State of Blockchain Q4 2016

STATE OF
BLOCKCHAIN
2016
YEAR IN REVIEW

CoinDesk – News, Data, Events and Research
for Blockchain Technology
State of Blockchain – 2016 Year in Review | 2
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reports
Notes: Expanded upon in Section 7: CoinDesk

About the ‘State of Blockchain’
For three years, CoinDesk has analyzed the ‘State of Blockchain’ in our quarterly
industry overview reports
We cover:
- Technical trends within the top open-source developer communities
- Major product updates from well-funded startups
- Digital currency market data, utilization rates, public sentiment and network
performance metrics
- Enterprise adoption rates and new proofs-of-concept
- Venture capital, corporate, and public investment trends
- Public policy updates from around the globe

State of Blockchain 2017 – Report Overview
1. RESEARCH FRAMEWORK
2. EXECUTIVE SUMMARY
3. PUBLIC BLOCKCHAINS
A. Bitcoin
B. Ethereum
C. ICOs (Spotlight Study)
4. ENTERPRISE BLOCKCHAINS
A. Solutions Providers
5. INVESTMENT
6. REGULATION & GOVERNMENT
Data Source: Image

1
RESEARCH FRAMEWORK

Defining The Blockchain Technology Market
A public blockchain is an internet protocol
that manages the distribution of provably
unique data that:
- Acts as a unit of account for transactions
on that ledger
- Incentivizes early adopters and developers
to use, support and verify the ledger
without the need for a trusted intermediary
An enterprise blockchain is a distributed
ledger that provides:
- Consensus via trusted intermediaries,
making digital currencies unnecessary
- Solutions to clients who wish to use
cryptographic databases managed and
shared by trusted parties
Many companies employ hybrid models where
they:
- Build on public blockchain infrastructure
- Provide technology for permissioned
networks

The Internet-Intranet Comparison
We believe both public and enterprise blockchains have useful applications,
much like the Internet and corporate intranets
ENTERPRISE BLOCKCHAINSPUBLIC BLOCKCHAINS
public (inter-)
The internet
private (intra-)
Intranets & IT

‘Public’ (Open) vs ‘Enterprise’ (Permissioned) Blockchains: Generalized
Features Comparison
Data Sources: Chain, Chris Skinner’s blog
ACCESS Open read and write Permissioned write and/or read
SPEED Slower Faster
SECURITY Open network Approved participants
IDENTITY Anonymous or pseudonymous Known identities
ASSET Native assets Any asset
PUBLIC ENTERPRISE

Blockchain Ecosystem Breakdown
When producing market maps and following investment trends,
we look for business shifts between these models:
Notes: Numerous protocols are also maintained by open source communities, non-profits like the Ethereum
Foundation, and consortiums like R3 and Hyperledger
The company layer crosses protocols and is heavily comprised of bitcoin related businesses,
while the application layer is dominated by ethereum applications
PROTOCOL
APPLICATION
COMPANY
PUBLIC ENTERPRISE

Blockchain Project Funding Models
ICOs rather than VC has driven the development of most public blockchain applications, as well as
numerous protocols and companies, a line which is becoming increasingly blurred
Entrepreneurs have begun considering blockchain token sales (‘ICOs’) as fundraising
alternatives to traditional venture capital and angel investment
PROTOCOL
APPLICATION
COMPANY
HYBRID VCICO
Notes: Numerous protocols are also maintained by companies like the Zerocoin Electric Coin Company, open source communities, non-profits like the
Ethereum Foundation, and consortiums like Hyperledger

2
EXECUTIVE SUMMARY

Q4 2016 Summary
Public blockchain startups adapt:
- Exchanges, miners and wallets continue shift to
‘multi-blockchain’ model
Bitcoin and blockchain in the media:
- Blockchain becomes media darling abroad, US
more focused on bitcoin
Blockchain consortiums thrive:
- R3 expands presence in Asia as Hyperledger
passes 100 members
Bitcoin gets volatile:
- Bitcoin price volatility reaches yearly peak as price
climbs to $983
Central banks taking note:
- Across the globe, central banks are trying to get
up to speed on blockchain tech
Investment plateaus:
- VC investment reaches $75m for the quarter, 2016
investment up only 1% YoY
Data Source: CoinDesk

Trends: Public Blockchains
Data Sources: CoinDesk, Image
Notes: Expanded upon in Section 2: Public Blockchains
- As a percentage of total public blockchain market cap, bitcoin’s share
grows as price reaches yearly peak
- Ether’s price falls to nine-month low as creators agree to technical hard
forks in order to fend off attackers
- Price performance of bitcoin, ethereum and monero highest out of top
cryptocurrenices, augur cracks the top ten
- ‘Big 3’ Chinese exchange volumes skyrocket in Q4, PBoC investigations
in January 2017 highlight questionable figures
- ICOs continue to generate interest, number of deals increase but
investment falls to $21m in Q4 from $29m in Q3

Blockchain technology and token sales may benefit both entrepreneurs and investors,
however the processes are still very young, opaque, and uncertain
OUR GOALS
- Identify perception around ICOs from both a fundraising
and investing perspective
- Determine factors driving and repelling investment
- Gauge viewpoints on structuring ICOs and the relation
to raising funds traditionally
- Determine the balance of retail and institutional demand
for ICOs
OUR STUDY
- We surveyed 400+ blockchain entrepreneurs and
investors to illustrate the state of ICOs
ICO STARTUP
ENTREPRENEURS
INVESTOR
RETAIL
INSTITUTIONAL
Spotlight Study: ICO Sentiment
Data Source: CoinDesk’s Q1 2017 ICO Survey
Notes: Expanded upon in Section 3C: ICOs (Spotlight Study)

Spotlight Study: Key Takeaways
76% 57%
29% 26%
91% 45%
Of entrepreneurs reported they have not
raised money with an ICO but had
seriously considered or attempted it
Of ICO investors cited investment and
speculation as their primary motivations
for investing
Believe that institutional capital will
start to control ICOs over retail
investors
Believe the majority of ICOs could have
raised traditional VC or angel
investment
Of investors who have participated in an
ICO would invest again
Of those yet to participate in an ICO felt
limited by the lack of information and
third party research
Notes: Expanded upon in Section 3C: ICOs (Spotlight Study)
+ insights into ICO caps, multiple rounds, portfolio
allocations and mixing in traditional investment

