Section 3: Blockchain industry players


Market growth and profitability The viability of mining Bitcoin is tightly linked to the price, expressed in fiat currencies, which means that miners are considering their opportunity cost, regardless of their equipment amortization or a bet on the price of BTC. In other words, the dynamic of the amount of hash power joining or leaving the network has caught up with the economic incentive to participate in the consensus mechanism, as opposed to being motivated by enthusiasm for the business.

So, stating the obvious, in recent weeks the higher BTC, ETH and other crypto-assets prices have made the operation of mining rigs profitable again for many operators, repeating the phenomenon observed at the end of 2018.



One question not yet addressed in this Blockchain Quarterly is: why do miners use processors on graphics cards (GPU) instead of just the CPU of the machine? The answer lies in the design of the GPU.

Central Processing Units (CPUs) are usually designed for “executive work”, that is, handling all of the tasks the computer has to perform. These diverse operations include processing math functions, executing various types of programming instructions, permissions, managing data flow, etc. The different requirements imposed on CPUs led manufacturers to make some technical decisions that resulted in a chip that can process a modest amount of calculations by a unit of time, but that is also suited to handle a range of other tasks that are expected of a computer.

A Graphics Processing Unit (GPU), by contrast, is a much more specialized device. It can handle a lot more instructions per clock cycle, and in particular, the computation-intensive operations required to render graphic displays, e.g., for gaming applications. GPUs are designed specifically for this purpose, and this is why they can typically execute significantly more instructions per clock cycle, compared to standard CPUs.


It happens that the hashing power needed for proof-of-work mining is a repetitive yet simple task that graphics processors are far more efficient at tackling than the standard CPU.

The concentration of hash power

With prices of BTC and other cryptos increasing again, break-even is easier for miners to reach, thus slightly easing the Chinese dominance.

Environmental issue – electricity consumption

It was big news for the sector when Chinese authorities recently announced they were considering banning Bitcoin mining in the country; currently, it is estimated that 70% of BTC mining occurs in China, so the impact could completely reshape the industry. Chinese miners may start delocalizing, just like their exchanges successfully did in 2017 after Yuan/crypto trading was prohibited, and ICOs were banned in the country. One of the main reasons advanced for a potential crypto mining ban is the terrible environmental impact of the activity.

Just a fun fact to mention in this section: US police were suspicious of the high electricity consumption and ventilation system installed by a resident. Dubious that they were dealing with cannabis cultivation, the police set up an operation to break in and enforce the law. After they violently entered, doing much damage on the way in, all they discovered were mining rigs in production.















Decentralized exchanges (DEX)

The momentum gained by decentralized exchanges in the past few months, and highlighted in the previous Quarterly, is not slowing down.

As with any decentralized application, the user interface of DEXs is still not very friendly or practical. Necessary graphic masks, allowing the display of data retrieved on-chain (offers/bids) and to manage private keys, so that users can send their orders to the DEX, are not yet mature. User interfaces need to be improved before a mainstream breakthrough can occur for DEX’s.

Of course, decentralized exchanges make sense for tokens that are instantiated on the same infrastructure. As such, it comes as no surprise that most DEXs have been built on Ethereum, where most tokens have been deployed (ICOs, etc.) – hence the type of manageable assets makes the most sense. However, other platforms are also getting their own DEX operating: an example is Scopuly on Stellar. Nash, among others, intends to build its application on NEO.


Off-chain crypto exchange platforms

Crypto exchanges should expect to face fierce competition from each other. One can argue that their fees are far too high at the moment, especially small exchanges that list minor tokens. Not even mentioning slippage of illiquid pairs, gateways to the crypto world (exchanges) still do not hesitate to charge high fees. Coinbase is probably the most shameless actor. We can expect competition to become fierce in this sector, thereby driving these fees down.

Another differentiating factor could be how the various exchanges redistribute the actual benefits derived from the tokens owned. Consider staking Maker or Tezos: when exchanges own a large chunk of the current supply, as custodians for their customers, they also have an incentive to play the role of significant stakes. As such, they logically are making big money that, at the moment, is not returned to the owners. Exchanges keep that for 
themselves, but hopefully, this will soon come under scrutiny. Some timid initiatives have begun work on this, but a lot more can be expected.








