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2017 CCAF Global Cryptocurrency Benchmarking Study
2
Table of Contents
Part 1: Overview
• Setting the Scene
• Cross-sector...
2017 CCAF Global Cryptocurrency Benchmarking Study
3
Over hundred cryptocurrency companies as well as 30
individual miners...
2017 CCAF Global Cryptocurrency Benchmarking Study
4
Study Authors
Dr Garrick Hileman
Research Fellow, Head of Cryptocurre...
Setting the Scene
2017 CCAF Global Cryptocurrency Benchmarking Study
6
Bitcoin’s genealogical tree: while thousands of new
cryptocurrencies ...
2017 CCAF Global Cryptocurrency Benchmarking Study
7
Total cryptocurrency market cap has increased nearly 4x since
January...
2017 CCAF Global Cryptocurrency Benchmarking Study
8
Bitcoin has conceded considerable market cap share to other
cryptocur...
2017 CCAF Global Cryptocurrency Benchmarking Study
9
Market prices of monero (XMR), DASH and ripple (XRP) have
experienced...
2017 CCAF Global Cryptocurrency Benchmarking Study
10
Bitcoin has by far the highest daily transaction in terms of
number ...
2017 CCAF Global Cryptocurrency Benchmarking Study
11
Bitcoin is the most widely supported cryptocurrency among
participat...
2017 CCAF Global Cryptocurrency Benchmarking Study
12
Largest number of study participants are based in the US (32)
and Ch...
2017 CCAF Global Cryptocurrency Benchmarking Study
13
At least 2,376 people are employed in the cryptocurrency
industry*; ...
2017 CCAF Global Cryptocurrency Benchmarking Study
14
North American cryptocurrency companies have the highest
median numb...
2017 CCAF Global Cryptocurrency Benchmarking Study
15
Lines blurring across industry segments: 31% of study
participants a...
2017 CCAF Global Cryptocurrency Benchmarking Study
16
Estimated number of unique active users of cryptocurrency
wallets ha...
Cross-Sector Comparisons
2017 CCAF Global Cryptocurrency Benchmarking Study
18
Payment service providers have the highest median number of
employee...
2017 CCAF Global Cryptocurrency Benchmarking Study
19
73% of exchanges have full custody of customer funds,
whereas only 1...
2017 CCAF Global Cryptocurrency Benchmarking Study
20
Wallets have significantly higher headcount and cost
associated with...
2017 CCAF Global Cryptocurrency Benchmarking Study
21
Exchanges and payment companies more frequently employ
external secu...
2017 CCAF Global Cryptocurrency Benchmarking Study
22
Payment companies have higher compliance headcount and
cost than wal...
2017 CCAF Global Cryptocurrency Benchmarking Study
23
While nearly 90% of payment companies perform KYC/AML
checks, only 3...
2017 CCAF Global Cryptocurrency Benchmarking Study
24
Internal checks are primary KYC/AML method; payment firms
more frequ...
2017 CCAF Global Cryptocurrency Benchmarking Study
25
More than half of payment companies hold a formal
government license...
Exchanges
2017 CCAF Global Cryptocurrency Benchmarking Study
27
51 exchanges from 27 countries are represented in the study
sample: ...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Exchanges based in Asia-Pacific employ most people;
European and AME...
2017 CCAF Global Cryptocurrency Benchmarking Study
29
…however, nearly half of all exchanges are small companies
with less...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Taxonomy of the three main types of exchange activities
2017 CCAF Global Cryptocurrency Benchmarking Study
31
Majority of small exchanges specialise in a single type of
activity ...
2017 CCAF Global Cryptocurrency Benchmarking Study
32
Trading volumes across the top exchanges are more evenly
distributed...
2017 CCAF Global Cryptocurrency Benchmarking Study
33
Similarly, bitcoin trading in Chinese renminbi has also
plummeted si...
2017 CCAF Global Cryptocurrency Benchmarking Study
34
USD is the most widely supported national currency on
exchanges; man...
2017 CCAF Global Cryptocurrency Benchmarking Study
35
Bitcoin is listed on all surveyed exchanges; ether and litecoin
next...
2017 CCAF Global Cryptocurrency Benchmarking Study
36
More than half of small exchanges hold a government license
compared...
2017 CCAF Global Cryptocurrency Benchmarking Study
37
IT security breaches pose the highest operational risk for
exchanges...
2017 CCAF Global Cryptocurrency Benchmarking Study
38
73% of exchanges take custody of users’ cryptocurrency funds
by cont...
2017 CCAF Global Cryptocurrency Benchmarking Study
39
Security: large exchanges are realising economies of scale,
spending...
2017 CCAF Global Cryptocurrency Benchmarking Study
40
Order-book only exchanges spend 2x more on security as a
share of to...
2017 CCAF Global Cryptocurrency Benchmarking Study
41
Large exchanges use more frequently and a greater number of
external...
2017 CCAF Global Cryptocurrency Benchmarking Study
42
Majority of exchanges enable optional two-factor authentication
(2FA...
2017 CCAF Global Cryptocurrency Benchmarking Study
43
… but large exchanges offer 2FA across a greater number of
user acti...