Trends: Enterprise Blockchains
- Hyperledger experiences 30% QoQ member growth in Q4, passes 100-
member milestone, discusses business blockchain frameworks (Iroha, Fabric,
Sawtooth Lake) at Construct 2017
- R3 gains five members, loses Goldman Sachs and Santander, completes KYC
trial on Corda with 10 banks
- Chain introduces confidential assets as business blockchains push to privacy,
launches open-source development platform
- Ripple runs PoC saving banks up to 60% on cross-border payments, DAH files
patent to trade wide range of assets using DLT
- Enterprise blockchains from incumbents like IBM, Accenture, JP Morgan,
Deloitte, MSFT and PwC are on the horizon
Notes: Expanded upon in Section 4: Enterprise Blockchains

Trends: Investment
QoQ Growth: -36% 57% -52%
- No clear trends emerging: public, hybrid and enterprise
blockchain startups see inconsistent investment
- Q4 YoY investment nearly tripled (188%), but YTD
stagnant
- PayCommerce sees quarter’s largest investment ($22m
Series B)
Notes: Expanded upon in Section 5: Investment

Trends: Regulation & Government
- US: Lawmakers continue to outline blockchain regulatory policy; Coinbase,
Coin Center, USV, ConsenSys publish framework for token sales; Coinbase
subpoenaed by the IRS
- Europe: Lawmakers express interest in blockchain uses in government
services while researching and welcoming startups
- Asia: South Korea forms blockchain consortium while trying to address
policy and regulatory blind spots towards bitcoin; Japan contemplates
dropping bitcoin sales tax while exploring DLT
- Middle East and Africa: Dubai continues to be a focal point for digital
currency in the Middle East; Uganda steps up as a potential blockchain leader
on the African continent
Notes: Expanded upon in Section 6: Regulation & Government

3
PUBLIC BLOCKCHAINS

Strengths and Weaknesses of Public Blockchains
Data Sources: Ethereum, MultiChain
Notes: Ledgers and protocol rules may be changed via forks, although these changes can introduce risks
We believe public blockchains will have the greatest impact on developing economies (reduced need for
trust) and the connected device, IoT economy (immutability, auditability)
STRENGTHS WEAKNESSES
Irreversible transactions
Slow transaction clearing
(e.g., 3 – 7 transactions / second)
More vulnerable to attacks
(e.g., 51%, spam, DDoS)
Reduced privacy
Energy consumption
Immutable ledger
Relatively fast settlement time
(e.g., 10 minutes or less)
Reduced security risks associated with
centralization-trusted third party
Easy to audit
Reduced need for trust

The State of Blockchain Focuses Primarily on Public Blockchains;
Enterprise Data is More Opaque
The majority of development work to date has been done using open-source tools and public
blockchains like bitcoin and ethereum
ENTERPRISE BLOCKCHAINSPUBLIC BLOCKCHAINS
public (inter-)
The Internet
private (intra-)
Intranets & IT

Bitcoin Represents Half of Media Mentions,
Blockchain Close Behind While Ethereum Interest Dwindles
Blockchain media mentions pull ahead in UK and Asia,
bitcoin interest still strong in US
Data Sources: Sina, WSJ, NYT, FT

Five Currencies Show 100%+ Growth,
Augur Cracks Top Ten
Bitcoin, ethereum, monero, dash and maidsafecoin achieve
highest price performances year to date
Data Source: Coinmarketcap
Notes: Ethereum Classic and Steem Price YTD are relative to the mining of their genesis blocks, July 24, 2016 and April 18, 2016, respectively
Q4 Rank Name Market Cap ∆ Q3 Rank Price YTD
1 Bitcoin $15,482,057,104 - 122%
2 Ethereum $722,829,967 - 723%
3 Ripple $237,638,345 - 8%
4 Litecoin $214,726,272 - 25%
5 Monero $185,582,499 - 2504%
6 Ethereum Classic $127,129,044 - -12%
7 Dash $78,695,538 +1 260%
8 MaidSafeCoin $44,886,080 +2 584%
9 Augur $41,714,289 +518 74%
10 Steem $39,078,093 - -72%

As Price Rises, Bitcoin's Share of Total Cryptocurrency
Market Grows
Data Source: Coinmarketcap
Notes: Altcoin market share is calculated by dividing the sum of all non-bitcoin digital currency market caps by the combined market caps of all digital currencies including bitcoin (for example, a
market cap share of 7% for altcoins indicates that bitcoin by represents 93% of the market cap of all digital currencies combined)

Bitcoin and Ethereum Networks Continue to Dominate (Nodes),
Litecoin and Augur Developer Interest (Commits) Nearly Doubles
Protocol Commits Releases Contributors
Bitcoin 12,838 167 416
Ethereum 8,154 110 110
Ripple 11,292 66 56
Litecoin 11,626 199 403
Monero 3,470 11 80
Ethereum Classic 168 0 8
Zcash 10,068 23 336
MaidSafeCoin 4,650 75 29
Augur 7,120 5 18
Steem 1,528 45 21
Data Sources: Coin.dance, Coinmarketcap, Github

Price Remains Focus of Public Blockchain Searches,
Zcash Rises in Related Search
Notes: Google Trends search for ‘bitcoin’ and ‘ethereum’, numbers represent search interest relative to the highest ranking term for
a given time period (a value of 100 is assigned to the most popular search term in the Trends analysis, while a value of 50 means
the term is half as popular as the leading search term)
Queries around bitcoin and ethereum led to increased interest in zcash in Q4
Related Searches: Top Related Searches: Rising
BTC
Q4 2016
ETH
Q4 2016
Ethereum related
Zcash related
Bitcoin related

The Push to Privacy:
Monero and Zcash Attract Investor Interest
Both monero and zcash are spearheading the movement towards
hidden account and transaction information
Data Source: Coincap
Q4 2016 Monero (XMR) Zcash (ZEC)
Market Cap ($m, EoQ) $185.6 $16.7
Price ($, avg.) $7.51 $366.70
Supply (m, EoQ) 13.7 0.3