From data published by exchanges, we see, for instance, that Kraken has 4 million users. It is safe to assume that half of the active users, at least in the Western world, have a Kraken account. This means that 8 million individuals are trading crypto-assets in the western world. Let’s make it four times this number to account for Asia. We now have a figure of 32 million people on the planet that have created an account on a crypto exchange platform. Now, let’s extrapolate and say that this means 32 million people have already had a taste of crypto. Out of 7 billion people on the planet, that indicates that around 0.5% of the human population is involved today. This is significant, but still small compared to the potential.

Some other news in summary:

  • CoinBase has proposed a Visa card for British customers that allows them to spend their Bitcoin, Litecoin, etc. Following the same approach as TenX or, cryptocurrencies are exchanged automatically when the customer purchases some goods at a retailer. This is an interesting example of an exchange expanding vertically in the value chain.

  • CoinDeal, a crypto exchange, is sponsoring a football team in the UK, showing the exposure that these businesses are obtaining.

  • CoinSquare, a Canadian centralized exchange has acquired StellarX, a Stellar Federated Byzantine Agreement, zero-fee, decentralized payment network.












Legacy exchanges

In a sign of crypto integration with traditional exchanges, Nasdaq now lists now Bitcoin and Ethereum indexes, with Ripple to follow. The aim of Brave New Coin (the entity behind this) is to provide price liquidity that does not depend on a single exchange, given that huge disparities still exist between the various markets on the planet at any given point in time. Importantly, this step might be used to defend the validity of Bitcoin ETFs further, because it could address the SEC’s assertion that the price of the cryptocurrency could be subject to manipulation.


We estimate the monetory erosion to be around 15% for Bitcoin over ten years, which is probably 1% per annum.


From an entrepreneur’s perspective, attracting money for a DLT business was not easy in early 2019, at least not in Europe – otherwise, there would be fewer ICOs. Projects that invested in BTC and ETH are hoping that the value will continue to increase in the medium term, funding them comfortably in 
the process, despite the meager amounts raised (compared to 2017). In parallel, ventures that owned cryptos experienced a revaluation of their assets, which must have had a positive impact on their mindset.






















One piece of recent news relates to a 21-year-old entrepreneur attempting to sell his failed ICO (i.e., his aborted development efforts) on eBay. In his description, he claims that he took the advice of a lawyer who advised him to have an MVP before launching. However, the ICO craze was over, so he was not able to raise funds.

Apart from this, it is worth noting that crypto entrepreneurs are struggling to open regular bank accounts. This is a concern in even the most cryptofriendly nations, which are Malta and Switzerland. The situation can be illustrated through an example : an enterpreneur manages to raise funds in Bitcoin or Ether, and then exchanged them for fiat on a crypto exchange through a corporate account. But then, if they want to use these funds, they need to transfer the money to a regular bank account. At this stage, a banker is going to ask them where this money came from; that is the crux of the concern. How do they explain that they conducted an ICO and that they want to exchange virtual money from the proceeds? Currently, they are almost sure to lose.



Exploration of the ledger (which does not allow active tracing of owners by type) in February-March showed that large holders were accumulating coins rather than selling them. The casual observation indicated that several hundred million euros worth of Bitcoin were bought by wealthy holders in the first three months of 2019. One would argue that these investors are not likely to sell these assets before prices rise again, and probably would even be willing to hold in the event of another decline.

Interestingly, evidence of large wallets accumulating Bitcoin was also seen for addresses that have been dormant for years.


On February 18th, a whale placed an order worth almost 300M euros for Bitcoin futures; a sign, among others, of bulls taking positions. In MarchApril, there were big moves on Bitcoin Cash, which can also be attributed to whales.


Crypto billionaires that can be confidently classified as whales, such as Binance’s Changpeng Zhao, the Winklevoss twins, and EOSs Blumer, all voiced their faith that Bitcoin has a bright future; will replace gold, and prices will hit several hundred thousand, etc. While this is in no small degree daydreaming, these opinions indicate there are embers under the ashes.


Casual holders

Limited research indicates that trading activity has significantly increased in developing economies: Indonesia, Iran and South America, in particular, are showing similar patterns. This is very interesting, as it is likely to represent significant progress in the acceptance of pure cryptocurrencies. We can ask ourselves, what is going on here? Why is this happening? Why now? And, is this trend likely to continue? Let’s propose an intellectual perspective.


Africa, South-East Asia, and Latin America did not deliberately lag, but as usual, it was the developed countries that had the opportunity to be involved early, DLTs being no exception. Now that knowledge of cryptocurrencies has spread more widely, not only at all social levels but also in all geographies, it is normal that some growth is observed in developing countries. An additional effect is “leapfrogging”, where unbanked individuals now have the option to immediately become their banker, with the ability to make and receive payments, and thanks to cryptocurrency, enjoying a parallel economic system more efficient than the traditional banked one.

