaneously, youth protestors took to the streets fighting against political and economic inequality. Lastly, big tech forayed further into financial services. The unsteadiness of the macroeconomic environment, civil unrest and influx of new monopolistic players sets the stage for bitcoin. 2 | Crypto Assets The crypto asset market recovered in 2019, up ~56% as of 11/30. Major token themes include the continued dominance of Tether among stablecoins and the rise, and subsequent, fall of IEOs. Conviction in bitcoin grew as the narrative shifted from store of value to potential “safe haven asset.” Ethereum held its position as the leading smart contract platform, with “Decentralized Finance (DeFi)” emerging as the strongest use case. 3 | Adoption Crypto assets are moving from fringe to mainstream across three segments: retail users, institutions and now, nation states. Digital assets continue to resonate with Gen Z / millennials. Institutional adoption pushed forward with both financial incumbents and big tech introducing products. Facebook’s Libra was the most radical development. In lieu of Libra, several nations engaged with the concept of central bank digital currencies (CBDC). 4 | Regulation U.S. regulation remains focused on two major areas: classification of assets and transmission of value. Major cases included the Kik complaint, EOS settlement and an emergency restraining order against Telegram. FinCEN provided more helpful guidance regarding how the transmission of value via digital assets is regulated. On a global level, many nations leaned into the regulatory environment proposing new regulations and laws. 5 | Major Themes DeFi was the biggest theme of 2019 with $600M+ in ETH locked in smart contracts. Lending emerged as the leading use case with Maker and Compound. The prime brokerage stack continues to develop with over a dozen players tackling custody, exchange and execution services. Gaming continues to be a focus for many base layer protocols. Lastly, developer tools, like node infrastructure and data analytics grew substantially. 6 | Looking Ahead The industry is in its nascence, with a majority of the value captured today as part of the onboarding process. Over time, developer mindshare may shift from horizontal protocol competition to vertical construction up the stack as Layer 1 further ossifies. With impending regulation, widespread onramps and new use cases, the industry has potential to explode. Our team shares a few predictions for 2020.
  • 4. 4 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Macro Environment 1
  • 5. 5 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Macro environment sets the stage for crypto assets Global macro uncertainty § 2019 saw a continued flight to safety in a yield-starved climate with signs of imminent monetary easing § Bitcoin is increasingly regarded as an uncorrelated safe-haven asset Political unrest § Leaderless movements took hold across the globe, questioning authoritarian motives and a wide range of social and fiscal policies § Big Tech dominance grew, as many announced financial products (e.g., Apple Credit Card, Libra), placing a new category of data in their hands Big tech dominance MACRO
  • 6. 6 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Flight to safety in a yield-starved climate Source: FRED (Federal Reserve Bank of St. Louis), Bloomberg $0T $2T $4T $6T $8T $10T $12T $14T $16T $18T D ec-09 D ec-10 D ec-11 D ec-12 D ec-13 D ec-14 D ec-15 D ec-16 D ec-17 D ec-18 Bloomberg Barclays Global Aggregate Negative- Yielding Debt Index -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% D ec-09 D ec-10 D ec-11 D ec-12 D ec-13 D ec-14 D ec-15 D ec-16 D ec-17 D ec-18 D ec-19 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity § Over the last decade, the Fed has pumped trillions of dollars into the economy, artificially inflating asset prices § Global instability is on the rise, as evidenced by US-China trade tensions, slowing global growth and the increasing prevalence of populist narratives worldwide § These factors (among others) have contributed to a flight to safety, and the combination of high asset values and low fixed income yields suggests allocators are in need of alternative stores of value MACRO
  • 7. 7 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE The future spells further monetary easing Source: Bridgewater Notwithstanding the growing debt burden, central banks are failing to hit inflation targets, suggesting monetary easing is imminent MACRO
  • 8. 8 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Enter bitcoin: an uncorrelated asset One Year Rolling Correlations (Daily Log Returns) Source: CoinMetrics, FRED (St. Louis Fed) -0.2 -0.1 0.0 0.1 0.2 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 US Dollar -0.2 -0.1 0.0 0.1 0.2 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 Gold -0.2 -0.1 0.0 0.1 0.2 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 VIX -0.2 -0.1 0.0 0.1 0.2 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 S&P 500 MACRO
  • 9. 9 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Base money: fiat vs bitcoin production rate Source: H/t to Crypto Voices (@crypto_voices) for the best data/analysis on base money production rates. -10% 0% 10% 20% 30% 40% 50% 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 Fiat: Blended Supply Inflation (% CAGR) Blended Supply Inflation (% CAGR) All-time Compound Growth (Blended) 2179% 211% 60% 33% 15% 12% 10% 7% 4% 4% 4% 0% 10% 20% 30% 40% 50% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Bitcoin Supply Inflation (% CAGR) § Bitcoin’s supply inflation halves every four years in perpetuity. The next halving event is May 2020. MACRO
  • 10. 10 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Civil protests reached new heights Youth-led protests swept the world as people fought for democracy, financial equality and social justice MACRO Source: Google Images