2017 CCAF Global Cryptocurrency Benchmarking Study
44
Majority of exchanges require employees to use mandatory
2FA for sen...
2017 CCAF Global Cryptocurrency Benchmarking Study
45
…but large exchanges require 2FA across a greater number of
employee...
2017 CCAF Global Cryptocurrency Benchmarking Study
46
Of the surveyed internal security measures, large exchanges
employed...
2017 CCAF Global Cryptocurrency Benchmarking Study
47
Security measures used by exchanges to vet staff for
production acce...
2017 CCAF Global Cryptocurrency Benchmarking Study
48
Nearly half of small exchanges acting as custodians do not have a
wr...
2017 CCAF Global Cryptocurrency Benchmarking Study
49
More common for large exchanges to have a written policy on
who can ...
2017 CCAF Global Cryptocurrency Benchmarking Study
50
21% of exchanges do not provide security training programs to
their ...
2017 CCAF Global Cryptocurrency Benchmarking Study
51
Exchanges hold the vast majority of funds in cold storage:
median va...
2017 CCAF Global Cryptocurrency Benchmarking Study
52
Large exchanges perform more frequent formal security audits
and rel...
Wallets
2017 CCAF Global Cryptocurrency Benchmarking Study
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26 wallets are represented in the study sample: 81% of wallet
provid...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Majority of wallets are provided by registered corporations
(‘incorp...
2017 CCAF Global Cryptocurrency Benchmarking Study
56
The average wallet provider is a small company: 69% have less
than 1...
2017 CCAF Global Cryptocurrency Benchmarking Study
57
Total number of estimated cryptocurrency wallets has grown
over 4x f...
2017 CCAF Global Cryptocurrency Benchmarking Study
58
Total number of currently ’active’ wallets estimated to range
betwee...
2017 CCAF Global Cryptocurrency Benchmarking Study
59
A significant range in the percentage of active wallets was
found ac...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Greatest number of wallet users are based in North America
and Europe
2017 CCAF Global Cryptocurrency Benchmarking Study
61
Only minor differences in user share by region can be observed
betwe...
2017 CCAF Global Cryptocurrency Benchmarking Study
62
European and North American users prefer using wallets from
local pr...
2017 CCAF Global Cryptocurrency Benchmarking Study
63
Daily on-chain transactions performed by users of large wallets
gene...
2017 CCAF Global Cryptocurrency Benchmarking Study
64
Over 70% of wallet providers do not control user funds; all
custodia...
2017 CCAF Global Cryptocurrency Benchmarking Study
65
Mobile wallet app is the most widely offered wallet format;
hardware...
2017 CCAF Global Cryptocurrency Benchmarking Study
66
Litecoin, ether and dogecoin are the most widely supported
cryptocur...
2017 CCAF Global Cryptocurrency Benchmarking Study
67
Majority of wallets support mechanisms to easily backup and
migrate ...
2017 CCAF Global Cryptocurrency Benchmarking Study
68
Blurring sector lines: more than half of surveyed wallet
providers o...
2017 CCAF Global Cryptocurrency Benchmarking Study
69
Taxonomy of three currency exchange models used by wallet
providers
2017 CCAF Global Cryptocurrency Benchmarking Study
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Nearly half of wallets providing currency exchange services
integrat...
2017 CCAF Global Cryptocurrency Benchmarking Study
71
Wallets providing national currency exchange services:
different exc...
2017 CCAF Global Cryptocurrency Benchmarking Study
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76% of incorporated wallet providers do not have a license, but
75% ...
2017 CCAF Global Cryptocurrency Benchmarking Study
73
Large wallets providing centralised national-to-cryptocurrency
excha...
2017 CCAF Global Cryptocurrency Benchmarking Study
74
37% of incorporated wallet providers perform KYC/AML
checks; interna...
2017 CCAF Global Cryptocurrency Benchmarking Study
75
Wallet providers’ perception of the current regulatory
environment i...
2017 CCAF Global Cryptocurrency Benchmarking Study
76
Majority of wallets based in Europe and Asia-Pacific appear to
be sa...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Security headcount varies considerably between small and
large walle...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Wallets providing national-to-cryptocurrency exchange services
have ...
2017 CCAF Global Cryptocurrency Benchmarking Study
79
80% of large wallets use external security providers as
opposed to o...
Payments
2017 CCAF Global Cryptocurrency Benchmarking Study
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48 payment companies from 27 countries are represented in
the study ...
2017 CCAF Global Cryptocurrency Benchmarking Study
82
Taxonomy of main cryptocurrency payment platform types:
payments sec...
2017 CCAF Global Cryptocurrency Benchmarking Study
83
General overview of the payment sector – segmented by
currency and c...
2017 CCAF Global Cryptocurrency Benchmarking Study
84
More than half of companies in the cryptocurrency payment
sector pro...
2017 CCAF Global Cryptocurrency Benchmarking Study
85
Nearly two-thirds of payment companies specialise in a single
paymen...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Cryptocurrency payment companies employ a total of 1,057
people (ave...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Companies providing ’cryptocurrency-focused’ activities and
services...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Significant differences with regard to the customer share by
region ...
