Map of Crypto Projects By Token Type And Industry

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Autonomous NEXT has analyzed crypto projects by token type and industry. The three token types consist of: (1) core infrastructure projects that seek to build new or supplement to the existing crypto ecosystem platforms to promote efficiency and effectiveness, (2) financial services projects are crypto projects aligned to the financial industry, and (3) Vertical apps are crypto projects that support a specific business process and targets a niche user base.

** 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

Unified Token Taxonomy

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Autonomous NEXT analyzed multiple taxonomies that categorize projects noting emerging common themes. We used these taxonomies to build the unified token taxonomy which seeks to incorporate elements of each taxonomy, and their means to breakdown a crypto asset into multiple use cases.

Our findings showed that: (1) Monetary instruments are the payment unit of crypto economic activity, with (a) coins like BTC attempting to be used everywhere for all use-cases, (b) protocol tokens like ETH attempting to be used generally within its protocol, and (c) we further break out coins by their monetary policy. (2) Application utility tokens where “Utility” correctly points out generalized functionality, i.e., something being useful, and is not limited to consumer or enterprise use cases but generally how software is powered when interactions provide surplus and are valuable.

The first split is between (a) tokens used in applications on public, decentralized networks, like Filecoin and (b) tokens or units of account used in applications on private, enterprise networks, like the UBS Utility Settlement Coin project, which we believe in the long run will be interoperable. Finally, (3) the category of financial instrument primarily refers to the coming wave of security tokens, which are akin to equity or real estate crowdfunding sitting on more modern, decentralized infrastructure. These assets have an established and clear role relative to capital tables of corporate entities. We expect a convergence of enterprise and public blockchains as consortia digitize existing capital markets, insurance and asset management, and thereafter become interested in crypto liquidity. Economic participation in decentralized applications (e.g., DAO, profit sharing, referrals) will inadvertently qualify as a financial instrument even if not explicit in the capital structure We include digital assets, such as tokenized commodities (e.g., a tokenized share of a painting) and digital collectibles (e.g., Cryptokitties), as a financial instrument when they function as a store of value and are legally structured as to become a regulated commodity.

Analysis of Global Crypto Regulation Map

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Autonomous NEXT and Latham & Watkins LLP analyzed the regulations covering most of the crypto hubs of the globe. The criteria for mapping each country’s respective regulation standpoints are: (1) Negative, (2) Neutral, (3) Mixed, and (4) Positive. Our findings show that the most active countries in the crypto space such as Japan, South Korea, U.S., and Russia have both positive and negative indicators of support within the space; whilst some countries such as Brazil, China, India, and Nigeria have implemented outright bans on cryptocurrencies, mining, or ICOs.

Breakdown of Investment in the Crypto Economy

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Autonomous NEXT analyzed the investment in the crypto economy from 2013 till June 2018. Our findings show the first wave of investment from traditional venture firms in Bitcoin associated companies was between 2013 and 2016, with $400-700 million annually. The second wave of investment from corporates into enterprise blockchain was between 2015 and 2017, with $250-400 million annually. The third wave of public crowdfunding flowed into ICOs, with an unprecedented rise in prices for crypto currencies, with $7 billion of investment going into the space, 4x greater than equity investment in crypto companies. Many ICOs formed to take advantage of the “gold rush” and created questions of quality and regulation for tokens

But nearly half of the $12B in funding raised in 2018 is EOS ($4.2B) and Telegram ($1.7B) hiding emerging weakness in the system.

Analysis of Crypto Funds by Inception & Strategy and Estimated AUM

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Autonomous NEXT has kept a running tally on the number of crypto funds within the space, as well as their respective estimated assets under management.  Our findings indicate that over 300 funds currently exist, most of which started in 2017 and 2018, with a variety of strategies including Venture, Trading, Quant & Artificial Intelligence, Fund of Funds, Indexes, Token Baskets, Credit and Ecosystem Funds; with the majority (56%) of total AUM controlled by liquid venture funds. The inception of 61 funds in the first half of 2018 means barriers to entry such as market volatility and significant start-up costs do not pose as significant deterrents to new entrants seeking exposure into the crypto space.