Monero Protocol:
Ring Signatures
“For Monero, money should have all of the important properties of cash, some of
the most important being anonymity, optional transparency, and fungibility.”
- Riccardo "fluffypony" Spagni
Monero, Core Developer
- Launched in April 2014
- Identity of most team members are pseudonymous,
protocol is based
on the Cryptonote white paper
- With ring signatures: purchases, receipts, and all
transfers remain absolutely private by default
Monero uses a group of cryptographic signatures with at least one real participant (a ‘ring signature’) to allow you to
send and receive funds without your transactions being easily revealed on the blockchain
Data Sources: Monero, Cryptonote white paper, Bitcoin Wednesday interview

Zcash Protocol:
Zero-Knowledge Proofs
Zcash utilizes a shielded payment scheme secured by zero-knowledge succinct non-interactive arguments
of knowledge (zk-SNARKs) to create encrypted yet verifiable data
“The use of shielded addresses—whether sending
or receiving—requires the generation of a zero-
knowledge proof. This {cryptographic technique}
allows others to verify a transaction's encrypted
data without it being revealed.”
- Zooko Wilcox-Hearn
Zcash, Founder
- Launched in October 2016
- Developed by a public team of engineers and
scientists
- Zcash payments are published on a public
blockchain, but the sender, recipient, and amount of
a transaction remain private, with option the for
selective transparency
Data Source: Z.cash

3A
BITCOIN

Q4 2016 Summary
Price volatility hits 2016 high:
- Bitcoin volatility reaches peak as price hits yearly high
on Dec 29
Mining difficulty sees sharp rise:
- Q4 mining difficulty sees 32% increase, surpasses
300bn
Bitcoin scaling and block size:
- Debates on scaling the protocol are far from over as
block size rapidly approaches 1MB
Bitcoin triumphs over fiat:
- 55% up against the US dollar, outperforming most
market currencies and commodities
Questionable Chinese volume:
- Chinese exchanges reported 94% of 2016 global
volume, January PBoC investigations drop figures
under 40%
Transaction volumes soar:
- Daily transactions on the bitcoin network exceeds
226k, nearly doubling 2015 averages

Bitcoin Infrastructure Landscape
Global bitcoin infrastructure has
been built
Application layer emerging
(cross-border dominates)

Bitcoin Key Metrics
Data Sources: Blockchain, Coindesk, Bitcoinity, Bitnodes
Q4 2016 Q3 2016 Q4/Q3 Δ Q4 2015 YoY Δ
Bitcoin Price
Market Capitalization ($m) (EoQ) $15,565 $9,676 60.9% $6,463 2.4x
Price ($/BTC) (avg) $727.48 $614.44 18.4% $345.09 2.1x
Bitcoin Supply (m) (EoQ) 16.1 15.9 1.1% 15.0 1.1x
VC Investment Activity
Deal ($m) $75 $159 -52.5% $26 2.9x
Deal # 12 16 -25.0% 10 1.2x
Transaction Metrics
Average Daily BTC Transactions 250,273 219,624 14.0% 164,132 1.5x
Exchange Traded Volume ($m) $342,520 $75,130 355.9% $616 556.3x
Average Fee per Transaction ($) (EoQ) $0.24 $0.18 37.2% $0.06 3.9x
Average Fee per Block ($) $406.21 $309.34 31.3% $71.36 5.7x
Total Transaction Fees ($) $5,795,903 $3,543,876 63.5% $148,404 39.1x
Average Transactions Per Block (EoQ) 1,691 1,767 -4.3% 1,147 1.5x
Network Growth Metrics
Blockchain Size (GB) 96 85 12.9% 54 1.8x
Nodes 5,480 5,135 6.7% 5,572 1.0x
Unique Address Count (EoQ) 449,831 391,458 14.9% 310,331 1.4x
New Wallet Growth (EoQ) 2,013,436 1,146,402 75.6% 1,057,047 1.9x
Mining Metrics
Network Hash Rate (TH/sec) (EoQ) 2,337,272 1,882,661 24.1% 743,604 3.1x
Block Difficulty (EoQ) 318 241 31.7% 99 3.2x
Average Mempool Transaction Count 6,555,598 4,335 151135.9% N/A N/A
Average Mempool Size Growth (bytes/sec) 1,324 1,217 8.8% N/A N/A
Unknown Mining Pools (%) 16% 17% -4.6% 2% 6.4x

Bitcoin: Key Market Events
Oct. 4:
Risky markets drive
investors to bitcoin
Oct. 18:
Lightning Network takes
steps towards
interoperability
Oct. 21:
$65m Bitfinex hack still
scares away traders
Nov. 2:
Zcash interest fades, BTC price
approaches $750
Nov. 18:
BTC hits 5-
month high
Dec. 8:
Japan anticipates dropping 8%
BTC sales tax
Dec. 13:
BTC trades at highest
price since 2014
Dec. 29:
BTC reaches 3-
year high

Data Source: Blockchain Data Source: Blockchain
Mining Difficulty Sees Sharp Increase as
BTC Price Rallies in Fourth Quarter
Data Source: Blockchain
Bitcoin mining difficulty increased 32% to 318bn in Q4 amidst price increase

Bitcoin Outperforms Major Currencies and Commodities
Bitcoin up 55% against US dollar, tripling growth of nearest currency
Data Source: XE Currency

Exchange Volume Reaches Peak Levels
as BTC Price Rallies
Data Source: Bitcoinity
Bitcoin exchange trading volume for Q4 peaked at $345bn, up 366% from $76bn in Q3

Global Volume Increase Led by China’s ‘Big 3’:
OKCoin, Huobi, and BTCChina
The Big 3 averaged over $1.6 billion per day of BTC trading volume in 2016,
with massive year end increases
Outside the Big 3, volumes were relatively steady throughout the year,
averaging $67.2 million per day
Data Source: Bitcoinity, Coincap

Chinese Figures Appear to Account for 94% of 2016’s
Global BTC Exchange Volume
Data Source: Bitcoinity

