Who Survived the Crypto Winter?
As the crypto winter of 2018 — Q1 2019 is officially declared “over”, it’s time to have a look at the damage done to the blockchain sector. As the first and main application of blockchain technology during this period, the value of all cryptocurrencies as measured in dollars dropped by 80% from its peak, a crash that rivals the bursting of the dot-com bubble in 2000. While major coins such as Bitcoin, Monero, and Litecoin suffered tumultuous roller coaster rides, many lesser-known coins failed to survive at all.
An exhaustive list of over 1600 defunct coins can be found on deadcoins.com. These deceased coins represent projects that were supposed to embody one of three different types of blockchain applications:
- Digital currencies meant as a store of value (“Value Tokens” such as Bitcoin),
- Digital tokens similar to stocks representing asset value of a blockchain project (“Security Tokens”), and
- Tokens giving owner rights to use or redeem goods and services that a blockchain project was supposed to deliver when it was deployed (“Utility Tokens”).
The fall from grace was spectacular.
Now the good news
Looking at the cryptocurrency with by far the largest market cap, the price of Bitcoin is a key indicator of the state of blockchain technology. It’s encouraging to see the price curve has recovered, entering the “Slope of Enlightenment” after suffering through the “Trough of Disillusionment” according to Gartner’s Hype Cycle which is often applied to new disruptive technologies.
Gartner’s Hype Cycle
The bad news is, according to most journalistic accounts, over 90% of all blockchain projects during this rollercoaster ride have failed. There is even an indication that 98% percent of blockchain B2B projects have faltered far before they went live, a miserable result for the hottest new technology that was supposed to streamline the business backend.
So what went wrong? It boils down to flawed human emotions; crowd mentality, greed, lack of due diligence, haste and “Fear of Missing Out” (FOMO). Nobody wants to miss being part of the next “Big Thing”, and there was no lack of false prophets and snake-oil merchants who sensed the opportunity to make a quick buck off of hopeful ICO investors and crypto-enthusiasts. There certainly were a handful of winners in the first real application of blockchain: 23,943 bitcoin address hold a million-plus dollars worth of bitcoin, and three bitcoin addresses are worth a billion dollars or more.
Cryptocurrencies and crypto winter aside, blockchain still holds promise for many sectors that can capitalise on distributed ledger in the form of lower infrastructure and personnel costs, cutting out the middlemen, streamlined transactions, and higher data security.
The figure below illustrates sectors where blockchain adoption will have the biggest impact.
Like a year-long ice age that killed off the tangled undergrowth, the strongest trees survived. As cryptocurrencies slowly recover from the depth of digital despair, let’s take a look at successful companies which survived the crypto winter in three blockchain sectors.
As the initial driver and early adopter of blockchain technology, the lion’s share of blockchain firms ranked by market cap are active in transacting, storing, or mining cryptocurrencies. These activities can be considered either as speculative gambling by crypto-investors, or as a new-age stock exchange where “tokens” in companies can be bought and sold based on investor’s belief in the success of the projects behind the coins (or in the case of bitcoin, the success of the coin itself). Just like Wall Street, it is probably a bit of both:
- Coinbase (market cap $8bn): Based in San Francisco, Coinbase is considered the most successful blockchain company up to now with $520m revenue in 2018. Founded in 2012, Coinbase is an online exchange where investors can buy, sell and transact with over 20 of the most popular cryptocurrencies such as bitcoin, ethereum, and litecoin. Coinbase currently has around six million users.
- Binance (market cap $1.3bn): Originally founded in China in 2016, Binance is a global cryptocurrency exchange enabling trade in more than 100 cryptocurrencies. Since early 2018, Binance is the biggest cryptocurrency exchange in the world in terms of trading volume. Binance has no official headquarters and tries to keep locations secret for security reasons.
- Kraken (market cap $4bn): Founded in 2011 and also based in San Francisco, Kraken is one of the largest and oldest bitcoin exchanges in the world, and is consistently named one of the best places to buy and sell crypto online. Kraken recently received 100 million dollars in additional funding, and paid “nine figures” to acquire Crypto Facilities, a British trading firm that specializes in derivatives.
- Robinhood (market cap $5.6bn): Launched in 2013, this California/Florida based firm offers zero-commission trading for stocks, ETFs, options, and cryptocurrencies through an easy-to-use trading app for smartphones aimed at getting millennials interested in investing.
- Bitmain (market cap $14bn): Founded in 2013, this firm has the largest market cap of them all. It runs a business akin to selling pickaxes to miners during the California gold rush. This privately-held China-based company is the leading producer of microchips and equipment dedicated to mining cryptocurrencies. It also operates large bitcoin and bitcoin cash mining operations.