  • 11. 11 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Bitcoin may be increasingly viewed as a political tool, decoupling money and state Hong Kong Argentina Source: LocalBitcoins, Coinshare Analysis Venezuela In countries with civil unrest, 2019 LocalBitcoins volumes spiked MACRO
  • 12. 12 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Big tech continues to dominate the world 7 of the top 10 largest companies by market cap are big tech MACRO Source: The Visual Capitalist
  • 13. 13 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE And now, big tech wants to be your bank Payment Applications Credit Money Market Funds / Insurance # of Users Primary Market AliPay X X ~900M China GooglePay X ~25M Global WePay X X ~200M China AmazonPay X ~310M Global Facebook Pay Libra ~1200M Global Apple Pay Apple Credit Card ~580M Global M-Pesa X ~33M India, East Africa Mercado Pago X ~27M South America Big tech added payment / banking services to their platforms in an effort to tap into new revenue opportunities MACRO Source: Statista
  • 14. 14 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE ~28% of U.S. adults had fraudulent financial activity happen to them recently As digital worlds become a large component of individual identity, stakes are higher with financial privacy than ever before MACRO Source: Pew Research Center “Americans and Privacy” 2019
  • 15. 15 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto Assets 2
  • 16. 16 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto asset markets partially recovered in 2019 but remain subdued Bitcoin § Bitcoin remains the market leader, with investors positioning for the May 2020 halving; innovation up the stack continues Ethereum § Ethereum shows strong fundamental growth despite suppressed prices; upcoming ETH 2.0 transition will be a marquis event Crypto asset market § As a whole, crypto surged from market cycle lows but has yet to reach new highs New chain launches § New smart contract chain launches disappoint, with a dozen on the horizon for 2020+ Notes: All data as of 11/30/19
  • 17. 17 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto asset markets recovered in 2019, largely due to BTC and ETH Note: Data as of 11/30/19 Source: CoinMetrics, Nomics ~$202B Total Market Cap 56% YTD Market Cap Growth ~67% Bitcoin Dominance Crypto Asset Market Cap, USD As of 11/30/19 BTC XRP ETH $400B May ‘19 Nov ‘19 MARKET $200B
  • 18. 18 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto markets rose ~$73B from 1/1/19 to 11/30/19, of which bitcoin accounted for 93% of growth 1/1/19 11/30/19 % Change Bitcoin $3,808 $7,556 98% Ethereum $139 $152 9% XRP $0.36 $0.22 (39%) Bitcoin Cash $163 $218 34% Litecoin $32 $47 47% EOS $2.63 $2.75 5% Binance $6.19 $15.77 155% Bitcoin SV $91 $107 18% Stellar $0.11 $.06 (45%) Top 10 Crypto Asset Prices, USD as of 11/30/19 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Jan-19 Apr-19 Jul-19 Oct-19 ETH BNB LTC BSV EOS XRP BCH XLM BTC Notes: Graph and table excludes Tether from Top 10, Dates as of 11/30/19 Source: CoinMetrics, onChainFX, Nomics MARKET § Top 10 assets rallied in 2019, however, bitcoin pulled away from the rest of the market § Binance token, BNB, led the market in terms of performance, ending the year up 154% § Combined market cap of the top ten assets, as of 11/30/19, comprises ~76% of the total crypto asset market, compared to ~70% at year end 2018. This highlights the slight shift away from small and mid-cap tokens in 2019
  • 19. 19 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Small-mid cap index performance highlights bearish market trend 0 20 40 60 80 100 120 140 Jan-19 Apr-19 Jul-19 Oct-19 Bletchley Ethereum Token Index, as of 11/30/19 § Bitwise Large Cap 10 outperformed the mid- and small-cap indices, highlighting bitcoin’s market share growth over small- and mid-cap assets. § Bletchley Ethereum Token Index had strong performance towards the end of 1Q19 and 3Q19, but overall performance flatlined by the end of the year. Commentary 0 2000 4000 6000 8000 10000 12000 14000 16000 Jan-19 Apr-19 Jul-19 Oct-19 Bitwise Indices, as of 11/30/19 Bitwise 10 Bitwise 20 Bitwise 70 NOTES: Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Performance prior to the inception date of each Bitwise Index represents a hypothetical, back-tested, and unaudited return-stream that does not represent the returns of an actual account. Index performance does not include the fees and expenses that are charged by the Fund. Actual returns may differ materially from hypothetical, back- tested returns. Visit: https://www.bitwiseinvestments.com/indexes/methodology for full methodology. ERC-20 asset market performance uses Bletchley Ethereum Token Index with the following methodology: The Bletchley Ethereum Token Index is a market cap weighted index composed of a variable number of assets that are run on the ethereum platform. The market capitalization of each member is calculated off of the expected total supply in 2050 (pulled from OnChainFX.com) for each asset, then adjusted to reflect the publicly current available amount (float) of each asset available today (also from OnChainFX.com). There are no limits set on the weight of any individual constituent. Ethereum itself, along with ethereum classic, are not included in this index. It is composed of every token that is a member of the Bletchley Universe and is classified as ERC20. Source: CoinMetrics, Bletchley Indices, Bitwise Investments MARKET
  • 20. 20 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Tether continues to dominate the stablecoin market 0% 20% 40% 60% 80% 100% Jan-19 Apr-19 Jul-19 Oct-19 Source: CoinMetrics, onChainFX MARKET § The total stablecoin market cap grew ~42% in 2019 from $3.3B to $4.7B, with Tether dominance at ~80% § Unhindered by controversy over reserves and a NYAG investigation, Tether continued to dominate the stablecoin market in 2019 o In 2019, the majority of new Tether issuance shifted away from Bitcoin and onto Ethereum (USDT_ETH) — which exacerbated congestion on the Ethereum blockchain § Excluding Tether, majority of the remaining growth came from USDC (+76% market cap) and Paxos (+50% market cap) Commentary Stablecoin Market Dominance, as of 11/30/19 Stablecoin Transaction Value, as of 11/30/19 $0 $200 $400 $600 $800 $1,000 $1,200 Nov-16 Nov-17 Nov-18 Nov-19 Millions
