2014-2017 ICO Category Breakdown and Funding

Autonomous Research have analysed investments in Initial Coin Offerings (ICOs) since their inception. The left-hand side graph depicts funding by category for ICOs from 2014 to 2017. Initial funding in 2014 began at US$26 million, breaking down to $19 million being spent on core tech and $7.5 million going towards cloud innovations. 2015 saw a dip in funding, dropping to a total of $14 million but it was spread out across a wider range of applications, with $5 million being dedicated to financial markets and $2 million being invested in cryptocurrencies. There onwards the ICO market has grown immensely, largely due to The DAO raising $150 million in investments, causing total ICO funding to rise to $222 million in 2016. The first half of 2017 has shown the greatest amount of funding, rising to over $1.2 billion, with over $500 million going towards cryptocurrencies and financial market services in second raising nearly $200 million.

The right-hand side depicts the firms with the most funds raised in the 2017 period so far. Topping the list is Tezos with $208 million followed shortly by EOS at $200 million, both of whom deliver core tech services. BANCOR received the third highest amount of investments at $150 million, dominating the financial market services, with only two other financial market firms with large investments: (1) Gnosis, raising $12 million, and (2) OpenANX, raising $19 million.  Media and social services grew hugely in 2017, with Status raising $95 million, Basic Attention Tokens raising $35 million and the DAO.Casino raising $12 million. Other notable service funding include cloud and payments, with TenX topping payment services at $80 million and SONM leading the way for cloud at $42 million.

Analysis of User Base and Money Supply in Popular Virtual Economies

Autonomous Next has estimated the money supply and user base of popular virtual economies in the period between 2014-2016. Our research provides insight into virtual currencies that existed before Bitcoin in four popular games of the 2000s, including: (1) Runescape, (2) World of Warcraft, (3) EVE Online, and (4) Second Life.  Companies developing these worlds act like a central bank issuing a digital money supply to keep functional economies of entirely virtual activity. Our findings show that World of Warcraft held the largest user base at 5.5 million players and a money supply equivalent to $10 million USD. Meanwhile, Second Life managed a significant money supply of $40 million USD and a user base of merely 0.9 million. Linden Labs, the creators of Second Life, even claims that the GDP for their virtual world was equal to $500 million USD in 2015. Lastly, Runescape and EVE Online held a user base of 1.3 million and 0.5 million respectively and a money supply equivalent to $2 million USD and $18 million USD. This phenomenon shows how entirely digital tokens that represent utility value in a virtual world can have both utility value and speculative value, as some traded on vibrant exchanges.

Analysis of Notable ICOs in 2017

Autonomous Next has analysed and mapped the notable Initial Coin Offerings (ICOs) in 2017. Our findings show that the equivalent of $1.2 billion was raised in token sales across 56 ICOs. The highest funding was raised by Blockchain start-up Tezos at $208 million. The company offers a Point-of-Sale smart contract platform with an emphasis on security through formal verification. Other companies, such as EOS.IO and BANCOR, follow closely at $200 million and $153 million in respective token sales. On average, the new wave of Blockchain companies have raised $22.6 million each and we expect the number of token sales to continue growing throughout 2017.

Breakdown of Current Best Practices for ICOs

Autonomous Research has uncovered the best practices for token sales that are in place to help inform and protect buyers, and to increase the chances of successful token sales. Safety and information resources and measures for ICOs include (1) a white paper, (2) clear development map and (3) open sourced and published code. The white paper is designed to cover technical descriptions of the product and an explanation of how their ICO funding will work. Whereas the development map details the project stages, how funds are escrowed and provides transparent communication on the progress of the firm. The code is typically open-sourced as a form of contributing to the community and helping to accelerate learning, and as a result code that is private is viewed as potentially hiding ulterior motives.

Additional practices performed by ICOs include providing clear and fair pricing, although this varies depending on the pricing mechanism of the firm, with some opting for equal pricing for all and others giving early bird discounts. Developers of the firm also receive a share of the tokens and the ownership percentage is consistent with best-practices in other early stage investing. Lastly, one of the most imperative factors for good practices is a good faith marketing approach. Its aims should clearly outline the function of the network and the tokens, whilst not marketing the product as a high speculative investment. The most notable sites where this information can be gathered will be the home site of the firm, Consenys, Coinbase, Coin Center and USV.

