Bird’s-eye view on crypto: where are we now?

This post compliments our first one with improved classification methodology, longer period of surveillance and bigger sample. Data in current research is intersection of top-500 cryptoassets by market cap (and approximately 200 random coins from the tail) with daily prices from starting from 2013. Those 200 coins were not selected randomly, but were in top by market cap when our first analytics had been conducted.
Although most categories remain self-descriptive, Bitcoin Family, Secure coins and Other crypto may seem very tricky because some coins have attributes of several categories, but in fact belong to only one. We decided to group Bitcoin and it’s ancestors if they had many forks of itself and/or got somewhat popular even being named after Bincoin.

Also, in comparison with the previous version of the article, we renamed the sector Capital & Liquidity into Finance.

First we look at the pie chart of projects and the table with their intragroup characteristics, such as average, median and standard deviation of capitalization of projects. The average is significantly higher than the median for each group, which indicates a specific distribution of projects (alike chi-squared) — one or two projects have a much larger capitalization than rest of others. In other words, the majority of such groups are similar in market structure to the whole market general, where Bitcoin is comparative to the rest of the thousands other cryptocurrencies in terms of market cap.

As we can see, Applications and Finance gained while Protocols and Middleware lost several points. Now Applications, Cryptocurrencies and Finance projects occupy 70% of the crypto-land. Finance projects had blossomed quite recently with lots of decentralized exchanges (DEXes), exchange utility tokens, p2p financial marketplaces and one-stop solutions for banks. Applications remain dominant group with lowest mean valuation. Prococols lost several points, and Applications, on the contrary, gained.

This situation shows gradual transition from the situation of so called thick protocols to applications: current landscape and upcoming projects show that the competition among protocols is very hard. This is a good basis for a next generation blockchain protocol to appear, and it’s not so important whether it will be upgraded Ethereum or one of its competitors.

It’s interesting to note that mean market cap for Middleware and Finance increased almost twice since our previous calculation; Applications showed a bit smaller but also significant growth.

Violin chart below reveals that majority of the projects are valued under $50M. We excluded superstars priced over $1B for better visibility, but they all will be shown at the map in the bottom of the article. Horizontal lines on violin bodies indicate medain capitalization as in table above.

In comparison with our previous computations, we can see that protocols became more diverse: the number of projects with cap above 250 million increased by half.

Distributions of the projects by category, not by sector, are presented the same way, in spite of the fact that we have so many categories that pie got pretty messy at the bottom.

It should be noted here that we slightly changed categories of projects inside single sectors. We have already spoken about cryptocurrencies sector above; in Protocols&Infrastructure we separated Scalability projects and Cross-blockchains, created the category of Turing-complete public blockchains, and liquidated marketplaces (they were moved partly into Finance and partly into Applications). In Middleware we separated Distributed computing&AI into a separate category (there are many new projects which create specific distributed AI solutions), and also redistributed projects from External data partly into Identity&Personal data where all the identity projects are listed.

The Finance sector gained several new categories, such as DEX (decentralized exchanges), Wallets, Exchanges&Infrastructure, Payments&Cards, Marketplaces.

The following table gives us better insight into divergence of financial metrics throughout the categories. It is nice to notice that categories merge fairly well into sectors without significantly biasing them as outliers. It implies that classification is both interpretative and explanatory.
Also it can be said that Bitcoin family has significant premium over Secure coins and Other coins.

Below is violin for the distribution of projects’ capitalizations in different categories (for the sake of visibility, projects with Cap > $250M are hidden). Densities of project capitalizations for each category allow us to relate not only the number of projects in groups, but also their placing within the groups. It can be noted that the majority of medians lie between $10M and $50M. This determines “probability-weigted” value of a typical project that has some liquidity and thus is present in our data. Projects in categories of Cross-blockchain swaps, Distributed storage, computing & AI, Turing complete public blockchains and (surprisingly) Health ledgers. Due to the current state of distributed ledgers, protocols and corresponding legislation in personal data and healthcare one might say that it’s hardly possible to create a fully functional healthcare system based on distributed ledgers. This is most likely a very important topic in the nearest future but probably not yesterday or today.

What we consider as promising and escalating industry is identification and personal data storage infrastructure and protocols. However, it is users, not investors who are going to benefit from development and maturing of such technologies due to its open-source nature and aptitude to forks.
Financial sector has recent changes as well. Apart from general adoption of centalized exhanges, the development of secure and convenient services for the decentralized exchange of crypto assets has become a notable trend. Now we can distinguish two key technologies that allow one to conduct safe transactions that do not require any centralized actor to trust transactions between different blockchains: DEXes and Cross-blockchain protocols (which fall into Scalability category of our classification).

The market performance shows exponential growth pattern that is known to everyone who face crypto on regular basis. Chart with natural values is useful for noticing robust spillover effects between Bitcoin and other markets. Stacked chart is presented to supplement description of global trends. We can note that only a year ago value transfer use case had ceased to be a dominant component of how investors percieve cryptographic assets. Protocols & Infrastructure carried only 10% of market cap in early 2017, but reached almost 50% by the middle of the year. This is supposed to be a signal of widespread adoption and utilizing of smart-contracts.
At the same time, Middlevare, Finance and Applications sectors do not exceed 5% of market share. The number of ICOs completed in recent year with fundraising over $6B together with the fact that most of them were attributed to these three sectors tells us that investors collate such projects with vanilla startups. After making macro-conclusions let’s describe intersectoral dynamics.

Stacked cryptocurrencies chart shows that it is very conservative sector that hasn’t changed at all since 2013.

Chart for Protocols & Infrastructure illustrates how Private blockchains were crowded out by Turing-complete public protocols. This doesn’t mean that private blockchains had depreciated in price, it means that public protocols advancement is really outstanding. Cross-blockchain protocols show some organic growth since its appearance.

IOT & Mesh networks attract the main attention in Middleware stacked chart. Other than that the following tendency is worth mentioning: shares of all other categories are smoothly equalized. Perhaps, IoT looks promising but it’s practically due to one project: the most significant contributor of uprising trend is IOTA.

Finance sector was usually distinguished for Tether and other sources of pegged synthetic assets (to gold price, for instance). However, we see that financial framework is being diversified by DEXes, cryptofunds and payments & cards solutions. The latter had quite hard time at the end of 2017 as one can remember.

The picture below is devoted to Applications sector. Traditionally incumbent categories were gaming & VR, lotteries and social applications. Attention Dapps promise to revolutionize digital marketing and have now fifth place in the ranking of sectoral capitalisation while they had twice more just a year ago. On the contrary, E-banking and E-commerce Dapps show positive dynamics.

To sum everything up, we believe that the industry experiences organic growth because underlying basic technologies are still valued much higher than upper-layer ones. Below we place financial map of crypto-landscape, faceted by sectors and separated by categories within.

Author: Klim Vahrameev