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Blockchain, Cryptocurrency & Apps
Our disclosure statements are located at the end of this report.
INDUSTRY REPORT | January 31, 2018
Investment Opportunities in Blockchain
We do not intend to fully define what blockchain is in this report. This is more than well
documented with innumerable industry reports. Blockchain will deliver cost savings
and prosperity to the masses that the Internet alone failed to reach. We look to several
key elements of blockchain to assess its market potential. First, like the Internet, it has
the potential to massively disintermediate business processes and to redefine entire
industries. More importantly, blockchain will unlock near endless new business
opportunities. By definition, these two factors imply blockchain would have at least a
similar market impact as the Internet itself. But blockchain has the capability to deliver
something the Internet has not — democratization of wealth of the unbanked global
masses.
Miners
Traditional mining companies (gold, silver, copper, etc.) and pulp and paper mills have
left a trail of deserted outposts and mining towns with world-class infrastructure (high-
speed fiber optics; stable, renewable and inexpensive hydroelectricity). Ironically,
these are basic ingredients necessary to build world-class cryptocurrency mining
operations. Add to the mix: sub-Arctic temperatures, willing local government, world-
class global reputation and now receptive capital markets, will make Canada a global
leader in securing the blockchain.
Apps
While Bitcoin serves as the world’s first blockchain application, it has been Ethereum
that has driven the blockchain apps revolution. Ethereum dominates the landscape by
a wide margin, accounting for ~90% of the total combined value of the top 500 tokens.
We see token values being driven a mix of network utility and ownership in
decentralized applications, with much potential for disrupting centralized models and
radically shifting the distribution of wealth from incumbents to protocol developers.
Almost all industries will be impacted by blockchain, with enterprises poised to more
meaningfully explore its use over the coming years.
Cryptocurrency
During the Internet bubble between 1997 and 2000, a total of 522 dotcom companies
were listed, raising more than $43 billion. The Nasdaq peak market cap was $6.6
trillion, with the dotcoms representing one-third of that total. Blockchain companies by
comparison currently have a combined market cap of only $6 billion. The headlines,
however, centre around cryptocurrencies which have a massive $510-billion combined
market cap. Bitcoin follows Metcalfe’s law, however taking this one step further, using
a price-to-Metcalfe value suggests Bitcoin has plenty of room for price appreciation.
Deeper still, Zipf’s law is a useful tool for trading cryptocurrencies as it demonstrates a
logarithmic relationship (Golden Ratio) between the various cryptocurrencies.
Conclusion
Within this report we have put together a complete list of every Canadian and U.S.
blockchain/cryptocurrency publicly traded company. We have also included a portfolio
of next-generation private companies who we believe hold great promise of becoming
tomorrow’s market darlings. Blockchain and decentralized applications will
undoubtedly have a profound impact on all business processes. The stock market is
clearly pricing in some of the impact of this new protocol; however, we are in the early
innings of a long game. We put forth in this report why investors cannot ignore
blockchain’s potential as we believe the opportunity for outsized returns has just
begun.
Daniel Kim, Analyst | 416.363.6644 | dkim@paradigmcap.com
Kevin Krishnaratne, Analyst | 416.361.6054 | kkrishnaratne@paradigmcap.com
Daniela Campo, Associate | 416.216.3574 | dcampo@paradigmcap.com
All figures in US$, unless otherwise noted.
Companies discussed in this report:
MINERS
CryptoGlobal Inc. (CPTO-V, NR): Operates facilities
with ASIC and GPU mining, with the ability to shift hash
power to take advantage of the most profitable coins.
DMG Blockchain Solutions (listing pending):
Specializes in Bitcoin mining, Mining as a Service
(MaaS), blockchain platform development, and
blockchain analytics.
Fortress Blockchain Corp. (private): Operates
mining facilities in low-cost and environmentally friendly
power regions.
Great North Data (private): Specializes in hosting
high-density computer hardware requiring substantial
access to both power and cooling.
HashChain Technology Inc. (KASH-V, NR): First
publicly traded Canadian cryptocurrency mining
company to support highly scalable and flexible
operations across all major cryptocurrencies.
Hyperblock Technologies Corp. (private): Operates
across four channels: self-mining, hashrate sales,
server hosting, and server hardware sales.
APPS
Auxesis (private): Created the world’s largest private
decentralized network which powers the Auxledger
blockchain platform.
Blockchain Intelligence Group (BIGG-CNQ, NR):
Brings security and accountability to cryptocurrency
with its trusted data analysis and risk-scoring
capabilities.
Boardwalktech (private): Developed a positional cell
data management tech that forms the core of a
patented, multi-party digital ledger blockchain database
designed for collaborative applications which rely on
digital information exchange.
Leonovus Inc. (LTV-V, NR): Offers a blockchain
hardened software-defined object storage solution.
Polymath (private): Guides customers through the
technical and legal process of a successful token
launch.
TradeWind Markets (private): Creating a technology
that will enhance the experience of trading, owning,
and using precious metals.
Victory Square Technologies Inc. (VST-CNQ, NR): A
venture builder that incubates and invests in technology
businesses focused on blockchain, AI, VR, and more.
TECHNOLOGY
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Table of Contents
Blockchain Is Just Math But Its Promise Is Revolutionary ..................................................3
Value Proposition Is Unstoppable................................................................................3
Market Size.........................................................................................................................4
Blockchain Market .......................................................................................................4
Cyclenomics ................................................................................................................4
Bubble Perspective......................................................................................................6
Cryptocurrency....................................................................................................................7
Cryptocurrency Market Size.........................................................................................7
Securely Canadian..............................................................................................................8
Blockchain Applications ....................................................................................................11
Bitcoin: Scalability Looks to Limit the Viability of Blockchain’s First Application ........11
Ethereum: The De Facto Blockchain Applications Platform.......................................12
Tokenomics ...............................................................................................................13
Overview of the World’s (Currently) Most Valuable Tokens.......................................15
Industries Most Likely to Be Impacted by Blockchain Applications ............................16
Enterprise Applications of Blockchain........................................................................17
Investment Opportunities ..................................................................................................19
Company Profiles..............................................................................................................22
APPENDIX I: Initial Coin Offerings....................................................................................43
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Blockchain Is Just Math But Its Promise Is Revolutionary
“Almost every company in the world, not just intermediaries, is at risk of being cannibalized from a
blockchain version of themselves. We are at the ground floor of a new paradigm in humanity that will
change the human experience. The thing that will change is trust.” (source: Richie Etwaru).
While it is too early to point to any single application, except Bitcoin, blockchain and decentralized
applications (Dapps) will undoubtedly have a profound impact in all business processes. The stock
market is clearly pricing in some of the impact of this new protocol; however, we are in the early
innings of a long game. We put forth in this report why investors cannot ignore blockchain’s potential
as we believe the opportunity for outsized returns has just begun.
Value Proposition Is Unstoppable
We look to several key elements of blockchain to assess its market potential. First, like the Internet, it
has the potential to massively disintermediate business processes and to redefine some entire
industries. More importantly, blockchain will unlock near endless new business opportunities. By
definition, these two factors imply blockchain would have at least a similar market impact as the
Internet itself. But blockchain has the capability to deliver something the Internet has not —
democratization of wealth of the unbanked global masses.
Blockchain will facilitate the largest asset transfers in human history “moving trillions of dollars from
millions of bank accounts to millions of Circle wallets” (source: Blockchain Revolution).
Facebook and Google were early to recognize the potential value of tapping into the unbanked market
of two-billion people with independent initiatives to provide inexpensive, broadband Internet access.
The value, however, accrues to companies who provide this consolidation role and not the users
whom they serve. Blockchain will democratize them. By leveling the playing field, lowering the cost of
doing business, and providing liquidity to two-billion untapped resources, it will unleash enormous
wealth creation and thus global growth.
We do not intend to fully define what blockchain is in this report. Blockchain is just math. This math,
however, will deliver cost savings and prosperity that the Internet alone failed to do. Below, we
summarize blockchain’s value proposition in five key bullets.
1. Trust: Establishes trust between independent parties; therefore, risk disappears for any
transaction. Furthermore, the level of distrust between parties is widening. This is particularly true
for financial services firms who are the most distrusted organizations on the planet.
2. Democratization of Wealth: Trust breaks down barriers which will bring the unbanked two-billion
people into the global economy.
3. Monetize Users: Companies whose value is defined by the number of users it attracts (e.g., Uber,
Airbnb, Google, Facebook, Amazon) will be disrupted. Blockchain will marginalize these
organizations and deliver more accrued value of these consolidators to its users.
4. Connect Capital to Investors: Opportunities for ordinary people to invest in tomorrow’s Google
are often limited to high-profile private equity firms who then work with their favoured investment
bank(s) for public offerings, which are typically limited to only their top clients. Initial coin offerings
(ICOs) offer anyone the opportunity to invest in these companies, thus leveling the playing field of
investable opportunities.
5. Disrupt Information Flow: Transactions posted on the blockchain are public for everyone to see.
Furthermore, the precise history of the entire transaction will be saved in perpetuity. (The opposite
is also true with private blockchains where only permissioned users have access to the
transactional data.) Imagine a corporation on blockchain where its financial health is posted in real
time. This will provide a constant stream of information, thus obviating the need, for example, of
quarterly filings, therefore leveling the playing field of information distribution and analysis.
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Market Size
Given its disruptive promise and industry-wide corporate buy-in, it comes as no surprise that every
industry we have researched has suggested explosive growth in the blockchain industry. Our key
findings are summarized with a range of 26–80% CAGR of an industry, growing to $6–$45 billion over
the next 5–10 years.
Blockchain Market
 Market size of $412 million in 2017 growing to $7.7 billion by 2022, representing 80% CAGR.
Looking further out, blockchain is expected to be a $45-billion industry in the next decade. (source:
ResearchandMarkets, Blockchain Market by Provider, Organziation Size, Vertical and Region).
 According to a recent report published by IndustryARC, the global blockchain market is expected
to grow at a 48% CAGR and reach $6 billion by 2023. North America is expected to dominate the
market with blockchain technology applied to payments, digital identities, smart contracts, and
identities.
 The World Economic Forum predicts 10% of global GDP will be stored on the blockchain by 2027.
It also estimates that 80% of banks are working on private blockchain applications and are
estimated to be spending $200 million on the development of these applications in 2017.
Furthermore, a report from CB Insights highlighted that since June 2014 the 10 largest U.S. banks
have participated in nine rounds of blockchain investments totaling $267 million (Figure 1).
Cyclenomics
We lived through the dotcom bubble and subsequent implosion. The following data demonstrates that
investors have elevated the combined market caps of blockchain companies faster than during the
dotcom bubble; however, we counter with two observations. First, the velocity of information is much
faster and broader today than it was 20 years ago. My first job as a research associate (in 1994)
required trips to the Toronto Reference Library to make copies off microfiche! Second, as previously
mentioned, blockchain’s impact on commerce, business processes, and wealth distribution should
have a more meaningful impact global growth than the Internet, so the early gains on stocks and larger
valuations are warranted, in our opinion.
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Figure 1: Blockchain Activity with Largest U.S. Banks (ranked by equity investment, Q1/12–Q2/17)
Source: CB Insights, Blockchain Investment Trends in Review
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Bubble Perspective
To put the Bitcoin bubble into perspective, first a little retrospective. In the Internet bubble, between
1997 and 2000, a total of 522 dotcom companies were listed, raising more than $43 billion. The
Nasdaq Composite peak market cap was $6.6 trillion, with dotcom companies representing one-third
of that total at $2.3 trillion. Blockchain companies by comparison currently have a combined market
cap of only $6 billion (Figure 2).
We have compiled a list of publicly traded blockchain companies (Figure 12 and 13) and have mapped
their collective performance to date with base lines set to the beginning of each index’s respective start
date (Figure 2). Bitcoin is an obvious outlier. However, the performance of blockchain companies is
clearly in the early stages.
“Clever as it is, however, bitcoin has shown no signs of replacing the dollar and other fiat currencies.
For bitcoin to be a success, it needs to take a large part of various markets—remittances, payments,
stored value.” (source: Matthew Gertler, Digital Asset Research)
Figure 2a: Dotcom vs. Blockchain Bubble
Source: FactSet
Figure 2b: Market Cap of Dotcom Companies vs. Blockchain Companies
Source: FactSet
-1000.0%
0.0%
1000.0%
2000.0%
3000.0%
4000.0%
5000.0%
6000.0%
7000.0%
0
72
144
216
288
360
432
504
576
648
720
792
864
936
1008
1080
1152
1224
1296
1368
1440
1512
1584
1656
1728
1800
1872
1944
2016
2088
2160
2232
2304
2376
2448
%ChangefromStartofBubble
Trading Days from Start of Bubble
Major Bubbles vs. BitcoinandBlockchain:% change
NASDAQ (since '95) Homebuilders(since '00) Bitcoin (since '15) Blockchain (since '17)
-200.0%
0.0%
200.0%
400.0%
600.0%
800.0%
1000.0%
1200.0%
0
70
140
210
280
350
420
490
560
630
700
770
840
910
980
1050
1120
1190
1260
1330
1400
1470
1540
1610
1680
1750
1820
1890
1960
2030
2100
2170
2240
2310
2380
2450
%ChangefromStartofBubble
Trading Days from Start of Bubble
Major Bubbles vs. Blockchain:% change
NASDAQ (since '95) Homebuilders(since '00) Blockchain (since '17)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
02/01/2015
02/03/2015
02/05/2015
02/07/2015
02/09/2015
02/11/2015
02/01/2016
02/03/2016
02/05/2016
02/07/2016
02/09/2016
02/11/2016
02/01/2017
02/03/2017
02/05/2017
02/07/2017
02/09/2017
02/11/2017
02/01/2018
Blockchain Companies Market Cap (Mln)
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
31/12/1998
28/02/1999
30/04/1999
30/06/1999
31/08/1999
31/10/1999
31/12/1999
29/02/2000
30/04/2000
30/06/2000
31/08/2000
31/10/2000
31/12/2000
28/02/2001
30/04/2001
30/06/2001
31/08/2001
31/10/2001
31/12/2001
Top 10 Dotcom Companies Market Cap (Mln)
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Cryptocurrency
Having a discussion about blockchain without cryptocurrency makes no sense. Cryptocurrencies are a
new asset class that enable decentralized applications. The first and most popular decentralized
application was Bitcoin. Bitcoin is a new form of capitalism. Blockchain is a database.
Cryptographic security means three things:
1. Creating new fake currency is virtually impossible
2. The record is immutable (i.e., encryption technique is virtually impossible to reverse engineer)
3. Owner/signer is uniquely defined
Figure 3: Bitcoin vs. Traditional Money
Source: BTCS, Andreessen Horowitz
Cryptocurrency Market Size
 The current market cap of all cryptocurrencies combined is $510 billion (which is approximately
equal to Facebook’s market cap). Compare that to U.S. dollars in circulation at $1.5 trillion;
physical money $31 trillion; stock market $67 trillion; all money $120 trillion; and gold $8 billion.
Bitcoin at $180 billion is less than 0.2% of total fiat currency.
 Market size to next halving (every 210,000 blocks or about four years): (144 blocks/day)x(12.5
BTC/block)x(862 days between January 31/18 and June 10/20)x(BTC price $10,719 as of January
22) = $16.6 billion.
 The single best explanation in calculating the value of Bitcoin is Metcalfe’s law which states that
the value of the network is proportional to the square of the number of users. This relationship has
a 94% correlation. Taking it a step further, calculates Bitcoin’s price-to-Metcalfe value. This is
somewhat analogous to a price-to-book ratio. As demonstrated in the chart in Figure 4 (left hand
graph), the 2013/2014 Bitcoin bubble was far larger than where it currently stands. Looked at
another way, when mapping Bitcoin’s price on a logarithmic scale, it has not yet achieved its peak
price (right hand graph).
 For the last 100 years, an obscure mathematical principle called Zipf’s law has predicted the size
of mega-cities and income distribution. “Zipf’s law is empirical law formulated using mathematical
statistics that refers to the fact that many types of data studied in the physical and social sciences
can be approximated with a Zipfian distribution, one of a family of related discrete power law
probability distributions.” (source: Wikipedia). Linguist George Zipf noticed that a small number of
words are used all the time while the vast majority are rarely used. The number-one ranked word
was used twice as often as the second-ranked word and three times as often as the third-ranked.
He called this the rank versus frequency rule that can be applied to many other social systems,
including economic.
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Cryptocurrency market caps appear to adhere to Zipfian’s distribution, (1/n)^(s), with n
representing rank, and the exponent s=1.618, this being the Golden Ratio. For example, recent
Bitcoin market capitalization was $71.6 billion. The second-ranked coin, Ethereum’s market cap as
calculated by this ratio is (1/2)^(1.618) = 0.326 of $71.6 billion = $23.3 billion, versus its actual
market cap of $28.0 billion. This is therefore a useful tool for trading cryptocurrency pairs.
Figure 4: Price/Metcalfe Value
Source: WolframAlpha, U.S. Global Investors, Advisor Perspectives
Securely Canadian
Traditional mining companies (gold, silver, copper, etc.) and pulp and paper mills have left a trail of
deserted outposts and mining towns with world-class infrastructure (high-speed fiber optics; stable,
high power, renewable and inexpensive hydroelectricity). Ironically, these are basic ingredients
necessary to build world-class cryptocurrency mining operations. Add to the mix: sub-Arctic
temperatures, willing local government, world-class global reputation and now receptive capital
markets, will make Canada a global leader in securing the blockchain.
As we suggested earlier, while blockchain is new technology, its ecosystem is maturing rapidly.
Hydro-Quebec is Canada’s
largest utility provider and
is offering special deals to
cryptocurrency miners with
rates of between $0.0248
and $0.0394; as such, it
has had requests for
6,000MW from
cryptocurrency miners.
Hydro-Quebec has
confirmed that it is in
advanced talks with over
30 mining companies and
expects that within four
years miners will use over
5TWh of the province’s
surplus hydro-electricity.
The same is true for
Manitoba Hydro, which has
received over 100 inquiries
from cryptocurrency
miners.
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Figure 5: Blockchain Ecosystem
Source: Josh Nussbaum
Bitcoin is a peer-to-peer digital currency and is the sum of three innovations:
1. Hashcash — invented in 1997 to prevent spam by having the sender of the message perform 25
seconds to do computational work (20 bits) versus the receiver who can verify in a fraction of a
second.
2. Public key cryptography.
3. Distributed ledger — domain name registers are a good example.
Bitcoin meant to be a currency but is more akin to gold.
 Deflationary because of limited supply (21-million coins to be released by 2140) compared to gold
supply which continually increases over time.
 Easy to send, divide, carry, track (e.g., Bill Gates is very interested to see confirmation that his
donations from his philanthropy organizations are going to the intended targets).
Bitcoin scaling
 Each block is 1MB
 Average transaction size is 250 bytes
 Therefore each block can hold on average 4,194 transactions
 At 10 minutes per block, equates to 7 tps (transactions per second)
 However, with Bitcoin's rising popularity, its blocksize has increased toward its 1MB maximum
 New coins (forks) propose to increase this block size
 Those who oppose the increased block size are Bitcoin supporters and those who favoured it
forked to Bitcoin Cash which supported an 8MB block size
 As scaling and protocols mature, the value of the blockchain's centralized promise could be
realized into a multi-trillion-dollar industry. Lightning Network will scale transactions to
millions/second on Bitcoin and Litecoin, which will dramatically reduce mining fees.
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Figure 6: Blockchain Companies
Source: Black Moon Crypto
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Blockchain Applications
Since the creation of Bitcoin, the world’s first application of blockchain, its rising popularity and rapidly
expanding valuation have stimulated the creation of variations of itself via forking, including
cryptocurrencies such as Litecoin, Bitcoin Cash, and, most recently, Bitcoin Gold; the development of
brand new native blockchains including Ethereum and Ripple; and the launch of hundreds of tokens
and related apps built on top of a variety of blockchains, Ethereum being the platform of choice for
developers by a wide margin.