2017 CCAF Global Cryptocurrency Benchmarking Study
89
Over 40 national currencies are supported by cryptocurrency
payment ...
2017 CCAF Global Cryptocurrency Benchmarking Study
90
Bitcoin is the most widely used payment rail by companies
surveyed f...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Majority of transactions, both in terms of value and number of
trans...
2017 CCAF Global Cryptocurrency Benchmarking Study
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For cross-border transactions, 70% are higher-value (>$100);
50% of ...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Business payments (B2B) have the highest average
transaction size of...
2017 CCAF Global Cryptocurrency Benchmarking Study
94
‘Customer acquisition’ cited most often as highest operational
cost ...
2017 CCAF Global Cryptocurrency Benchmarking Study
95
Nearly 80% of payment companies have existing relationships
with ban...
2017 CCAF Global Cryptocurrency Benchmarking Study
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…but the difficulty of obtaining and maintaining good
relationships ...
2017 CCAF Global Cryptocurrency Benchmarking Study
97
Nearly half of payments companies do not have a license; but
almost ...
2017 CCAF Global Cryptocurrency Benchmarking Study
98
Proportion of budget spent on compliance is higher than the
proporti...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Similar to wallet providers, KYC/AML checks are predominantly
perfor...
2017 CCAF Global Cryptocurrency Benchmarking Study
100
Payment service providers’ perception of the current regulatory
env...
Mining
2017 CCAF Global Cryptocurrency Benchmarking Study
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Taxonomy of mining industry actors and their activities
2017 CCAF Global Cryptocurrency Benchmarking Study
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The mining industry value chain
2017 CCAF Global Cryptocurrency Benchmarking Study
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Over 80% of large miners are performing multiple mining value
chain...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Pool operators and miners have earned more than $2 billion* to
date...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Over half of miners consider their ability to influence protocol
de...
2017 CCAF Global Cryptocurrency Benchmarking Study
107
Miner self-reported influence over protocol development (e.g.,
scal...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Large miners believe they have a much greater ability to
influence ...
2017 CCAF Global Cryptocurrency Benchmarking Study
109
Evolution of average hash rate distribution of major bitcoin
mining...
2017 CCAF Global Cryptocurrency Benchmarking Study
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More than half of major mining pools are based in China…
2017 CCAF Global Cryptocurrency Benchmarking Study
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… but 63% of all major pools have two or more languages available
o...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Cryptocurrency Mining Map: location of public facilities and
288MW ...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Miner viewpoints on current regulatory environment: no
significant ...
2017 CCAF Global Cryptocurrency Benchmarking Study
114
Majority of European and North American miners are satisfied
with e...
2017 CCAF Global Cryptocurrency Benchmarking Study
115
Miners’ position on taxation of cryptocurrencies
2017 CCAF Global Cryptocurrency Benchmarking Study
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Tighter regulation to create barriers to mining/cryptocurrency
adop...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Miners recognize the negative environmental externalities of
proof-...
2017 CCAF Global Cryptocurrency Benchmarking Study
118
Differences observed between small and large miners with
regards to...
2017 CCAF Global Cryptocurrency Benchmarking Study
119
Regular reductions in block rewards cited as operational risk
facto...
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120
Three potential types of mining centralisation (control of hashing
...
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Total bitcoin transaction fees have significantly risen in 2016…
2017 CCAF Global Cryptocurrency Benchmarking Study
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…and constitute a growing proportion of total mining revenues
(more...
2017 CCAF Global Cryptocurrency Benchmarking Study
123
Transaction fees as a % of total bitcoin mining revenues are
projec...
2017 CCAF Global Cryptocurrency Benchmarking Study
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Online Report Links
• Full report: https://www.jbs.cam.ac.uk/facult...
2017 CCAF Global Cryptocurrency Benchmarking Study
125
About the Cambridge Centre for Alternative Finance
Website:
https:/...
2017 Global Cryptocurrency Benchmarking Study
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2017 Global Cryptocurrency Benchmarking Study

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The full 114-page written report can be found here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2965436

About: The first global cryptocurrency benchmarking study presents a systematic and comprehensive picture of a rapidly evolving industry, illustrating how cryptocurrencies are being used, stored, transacted and mined. The study gathered non-public data from more than 100 cryptocurrency companies and over 30 individual cryptocurrency miners in 38 countries around the world via secure web-based questionnaires, capturing an estimated 75 per cent of the cryptocurrency industry. The study breaks down the cryptocurrency industry into four key sectors – exchanges, wallets, payments and mining. Key findings and highlights from the study include our estimate that over three million unique individuals are actively using cryptocurrency today, data on regulation and compliance practices and costs at firms, and a global map of cryptocurrency mining.

Published in: Technology
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  • Great slides. However, it's missing a few key players. Bitcoin doesn't always have the most transactions. Bitshares and steem have put up very comparable transactions per day numbers (bts ~680k tx/day, steem ~275k tx/day) and have been in only top 3 most used for months, which makes them worth mentioning. Additionally, the graphene tech used allows speeds north of 10,000 transactions per second (compared to bitcoins 4 and eth 14-30). This also allows bitshares to have ultra low fees, and steem by very different design has no fees. I also didn't see a part on staking security model designs used in PoS, dPoS, and so on. Hope you find my comments constructive as they are intended.