  • 21. 21 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE 2019 saw the rise (& fall) of exchange tokens and IEOs with Binance as the major outlier 0 5 10 15 20 25 30 35 40 45 $0 $5 $10 $15 $20 $25 $30 $35 $40 Jan-19 Apr-19 Jul-19 Oct-19 Exchange Token Price, USD as of 11/30/19 Bitfinex Huobi KuCoin QASH Binance -100% -50% 0% 50% 100% 150% 200% BinanceG ate.io O KExKucoin Binance D ex H uobiG lobal Bibox M XCBitM axBgogoBittrex ProbitBitforex Average IEO Returns YTD by Platform Notes: Average returns analysis includes 95 IEOs Source: onChainFX, CryptoRank.io MARKET § 2019 saw the rise of exchange tokens: tokens issued by crypto exchanges that incentivize participants to use their platform; some potential benefits included discounted trading fees, market making rewards and token burn mechanisms § Binance pioneered the exchange token and IEO model and continues to set the pace in terms of token model innovation § Initial exchange offerings (IEOs) emerged as a way for projects to raise capital through exchanges themselves with a direct exchange listing § Aside from Binance, the majority of IEOs exchange platforms struggled to perform post-launch Commentary
  • 22. 22 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The industry converges upon bitcoin A decade of bitcoin In its first decade, bitcoin’s narrative evolved from an e-money proof of concept to powerful asset. Along the way, bitcoin went from a retail asset to an increasingly institutionalized asset. $1-3B transactions processed daily Over $2 trillion in transactions processed since 2011 Over $1.6 trillion in the past 2 years alone Proof of concept for e-money Peer-to-peer payments Anonymous darknet currency Censorship- resistant store of value Safe haven asset Digital gold Source: CoinMetrics, ”Visions of Bitcoin” by Nic Carter and Hasufly BITCOIN
  • 23. 23 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Bitcoin continues to have strong fundamentals through 2019 Notes: All data as of 11/30/19 Source: CoinMetrics Bitcoin Market Cap, 30d Trailing Avg $ USD Bitcoin Adj Transaction Volume, 30d Trailing Avg $ USD Bitcoin Hash Rate, 30d Trailing Avg TH/s BITCOIN Total Fees, 30d Trailing Avg $ USD $- $50 $100 $150 $200 $250 $300 Jan-17 Jan-18 Jan-19 Billions $- $2 $4 $6 $8 $10 $12 $14 Jan-17 Jan-18 Jan-19 Millions - 20 40 60 80 100 120 Jan-17 Jan-18 Jan-19 Millions $- $1 $2 $3 $4 $5 $6 $7 $8 Jan-17 Jan-18 Jan-19 Billions
  • 24. 24 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Bitcoin’s third halving set for spring 2020 § Bitcoin’s third halving will occur in May 2020, cutting the block reward in half to 6.25 BTC § Bitcoin has a total supply of 21M with more than 98% of bitcoins mined by 2030, with ~86% mined as of 2019 § Although the halving is well known in advance and theoretically should be priced in, previous halvings ostensibly had significant impact on price o Between the first and second halving the price increased ~55x o Between the second and upcoming third halving, the price has increased ~12x (as of Q4 2019) Dates Block Reward Bitcoin Issuance Historical Price on Halving Day 2009-12 50 BTC 10.5M $12.35 2012-16 25 BTC 5.25M $650.63 2016-20 12.5 BTC 2.625M -- 2020-24 6.25 BTC 1.312M -- Source: Bitcoinblockhalf.com, bitcoinclock.com, Coin Metrics, Galaxy Research Commentary BITCOIN
  • 25. 25 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Primary focus for bitcoin continues to be privacy and scalability Notes: (1) Based on BitMex Schnorr Signatures research Source: CoinMetrics, BitMex Research Description Implications Schnorr Signatures Schnorr signatures are digital signatures that are easy to compute, highly secure, and allow for aggregation of multi-sig transactions as a normal single signature. Schnorr signature aggregation will result in scalability enhancements, resulting in an estimated 13%1 increase in network capacity. Additionally, privacy on Bitcoin is increased as multi-sig transactions become indistinguishable from transactions with a single signer. Taproot Taproot upgrade is a public change that allows for only a single public key / signature to be published, rather than including the additional hash needed in the MAST structure. By eliminating the additional hash, Taproot provides efficiency gains. Taproot also provides privacy enhancements by hiding unexecuted conditions and making cooperative transactions look the same to a third party observer. Liquid Liquid is a sidechain network developed by Blockstream that offers faster and more private transaction settlement. Liquid provides a venue for exchanges and traders to settle large amounts of bitcoin in a quicker, cheaper and more private manner. Additionally, new assets and behaviors can be enabled through Liquid. Lightning Network Lightning is a layer 2 solution using payment channels to create a microtransaction network layer on bitcoin. Lightning enables cheaper, faster and more private payments on top of Bitcoin, opening up new use cases such as micropayments. BITCOIN
  • 26. 26 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Lightning network channels and capacity demonstrate slow but steady growth 0 1000 2000 3000 4000 5000 6000 Jan-19 Apr-19 Jul-19 Oct-19 Nodes with Channels, as of 11/30/19 § Lighting network now has 5K+ nodes, 30K channels and current network capacity is ~$6M, up 3x from Jan 2019 § Lightning Labs improved Lightning usability, launching the mobile app and releasing light client support through Neutrino § Venture funding accelerated with new tools and applications including OpenNode, Acinq, RADAR ION and Casa. Merchant products enable payments with consumer products like BitRefill, Fold and LN.Pizza. Despite the influx of Lightning-based projects, scalable revenue-generating models remain an outstanding question Commentary 0 200 400 600 800 1000 1200 $0 $2 $4 $6 $8 $10 $12 $14 Jan-19 Apr-19 Jul-19 Oct-19 BTC USDMillions Lightning Network Capacity, as of 11/30/19 Capacity USD Capacity BTC BITCOIN Source: Bitcoin Visuals