Comparison of Dotcom Bubble and Current ICO Rage


Autonomous Research have analysed the resemblance between the dotcom bubble and the current ICO rage that is being experienced currently. The left-hand side graph depicts initially the amount of IPOs between 1997 and 2000, totalling at almost 900, which since then has dwindled down significantly. By 2005 the amount of survivors had reduced to 600 and continued to fall to 175 by 2010 and 128 by the end of 2010, equating to an 86% company failure rate. Annual share-price return for this cohort was 3.7% between 2000 and 2010.

Despite the vast majority of companies from the dotcom bubble performing extremely poorly, those who survived went on to dominate their industries. The two companies exemplified in the graph above are Amazon and Netflix, who are then contrasted with the NASDAQ composite. It can be noted that despite initial turbulence these companies went on to dominate their respective industries and performed well above the NASDAQ composite. Netflix’s market capitalisation rose from $320 million to $70 billion and Amazons grew from $429 million to $475 billion, equating to increases in market capitalisation by 225x and 1000x respectively.

Opportunities of ICOs for Financial Services Incumbents


Autonomous Next has analysed the opportunities for Financial Services incumbents to incorporate ICOs as an asset class into their business models. We measured opportunities in two dimensions: (1) proximity to end-client financial assets and (2) time horizon of financial activity. Our findings show that the opportunities for businesses with relatively short term financial activities, such as payments, are limited. However, companies operating in longer time horizons, such as investing, experience more methods of creating value through ICOs. For example, an incumbent operating in payments has the opportunity to aggregate payment data for financial management, but cannot leverage ICOs as an asset class closer to the end-client. However, with investing, an incumbent can create value close to the end client by adding tokens as part of asset allocations in client advisory , while using AI to extract sentiment from crypto-discussions on the other end.

Sources of Capital for ICOs and Bitcoin Whales

Autonomous Next has analysed the sources of capital for the recent surge in Initial Coin Offerings (ICOs). Our findings show that the digital currency ‘whales’ are split into five categories: (1) mining pools, (2) exchanges, (3) currency traders, (4) ICO investors, and (5) traditional financial investors.

Firstly, the mining pools (e.g.  Antpool) are the early beneficiaries of the crypto-currency wave and represent a collection of specialised computing clusters that centralise their computing power to gain the next coin distribution. Exchanges represent the retail and over-the-counter venues that allow for the conversion between fiat and digital currencies (including coins/tokens). Currency traders are funds that focus on the trade of crypto-currencies with the aim of making a profit rather than the investment into tech projects. ICO investors, however, are larger funds with institutional or private capital to invest in emerging technology projects. Finally, traditional financial investors represent venture and Angel investors in the equity of companies working on Blockchain solutions. Together, these groups account for over $700 million of ICO funding.

Bitcoin Transaction Volume and Marketcap Comparison

Autonomous Research have analysed and compared transactions and market capitalisation between Visa, MasterCard and the blockchain platform, Bitcoin. In the fourth quarter of 2016 Visa and MasterCard transacted volumes of US$1.9 trillion and $1.2 trillion respectively, with their market cap approximately equalling 1% of transactions volumes. Alternatively, Bitcoin had $107 billion in transaction volume in 2016 and its ecosystem is valued at $11 billion, although another $30 billion can be priced into Bitcoins market cap as a growth prospect. That number can be discounted due to the high correlation between funds and speculation, lack of full scale and technical and regulatory issues. However, it can also be buffered by the other 50% of Cryptocurrency assets and next-gen growth technology that is being integrated into the ecosystem.

Digital Tokens Economic Model and Self-Imposed Price Ceilings

Autonomous Next has modelled the increasingly popular market for digital tokens to show how Blockchain start-ups are responding to excessive funding. Digital tokens are a form of crypto-currency released during a new method of crowd-funding known as Initial Coin Offerings (ICO). The price of digital tokens during ICOs is determined by supply and demand with current demand being insensitive to price. Our view is that a high demand for tokens is leading to excessive funds being raised for unproven projects that should be at seed stage. These irregular outcomes show similarities to the Dotcom bubble and have forced start-ups to show signs of constraining supply or demand in order to avoid negative backlash. As a result, a large number of start-ups have experimented with limiting supply and initiating auctions. Our chart shows a popular incremental solution where a self-imposed price ceiling creates a gap between supply and demand. Upon starting the ICO, this self-restriction is often relaxed by companies to raise a vast amount of capital in a short time period.

The Economics of Crypto-Tokens Compared to Traditional Stocks

Autonomous Research has modelled the flow of resources in traditional stock investing and the increasingly popular Crypto-token investing.  In both cases, the four primary players are: (1) the operating organisation, (2) the founders, (3) outside investors, and (4) products and services.  In traditional stock investing (left model), outside investors trade cash for an ownership stake in the operating organisation. Meanwhile, the organisation generates economic activity in the form of products and services in return for an economic reward from the external fiat money supply. Fiat money, as opposed to crypto-currency, refers to inconvertible paper money declared by a government to be legal tender. Further, we note that a company’s utilities, such as money transfer technology between bank departments, are not monetized.

