Crypto Unicorns and Blockchains?

Insights about Crypto Market and Unicorns

By now you have heard about Bitcoin. The 2017 holidays many family and friends conversations buzzed more about Bitcoin than probably the Macy’s Day parade. The word Blockchain also started to become synonymous with these Bitcoin fireside chats but still most didn’t or still don’t understand the connection between these two new buzzwords? The global market for crypto currencies has become a reality in 2017 more than ever before. There are more than 1400 coins and tokens listed in 72 exchanges worldwide with a capitalization value that peaked at more than $800 Billion dollars in early January 2018. ICO crowdfunding has accelerated the creation of startups in this market. Blockchain technology is at the core of this crypto asset market.

Blockchain vs Bitcoin?

The relationship between say Bitcoin (a crypto asset also known as a crypto currency) and Blockchain technology, is an elegant, secure, bond based on cryptography. From a software development perspective, Bitcoin is the first major application running on a Blockchain platform. A Blockchain is a distributed ledger of transactions stored in a chain of cryptographic blocks of data. Each new crypto block is immutable because the next block to be created has the unique cryptographic hash signature of the block before it. What makes this immutable is it is near impossible to tamper with a block’s transaction because to do so will change all blocks from that modified block forward on the blockchain. Today the Bitcoin blockchain has >400K of blocks. Blockchain based crypto currencies are structured as peer-to-peer networks with no central authority. Each network follows a protocol that validates transactions after consensus (link to consensus definition) is reached by the operators (miners) before inclusion in the blockchain. Every computer node has a copy of the blockchain ledger securing the transactions.

The coins and tokens generated by these networks are traded by companies to pay for software development, and by investors to profit from the trade. As such, the market capitalization of the crypto market is an aggregate of the value that investors give to the respective blockchain networks. tracks price data of the cryptocurrencies across the different exchanges.

Explosive volatile growth in 2018

The crypto market has increased by more than ten times since May 2017. In May 7, there were 766 coins being traded with a market cap of $48 B. On January 22, after two significant corrections the capitalization was $540 B. At this time there are 1478 coins/tokens being traded. See the following charts showing market history and the 30 largest blockchain companies.


The New Blockchain Unicorns

There are 30 companies that have a capitalization of over $1 billion dollars in the crypto asset market. As a point of reference, private companies with a capitalization larger than $1 B are called Unicorns in the capital market. The most popular of them UBER, have a capitalization lower than the three leaders of the crypto market. See charts above.

The crypto currencies with the biggest cap value are: Bitcoin with $183 Billion, created in 2008; and Ethereum with $97 B cap, started in 2015. The majority of the other companies were started in 2017. The above unicorns represent more than 90% of the total crypto market capitalization. During the period of May 2017 to January 2018, the number of unicorns companies increased from 4 to 30.

Coin type of cryptocurrencies is digital money. Tokens represent and asset or utility and exist on top of the blockchain. They are tradeable goods and can represent coins, loyalty points, or other type of assets. They can also be exchanged for services. Tokens are issued by Eherereum, Waves, Omni, and other platforms. When reported by they are categorized as tokens, separate from the coins. The list of 30 Unicorns above includes seven token platforms.

The coins that act as digital money that store value are driving the market. The largest Bitcoin, that created the market, have cousins such as Bitcoin Cash, Litecoin, and Dash. These are all derived from the original software invented by Satoshi. These are also called alt coins.

Another type of cryptocurrency that is driving the market is Ethereum, the Vitalic Buterin ‘s innovation of distributed computer platforms that run decentralized applications. Ethereum capitalization has increased faster than Bitcoin during 2017 due to the proliferation of applications powered by the tokens used in their software platform.

Different variations of these two crypto assets have appeared in the last six month that either adds new features or new platforms. These are:

• Fin-tech coins such as Ripple and Stellar which move money around the world for financial institutions

• Privacy coins such as Monero and Z cash which are digital versions of cash offering anonymous ownership.

• New platform such as EOS and IOTA

• Applications oriented tokens such as Ardor that is run by the NXT platform. And, Tether that is run by the Omni platform.

2017 has being incredible in terms of technology advance and market performance. However, many challenges remain before the mainstream adoption of blockchain technology occurs. These challenges are of technical and regulatory nature.

We expect that technical limitations associated with security, scalability, privacy, storage, and consensus mechanisms will be resolved by the companies that lead the market. However, more transparent governance and interconnection standards need to be tackled by the industry.  Interoperability of the blockchain networks is essential to accelerate adoption.

The crypto market is unregulated today, which creates unequal opportunity for certain coins, and also opens chances of illegal behavior. It is difficult or impossible for US investors to trade in exchanges located overseas.

BlockchainCLT is actively involved with the entrepreneurial community to resolve the challenges faced by the industry as well and Blockchain for Good Social Impact initiatives like Block Human Trafficking humanitarian efforts.

We will continue to comment about coins and tokens Unicorns in our next blog

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