Analysis of Liquid Coin Price Performance

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Autonomous NEXT analyzed the price performance of the top 200 liquid coins over the last 1.5 years. The resultant graph looks like a Monte Carlo simulation, except the scale for outcomes is an unbelievable 10%-1,000,000%, graphed on a log scale. The black bar represents BTC and the magenta represents the BITA top 50 coin Index, which immediately highlight the correlation waves between BTC and the other crypto assets. Our findings conclude that such continued outperformance would suggest exponential software-like growth for digital assets, and that after an ICO offering, tokens may be listed on an exchange and experience the price performance of liquid coins.

Breakdown of ICO Launch Costs

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Autonomous NEXT have modelled the cost breakdown relating to launching an ICO. The breakdown has identified 3 key areas of consideration: (1) Crypto law firm cost, (2) ICO platform cost, and (3) Liquidity.

Crypto law firm costs are split into two phases relating to the initialisation of the project and the items relating to the operation thereafter, both of which constitute around 20% of the overall launch costs. ICO platform costs relate to the construction and marketing costs of the ICO, including the payment for positive ratings, which accumulate to around 20% of overall launch costs. Liquidity relates to the launching of the ICO on a single crypto exchange which accumulate to a considerable 60% of overall launch costs.

Our findings were that the capital outlay needed to launch a crypto fund are considerably higher than originally thought, and as the space becomes more institutionalized so it’s likely to see these costs normalise.

Emerging set of approaches to crypto valuation

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Autonomous NEXT has broken down the emerging set of philosophical approaches to crypto valuation which has resulted in various feedback loops.

Our findings show that the lack of concrete definitions behind tokens and coins coupled with the retro-fitting of existing economic frameworks and math from adjacent industries results in finding a commonly used valuation framework close to impossible. The need for a valuation framework is driven by (1) institutional investors used to DCF and comps entering a market that is more appropriate for early stage venture, and (2) the immaturity of decentralized project models, which have no stable equilibrium around long-term instrument pricing and market outcomes. Market manipulation and persistent speculation has skewed activity statistics related to digital assets and hence made real vs. created activity difficult to distinguish. The transition from corporations to networks and from profits to mutualized resources is also a meaningful unknown.

Directions of global regulatory approaches to Crypto

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Autonomous NEXT has analyzed how, from a strategy perspective, global regulatory approaches follow three directions according to their role in the global economy. Our findings show that the adoption of regulatory approaches towards crypto is different across different countries.

Crypto Delaware represents economies that are less concerned with consumer protection and are more attractive regulatory environments for innovation and start-up activities. Sovereign technology sword economies use sovereign power and investment to control and direct technology and economic competition. Consumer protection shield economies favour innovation to be bound by the existing regulations and laws in order to maintain the status quo of economic activity.

The four waves of innovation within crypto themes

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Autonomous NEXT has identified the four key waves of innovation within crypto themes starting with: (1) Bitcoin, (2) Enterprise Blockchain, (3) Decentralised Apps, and (4) Smart Securities.

Firstly, Bitcoin in 2008 exemplified the first decentralised and secure digital store of value from 2008, potentially disrupting $7-100 trillion in the global macro trade. Enterprise Blockchain in 2014 allowed for private consortia within industries to take advantage of the efficiencies of the blockchain whilst retaining necessary elements of privacy, impacting $500 billion of costs in financial services alone. Decentralized Applications commercialised blockchains further by allowing for entrepreneurs to build digital products and services (ICOs) harnessing the security and efficiencies of the blockchain. Finally, Smart Securities launched in 2018 enabling for further institutionalization and tokenization of the crypto space, spreading the overall impact to all asset classes valued at $500 trillion.