Bitcoin: Scalability Looks to Limit the Viability of Blockchain’s First Application
Bitcoin remains the most discussed and highly valued cryptocurrency at a current market cap of ~$180
billion, though there remains much debate on its longer-term viability as a method for everyday
transactions. This has largely been owing to scalability issues related to Bitcoin’s underlying protocol,
which, as previously noted, limits a transaction’s block size to 1MB and leads to lower transaction
speeds that result in uneconomical transaction processing fees for practical purposes. Transaction
fees are attached to each proposed Bitcoin transaction as an incentive to be processed by a miner and
to be added to the Bitcoin blockchain. In order to have a given user’s transaction processed on the
limited space of a 1MB block, it needs to outbid other users, leading to fee inflation given supply and
demand dynamics. At the time of writing this report, the average Bitcoin transaction fee sits at ~US$10,
well below the recent peak of +US$55 in late December, but still orders of magnitude above the
~$0.01–$0.10 seen at the cryptocurrency’s inception through to 2016, when this metric started to
materially rise. Besides rapidly increasing transaction fees, early Bitcoin applications, such as Bitpay,
suffered from slow payment times owing to increasing congestion on the network. Such scalability
limitations have led developers to upgrade Bitcoin’s protocol to address these issues, a process known
as forking.
As discussed earlier, Bitcoin Cash, which was a hard fork created on August 1, 2017, served to solve
the capacity constraints of Bitcoin by increasing the block size within this new protocol to 8MB. While
this technically drives higher transaction speeds, the catch is that it also requires more storage space
given that every node maintains a copy of this much larger ledger. An argument can be made that
such an implementation raises storage costs and could therefore lead to a network controlled by an
increasing proportion of well-funded and larger entities, negating Bitcoin’s original decentralization
promise. Bitcoin Gold, the latest Bitcoin hard fork which went live on October 24, 2017, aims to solve
the decentralization problem by ensuring ASICs can’t be used the way they currently are leveraged by
professional Bitcoin miners with dedicated and expensive hardware. The thought is that Bitcoin Gold
can give the power of processing back to a more distributed network of everyday PC users as opposed
to the concentrated Bitcoin mining pools and entities of today. Other mechanisms to address the
scalability constraints of blockchain continue to be explored, such as the Lightning Network, which
leverages a network of payment channels through which parties can make transactions off the
blockchain (i.e., not added to the ledger), thereby saving work and time.
It remains to be seen which decentralized payment protocol might prevail, and the reality is that the
market and its consumer and merchant participants will ultimately dictate the most efficient method for
blockchain’s first recognized and obvious application. Some retailers do accept Bitcoin and other
cryptocurrencies as a form of payment, but many do not. Last year, Internet Retailer noted that Bitcoin
was accepted at just three of the top 500 online merchants that it tracks, down from five in 2016.
During its Q3/17 call, Shopify’s CEO acknowledged the e-commerce infrastructure provider’s lead in
enabling its merchants to accept Bitcoin (as early as 2012), though he also noted his view of it being
an “exceptionally volatile store of value rather than a transactional system”. And just last week, online
payments processor Stripe formally announced it is ending its support of Bitcoin on April 23, noting
how block size limitations have led the cryptocurrency to evolve into more of an asset than a means for
exchange (with transaction fees on par with bank wires). Interestingly, the firm remains bullish on
cryptocurrencies overall, looking forward to initiatives such as Lightning, Ethereum-based tokens, and
even the potential for Bitcoin forks such as Bitcoin Cash or Litecoin.
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Ethereum: The De Facto Blockchain Applications Platform
Bitcoin’s open-source nature has made it relatively easy for developers to copy its software and modify
its protocols in order to create new forks, such as Bitcoin Cash and Bitcoin Gold. Scaling issues aside,
the protocol’s major limitations with regards to use cases other than payments relate to its lack of
flexibility to program more complex rules and logic governing the movement of tokens between two
parties without the use of an intermediary. Early attempts to build on top of Bitcoin’s protocols to allow
for this functionality gave birth to the likes of Counterparty and Omni. However, it was an entirely new
blockchain, known as Ethereum, with its own scripting language and an ability to create “smart
contracts” (the logic governing the rules of token transfer) that has driven today’s blockchain
applications revolution. Fueling the growth in Ethereum-based apps over the past two years was
the release of ERC-20, with nearly all Ethereum tokens being compliant with this standard.
What are tokens in the Ethereum blockchain? Tokens represent digital assets within Ethereum-
based decentralized applications (Dapps) that can range from almost anything such as in-game items,
loyalty points, media rights, and access to server space, among many other use cases. Each token is
defined by a set of code that dictates how it will behave on the network when a given user or a smart
contract sends a message to the token’s contract, along with an associated database keeping track of
Ether payments. Tokens are application specific, in contrast to Ether, which is the cryptocurrency
underlying Ethereum and is what an application user uses to “pay” for a transaction. For example,
when a token is sent across the network (reflecting the transfer of an in-game weapon from one player
to another), the “miner” who confirms this transaction onto the Ethereum blockchain is paid in Ether as
incentive. We discuss in detail later, but tokens should generally only reflect the utility derived from its
use within an application, nothing more and nothing less.
Why are ERC-20 compliant tokens important to Ethereum applications development? Ethereum
Request for Comments proposal ID 20, or ERC-20 for short, was created in November 2015 and only
formally standardized in September 2017. It’s an important standard that has led to the explosion of
Ethereum-based tokens and related applications that govern how new tokens are launched (ICOs) and
how they behave across the blockchain. By creating a set of rules for Ethereum-based tokens to
adhere to, apps developers were able to understand how their tokens would behave within smart
contracts, inside of wallets, and on exchanges. ERC-20 is underscored by a set of six functions, such
as how to transfer a token and how to access a token’s data (token balance, name, etc.). In our view,
the creation of ERC-20 has allowed the Ethereum-based applications ecosystem to flourish.
Ethereum dominates the token landscape by a wide margin. Per Coinmarketcap.com data, out of
the top 500 tokens ranked by market cap, Ethereum accounts for ~80% of the share, followed by
Waves in a distant second at 5% and Bitshares in third at ~3% (Omni and Counterparty combined
account for ~3% of the total). Even more striking, based on market cap, Ethereum reflects +90% of the
total combined valuation of the top 500 tokens (+$60 billion) with the top five all being Ethereum-based
(~$20-billion combined market cap).
Figure 7: Ethereum Dominates the Token Landscape
Source: www.coinmarketcap.com
$7.6
$3.6
$3.3
$2.7
$2.5
$2.2
$1.6
$1.1 $0.9 $0.8
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
EOS
TRON
ICON
VeChain
Populous
Tether
OmiseGO
Binance
Coin
Status
Walton
MarketValue($Bln)
Token
Top 10 Tokens by Market Value ($Bln)
Populous
Tether
Built on Ethereum
Built on Omni
81.6%
4.8%
3.4%
10.2%
Share of Tokens by BlockchainType (Top 500)
Ethereum Waves BitShares All others
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Tokenomics
What’s a token worth? While it’s easy to understand why there’s been a material jump in the number
of Ethereum-based applications being launched, given the ease of development and the establishment
of related rules governing smart contracts, it’s less obvious how investors should properly assign value
to a given token and its corresponding application. In theory, the market value of a token asset class
should approximate the value attributable to the utility of the underlying application the tokens allow
access to. Conversely, one might consider the value of any decentralized application which replaces a
two-sided, centralized middleman marketplace as converging toward the sum of the minimum feasible
costs to run such a network. In other words, an application’s token should really just be worth the
bottom-line economic benefit to the user.
Clearly, there’s much more at play, with tokens of today reflecting part real-world application
usage value, part speculation…in many cases, maybe mainly speculation. In October, Ethereum
co-founder Vitalik Buterin emphatically stressed his bearish views on the future of most of today’s
tokens, suggesting that at least 90% are likely to fail. Application tokens do not represent equity in a
company, and its holder has no legal claim on a company’s assets — they merely have the right to
utilize an application (in most cases, an as of yet to be developed application). We do not make an
attempt on how to separate a token’s true signal from the noise, the latter moving ever louder and
fueled by an increasing participation of less-than-sophisticated and “fear of missing out” investors in
unregulated token offerings. What we do outline, however, are our views on the financial and societal
implications of the promise of blockchain applications.
Token values are driven by network ownership effects, not network effects. It’s well understood
(Metcalfe’s Law) that the value or utility of a network is proportional to the number of customers using
that network. Traditionally, it’s a challenge to “bootstrap” and start a new network, as there’s little to no
incentive for early adopters to use that network, meaning that the benefits to consumers are only
realized at scale. Furthermore, while the consumers of the network may “socially” benefit from the
application, it is the centralized owners who benefit “financially”. Decentralized network models
using a token structure can accelerate the initiation of a network by incentivizing early
participation. Furthermore, with no centralized owners, all users who “buy in” to the token early on,
including developers, consumers, and speculators, share in outsized financial utility. This powerful
combination of network utility + ownership drives players with a vested interest in seeing their own
wealth increase rapidly develop applications and act as marketers and evangelists for the token,
thereby creating a feedback loop that fuels further token appreciation. Bitcoin users not only use the
application, but also have ownership in the network, and benefit by being advocates for the BTC token.
Bitcoin sees its value rise and fall in line with the supply and demand of its application, as well as
owing to the perception of its future usage. Early application adopters enjoy the highest financial utility
(greatest token appreciation) and kickstart the network into wider recognition. Traditional
applications have “customers”, decentralized applications have “users”, and the distinction
between participants in the latter such network is much more blurred.
Figure 8: Ownership in Network Accelerates Application Adoption
Source: Andreesen Horowitz (Decrypting Crypto, From Bitcoin and Blockchain to ICOs) & Nick Tomaino (The Token Economy)
UtilitytoUser
Number of users
Traditional Network Effect
Overall utility= Application utility
Bootstrapping Problem
UtilitytoUser
Number of users
Token Network Effect
Applicationutility
Financial utility
Overall utility= financial
applicationutility
“It is an established fact
that ninety percent of start-
ups fail. And it should also
be an established fact that
90 percent of these
ERC20s on
CoinMarketCap are going
to go to zero” – Vitalik
Buterin
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Only decentralized applications with real-world utility and sound token structures should
survive. Market forces should ultimately dictate which Dapps make the most sense at disrupting a
given industry’s centrally operated incumbents. Many applications being proposed today are likely
destined to remain as proposals, particularly if they do not provide a superior benefit to customers than
already existing solutions (or in the case of new wealth creation in the underdeveloped economy, if
they are too costly to deploy and gain significant traction). Besides utility, another consideration when
assessing the future viability of a Dapp is its initial token offering structure, which provides the
incentive for participants to develop and champion the network. Developers look to strike a fine
balance between the mix of tokens to be initially released to the public and those to be held internally,
in addition to considering dynamics related to future token supply and controlled inflation. While it’s
typically standard practice for developers to maintain a pre-allocation of new tokens to fund future
project development once their cryptocurrencies are listed on an exchange and can be sold for fiat (or
another cryptocurrency) on the back of some price appreciation, too much ownership might be viewed
as being overly greedy and limit a token’s wider adoption.
Decentralized apps and economies can radically shift the distribution of wealth. In the world of
blockchain, value accrues to the developers of the underlying protocols versus at the application layer,
as is the case in traditional centralized network structures. Additionally, participants in the networks are
also able to enjoy financial benefits as opposed to one central authority.
One example being seriously explored today is that of distributed file storage, led by new protocols
including Filecoin, SIA, and Storj. Instead of relying on a storage provider such as Amazon’s S3,
users are able to “rent out” excess storage space on their existing PCs and be rewarded in the form of
tokens, paid by other users looking to “store” data across this decentralized network. If the service is
seen as being valuable, the value of the corresponding tokens will rise. Storage contributors and the
developer of the protocol will benefit, assuming they’ve retained some tokens for themselves.
Applications at the user experience level are able to leverage these protocols (in exchange for tokens)
and create their own unique service offerings, but the majority of the value will accrue to the protocol
layer. This is the opposite of current centralized models where all the value is captured at the
application level (protocols are essentially free).
Decentralized applications may also materially change the dynamics related to the “sharing economy”
and marketplace-based industries that rely on centralized middleman structures. Ride-sharing
networks (such as Lyft) have been cited as examples where blockchain applications might pose
significant disruption. In the case of Lyft, the company takes a portion of ride fare for connecting
drivers to passengers, with the company’s valuation rising as the number of participants increases
(drivers may see some financial benefit as the network grows, and riders will gain benefits in the form
of reduced wait times, but a disproportionate share of incremental wealth ultimately accrues to Lyft). In
the decentralized model, a limited number of tokens are released, set at some initial value (1 ride = 1
token = $1), and are used by riders to pay for a ride. As demand for the service increases, demand
outpaces supply and the price of a token appreciates in value (1 token = $2). Drivers continue to
charge 1 token for a ride, but this token can now be exchanged for $2. No centralized authority is
involved in the process at all, and all of the value creation flows to participants in the network.
Security tokens — distinct from utility tokens in representation and legality. While regulations on
utility tokens remain a hotly debated topic, security tokens that represent shares in a company or are
backed by an entity’s assets should be regulated and follow KYC/AML standards. Polymath is a
company looking to capitalize on the securities token boom, which it sees reaching a market cap of
$10 trillion by 2027, up from $10 million in 2017. The company guides customers through the technical
and legal process of a successful token launch, all the way from creation to fundraising to compliance
issuance.
With regards to utility tokens, recent statements by SEC Chairman Jay Clayton reflect the regulators
view that most offerings indeed likely look closer to securities tokens. That said, he did leave the door
open for true utility tokens to remain unregulated; for example, those which represent participation in
an already existing platform or offering, noting that they could be an efficient way to fund the ongoing
development of such applications.
“By and large, the
structures of ICOs that I
have seen promoted
involve the offer and sale of
securities and directly
implicate the securities
registration requirements
and other investor
provisions of our federal
securities laws.” –Jay
Clayton, SEC Chairman.
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Overview of the World’s (Currently) Most Valuable Tokens
At the time of writing this report, the top five tokens by market cap are all based on Ethereum and
largely relate to platforms that allow developers to quickly create a variety of Dapps.
1. EOS (market cap $7.6 billion): EOS is a software platform that allows developers to easily build
decentralized applications through an intuitive operating system-like architecture. The platform’s
founders suggest that its design has the potential to scale to millions of transactions per second
that can push down transaction fees to fractions of a penny, therefore being much more scalable
than Bitcoin and even Ether itself.
2. TRON (market cap $3.6 billion): Tron touts itself as a decentralized content entertainment protocol
that allows users to openly publish, store, and own data. Tron has partnered with several
application partners, including Obike (Singapore bike-sharing company), Peiwo (audio content
sharing), UPLive (live streaming platform), and Gifto (virtual gift exchange platform), giving it a
base of four-million active users which its website notes makes it the protocol with the most Dapp
users globally. The protocol enables content providers to engage with consumers in a manner that
drastically reduces the fees associated with entertainment platforms (Google Play, Apple Store).
3. ICON (market cap $3.3 billion): ICON and its associated token ICX envision the creation of an
ecosystem that connects organizations such as government, financial institutions, and hospitals to
interact without third-party intermediaries and is essentially another example of a Dapp platform.
Some example use cases listed on ICON’s website include the use of Blockchain ID (smart
contracts to be used for verification; for example, opening a bank account in a matter of seconds,
receiving student discounts without showing a physical ID card) and Payment & Exchange (within
bank, insurance, university settings, for example).
4. VeChain (market cap $2.7 billion): VeChain has rapidly emerged as one of the most highly valued
tokens. Its website notes that it is the world’s leading blockchain platform for products and
information, and cites some tangible examples of its technology being deployed in practical world
examples. Those include an API gateway service related to the supply chain industry, third-party
services being used by PricewaterhouseCoopers, and the collection and monitoring of agricultural
data used by the Liaoning Academy.
5. Populous (market cap $2.5 billion): Populous is a classic example of a blockchain application in
the financial services industry serving a function that has historically involved a third party to
connect trading partners. Populous is a peer-to-peer invoice finance platform that enables
business owners to sell outstanding sales invoices to invoice buyers at a discounted rate in order
to unlock tied up cash. Once invoices have been paid, the buyer receives their cash back, with all
of these transactions recorded on a blockchain.
We also highlight some other notable tokens and related Dapps that are looking to disrupt traditional
industries with centralized structures.
Filecoin holds the record for the most successful ICO to date, raising $275 million in funding. As we’ve
previously highlighted, Filecoin is looking to take share of the storage industry by allowing anyone to
rent out their spare disk space to be plugged into a decentralized network, where a user’s data is
spread across multiple nodes and only accessible and readable using a private key.
Gnosis and Augur are examples of predictions and forecasting networks that reward users for
correctly predicting future events and are based on the concept of the collective knowledge of a crowd.
The Augur website notes that prediction markets such as itself have been proven to be more accurate
at forecasting versus individual experts, opinion polling, and surveys.
Basic Attention Tokens (BAT) and the corresponding Brave browser, built by the creator of
JavaScript and the co-founder of Mozilla and Firefox, are looking to upend the advertising industry.
The platform hopes to make for a much more efficient advertising model, where ad dollars can be
directly linked to a consumer. In the model, a token will be paid by an advertiser for a consumer’s
attention (for example, an ad blocker inherent in the browser will be shut off upon the transfer of the
token to the user who agrees to view the ad). Tokens can also be paid by website visitors to access
content, where articles can be purchased on a pay-per-view basis instead of a monthly subscription.
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Industries Most Likely to Be Impacted by Blockchain Applications
The token examples on the previous page provide some clues as to where some of the most logical
areas and industries that blockchain technologies may be well suited for deployment.
In short, the greatest business opportunities for blockchain applications will be in industries
characterized by a relatively high level of intermediaries.
One industry stands out well above the rest, Financial Services, which a McKinsey & Company
study (January 2017) noted as representing +50% of all blockchain opportunities and includes sub-
sectors in Insurance, Payments, Register of Ownership, Identity, and Securities. With regards to
Financial Services, the consulting firm identified seven use cases that collectively could generate a
~$80–$110-billion impact.
Figure 9: Blockchain Use Cases Skew Toward Financial Services
Source: McKinsey & Company: Blockchain Technology in the Insurance Sector, January 2017
Supply Chain & Logistics is another area being actively explored as a logical use case for
blockchain, where transparency related to the tracking of goods, from supplier, to manufacturer, to
retailer, to end consumer is becoming increasingly important. Supply chain tracking onto the
blockchain can help reduce or even eliminate the counterfeiting of goods, while the logistics, freight,
and shipping networks characterized by a deep and complex web of intermediaries and related
document exchange can be simplified and achieve material cost savings. IBM and Maersk have
announced a collaborative effort to digitize the supply chain process related to ocean shipping
container tracking. The firms note that +90% of goods traded globally are carried by ocean logistics,
with its solution potentially saving billions of industry dollars.
Identity management on the blockchain could drive efficiencies in many use cases, whether that
be inherently trusted identity related to voting (reducing fraudulent votes or recounts and providing an
immutable and verifiable trail of a voters history), to often cited examples such as property records and
land transfer, birth and marriage certificates documentation, and the creation and execution of wills
and inheritances (which could be governed by smart contracts that automatically send distributions to
beneficiaries, saving court and legal costs).
Healthcare processes related to the exchange of patient information and electronic medical
records can be streamlined using the blockchain, eliminating administrative costs and giving patients
authority on who has access to their data. For example, a patient’s medical history can be secured on
the blockchain and that data might only be able to be accessed when the patient gives a medical
authority permission (patient holds the private keys to their data), enabling much higher levels of
privacy and security.
17%
5%
11%
9%
6%
22%
2%
6%
9%
13%
0% 5% 10% 15% 20% 25%
Other
Arts& Entertainment
Public Sector
Consumer
Healthcare
Insurance
Securities
Identity
Register of ownership
Payments
FinancialServices(50%)
Distributionof BlockchainUsage (%)
$15.5
$55.0
$4.0 $3.5
$5.5 $6.0
$8.0
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Tradefinance
Cross-border
B2B
payments
Cross-border
P2P
payments
Repos
OTC
Derivatives
KYC/AML
management
Identityfraud
Impact Value Generatedby Blockchain($Bln)
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Enterprise Applications of Blockchain
Enterprises are poised to account for an increasing share of blockchain usage and in our view
are likely to leverage more private versus public architectures. Gartner estimates that nine out of
10 enterprises will deploy a blockchain project and that the business value-add of related apps will
reach $3.1T by 2030, with 50% of this attributable to uses between companies and intracompany.