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2017 Global Cryptocurrency Benchmarking Study

  1. 1. 2017 CCAF Global Cryptocurrency Benchmarking Study 2 Table of Contents Part 1: Overview • Setting the Scene • Cross-sector comparisons Part 2: Industry Sectors • Exchanges • Wallets • Payments • Mining
  2. 2. 2017 CCAF Global Cryptocurrency Benchmarking Study 3 Over hundred cryptocurrency companies as well as 30 individual miners are included in the research study sample
  3. 3. 2017 CCAF Global Cryptocurrency Benchmarking Study 4 Study Authors Dr Garrick Hileman Research Fellow, Head of Cryptocurrency and Blockchain Research g.hileman@jbs.cam.ac.uk Michel Rauchs Research Assistant m.rauchs@jbs.cam.ac.uk
  4. 4. Setting the Scene
  5. 5. 2017 CCAF Global Cryptocurrency Benchmarking Study 6 Bitcoin’s genealogical tree: while thousands of new cryptocurrencies have emerged most offer no substantial advantage or innovation over the original
  6. 6. 2017 CCAF Global Cryptocurrency Benchmarking Study 7 Total cryptocurrency market cap has increased nearly 4x since January 2017 (and 10x since February 2016); now approximately $80 billion as of May 2017 $0 $10 $20 $30 $40 $50 $60 $70 $80 1/1/17 1/15/17 1/29/17 2/12/17 2/26/17 3/12/17 3/26/17 4/9/17 4/23/17 5/7/17 5/21/17 Billions Bitcoin Other cryptocurrencies Data sourced from CoinDance
  7. 7. 2017 CCAF Global Cryptocurrency Benchmarking Study 8 Bitcoin has conceded considerable market cap share to other cryptocurrencies – down from 88% to 47% in past 2 years 47% 78% 88% 17% 13% 1% 1% <1% 1% <1% <1% 19% 2% 6% 2% 2% 2% 13% 4% 4% May 2017 May 2016 May 2015 % of total cryptocurrency market capitalisation Bitcoin (BTC) Ether (ETH) DASH Monero (XMR) Ripple (XRP) Litecoin (LTC) Other Data sourced from CoinMarketCap
  8. 8. 2017 CCAF Global Cryptocurrency Benchmarking Study 9 Market prices of monero (XMR), DASH and ripple (XRP) have experienced the most significant growth since May 2016 0.25 0.5 1 2 4 8 16 32 64 05/2016 06/2016 07/2016 08/2016 09/2016 10/2016 11/2016 12/2016 01/2017 02/2017 03/2017 04/2017 05/2017 Price multiplier (log scale) BTC ETH DASH XMR XRP LTC Data sourced from CryptoCompare Note: the price multiplier variable shows the price evolution of each cryptocurrency since the beginning of May 2016. A value above 1 means that the price has increased by this factor, whereas a value below 1 indicates that the price has decreased during the specified time window.
  9. 9. 2017 CCAF Global Cryptocurrency Benchmarking Study 10 Bitcoin has by far the highest daily transaction in terms of number of transactions; all analysed cryptocurrencies (except Litecoin) have shown rising transaction volumes since Q4 2016
  10. 10. 2017 CCAF Global Cryptocurrency Benchmarking Study 11 Bitcoin is the most widely supported cryptocurrency among participating exchanges, wallets and payment companies
  11. 11. 2017 CCAF Global Cryptocurrency Benchmarking Study 12 Largest number of study participants are based in the US (32) and China (29); 38 countries and all world regions represented
  12. 12. 2017 CCAF Global Cryptocurrency Benchmarking Study 13 At least 2,376 people are employed in the cryptocurrency industry*; Asian-Pacific and North American firms have most headcount *Note: Well in excess of 2500 people likely work in the industry as this figure does not include major miners and companies that did not respond to the survey. 1220 676 346 105 29
  13. 13. 2017 CCAF Global Cryptocurrency Benchmarking Study 14 North American cryptocurrency companies have the highest median number of employees
  14. 14. 2017 CCAF Global Cryptocurrency Benchmarking Study 15 Lines blurring across industry segments: 31% of study participants are operating across at least two industry sectors
  15. 15. 2017 CCAF Global Cryptocurrency Benchmarking Study 16 Estimated number of unique active users of cryptocurrency wallets has grown significantly since 2013 to between 2.9 million and 5.8 million today
  16. 16. Cross-Sector Comparisons
  17. 17. 2017 CCAF Global Cryptocurrency Benchmarking Study 18 Payment service providers have the highest median number of employees; incorporated wallet providers the lowest 24 19 22 11 8 13 Exchanges Incorporated wallets Payment Service Providers Average number of employees Median number of employees
  18. 18. 2017 CCAF Global Cryptocurrency Benchmarking Study 19 73% of exchanges have full custody of customer funds, whereas only 15% of wallet providers act as full custodians Exchange controls keys 73% User controls keys 23% User has the option 4% Exchanges Wallet provider controls keys 15% User controls keys 73% User has the option 12% Wallets
  19. 19. 2017 CCAF Global Cryptocurrency Benchmarking Study 20 Wallets have significantly higher headcount and cost associated with security than exchanges and payment firms 13% 12% 37% 17% 14% 35% Exchanges Payment Service Providers Wallets Average security headcount Average security cost
  20. 20. 2017 CCAF Global Cryptocurrency Benchmarking Study 21 Exchanges and payment companies more frequently employ external security providers than wallets External security providers 72% No external security providers 28% Exchanges External security providers 69% No external security providers 31% Payment Service Providers External security provider s, 53% No external security providers 47% Wallets