In economies that are still somewhat fragile, trust in fiat currencies issued by central banks raises questions. This is true of Argentina and South Africa for instance. Individuals in these countries are tempted to try alternatives, such as among which Bitcoin. As long as central bank currencies are poorly managed, this is likely to encourage crypto adoption.


There is no doubt that inhabitants of developing countries have been significantly exposed to crypto through remittance mechanisms. Sending money abroad has always been a hassle and very costly for workers employed abroad. Forwarding funds across borders has been a visible and significant first-application of Bitcoin, thereby triggering crypto awareness in those countries. 


Rising crypto-currency prices can only create a positive feedback loop here. So yes, we’d say that the phenomenon is likely to continue.


A study in the United Kingdom concluded that crypto-investors are still mostly motivated by the prospect of getting rich fast. There are two ways to read this: one is, of course, that the opportunity of getting more prosperous always drives an investor, and the faster, the better; the other assumes that actors in the market today are mostly the same as those who were active in early 2017, and who are convinced the crypto-sphere is going to keep behaving the same. They may or may not be correct, but it is essential to acknowledge that they are the people that are playing out there. While some of them still don’t have much of an understanding of cryptocurrencies, on average, they have now had time to do their research and start to settle down.


A surge in Google searches, using Bitcoin as the keyword, was once a great indicator of the hype. The number of these searches skyrocketed in early 
April, suggesting that some of the crazes have returned.


From our direct observation, individuals who tasted crypto in late 2017, with more or less success, are starting to get involved again. The April 2nd upward shock awakened the enthusiasm of investors that had not been too badly hurt.


Long story short, all available indicators show a return of excitement among casual holders towards cryptos and blockchains.




Every day, it is more evident that the PE/VC business can never be the same again. Whether it be through ICO, STO, private offerings or other mechanism, the tokenization of shares in small companies is forever changing the coupling of the action to help companies to achieve a capital reward for investors. One of the impacts is that an owner (or major shareholder) of business will dedicate themselves to the success of the venture, while those that are “free riders” will hopefully be there to enjoy the right results.

PE firms and VCs are reported to be continuously investing heavily in DLT-related businesses, and many of them are of course acquiring the real stuff: shares, as opposed to utility tokens (and as a result, they go below the ICO radars).

Some observers have estimated there will be over 1 billion euros in PE/VC investments in DLT start-ups in 2019. This is below the 2018 high (of 5 billion euros), but still more than the level of venture capital investment in 2017.

Private bankers and classical investment/ hedge funds

There is an ongoing race among banking conglomerates to offer crypto-related services to their customers, in terms of custody and access to crypto-markets. This has been triggered by their high-net-worth clients who want to diversify into crypt-assets, and in the process, forcing their bankers to offer the new asset class to them. As can be expected, it takes some time for the banks to adapt their operations, and for the management to ensure adherence to regulatory requirements, and so the first banks have recently started to advertise this service officially.




















Time will tell whether the introduction of custody services by traditional financial institutions will be the entry door for them. If they are open to that, it can result in them having first-mover status, that triggers the rest, and normalizes cryptocurrency involvement by traditional financial institutions. Indeed, whether institutional investors participate in the crypto market sooner or later is of uttermost importance, and will determine whether crypto prices increase significantly.


There are still no convincing signs that active trading by the traditional big banks and investment funds has started. One article reported: “Traditional asset managers – the likes of BlackRock, Vanguard, and Pimco – remain on the sidelines due to a lack of regulatory clarity across the world’s major markets. This is not to say their interest has not been piqued, but volatility, liquidity concerns, and an unfamiliar market infrastructure render the new asset class relatively untouchable, while regulatory uncertainty also persists.”

However, they are no longer loudly voicing how much Bitcoin is a fraud and is unsustainable, and how "untouchable" it is for them. So, they could well be preparing to be ready if and when they finally decide to enter the space. Journalists  often complain that they are unable to get big bankers to express their intentions with blockchain; the example of Bank of America filing 60 DLT patents and refusing to speak to Forbes about its progress, is indicative.


Otherwise, there is still no Bitcoin ETF out there. The latest prospectuses submitted for SEC approval will not be examined before mid-May 2019. Some argue that disapproval of an ETF because of potential manipulation, and protection of investors, is contradictory, because without an investment fund the investor is susceptible to buying Bitcoin on deregulated exchanges, and could lose their investment.