  • 27. 27 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Ethereum usage grew in 2019 despite suppressed prices Notes: Data as of 11/30/19 Source: CoinMetrics, Etherscan Ethereum Market Cap, 30d Trailing Avg $ USD Ethereum Contract Calls, 30d Trailing Avg Total Fees, 30d Trailing Avg $ USDEthereum Active Addresses, 30d Trailing Avg ETHEREUM $- $20 $40 $60 $80 $100 $120 Jan-17 Jan-18 Jan-19 Billions - 100 200 300 400 500 600 700 Jan-17 Jan-18 Jan-19 Thousands $- $1 $1 $2 $2 $3 Jan-17 Jan-18 Jan-19 Millions - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Jan-17 Jan-18 Jan-19 Thousands
  • 28. 28 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE ETH 2.0 transition is in flux; expected to take multiple years Source: Ethereum Foundation, Vitalik Buterin Blog, DevCon 2023+202220212020 Phase 0: Beacon Chain Introduce new chain and new asset (ETH 2) First building block of ETH 2.0 Phase 1: Shard Chains Design and delivery of shard chains. Focus on construction, validation and consensus of shard chains Phase 2: Execution Smart contracts reintroduced, with support for accounts, contracts and other familiar validations Phase 3: Light Client State Protocol Minimized on-chain state by moving data off chain § The Ethereum Foundation has $30M of capital allocated towards supporting Eth 1.0 ($8M), Eth 2.0 research and launch ($19M) and growing the developer ecosystem ($3M) § Ethereum’s planned transition to Eth 2.0 is expected to rollout over the next 3-5 years, with initial launch of the beacon chain in Q1 of 2020 § The transition management strategy is in flux; likely that Eth 1.0 and Eth 2.0 will exist in parallel for some time § The next planned iteration of Ethereum will remove the ability to execute transactions atomically, which may compromise the overall composability of Ethereum dApps § There are a dozen teams working on Eth 2.0; however many look to Vitalik as a source for direction and strategy Estimated Planned Transition from ETH 1.0 to 2.0 Commentary ETHEREUM
  • 29. 29 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE 2019 crypto asset launches largely disappoint Source: CoinMetrics -48% -59% -92% -100% -80% -60% -40% -20% 0% 20% 0 30 60 90 120 150 180 210 240 270 Days Since Launch Post-Launch Price Performance of New Assets Cosmos Hashgraph Algorand § 2019 saw the launch of a few high-profile Proof-of-Stake chain launches, namely Cosmos ($17M+ raised) Hashgraph ($100M+ raised) and Algorand ($60M+ raised) § Each of these chains struggled from a price perspective as they failed to attract significant developer or user attention § Most of these projects have launched ‘ecosystem funds’ in an attempt to catalyze development activity and, ultimately, user demand. However, past ecosystem funding efforts have tended to only be successful in recruiting “mercenaries” collecting easy funding rather than “missionaries” with longer-term conviction Commentary NEW LAUNCHES
  • 30. 30 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE “ETH killer” chain hasn’t emerged;15+ new launches upcoming Source: Various project websites 2019 Launches Upcoming Launches § Over the course of 2019, Bitcoin and Ethereum maintained ~70% market cap dominance of the entire crypto asset market cap, despite a few high-profile launches § In the next 12 months, billions of dollars of VC capital will be unlocked and available for sale in the market as 15+ protocols go live § In the search for the next smart contract platform, ethereum and bitcoin are likely immediate beneficiaries of these launches as a portion of capital shifts from new launches back to these assets Commentary NEW LAUNCHES
  • 31. 31 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Adoption 3
  • 32. 32 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Varying adoption across market segments Institutional Interest § Traditional institutions and big tech firms revealed large crypto projects § Sophisticated infrastructure develops further in the crypto ecosystem Retail Users § Bitcoin continues to resonate with millennials § Full time crypto protocol developers grew in 2019 Nation States § Facebook’s Libra awakened governments globally to digital currencies § China’s PBoC plans for a digital currency came under spotlight
  • 33. 33 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto assets are going from fringe to mainstream across three major user segments 2011 2019 2030+ Fringe Mainstream Retail Users Institutions Nation States ADOPTION
  • 34. 34 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Bitcoin is a demographic mega-trend, resonating with millennials and Gen-Z Notes: This survey was conducted online within the United States between April 23–25, 2019 among 2029 adults (aged 18 and over) by The Harris Poll on behalf of Blockchain Capital via its Harris On Demand omnibus product. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online. Source: Blockchain Capital Harris Poll Survey 0% 50% 100% Awareness Familiarity Positive Perception Conviction Propensity to Purchase Fall 2017 Spring2019 Bitcoin sentiment in following categories… Bitcoin resonates particularly with millennials and Gen Z (ages 18-34) ~50% strongly/somewhat agree that most people will be using Bitcoin in the next 10 years ADOPTION
  • 35. 35 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE 0% 5% 10% 15% 20% 25% 30% 35% 18-34 35-44 45-54 55-64 65+ Government Bonds Stocks Real Estate Gold As generational wealth transfer begins, investment preferences may be a bitcoin catalyst An estimated $15T of wealth is expected to transfer by 2030 to younger generations… ...making their investment preferences increasingly meaningful $8,808 $579 $3,212 $572 $1,889 $173 $220 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 N orth Am erica Latin Am erica /Caribbean EuropeM iddle East Asi Africa Pacific Millions Source: Wealth-X Consulting Firm, Blockchain Capital Harris Poll Survey % of individuals, by age who prefer to own $1000 of Bitcoin over…
