STATE OFBLOCKCHAINQ3 2017Q3 2017 State of Blockchain:Table of ContentsState of Blockchain Q3 2017 | 21. EXECUTIVE SUMMARY2. PUBLIC BLOCKCHAINSA. BitcoinB. Ethereum3. ENTERPRISE BLOCKCHAINS4. INVESTMENT5. GOVERNMENT & REGULATION6. SENTIMENT SURVEY7. COINDESKA. Research Framework1EXECUTIVE SUMMARYState of Blockchain Q3 2017 | 3Sentiment survey:- Hedge against monetary policy was BTCs best quality; 83% checked prices everyday (50%) or compulsively, every hour (33%).Bitcoin tested by soft and hard fork:- Often debated soft fork resulted in segregated witness, opened Bitcoin to cryptographic innovations; hard fork resulted in big block Bitcoin Cash. Q3 2017 Overall SummaryData Source: CoinDeskState of Blockchain Q3 2017 | 4Market grows despite regulatory challenges:- Multiple executive regulators announced aggressive action, markets boom to all-time high above $170bn.Key metrics up across public blockchains:- Hash rate, >1MB Bitcoin blocks; ethereum hit a record for blockchain transactions.ICOs and VC hit new highs:- ICOs raise $1.24bn, led by Filecoin, Tezos. Coinbaseraises $100mn: puts valuation at $1.6bn, becoming the industrys first unicorn. Token diversity sparks growth of buy side:- Cryptocurrencies see development of buy side, and sophisticated analysis for valuations. Major law firms develop blockchain specialties.Q3 2017 Trends:Public BlockchainsData Sources: CoinDesk, ImageNotes: Expanded upon in Section 2: Public Blockchains- Bitcoin tested by regulators, forks, breaks all time high of $5000.- Bitcoin begins to reassert market dominance over ETH, XRP.- Global trading volumes accelerate and grow in diversity in terms of geography, exchanges, and currency pairs.State of Blockchain Q3 2017 | 5- Transactions on major blockchains increased, except for Bitcoin. Ethereumsets transaction record for any blockchain.- Major digital assets BTC, ETH, XRP, DASH, and XMR rally 3000%, almost 5% daily return.- Industry terms like Bitcoin, Cryptocurrency and Blockchain hit all-time high in Google search frequencies.Q3 2017 Trends: Enterprise Blockchains- 10 law firms that include Cooley, Debevoise & Plimpton, Hogan Lovells, Jones Day, Perkins Coie, Morrison Foerster join Enterprise Ethereum Alliance.- R3 launches Corda v1.0, works trade finance applications.- A group of telecom companies that includes Sprint and SoftBank launch Carrier Blockchain Study Group.State of Blockchain Q3 2017 | 6Data Sources: CoinDesk, ImageNotes: Expanded upon in Section 3: Enterprise Blockchains- Microsoft and Hyperledger each work on interoperability between enterprise chains.Q3 2017 Trends:Investment- YTD returns for digital reached 690%, with increased diversification of assets and investors.- Q3 sent ICO total funding ($2.38bn) above total VC funding for blockchain investment ($1.95bn).- Token diversification led to sophisticated buy side, 100+ crypto hedge funds launch and pioneer valuations.State of Blockchain Q3 2017 | 7Data Sources: CoinDesk, ImageNotes: Expanded upon in Section 4: InvestmentQ3 2017 Trends:Regulation & GovernmentState of Blockchain Q3 2017 | 8Data Source: CoinDeskNotes: Expanded upon in Section 5: Regulation & Government- Chinese crackdown on ICOs and cryptocurrency exchanges, all exchanges cease operations on final day of Q3.- SEC published ICO guidance, demonstrates new depth of expertise.- CFTC granted LedgerX registration as a derivative clearing organization and a swap execution facility.