Warren Buffet, despite being a classic critic of cryptocurrencies, has expressed the view that blockchain technology “is important and ingenious”, but stated his negative opinion on Bitcoin again.


Dedicated (and new) crypto investment funds

The news from crypto-focused funds is not too bad, overall. Despite posting disastrous performances in 2018, funds were still able to attract capital in February and March (before April 2nd). For example, Pantera Capital raised over 150M euros in the first three months of the year. According to the fund, this was a difficult period, but clearly, it could have been worse.




Universities are actively developing their courses, with their focus on DLTs. The following are some of the most prominent schools and their initiatives:

  • In China, Fudan University has opened a research center focused on blockchain.

  • The University of Luxembourg has partnered with the trading platform VNX Exchange in a bid to improve the security of digital assets. The collaboration entails the University of Luxembourg developing higher levels of network security for digital assets.

  • Ripple has built a “global University Blockchain Research Initiative (UBRI)”.

  • EMURGO, the investment venture arm of Cardano, has established an academy in Bengaluru, India. The goal is to train developers and blockchain experts to promote the use of technology.

  • The Institute of Decentralized Economics in the UK has launched a study of blockchain economic systems. The goal is to “help organizations better understand the economics that underlies the blockchain industry”.

  • The New York City Economic Development Corporation (NYCEDC) has announced that it is opening a Blockchain Center in Manhattan, to offer blockchain-oriented educational services to the general public, such as programming classes and lectures for software developers.

  • The University of Zürich is building an impressive pool of PhDs involved in all fields of cryptocurrencies and blockchain research.

  • The National University of Singapore has announced it will work with a Chinese tech company to research and develop blockchain solutions.

  • Economist and researcher, Niall Fergusson, has stated that he has been very wrong “to think there was no use for a form of currency based on blockchain technology”.

More and more training courses and diplomas are being offered by traditional education institutions, focused on distributed ledger technologies; a sure indication that DLTs are a tech component that is here to stay. Let’s make no mistake; recognition by the academic world is complete.



Among start-ups, lay-offs of staff continued in March. This was the case at CoinSquare (a crypto exchange), at the Dash Core Group (the company behind Dash), at the NEM Foundation, and Bithumb in Korea, which has laid off 50% of its staff. However, since then there have been no further reports of layoffs.


On the other end of the industrial spectrum, i.e., as far as large corporations are concerned, the biggest hirers blockchain competences have been: IBM, Cisco, the big 4, and above all the others, by far… JP Morgan.


Also, the flow of investment bank executives joining crypto-centered funds continues.



Compared to 2015, and even if the value of cryptoassets has fallen by between 85% and 95%, the situation today is different by order of magnitude. For the crypto-sphere to move up in proportions comparable with the period from 2015 to 2017, it is necessary for much money to enter the crypto market.


What will be the source of this money? This is a crucial question with some potential answers:


  • Financial institutions have the potential to bring cryptocurrencies into another dimension. They are likely to treat the various crypto-assets professionally, Bitcoin in particular, and native cryptocurrencies, in general, will focus back the attention, while utility tokens will be handled by these actors for what they are, valuation-wise.

  • Citizens of developing countries may continue catching up with the rate of adoption in more mature economies. The potential here is exciting, especially if we consider extrapolating to the whole planet the proportion of Korean population that is actively involved.

  • The phenomenon of failing central banks, resulting in hyperinflation of official currencies, primarily if a financial crisis occurs. In some countries, we can expect the monetary situation to be bad enough for people to try to use alternatives, even if officially banned. Scaling solutions will make this possible.

  • The need to hedge the astonishingly high stock prices might be another mechanism pushing in the same direction. On the other hand, institutions may have no choice but to hedge against the price of Bitcoin, by just buying some.

  • There will be a requirement for more crypto volume, despite the reduced inflation rate, primarily if cryptos become widely used for payments. Starting from the low or nonexistent acceptance where we currently stand, this usage can only increase; even if a tiny fraction of traveler’s payments, remittances and shopping are conducted using Bitcoin, the impact on the valuation will be huge.

  • The generalization of tokenized finance will require a “moneta franca”, i.e., a commonlyused backbone currency, that cannot be the only fiat. Pure cryptocurrencies as a vehicle of exchange will benefit from the building of this new environment. There is no alternative.

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