  • 36. 36 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE 0 500 1000 1500 2000 2500 3000 3500 4000 4500 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Full Time Part Time One Time Full time blockchain developers increased 13% from June ‘18 to June ‘19 Source: Electric Capital 1H19 Developer Report ADOPTION
  • 37. 37 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Industry made leaps in terms of end user experience and access to accelerate adoption Exposure to new demographics Startups targeting new demographics seek to tap into familiar ecommerce patterns (e.g., cashback rewards) Increased access Crypto payment processors are focused on increasing access with frictionless fiat onramps such as ApplePay Improved UI / UX New wallets and products are creating intuitive experiences, obfuscating confusing user steps like address and gas fees ADOPTION
  • 38. 38 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Financial institutions make major moves as crypto financial products mature Traditional FIs entering the space § Fidelity Digital Assets rolled out their custody offering § TD Ameritrade offers clients ability to invest in bitcoin futures via ErisX § JPMorgan announced their enterprise stablecoin for B2B transactions § Bakkt (ICE/NYSE owned) launches their bitcoin futures to the market Crypto FIs mature in the market § Anchorage, Gemini and Coinbase become institutional qualified custodians § BlockFi competes in the traditional bitcoin lending space § Routefire, Tagomi, Talos Trading entered the space to provide liquidity aggregation and tooling Commentary § Five years ago, most FIs were dismissive of bitcoin and blockchain – today it feels imprudent to not have a blockchain strategy. In many ways bitcoin is increasingly viewed as a reputationally de-risked asset § FI distribution channels have potential to enable access for tens of millions of new bitcoin users, as well as mainstream adoption for the entire asset class (both retail and institutional clients) § Despite nascent institutional support for bitcoin, there is massive room for growth among retail and institutional segments alike; education and awareness are necessary ingredients ADOPTION
  • 39. 39 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Fintech doubles down on crypto products to meet demographic demand Source: Square financials, Yahoo Finance Cash app functionality to buy / sell bitcoin, as well as send to family members Square sold more than $125M of bitcoin in 2Q19 alone $28B Mkt Cap Robinhood offers commission free crypto trading for some US states Crypto assets are not transferrable in and out of Robinhood custody right now $5.6B Mkt Cap SoFi offers crypto trading with SoFi invest in some states Currently offers trading for bitcoin, ethereum and litecoin; it is a closed system with assets remaining in SoFi $1B+ Mkt Cap eToro offers trading for 14 assets eToro also launched a cryptocurrency trading strategy for users based on social media sentiment regarding various assets $800M+ Mkt Cap ADOPTION Commentary § Given the demographic overlap, Fintech is extremely well positioned to enable crypto on-ramps and capture demand for crypto trading § Square emerged as a leading platform, bringing on high profile bitcoin talent to build bitcoin products and funding open source development § As more fintech players get involved, opportunity to grow the crypto retail user base expands significantly
  • 40. 40 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Social media giants look to launch their own blockchains and tokens Geography Users Project Response Source: Statista, Libra, Calibra, Coindesk, Blockchain Capital Global ~2.4B Stablecoin backed by basket of currencies Calibra wallet for supporting products Libra Association to govern Libra token US regulators reacted extremely negatively - questioning the intentions of Facebook and potential harm of Libra on the U.S. dollar Global leaders expressed uncertainty, instigating conversations around digital currencies at the central bank level. Zuckerberg claims the project will not launch until regulators approve. Global ~200M The launch of TON has been halted by an SEC emergency action in Fall 2019 Telegram raised $1.7B to launch in-app currency TON Japan ~217M LINE, a leading Southeast Asia messenger, launches their own crypto exchange Project went live Sept 2019 for 80 million users in Japan with full regulatory approval Korea ~50M Klaytn, Kakao’s blockchain, went live in 2019 with a slew of social and gaming apps Klaytn launched with 10+ dapps and has been growing users ever since ADOPTION
  • 41. 41 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE The separation of money and state was tested by Libra and China’s digital currency plans Various sovereign central bank digital currency efforts rumored to be underway Source: Wall Street Journal, Epoch Times, Reuters, The Block ADOPTION
  • 42. 42 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Central bank digital currencies heavily explored by a number of nations ADOPTION What is a CBDC? A CBDC is a new form of legal tender, different from other types of money that central banks currently issue (i.e., cash, reserves). Instead, CBDC is the equivalent of digital cash. While proposed approaches vary, in most, the central bank plays a critical function. At a minimum, the central bank maintains the reserves backing the digital cash. In more involved approaches, the central bank may play a role in issuing the digital cash, as well as creating and supporting the underpinning technology. Why create a CBDC? First, a CBDC offers the benefits touted by digital payments broadly. As a means of payment, CBDC could increase liquidity and scalability for domestic transactions. Digital cash also makes it easier to export and drive adoption of domestic currency abroad – which potentially augments any nation’s influence on the global economy and international politics However, some central banks may issue CBDC to surveil their citizens' digital activities and be able to trace financial transactions more efficiently. This intent would be destructive to financial freedom and privacy. What efforts are underway? In 2019, rumors emerged that Japan, France, the EU, Ghana and Tunisia, in addition to China are all evaluating or planning a digital currency. The U.S. is also said to be evaluating a digital dollar and its implications. Source: IMF, The Block, CoinDesk, Committee on Payments and Market infrastructure Remains unclear if CBDCs will function like cash or a bank account, but each model has widely different implications