Our right model represents the flow of resources in crypto-token investing. In this case, outside investors are required to trade cash for an ownership stake in the functional utilities or proprietary money supply, which is owned and issued by the operating organisation. This money supply is usually a liquid digital crypto-currency known as a token and is unique to the operating organisation. Depending on the company, token holders could have a right to investment features, such as equity interest, but also to functional features, such as using the system and its outputs.

Breakdown of Global Fintech Investment by Region

Autonomous Research has found that global Fintech investments by region have grown from a total of $2.5 billion in 2012 to over $17 billion in 2016. Although there have been notable increases in investments in North America and Europe, Asia has grown most rapidly with investments in the region rising from $0.2 billion to $8.5 billion over the past 4 years.

Analysis of the share of global Fintech deals depicted by region tells us how the quantity of deals made in each region has fluctuated over recent years. North America remains the leader in Fintech deals, but has been experiencing an incrementally lower share of the total deals globally. Europe has maintained steady growth and now represents 28% of all deals, up from 22%. Asia once again has experienced the greatest growth having more than quadrupled the number of deals between 2012 and 2016. The correlation between the global share of the amount of deals and the total investments received in Asia can be explained by the fact that six of the seven largest Fintech companies come from Asia.  Deals and investments from other countries remain fairly constant with only minor fluctuations.

The Attention Economy and New Revenue Streams from Social Media

The above graph shows that celebrities can now use social media as a source of income, with Twitter being a primary example. Musician Snoop Dogg would receive $8000 a tweet as a result of his 6.2 million followers, Paula Abdul would receive $5000 with her 2.2 million followers and Whitney Port would receive $2500 at 0.8 million followers.

This new pay structure has developed as entertainers begin to receive declining sales on music and media with the advent of streaming sites, such as Spotify, Soundcloud and Youtube, providing free access to content. As a result, influence has become a new form of currency, where firms will pay considerable amounts for sponsored tweets that have the potential to reach millions. Twitter is not the only platform incentivising influencers and entertainers, the same can be said for Youtube, Snapchat, Twitch and Instagram as businesses aim to appeal to the ever growing digital savvy populace.

Analysis of Global Fintech Investment

Autonomous Research has estimated the Global Fintech Venture Capital Investment to be $17.7 billion in total capital across 1556 deals in 2016. Compared to 2015, these figures represent an 8.3% increase in total capital received by Fintech start-ups and a decrease of 6.4% in number of investments. Despite this decrease, the CAGR across 2012-2016 stands at 62% for total capital invested and 22% for deal count. As a result, we find that the average capital per deal is growing steadily and new Fintech entrepreneurs are being supported by increased venture financing. 

Size of Investment and Wealth Management Market

Autonomous Research has estimated the size of the US wealth management industry to be $376 billion in revenue in 2016. This figure is derived from investable assets of $37 trillion, which are defined as household net worth less illiquid assets such as residence and private company shares. The resulting industry pricing is slightly below 1% in fees across the ecosystem. Investable assets are derived based on the distribution of households in the United States, of which there were 124 million.

The overall market is separated into the following segments: (1) retail households with <$100k, (2) emerging affluent households with $100k-250k, (3) mass affluent households with $250k-1mm, (4) high-net worth households with $1-10mm, and (5) ultra high-net worth households with $10mm or more. Different firms use slightly different terminology and cut-offs for these populations. Our methodology reflects how most industry participants structure their service offerings and channels to target the quantified segments. The first chart shows households, investable assets and revenue pools by household segment.

On the second chart, we looked at the asset management side of the equation. Asset management is the manufacturing part of the investment management industry. Within fund management in particular, we find an 8.3% CAGR between 2008 and 2015, which is the period defined by the recovery from the financial crisis. For the same period, exchange traded funds grew at a 21.7% CAGR. The story that passive index investing and ETF investing have grown faster than the rest of the industry is shown here quantitatively. Whereas mutual fund growth is beginning to stall, ETF growth continues to expand.