  21. 21. 2017 CCAF Global Cryptocurrency Benchmarking Study 22 Payment companies have higher compliance headcount and cost than wallets; however significant differences observed in each sector based on business model* 8% 5% 12% 8% Payment Service Providers Incorporated Wallets Average compliance headcount Average compliance cost *Note: depending on the type of activities performed as well the custody of customer funds and the offering of national currency exchange services
  22. 22. 2017 CCAF Global Cryptocurrency Benchmarking Study 23 While nearly 90% of payment companies perform KYC/AML checks, only 37% of incorporated wallets do so (and all these wallets offer national currency exchange services) KYC/AM L checks, 37% No checks/not applicable 63% Incorporated Wallets KYC/AM L checks, 86% No checks/not applicable 14% Payment Service Providers
  23. 23. 2017 CCAF Global Cryptocurrency Benchmarking Study 24 Internal checks are primary KYC/AML method; payment firms more frequently employ other methods than wallets 28% 56% 84% 17% 17% 83% Third-party blockchain analytics specialist Traditional third-party KYC/AML service provider Internally performed Incorporated Wallets Payment Service Providers
  24. 24. 2017 CCAF Global Cryptocurrency Benchmarking Study 25 More than half of payment companies hold a formal government license, compared to 46% of exchanges and 24% of incorporated wallets License 46% No license 54% Exchanges License 54% No license 46% Payment Service Providers License 24% No license 76% Incorporated wallets
  25. 25. Exchanges
  26. 26. 2017 CCAF Global Cryptocurrency Benchmarking Study 27 51 exchanges from 27 countries are represented in the study sample: Europe is leading in terms of the number of exchanges, followed by Asia-Pacific
  27. 27. 2017 CCAF Global Cryptocurrency Benchmarking Study 28 Exchanges based in Asia-Pacific employ most people; European and AME exchanges have the lowest average number of employees…
  28. 28. 2017 CCAF Global Cryptocurrency Benchmarking Study 29 …however, nearly half of all exchanges are small companies with less than 11 employees
  29. 29. 2017 CCAF Global Cryptocurrency Benchmarking Study 30 Taxonomy of the three main types of exchange activities
  30. 30. 2017 CCAF Global Cryptocurrency Benchmarking Study 31 Majority of small exchanges specialise in a single type of activity while large exchanges are generally engaged in more than one activity
  31. 31. 2017 CCAF Global Cryptocurrency Benchmarking Study 32 Trading volumes across the top exchanges are more evenly distributed following increased regulation of Chinese exchanges in early 2017
  32. 32. 2017 CCAF Global Cryptocurrency Benchmarking Study 33 Similarly, bitcoin trading in Chinese renminbi has also plummeted since the Chinese authorities tightened regulation
  33. 33. 2017 CCAF Global Cryptocurrency Benchmarking Study 34 USD is the most widely supported national currency on exchanges; many specialise in local currencies and markets
  34. 34. 2017 CCAF Global Cryptocurrency Benchmarking Study 35 Bitcoin is listed on all surveyed exchanges; ether and litecoin next most widely supported – 61% of exchanges have two or more cryptocurrencies listed
  35. 35. 2017 CCAF Global Cryptocurrency Benchmarking Study 36 More than half of small exchanges hold a government license compared to only 35% of large exchanges
  36. 36. 2017 CCAF Global Cryptocurrency Benchmarking Study 37 IT security breaches pose the highest operational risk for exchanges; deteriorating banking relationships (small exchanges) and regulation (large exchanges) ranked high as well
  37. 37. 2017 CCAF Global Cryptocurrency Benchmarking Study 38 73% of exchanges take custody of users’ cryptocurrency funds by controlling the private keys
  38. 38. 2017 CCAF Global Cryptocurrency Benchmarking Study 39 Security: large exchanges are realising economies of scale, spending smaller % of budget on security and having less headcount in % of total employees associated with security
  39. 39. 2017 CCAF Global Cryptocurrency Benchmarking Study 40 Order-book only exchanges spend 2x more on security as a share of total budget than ‘pure’ brokerage services and trading platforms
  40. 40. 2017 CCAF Global Cryptocurrency Benchmarking Study 41 Large exchanges use more frequently and a greater number of external security providers than small exchanges
  41. 41. 2017 CCAF Global Cryptocurrency Benchmarking Study 42 Majority of exchanges enable optional two-factor authentication (2FA) for customers for logging in and withdrawing funds…
  42. 42. 2017 CCAF Global Cryptocurrency Benchmarking Study 43 … but large exchanges offer 2FA across a greater number of user actions than small exchanges
  43. 43. 2017 CCAF Global Cryptocurrency Benchmarking Study 44 Majority of exchanges require employees to use mandatory 2FA for sensitive operations…
  44. 44. 2017 CCAF Global Cryptocurrency Benchmarking Study 45 …but large exchanges require 2FA across a greater number of employee actions than small exchanges