  • 43. 43 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Regulation 4
  • 44. 44 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Regulatory landscape remains a complex and critical area for crypto assets Token issuance & distribution § SEC announced settlements or actions for major projects like EOS, Sia and Telegram § Overall, regulation of token issuance remains unclear Money transmission & B/D licensing § FINCEN provided clarity around the requirements for money transmitters § SEC awarded a B/D license and two Transfer Agent licenses Global outlook § Regulators increasingly addressed crypto assets in particular, clarifying guidance by proposing or adopting specific laws
  • 45. 45 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Two regulatory areas emerged in the U.S.: classification of assets and transmission of value January June Nov TKJ No-Action Letter Apr 3, 2019 SEC qualifies Blockstack and YouNow token offerings under Reg A+ Jul 10/11, 2019 Kik complaint, Jun 24, 2019 Volantis charged by NY US Attorney, Jul 25, 2019 Block.one and Nebulous settlements, Sept 30, 2019 TRO against Telegram Oct 11, 2019 Pocketful of Quarters, Inc. No- Action Letter Jul 25, 2019 Gladius Network LLC Feb 20, 2019 FinCEN provides guidance around crypto regulations May 9, 2019 Bittrex Bitlicense denied by NYDFS, Apr 10, 2019 Wyoming passes 3 bills to boost crypto industry Feb 20, 2019 Veritaseum Inc. emergency asset freeze, Aug 12, 2019 CLASSIFICATION OF ASSETS (Securities & Commodities Regulations) TRANSMISSION OF VALUE (Broker/Dealer and Money Transmission Regulations) OTHER REGULATION Source: FinCEN, SEC, Blockchain Capital Analysis “Managed Stablecoin” Act Introduced Nov 21, 2019
  • 46. 46 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Token issuance continues to be an uncertain regulatory area Source: Blockchain Capital Analysis First, SEC suggests certain ICOs violated securities laws… Projects were penalized and forced to register tokens as securities and / or rescind tokens entirely …then EOS, a $4B token sale, was deemed an unregistered offer of securities, with a different outcome… EOS was penalized, with no registration or rescission required, seeming to indicate the SEC deemed EOS tokens to NOT be securities …finally, SEC filed an emergency restraining order against Telegram Telegram sold to institutional investors and never planned a public token sale. Their token distribution was blocked by the SEC restraining order It is likely that there are true standards for decentralization and/or demonstrated use case, but each case differs by the “facts and circumstances” REGULATION
  • 47. 47 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE FinCEN provided guidance around money transmitters NOT Money Transmitters: § Non-custodial wallets § Decentralized exchanges § “software” providers § dApp developers Money Transmitters: § Custodial wallets § Custodial exchanges § “service” providers utilizing dApps to transmit value REGULATION Source: FinCEN guidance FinCEN provides guidance offering a framework for classifying money transmitters for business models involving “convertible virtual currencies.” The guidance suggests the following types of designations:
  • 48. 48 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Regulatory Approval Implications Blockstack and YouNow tokens approved for a Reg A+ qualified offering Provides guarantees there is a legally compliant path for token funding and distribution Eight projects received their NY Bitlicense approval, including: Tagomi, Bitstamp, LibertyX, SoFi and Robinhood Notoriously stringent, the NY Bitlicense approval means projects can expand their offerings in a key market Securitize approved for first ever digital asset transfer agent SEC recognizes a transfer agent as an important part of the capital market ecosystem for crypto assets First non-custodial digital asset broker-dealer license approved for Harbor, with others next in line FINRA approval may suggest a path forward for digitally native broker - dealers, after a long wait-and-hold period for most applications Positive regulatory clarity around money transmission and regulatory approvals REGULATION Source: Blockstack, Securitize, Harbor
  • 49. 49 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Source: Comply Advantage Crypto assets are regulated at a global level REGULATION
  • 50. 50 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE However, regulation widely varies across geographies Major Events Stance China President Xi announced new initiatives to position China as a blockchain leader Potential for China to loosely use blockchain based technology for a new digital yuan Pro enterprise blockchain use cases Japan Japan continues to regulate crypto exchanges, recently granting a licenses to messaging giant LINE Rumors that Japan may be developing a SWIFT-like network for crypto payments Cautious but still positive regulatory environment Hong Kong Hong Kong regulators determine new rules for crypto exchanges to get licensing Cautious but still positive regulatory environment UK FCA proposed crypto asset classification framework to allow token issuers to create innovative tokens that are not securities Cautious but still positive regulatory environment EU FATF proposed travel rule suggests KYC / AML will be set at a much higher threshold for exchanges and wallets High degree of regulation towards the crypto industry India Continued ban on exchanges, harsh regulation for blockchain projects Negative sentiment Source: Wall Street Journal, The Block, Coindesk REGULATION