Figure 10: Business Value-Add of Blockchain to Reach $3.1 Trillion by 2030
Source: Gartner Webinars – Blockchain: How Real Is The Market
Public Blockchains: Anyone is free to read, write, send transactions, and engage in the consensus
process to add blocks to the chain. Proof of Work or Proof of Stake verification mechanisms ensure
that a given mode’s influence in determining consensus is proportional to the level of effort or
resources owned. Such blockchains are 100% decentralized, such as the Bitcoin blockchain.
Advantages of a Public Blockchain
1. Openness: Given its open-source nature, it is much more likely to be widely adopted by many
users, organizations, and entities to rapidly gain traction.
2. Anonymity: Users are able to perform transactions anonymously.
3. Trust of Developers: Application users are inherently ensured that the creators of the blockchain
have no control or authority over the blockchain once it is in operation.
Private Blockchains: Such blockchains differ drastically from their public counterparts in that
permission to write new blocks to the chain might be centralized to one entity, while read permissions
could be either public for all to read or restricted to a select set of users. Since such blockchains are
typically designed by a single company (or consortium of companies), it is not necessary to be publicly
readable by all to see. Consensus mechanisms may or may not be necessary in such blockchains.
1. Scalability: Given that transactions are typically only verified by a few nodes or users and not by
an unlimited number of users (thousands and thousands), as is the case in a public blockchain,
transaction and validation times are much faster and less costly.
2. Known Validators: With known entities all tending to work toward a common shared goal, the
likelihood of collusion between parties or an attack on the system is low.
3. Flexibility & Control: As private blockchains are run/owned by a company or consortium, rules
can be changed, transactions can be reverted, and technical issues/faults can be quickly resolved.
It’s up to the creators of the blockchain to do with it as they please.
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2025 2026 2027 2028 2029 2030
Business value-add of Blockchain ($Bln)
Auto-Adjudication Between Companies Digital Cash Intracompany Public Record
10%
28%
22%
22%
18%
2030
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Requirements for enterprises to operate transactions at scale and retain control over data
access should drive private blockchain adoption in the Enterprise. Notwithstanding efforts being
made to increase the scalability issues of existing public blockchains, such as Lightning, the reality is
that private blockchains appear to be much better suited for the level of transactions processed by
most Enterprises. For example, global telecom companies can process 100’s of thousands of
payments transactions per second, while major credit card companies are known to be able to handle
10’s of thousands of transactions per second. Furthermore, private blockchains, which many consider
to be closer to “permissioned private databases”, may actually require user identity and accountability
depending on the application in question. An example could be a supply chain implementation where a
retailer requires a full time-stamped history of a product’s journey from supplier to manufacturer to end
customer. We highlight in the figure below (reference: Distributed Lab) the various blockchain
architectures and their corresponding level of anonymity and trust.
Figure 11: Public vs. Private Blockchain Analysis
Source: Pavel Kravchenko (Distributed Lab – Ok, I need a blockchain, but which one?), Paradigm Capital Inc.
Level of trust
Level of
anonymity
Proof of StakeProof of Work
Federated Byzantime
Agreement
Practical Byzantime
Fault Tolerance,
Multisignature
Permissionless Public
Permissionless Public
Permissioned Public
Permissioned Private
“When I and others talk to
companies about building
their applications on a
blockchain, two primary
issues always come up:
scalability and privacy.” –
Vitalik Buterin.
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Investment Opportunities
The following tables summarize all publicly traded Canadian and U.S. blockchain/cryptocurrency
companies and investment portfolios. Our first observation, the rule of 10x has been broken. Canada is
very well represented by this list with more publicly listed blockchain companies than in the U.S. and
with a combined market capitalization of ~C$2.5 billion compared to their American counterparts at just
US$800 million.
We conclude the substance of this report with profiles on 13 next-generation companies, who we
believe hold great promise of disrupting the market.
Peripherally, we often get asked by investors if there are investment opportunities within the
ecosystem of companies who provide the hardware for cryptocurrency mining. Below we summarize
some anecdotal numbers and a cautionary note.
 ASIC Manufacturer | Bitcoin mining is powering the growth engine for the world’s biggest chip
maker, Taiwan Semiconductor Manufacturing Company (TSM-N, NR). Analyst’s estimate cypto-
mining generated $350-$400 million in TSMC’s third alone (4–5% of revenue and up 46% year-
over-year) and could account for as much as $3.7 billion (10% of revenue) in 2018, thus becoming
its fastest-growing segment. TSMC manufacturers ASICs for Bitmain and Bitfury as well as GPUs
for Nvidia and AMD.
 GPU Manufacturers | Analysts estimate $150 million or 6.7% of Nvidia’s (NVDA-Q, NR) Q2
revenue is derived from cypto-mining. Advanced Micro Devices (AMD-N, NR) has been much
more tight-lipped. Recent commentary from the semiconductor analyst at Morgan Stanley
estimates “total graphic sales for Ethereum mining in 2017 will be $800 million or so, and will
decline by 50% in 2018”. This will be a consequence of shift to a technology called “the Casper
hard fork” which will render current Ethereum mining hardware obsolete.
 ASIC Testing | Cadence Design Systems (CDNS-Q, NR)
 Memory Modules | Samsung Electronics (005930.KS, NR)
 Chip Packaging | Advanced Semiconductor Engineering (ASX-N, NR)
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Figure 12: Publicly Listed Canadian Blockchain Companies
Source: FactSet
In millions except per share data Shares Market Avg. Volume Money
Company Name Ticker Price Out Cap High Low 6-month Raised (M) LTM
Miners
360 Blockchain Inc CODE-CA $0.17 153.2 $25 $0.39 $0.04 - $2.5
Aim Explorations Ltd AXN-CA $0.18 7.9 $1 - - - $40.8
Blockchain Power Trust BPWR.UT-CA $0.39 223.1 $87 $0.90 $0.33 247 $46.6
CryptoGlobal Corp. CPTO-CA $1.13 120.1 $136 $1.74 $0.49 - $11.0
HashChain Technology, Inc. KASH-CA $2.12 45.9 $97 $4.00 $1.50 477 $29.7
HIVE Blockchain Technologies Ltd HIVE-CA $2.95 261.3 $771 $6.75 $0.74 2,564 $185.4
Global Blockchain Technologies Corp BLOC-CA $1.78 29.4 $52 $1.86 $1.45 1,718 $55.3
Average $167
Median $1,170
Apps
BIG Blockchain Intelligence Group Inc. BIGG-CA $1.31 73.8 $97 $2.77 $0.30 275 $19.6
Block One Capital Inc BLOK-CA $0.93 62.5 $58 $1.85 $0.10 424 $10.5
BTL Group Ltd. BTL-CA $8.80 21.3 $188 $18.90 $2.79 202 $18.4
Glance Technologies, Inc. GET-CA $1.45 131.8 $191 $3.84 $0.16 2,311 $19.4
LeoNovus Inc. LTV-CA $0.26 246.0 $63 $0.70 $0.05 2,595 $16.6
eXeBlock Technology Corp. XBLK-CA $0.54 61.4 $33 $1.79 $0.48 234 -
Imagination Park Entertainment Inc IP-CA $0.94 63.0 $59 $1.08 $0.22 386 $0.1
Identillect Technologies Corp. ID-CA $0.23 97.2 $22 $0.61 $0.07 1,409 $2.7
Internet of Things Inc. ITT-CA $0.13 167.5 $21 $0.15 $0.05 651 $0.6
Kontrol Energy Corp. KNR-CA $1.44 25.3 $36 $1.58 $0.56 13 $3.2
Blox Labs Inc BLOX-CA $0.50 24.1 $12 $2.25 $0.02 9 $0.7
Syncordia Technologies and Healthcare Solutions Corp SYN-CA $0.15 19.7 $3 $0.30 $0.05 31 -
Stompy Bot Corp. BOT-CA $0.15 111.3 $16 $0.25 $0.01 1,035 $2.1
Global Remote Technologies Ltd RGT-CA $0.61 42.1 $26 $0.61 $0.06 590 $5.0
Average $59
Total $825
Exchange
NetCents Technology, Inc. Class A NC-CA $2.55 41.4 $106 $6.75 $0.26 659 $1.7
Average $106
Total $106
ATM/POS
DataMetrex AI Ltd. DM-CA $0.26 199.8 $51 $0.47 $0.05 2,308 $8.8
Fintech Select Ltd FTEC-CA $0.23 64.4 $14 $0.64 $0.17 1,610 $3.5
Average $33
Total $65
Fin Tech
Fineqia International, Inc. FNQ-CA $0.04 760.0 $22 $0.08 $0.01 913 $0.9
Katipult Technology Corp. FUND-CA $0.52 24.9 $10 $0.88 $0.25 79 -
Midpoint Holdings Ltd. MPT-CA $0.21 103.8 $18 $0.38 $0.05 269 $1.7
Posera Limited PAY-CA $0.24 118.5 $23 $0.34 $0.14 399 $4.7
Vogogo Inc VGO-CA $0.89 132.5 $88 $0.94 $0.75 306 $6.0
Average $32
Total $161
Investment Portfolio
Victory Square Technologies Inc VST-CA $2.97 41.4 $123 $4.17 $0.35 178 $3.9
Average $123
Total $123
Total Combined Market Caps of Canadian Blockchain Companies $2,450
6-month
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Figure 13: Publicly Listed U.S. Blockchain Companies
Source: FactSet
In millions except per share data Shares Market Avg. Volume Money
Company Name Ticker Price Out Cap High Low 6-month Raised (M) LTM
Miners
Bitcoin Services, Inc. BTSC-US $0.14 462.835 $64 $0.64 $0.05 19,227 -
Integrated Ventures Inc INTV-US $1.36 7.742 $11 $6.74 $0.04 328 $0.33
MGT Capital Investments, Inc. MGTI-US $3.07 48.524 $149 $8.14 $1.05 2,126 $23.30
Riot Blockchain Inc RIOT-US $15.23 11.622 $177 $46.20 $3.45 3,278 $56.50
WRIT Media Group Inc. WRIT-US $0.17 57.411 $9 $0.56 $0.10 235 $0.08
Rich Cigars Inc RCGR-US $0.63 3.263 $2 $1.05 $0.02 184 $0.56
Average $69
Total $412
Apps
BTCS, Inc. BTCS-US $0.11 368.219 $40 $0.58 $0.07 19,167 $0.12
Black Cactus Global Inc BLGI-US $0.42 157.900 $67 $0.78 $0.07 1,294 $0.64
Average $54
Median $107
Exchange
American Security Resources Corporation ARSC-US $0.14 0.000 $0 $3.02 $0.08 26 -
Digatrade Financial Corp. DIGAF-US $0.25 45.161 $11 $1.06 $0.06 1,015 $0.60
First Bitcoin Capital Corp. BITCF-US $0.75 302.080 $225 $3.15 $0.00 919 -
Average $79
Median $236
ATM/POS
Connexus Corporation CNXS-US $0.00 31.179 $0 $0.00 $0.00 100,228 -
MarilynJean Interactive, Inc. MJMI-US $0.00 173.345 $0 $0.01 $0.00 6 -
Average $0
Median $0
Total Combined Market Caps of U.S. Blockchain Companies $755
6-month
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Company Profiles
Auxesis Group (private)
Auxesis partners with organizations to build, deploy, and operate blockchain networks. The company
has created the world’s largest private decentralized network which powers the Auxledger blockchain
platform. Auxledger is a blockchain infrastructure that has been deployed successfully across a
number of enterprises focusing on security, performance, and scalability. The current version of
Auxledger has over 53-million users in India with customers across different verticals including:
government, Internet of Things (IoT), cross-border remittances, capital markets, insurance, and supply
chain. This blockchain powers 15 applications. In addition to Auxledger, the company has a financial
product suite:
 Auxy: A cryptocurrency and crypto-token wallet.
 AuxPay: Payment solutions for merchants to enable the acceptance of cryptocurrencies as a form
of payment.
 AuxCE: A high-frequency cryptocurrency exchange. Allows users to trade Bitcoin, Ethereum, fiat
currency, gold, and energy.
Auxesis also operates an advisory, research and training lab called Blockchain Lab. The lab was
established in 2017 to promote and grow the Blockchain ecosystem in India. The lab has four zones:
defence, IoT, FinTech, and RegTech. The Blockchain Lab focuses on product development,
organizing conferences and seminars, and training students and professionals on implementing
blockchain technology.
Highlights
 Recognition: Auxesis has been recognized among the Top 100 Most Influential Blockchain
Companies, ranking 42 in the world and the only one from India. It has also partnered with
industry leaders to grow its network, including HP (server side and applications deploymnet), Ernst
& Young (consulting & advisory), and IIT (research & development).
 Large Customer Base: Auxledger is already powering enterprise applications and is being used
by over 53-million customers.
Management & Board
Kumar Gaurav – Chairman | Kumar is an entrepreneur who has been responsible for building some
of today’s most exciting fintech businesses. He is among the Top 100 Most Influential People in the
blockchain industry. He was granted Extraordinary status (O1) by the U.S. government for blockchain
expertise. Kumar is the Chairman of Auxesis, India’s first enterprise blockchain company. He also
founded Cashaa and co-founded Darwinsurance. He is the Vice President, Innovation, of Responsible
Gold, the Advisor for Satoshi Studio, and is on the Editorial Board of CoinTelegraph. Kumar holds a
Bachelor’s degree in Computer Engineering and a Master’s in Management from Politechnico di
Milano.
Akash Gaurav – CEO | Akash is a blockchain entrepreneur. He founded Auxesis Group during his
undergraduate studies at IIT Bombay. He also founded Blockchain Lab and Auxledger Foundation. He
is on the Advisory Board of Cashaa and is the Technology Advisor for VEDA Networks. He is also a
mentor to the Entrepreneurship Club of MISB Bocconi. Before founding Auxesis he was the manager
of The Entrepreneurship Cell, IIT Bombay. He also founded Sporturlook and MyCarGenie.
Janina Lowisz – Senior Vice President, Marketing | Janina is well known in the industry as
Blockchain Girl. She has worked as a blockchain analyst for major companies including Amex and
ManPower, and Co-Founded Bitnation. She is a Top 100 Global Blockchain influencer, a blockchain
speaker, and a model.
Sudhir Chaudhary – Senior Vice President, Technology | Sudhir is an experienced techie from
HSBC, Emirates National Bank of Dubai, and Infosys. He is a contributor of Digital Transformation for
HSBC as Integration Specialist for re-innovating HSBC’s e-channels platform to elevate
Commercial/Wholesale banking business for HSBC. He was an Integration Specialist for Emirates
NBD and built e-channel platforms to automate Bulk Payments for Emirates Group, Fly Dubai, and
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Dubai Smart Government. He is an Enterprise Technical expert for IBM’s integration product suite
particularly in Managed File Transfer domain and Sterling B2B integrator.
Dr. Bernard Lietaer – Strategic Advisor | Bernard Lietaer is a civil engineer, economist, author, and
professor. He studies monetary systems and promotes the idea that communities can benefit from
creating their own local or complementary currency, which circulate parallel with national currencies.
He has been active in the realm of money systems for close to 40 years in a wide variety of functions.
With the publication of his post-graduate thesis at MIT in 1971 and the Nixon Shock of that same year
which eradicated the Bretton Woods system by unhinging the U.S. dollar value from its gold standard
and inaugurated the new era of universal floating exchanges, the fledgling management consultant
suddenly found himself to be at the centre of the financial world's attention. The techniques that he had
developed for those marginal Latin American currencies were overnight the only systematic research
that could be used to deal with all of the major currencies of the world. A major U.S. bank negotiated
exclusive rights to his approach which required that he begin another career. While at the Central Bank
in Belgium (National Bank of Belgium) he implemented the convergence mechanism (ECU) to the
single European currency system. During that period, he also served as President of Belgium’s
Electronic Payment System. His consultant experience in monetary aspects on four continents ranges
from multinational corporations to developing countries.
Dr. John Clippinger – Strategic Advisor | Throughout his career John has always been interested in
complex, self-organizing systems and new approaches to organizational and institutional design to
address fundamental civic, economic, and ecological issues. John has held senior positions in
government and large enterprises, and founded four software companies. He has been engaged with
non-profit organizations and institutes, Santa Fe Institute, Aspen Institute, World Economic Forum,
Kauffman Foundation, and has started new programs and institutes at Harvard and Harvard Law
School, Brandeis Florence Heller School, MIT Media Lab, and, more recently, co-founded ID3 with
Sandy Pentland of MIT Media Lab. John is especially interested in the disruptive opportunities enabled
through decentralized technologies such as cryptocurrencies, smart contracts, and ledgers. He
recently organized a series of retreats and workshops to develop principles for new forms of emergent
self-organization and autonomous communities. He also recently edited a book, From Bitcoin to
Burning Man and Beyond — The Quest for Identity and Autonomy in Digital Society.
Richard Kastelein – Crypto Advisor | Founder of industry publication Blockchain News, partner at
ICO services collective CryptoAsset Design Group, director of education company Blockchain Partners
(Oracle Partner) and ICO event organizer — Richard is an award-winning publisher & entrepreneur.
He sits on the advisory boards of half a dozen blockchain start-ups (ICOs) and has written over 1,400
articles on blockchain technology at Blockchain News, and has also published on ICOs in Harvard
Business Review & Venturebeat. Kastelein has spoken (keynotes and panels) on blockchain in
Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen,
the Hague, Helsinki, London, Manchester, Minsk, Nairobi, Nanchang, San Mateo, Shanghai, Tel Aviv,
Venice, and Zurich. He's a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from
the Canadian Native Press (Arctic) to the Caribbean and Europe. He's written occasionally for Harvard
Business Review, Wired, Venturebeat, The Guardian, and Virgin.com — his work and ideas have been
translated into Dutch, Greek, Polish, German, and French.
Alex Norta – Blockchain Advisor | Alex Norta is currently a research member at the Faculty of
Informatics/TTU and was earlier a researcher at the Oulu University Secure-Programming Group
(OUSPG ) after having been a post-doctoral researcher at the University of Helsinki, Finland. He
received his MSc (2001) from the Johannes Kepler University of Linz, Austria, and his PhD (2007) from
the Eindhoven University of Technology, The Netherlands. His PhD thesis was partly financed by the
IST project CrossWork, in which he focused on developing the eSourcing concept for dynamic inter-
organizational business process collaboration. His research interests include business-process
collaboration, workflow management, e-business transactions, service-oriented computing, software
architectures and software engineering, ontologies, mashups, and social web. At the IEEE EDOC'12-
conference, Alex won the best-paper award for his full research paper with the title #Inter-enterprise
business transaction management in open service ecosystems#.
Dinesh Prasad – Strategic Advisor | Head of Devices, Qualcomm India & South Asia, with the prime
responsibility of driving chipset/device sales through global OEMs, Operators, Local Distributors, and
Brands. Accomplished and knowledgeable in sales, business development, and program management
professional with 22+ years of global experience in the wireless telecom and semiconductor industries.
Results oriented and decisive leader with a proven track record in ecosystem creation, new business
development, increasing sales and market share, achieving growth objectives and program
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management through astute business acumen and sound technical knowledge, identifying and
architecting creative solutions while gaining credibility and building influential relationships at the
highest levels with industry partners and key stakeholders.
Anil Earla – Fintech Advisor | Head of Information & Data Analytics, Visa. Enterprise technology
executive heading digital transformation for world’s largest payment network. Leading various
technology teams to maximize the data assets of Visa Inc. Reduced the incident response time of Visa
network from 6–10 days to 2–3 milliseconds. Intrapreneur passionate about bringing Silicon Valley
innovative mindset to larger organizations. Built lean start-ups resulting in creating new stream of
revenue.
