The Crypto Dollar industry has hit an inflection point in growth, with Tether the biggest beneficiary

Since launching in 2014, Tether has been a highly debated project within the crypto industry. Naysayers have given it a fair bit of criticism — from questions about the collateral backing to regulatory uncertainty. It also has faced increasing competition from numerous stablecoin projects that have launched over the past 3 years and seemed poised to eat into Tether’s market share.

Now, years later, Tether has withstood these attacks and uncertainty and exceeded all expectations around its growth. Over the past 12 months, Tether issuance has tripled to $10B, and now accounts for >85% of all outstanding stablecoin issuance. While the stablecoin category as a whole has become increasingly relevant, Tether has benefited the most from the increased attention and usage. …

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Blockchain networks are open, accessible networks in which anyone can participate and contribute. There are many new ways to interact with these systems, including staking, voting, governance or app development. These behaviors are crucial to the health and overall utility of public blockchains.

However, running secure and redundant node infrastructure that enables these types of activities and behaviors is a capital-, resource- and time-intensive process. Most organizations require dedicated personnel with significant technical expertise to ensure that this infrastructure is functioning properly. Aside from being costly, this effort detracts from these organizations’ core competency, focus and objectives.

Even with dedicated personnel, the stakes are high: Done poorly, network participation can result in loss of funds for the user, culminating in an exit from these systems. Combined, these hurdles represent a substantial barrier for many stakeholders who wish to contribute and participate in public blockchains. …

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Initial Exchange Offerings (IEOs) have emerged as a recent phenomenon, attracting attention and scrutiny. IEOs are similar to ICOs, except that the raise is conducted through the exchanges themselves. Each exchange’s IEO structure may differ slightly, but the general principle is the same. The exchange will perform some of the key underwriting functions — marketing, fundraising, and distribution. Upon completion, the project’s token will be listed on the exchange and available for trading. In return for performing these services, the exchange is paid a fee generally denominated in the given token.

Binance pioneered the model with the Bittorrent sale in early 2019, and numerous exchanges have followed with their own — including Bittrex, Huobi, Kucoin, OKEX, and many more. IEOs are an exciting, innovative new phenomenon, but questions remain around long term sustainability and market impact. In this piece I’ll address some of the main themes of IEOs, and their broader impact on crypto markets. …


Derek Hsue

Investment team @BlockchainCapital, @Wharton

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