  45. 45. 2017 CCAF Global Cryptocurrency Benchmarking Study 46 Of the surveyed internal security measures, large exchanges employed more measures than small exchanges
  46. 46. 2017 CCAF Global Cryptocurrency Benchmarking Study 47 Security measures used by exchanges to vet staff for production access: 73% of large exchanges use three or more compared to 48% of small exchanges
  47. 47. 2017 CCAF Global Cryptocurrency Benchmarking Study 48 Nearly half of small exchanges acting as custodians do not have a written policy outlining what happens to customer funds in the event of a security breach that leads to a loss of customer funds
  48. 48. 2017 CCAF Global Cryptocurrency Benchmarking Study 49 More common for large exchanges to have a written policy on who can access sensitive information and production enivornment than small exchanges
  49. 49. 2017 CCAF Global Cryptocurrency Benchmarking Study 50 21% of exchanges do not provide security training programs to their staff, but most provide ongoing education and training
  50. 50. 2017 CCAF Global Cryptocurrency Benchmarking Study 51 Exchanges hold the vast majority of funds in cold storage: median value of 95% of cryptocurrency held offline
  51. 51. 2017 CCAF Global Cryptocurrency Benchmarking Study 52 Large exchanges perform more frequent formal security audits and rely more on external parties to perform these audits than small exchanges
  52. 52. Wallets
  53. 53. 2017 CCAF Global Cryptocurrency Benchmarking Study 54 26 wallets are represented in the study sample: 81% of wallet providers are based in North America and Europe; nearly half are based in the US and the UK
  54. 54. 2017 CCAF Global Cryptocurrency Benchmarking Study 55 Majority of wallets are provided by registered corporations (‘incorporated wallets’)
  55. 55. 2017 CCAF Global Cryptocurrency Benchmarking Study 56 The average wallet provider is a small company: 69% have less than 11 employees; all that employ more than 10 people are also active in other cryptocurrency industry sectors (e.g., exchange)
  56. 56. 2017 CCAF Global Cryptocurrency Benchmarking Study 57 Total number of estimated cryptocurrency wallets has grown over 4x from over 8 million in 2013 to nearly 35 million in 2016
  57. 57. 2017 CCAF Global Cryptocurrency Benchmarking Study 58 Total number of currently ’active’ wallets estimated to range between 5.8 million and 11.5 million
  58. 58. 2017 CCAF Global Cryptocurrency Benchmarking Study 59 A significant range in the percentage of active wallets was found across study participants* *Note: wallet providers use different methods for determining what constitutes an active wallet.
  59. 59. 2017 CCAF Global Cryptocurrency Benchmarking Study 60 Greatest number of wallet users are based in North America and Europe
  60. 60. 2017 CCAF Global Cryptocurrency Benchmarking Study 61 Only minor differences in user share by region can be observed between small and large wallet providers
  61. 61. 2017 CCAF Global Cryptocurrency Benchmarking Study 62 European and North American users prefer using wallets from local providers
  62. 62. 2017 CCAF Global Cryptocurrency Benchmarking Study 63 Daily on-chain transactions performed by users of large wallets generally range between 10% and 25% of total bitcoin on-chain transaction volume, but are trending down slightly of late
  63. 63. 2017 CCAF Global Cryptocurrency Benchmarking Study 64 Over 70% of wallet providers do not control user funds; all custodial wallets and 11% of self-hosted wallets surveyed are closed source
  64. 64. 2017 CCAF Global Cryptocurrency Benchmarking Study 65 Mobile wallet app is the most widely offered wallet format; hardware wallets are becoming increasingly popular wallets are closed source Figure 9: Mobile wallet app is the most widely offered wallet format Desktop Web Tablet HardwareMobile 42% 38% 31% 23% 65% % of wallet providers supporting the listed formats
  65. 65. 2017 CCAF Global Cryptocurrency Benchmarking Study 66 Litecoin, ether and dogecoin are the most widely supported cryptocurrencies after bitcoin; trend towards multi- cryptocurrency wallets can be observed
  66. 66. 2017 CCAF Global Cryptocurrency Benchmarking Study 67 Majority of wallets support mechanisms to easily backup and migrate keys
  67. 67. 2017 CCAF Global Cryptocurrency Benchmarking Study 68 Blurring sector lines: more than half of surveyed wallet providers offer an integrated currency exchange in the wallet interface
  68. 68. 2017 CCAF Global Cryptocurrency Benchmarking Study 69 Taxonomy of three currency exchange models used by wallet providers
  69. 69. 2017 CCAF Global Cryptocurrency Benchmarking Study 70 Nearly half of wallets providing currency exchange services integrate a third-party exchange; 85% enable the exchange of national currencies
  70. 70. 2017 CCAF Global Cryptocurrency Benchmarking Study 71 Wallets providing national currency exchange services: different exchange models used; only 27% control user funds
  71. 71. 2017 CCAF Global Cryptocurrency Benchmarking Study 72 76% of incorporated wallet providers do not have a license, but 75% of wallets providing centralised national-to-cryptocurrency exchange services do