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Blockchain Intelligence Group (BIGG-CNQ, NR)
Blockchain Intelligence Group (BIG) strives to bring security and accountability to cryptocurrency with
its trusted data analysis and risk-scoring capabilities for blockchain/Bitcoin and other cryptocurrencies.
The company was founded in 2010 and is located in Vancouver, B.C. BIG’s proprietary platform
uncovers criminal transactions in the blockchain network and provides peace of mind to people
transacting on the blockchain. The company has created the first easy-to-understand “risk score” for
cryptocurrencies, as well as an Anti-Money Laundering (AML) and Office of Foreign Asset Control
(OFAC) detection API. The platform will target the financial services industry, regulators, and the law
enforcement community to help meet the demands of a blockchain-based future, providing trust and
real-time risk evaluation.
All transactions on the blockchain are permanently stored for all to see on an online public ledger. BIG
uses advanced search and analytics to gather evidence, track movement of funds between wallets,
and ultimately connect criminals with their transactions.
Highlights
 BitRank: A proprietary risk scoring system that ranks the safety of the wallet that a customer is
transacting with. Wallet holders can check their safety rank on bitrankverified.com. Wallets are
ranked on a 0 to 100 scale, 0 being the most dangerous score and 100 being the safest score.
Clients are able to use their API to perform large-volume look-ups.
 Qlue: Qlue stands for Qualitive Law Enforcement Unified Edge. This platform was created to aid
in the fight against financial crimes involving Bitcoin and other cryptocurrencies. Qlue uses
advanced search algorithms and other techniques to detect suspicious activity in Bitcoin and other
cryptocurrency transactions, use of “Dark Web” tools, and other methods used by criminals to
cover illegal activity.
 Blockbits: Provides search and data analytics for companies needing to verify critical business
information.
Management & Board
Shone Anstey – Executive Chairman & Co-Founder | Shone brings 20 years of experience building
complex technologies and software within the IT industry. Shone was co-founder of a scalable web
crawler and search engine, and is a Certified Bitcoin Professional. Formerly, Shone acted as Director
of Technology for a distributed Bitcoin mining pool.
Lance Morginn – CEO & Co-Founder | With over 20 years of industry experience in technology-
based start-ups, Lance brings a vast and proven track record for growing and developing multi-million-
dollar businesses from the ground up. His background includes roles as Founder/CEO/Director in a
handful of publicly traded and privately held companies.
Anthony Zelen – Corporate Development & Co-Founder | Anthony has over 17 years of experience
in finance, investor relations, and corporate development. He is the owner of the full-service corporate
communications firm Senergy Communications Inc., providing investor relations, public relations, and
marketing solutions.
Kim Evans, CPA, CGA – CFO | Kim, founder of Golden Reign, is a Certified General Accountant with
extensive experience in both the junior mining sector and the corporate securities industry. Ms. Evans
has 17 years' experience as a director and/or officer, working with a number of public companies listed
on the TSX Venture Exchange.
Tom Kennedy – Director | Mr. Kennedy, B.Comm., J.D., is a graduate of the University of British
Columbia. After an initial career at the Federal Department of Justice, he has primarily focused as a
legal, financial, and business consultant to publicly traded companies. Mr. Kennedy is currently a
member of the Law Society of British Columbia, the Canadian Bar Association, the British Columbia
Bar Association, and an Associate member of the American Bar Association. Mr. Kennedy is an officer
and/or director of several publicly traded companies. He is an independent contractor and expects to
devote 5% of his time to the affairs of the resulting issuer.
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Robert Birmingham – Director | Mr. Birmingham has over 10 years’ experience in the resources and
corporate sector. He is the current President & CEO of New Destiny Mining Inc., a TSX Venture-listed
company involved in mining exploration. He was previously the President & Chief Executive Officer of
Revolver Resources Inc. (now GGX Resources), a TSX Venture-listed company involved in mining
exploration. In addition, Mr. Birmingham has been a director of multiple public companies on the TSX
Venture Exchange and the Canadian Securities Exchange. Mr. Birmingham holds a business degree
from Capilano University. He is an independent contractor and expects to devote 5% of his time to the
affairs of the resulting issuer.
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Boardwalktech (private)
Founded in 2005, Boardwalktech was the first company to develop a positional, cell data management
technology that it now delivers as the core component of a patented, multi-party digital ledger
blockchain database designed for collaborative, multi-party, mission-critical applications which rely on
a digital information exchange internally and externally. Its platform is ideal for managing the exchange
of information between parties in a distributed manner in any application and in any industry via a
blockchain digital ledger that facilitates more efficient trade, establishes trust, enhances transparency,
and enables better control for businesses and their customers
The company has a blue-chip customer base, including a number of Fortune 500 companies like
Apple, Coke, Teva, and PwC. In addition, the company works with IBM, Oracle, Microsoft, Accenture,
and McKinsey as both consulting and technology partners. The return on investment (ROI) for
customers is a reduction in manual processes, a reduction in inefficiencies and risk, better data
accuracy, and faster decision cycles.
Highlights
 Boardwalk Application Engine (BAE): allows customers to build enterprise quality applications
that scale, secure, and integrate existing spreadsheet processes or create entirely new
applications based using BAE’s digital ledger data management technology. BAE’s tools can be
used to build and maintain applications with multiple internal or external using Excel or any other
UI.
 Boardwalk Enterprise Blockchain: provides a dynamic, smart contract enabled information
exchange that combines BAE’s temporal data management and enterprise integration
environment with Blockchain’s trust and validation capabilities. The result is a private
permissioned enterprise blockchain that supports multi-party transactions and consensus models.
Management & Board
Andrew Duncan – CEO | Andy has over 20 years of experience focused on building companies and
taking products and services to market. Prior to Boardwalktech, he served as President and CEO of
Advanced Data Exchange. ADX provides an on-demand supply chain transaction processing network
used today by over 200 of the Fortune 1000 companies. Andy also served as President and CEO of
The EC Company, which was focused on payment transaction technologies for the small and mid-
market. During his work in the technology field, he has led companies through several stages of
growth and secured significant investments from American Express, CMGI @Ventures, Invamed
Associates, Intel Capital, Wasserstein Addelson Ventures, GKM Ventures, Sandler Captial, and The
Thomson Companies. Prior to entering the technology field, Andy was President and CEO of Duncan
Insurance, Inc., a nationwide insurance brokerage representing over 80 insurance companies
specializing in commercial insurance.
Ravi Krishan – CTO | Ravi, and the other two founders, Sarang Kulkarni and Dharmesh Dadbhawala,
have over 50 years combined of engineering product data management experience working for
Parametric Technology, Sherpa, and Netfish. Prior to Boardwalktech, Ravi was a founder of the
Hunington Group which provided advanced database architecture and design consulting. Ravi was
responsible for the vision and drive beyond a 10,000-user, $100-million collaborative product data
management solution, using existing database technology, at Parametric Technology Corporation.
Mike Braun – Advisor & Director | Mike Braun was most recently the President and CEO of Intacct
Corp., a leader in cloud-based accounting and financial management software for small- and medium-
sized businesses using the software-as-a-service (SaaS) model. Mr. Braun led a period of rapid
investment and growth and was one of the Top 100 Most Influential People in the Accounting
Profession. He retired in late 2009 and was named CEO Emeritus of Intacct. After retirement, he
worked part-time as Dean's Executive Professor of Information Systems at the Leavey School of
Business at Santa Clara University. Mr. Braun has over 40 years of experience in the information
technology industry spanning businesses of all sizes and most product categories. He was also CEO
of The Interim CEO Network, a specialized recruiting firm he founded; Neuron Data which he
transformed to become Blaze Software and went public; and Kaleida Labs, the pioneering multimedia
joint venture of Apple and IBM. Mr. Braun spent over 23 years at IBM, including as General Manager
of four divisions: Global Small Business; Global Consumer Division; Fireworks Partners, a venture
capital firm; and the Multimedia. He has a BA and an MBA from the University of Rochester.
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Ken Goldman – Advisor | Ken Goldman is an accomplished executive with extensive financial,
operational and business management experience, and a solid track record of success. He is currently
the CFO of Yahoo. Previously, he served as the the CFO of Fortinet, the Senior Vice President,
Finance and Administration, and CFO of Siebel Systems from August 2000 until the close of Oracle's
acquisition in January 2006. Prior to that, he held CFO positions at Excite@Home, Sybase, Inc.,
Cypress Semiconductor, and VLSI Technology. Additionally, his experience includes board director,
audit committee chairman, and financial advisory roles at several leading public and private technology
companies. Ken earned his Bachelor's degree in Electrical Engineering from Cornell University in 1971
and his Master's in Business Administration from Harvard Business School in 1974. He is a member
and the former president of The Financial Executive Institute, Santa Clara chapter, and was formerly a
member of the Financial Accounting Standards Board Advisory Council (FASAC) from 2000 to 2004.
Joe Cardenas – Advisor | Joe Cardenas was most currently the CIO of Salesforce.com where he was
responsible for all system infrastructure and IT practices. He was also the Executive Vice President
and CIO for Employers Direct Insurance Corporation (EDIC) working with the company from start-up to
over $100 million in 18 months. Before EDIC, he was the CIO for Autodesk and for Fremont General, a
financial services company. Cardenas also spent four years at Oracle Corp. as Vice President of
Information Technology. At Oracle he was responsible for internal application development, data
centre, network operation centres, and network security.
Pierluigi Zappacosta – Advisor | Mr. Zappacosta co-founded Logitech (Nasdaq: LOGI), the leading
maker of mice and other personal interface products that enable people to work, play and
communicate in the digital world. At Logitech, he served over a sixteen-year period first as President
and CEO and later as Vice-Chairman. He was instrumental in taking the company public in Switzerland
in 1988 and on NASDAQ in 1997, raising over $60 million. By the time Mr. Zappacosta left in 1998,
sales of Logitech had risen to over $400 million per year.
Don Haderle – Advisor | Don Haderle is a pioneer of relational database and information
management technology. From 1968 to 2005, he worked in Research & Development at IBM Corp.
where he was responsible for over 50 patents and disclosures. As the technology leader for IBM's
relational database, DB2, which debuted in the 1980s and serves most of the major corporations in the
world today, Haderle is known as the "Father of DB2." In 1989 Haderle was appointed IBM Fellow,
IBM's most prestigious position for technologists.
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CryptoGlobal Corp. (CPTO-T, NR)
CryptoGlobal Inc. is a cryptocurrency mining company. It operates facilities with both ASIC and GPU
mining in order to generate profit from mining various cryptocurrencies, including Bitcoin, Litecoin,
Dash, Ethereum, and Monero. The company has the ability to quickly shift hash power to take
advantage of the most profitable coins. CryptoGlobal uses the cryptocurrencies mined to distribute
profits to investors and build its own coin inventory. Its goal is to become Canada’s largest crypto-
mining company by expanding its mines across multiple provinces.
Highlights
 Canadian Edge: Canada is recognized as one of the best places for cryptocurrency mining owing
to its economic and political stability, inexpensive renewable power, will government, educated
workforce, and sub-Arctic temperatures.
Management & Board
Rob Segal – CEO & Director | Mr. Segal is a North American marketing and communications
executive and entrepreneur. He founded Segal Communications (acquired by Interpublic in 2000) and
went on to lead WorldGaming (acquired by Cineplex in 2015) and Ruby, and has worked with a
number of global brands. Mr. Segal is a co-founder of CryptoGlobal and a board member of OMX
(theOMX.com) and Autism Speaks Canada. He holds a B.A. from the University of Western Ontario.
James Millership – President & Director | Mr. Millership is an early-stage investor and entrepreneur.
His background in operations and finance has led to a successful career focused on start-ups and
corporate turnarounds. He most recently played a leadership role in the re-organization of two tech
platforms: WorldGaming (acquired by Cineplex in 2015) and Ruby. James is a co-founder of
CryptoGlobal. He has an MBA from the Ivey School of Business.
Perry Miele – Director | Mr. Miele is Chairman and partner of Beringer Capital, a fund investing in
emerging marketing services companies. Most recently, he assumed the role of Chairman of Match
Marketing, a North American retail marketing firm with over 7,000 employees and eight offices in the
U.S. and Canada. Mr. Miele is also a director of Andrew Peller Ltd., a TSX-listed company, and is on
the board of Trillium Heath Partners.
Nicole Verkindt – Director | Ms. Verkindt is the founder of OMX (Offset Market Exchange) and the
newest Dragon on CBC’s Next Gen Den. She also sits on the board of the Peter Munk School of
Global Affairs MGA Program. Additionally, Ms. Verkindt is the official technology columnist for
Vanguard Magazine and a regular commentator and panellist on CBC’s The Exchange. She is an
active member of the CSCA (Canadian Space Commerce Association), CADSI (Canadian Aerospace,
Defence, Security Industry Association), Aerospace Industries Association of Canada (AIAC), and
Global Offset and Countertrade Association (GOCA). In 2017, Nicole was named “Canada’s 2017
Woman Entrepreneur of the Year” by StartUp Canada.
Eric Klein – Director | Mr. Klein is Executive Vice President, Corporate Development, at Dundee
Corp.. He has more than 25 years of experience advising on mergers and acquisitions, corporate
finance, business valuations, and corporate strategy. Prior to joining Dundee, Mr. Klein was the
Partner at Klein Farber Financial where his duties included providing value-added financial advisory
services to mid-market companies. Eric holds a Bachelor’s degree in Commerce and Graduate
Diploma in Public Accounting from McGill University. He is a Chartered Accountant (CA) and a
Chartered Business Valuator (CBV). Mr. Klein currently serves on the boards of several public issuers
and is a frequent lecturer and speaker on valuation, corporate finance, and entrepreneurship, and is
involved in various charities.
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DMG Blockchain Solutions (listing pending)
DMG Blockchain Solutions Inc., is a diversified leader in blockchain technology, specializing in Bitcoin
mining, Mining as a Service (MaaS), blockchain platform development, and blockchain analytics. DMG
is one of the first companies to offer Maas, and its access to a large customer base of Bitcoin buyers
throughout Japan has already led to more than $3 million in MaaS sales. While the company focuses
on Bitcoin because of its addressable market size and DMG’s competitive advantage for executing
industrial mining at scale, DMG intends to expand into other leading cryptocurrencies during 2018. The
company was built by an experienced team of seasoned Bitcoin mining experts and blockchain
technology executives.
DMG has two operational mining facilities in Western Canada with thousands of Bitcoin mining rigs
now energized. The company has acquired a third facility, which when completed will have access to
up to 85MW, which, to our knowledge, would be the largest such facility in Canada.
Today, DMG is generating revenue through DMG-owned Bitcoin mining and MaaS; however, the
company will soon add the following revenue streams:
 Expansion of Mining as a Service (MaaS): MaaS allows individuals and groups to purchase any
number of servers from anywhere in the world. DMG charges on average a hosting fee of
$200/server per month, which equates to $110,000/month per MW (550 servers per MW of
mining). DMG recently entered into a lease and hosting agreement with Mogo Financial (MOGO-
T, NR) for the lease of 1,000 Bitcoin mining rigs to be managed and hosted by DMG on behalf of
Mogo.
 Blockchain Platforms: DMG’s blockchain platform development team has recently announced a
partnership with leading licensed producer, Emerald Health Therapeutics (EMH-T), to develop a
blockchain-based supply chain management platform for the medicinal cannabis market. DMG
has also begun collaborating with Element Fleet Management (EFM-T) to develop a blockchain-
based smart contract platform to facilitate life-cycle management and vehicle tracking. Element is
North America’s largest fleet leasing company.
 Forensics: DMG’s cryptocurrency forensics effort is led by Simon Padgett, a Certified Fraud
Examiner and CPA. The company plans to partner with legal and accounting firms to provide
forensic services as they relate to Bitcoin, Ethereum, and other cryptocurrencies.
Highlights
 Scalability: DMG employs a blended model for its mining, specifically company-owned miners,
and MaaS. This model allows DMG to scale rapidly with a substantial portion of the capital costs
and currency risk borne by hosting clients. This business model is highly scalable, and it is DMG’s
goal to provide complete transparency on costs and returns to customers.
 Management Team: There are few companies in this emerging space with a management team
that includes former executives from the world’s second-largest Bitcoin mining and blockchain
company, Bitfury. Prior to co-founding DMG, Sheldon Bennett was responsible for building
Bitfury’s largest mining facility at 58MW, providing plenty of experience and expertise as he leads
the construction of DMG’s 85MW facility. Steven Eliscu, also formerly with Bitfury, leads corporate
development for DMG, and Varun Gupta, formerly legal counsel for Bitfury, provides crypto-
focused legal advice to DMG’s legal team. DMG’s Chairman is head of Bitmasters, a network of
Japanese Bitcoin buyers, numbering in the tens of thousands.
Recent Announcements and Potential Transactions (Letters of Intent Signed)
 January 26, 2018: Emerald Health Therapeutics and DMG Blockchain Solutions establish letters
of intent (LOI) to create cannabis supply chain management system and e-commerce platform.
 January 24, 2018: BlockSeer LOI signed for acquisition (leading blockchain AI, analytics and
forensics company).
 January 23, 2018: DMG and MOGO sign MaaS LOI.
 December 28, 2017: DMG Blockchain Solutions Inc. and Aim Explorations Ltd. announce closing
of C$28,060,800.
 December 14, 2017: DMG launches Bitcoin Mining as a Service (MaaS) direct to Japanese
customers and receives initial order in excess of C$3 million.
 December 4, 2017: Element Fleet Management strategic investment (a global leader in fleet
management).
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Management & Board
Dan Reitzik – CEO & Director | Dan Reitzik is a successful entrepreneur having built companies at
the forefront of societal change. These include Digital Youth Network, a teen-focused wireless
community, which was a joint venture between Rogers Wireless, Canada’s largest mobile phone
network, and Universal Music, the world’s largest record label.
Ryan Cheung – CFO & Director | Ryan Cheung is the founder and managing partner of MCPA
Services Inc., Chartered Professional Accountants, in Vancouver, B.C. Leveraging his experience as a
former auditor for junior-venture and resource companies, Mr. Cheung serves as a director and/or
officer or consultant for public and private companies providing financial reporting, taxation, and
strategic guidance.
Chris Filiatrault – Chairman | Chris Filiatrault is a co-founder and director of DMG. For over 30 years
he has been developing Internet technology and software for the Japanese business market. In 1999,
he founded Universal Objects Japan. In May 2012, Mr. Filiatrault brought Bitcoin to the Japanese
market and since then he has become a respected international authority on Bitcoin, opening the first
Bitcoin ATM in Tokyo in 2014.
Sheldon Bennett – Director | Sheldon Bennett has over 20 years of management experience leading
international companies including PwC, Ernst & Young, Baker & McKenzie, Cisco Systems, and
Fonterra CIS. For the past three years, Sheldon led Bitfury’s Canadian mining operations, where he
was responsible for the set-up and development of industrial Bitcoin mining operations, including
government relations, power optimization with Canadian utilities, and the engineering and
development of mining operations.
Simon Paget – Forensics | Simon Paget is a British ACCA Accountant with a Canadian CPA and an
MBA from Oxford. He is also a CFE (Certified Fraud Examiner) with over 25 years of experience as
Head of Internal Audit, Risk Management and Corporate Governance, with a particular focus on and
specialism in forensic accounting and fraud and corruption investigations, anti-fraud programs and
anti-money laundering. He has worked for the big four accountancy firms, including six years at Ernst
& Young in South Africa and KPMG in the Caribbean Region.
Steven Eliscu – Special Advisor to the Board | Steven Eliscu leads the corporate development
efforts at DMG. He was most recently Head of Finance at Bitfury, a leading blockchain and
cryptocurrency company. Prior to Bitfury, Steve had his own consulting business, during which he was
part of a corporate development team that executed a half-billion-dollar acquisition. Prior to that, Steve
was an equity research analyst at UBS for nine years, during which he covered semiconductor
companies with an aggregate market cap in excess of $200 billion. He has also worked in executive
marketing and business development roles in the semiconductor and network equipment sectors.