- Virtual Currency Tax Act tabled in the House, would see an exception to gains tax for small transactions.State of Blockchain Q3 2017 | 92PUBLIC BLOCKCHAINSQ3 2017 Public Blockchain SummaryData Source: CoinDeskState of Blockchain Q3 2017 | 10Trading volume grows and distributes:- Exchange trading volumes increased worldwide, now more distributed than ever.Some major assets grew 30x YTD:- ETH, XRP, and DASH are all up approximately 3,000%Aggregate market cap breaks $100bn:- Public blockchain assets rallied 4x, over $75bn in value within the quarter.Bitcoin dominance returns to 50% range:- Bitcoin reasserted market dominance it ceded in Q1 and Q2 (trend continued into Q4).Transactions hit new highs:- Transactions on major blockchains increased, except for Bitcoin; ethereum broke records.Sector sees all-time high interest:- Google searches for blockchain terms (except ethereum) see new highs.Digital Assets Outperformed Traditional AssetsNearly 7X Return YTDState of Blockchain Q3 2017 | 11Data Source: Yahoo! Finance, Coincap, Coin.danceNotes: Daily data, RWO, GLD, SPY, CWI, & BTC prices, all cryptocurrency market cap, data through 9/30/20174.0% 10.1% 13.1% 20.8%332.2%690.8%0%100%200%300%400%500%600%700%800%Global Real Estate Gold U.S. Equities Global Equities Bitcoin All Digital Assets2017 YTD ReturnsFive Cryptocurrencies Returned At Least 500% in Q3State of Blockchain Q3 2017 | 12Data Source: CoinmarketcapNotes: Limited to cryptocurrencies with >$20 MM market cap, launched by 7/1/2017; based on 7/1/2017 USD open compared to 9/30/2017 USD close590%771% 856%1334%2666%0%500%1000%1500%2000%2500%3000%AdEx Rise Triggers NoLimitCoin PuraTop Performing Cryptocurrencies of Q3 -$20bn$40bn$60bn$80bn$100bn$120bn$140bn$160bn$180bnJul-1 Jul-8 Jul-15 Jul-22 Jul-29 Aug-5 Aug-12 Aug-19 Aug-26 Sep-2 Sep-9 Sep-16Sep-23Sep-30AggregateMarket Cap($, billions)2017Total Cryptocurrency Market CapTotal Cryptocurrency Market Cap Increased Over 50%Reached All-Time High Above $170bn in Q3State of Blockchain Q3 2017 | 13Data Source: Coin.danceJul. 1:$93.3bnSep. 30:$146.0bn56.5%$52.7bnFor some context, the market cap of:Western Union $9 billionEther $30 billionBitcoin $70 billionAll Cryptocurrencies $150 billionVisa $240 billionGold $8 trillionBitcoin Regained ShareApproached 50% of Total Cryptocurrency Market Cap in Q3 State of Blockchain Q3 2017 | 14Data Source: CoinmarketcapJan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Percentage of Total Cryptocurrency Market CapBitcoin: 48.65%Ethereum: 19.41%Bitcoin Cash: 4.94%Litecoin: 1.98%Ripple: 5.16%Dash: 1.69%NEM: 1.44%Monero: 0.98%IOTA: 1.18%NEO: 1.11%Others: 13.45%100%90%80%70%60%50%40%30%20%10%0%0%1000%2000%3000%4000%5000%6000%7000%January February March April May June July August SeptemberCumulativeReturn (%, since January 1, 2017)20172017 Price MovementCumulative Return (%)BTC ETH XRP DASH XMRMajor Asset Prices Rallied 3000% Year to DateExceeded 5% Average Daily VolatilityState of Blockchain Q3 2017 | 15Data Source: CoincapNotes: Average day over day price movement (absolute value)Average Daily Price MovementAsset Symbol Q1 2017 Q2 2017 Q3 2017 YTD 2017Bitcoin BTC 2.6% 3.1% 3.9% 3.2%Ethereum ETH 4.7% 5.5% 5.0% 5.1%Ripple XRP 2.9% 11.3% 4.9% 6.4%Dash DASH 6.0% 5.2% 5.3% 5.5%Monero XMR 4.7% 5.2% 6.0% 5.3%Transactions on Major Blockchains Increased, Except for BitcoinState of Blockchain Q3 2017 | 160100,000200,000300,000400,000500,000600,000700,000Q1'09Q2'09Q3'09Q4'09Q1'10Q2'10Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12Q4'12Q1'13Q2'13Q3'13Q4'13Q1'14Q2'14Q3'14Q4'14Q1'15Q2'15Q3'15Q4'15Q1'16Q2'16Q3'16Q4'16Q1'17Q2'17Q3'17Average Daily Transactions(#)Daily Cryptocurrency TransactionsBTC ETH BCH LTC DASH XMR ETC ZECAverage Daily Cryptocurrency Transactions Quarter BTC ETH BCH LTC DASH XMR ETC ZEC Total Q1 '16 201,633 20,242 4,453 1,582 580 20,242 248,733Q2 '16 220,659 40,895 5,519 1,184 434 40,895 309,586Q3 '16 218,831 45,109 3,432 1,549 1,038 21,324 291,283Q4 '16 260,987 42,908 3,455 1,238 1,600 14,658 3,186 328,032Q1 '17 286,052 58,291 3,345 3,118 2,720 19,890 2,561 375,975Q2 '17 290,845 154,176 11,707 4,893 2,796 27,524 4,033 495,974Q3 '17 242,180 315,631 12,391 21,808 5,910 3,835 34,614 5,399 641,768Data Source: BitinfochartsAverage Transaction Fees Rose for All Major CryptocurrenciesBTC Fees Above $3State of Blockchain Q3 2017 | 17Data Source: Bitinfocharts$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17Average Transaction Fees ($)Cryptocurrency Transaction FeesBTC ETH BCH LTC DASH XMR ETC ZECAverage Cryptocurrency Transaction Fees Quarter BTC ETH BCH LTC DASH XMR ETC ZEC Q1 '16 $0.08 $0.01 $0.05 $0.04 $0.07Q2 '16 $0.13 $0.01 $0.02 $0.08 $0.11Q3 '16 $0.18 $0.01 $0.02 $0.09 $0.33 $0.00Q4 '16 $0.24 $0.01 $0.02 $0.13 $0.13 $0.00 $0.00Q1 '17 $0.62 $0.01 $0.03 $0.12 $0.38 $0.00 $0.00Q2 '17 $2.40 $0.22 $0.11 $0.10 $1.09 $0.01 $0.00Q3 '17 $3.20 $0.33 $0.17 $0.15 $0.16 $1.84 $0.01 $0.00Bitcoin Cash Forked Off of Bitcoin on August 1stBitcoin Cash Difficulty Adjustment Led to Hash Power > Bitcoin for One Day State of Blockchain Q3 2017 | 18Data Sources: Bitinfocharts, Blockchain-2m4m6m8m10m12mHash Rate(TH/s)Bitcoin and Bitcoin Cash Network SecurityBCH BTC00.10.20.30.40.5$0$200$400$600$800BCHPrice in BTCBCHPrice in USDBitcoin Cash PriceUSD BTCWhile the BCH Hash Rate started off near BTC, it generally fell below in subsequent weeksMany Blockchain Terms Hit an All-Time Google Search HighEthereum Searches Fell from a Peak in Q2 2017State of Blockchain Q3 2017 | 19Data Source: Google Trends0%10%20%30%40%50%60%70%80%90%100%Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17Traffic Relativeto Maximumin Period (%)Global Google Search TrendsBitcoin Ethereum Blockchain CryptocurrencyState of Blockchain Q3 2017 | 202ABITCOINQ3 2017 Bitcoin SummaryState of Blockchain Q3 2017 | 21Important soft and hard forks occur:- Segregated witness adopted after a soft fork, Bitcoin Cash created after a hard fork.Global trading volume continues growth:- JPY, USD dominate, KRW jumps.Transaction fee surge slowed:- Average transaction fees rose 33% after nearly tripling in Q2.First > 1MB blocks mined:- At block 48197, BitFury mined first ever >1MB block.Data Source: CoinDeskBitcoin breaks $5,000:- Most variation in history, second straight largest quarterly $ variation.Hash rate up 50% to new all time high:- Network security grows, but hash rate slipped one day from competition. -$10bn$20bn$30bn$40bn$50bn$60bn$70bn$80bn$90bnJul Aug Sep 2017BitcoinQ3 2017 Market CapBitcoin Ended Volatile Quarter Up 69%Set a New All-Time High Above $80bnState of Blockchain Q3 2017 | 22Data Source: CoincapJul. 1:$41.2bnSep. 30:$69.8bn69%$28.6bn -$10bn$20bn$30bn$40bn$50bn$60bn$70bn$80bn$90bn7/1/1310/1/131/1/144/1/147/1/1410/1/141/1/154/1/157/1/1510/1/151/1/164/1/167/1/1610/1/161/1/174/1/17 7/1/17BitcoinHistorical Market Cap $-$1,000$2,000$3,000$4,000$5,000Jul Aug Sep 2017Bitcoin: Key Market EventsState of Blockchain Q3 2017 | 23Data Sources: CoinDesk, bitcoin price pageJul. 