  • 51. 51 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Major Themes 5
  • 52. 52 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Major themes of 2019 DeFi § Financial infrastructure built using protocols and smart contracts emerged as a key use case in 2019 Prime Brokerage § Prime brokerage stack continues to grow, with sophisticated crypto players offering services from custody and exchange to settlement and execution Gaming § Major protocols continue to push forward on gaming plans despite any major traction among users Developer Tools § Data, node deployment and developer tools emerged to fill a critical gap in making blockchain-based product development easier
  • 53. 53 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE The DeFi ecosystem grew rapidly over the course of 2019 WALLETS LENDING STABLECOINS DERIVATIVES PREDICTION MARKETS EXCHANGES & LIQUIDITY INVESTING OTHER Source: Defi Pulse, DefiPrime DEFI
  • 54. 54 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Over $600M of ETH is locked in open finance smart contracts Source: Defi Pulse Total Value Locked (ETH) in “Decentralized Finance” projects 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Maker Compound Synthetix § ~84% of value is locked in top three projects: Maker, Compound and Synthetix. § Maker dominance declines to <50% of all ETH locked in smart contracts o The DAI borrowing rate spiked over 2019, reaching 20.5% in August at its peak; since then it has been declining § Defi Pulse now tracks over 20 projects in the DeFi ecosystem, with Compound, Synthetix, and Uniswap as breakouts in 2019 Commentary DEFI
  • 55. 55 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Over the course of 2019, $600M+ in DeFi loans were originated Source: Loanscan.io, Defi Pulse § Across lending platforms, $648M in loans were originated in 2019; as of Jan ‘19, only $22M in loans had been originated, a 28x increase § The primary motivations for borrowers were: leverage for traders and working capital for crypto-native companies § Assets are primarily stablecoins like Dai; however the introduction of multi-collateral Dai will introduce new collateral options for loans § Lending products today are primarily highly overcollateralized, making them less capital efficient § Identity and reputation remain key outstanding ingredients for improving the capital efficiency of on-chain lending and expanding the addressable market Commentary Loans Originated, USD Collateral Ratio, % DEFI
  • 56. 56 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Competition for prime brokerage services grew intense Source: Company logos EXCHANGES CUSTODIANS OTC DESKS MARKET MAKERS TRADE EXECUTION LENDING In its current state, crypto prime brokerage services are unbundled Likely to see consolidation into 2020+, as providers move towards vertical consolidation to offer better pricing, convenience and optionality PRIME BROKERAGE
  • 57. 57 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Bitcoin derivatives are improving price discovery in the market Source: Skew, Coindesk, CME, Bakkt Bakkt bitcoin futures total open interest and volume, $ USD CME bitcoin futures total open interest and volume, $ USD PRIME BROKERAGE § Bakkt bitcoin futures launched in September, reaching ~$10M daily volumes of and $1.36M in open interest by November § CME bitcoin futures saw average daily volumes of $200M and average open interest of $168M higher than the usual § While CME continues to dominate Bakkt, the gap is slowly decreasing as Bakkt looks to catch up Commentary
  • 58. 58 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto-backed lending growth indicates strong institutional interest Source: Genesis Lending Quarterly Reports Genesis Capital lending originations, $ USD PRIME BROKERAGE § Growth in crypto-collateralized borrowing from centralized lending desks highlights appetite among industry participants § As the industry’s largest and most liquid asset, bitcoin comprised a significant portion of Genesis Capital’s lending and borrowing demand § BTC-backed cash lending to international and Asian counterparties grew significantly for Genesis Capital, presenting an opportunity to earn attractive yields Commentary 0 200 400 600 800 1000 4Q2018 1Q2019 2Q2019 3Q2019 Millions
  • 59. 59 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE The blockchain gaming ecosystem continues to developSTUDIOSPROTOCOLINFRASTRUCTURE MARKETPLACES GAMES GAMING Source: Various project websites
  • 60. 60 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Ethereum remains leading protocol for games, despite a flurry of competition Source: Various project websites Protocol Description Games ETHEREUM Leading smart contract platform, creator of ERC-721 open standard FLOW (DAPPER) CryptoKitties creator’s base layer protocol for scalable blockchain-based games RIPPLE (INTERLEDGER) Payment protocol for conducting transactions across different blockchains EOS DPoS chain focused on higher throughput and scalability LOOM SIDECHAIN Sidechain similar to Plasma, with gaming dapps as side chains STEEM Social media network using DPoS GAMING
  • 61. 61 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Despite buzz, blockchain gaming activity remains underwhelming with no hits Among most popular live games, traction has flatlined or remained low Crypto Kitties, Ethereum / Dapper Gods Unchained, Ethereum EOS Knights, EOS Total usage remains low dApps across gaming / gambling Average DAU for gaming<1K <20K Source: Dapp Radar, State of the Dapps GAMING 0 0.2 0.4 0.6 0.8 1 1.2 Jun-18 Dec-18 Jun-19 Thousands 0 0.2 0.4 0.6 0.8 1 1.2 Jul-18 Jan-19 Jul-19 Thousands dau volume 0 2 4 6 8 Jul-18 Jan-19 Jul-19 Thousands
  • 62. 62 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Developer infrastructure and tools make building crypto products easier DEVELOPER TOOLS NODE INFRASTRUCTURE TESTING & TOOLS DATA & ANALYTICS Source: Various websites