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Paradigm Capital Blockchain, Cryptocurrency & Apps Report
Paradigm Capital Blockchain, Cryptocurrency & Apps Report
Paradigm Capital Blockchain, Cryptocurrency & Apps Report
Paradigm Capital Blockchain, Cryptocurrency & Apps Report
Paradigm Capital Blockchain, Cryptocurrency & Apps Report

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Paradigm Capital Blockchain, Cryptocurrency & Apps Report

  • 1. Blockchain, Cryptocurrency & Apps Our disclosure statements are located at the end of this report. INDUSTRY REPORT | January 31, 2018 Investment Opportunities in Blockchain We do not intend to fully define what blockchain is in this report. This is more than well documented with innumerable industry reports. Blockchain will deliver cost savings and prosperity to the masses that the Internet alone failed to reach. We look to several key elements of blockchain to assess its market potential. First, like the Internet, it has the potential to massively disintermediate business processes and to redefine entire industries. More importantly, blockchain will unlock near endless new business opportunities. By definition, these two factors imply blockchain would have at least a similar market impact as the Internet itself. But blockchain has the capability to deliver something the Internet has not — democratization of wealth of the unbanked global masses. Miners Traditional mining companies (gold, silver, copper, etc.) and pulp and paper mills have left a trail of deserted outposts and mining towns with world-class infrastructure (high- speed fiber optics; stable, renewable and inexpensive hydroelectricity). Ironically, these are basic ingredients necessary to build world-class cryptocurrency mining operations. Add to the mix: sub-Arctic temperatures, willing local government, world- class global reputation and now receptive capital markets, will make Canada a global leader in securing the blockchain. Apps While Bitcoin serves as the world’s first blockchain application, it has been Ethereum that has driven the blockchain apps revolution. Ethereum dominates the landscape by a wide margin, accounting for ~90% of the total combined value of the top 500 tokens. We see token values being driven a mix of network utility and ownership in decentralized applications, with much potential for disrupting centralized models and radically shifting the distribution of wealth from incumbents to protocol developers. Almost all industries will be impacted by blockchain, with enterprises poised to more meaningfully explore its use over the coming years. Cryptocurrency During the Internet bubble between 1997 and 2000, a total of 522 dotcom companies were listed, raising more than $43 billion. The Nasdaq peak market cap was $6.6 trillion, with the dotcoms representing one-third of that total. Blockchain companies by comparison currently have a combined market cap of only $6 billion. The headlines, however, centre around cryptocurrencies which have a massive $510-billion combined market cap. Bitcoin follows Metcalfe’s law, however taking this one step further, using a price-to-Metcalfe value suggests Bitcoin has plenty of room for price appreciation. Deeper still, Zipf’s law is a useful tool for trading cryptocurrencies as it demonstrates a logarithmic relationship (Golden Ratio) between the various cryptocurrencies. Conclusion Within this report we have put together a complete list of every Canadian and U.S. blockchain/cryptocurrency publicly traded company. We have also included a portfolio of next-generation private companies who we believe hold great promise of becoming tomorrow’s market darlings. Blockchain and decentralized applications will undoubtedly have a profound impact on all business processes. The stock market is clearly pricing in some of the impact of this new protocol; however, we are in the early innings of a long game. We put forth in this report why investors cannot ignore blockchain’s potential as we believe the opportunity for outsized returns has just begun. Daniel Kim, Analyst | 416.363.6644 | dkim@paradigmcap.com Kevin Krishnaratne, Analyst | 416.361.6054 | kkrishnaratne@paradigmcap.com Daniela Campo, Associate | 416.216.3574 | dcampo@paradigmcap.com All figures in US$, unless otherwise noted. Companies discussed in this report: MINERS CryptoGlobal Inc. (CPTO-V, NR): Operates facilities with ASIC and GPU mining, with the ability to shift hash power to take advantage of the most profitable coins. DMG Blockchain Solutions (listing pending): Specializes in Bitcoin mining, Mining as a Service (MaaS), blockchain platform development, and blockchain analytics. Fortress Blockchain Corp. (private): Operates mining facilities in low-cost and environmentally friendly power regions. Great North Data (private): Specializes in hosting high-density computer hardware requiring substantial access to both power and cooling. HashChain Technology Inc. (KASH-V, NR): First publicly traded Canadian cryptocurrency mining company to support highly scalable and flexible operations across all major cryptocurrencies. Hyperblock Technologies Corp. (private): Operates across four channels: self-mining, hashrate sales, server hosting, and server hardware sales. APPS Auxesis (private): Created the world’s largest private decentralized network which powers the Auxledger blockchain platform. Blockchain Intelligence Group (BIGG-CNQ, NR): Brings security and accountability to cryptocurrency with its trusted data analysis and risk-scoring capabilities. Boardwalktech (private): Developed a positional cell data management tech that forms the core of a patented, multi-party digital ledger blockchain database designed for collaborative applications which rely on digital information exchange. Leonovus Inc. (LTV-V, NR): Offers a blockchain hardened software-defined object storage solution. Polymath (private): Guides customers through the technical and legal process of a successful token launch. TradeWind Markets (private): Creating a technology that will enhance the experience of trading, owning, and using precious metals. Victory Square Technologies Inc. (VST-CNQ, NR): A venture builder that incubates and invests in technology businesses focused on blockchain, AI, VR, and more. TECHNOLOGY
  • 2. Paradigm Capital Inc. | IIROC/TSX member Page | 2 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Table of Contents Blockchain Is Just Math But Its Promise Is Revolutionary ..................................................3 Value Proposition Is Unstoppable................................................................................3 Market Size.........................................................................................................................4 Blockchain Market .......................................................................................................4 Cyclenomics ................................................................................................................4 Bubble Perspective......................................................................................................6 Cryptocurrency....................................................................................................................7 Cryptocurrency Market Size.........................................................................................7 Securely Canadian..............................................................................................................8 Blockchain Applications ....................................................................................................11 Bitcoin: Scalability Looks to Limit the Viability of Blockchain’s First Application ........11 Ethereum: The De Facto Blockchain Applications Platform.......................................12 Tokenomics ...............................................................................................................13 Overview of the World’s (Currently) Most Valuable Tokens.......................................15 Industries Most Likely to Be Impacted by Blockchain Applications ............................16 Enterprise Applications of Blockchain........................................................................17 Investment Opportunities ..................................................................................................19 Company Profiles..............................................................................................................22 APPENDIX I: Initial Coin Offerings....................................................................................43
  • 3. Paradigm Capital Inc. | IIROC/TSX member Page | 3 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Blockchain Is Just Math But Its Promise Is Revolutionary “Almost every company in the world, not just intermediaries, is at risk of being cannibalized from a blockchain version of themselves. We are at the ground floor of a new paradigm in humanity that will change the human experience. The thing that will change is trust.” (source: Richie Etwaru). While it is too early to point to any single application, except Bitcoin, blockchain and decentralized applications (Dapps) will undoubtedly have a profound impact in all business processes. The stock market is clearly pricing in some of the impact of this new protocol; however, we are in the early innings of a long game. We put forth in this report why investors cannot ignore blockchain’s potential as we believe the opportunity for outsized returns has just begun. Value Proposition Is Unstoppable We look to several key elements of blockchain to assess its market potential. First, like the Internet, it has the potential to massively disintermediate business processes and to redefine some entire industries. More importantly, blockchain will unlock near endless new business opportunities. By definition, these two factors imply blockchain would have at least a similar market impact as the Internet itself. But blockchain has the capability to deliver something the Internet has not — democratization of wealth of the unbanked global masses. Blockchain will facilitate the largest asset transfers in human history “moving trillions of dollars from millions of bank accounts to millions of Circle wallets” (source: Blockchain Revolution). Facebook and Google were early to recognize the potential value of tapping into the unbanked market of two-billion people with independent initiatives to provide inexpensive, broadband Internet access. The value, however, accrues to companies who provide this consolidation role and not the users whom they serve. Blockchain will democratize them. By leveling the playing field, lowering the cost of doing business, and providing liquidity to two-billion untapped resources, it will unleash enormous wealth creation and thus global growth. We do not intend to fully define what blockchain is in this report. Blockchain is just math. This math, however, will deliver cost savings and prosperity that the Internet alone failed to do. Below, we summarize blockchain’s value proposition in five key bullets. 1. Trust: Establishes trust between independent parties; therefore, risk disappears for any transaction. Furthermore, the level of distrust between parties is widening. This is particularly true for financial services firms who are the most distrusted organizations on the planet. 2. Democratization of Wealth: Trust breaks down barriers which will bring the unbanked two-billion people into the global economy. 3. Monetize Users: Companies whose value is defined by the number of users it attracts (e.g., Uber, Airbnb, Google, Facebook, Amazon) will be disrupted. Blockchain will marginalize these organizations and deliver more accrued value of these consolidators to its users. 4. Connect Capital to Investors: Opportunities for ordinary people to invest in tomorrow’s Google are often limited to high-profile private equity firms who then work with their favoured investment bank(s) for public offerings, which are typically limited to only their top clients. Initial coin offerings (ICOs) offer anyone the opportunity to invest in these companies, thus leveling the playing field of investable opportunities. 5. Disrupt Information Flow: Transactions posted on the blockchain are public for everyone to see. Furthermore, the precise history of the entire transaction will be saved in perpetuity. (The opposite is also true with private blockchains where only permissioned users have access to the transactional data.) Imagine a corporation on blockchain where its financial health is posted in real time. This will provide a constant stream of information, thus obviating the need, for example, of quarterly filings, therefore leveling the playing field of information distribution and analysis.
  • 4. Paradigm Capital Inc. | IIROC/TSX member Page | 4 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Market Size Given its disruptive promise and industry-wide corporate buy-in, it comes as no surprise that every industry we have researched has suggested explosive growth in the blockchain industry. Our key findings are summarized with a range of 26–80% CAGR of an industry, growing to $6–$45 billion over the next 5–10 years. Blockchain Market  Market size of $412 million in 2017 growing to $7.7 billion by 2022, representing 80% CAGR. Looking further out, blockchain is expected to be a $45-billion industry in the next decade. (source: ResearchandMarkets, Blockchain Market by Provider, Organziation Size, Vertical and Region).  According to a recent report published by IndustryARC, the global blockchain market is expected to grow at a 48% CAGR and reach $6 billion by 2023. North America is expected to dominate the market with blockchain technology applied to payments, digital identities, smart contracts, and identities.  The World Economic Forum predicts 10% of global GDP will be stored on the blockchain by 2027. It also estimates that 80% of banks are working on private blockchain applications and are estimated to be spending $200 million on the development of these applications in 2017. Furthermore, a report from CB Insights highlighted that since June 2014 the 10 largest U.S. banks have participated in nine rounds of blockchain investments totaling $267 million (Figure 1). Cyclenomics We lived through the dotcom bubble and subsequent implosion. The following data demonstrates that investors have elevated the combined market caps of blockchain companies faster than during the dotcom bubble; however, we counter with two observations. First, the velocity of information is much faster and broader today than it was 20 years ago. My first job as a research associate (in 1994) required trips to the Toronto Reference Library to make copies off microfiche! Second, as previously mentioned, blockchain’s impact on commerce, business processes, and wealth distribution should have a more meaningful impact global growth than the Internet, so the early gains on stocks and larger valuations are warranted, in our opinion.
  • 5. Paradigm Capital Inc. | IIROC/TSX member Page | 5 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Figure 1: Blockchain Activity with Largest U.S. Banks (ranked by equity investment, Q1/12–Q2/17) Source: CB Insights, Blockchain Investment Trends in Review
  • 6. Paradigm Capital Inc. | IIROC/TSX member Page | 6 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Bubble Perspective To put the Bitcoin bubble into perspective, first a little retrospective. In the Internet bubble, between 1997 and 2000, a total of 522 dotcom companies were listed, raising more than $43 billion. The Nasdaq Composite peak market cap was $6.6 trillion, with dotcom companies representing one-third of that total at $2.3 trillion. Blockchain companies by comparison currently have a combined market cap of only $6 billion (Figure 2). We have compiled a list of publicly traded blockchain companies (Figure 12 and 13) and have mapped their collective performance to date with base lines set to the beginning of each index’s respective start date (Figure 2). Bitcoin is an obvious outlier. However, the performance of blockchain companies is clearly in the early stages. “Clever as it is, however, bitcoin has shown no signs of replacing the dollar and other fiat currencies. For bitcoin to be a success, it needs to take a large part of various markets—remittances, payments, stored value.” (source: Matthew Gertler, Digital Asset Research) Figure 2a: Dotcom vs. Blockchain Bubble Source: FactSet Figure 2b: Market Cap of Dotcom Companies vs. Blockchain Companies Source: FactSet -1000.0% 0.0% 1000.0% 2000.0% 3000.0% 4000.0% 5000.0% 6000.0% 7000.0% 0 72 144 216 288 360 432 504 576 648 720 792 864 936 1008 1080 1152 1224 1296 1368 1440 1512 1584 1656 1728 1800 1872 1944 2016 2088 2160 2232 2304 2376 2448 %ChangefromStartofBubble Trading Days from Start of Bubble Major Bubbles vs. BitcoinandBlockchain:% change NASDAQ (since '95) Homebuilders(since '00) Bitcoin (since '15) Blockchain (since '17) -200.0% 0.0% 200.0% 400.0% 600.0% 800.0% 1000.0% 1200.0% 0 70 140 210 280 350 420 490 560 630 700 770 840 910 980 1050 1120 1190 1260 1330 1400 1470 1540 1610 1680 1750 1820 1890 1960 2030 2100 2170 2240 2310 2380 2450 %ChangefromStartofBubble Trading Days from Start of Bubble Major Bubbles vs. Blockchain:% change NASDAQ (since '95) Homebuilders(since '00) Blockchain (since '17) $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 02/01/2015 02/03/2015 02/05/2015 02/07/2015 02/09/2015 02/11/2015 02/01/2016 02/03/2016 02/05/2016 02/07/2016 02/09/2016 02/11/2016 02/01/2017 02/03/2017 02/05/2017 02/07/2017 02/09/2017 02/11/2017 02/01/2018 Blockchain Companies Market Cap (Mln) $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 31/12/1998 28/02/1999 30/04/1999 30/06/1999 31/08/1999 31/10/1999 31/12/1999 29/02/2000 30/04/2000 30/06/2000 31/08/2000 31/10/2000 31/12/2000 28/02/2001 30/04/2001 30/06/2001 31/08/2001 31/10/2001 31/12/2001 Top 10 Dotcom Companies Market Cap (Mln)
  • 7. Paradigm Capital Inc. | IIROC/TSX member Page | 7 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Cryptocurrency Having a discussion about blockchain without cryptocurrency makes no sense. Cryptocurrencies are a new asset class that enable decentralized applications. The first and most popular decentralized application was Bitcoin. Bitcoin is a new form of capitalism. Blockchain is a database. Cryptographic security means three things: 1. Creating new fake currency is virtually impossible 2. The record is immutable (i.e., encryption technique is virtually impossible to reverse engineer) 3. Owner/signer is uniquely defined Figure 3: Bitcoin vs. Traditional Money Source: BTCS, Andreessen Horowitz Cryptocurrency Market Size  The current market cap of all cryptocurrencies combined is $510 billion (which is approximately equal to Facebook’s market cap). Compare that to U.S. dollars in circulation at $1.5 trillion; physical money $31 trillion; stock market $67 trillion; all money $120 trillion; and gold $8 billion. Bitcoin at $180 billion is less than 0.2% of total fiat currency.  Market size to next halving (every 210,000 blocks or about four years): (144 blocks/day)x(12.5 BTC/block)x(862 days between January 31/18 and June 10/20)x(BTC price $10,719 as of January 22) = $16.6 billion.  The single best explanation in calculating the value of Bitcoin is Metcalfe’s law which states that the value of the network is proportional to the square of the number of users. This relationship has a 94% correlation. Taking it a step further, calculates Bitcoin’s price-to-Metcalfe value. This is somewhat analogous to a price-to-book ratio. As demonstrated in the chart in Figure 4 (left hand graph), the 2013/2014 Bitcoin bubble was far larger than where it currently stands. Looked at another way, when mapping Bitcoin’s price on a logarithmic scale, it has not yet achieved its peak price (right hand graph).  For the last 100 years, an obscure mathematical principle called Zipf’s law has predicted the size of mega-cities and income distribution. “Zipf’s law is empirical law formulated using mathematical statistics that refers to the fact that many types of data studied in the physical and social sciences can be approximated with a Zipfian distribution, one of a family of related discrete power law probability distributions.” (source: Wikipedia). Linguist George Zipf noticed that a small number of words are used all the time while the vast majority are rarely used. The number-one ranked word was used twice as often as the second-ranked word and three times as often as the third-ranked. He called this the rank versus frequency rule that can be applied to many other social systems, including economic.
  • 8. Paradigm Capital Inc. | IIROC/TSX member Page | 8 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Cryptocurrency market caps appear to adhere to Zipfian’s distribution, (1/n)^(s), with n representing rank, and the exponent s=1.618, this being the Golden Ratio. For example, recent Bitcoin market capitalization was $71.6 billion. The second-ranked coin, Ethereum’s market cap as calculated by this ratio is (1/2)^(1.618) = 0.326 of $71.6 billion = $23.3 billion, versus its actual market cap of $28.0 billion. This is therefore a useful tool for trading cryptocurrency pairs. Figure 4: Price/Metcalfe Value Source: WolframAlpha, U.S. Global Investors, Advisor Perspectives Securely Canadian Traditional mining companies (gold, silver, copper, etc.) and pulp and paper mills have left a trail of deserted outposts and mining towns with world-class infrastructure (high-speed fiber optics; stable, high power, renewable and inexpensive hydroelectricity). Ironically, these are basic ingredients necessary to build world-class cryptocurrency mining operations. Add to the mix: sub-Arctic temperatures, willing local government, world-class global reputation and now receptive capital markets, will make Canada a global leader in securing the blockchain. As we suggested earlier, while blockchain is new technology, its ecosystem is maturing rapidly. Hydro-Quebec is Canada’s largest utility provider and is offering special deals to cryptocurrency miners with rates of between $0.0248 and $0.0394; as such, it has had requests for 6,000MW from cryptocurrency miners. Hydro-Quebec has confirmed that it is in advanced talks with over 30 mining companies and expects that within four years miners will use over 5TWh of the province’s surplus hydro-electricity. The same is true for Manitoba Hydro, which has received over 100 inquiries from cryptocurrency miners.
  • 9. Paradigm Capital Inc. | IIROC/TSX member Page | 9 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Figure 5: Blockchain Ecosystem Source: Josh Nussbaum Bitcoin is a peer-to-peer digital currency and is the sum of three innovations: 1. Hashcash — invented in 1997 to prevent spam by having the sender of the message perform 25 seconds to do computational work (20 bits) versus the receiver who can verify in a fraction of a second. 2. Public key cryptography. 3. Distributed ledger — domain name registers are a good example. Bitcoin meant to be a currency but is more akin to gold.  Deflationary because of limited supply (21-million coins to be released by 2140) compared to gold supply which continually increases over time.  Easy to send, divide, carry, track (e.g., Bill Gates is very interested to see confirmation that his donations from his philanthropy organizations are going to the intended targets). Bitcoin scaling  Each block is 1MB  Average transaction size is 250 bytes  Therefore each block can hold on average 4,194 transactions  At 10 minutes per block, equates to 7 tps (transactions per second)  However, with Bitcoin's rising popularity, its blocksize has increased toward its 1MB maximum  New coins (forks) propose to increase this block size  Those who oppose the increased block size are Bitcoin supporters and those who favoured it forked to Bitcoin Cash which supported an 8MB block size  As scaling and protocols mature, the value of the blockchain's centralized promise could be realized into a multi-trillion-dollar industry. Lightning Network will scale transactions to millions/second on Bitcoin and Litecoin, which will dramatically reduce mining fees.