January 2017 PBoC Investigation
Significantly Impacts Global Bitcoin Exchange Activity
Since the People’s Bank of China met with the Big 3, volumes have fallen dramatically,
making room for a more diverse group of exchanges to share trading volumes

Assuming China Accounted for 35%,
2016’s Daily Global BTC Trading Volume Averages $103 Million
If we assume that the Big 3 instead encompassed 35% of global exchange volume,
an average of $103.4 million of bitcoin was traded per day in 2016

Bitcoin Volatility Spikes,
But Remains Below Q2 Peak
Amid yearly price high, bitcoin volatility reaches 62% for Q4, but remains below Q2 peak
Quarter High Date Low Date ∆ Low to High
Q1 2016 $458.28 Jan-07 $358.77 Jan-15 27.7%
Q2 2016 $768.24 Jun-16 $417.01 Apr-01 84.2%
Q3 2016 $703.69 Jul-02 $552.82 Aug-02 27.3%
Q4 2016 $982.87 Dec-29 $607.68 Oct-04 61.7%
Notes: Just one simple illustration of volatility

Q4 Average Daily Bitcoin Transactions
Continue to Have Steady Growth
Q4 average daily bitcoin transactions increased 80% YoY

Block Sizes Hit Yearly High
Q4 bitcoin blocks averaged 86% capacity

Scaling Debate Rages On
The best way to scale the bitcoin network has long been
the subject of intense debate, as solutions may impact:
- the decentralization of the system and barriers to
enter
- the economics of transaction fees and mining
- the core architecture of the protocol
Current scaling proposals generally lie in 3 major
categories:
- Straightforward block size increases (e.g., 1MB to
2MB)
- “On-chain” solutions (e.g., SegWit)
- “Off-chain” solutions (e.g., Lightning network)

SegWit Soft Fork Eliminates Malleability
Effectively Raises Block Size Over 60%
Data Sources: Bitcoin Core, Bitcoin Unlimited, Coin.dance, Peter Rizun’s Blog
95% or more of the bitcoin network’s hashing power
must signal support for SegWit to activate:
Beginning on November 15, 2016, and in place for 1 year, if 95% of blocks
during a 2,016 block period signal support for SegWit, the soft-fork will
schedule activation after 2,016 more blocks
Bitcoin Unlimited
Features:
- Removes Block-size Limit
- Flexible and customizable replacement
- Scaling Proposals
- Xtreme Thinblocks (“X-Thin”):
≈ 60 tps (on-chain) and 20 MB blocks
Soft Fork Hard Fork
SegWit
Features:
- Capacity Increase
- Effective limit ≈ 1.6 - 2 MB blocks
- Malleability Elimination
- Eases wallet software and smart contract
development (like Lightning Network)
Developers:
- Bitcoin Core
Mining Pool Support:
- BitClub, BitFury, BTCC
Developers:
- Separate
development team
Mining Pool Support:
- Bitcoin.com, BTC.top,
GBMiners, ViaBTC

Support for SegWit Alternatives Grows
As 95% Activation Threshold Remains Distant
Data Source: Coin.dance
SegWit has 26% signaled support at year end 2016

3B
ETHEREUM

Q4 2016 Summary
Ether price declines:
- ETH price hits nine-month low of $7, the lowest
since March 1st
Ether volume decreases in Q4:
- Monthly ether exchange traded volume
reaches yearly low
Enterprise interest grows:
- JP Morgan, Microsoft and Deloitte demo ethereum
tech projects
Ethereum classic roadmap:
- The protocol will enter its second year with new
monetary policy
Decrease in active nodes:
- Although ethereum has the most active nodes, Q4
saw 12% network size decrease
Forks in the road:
- Ethereum hard forks due to network issues,
ethereum classic follows suit

Ethereum Infrastructure Landscape
Early ethereum infrastructure
emerging
Crowd-funded dapps more
common than venture funded
platforms

Ethereum Key Metrics
Data Sources: Etherscan, Smith and Crown
Q4 2016 Q3 2016 Q4/Q3Δ Q4 2015 YoY Δ
Ether Price
Market Capitalization ($m) (EoQ) $708 $1,118 -36.7% $72 9.8x
Price ($/ETH) (Avg) $9.97 $11.90 -16.2% $0.86 11.6x
Ether Supply (m) 87.0 85.0 2.4% 76.0 1.1x
VC/ICO Activity
Deal ($m) $29 $30 -3.5% N/A N/A
Deal # 17 11 54.5% N/A N/A
Transaction Metrics
Average Daily ETH Transactions 42,908 35,836 19.7% 6,808 6.3x
Average Gas Price (Gwei) (EoQ) $22 $30 -25.2% $58 .4x
Average Gas Limit Per Day $4.00 $1.50 166.7% $3.10 1.3x
Network Growth Metrics
Blockchain Size (GB) 117 53 120.8% N/A N/A
Nodes 6,083 6,868 -11.4% N/A N/A
Total Unique Addresses (EoQ) 941,811 647,482 45.5% 40,566 23.2x
Number of Contract Addresses (EoQ) 239,230 199,234 20.1% N/A N/A
Mining Metrics
Network Hash Rate (GH/s) (EoQ) 5,740 5,880 -2.4% 511 11.2x
Block Difficulty Growth (TH) (EoQ) 81 83 -2.3% 9 9.5x
Average Block Time (sec) (EoQ) 14 14 -0.4% 17 1
Average Block Size (bytes ) (EoQ) 1,544 1,437 7.4% 1,057 1
Daily Block Reward (EoQ) 31,228 31,623 -1.2% 26,912 1

Ethereum: Key Market Events
Oct. 6:
Network spam attacks lead
to ethereum node outages
Oct. 19:
Ethereum hard forks
to fend off network
attacks
Nov. 2:
Programming bug leads to
flaws in smart contracts
Nov. 22:
Ethereum hard forks again
due to network performances
issues
Dec. 30:
Developer focus shifts
towards next phase -
Metropolis
Dec. 5:
Price sinks to 9-month low