  • 63. 63 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Anecdotal evidence suggests demand for developer tools appears on the rise Source: Truffle DEVELOPER TOOLS
  • 64. 64 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Looking Ahead 8
  • 65. 65 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Looking ahead Predictions Industry Maturation § Crypto remains in early stages, with a majority of user traction congregating around onboarding (exchanges) § As industry matures, expect increase in M&A activity § Our team shares our bold predictions around the regulatory landscape, DeFi and more
  • 66. 66 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Zooming out on crypto shows we are in the early stages Bitcoin Global Stock Market $73T Gold $7.7T Apple $1T Crypto assets $.25 T Global Money Supply $90T LOOKING AHEAD Source: CoinMetrics, Yahoo Finance, Visual Capitalist
  • 67. 67 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Crypto is still in the early “onboarding phase” ‘onboarding’ companies are typically exchanges and others providing onramps to crypto - as such, it’s no surprise that in the current onboarding phase exchanges have been most profitable companies to-date Internet Companies Crypto Companies Onboarding Phase 2010s 2030s 1980s 2010s As the number of people ‘onboarded’ into crypto grows, we can expect more mainstream applications of programmable money to emerge Opportunities beyond Onboarding LOOKING AHEAD
  • 68. 68 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Today, protocol development is largely focused on horizontal competition Present State: Horizontal Competition $133B MKT CAP $16B MKT CAP$1.8B MKT CAP LAUNCHED MAJORITY REMAIN UNLAUNCHED $900M $69M $822M LOOKING AHEAD Source: CoinMetrics
  • 69. 69 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Developer momentum may shift from horizontal competition to vertical construction Future State: Vertical Construction As layer 1 further ossifies, development may shift towards vertical construction for a few base layer chains LOOKING AHEAD
  • 70. 70 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE As industry reaches inflection point, M&A activity is expected to increase M&A activity has primarily been limited to internal players… …but incumbents are quickly devising their blockchain strategies M&A activity expected to increase as incumbents lean in and companies demonstrate ability to generate stable cash flows and growth LOOKING AHEAD
  • 71. 71 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE Blockchain Capital’s bold 2020 predictions LOOKING AHEAD 1. A crypto company is acquired for more than $500m 2. Value locked in DeFi hits $5B 3. In the face of competition from China, Libra will receive the green light for a dollar-backed stablecoin 4. A federal judge rules against the SEC in a crypto case 5. Not a single 2020 L1 network launch achieves "top 10” status, as defined by network value 6. USDC sees 300%+ growth (as measured by transaction value, issuance, market cap and trading volume) 7. Demand for Bitcoin transactions drives fees to exceed $100, catalyzing scaling up the stack 8. FinCEN / FATF hold stablecoins to a stricter standard than paper cash by requiring broad application of the travel rule 9. KYC / AML becomes the primary regulatory battleground for DeFi 10. Privacy coins are de-listed from major exchanges 11. Bitcoin price blows past all-time high
  • 72. 72 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE About Blockchain Capital Bart Stephens Co-Founder & Managing Partner Brad Stephens Co-Founder and Managing Partner Spencer Bogart General Partner INVESTMENT TEAM H. Joshua Rivera General Counsel & Chief Compliance Officer Kinjal Shah Senior Associate Jimmy Song Bitcoin Fellow Ben Davenport Venture Partner Derek Hsue Analyst Aleks Larsen Associate AT A GLANCE § 80+ portfolio companies § $300M+ in assets under management § 9 dedicated investment professionals § 4 funds to date PORTFOLIO SNAPSHOT
  • 73. 73 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICEFOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE THE INFORMATION PRESENTED IN THIS DOCUMENT HAS BEEN DEVELOPED INTERNALLY AND/OR OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE; HOWEVER, BLOCKCHAIN CAPITAL DOES NOT GUARANTEE THE ACCURACY, ADEQUACY OR COMPLETENESS OF SUCH INFORMATION. BLOCKCHAIN CAPITAL IS NOT UNDER ANY OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. PREDICTIONS, OPINIONS, AND OTHER INFORMATION CONTAINED IN THIS ARTICLE ARE SUBJECT TO CHANGE CONTINUALLY AND WITHOUT NOTICE OF ANY KIND AND MAY NO LONGER BE TRUE AFTER THE DATE INDICATED. ANY FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE THEY ARE MADE AND ARE SUBJECT TO NUMEROUS ASSUMPTIONS, RISKS AND UNCERTAINTIES, WHICH CHANGE OVER TIME. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN FORWARD-LOOKING STATEMENTS. EXAMPLES OF PORTFOLIO COMPANIES ARE PURELY FOR ILLUSTRATIVE PURPOSES. THIS LIST IS ONLY PARTIAL, AND READERS SHOULD NOT ASSUME THAT THE INVESTMENTS IDENTIFIED WERE OR WILL BE PROFITABLE OR ARE REPRESENTATIVE OF INVESTMENTS BY BLOCKCHAIN CAPITAL’S ADVISED FUNDS. THERE IS NO GUARANTEE THAT ANY FUND WILL ACHIEVE THE SAME EXPOSURE TO, OR QUALITY OF, INVESTMENTS HELD BY ANY EXISTING FUND. THIS MATERIAL IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY; IT IS NEITHER A PROSPECTUS NOR AN ADVERTISEMENT, AND NO OFFERING IS BEING MADE TO THE PUBLIC. RECIPIENTS OF THIS DOCUMENT ARE NOT TO CONSTRUE IT AS INVESTMENT, LEGAL, OR TAX ADVICE AND IT IS NOT INTENDED TO PROVIDE THE BASIS FOR ANY EVALUATION OF ANY INVESTMENT. BLOCKCHAIN CAPITAL DOES NOT PROVIDE INVESTMENT ADVICE TO INVESTORS AND NO COMMUNICATION, THROUGH THIS DOCUMENT OR IN ANY OTHER MEDIUM, SHOULD BE CONSTRUED AS A RECOMMENDATION FOR ANY SECURITY. VENTURE INVESTING INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR SOPHISTICATED AND QUALIFIED ACCREDITED INVESTORS. Disclaimer
  • 74. 74 FOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICEFOR INFORMATIONAL PURPOSES ONLY | NOT INVESTMENT ADVICE @blockchaincap contact@blockchaincapital.com Thank you!