  • 10. Paradigm Capital Inc. | IIROC/TSX member Page | 10 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Figure 6: Blockchain Companies Source: Black Moon Crypto
  • 11. Paradigm Capital Inc. | IIROC/TSX member Page | 11 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Blockchain Applications Since the creation of Bitcoin, the world’s first application of blockchain, its rising popularity and rapidly expanding valuation have stimulated the creation of variations of itself via forking, including cryptocurrencies such as Litecoin, Bitcoin Cash, and, most recently, Bitcoin Gold; the development of brand new native blockchains including Ethereum and Ripple; and the launch of hundreds of tokens and related apps built on top of a variety of blockchains, Ethereum being the platform of choice for developers by a wide margin. Bitcoin: Scalability Looks to Limit the Viability of Blockchain’s First Application Bitcoin remains the most discussed and highly valued cryptocurrency at a current market cap of ~$180 billion, though there remains much debate on its longer-term viability as a method for everyday transactions. This has largely been owing to scalability issues related to Bitcoin’s underlying protocol, which, as previously noted, limits a transaction’s block size to 1MB and leads to lower transaction speeds that result in uneconomical transaction processing fees for practical purposes. Transaction fees are attached to each proposed Bitcoin transaction as an incentive to be processed by a miner and to be added to the Bitcoin blockchain. In order to have a given user’s transaction processed on the limited space of a 1MB block, it needs to outbid other users, leading to fee inflation given supply and demand dynamics. At the time of writing this report, the average Bitcoin transaction fee sits at ~US$10, well below the recent peak of +US$55 in late December, but still orders of magnitude above the ~$0.01–$0.10 seen at the cryptocurrency’s inception through to 2016, when this metric started to materially rise. Besides rapidly increasing transaction fees, early Bitcoin applications, such as Bitpay, suffered from slow payment times owing to increasing congestion on the network. Such scalability limitations have led developers to upgrade Bitcoin’s protocol to address these issues, a process known as forking. As discussed earlier, Bitcoin Cash, which was a hard fork created on August 1, 2017, served to solve the capacity constraints of Bitcoin by increasing the block size within this new protocol to 8MB. While this technically drives higher transaction speeds, the catch is that it also requires more storage space given that every node maintains a copy of this much larger ledger. An argument can be made that such an implementation raises storage costs and could therefore lead to a network controlled by an increasing proportion of well-funded and larger entities, negating Bitcoin’s original decentralization promise. Bitcoin Gold, the latest Bitcoin hard fork which went live on October 24, 2017, aims to solve the decentralization problem by ensuring ASICs can’t be used the way they currently are leveraged by professional Bitcoin miners with dedicated and expensive hardware. The thought is that Bitcoin Gold can give the power of processing back to a more distributed network of everyday PC users as opposed to the concentrated Bitcoin mining pools and entities of today. Other mechanisms to address the scalability constraints of blockchain continue to be explored, such as the Lightning Network, which leverages a network of payment channels through which parties can make transactions off the blockchain (i.e., not added to the ledger), thereby saving work and time. It remains to be seen which decentralized payment protocol might prevail, and the reality is that the market and its consumer and merchant participants will ultimately dictate the most efficient method for blockchain’s first recognized and obvious application. Some retailers do accept Bitcoin and other cryptocurrencies as a form of payment, but many do not. Last year, Internet Retailer noted that Bitcoin was accepted at just three of the top 500 online merchants that it tracks, down from five in 2016. During its Q3/17 call, Shopify’s CEO acknowledged the e-commerce infrastructure provider’s lead in enabling its merchants to accept Bitcoin (as early as 2012), though he also noted his view of it being an “exceptionally volatile store of value rather than a transactional system”. And just last week, online payments processor Stripe formally announced it is ending its support of Bitcoin on April 23, noting how block size limitations have led the cryptocurrency to evolve into more of an asset than a means for exchange (with transaction fees on par with bank wires). Interestingly, the firm remains bullish on cryptocurrencies overall, looking forward to initiatives such as Lightning, Ethereum-based tokens, and even the potential for Bitcoin forks such as Bitcoin Cash or Litecoin.
  • 12. Paradigm Capital Inc. | IIROC/TSX member Page | 12 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Ethereum: The De Facto Blockchain Applications Platform Bitcoin’s open-source nature has made it relatively easy for developers to copy its software and modify its protocols in order to create new forks, such as Bitcoin Cash and Bitcoin Gold. Scaling issues aside, the protocol’s major limitations with regards to use cases other than payments relate to its lack of flexibility to program more complex rules and logic governing the movement of tokens between two parties without the use of an intermediary. Early attempts to build on top of Bitcoin’s protocols to allow for this functionality gave birth to the likes of Counterparty and Omni. However, it was an entirely new blockchain, known as Ethereum, with its own scripting language and an ability to create “smart contracts” (the logic governing the rules of token transfer) that has driven today’s blockchain applications revolution. Fueling the growth in Ethereum-based apps over the past two years was the release of ERC-20, with nearly all Ethereum tokens being compliant with this standard. What are tokens in the Ethereum blockchain? Tokens represent digital assets within Ethereum- based decentralized applications (Dapps) that can range from almost anything such as in-game items, loyalty points, media rights, and access to server space, among many other use cases. Each token is defined by a set of code that dictates how it will behave on the network when a given user or a smart contract sends a message to the token’s contract, along with an associated database keeping track of Ether payments. Tokens are application specific, in contrast to Ether, which is the cryptocurrency underlying Ethereum and is what an application user uses to “pay” for a transaction. For example, when a token is sent across the network (reflecting the transfer of an in-game weapon from one player to another), the “miner” who confirms this transaction onto the Ethereum blockchain is paid in Ether as incentive. We discuss in detail later, but tokens should generally only reflect the utility derived from its use within an application, nothing more and nothing less. Why are ERC-20 compliant tokens important to Ethereum applications development? Ethereum Request for Comments proposal ID 20, or ERC-20 for short, was created in November 2015 and only formally standardized in September 2017. It’s an important standard that has led to the explosion of Ethereum-based tokens and related applications that govern how new tokens are launched (ICOs) and how they behave across the blockchain. By creating a set of rules for Ethereum-based tokens to adhere to, apps developers were able to understand how their tokens would behave within smart contracts, inside of wallets, and on exchanges. ERC-20 is underscored by a set of six functions, such as how to transfer a token and how to access a token’s data (token balance, name, etc.). In our view, the creation of ERC-20 has allowed the Ethereum-based applications ecosystem to flourish. Ethereum dominates the token landscape by a wide margin. Per Coinmarketcap.com data, out of the top 500 tokens ranked by market cap, Ethereum accounts for ~80% of the share, followed by Waves in a distant second at 5% and Bitshares in third at ~3% (Omni and Counterparty combined account for ~3% of the total). Even more striking, based on market cap, Ethereum reflects +90% of the total combined valuation of the top 500 tokens (+$60 billion) with the top five all being Ethereum-based (~$20-billion combined market cap). Figure 7: Ethereum Dominates the Token Landscape Source: www.coinmarketcap.com $7.6 $3.6 $3.3 $2.7 $2.5 $2.2 $1.6 $1.1 $0.9 $0.8 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 EOS TRON ICON VeChain Populous Tether OmiseGO Binance Coin Status Walton MarketValue($Bln) Token Top 10 Tokens by Market Value ($Bln) Populous Tether Built on Ethereum Built on Omni 81.6% 4.8% 3.4% 10.2% Share of Tokens by BlockchainType (Top 500) Ethereum Waves BitShares All others
  • 13. Paradigm Capital Inc. | IIROC/TSX member Page | 13 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Tokenomics What’s a token worth? While it’s easy to understand why there’s been a material jump in the number of Ethereum-based applications being launched, given the ease of development and the establishment of related rules governing smart contracts, it’s less obvious how investors should properly assign value to a given token and its corresponding application. In theory, the market value of a token asset class should approximate the value attributable to the utility of the underlying application the tokens allow access to. Conversely, one might consider the value of any decentralized application which replaces a two-sided, centralized middleman marketplace as converging toward the sum of the minimum feasible costs to run such a network. In other words, an application’s token should really just be worth the bottom-line economic benefit to the user. Clearly, there’s much more at play, with tokens of today reflecting part real-world application usage value, part speculation…in many cases, maybe mainly speculation. In October, Ethereum co-founder Vitalik Buterin emphatically stressed his bearish views on the future of most of today’s tokens, suggesting that at least 90% are likely to fail. Application tokens do not represent equity in a company, and its holder has no legal claim on a company’s assets — they merely have the right to utilize an application (in most cases, an as of yet to be developed application). We do not make an attempt on how to separate a token’s true signal from the noise, the latter moving ever louder and fueled by an increasing participation of less-than-sophisticated and “fear of missing out” investors in unregulated token offerings. What we do outline, however, are our views on the financial and societal implications of the promise of blockchain applications. Token values are driven by network ownership effects, not network effects. It’s well understood (Metcalfe’s Law) that the value or utility of a network is proportional to the number of customers using that network. Traditionally, it’s a challenge to “bootstrap” and start a new network, as there’s little to no incentive for early adopters to use that network, meaning that the benefits to consumers are only realized at scale. Furthermore, while the consumers of the network may “socially” benefit from the application, it is the centralized owners who benefit “financially”. Decentralized network models using a token structure can accelerate the initiation of a network by incentivizing early participation. Furthermore, with no centralized owners, all users who “buy in” to the token early on, including developers, consumers, and speculators, share in outsized financial utility. This powerful combination of network utility + ownership drives players with a vested interest in seeing their own wealth increase rapidly develop applications and act as marketers and evangelists for the token, thereby creating a feedback loop that fuels further token appreciation. Bitcoin users not only use the application, but also have ownership in the network, and benefit by being advocates for the BTC token. Bitcoin sees its value rise and fall in line with the supply and demand of its application, as well as owing to the perception of its future usage. Early application adopters enjoy the highest financial utility (greatest token appreciation) and kickstart the network into wider recognition. Traditional applications have “customers”, decentralized applications have “users”, and the distinction between participants in the latter such network is much more blurred. Figure 8: Ownership in Network Accelerates Application Adoption Source: Andreesen Horowitz (Decrypting Crypto, From Bitcoin and Blockchain to ICOs) & Nick Tomaino (The Token Economy) UtilitytoUser Number of users Traditional Network Effect Overall utility= Application utility Bootstrapping Problem UtilitytoUser Number of users Token Network Effect Applicationutility Financial utility Overall utility= financial applicationutility “It is an established fact that ninety percent of start- ups fail. And it should also be an established fact that 90 percent of these ERC20s on CoinMarketCap are going to go to zero” – Vitalik Buterin
  • 14. Paradigm Capital Inc. | IIROC/TSX member Page | 14 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Only decentralized applications with real-world utility and sound token structures should survive. Market forces should ultimately dictate which Dapps make the most sense at disrupting a given industry’s centrally operated incumbents. Many applications being proposed today are likely destined to remain as proposals, particularly if they do not provide a superior benefit to customers than already existing solutions (or in the case of new wealth creation in the underdeveloped economy, if they are too costly to deploy and gain significant traction). Besides utility, another consideration when assessing the future viability of a Dapp is its initial token offering structure, which provides the incentive for participants to develop and champion the network. Developers look to strike a fine balance between the mix of tokens to be initially released to the public and those to be held internally, in addition to considering dynamics related to future token supply and controlled inflation. While it’s typically standard practice for developers to maintain a pre-allocation of new tokens to fund future project development once their cryptocurrencies are listed on an exchange and can be sold for fiat (or another cryptocurrency) on the back of some price appreciation, too much ownership might be viewed as being overly greedy and limit a token’s wider adoption. Decentralized apps and economies can radically shift the distribution of wealth. In the world of blockchain, value accrues to the developers of the underlying protocols versus at the application layer, as is the case in traditional centralized network structures. Additionally, participants in the networks are also able to enjoy financial benefits as opposed to one central authority. One example being seriously explored today is that of distributed file storage, led by new protocols including Filecoin, SIA, and Storj. Instead of relying on a storage provider such as Amazon’s S3, users are able to “rent out” excess storage space on their existing PCs and be rewarded in the form of tokens, paid by other users looking to “store” data across this decentralized network. If the service is seen as being valuable, the value of the corresponding tokens will rise. Storage contributors and the developer of the protocol will benefit, assuming they’ve retained some tokens for themselves. Applications at the user experience level are able to leverage these protocols (in exchange for tokens) and create their own unique service offerings, but the majority of the value will accrue to the protocol layer. This is the opposite of current centralized models where all the value is captured at the application level (protocols are essentially free). Decentralized applications may also materially change the dynamics related to the “sharing economy” and marketplace-based industries that rely on centralized middleman structures. Ride-sharing networks (such as Lyft) have been cited as examples where blockchain applications might pose significant disruption. In the case of Lyft, the company takes a portion of ride fare for connecting drivers to passengers, with the company’s valuation rising as the number of participants increases (drivers may see some financial benefit as the network grows, and riders will gain benefits in the form of reduced wait times, but a disproportionate share of incremental wealth ultimately accrues to Lyft). In the decentralized model, a limited number of tokens are released, set at some initial value (1 ride = 1 token = $1), and are used by riders to pay for a ride. As demand for the service increases, demand outpaces supply and the price of a token appreciates in value (1 token = $2). Drivers continue to charge 1 token for a ride, but this token can now be exchanged for $2. No centralized authority is involved in the process at all, and all of the value creation flows to participants in the network. Security tokens — distinct from utility tokens in representation and legality. While regulations on utility tokens remain a hotly debated topic, security tokens that represent shares in a company or are backed by an entity’s assets should be regulated and follow KYC/AML standards. Polymath is a company looking to capitalize on the securities token boom, which it sees reaching a market cap of $10 trillion by 2027, up from $10 million in 2017. The company guides customers through the technical and legal process of a successful token launch, all the way from creation to fundraising to compliance issuance. With regards to utility tokens, recent statements by SEC Chairman Jay Clayton reflect the regulators view that most offerings indeed likely look closer to securities tokens. That said, he did leave the door open for true utility tokens to remain unregulated; for example, those which represent participation in an already existing platform or offering, noting that they could be an efficient way to fund the ongoing development of such applications. “By and large, the structures of ICOs that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor provisions of our federal securities laws.” –Jay Clayton, SEC Chairman.
  • 15. Paradigm Capital Inc. | IIROC/TSX member Page | 15 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Overview of the World’s (Currently) Most Valuable Tokens At the time of writing this report, the top five tokens by market cap are all based on Ethereum and largely relate to platforms that allow developers to quickly create a variety of Dapps. 1. EOS (market cap $7.6 billion): EOS is a software platform that allows developers to easily build decentralized applications through an intuitive operating system-like architecture. The platform’s founders suggest that its design has the potential to scale to millions of transactions per second that can push down transaction fees to fractions of a penny, therefore being much more scalable than Bitcoin and even Ether itself. 2. TRON (market cap $3.6 billion): Tron touts itself as a decentralized content entertainment protocol that allows users to openly publish, store, and own data. Tron has partnered with several application partners, including Obike (Singapore bike-sharing company), Peiwo (audio content sharing), UPLive (live streaming platform), and Gifto (virtual gift exchange platform), giving it a base of four-million active users which its website notes makes it the protocol with the most Dapp users globally. The protocol enables content providers to engage with consumers in a manner that drastically reduces the fees associated with entertainment platforms (Google Play, Apple Store). 3. ICON (market cap $3.3 billion): ICON and its associated token ICX envision the creation of an ecosystem that connects organizations such as government, financial institutions, and hospitals to interact without third-party intermediaries and is essentially another example of a Dapp platform. Some example use cases listed on ICON’s website include the use of Blockchain ID (smart contracts to be used for verification; for example, opening a bank account in a matter of seconds, receiving student discounts without showing a physical ID card) and Payment & Exchange (within bank, insurance, university settings, for example). 4. VeChain (market cap $2.7 billion): VeChain has rapidly emerged as one of the most highly valued tokens. Its website notes that it is the world’s leading blockchain platform for products and information, and cites some tangible examples of its technology being deployed in practical world examples. Those include an API gateway service related to the supply chain industry, third-party services being used by PricewaterhouseCoopers, and the collection and monitoring of agricultural data used by the Liaoning Academy. 5. Populous (market cap $2.5 billion): Populous is a classic example of a blockchain application in the financial services industry serving a function that has historically involved a third party to connect trading partners. Populous is a peer-to-peer invoice finance platform that enables business owners to sell outstanding sales invoices to invoice buyers at a discounted rate in order to unlock tied up cash. Once invoices have been paid, the buyer receives their cash back, with all of these transactions recorded on a blockchain. We also highlight some other notable tokens and related Dapps that are looking to disrupt traditional industries with centralized structures. Filecoin holds the record for the most successful ICO to date, raising $275 million in funding. As we’ve previously highlighted, Filecoin is looking to take share of the storage industry by allowing anyone to rent out their spare disk space to be plugged into a decentralized network, where a user’s data is spread across multiple nodes and only accessible and readable using a private key. Gnosis and Augur are examples of predictions and forecasting networks that reward users for correctly predicting future events and are based on the concept of the collective knowledge of a crowd. The Augur website notes that prediction markets such as itself have been proven to be more accurate at forecasting versus individual experts, opinion polling, and surveys. Basic Attention Tokens (BAT) and the corresponding Brave browser, built by the creator of JavaScript and the co-founder of Mozilla and Firefox, are looking to upend the advertising industry. The platform hopes to make for a much more efficient advertising model, where ad dollars can be directly linked to a consumer. In the model, a token will be paid by an advertiser for a consumer’s attention (for example, an ad blocker inherent in the browser will be shut off upon the transfer of the token to the user who agrees to view the ad). Tokens can also be paid by website visitors to access content, where articles can be purchased on a pay-per-view basis instead of a monthly subscription.