Ether Exchange Traded Volumes Fall From Mid-Year Highs

Ethereum Most Heavily Traded With Bitcoin,
USD Rising
Data Source: Cryptocompare

Coinbase, Gemini Gain Share of Emerging ETH / USD Markets
Data Source: Cryptocompare

Enterprises Continue to Show Interest in Ethereum
JP Morgan is Quietly Developing a Private Ethereum
Blockchain
Microsoft Doubles Down on Ethereum With Launch of
Consortium Blockchain Network
Deloitte Opens Ethereum Identity Platform to
Blockchain Developers
Austria's Erste Bank Awards Ethereum Projects in
Startup Contest

Ethereum Classic Technology and Roadmap Begins
Move Away from Ethereum
Ethereum classic has begun to develop their own strategies
and ideas for the evolution of their protocol independent of that
of ethereum
- New monetary and economic policies
- Hard fork in January 2017 to delay the impending
“difficulty bomb”
- Currently researching switching to a supply curve
similar to bitcoin, with a decreasing annual inflation rate
and a maximum supply
- New consensus mechanisms
- Currently researching hybrid Proof of Work & Proof of
Stake systems - (“Twinschain”)
As compared to Ethereum:
Proof of Stake (“Casper”)
- Vlad Zamfir
Ethereum Foundation, Researcher
- Researching perpetual inflationary supply
increase
- Difficulty bomb scheduled for mid-2017
Data Source: Ethereum Classic presentation at CoinDesk’s Construct Conference
Notes: More on Ethereum in CoinDesk’s ‘Understanding Ethereum’ research report

Ethereum Classic: Key Market Events
Oct. 15:
ETC price crashes as
network comes under DoS
attack
Oct. 25:
Ethereum Classic agrees to
controversial hard fork in response
to attacks
Nov. 10:
Major Chinese exchange BTCC
announces preference for ETC
Dec. 8:
ETC 24-hr trading volumes
hit record low
Dec. 29:
ETC price surges to 4-
month high
Dec. 17:
ETC embraced by
community, price
makes comeback

ETC Price Relative to ETH Quickly Peaks at 30%
Trending Upward at 2016 Year End
Within the first month of its creation, ETC hit its 2016 high,
reaching $2.92 and 29.7% of the price of ETH
Moving into 2017, the price of ETC and its relative value to ETH has been on an upward trend

3C
ICOs
Spotlight Study

ICO Funding is Closing in on Blockchain Venture Capital
ICOs are becoming attractive fundraising and investment alternatives
for both entrepreneurs and investors
Data Source: CoinDesk’s Venture Capital database, Smith and Crown, CoinDesk’s Q1 2017 ICO Survey

Two Funding Models Are Emerging
Blockchain protocols, companies, and applications are also considering hybrid models,
raising from ICOs as well as VCs
Entrepreneurs have begun considering blockchain token sales (“ICOs”) as fundraising
alternatives to traditional venture capital and angel investment
PROTOCOL
APPLICATION
COMPANY
HYBRIDICO
Notes: Numerous protocols are also maintained by companies like the Zerocoin Electric Coin Company, open source communities, non-profits like the
Ethereum Foundation, and consortiums like Hyperledger

Our 2017 ICO Survey Highlights the Viewpoints
of 400+ Blockchain Enthusiasts
- Entrepreneurial insights into selling blockchain tokens
to raise funds for a project
- Retail public on ICO investment opportunities
- Institutional capital entering the market
OUR GOALS
- Identify perception around ICOs from both a
fundraising and investing perspective
- Determine factors driving and repelling investment
- Gauge viewpoints on structuring ICOs and the
relation to raising funds traditionally
- Determine the balance of retail and institutional
demand for ICOs
INSTITUTIONAL
enterprise managed money
RETAIL
general public investors

BLOCKCHAIN ICOS
Check out our full Spotlight Study
and survey results in our dedicated piece on ICOs!

4
ENTERPRISE BLOCKCHAINS

Q4 2016 Summary
Trend to open-source tech:
- R3 and Chain make blockchain offering freely available
to developers to build services and applications
Chain’s confidential assets:
- Chain demos new privacy tech, ‘Confidential Assets’,
obscuring values and asset IDs
Proofs-of-concept on the rise:
- 50 proofs-of-concept announced in Q4 publicly with over
120 unique participants
Key PoC areas of focus emerge:
- Post-trade settlement, banking, payment processing and
recordkeeping become main PoC categories for
enterprise
Ripple achieves landmark PoC:
- 12 global banks complete a series of trials using
Ripple’s native asset, XRP
Digital Asset reveals new blockchain tech:
- Digital Asset seeks to standardize blockchain tech with
the Global Synchronization Log (‘GSL’)

Top Banks Tackle Blockchain Proofs-of-Concepts
28 of the top 30 banks are now engaging in blockchain proofs-of-concept
Notes: 2 of 30, Agricultural Bank of China and Bank of Communications Limited have not gone public with any PoC
14 banks featured in addition to the 14 featured in our Q3 2016 State of Blockchain

4A
SOLUTIONS PROVIDERS

Chain Partners With Visa,
Releases Open Source DLT Platform
Website: chain.com
HQ: San Francisco, CA
Amount Raised: $44m
Founders:
Devon Gundry, Adam Ludwin
Key Executives:
Adam Ludwin, CEO
Data Source: Chain
Chain provides permissioned and private blockchain
services for enterprise businesses
Q4 Milestones:
- Visa Introduces International B2B Payment Solution
Built on Chain’s Blockchain Technology
- Chain Launches Open Source Developer Platform

Chain Demos Privacy Focused ‘Confidential Assets’ Scheme
- Chain’s confidential assets scheme hides the
transaction amount and account identity on multi-asset
ledgers
- Utilizes zero-knowledge proof system to verify
transaction amounts and asset IDs
- Additional 'noise', or extraneous data, hides
transaction information; requires key to derive noise
values and find transaction amount
“To maintain privacy [on the blockchain], transactions must obfuscate or omit
sensitive information. Chain's ‘Confidential Assets’ scheme keeps values and asset
identifiers private through the use of a special type of homomorphic encryption.”
- Oleg Andreev
Chain, Product Architect
Data Source: Chain