  72. 72. 2017 CCAF Global Cryptocurrency Benchmarking Study 73 Large wallets providing centralised national-to-cryptocurrency exchange services have more than 4x higher compliance headcount and cost than small wallets
  73. 73. 2017 CCAF Global Cryptocurrency Benchmarking Study 74 37% of incorporated wallet providers perform KYC/AML checks; internal checks are the preferred method
  74. 74. 2017 CCAF Global Cryptocurrency Benchmarking Study 75 Wallet providers’ perception of the current regulatory environment is mixed, and no clear trend is observed for both small and large wallets
  75. 75. 2017 CCAF Global Cryptocurrency Benchmarking Study 76 Majority of wallets based in Europe and Asia-Pacific appear to be satisfied with the existing regulatory environment (or the lack thereof); North American wallet providers are more divided
  76. 76. 2017 CCAF Global Cryptocurrency Benchmarking Study 77 Security headcount varies considerably between small and large wallets
  77. 77. 2017 CCAF Global Cryptocurrency Benchmarking Study 78 Wallets providing national-to-cryptocurrency exchange services have on average considerably higher headcount and cost associated with security
  78. 78. 2017 CCAF Global Cryptocurrency Benchmarking Study 79 80% of large wallets use external security providers as opposed to only 42% of small wallets; on average wallets use the services of three external security providers
  79. 79. Payments
  80. 80. 2017 CCAF Global Cryptocurrency Benchmarking Study 81 48 payment companies from 27 countries are represented in the study sample; in line with exchanges, payment companies are geographically dispersed
  81. 81. 2017 CCAF Global Cryptocurrency Benchmarking Study 82 Taxonomy of main cryptocurrency payment platform types: payments sector can be broadly split into ’cryptocurrency- focused’ and ‘national currency-focused’
  82. 82. 2017 CCAF Global Cryptocurrency Benchmarking Study 83 General overview of the payment sector – segmented by currency and customer focus
  83. 83. 2017 CCAF Global Cryptocurrency Benchmarking Study 84 More than half of companies in the cryptocurrency payment sector provide merchant services
  84. 84. 2017 CCAF Global Cryptocurrency Benchmarking Study 85 Nearly two-thirds of payment companies specialise in a single payment activity; merchant services most frequent
  85. 85. 2017 CCAF Global Cryptocurrency Benchmarking Study 86 Cryptocurrency payment companies employ a total of 1,057 people (average: 22); more than half have more than 10 employees
  86. 86. 2017 CCAF Global Cryptocurrency Benchmarking Study 87 Companies providing ’cryptocurrency-focused’ activities and services have a more geographically diverse customer base than companies engaged in ’national currency-focused’ activities
  87. 87. 2017 CCAF Global Cryptocurrency Benchmarking Study 88 Significant differences with regard to the customer share by region are observed between payment companies based in different regions
  88. 88. 2017 CCAF Global Cryptocurrency Benchmarking Study 89 Over 40 national currencies are supported by cryptocurrency payment companies; global reserve currencies (CNY, EUR, GBP, USD) are most widely supported
  89. 89. 2017 CCAF Global Cryptocurrency Benchmarking Study 90 Bitcoin is the most widely used payment rail by companies surveyed for cross-border transactions and payments
  90. 90. 2017 CCAF Global Cryptocurrency Benchmarking Study 91 Majority of transactions, both in terms of value and number of transactions, are national-to-cryptocurrency (and vice-versa)
  91. 91. 2017 CCAF Global Cryptocurrency Benchmarking Study 92 For cross-border transactions, 70% are higher-value (>$100); 50% of intra-country payments are below $100
  92. 92. 2017 CCAF Global Cryptocurrency Benchmarking Study 93 Business payments (B2B) have the highest average transaction size of all payment channels ($1,878)
  93. 93. 2017 CCAF Global Cryptocurrency Benchmarking Study 94 ‘Customer acquisition’ cited most often as highest operational cost factor; ‘Other’ refers in most cases to costs associated with IT infrastructure development
  94. 94. 2017 CCAF Global Cryptocurrency Benchmarking Study 95 Nearly 80% of payment companies have existing relationships with banks and local payment networks…
  95. 95. 2017 CCAF Global Cryptocurrency Benchmarking Study 96 …but the difficulty of obtaining and maintaining good relationships with banking institutions and/or money transfer operators constitutes the biggest challenge for this sector
  96. 96. 2017 CCAF Global Cryptocurrency Benchmarking Study 97 Nearly half of payments companies do not have a license; but almost 90% have some sort of compliance program
  97. 97. 2017 CCAF Global Cryptocurrency Benchmarking Study 98 Proportion of budget spent on compliance is higher than the proportion of employees working full-time on compliance; but significant differences are observed between companies
  98. 98. 2017 CCAF Global Cryptocurrency Benchmarking Study 99 Similar to wallet providers, KYC/AML checks are predominantly performed internally; however they are more often complemented by the use of other methods
  99. 99. 2017 CCAF Global Cryptocurrency Benchmarking Study 100 Payment service providers’ perception of the current regulatory environment are divided; 41% do not perceive existing regulations, but would like to have more regulatory clarity