Analysis of Venture Investment Activity for Digital Wealth Start-ups

Autonomous Research has analysed Venture Investment Activity within the digital wealth sector starting from 2008.  The findings show a surge in venture funding with investments reaching $615 million in 2014 compared to $194 million in 2013. The vast majority of capital was raised in North America, giving rise to digital wealth management start-ups such as Wealthfront and Personal Capital. In 2015, venture funding doubled to $1.3billion resulting from increased investment in Asia and start-ups such as Chunhua Wealth and Wacai.com entered the scene. With considerably smaller venture activity in Europe (and other regions) and investment reductions in Asia in 2016, North America is accounting for the majority of support for digital wealth entrepreneurs.

The second chart analyses the number of companies with seeding rounds targeting digital wealth start-ups across the same time period. We find a surge in companies providing venture funding across all regions from 2014: 56 companies in 2013 to 115 in 2016. Breaking down the companies by region re-affirms that North America offers the majority of venture funding in the wealth tech sector and support of digital wealth start-ups.

Trends in Initial Coin Offerings and Crowdfunding Volume

Autonomous Research has analysed the trend in Initial Coin Offerings (ICOs) as an unregulated means of financing public Blockchains.  ICOs have experienced significant growth in 2014-2016 with funding rising from $26 million to $222 million. Cryptocurrency Ethereum was responsible for the majority (73%) of total funding from its ICO in 2004, whereas theDAO lead with a majority (68%) in 2016. The number of notable ICOs also rose from 3 to 16 in this period.

Our second chart shows the 2015 breakdown of global crowdfunding activity. ICOs represent less than 1% of the $34 billion raised, with peer-to-peer funding making up a majority 74% of total funding. With the surge in financing of public blockchains, we expect ICOs to capture an increasing portion of crowdfunding volume.

Analysis of Technological and Regulatory Pressure on Global Capital Markets

Autonomous Research has quantified the rising regulatory and technological pressure in global capital markets. Since 2010, we have found a gradually decreasing revenue pool across (1) FICC, (2) Equities and (3) IBD. The CAGR across these divisions stands at -3.4% for the period between 2010-2016. However, The FICC division experienced a significant decline with a CAGR of -5.5%.  This is attributed to increased regulation and the associated deleveraging of the ecosystem combined with increasing technological forces.

Short-Term and Long-Term Projection of Digital Assets Under Management up to 2030

Autonomous Research has estimated the growth of Digital Assets under Management in the short-term and long-term respectively. The short-term base case projection estimates $1.5 trillion in digital AUM by 2020. This figure is driven by our expectation of an increased adoption of Roboadvisors as a result of fiduciary requirements shrinking transactional businesses. In the case of a delayed adoption, our conservative projection estimates $0.5 trillion in digital AUM by 2020.

In the longer term, our base case projection reaches $4 trillion in digital AUM by 2030. However, with growth and ETF-like adoption, where Roboadvisors use passive ETFS to shrink industry fees, we estimate $8 trillion in AUM.  Finally, our Bull case occurs with digital wealth growing into HNW with early adoption across orphan accounts and the high-end mass affluent. This would lead to $17 trillion in digital AUM by 2030.

2030 Projection of Blockchain Technology Market

Our findings project that Blockchain technology companies could experience a revenue pool of $6 billion by 2020 and $20 billion by 2030. These figures are based on the impact of digital ledger technology on payments: (1) Business Cross Border, (2) Remittance, as well as impact on (3) Capital Markets and (4) Title Insurance. Findings show that Cross Border B2B will make up most of the Blockchain revenue pool at $3.5 billion (56%) in 2020 and $12.2 billion (60%) in 2030. We also expect the increasing adoption of digital currency to put downward pressure on remittance payments shifting 20% of revenue to Blockchain companies. We project this to account for $1.5 billion (24%) of Blockchain revenue in 2020 and $3.8 billion (19%) in 2030. Remaining revenue is captured by the reduction of infrastructure and counterparty risk for capital markets, as well as savings in Title Insurance commissions and maintenance cost. In the period 2020-2030, Autonomous Research estimates a CAGR of 12.6% for the Blockchain technology market.

Analysis of Blockchain Venture Activity and Bitcoin Relation


Autonomous Research has analysed the Venture Activity relating to Blockchain and Bitcoin in the period 2011-2016. Our findings show a strong growth in venture funding and deals made, starting in 2013 with $75 million (75 deals). Peak investment in this period occurred in 2016 at $525 million (142 deals) with deals made declining from 195 in 2015. This suggests higher funding per deal and new start-ups are increasingly supported by venture activity, primarily in North America.

Our second chart shows a decline in the share of funding targeted at Bitcoin entrepreneurs with 42% of venture funding not focused on the currency. This is a sharp decrease from 3% in 2014 and implies a shift in interest away from Bitcoin and towards other cryptocurrency and digital ledger technology.