Digital Asset Publishes Two White Papers,
Intends to Open Source Technology
Digital Asset is a blockchain software provider focused on
distributed asset settlement
Q4 Milestones:
- DA publishes white paper introducing the Global
Synchronization Log (‘GSL’)
- DA publishes non-technical white paper detailing a high
level overview of their platform
- DA files ‘Intermediary Electronic Settlement Platform’
patent, described as a method to trade a wide range of
assets on a distributed ledger
Data Source: Digital Asset
Website: digitalasset.com
HQ: New York, NY
Founders:
Dan O’Prey, Don Wilson, Sunil Hirani
Key Executives:
Blythe Masters, CEO
Chris Church, CBDO
Amount Raised: $67m

Digital Asset Tackles Financial Transaction Processing
- GSL uses Digital Asset Machine Language (‘DAML’) to
help other enterprise blockchain frameworks improve
smart contract services
- White paper reveals Digital Asset platform reduces risk,
cost and capital requirements involved in processing
financial transactions
“Rather than a series of competing full-stack implementations, which each have
to re-implement their own solutions to common problems, the GSL focuses on a
very specific subsection of a platform so that it can be reused and combined
with other components.”
- Shaul Kfir
Digital Asset, CTO
Data Source: Digital Asset

Hyperledger Passes 100-Member Milestone
Data Source: Hyperledger
Website: hyperledger.org
Key Executives:
Brian Behlendorf, Executive Director
Todd Benzies, Senior Program Manager
Hyperledger is an open-source cooperative managed by
the Linux Foundation creating permissioned distributed
ledger platforms to help financial institutions mitigate
settlement risk and lower reconciliation costs
Q4 Milestones:
- 105 partner organizations
- 30% member growth in Q4
- 28 media mentions

Hyperledger Expands Global Reach
Data Sources: Hyperledger, CoinDesk
- Hyperledger members participate in the
first cross-ocean transaction on the Fabric
blockchain platform
- Behlendorf proposes Technical Working Group
China, 25% of Hyperledger membership now in
China
- Chamber of Digital Commerce and Hyperledger
launch strategic advocacy and education
partnership
"It’s always been a part of the vision of the Hyperledger project that we’re
building foundational technologies for blockchain that are never necessarily tied
to financial use cases. This is as foundational as an operating system, a
database, a programming language.”
- Brian Behlendorf
Hyperledger, Executive Director

Hyperledger’s ‘Umbrella’ Approach
Data Source: Hyperledger

Hyperledger’s Contributors:
Intel’s Sawtooth Lake
Data Source: Intel
Announced: April 2016
Github Statistics:
2,645 commits
24 contributors
1 release
Consensus Algorithms:
PoET: proof of elapsed time
Quorom Voting: an adaptation of
ripple consensus protocols
Sawtooth Lake is a platform for developing and
maintaining distributed ledgers
“In Sawtooth Lake, the data model and transaction language are implemented in a
‘transaction family’. While we expect users to build custom transaction families that
reflect the unique requirements of their ledgers, we provide three transaction families
that are sufficient for building, testing and deploying a marketplace for digital assets.”
- Intel

Iroha
Announced: September 2016
Github Statistics:
1,141 commits
9 contributors
0 releases
Consensus Algorithm:
Introduces a Byzantine Fault Tolerant consensus algorithm
called ‘Sumeragi’, inspired by b-chain (Duan, Meling et al
2014)
“By creating C++, mobile, and web development environments for Hyperledger, new
developers can join the project and help contribute not only to Iroha, but to other sub
projects, such as Fabric and Sawtooth Lake.”
- Makoto Takemiya
Founder, Iroha Project
Iroha is a distributed ledger project inspired by the Fabric
architecture, it aims to provide a development environment for
C++ and mobile application developers to contribute to
Hyperledger
Data Sources: CoinDesk, Iroha whitepaper, Github

Iroha (cont.)
Data Sources: CoinDesk, Iroha whitepaper
The order of processing nodes is determined based
on the server reputation system called Hiriji
- Reliability of servers is based on length of
membership on the network and the number of
successful transactions processed
- If failures are detected in servers, the server
rebroadcasts the signal to the next server in the chain

Fabric (IBM & Digital Asset)
"We set off to engineer a blockchain fabric from the ground up. It’s not about creating
a consortium in some industry, we’re setting out on a mission to build a blockchain for
business.”
- Jerry Cuomo
IBM, Vice President of Blockchain Tech
Announced: March 2016
Github Statistics:
1,841 commits
72 contributors
3 releases
Consensus Algorithm:
Uses a validation method called the Practical Byzantine
Fault Tolerance (‘PBFT’) consensus protocol
Fabric is an implementation of blockchain technology proposed by
Tamas Blummer (Digital Asset) and Christopher Ferris (IBM) that
allows components like consensus and membership services to be
plug-and-play
Data Sources: CoinDesk, IBM, Github

Fabric (cont.)
- Fabric allows two or more parties to automate
contractual agreements in a trusted way
- Use cases include:
- Manufacturing supply chain
- Asset depository
- Interoperability of assets
- Available as an application service on IBM Bluemix
Practical Byzantine Fault Tolerance (PBFT) ensures that a
minimum of 2*f + 1 nodes reach consensus on the order of
transactions before adding them to a shared ledger
Data Sources: CoinDesk, IBM, Github

R3 Gains 5 Members,
Loses 2 Dominant Players
Data Source: R3CEV
R3CEV is a permissioned and private blockchain technology
provider leading a consortium of 70+ financial institutions
Q4 Milestones:
- R3 Corda blockchain is now open-source
- Credicorp, Calypso, Qiwi, ABN AMRO and CFETS join R3
- R3 expands presence in Asia with DLT Centre of
Excellence in Singapore
- Goldman Sachs, Santander leave the consortium
- 46 media mentions
Website: R3CEV.com
HQ: New York, NY
Founders:
David Rutter, Jesse Edwards, Todd McDonald
Key Tech Players:
Richard Gendal Brown, Mike Hearn, Ian Grigg