  100. 100. Mining
  101. 101. 2017 CCAF Global Cryptocurrency Benchmarking Study 102 Taxonomy of mining industry actors and their activities
  102. 102. 2017 CCAF Global Cryptocurrency Benchmarking Study 103 The mining industry value chain
  103. 103. 2017 CCAF Global Cryptocurrency Benchmarking Study 104 Over 80% of large miners are performing multiple mining value chain activities
  104. 104. 2017 CCAF Global Cryptocurrency Benchmarking Study 105 Pool operators and miners have earned more than $2 billion* to date in mining revenues (if immediately converted to USD) Note: other revenues such as hardware sales, cloud mining fees, etc. are not included; meaning that total revenues of the mining sector are considerably higher
  105. 105. 2017 CCAF Global Cryptocurrency Benchmarking Study 106 Over half of miners consider their ability to influence protocol development to be high or very high
  106. 106. 2017 CCAF Global Cryptocurrency Benchmarking Study 107 Miner self-reported influence over protocol development (e.g., scaling): European miners report greater influence than Asia; North American miners report least influence Very high 26% High 38% Medium 26% Low 4% Very low 4% Asia-Pacific Very high 33% High 50% Very low 17% Europe Very high 13% High 25% Medium 56% Low 6% North America
  107. 107. 2017 CCAF Global Cryptocurrency Benchmarking Study 108 Large miners believe they have a much greater ability to influence protocol development than small miners
  108. 108. 2017 CCAF Global Cryptocurrency Benchmarking Study 109 Evolution of average hash rate distribution of major bitcoin mining pools: figures suggest that mining has become more distributed in 2016
  109. 109. 2017 CCAF Global Cryptocurrency Benchmarking Study 110 More than half of major mining pools are based in China…
  110. 110. 2017 CCAF Global Cryptocurrency Benchmarking Study 111 … but 63% of all major pools have two or more languages available on their website, suggesting that their customer base is not limited to domestic miners
  111. 111. 2017 CCAF Global Cryptocurrency Benchmarking Study 112 Cryptocurrency Mining Map: location of public facilities and 288MW of estimated power consumption
  112. 112. 2017 CCAF Global Cryptocurrency Benchmarking Study 113 Miner viewpoints on current regulatory environment: no significant differences observed between small and large miners
  113. 113. 2017 CCAF Global Cryptocurrency Benchmarking Study 114 Majority of European and North American miners are satisfied with existing regulations (or the lack thereof); Asian miners would like to have more regulatory clarity
  114. 114. 2017 CCAF Global Cryptocurrency Benchmarking Study 115 Miners’ position on taxation of cryptocurrencies
  115. 115. 2017 CCAF Global Cryptocurrency Benchmarking Study 116 Tighter regulation to create barriers to mining/cryptocurrency adoption and increased taxation of mining profits considered highest regulatory risks by both small and large miners
  116. 116. 2017 CCAF Global Cryptocurrency Benchmarking Study 117 Miners recognize the negative environmental externalities of proof-of-work
  117. 117. 2017 CCAF Global Cryptocurrency Benchmarking Study 118 Differences observed between small and large miners with regards to operational risk factors and challenges; miners based in the Americas tend to rate factors lower
  118. 118. 2017 CCAF Global Cryptocurrency Benchmarking Study 119 Regular reductions in block rewards cited as operational risk factor, but total 2016 mining revenues have been higher than in 2015 despite the bitcoin block reward halving in June
  119. 119. 2017 CCAF Global Cryptocurrency Benchmarking Study 120 Three potential types of mining centralisation (control of hashing power, location of hashing power, and location of mining equipment manufacturing); miners least concerned about the last
  120. 120. 2017 CCAF Global Cryptocurrency Benchmarking Study 121 Total bitcoin transaction fees have significantly risen in 2016…
  121. 121. 2017 CCAF Global Cryptocurrency Benchmarking Study 122 …and constitute a growing proportion of total mining revenues (more than 2x increase after bitcoin halving event in June)
  122. 122. 2017 CCAF Global Cryptocurrency Benchmarking Study 123 Transaction fees as a % of total bitcoin mining revenues are projected to reach 10% with current growth rates; often-used argument in the heated scaling debate
  123. 123. 2017 CCAF Global Cryptocurrency Benchmarking Study 124 Online Report Links • Full report: https://www.jbs.cam.ac.uk/faculty- research/centres/alternative-finance/publications/global- cryptocurrency/ • PDF report download: https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/c entres/alternative-finance/downloads/2017-04-20-global- cryptocurrency-benchmarking-study.pdf • Overview article: https://www.cam.ac.uk/research/news/study-highlights- growing-significance-of-cryptocurrencies
  124. 124. 2017 CCAF Global Cryptocurrency Benchmarking Study 125 About the Cambridge Centre for Alternative Finance Website: https://www.jbs.cam.ac.uk/faculty- research/centres/alternative-finance/ Email: ccaf@jbs.cam.ac.uk

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