#Token Mania

2014-2017 ICO Category Breakdown and Funding

ICO Funding 1H 2017

ICO Funding 1H 2017

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.

* Updated numbers through December 10th, 2017 are below:

ICO Funding, December 2017

ICO Funding, December 2017

** A note on methodology. We primarily look at ICOs that have raised or are raising over $1mm USD, which filters for more reputable projects but may miss the longer tail of seed-stage token investing. To collect the data, we leverage and cross-check multiple primary and secondary data sources, and then categorize projects based on use-case into industries. The starting and ending dates of ICOs are also a moving target, therefore we use the earliest of the dates where possible. Our goal with this data is highlight the direction of travel, which appears to be from the protocol level to the application level.

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.