R3 Completes KYC Trial on Corda,
Open Sources Platform
“Corda was built with the explicit
purpose of recording and
enforcing business agreements
among registered financial
institutions; it is not intended to be
a general purpose solution for all
problems.”
- Richard Gendal Brown
R3, CTO
- R3 releases code for Corda, a DLT platform that
manages and executes financial agreements
- R3 and 10 banks develop proof-of-concept for a KYC
identity registry on Corda
"Corda is the Xbox Live, it’s the
ecosystem, it’s the connectivity.
We want to focus on the platform
and services.”
- Clemens Wan
R3, Associate Director
Data Source: R3CEV

Ripple Update:
Maintaining XRP and Interledger
Data Source: Ripple
Ripple allows banks to offer real-time cross-border
payments to their customers
Q4 Milestones:
- Github statistics:
- 11,292 commits
- 56 contributors
- 66 releases
- Financial partners: 19
Website: ripple.com
Founders:
Chris Larsen, Arthur Britto
Key Executives:
Brad Garlinghouse, CEO
Amount Raised: $93.6m

XRP Update:
Trials Save Banks Over 40% on Cross-Border Payments
Data Source: Ripple
- 12 banks complete a series of trials using XRP,
estimated savings of 42% on cross-border payments
and up to 60% as XRP gains usage and volatility
decreases
- Ripple uses XRP as a bridge asset for global
interbank payments, dramatically reducing cost of
cross-border payments
"Everything comes down to return on investment. This project was aimed to show the
ROI of reducing costs around liquidity by around 60%.”
- Nilesh Dusane
Ripple, Head of Global Sales

Interledger Update:
Bridging Diverse Blockchains and Payment Networks
Data Source: Ripple
- Secure transactions between ledgers using ledger-
provided escrow
- Connector to Connector Protocol (‘CCP’) to
coordinate routing and facilitate payments
- Interledger Quoting Protocol (‘ILQP’) estimates cost
of payment
“As long as your ledger supports [Interledger], you can participate in a payment and
someone will be able to provide liquidity. It can be PayPal, Alipay, bitcoin, bank ledgers
or Skype, anywhere people hold balances, they have a ledger."
- Stefan Thomas
Ripple, CTO

Enterprise Blockchain Incumbents
Rubix aims to bring start-up speed and enterprise reliability to
the blockchain market
Vulcan allows clients to launch digital assets that trade alongside
other virtual currencies
JP Morgan unveils permissioned ethereum blockchain Quorum
and ‘distributed cryptoledger’ Juno
Editable blockchain for enterprise and permissioned systems
IBM Blockchain is the company’s enterprise offering,
independent of its Hyperledger project contribution
Project Bletchley is an open, modular Blockchain-as-a-Service
(BaaS) fabric powered by Azure

A Closer Look:
PWC’s Vulcan Project
- A joint effort by Bloq, Libra, Netki and PwC
- Use cases include:
- Loyalty or rewards points that could be traded
for bitcoin or other digital assets
- Meeting compliance needs while leveraging
open-source blockchain technology
"Where we started was with digital currency, 'How do we make bitcoin relevant to
banks?' It soon became apparent that using identity, using methods to apply
compliance and regulatory reporting to cryptocurrencies like bitcoin actually had a
wide application."
- Robert Allen
PwC, Vulcan Lead
Vulcan services include digital asset wallets,
international payment processing, and investment and
trading services

A Closer Look:
JP Morgan’s Quorum Project
- A joint effort by JP Morgan and EthLab
- Targeting long and expensive settlement times, system
breakdowns and lack of risk clarity
- Key enhancements:
- QuorumChain consensus model based on majority
voting
- Constellation peer-to-peer encrypted message
exchange
- Peer Security - node/peer permissioning using smart
contracts
"One of our goals in working with an open-source platform and contributing our work
back is to encourage collaboration and innovation. The more people that get involved,
the faster we will see adoption challenges addressed and the more robust the system
will become.”
- Amber Valdet
JP Morgan, Blockchain Lead
Quorum is an enterprise-ready distributed ledger and smart
contract platform

A Closer Look:
JP Morgan’s Juno Project
- Consensus is reached through election-type system that
determines 'Leader' and a group of 'Followers'
- Leader system said to reduce likelihood of forking, while
enhancing performance and visibility
- Un-optimized versions of Juno: 500 transactions per second
and latency of ~2ms
Juno is inspired by a consensus algorithm called Tangaroa,
a variant of Raft consensus which is said to offer improved
scalability over proof-of-work mining

A Closer Look:
Microsoft’s Bletchley Project
- Ability to construct ‘members-only, permissioned’
consortium blockchains
- Two new concepts:
- Cryptlets a form of oracle that uses an outside
data source to inform a smart contract
- Middleware core services functioning in the cloud
(identity and operations management)
"Project Bletchley is a vision for Microsoft to deliver Blockchain as a Service (BaaS)
that is open and flexible for all platforms, partners and customers.”
- Marley Gray
Microsoft, Business Development Director
Project Bletchley is an open, modular blockchain fabric
interacting with identity and key management

A Closer Look:
Accenture’s Editable Blockchain Project
- Any redaction leaves an inevitable ‘scar’ that cannot be
removed
- Blockchain editing through a variant of the chameleon
hash, which recreates private algorithms through private
keys
“As blockchain solutions gain momentum in financial services and other industries,
more and more real-world situations will emerge where information on blockchains
simply needs to be modified or removed.”
- David Treat
Accenture, Capital Markets — Blockchain
Accenture has created a prototype of an editable blockchain
capability for permissioned systems based on a modified
chameleon hash function developed with Dr. Giuseppe
Ateniese

A Closer Look:
IBM’s Blockchain Project
- The architecture behind IBM Blockchain is the open source
Hyperledger Fabric
- Test cases:
- Supply chain
- Trade finance
“I have a strong opinion on the blockchain as a solution for contracts and supply
chains and the Internet of Things. I think bitcoin is an interesting application for
blockchain but there are thousands of applications and wider use cases beyond that.”
- Jerry Cuomo
IBM, Vice President of Blockchain Tech
IBM Blockchain offers private permissioned networks that
can leverage the embedded technology in smart contracts to
automate business processes