16:Debate around impending Bitcoin Cash fork, initiates transactions to custody private keys and hold both chains.Aug. 1Bitcoin Cash fork takes place.Jul. 20:Miners vote 97% on BIP 91, stage is set to activate segregated witness.Jul. 26:Its not real!Sept. 29:BTCC, worlds oldest exchange, stopped trades after 2305 days.Sept. 7:Equifax Data Breach made public.Aug. 23:First blocks > 1mb mined after SegWitadoption.Sept. 12:Any JP Morgan trader caught trading BTC risks job loss for being stupid.Sept. 14:Chinese exchanges announce shutdowns after regulators signal a total reset for Bitcoin in the country .Global Trading Volumes Began to ReboundOther Markets Grew Despite Peoples Bank of China ActionsData Source: CryptocompareState of Blockchain Q3 2017 | 24-$2bn$4bn$6bn$8bn$10bn$12bnJanuary April July October January April JulyAggregateTrading Volume($, billions)2016 2017Global Daily Bitcoin Exchange Trading VolumeUSD JPY CNY EUR KRW PLN HKDBitcoin Behaves as Crisis Currency in Venezuela and ZimbabweExchange Rates at Premium as Demand SurgesData Source: Coindesk, The Street, The AtlanticState of Blockchain Q3 2017 | 270%20%40%60%80%100%February March April May June July August September% ofAggregate TradingVolume2017Global Daily Bitcoin Exchange Trading VolumeUSD JPY CNY EUR KRW PLN HKD0%20%40%60%80%100% ofAggregateTrading VolumeGlobal Daily Bitcoin Exchange Trading VolumeUSD JPY CNY EUR KRW PLN HKDGlobal Trading Volume Dominated by USD and JPYData Source: CryptocompareState of Blockchain Q3 2017 | 26CNYUSDJPYUSDCNYJPYKRWExchange Trading Volume IncreasedBitfinex, With Margin Trading, is the Largest USD ExchangeData Source: CryptocompareState of Blockchain Q3 2017 | 27-$1.0bn$2.0bn$3.0bn$4.0bn$5.0bnAggregateTrading Volume($, billions)2017Global Daily Bitcoin Exchange Trading VolumeUSD JPY CNY EUR KRW PLN HKDBitfinex44.92%Bitstamp17.18%Coinbase16.81%Gemini12.97%Bittrex8.12%Top BTC 1$. (The USA enforced a KYC law for transactions above $10,000).Data Sources: CoinDesk, ImageState of Blockchain Q3 2017 | 726Blockchain Sentiment SurveySPOTLIGHT STUDYQ3 2017 Blockchain Sentiment Survey:Demographics 400 RespondentsData Source: CoinDesksQ3 2017 Blockchain Sentiment SurveyState of Blockchain Q3 2017 | 73Asia8%Europe32%U.S. & Canada48%Africa3%Central & South America3%18 2513%26 3532%46 - 5515%56 659%66+2%1MB were mined in Q3 2017 as a result of the SegWit soft fork?Yes51.7%No9.7%Uncertain38.6%Do you think the proposals for 2X blocks will result in a contentious hard fork or blockchain split of Bitcointhis year?After the BCH Hard Fork, 33% Hodled Until Now72% Were Unaware of the Lumens AirdropData Source: CoinDesksQ3 2017 Blockchain Sentiment SurveyState of Blockchain Q3 2017 | 8612.0% 7.9% 1.9% 4.8% 1.6%71.8%Hodled until now Exchanged for BTC Exchanged for ETH Exchanged for acombination of coinsExchanged for fiat Wait, what?0%20%40%60%80%If you were a bitcoin holder when Stellar airdropped lumens (XLM) as part of a token generating event (TGE), what did you do with your free tokens?32.9% 28.8%5.9%12.2%4.8%15.4%Hodled until now Exchanged for BTC Exchanged for ETH Exchanged for acombination of coinsExchanged for fiat Wait, what?0%10%20%30%40%If you were a bitcoin (BTC) holder when Bitcoin Cash (BCH) was created, what did you do with your BCH?The Overall Sentiment Towards Ethereum Improved in Q3 Relative to Q2Ethereum Sentiment Slightly Lower than BitcoinData Source: CoinDesksQ3 2017 Blockchain Sentiment SurveyState of Blockchain Q3 2017 | 87Q2 2017 State of Blockchain response:76.7%8.6%positivenegative 64.8%22.7% positivenegativeOverall state of bitcoin response:87.2%7.6%positivenegative2.7% 3.5% 2.4%14.8% 13.1%30.3%33.2%0%5%10%15%20%25%30%35%Extremely negative Moderately negative Slightly negative Neutral or ok Slightly positive Moderately positive Extremely positiveHow do you feel about the current overall state of ethereum?Most Positive Aspect of Ethereum Was the Protocol81% Dont Expect Ethereum to Overtake Bitcoins Market Cap by 2018Data Source: CoinDesksQ3 2017 Blockchain Sentiment SurveyState of Blockchain