Financial institutions were initially skeptical and even afraid of the havoc and disruption that blockchain and cryptocurrencies would unleash. Banks, Trading Companies and Money Service Businesses (MSBs) whose bread-and-butter business is fiat currency, fees and middle-men, are now adopting an “If you can’t beat ’em, join ‘em” mentality.
- Founded in 2007, London-based Calastone operates the world’s largest global funds transaction network, processing £170 bn in transactions each month. In May 2019, Calastone migrated their transaction network to blockchain, calling it the “Distributed Market Infrastructure” (DMI). The migration included 1,800 customers across 41 markets represents the largest community of global financial services organisations connecting and transacting via distributed ledger technology.
- Thirteen of the world’s largest banks including Barclays, CIBC, Credit Suisse, HSBC, MUFG, State Street, UBS, BNY Mellon, Deutsche Bank, Santander, and NEX are preparing to launch blockchain based versions of major global currencies in 2020. Years of research has convinced them that the technology underpinning cryptocurrencies could be used to make trading less risky and cheaper.
- Ripple (market cap: $5bn): Founded in 2012, Ripple provides “a frictionless experience to send money globally using the power of blockchain”. By joining Ripple’s network, RippleNet, financial institutions can process their customers’ payments anywhere in the world instantly, reliably and cost-effectively using Ripple’s XRP cryptocurrency. 200 banks and payment providers have now joined “RippleNet”.
- Facebook and Libra: A latecomer to crypto, and initially a sceptic, Facebook even banned crypto and ICO ads on its platform during the crypto winter. Founded in 2004 and worth 550+ billion dollars, Facebook has now embraced digital currency by recently announcing it’s impending stablecoin “Libra”. The entrance of this internet heavyweight to the crypto scene has prompted large brick-and-mortar banks to line up to act as “nodes” to hold the basket of fiat assets that will back the new Facebook currency. With over 1 billion users and a robust business model that encourages merchants and consumers to transact with each other, Facebook’s stable digital currency may be recorded in history as the day crypto went mainstream.
Securely storing, accessing and exchanging medical records is a sector ripe for transformation by blockchain technology. Medical records are currently siloed on numerous incompatible systems. Secure permissioned access is a persistent problem as personal health data is sensitive and once compromised can have serious repercussions for individuals seeking insurance or employment. Here are some of the most promising players.
- Founded in 2015, Atlanta-based Patientory aims to revolutionize the way doctors and patients interact and gain access to information, cutting out unnecessary layers and processes that currently are stumbling blocks in coordinating healthcare. The main features of their platform include 24/7 permissioned access to health data, immutable blockchain data storage, and health information storage that is compliant with region-specific regulatory guidelines.
- Established in 2015, Slovenia-based Iryo has created the first open healthcare platform that enables the secure and private exchange of anonymous medical data for researchers. The platform gives doctors, pharmaceutical companies and researchers access to a vast repository of anonymized, encrypted health records to aid them in the development of treatments and cures. It implements blockchain permissioned control for patient record access and offers tokens to incentivize end-users to consent to provide their anonymized records.
- Founded in 2016, Palo-Alto based doc.ai has created a system that gives individuals secure access to their complete health data hosted on an encrypted, decentralized blockchain ledger. Data is only accessible to the individual who then has the power to selectively provide access to others. As data from an increasingly biodiverse population accumulates, doc.ai enables researchers to conduct studies more quickly, inexpensively, and accurately than ever before.
- Nebula Genomics: DNA sequencing can provide consumers with a treasure-chest of information about themselves and their potential to develop certain diseases. Founded in 2016, San Francisco-based Nebula Genomics is helping people benefit from their own DNA by making personal genome sequencing affordable, and the data privately accessible via a blockchain ledger. This allows people to understand their risk for specific diseases and benefit from early screening and personalized treatments. The firm also aims to eliminate the middlemen and give power to the people by creating an open environment where DNA data owners can directly communicate with and provide their data to researchers while being rewarded for the data provided.
As the crypto winter subsides, we at THE RELEVANCE HOUSE salute the innovative startups who persevered through the downturn to become leaders in new sectors that benefit the most from blockchain technology. Our mission is to help blockchain firms with great ideas to manage their STO, ICO or IEO and build a brand that prospers. We are experts in crafting compelling messages which clearly explain the advantages and relevance of your business model and token. Find out more here.
THE RELEVANCE HOUSE is a full-service blockchain marketing consulting agency for startups conducting an ICO or STO. The focus is to guide blockchain startups in building, designing and delivering a relevant brand and story. Because only relevance has impact. We look forward to hearing about your project. Contact us, we don’t bite!