Crypto-Assets Market Watch

(2013-2017)

Tokenization of the Economy:

From Internet of Value to Internet of Society

Introduction

Historical Perspective

• In 2013, Bitcoin represented 92% of the crypto global market capitalization and the value transfer layer (payment & remittance) represented 100 %. Blockchain allowed the creation of crypto-assets which can not be double-spent nor duplicated: the first use case for such assets has been to transfer value between individuals without the need of a government-backed fiat currency: the Internet of Value was born

• At the end of 2017, Bitcoin represented 44% of the crypto global market capitalization and value transfer represented 70%. In 2013, with Ethereum, a new use case for blockchain has been found: running smart-contracts on a decentralized environment. Ethereum and other blockchains (e.g. Neo) allow developers to build decentralized applications on top of the blockchain and using the blockchain’s smart-contracts

• Between 2013 and 2017 we saw a major shift in the crypto-ecosystem: crypto-assets are now used for several purpose: to transfer value, to run smart-contract and other infrastructure services, to access to services offered by a decentralized application. We see the raise of an Internet of Society where everything is connected thanks to blockchains and valued thanks to crypto-assets

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Methodology

• The purpose of this paper is to understand the evolution of the crypto-ecosystem. To do so, we worked on our own crypto-assets mapping: we selected 100 major crypto-assets and divided them into 3 categories themselves divided into sectors:

• We tracked the market capitalization of each of the 100 crypto-assets we follow and reported it in our data if it was superior to $1 Million. By studying the market capitalizations of the assets, the sectors and the categories we follow, we have been able to run a both qualitative and quantitative analysis

Category Value Transfer Infrastructure Decentralized Application

Sectors Remittance

Payment

Asset Creation

Computing Tool

IoT

AI

Asset Management

Audit

Data Storage

Decentralized Exchange

Energy Trading

Gambling

Gaming

Healthcare

Lending

Retail Banking

Payment Card

Rewarding

Social Network

Security

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Coverage

• Here are the 100 crypto-assets we follow and the aggregated market

capitalization of each sector at the end of 2017 5

Source: CoinMarketCap, Token Capital Market

Market diversification

Crypto-Space Evolution (2013-2014)

• In 2013, we recorded 4 assets with a market capitalization superior to $1 Million for a global market capitalization of $10 Billion

• At the end of 2017, we recorded 100 assets with a market capitalization superior to $1 Million for a global market capitalization of $500 Billion

• The global market capitalization has been multiplied by 30 between the end of 2016 and the end of 2017 (while Bitcoin price has been multiplied by 15)

• At the end of 2017, 51% of the assets we follow were decentralized application (Dapp) crypto-assets

Number of crypto-assets by category (2013-2017)

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Source: CoinMarketCap, Token Capital Market Source: Token Capital Market

Global Market Overview

Crypto-ecosystem by Category

Global Market Capitalization by Category (Million) Global Market Capitalization by Category (%)

• The Infrastructure layer of crypto-assets multiplied its market share by 5 between 2015 and 2016 and between 2016 and 2017 as well

• The Dapp layer of crypto-assets multiplied its market share by 4 between 2016 and 2017

• At the end of 2017,Dapp crypto-assets represented 51% of our coverage scope in term of number of asset and 4% of our coverage scope in term of aggregate market capitalization 8

Source: CoinMarketCap, Token Capital Market

Crypto-ecosystem by Sector

Global Market Capitalization by Sector (Million) Global Market Capitalization by Sector (%)

• Computing Tool sector is the main component of the Infrastructure layer, it makes sense since most blockchain infrastructures are here to help developers to build decentralized applications and create new use cases for blockchain and crypto-assets

• Remittance stay bigger than Payment in term of market capitalization, the Payments sectors for crypto-assets is very tied to the acceptance of crypto-assets in shops as a medium of payment 9

Source: CoinMarketCap, Token Capital Market

Crypto-ecosystem by Asset

• Bitcoin’s market share stayed pretty stable around 90% of the global

market capitalization between 2013 and 2016 before being divided by 2

in 2017

• Ether has multiplied its market share by 3 between 2016 and 2017

from 4% to 12% of the global market capitalization

Global Market Capitalization by Asset (Million) Global Market Capitalization by Asset (%)

10 Source: CoinMarketCap, Token Capital Market

2013: Internet of value

Global Market Capitalization by Asset (%)

• In 2013, the crypto-space only was a value transfer layer, Bitcoin was 92%

of the global market capitalization and the other assets (Ripple, DogeCoin,

Litecoin) did not bring disruptive technology compared to Bitcoin protocol

• Using crypto-assets for value transfer purpose allows to exchange value

worldwide without state-backed fiat currencies

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Source: CoinMarketCap, Token Capital Market

2014: Infrastructure layer

Global Market Capitalization by Asset (%)

• In 2014, after the Ethereum ICO, the computing tool layer started.