5
INVESTMENT

2016 Blockchain Investment Nears $500m
Over 50 Deals
Data Source: CoinDesk’s Venture Capital database

Q4 Investments Up Year-Over-Year,
Marginal Improvement Year to Year
Q4 investment up 188% YoY while 2016 overall investment up 1%

Q4 Average Deal Size Falls 30%,
Following 2015’s Trend
Average deal size declines at year end, but slower than in 2015

Top Q4 Deals Show Shift Towards Permissioned Blockchain Technology
PRIVATE
$22m
PUBLIC
$10m
HYBRID
$4m

Private Blockchains (PayCommerce) Captured Most VC Investment in Q4, But More
Public Startups Are Raising
Number of InvestmentsInvestment Amount
Although private blockchain startups represented the lion’s share of Q4 investment,
overall volume decreased to $40m in Q4, down 55% from $62m in Q3

However, Data Doesn’t Suggest a Trend Toward
Any Specific Infrastructure Model

Decentralized Application Projects Are Raising Money Through Public
Digital Currency Sales vs. VC
More “decentralized application” companies are using token launches (“ICOs”) to raise capital, the majority in
2016 has come from ETH (with 64% from The DAO)
Total Historic Investment
Venture Capital into bitcoin and ethereum
Historic Investment
2016 Cumulative VC and ICO volume
Data Sources: CoinDesk’s Venture Capital database, Smith and Crown

Despite Global Blockchain Interest, Silicon Valley Captures Bulk of
Investment Dollars in Q4
Number of Companies$ Invested
Total number of VC backed public and private blockchain companies has increased
marginally to 158 in Q4, up 7% from 148 Q3

6
REGULATION & GOVERNMENT

US: Lawmakers Discuss Blockchain Policy,
Welcome Feedback From Industry
28th October – Office of the Comptroller of the Currency (OCC) begins to
release policy outline for distributed ledger technology
2nd November – Ontario Securities Commission (OSC) seeks reps from
blockchain industry for fintech advisory panel
17th November – SEC’s Distributed Ledger Technology Working Group
(DLTWG) expands to 75 members to learn about merits and considerations
of blockchain technology
30th November – A consortium of Illinois government agencies seek to create
a welcoming regulatory environment for blockchain companies, release RFI
soliciting input from industry

US: Coinbase Subpoena Sparks National Discourse, Company Publishes Legal
Framework as Political and Regulatory Uncertainty Lingers
8th November – Treasury Inspector General insists that that IRS needs a
more strategic plan to deal with bitcoin and digital assets
10th November – Trump election casts an uncertain shadow on US
blockchain policy
22nd November – A Congressional committee has called on the CFTC to
focus on digital currency regulation in the coming year
30th November – Judge Corley clears IRS to serve Coinbase with a
summons for information about its users
7th December – Coinbase leads legal framework launch to provide users with
a "decision matrix" to mitigate design flaws that could have real-world legal
consequences

Europe: Regulators Explore Blockchain Use Cases
18th November – The Swiss Government is paving the way for crypto banks
21st November – Germany’s Bundesbank hosts conference to discuss
blockchain technology use cases in the financial sector
3rd October – European Parliament releases discussion paper outlining
bitcoin-powered elections, seeks to establish “tech-enabled community
consensus”
7th November – UK regulator adds nine blockchain startups to fintech
‘sandbox’ to test new services and products under the supervision of
regulators

Europe: Research Continues as ECB Calls for Tighter Digital Currency
Control, Swiss Want to Ease Barrier to Entry
3rd November – EU Parliament budget allocates funds for a working group
dedicated to distributed ledger technology
1st December – The Bank of Finland organizes event to support ongoing
blockchain research, aim to establish common strategy for DLT in Finnish
private and public sectors
18th October – European Central Bank urges members to impose tighter
controls on digital currency exchanges, worries about price stability of the
euro and the supply of money
2nd November – Swiss lawmakers make plans to regulate fintech with an eye
to introduce legislation sometime next year

Asia: Banks Weigh in on Key Tax Issues and Regulatory Blind Spots,
Continue to Share Resources and Advance Research
18th November – South Korea is debating new bitcoin exchange rules, aims
to introduce new regulation early next year
18th November – Japan's Central Bank believes blockchain could create tax
issues, deputy governor discusses monetary and regulatory policy
implications
8th December – Japan’s 8% sales tax on bitcoin purchases could disappear
in mid-2017
5th December – Japan's Central Bank speculates blockchain could reshape
transaction settlement, adds resources to research
12th December – 27 financial firms and startups form blockchain consortium
based in South Korea to address regulatory issues

Middle East and Africa: Emerging Markets Discuss Regulation
17th November – Dubai legislators hold gathering to develop a legal
knowledge base for bitcoin and digital currencies
23rd November – Uganda on the path to become first African nation to
regulate bitcoin after conference with African Institute and Bank of Uganda

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Authors
Pete Rizzo
Editor
Bradley Miles
Researcher
Alex Sunnarborg
Researcher
@pete_rizzo_
@Bradley_Miles_
@alexsunnarborg
@CoinDesk

Disclaimer
CoinDesk makes every effort to ensure the information used these slides is accurate and up to date. We cannot, however, accept responsibility for any loss or
inconvenience caused by reliance on the material contained here.
This presentation does not constitute financial advice or an investment recommendation in any way whatsoever. It is recommended you perform your own
independent research and/or speak with a qualified investment professional before making any financial decisions.
CoinDesk is owned by Digital Currency Group, one of the most active investors in the bitcoin and blockchain technology industry. Many DCG investments are
referenced in this report, and a full list can be reviewed at www.dcg.co. CoinDesk is run as an independent entity, and its editorial team does not give preferential
treatment to DCG investments when they are referenced in research reports or news posts. DCG portfolio companies referenced in this report include Align
Commerce, Bitpagos, Bitpesa, Bitso, Blockstream, BTCC, Chain, Circle, Coinbase, Coins.ph, Everledger, Itbit, Korbit, Kraken, Ripple, Safello, Streami, SurBTC,
Tierion, Unocoin and Zcash.

State of Blockchain Q4 2016

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