  • 16. Paradigm Capital Inc. | IIROC/TSX member Page | 16 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Industries Most Likely to Be Impacted by Blockchain Applications The token examples on the previous page provide some clues as to where some of the most logical areas and industries that blockchain technologies may be well suited for deployment. In short, the greatest business opportunities for blockchain applications will be in industries characterized by a relatively high level of intermediaries. One industry stands out well above the rest, Financial Services, which a McKinsey & Company study (January 2017) noted as representing +50% of all blockchain opportunities and includes sub- sectors in Insurance, Payments, Register of Ownership, Identity, and Securities. With regards to Financial Services, the consulting firm identified seven use cases that collectively could generate a ~$80–$110-billion impact. Figure 9: Blockchain Use Cases Skew Toward Financial Services Source: McKinsey & Company: Blockchain Technology in the Insurance Sector, January 2017 Supply Chain & Logistics is another area being actively explored as a logical use case for blockchain, where transparency related to the tracking of goods, from supplier, to manufacturer, to retailer, to end consumer is becoming increasingly important. Supply chain tracking onto the blockchain can help reduce or even eliminate the counterfeiting of goods, while the logistics, freight, and shipping networks characterized by a deep and complex web of intermediaries and related document exchange can be simplified and achieve material cost savings. IBM and Maersk have announced a collaborative effort to digitize the supply chain process related to ocean shipping container tracking. The firms note that +90% of goods traded globally are carried by ocean logistics, with its solution potentially saving billions of industry dollars. Identity management on the blockchain could drive efficiencies in many use cases, whether that be inherently trusted identity related to voting (reducing fraudulent votes or recounts and providing an immutable and verifiable trail of a voters history), to often cited examples such as property records and land transfer, birth and marriage certificates documentation, and the creation and execution of wills and inheritances (which could be governed by smart contracts that automatically send distributions to beneficiaries, saving court and legal costs). Healthcare processes related to the exchange of patient information and electronic medical records can be streamlined using the blockchain, eliminating administrative costs and giving patients authority on who has access to their data. For example, a patient’s medical history can be secured on the blockchain and that data might only be able to be accessed when the patient gives a medical authority permission (patient holds the private keys to their data), enabling much higher levels of privacy and security. 17% 5% 11% 9% 6% 22% 2% 6% 9% 13% 0% 5% 10% 15% 20% 25% Other Arts& Entertainment Public Sector Consumer Healthcare Insurance Securities Identity Register of ownership Payments FinancialServices(50%) Distributionof BlockchainUsage (%) $15.5 $55.0 $4.0 $3.5 $5.5 $6.0 $8.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 Tradefinance Cross-border B2B payments Cross-border P2P payments Repos OTC Derivatives KYC/AML management Identityfraud Impact Value Generatedby Blockchain($Bln)
  • 17. Paradigm Capital Inc. | IIROC/TSX member Page | 17 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Enterprise Applications of Blockchain Enterprises are poised to account for an increasing share of blockchain usage and in our view are likely to leverage more private versus public architectures. Gartner estimates that nine out of 10 enterprises will deploy a blockchain project and that the business value-add of related apps will reach $3.1T by 2030, with 50% of this attributable to uses between companies and intracompany. Figure 10: Business Value-Add of Blockchain to Reach $3.1 Trillion by 2030 Source: Gartner Webinars – Blockchain: How Real Is The Market Public Blockchains: Anyone is free to read, write, send transactions, and engage in the consensus process to add blocks to the chain. Proof of Work or Proof of Stake verification mechanisms ensure that a given mode’s influence in determining consensus is proportional to the level of effort or resources owned. Such blockchains are 100% decentralized, such as the Bitcoin blockchain. Advantages of a Public Blockchain 1. Openness: Given its open-source nature, it is much more likely to be widely adopted by many users, organizations, and entities to rapidly gain traction. 2. Anonymity: Users are able to perform transactions anonymously. 3. Trust of Developers: Application users are inherently ensured that the creators of the blockchain have no control or authority over the blockchain once it is in operation. Private Blockchains: Such blockchains differ drastically from their public counterparts in that permission to write new blocks to the chain might be centralized to one entity, while read permissions could be either public for all to read or restricted to a select set of users. Since such blockchains are typically designed by a single company (or consortium of companies), it is not necessary to be publicly readable by all to see. Consensus mechanisms may or may not be necessary in such blockchains. 1. Scalability: Given that transactions are typically only verified by a few nodes or users and not by an unlimited number of users (thousands and thousands), as is the case in a public blockchain, transaction and validation times are much faster and less costly. 2. Known Validators: With known entities all tending to work toward a common shared goal, the likelihood of collusion between parties or an attack on the system is low. 3. Flexibility & Control: As private blockchains are run/owned by a company or consortium, rules can be changed, transactions can be reverted, and technical issues/faults can be quickly resolved. It’s up to the creators of the blockchain to do with it as they please. $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2025 2026 2027 2028 2029 2030 Business value-add of Blockchain ($Bln) Auto-Adjudication Between Companies Digital Cash Intracompany Public Record 10% 28% 22% 22% 18% 2030
  • 18. Paradigm Capital Inc. | IIROC/TSX member Page | 18 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Requirements for enterprises to operate transactions at scale and retain control over data access should drive private blockchain adoption in the Enterprise. Notwithstanding efforts being made to increase the scalability issues of existing public blockchains, such as Lightning, the reality is that private blockchains appear to be much better suited for the level of transactions processed by most Enterprises. For example, global telecom companies can process 100’s of thousands of payments transactions per second, while major credit card companies are known to be able to handle 10’s of thousands of transactions per second. Furthermore, private blockchains, which many consider to be closer to “permissioned private databases”, may actually require user identity and accountability depending on the application in question. An example could be a supply chain implementation where a retailer requires a full time-stamped history of a product’s journey from supplier to manufacturer to end customer. We highlight in the figure below (reference: Distributed Lab) the various blockchain architectures and their corresponding level of anonymity and trust. Figure 11: Public vs. Private Blockchain Analysis Source: Pavel Kravchenko (Distributed Lab – Ok, I need a blockchain, but which one?), Paradigm Capital Inc. Level of trust Level of anonymity Proof of StakeProof of Work Federated Byzantime Agreement Practical Byzantime Fault Tolerance, Multisignature Permissionless Public Permissionless Public Permissioned Public Permissioned Private “When I and others talk to companies about building their applications on a blockchain, two primary issues always come up: scalability and privacy.” – Vitalik Buterin.
  • 19. Paradigm Capital Inc. | IIROC/TSX member Page | 19 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Investment Opportunities The following tables summarize all publicly traded Canadian and U.S. blockchain/cryptocurrency companies and investment portfolios. Our first observation, the rule of 10x has been broken. Canada is very well represented by this list with more publicly listed blockchain companies than in the U.S. and with a combined market capitalization of ~C$2.5 billion compared to their American counterparts at just US$800 million. We conclude the substance of this report with profiles on 13 next-generation companies, who we believe hold great promise of disrupting the market. Peripherally, we often get asked by investors if there are investment opportunities within the ecosystem of companies who provide the hardware for cryptocurrency mining. Below we summarize some anecdotal numbers and a cautionary note.  ASIC Manufacturer | Bitcoin mining is powering the growth engine for the world’s biggest chip maker, Taiwan Semiconductor Manufacturing Company (TSM-N, NR). Analyst’s estimate cypto- mining generated $350-$400 million in TSMC’s third alone (4–5% of revenue and up 46% year- over-year) and could account for as much as $3.7 billion (10% of revenue) in 2018, thus becoming its fastest-growing segment. TSMC manufacturers ASICs for Bitmain and Bitfury as well as GPUs for Nvidia and AMD.  GPU Manufacturers | Analysts estimate $150 million or 6.7% of Nvidia’s (NVDA-Q, NR) Q2 revenue is derived from cypto-mining. Advanced Micro Devices (AMD-N, NR) has been much more tight-lipped. Recent commentary from the semiconductor analyst at Morgan Stanley estimates “total graphic sales for Ethereum mining in 2017 will be $800 million or so, and will decline by 50% in 2018”. This will be a consequence of shift to a technology called “the Casper hard fork” which will render current Ethereum mining hardware obsolete.  ASIC Testing | Cadence Design Systems (CDNS-Q, NR)  Memory Modules | Samsung Electronics (005930.KS, NR)  Chip Packaging | Advanced Semiconductor Engineering (ASX-N, NR)
  • 20. Paradigm Capital Inc. | IIROC/TSX member Page | 20 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Figure 12: Publicly Listed Canadian Blockchain Companies Source: FactSet In millions except per share data Shares Market Avg. Volume Money Company Name Ticker Price Out Cap High Low 6-month Raised (M) LTM Miners 360 Blockchain Inc CODE-CA $0.17 153.2 $25 $0.39 $0.04 - $2.5 Aim Explorations Ltd AXN-CA $0.18 7.9 $1 - - - $40.8 Blockchain Power Trust BPWR.UT-CA $0.39 223.1 $87 $0.90 $0.33 247 $46.6 CryptoGlobal Corp. CPTO-CA $1.13 120.1 $136 $1.74 $0.49 - $11.0 HashChain Technology, Inc. KASH-CA $2.12 45.9 $97 $4.00 $1.50 477 $29.7 HIVE Blockchain Technologies Ltd HIVE-CA $2.95 261.3 $771 $6.75 $0.74 2,564 $185.4 Global Blockchain Technologies Corp BLOC-CA $1.78 29.4 $52 $1.86 $1.45 1,718 $55.3 Average $167 Median $1,170 Apps BIG Blockchain Intelligence Group Inc. BIGG-CA $1.31 73.8 $97 $2.77 $0.30 275 $19.6 Block One Capital Inc BLOK-CA $0.93 62.5 $58 $1.85 $0.10 424 $10.5 BTL Group Ltd. BTL-CA $8.80 21.3 $188 $18.90 $2.79 202 $18.4 Glance Technologies, Inc. GET-CA $1.45 131.8 $191 $3.84 $0.16 2,311 $19.4 LeoNovus Inc. LTV-CA $0.26 246.0 $63 $0.70 $0.05 2,595 $16.6 eXeBlock Technology Corp. XBLK-CA $0.54 61.4 $33 $1.79 $0.48 234 - Imagination Park Entertainment Inc IP-CA $0.94 63.0 $59 $1.08 $0.22 386 $0.1 Identillect Technologies Corp. ID-CA $0.23 97.2 $22 $0.61 $0.07 1,409 $2.7 Internet of Things Inc. ITT-CA $0.13 167.5 $21 $0.15 $0.05 651 $0.6 Kontrol Energy Corp. KNR-CA $1.44 25.3 $36 $1.58 $0.56 13 $3.2 Blox Labs Inc BLOX-CA $0.50 24.1 $12 $2.25 $0.02 9 $0.7 Syncordia Technologies and Healthcare Solutions Corp SYN-CA $0.15 19.7 $3 $0.30 $0.05 31 - Stompy Bot Corp. BOT-CA $0.15 111.3 $16 $0.25 $0.01 1,035 $2.1 Global Remote Technologies Ltd RGT-CA $0.61 42.1 $26 $0.61 $0.06 590 $5.0 Average $59 Total $825 Exchange NetCents Technology, Inc. Class A NC-CA $2.55 41.4 $106 $6.75 $0.26 659 $1.7 Average $106 Total $106 ATM/POS DataMetrex AI Ltd. DM-CA $0.26 199.8 $51 $0.47 $0.05 2,308 $8.8 Fintech Select Ltd FTEC-CA $0.23 64.4 $14 $0.64 $0.17 1,610 $3.5 Average $33 Total $65 Fin Tech Fineqia International, Inc. FNQ-CA $0.04 760.0 $22 $0.08 $0.01 913 $0.9 Katipult Technology Corp. FUND-CA $0.52 24.9 $10 $0.88 $0.25 79 - Midpoint Holdings Ltd. MPT-CA $0.21 103.8 $18 $0.38 $0.05 269 $1.7 Posera Limited PAY-CA $0.24 118.5 $23 $0.34 $0.14 399 $4.7 Vogogo Inc VGO-CA $0.89 132.5 $88 $0.94 $0.75 306 $6.0 Average $32 Total $161 Investment Portfolio Victory Square Technologies Inc VST-CA $2.97 41.4 $123 $4.17 $0.35 178 $3.9 Average $123 Total $123 Total Combined Market Caps of Canadian Blockchain Companies $2,450 6-month
  • 21. Paradigm Capital Inc. | IIROC/TSX member Page | 21 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Figure 13: Publicly Listed U.S. Blockchain Companies Source: FactSet In millions except per share data Shares Market Avg. Volume Money Company Name Ticker Price Out Cap High Low 6-month Raised (M) LTM Miners Bitcoin Services, Inc. BTSC-US $0.14 462.835 $64 $0.64 $0.05 19,227 - Integrated Ventures Inc INTV-US $1.36 7.742 $11 $6.74 $0.04 328 $0.33 MGT Capital Investments, Inc. MGTI-US $3.07 48.524 $149 $8.14 $1.05 2,126 $23.30 Riot Blockchain Inc RIOT-US $15.23 11.622 $177 $46.20 $3.45 3,278 $56.50 WRIT Media Group Inc. WRIT-US $0.17 57.411 $9 $0.56 $0.10 235 $0.08 Rich Cigars Inc RCGR-US $0.63 3.263 $2 $1.05 $0.02 184 $0.56 Average $69 Total $412 Apps BTCS, Inc. BTCS-US $0.11 368.219 $40 $0.58 $0.07 19,167 $0.12 Black Cactus Global Inc BLGI-US $0.42 157.900 $67 $0.78 $0.07 1,294 $0.64 Average $54 Median $107 Exchange American Security Resources Corporation ARSC-US $0.14 0.000 $0 $3.02 $0.08 26 - Digatrade Financial Corp. DIGAF-US $0.25 45.161 $11 $1.06 $0.06 1,015 $0.60 First Bitcoin Capital Corp. BITCF-US $0.75 302.080 $225 $3.15 $0.00 919 - Average $79 Median $236 ATM/POS Connexus Corporation CNXS-US $0.00 31.179 $0 $0.00 $0.00 100,228 - MarilynJean Interactive, Inc. MJMI-US $0.00 173.345 $0 $0.01 $0.00 6 - Average $0 Median $0 Total Combined Market Caps of U.S. Blockchain Companies $755 6-month
  • 22. Paradigm Capital Inc. | IIROC/TSX member Page | 22 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Company Profiles Auxesis Group (private) Auxesis partners with organizations to build, deploy, and operate blockchain networks. The company has created the world’s largest private decentralized network which powers the Auxledger blockchain platform. Auxledger is a blockchain infrastructure that has been deployed successfully across a number of enterprises focusing on security, performance, and scalability. The current version of Auxledger has over 53-million users in India with customers across different verticals including: government, Internet of Things (IoT), cross-border remittances, capital markets, insurance, and supply chain. This blockchain powers 15 applications. In addition to Auxledger, the company has a financial product suite:  Auxy: A cryptocurrency and crypto-token wallet.  AuxPay: Payment solutions for merchants to enable the acceptance of cryptocurrencies as a form of payment.  AuxCE: A high-frequency cryptocurrency exchange. Allows users to trade Bitcoin, Ethereum, fiat currency, gold, and energy. Auxesis also operates an advisory, research and training lab called Blockchain Lab. The lab was established in 2017 to promote and grow the Blockchain ecosystem in India. The lab has four zones: defence, IoT, FinTech, and RegTech. The Blockchain Lab focuses on product development, organizing conferences and seminars, and training students and professionals on implementing blockchain technology. Highlights  Recognition: Auxesis has been recognized among the Top 100 Most Influential Blockchain Companies, ranking 42 in the world and the only one from India. It has also partnered with industry leaders to grow its network, including HP (server side and applications deploymnet), Ernst & Young (consulting & advisory), and IIT (research & development).  Large Customer Base: Auxledger is already powering enterprise applications and is being used by over 53-million customers. Management & Board Kumar Gaurav – Chairman | Kumar is an entrepreneur who has been responsible for building some of today’s most exciting fintech businesses. He is among the Top 100 Most Influential People in the blockchain industry. He was granted Extraordinary status (O1) by the U.S. government for blockchain expertise. Kumar is the Chairman of Auxesis, India’s first enterprise blockchain company. He also founded Cashaa and co-founded Darwinsurance. He is the Vice President, Innovation, of Responsible Gold, the Advisor for Satoshi Studio, and is on the Editorial Board of CoinTelegraph. Kumar holds a Bachelor’s degree in Computer Engineering and a Master’s in Management from Politechnico di Milano. Akash Gaurav – CEO | Akash is a blockchain entrepreneur. He founded Auxesis Group during his undergraduate studies at IIT Bombay. He also founded Blockchain Lab and Auxledger Foundation. He is on the Advisory Board of Cashaa and is the Technology Advisor for VEDA Networks. He is also a mentor to the Entrepreneurship Club of MISB Bocconi. Before founding Auxesis he was the manager of The Entrepreneurship Cell, IIT Bombay. He also founded Sporturlook and MyCarGenie. Janina Lowisz – Senior Vice President, Marketing | Janina is well known in the industry as Blockchain Girl. She has worked as a blockchain analyst for major companies including Amex and ManPower, and Co-Founded Bitnation. She is a Top 100 Global Blockchain influencer, a blockchain speaker, and a model. Sudhir Chaudhary – Senior Vice President, Technology | Sudhir is an experienced techie from HSBC, Emirates National Bank of Dubai, and Infosys. He is a contributor of Digital Transformation for HSBC as Integration Specialist for re-innovating HSBC’s e-channels platform to elevate Commercial/Wholesale banking business for HSBC. He was an Integration Specialist for Emirates NBD and built e-channel platforms to automate Bulk Payments for Emirates Group, Fly Dubai, and
  • 23. Paradigm Capital Inc. | IIROC/TSX member Page | 23 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Dubai Smart Government. He is an Enterprise Technical expert for IBM’s integration product suite particularly in Managed File Transfer domain and Sterling B2B integrator. Dr. Bernard Lietaer – Strategic Advisor | Bernard Lietaer is a civil engineer, economist, author, and professor. He studies monetary systems and promotes the idea that communities can benefit from creating their own local or complementary currency, which circulate parallel with national currencies. He has been active in the realm of money systems for close to 40 years in a wide variety of functions. With the publication of his post-graduate thesis at MIT in 1971 and the Nixon Shock of that same year which eradicated the Bretton Woods system by unhinging the U.S. dollar value from its gold standard and inaugurated the new era of universal floating exchanges, the fledgling management consultant suddenly found himself to be at the centre of the financial world's attention. The techniques that he had developed for those marginal Latin American currencies were overnight the only systematic research that could be used to deal with all of the major currencies of the world. A major U.S. bank negotiated exclusive rights to his approach which required that he begin another career. While at the Central Bank in Belgium (National Bank of Belgium) he implemented the convergence mechanism (ECU) to the single European currency system. During that period, he also served as President of Belgium’s Electronic Payment System. His consultant experience in monetary aspects on four continents ranges from multinational corporations to developing countries. Dr. John Clippinger – Strategic Advisor | Throughout his career John has always been interested in complex, self-organizing systems and new approaches to organizational and institutional design to address fundamental civic, economic, and ecological issues. John has held senior positions in government and large enterprises, and founded four software companies. He has been engaged with non-profit organizations and institutes, Santa Fe Institute, Aspen Institute, World Economic Forum, Kauffman Foundation, and has started new programs and institutes at Harvard and Harvard Law School, Brandeis Florence Heller School, MIT Media Lab, and, more recently, co-founded ID3 with Sandy Pentland of MIT Media Lab. John is especially interested in the disruptive opportunities enabled through decentralized technologies such as cryptocurrencies, smart contracts, and ledgers. He recently organized a series of retreats and workshops to develop principles for new forms of emergent self-organization and autonomous communities. He also recently edited a book, From Bitcoin to Burning Man and Beyond — The Quest for Identity and Autonomy in Digital Society. Richard Kastelein – Crypto Advisor | Founder of industry publication Blockchain News, partner at ICO services collective CryptoAsset Design Group, director of education company Blockchain Partners (Oracle Partner) and ICO event organizer — Richard is an award-winning publisher & entrepreneur. He sits on the advisory boards of half a dozen blockchain start-ups (ICOs) and has written over 1,400 articles on blockchain technology at Blockchain News, and has also published on ICOs in Harvard Business Review & Venturebeat. Kastelein has spoken (keynotes and panels) on blockchain in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London, Manchester, Minsk, Nairobi, Nanchang, San Mateo, Shanghai, Tel Aviv, Venice, and Zurich. He's a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean and Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian, and Virgin.com — his work and ideas have been translated into Dutch, Greek, Polish, German, and French. Alex Norta – Blockchain Advisor | Alex Norta is currently a research member at the Faculty of Informatics/TTU and was earlier a researcher at the Oulu University Secure-Programming Group (OUSPG ) after having been a post-doctoral researcher at the University of Helsinki, Finland. He received his MSc (2001) from the Johannes Kepler University of Linz, Austria, and his PhD (2007) from the Eindhoven University of Technology, The Netherlands. His PhD thesis was partly financed by the IST project CrossWork, in which he focused on developing the eSourcing concept for dynamic inter- organizational business process collaboration. His research interests include business-process collaboration, workflow management, e-business transactions, service-oriented computing, software architectures and software engineering, ontologies, mashups, and social web. At the IEEE EDOC'12- conference, Alex won the best-paper award for his full research paper with the title #Inter-enterprise business transaction management in open service ecosystems#. Dinesh Prasad – Strategic Advisor | Head of Devices, Qualcomm India & South Asia, with the prime responsibility of driving chipset/device sales through global OEMs, Operators, Local Distributors, and Brands. Accomplished and knowledgeable in sales, business development, and program management professional with 22+ years of global experience in the wireless telecom and semiconductor industries. Results oriented and decisive leader with a proven track record in ecosystem creation, new business development, increasing sales and market share, achieving growth objectives and program
  • 24. Paradigm Capital Inc. | IIROC/TSX member Page | 24 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 management through astute business acumen and sound technical knowledge, identifying and architecting creative solutions while gaining credibility and building influential relationships at the highest levels with industry partners and key stakeholders. Anil Earla – Fintech Advisor | Head of Information & Data Analytics, Visa. Enterprise technology executive heading digital transformation for world’s largest payment network. Leading various technology teams to maximize the data assets of Visa Inc. Reduced the incident response time of Visa network from 6–10 days to 2–3 milliseconds. Intrapreneur passionate about bringing Silicon Valley innovative mindset to larger organizations. Built lean start-ups resulting in creating new stream of revenue.