Ethereum, the biggest infrastructure blockchain, allows developers to use

the Ethereum protocol to build application run by a decentralized network

• 2014 also saw the first Dapps which were focused on Data Storage using

distributed ledger technology

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2015: Transition year

Global Market Capitalization by Asset (%)

• We see 2015 as a transition year for the crypto-space: the Ethereum

blockchain was not ready yet to issue tokens

• Dapps still focused on the ledger feature of blockchain with an

application in the Audit field 13

2016: Dapp implementation

Global Market Capitalization by Asset (%)

• 2016 saw the development of Dapps with Initial Coin Offerings allowing

crypto-entrepreneurs to raise money from the community

• Bitcoin still represented 90% of the global market capitalization while

Ether reached for the first time 4% of the global market capitalization

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2017: Internet of Society

Global Market Capitalization by Asset (%)

• Initial Coin Offering has made Token and Dapp mainstream: almost

each economic sector now has its Dapp offering a decentralized service

or platform

• 2017 is the year of diversification for the crypto-space with Bitcoin’s

market share in term of market capitalization being divided by 2 15

Source: CoinMarketCap, Token Capital Market

Decentralized Applications

Dapp crypto-assets overview

Dapp Market Capitalization by sector (Million) Global Market Capitalization by Asset (%)

• Dapp crypto-assets represented $20 Billion at the end of 2017 versus $200 Million at the end of 2016

• Data Storage was the first sector for Dapps, representing 100% of the Dapp layer aggregate market capitalization at the end of 2014, constantly lost market share year over year to represent only 12% of the Dapp market capitalization at the end of 2017

17 Source: CoinMarketCap, Token Capital Market

New start-up ecosystem

Global Market Capitalization by Asset (%)

• We aggregated Payment Card, Retail Banking, Lending, Decentralized Exchange, and Asset Management into Financial Services: it represented 47% of the Dapp market capitalization while it represented 0% at the end of 2015

• Financial Services and Social Network together represented 70% of the Dapp market cap at the end of 2017

18 Source: CoinMarketCap, Token Capital Market

Venture Capital Democratization

Start-up Definition, Damoradan (2009) :

« No history…, small or no revenues, operating losses … dependent on private equity … many don’t

survive ».

Dilution Repayment Interest Dividend

Equity Yes No No Yes

Debt No Yes Yes No

Mezzanine Yes Yes Yes Yes

Token No No No No

A new financial paradign

• Ethereum’s ERC20 Token put a stop on the Private Equity & Venture Capital monopoly for

start-up financing

• Token Sales or ICOs should be viewed as a disruptive fundraising mechanism taking

advantage of the Blockchain Technology to fund start-ups

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Conclusion

Market Forecast

• We see the Dapp category as the most promising one, we forecast a big

growth in 2018 for this category in term of aggregate market

capitalization and number of assets as well

• We expect to see more Initial Coin Offering to fund start-up projects in

all economics sectors. We see a big potential for Dapp ICO in

InsureTech, FoodTech, Virtual & Augmented Reality, Peer-to-Peer

services and already established sectors such as FinTech, Social

Network and online gaming

• We also expect to see more institutional investors entering the crypto-

space and more professionalism in the investment processes

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Investment Strategies

• Initial Coin Offering still the best way to be exposed to early-stage Dapp crypto-assets

• Due to the large number of ICO outstanding each month, portfolio diversification, sector exposure management and strong due diligence are the keys to run a successful ICO investment strategy

• We recommend a 2-steps investment method: first select the most promising sectors, then, invest in the most promising projects in the most promising sectors

• In term of valuation, the 𝑀 ∗ 𝑉 = 𝑃 ∗ 𝑄 equation from the Quantity Theory of Money works for most of the crypto-assets, the hard thing being to model the equation for each specific use case

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