  • 25. Paradigm Capital Inc. | IIROC/TSX member Page | 25 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Blockchain Intelligence Group (BIGG-CNQ, NR) Blockchain Intelligence Group (BIG) strives to bring security and accountability to cryptocurrency with its trusted data analysis and risk-scoring capabilities for blockchain/Bitcoin and other cryptocurrencies. The company was founded in 2010 and is located in Vancouver, B.C. BIG’s proprietary platform uncovers criminal transactions in the blockchain network and provides peace of mind to people transacting on the blockchain. The company has created the first easy-to-understand “risk score” for cryptocurrencies, as well as an Anti-Money Laundering (AML) and Office of Foreign Asset Control (OFAC) detection API. The platform will target the financial services industry, regulators, and the law enforcement community to help meet the demands of a blockchain-based future, providing trust and real-time risk evaluation. All transactions on the blockchain are permanently stored for all to see on an online public ledger. BIG uses advanced search and analytics to gather evidence, track movement of funds between wallets, and ultimately connect criminals with their transactions. Highlights  BitRank: A proprietary risk scoring system that ranks the safety of the wallet that a customer is transacting with. Wallet holders can check their safety rank on bitrankverified.com. Wallets are ranked on a 0 to 100 scale, 0 being the most dangerous score and 100 being the safest score. Clients are able to use their API to perform large-volume look-ups.  Qlue: Qlue stands for Qualitive Law Enforcement Unified Edge. This platform was created to aid in the fight against financial crimes involving Bitcoin and other cryptocurrencies. Qlue uses advanced search algorithms and other techniques to detect suspicious activity in Bitcoin and other cryptocurrency transactions, use of “Dark Web” tools, and other methods used by criminals to cover illegal activity.  Blockbits: Provides search and data analytics for companies needing to verify critical business information. Management & Board Shone Anstey – Executive Chairman & Co-Founder | Shone brings 20 years of experience building complex technologies and software within the IT industry. Shone was co-founder of a scalable web crawler and search engine, and is a Certified Bitcoin Professional. Formerly, Shone acted as Director of Technology for a distributed Bitcoin mining pool. Lance Morginn – CEO & Co-Founder | With over 20 years of industry experience in technology- based start-ups, Lance brings a vast and proven track record for growing and developing multi-million- dollar businesses from the ground up. His background includes roles as Founder/CEO/Director in a handful of publicly traded and privately held companies. Anthony Zelen – Corporate Development & Co-Founder | Anthony has over 17 years of experience in finance, investor relations, and corporate development. He is the owner of the full-service corporate communications firm Senergy Communications Inc., providing investor relations, public relations, and marketing solutions. Kim Evans, CPA, CGA – CFO | Kim, founder of Golden Reign, is a Certified General Accountant with extensive experience in both the junior mining sector and the corporate securities industry. Ms. Evans has 17 years' experience as a director and/or officer, working with a number of public companies listed on the TSX Venture Exchange. Tom Kennedy – Director | Mr. Kennedy, B.Comm., J.D., is a graduate of the University of British Columbia. After an initial career at the Federal Department of Justice, he has primarily focused as a legal, financial, and business consultant to publicly traded companies. Mr. Kennedy is currently a member of the Law Society of British Columbia, the Canadian Bar Association, the British Columbia Bar Association, and an Associate member of the American Bar Association. Mr. Kennedy is an officer and/or director of several publicly traded companies. He is an independent contractor and expects to devote 5% of his time to the affairs of the resulting issuer.
  • 26. Paradigm Capital Inc. | IIROC/TSX member Page | 26 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Robert Birmingham – Director | Mr. Birmingham has over 10 years’ experience in the resources and corporate sector. He is the current President & CEO of New Destiny Mining Inc., a TSX Venture-listed company involved in mining exploration. He was previously the President & Chief Executive Officer of Revolver Resources Inc. (now GGX Resources), a TSX Venture-listed company involved in mining exploration. In addition, Mr. Birmingham has been a director of multiple public companies on the TSX Venture Exchange and the Canadian Securities Exchange. Mr. Birmingham holds a business degree from Capilano University. He is an independent contractor and expects to devote 5% of his time to the affairs of the resulting issuer.
  • 27. Paradigm Capital Inc. | IIROC/TSX member Page | 27 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Boardwalktech (private) Founded in 2005, Boardwalktech was the first company to develop a positional, cell data management technology that it now delivers as the core component of a patented, multi-party digital ledger blockchain database designed for collaborative, multi-party, mission-critical applications which rely on a digital information exchange internally and externally. Its platform is ideal for managing the exchange of information between parties in a distributed manner in any application and in any industry via a blockchain digital ledger that facilitates more efficient trade, establishes trust, enhances transparency, and enables better control for businesses and their customers The company has a blue-chip customer base, including a number of Fortune 500 companies like Apple, Coke, Teva, and PwC. In addition, the company works with IBM, Oracle, Microsoft, Accenture, and McKinsey as both consulting and technology partners. The return on investment (ROI) for customers is a reduction in manual processes, a reduction in inefficiencies and risk, better data accuracy, and faster decision cycles. Highlights  Boardwalk Application Engine (BAE): allows customers to build enterprise quality applications that scale, secure, and integrate existing spreadsheet processes or create entirely new applications based using BAE’s digital ledger data management technology. BAE’s tools can be used to build and maintain applications with multiple internal or external using Excel or any other UI.  Boardwalk Enterprise Blockchain: provides a dynamic, smart contract enabled information exchange that combines BAE’s temporal data management and enterprise integration environment with Blockchain’s trust and validation capabilities. The result is a private permissioned enterprise blockchain that supports multi-party transactions and consensus models. Management & Board Andrew Duncan – CEO | Andy has over 20 years of experience focused on building companies and taking products and services to market. Prior to Boardwalktech, he served as President and CEO of Advanced Data Exchange. ADX provides an on-demand supply chain transaction processing network used today by over 200 of the Fortune 1000 companies. Andy also served as President and CEO of The EC Company, which was focused on payment transaction technologies for the small and mid- market. During his work in the technology field, he has led companies through several stages of growth and secured significant investments from American Express, CMGI @Ventures, Invamed Associates, Intel Capital, Wasserstein Addelson Ventures, GKM Ventures, Sandler Captial, and The Thomson Companies. Prior to entering the technology field, Andy was President and CEO of Duncan Insurance, Inc., a nationwide insurance brokerage representing over 80 insurance companies specializing in commercial insurance. Ravi Krishan – CTO | Ravi, and the other two founders, Sarang Kulkarni and Dharmesh Dadbhawala, have over 50 years combined of engineering product data management experience working for Parametric Technology, Sherpa, and Netfish. Prior to Boardwalktech, Ravi was a founder of the Hunington Group which provided advanced database architecture and design consulting. Ravi was responsible for the vision and drive beyond a 10,000-user, $100-million collaborative product data management solution, using existing database technology, at Parametric Technology Corporation. Mike Braun – Advisor & Director | Mike Braun was most recently the President and CEO of Intacct Corp., a leader in cloud-based accounting and financial management software for small- and medium- sized businesses using the software-as-a-service (SaaS) model. Mr. Braun led a period of rapid investment and growth and was one of the Top 100 Most Influential People in the Accounting Profession. He retired in late 2009 and was named CEO Emeritus of Intacct. After retirement, he worked part-time as Dean's Executive Professor of Information Systems at the Leavey School of Business at Santa Clara University. Mr. Braun has over 40 years of experience in the information technology industry spanning businesses of all sizes and most product categories. He was also CEO of The Interim CEO Network, a specialized recruiting firm he founded; Neuron Data which he transformed to become Blaze Software and went public; and Kaleida Labs, the pioneering multimedia joint venture of Apple and IBM. Mr. Braun spent over 23 years at IBM, including as General Manager of four divisions: Global Small Business; Global Consumer Division; Fireworks Partners, a venture capital firm; and the Multimedia. He has a BA and an MBA from the University of Rochester.
  • 28. Paradigm Capital Inc. | IIROC/TSX member Page | 28 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Ken Goldman – Advisor | Ken Goldman is an accomplished executive with extensive financial, operational and business management experience, and a solid track record of success. He is currently the CFO of Yahoo. Previously, he served as the the CFO of Fortinet, the Senior Vice President, Finance and Administration, and CFO of Siebel Systems from August 2000 until the close of Oracle's acquisition in January 2006. Prior to that, he held CFO positions at Excite@Home, Sybase, Inc., Cypress Semiconductor, and VLSI Technology. Additionally, his experience includes board director, audit committee chairman, and financial advisory roles at several leading public and private technology companies. Ken earned his Bachelor's degree in Electrical Engineering from Cornell University in 1971 and his Master's in Business Administration from Harvard Business School in 1974. He is a member and the former president of The Financial Executive Institute, Santa Clara chapter, and was formerly a member of the Financial Accounting Standards Board Advisory Council (FASAC) from 2000 to 2004. Joe Cardenas – Advisor | Joe Cardenas was most currently the CIO of Salesforce.com where he was responsible for all system infrastructure and IT practices. He was also the Executive Vice President and CIO for Employers Direct Insurance Corporation (EDIC) working with the company from start-up to over $100 million in 18 months. Before EDIC, he was the CIO for Autodesk and for Fremont General, a financial services company. Cardenas also spent four years at Oracle Corp. as Vice President of Information Technology. At Oracle he was responsible for internal application development, data centre, network operation centres, and network security. Pierluigi Zappacosta – Advisor | Mr. Zappacosta co-founded Logitech (Nasdaq: LOGI), the leading maker of mice and other personal interface products that enable people to work, play and communicate in the digital world. At Logitech, he served over a sixteen-year period first as President and CEO and later as Vice-Chairman. He was instrumental in taking the company public in Switzerland in 1988 and on NASDAQ in 1997, raising over $60 million. By the time Mr. Zappacosta left in 1998, sales of Logitech had risen to over $400 million per year. Don Haderle – Advisor | Don Haderle is a pioneer of relational database and information management technology. From 1968 to 2005, he worked in Research & Development at IBM Corp. where he was responsible for over 50 patents and disclosures. As the technology leader for IBM's relational database, DB2, which debuted in the 1980s and serves most of the major corporations in the world today, Haderle is known as the "Father of DB2." In 1989 Haderle was appointed IBM Fellow, IBM's most prestigious position for technologists.
  • 29. Paradigm Capital Inc. | IIROC/TSX member Page | 29 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 CryptoGlobal Corp. (CPTO-T, NR) CryptoGlobal Inc. is a cryptocurrency mining company. It operates facilities with both ASIC and GPU mining in order to generate profit from mining various cryptocurrencies, including Bitcoin, Litecoin, Dash, Ethereum, and Monero. The company has the ability to quickly shift hash power to take advantage of the most profitable coins. CryptoGlobal uses the cryptocurrencies mined to distribute profits to investors and build its own coin inventory. Its goal is to become Canada’s largest crypto- mining company by expanding its mines across multiple provinces. Highlights  Canadian Edge: Canada is recognized as one of the best places for cryptocurrency mining owing to its economic and political stability, inexpensive renewable power, will government, educated workforce, and sub-Arctic temperatures. Management & Board Rob Segal – CEO & Director | Mr. Segal is a North American marketing and communications executive and entrepreneur. He founded Segal Communications (acquired by Interpublic in 2000) and went on to lead WorldGaming (acquired by Cineplex in 2015) and Ruby, and has worked with a number of global brands. Mr. Segal is a co-founder of CryptoGlobal and a board member of OMX (theOMX.com) and Autism Speaks Canada. He holds a B.A. from the University of Western Ontario. James Millership – President & Director | Mr. Millership is an early-stage investor and entrepreneur. His background in operations and finance has led to a successful career focused on start-ups and corporate turnarounds. He most recently played a leadership role in the re-organization of two tech platforms: WorldGaming (acquired by Cineplex in 2015) and Ruby. James is a co-founder of CryptoGlobal. He has an MBA from the Ivey School of Business. Perry Miele – Director | Mr. Miele is Chairman and partner of Beringer Capital, a fund investing in emerging marketing services companies. Most recently, he assumed the role of Chairman of Match Marketing, a North American retail marketing firm with over 7,000 employees and eight offices in the U.S. and Canada. Mr. Miele is also a director of Andrew Peller Ltd., a TSX-listed company, and is on the board of Trillium Heath Partners. Nicole Verkindt – Director | Ms. Verkindt is the founder of OMX (Offset Market Exchange) and the newest Dragon on CBC’s Next Gen Den. She also sits on the board of the Peter Munk School of Global Affairs MGA Program. Additionally, Ms. Verkindt is the official technology columnist for Vanguard Magazine and a regular commentator and panellist on CBC’s The Exchange. She is an active member of the CSCA (Canadian Space Commerce Association), CADSI (Canadian Aerospace, Defence, Security Industry Association), Aerospace Industries Association of Canada (AIAC), and Global Offset and Countertrade Association (GOCA). In 2017, Nicole was named “Canada’s 2017 Woman Entrepreneur of the Year” by StartUp Canada. Eric Klein – Director | Mr. Klein is Executive Vice President, Corporate Development, at Dundee Corp.. He has more than 25 years of experience advising on mergers and acquisitions, corporate finance, business valuations, and corporate strategy. Prior to joining Dundee, Mr. Klein was the Partner at Klein Farber Financial where his duties included providing value-added financial advisory services to mid-market companies. Eric holds a Bachelor’s degree in Commerce and Graduate Diploma in Public Accounting from McGill University. He is a Chartered Accountant (CA) and a Chartered Business Valuator (CBV). Mr. Klein currently serves on the boards of several public issuers and is a frequent lecturer and speaker on valuation, corporate finance, and entrepreneurship, and is involved in various charities.
  • 30. Paradigm Capital Inc. | IIROC/TSX member Page | 30 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 DMG Blockchain Solutions (listing pending) DMG Blockchain Solutions Inc., is a diversified leader in blockchain technology, specializing in Bitcoin mining, Mining as a Service (MaaS), blockchain platform development, and blockchain analytics. DMG is one of the first companies to offer Maas, and its access to a large customer base of Bitcoin buyers throughout Japan has already led to more than $3 million in MaaS sales. While the company focuses on Bitcoin because of its addressable market size and DMG’s competitive advantage for executing industrial mining at scale, DMG intends to expand into other leading cryptocurrencies during 2018. The company was built by an experienced team of seasoned Bitcoin mining experts and blockchain technology executives. DMG has two operational mining facilities in Western Canada with thousands of Bitcoin mining rigs now energized. The company has acquired a third facility, which when completed will have access to up to 85MW, which, to our knowledge, would be the largest such facility in Canada. Today, DMG is generating revenue through DMG-owned Bitcoin mining and MaaS; however, the company will soon add the following revenue streams:  Expansion of Mining as a Service (MaaS): MaaS allows individuals and groups to purchase any number of servers from anywhere in the world. DMG charges on average a hosting fee of $200/server per month, which equates to $110,000/month per MW (550 servers per MW of mining). DMG recently entered into a lease and hosting agreement with Mogo Financial (MOGO- T, NR) for the lease of 1,000 Bitcoin mining rigs to be managed and hosted by DMG on behalf of Mogo.  Blockchain Platforms: DMG’s blockchain platform development team has recently announced a partnership with leading licensed producer, Emerald Health Therapeutics (EMH-T), to develop a blockchain-based supply chain management platform for the medicinal cannabis market. DMG has also begun collaborating with Element Fleet Management (EFM-T) to develop a blockchain- based smart contract platform to facilitate life-cycle management and vehicle tracking. Element is North America’s largest fleet leasing company.  Forensics: DMG’s cryptocurrency forensics effort is led by Simon Padgett, a Certified Fraud Examiner and CPA. The company plans to partner with legal and accounting firms to provide forensic services as they relate to Bitcoin, Ethereum, and other cryptocurrencies. Highlights  Scalability: DMG employs a blended model for its mining, specifically company-owned miners, and MaaS. This model allows DMG to scale rapidly with a substantial portion of the capital costs and currency risk borne by hosting clients. This business model is highly scalable, and it is DMG’s goal to provide complete transparency on costs and returns to customers.  Management Team: There are few companies in this emerging space with a management team that includes former executives from the world’s second-largest Bitcoin mining and blockchain company, Bitfury. Prior to co-founding DMG, Sheldon Bennett was responsible for building Bitfury’s largest mining facility at 58MW, providing plenty of experience and expertise as he leads the construction of DMG’s 85MW facility. Steven Eliscu, also formerly with Bitfury, leads corporate development for DMG, and Varun Gupta, formerly legal counsel for Bitfury, provides crypto- focused legal advice to DMG’s legal team. DMG’s Chairman is head of Bitmasters, a network of Japanese Bitcoin buyers, numbering in the tens of thousands. Recent Announcements and Potential Transactions (Letters of Intent Signed)  January 26, 2018: Emerald Health Therapeutics and DMG Blockchain Solutions establish letters of intent (LOI) to create cannabis supply chain management system and e-commerce platform.  January 24, 2018: BlockSeer LOI signed for acquisition (leading blockchain AI, analytics and forensics company).  January 23, 2018: DMG and MOGO sign MaaS LOI.  December 28, 2017: DMG Blockchain Solutions Inc. and Aim Explorations Ltd. announce closing of C$28,060,800.  December 14, 2017: DMG launches Bitcoin Mining as a Service (MaaS) direct to Japanese customers and receives initial order in excess of C$3 million.  December 4, 2017: Element Fleet Management strategic investment (a global leader in fleet management).
  • 31. Paradigm Capital Inc. | IIROC/TSX member Page | 31 Blockchain, Cryptocurrency & Apps INDUSTRY REPORT | January 31, 2018 Management & Board Dan Reitzik – CEO & Director | Dan Reitzik is a successful entrepreneur having built companies at the forefront of societal change. These include Digital Youth Network, a teen-focused wireless community, which was a joint venture between Rogers Wireless, Canada’s largest mobile phone network, and Universal Music, the world’s largest record label. Ryan Cheung – CFO & Director | Ryan Cheung is the founder and managing partner of MCPA Services Inc., Chartered Professional Accountants, in Vancouver, B.C. Leveraging his experience as a former auditor for junior-venture and resource companies, Mr. Cheung serves as a director and/or officer or consultant for public and private companies providing financial reporting, taxation, and strategic guidance. Chris Filiatrault – Chairman | Chris Filiatrault is a co-founder and director of DMG. For over 30 years he has been developing Internet technology and software for the Japanese business market. In 1999, he founded Universal Objects Japan. In May 2012, Mr. Filiatrault brought Bitcoin to the Japanese market and since then he has become a respected international authority on Bitcoin, opening the first Bitcoin ATM in Tokyo in 2014. Sheldon Bennett – Director | Sheldon Bennett has over 20 years of management experience leading international companies including PwC, Ernst & Young, Baker & McKenzie, Cisco Systems, and Fonterra CIS. For the past three years, Sheldon led Bitfury’s Canadian mining operations, where he was responsible for the set-up and development of industrial Bitcoin mining operations, including government relations, power optimization with Canadian utilities, and the engineering and development of mining operations. Simon Paget – Forensics | Simon Paget is a British ACCA Accountant with a Canadian CPA and an MBA from Oxford. He is also a CFE (Certified Fraud Examiner) with over 25 years of experience as Head of Internal Audit, Risk Management and Corporate Governance, with a particular focus on and specialism in forensic accounting and fraud and corruption investigations, anti-fraud programs and anti-money laundering. He has worked for the big four accountancy firms, including six years at Ernst & Young in South Africa and KPMG in the Caribbean Region. Steven Eliscu – Special Advisor to the Board | Steven Eliscu leads the corporate development efforts at DMG. He was most recently Head of Finance at Bitfury, a leading blockchain and cryptocurrency company. Prior to Bitfury, Steve had his own consulting business, during which he was part of a corporate development team that executed a half-billion-dollar acquisition. Prior to that, Steve was an equity research analyst at UBS for nine years, during which he covered semiconductor companies with an aggregate market cap in excess of $200 billion. He has also worked in executive marketing and business development roles in the semiconductor and network equipment sectors.