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Bloccelerate VC Webinar: Blockchain Winter 2019
- 1. BLOCKCHAIN WINTER: WHO WILL EMERGE WITH THE THRONE IN 2019? Kate Mitselmakher (CEO & Founder of Bloccelerate VC) @Bloccelerate RayValdes (CTO @ ConsenSys) @rayval
- 2. 1. Disclaimer:The content provided here is for information purposes only, and does not constitute an offer or solicitation to purchase any investment solution or a recommendation to buy or sell a security; not is it to be taken as legal, business, investment, or tax advice. In fact, none of the information in this webinar or any other content on www.Bloccelerate.vc should be relied on in any manner as advice. 2. Content Sharing:This presentation and recording of the webinar will be available for download onTwitter @Bloccelerate 3. Questions: Feel free to tweet your questions throughout the webinar @Bloccelerate or use the zoom chat room
- 3. Agenda What have we lived through? Where are we now? Where are we going? What are we watching for? Who will emerge as winners?
- 4. HAVE WE SEEN THIS BEFORE? 1994–2002 Since 1994, we have lived through the hype and trough of the Internet (the dotcom bubble) 2008–2018 Followed in 2008-2018, by the hype and trough of the blockchain bubble…
- 6. Dotcom Bubble of 2000… NASDAQComposite Index: 1990 - 2010
- 7. NASDAQ Summary: 2018… NASDAQComposite Index: 1990 - Present
- 10. 2018… Summary:
- 11. REASONS FOR SETBACKS? Uncertainty, speculation, governance challenges, weak infrastructure, lack of knowledge, poor user experience, bad POCs?
- 12. January 2017, we said "Winter is Coming" Blockchain Winter
- 13. January 2017, we said "Winter is Coming"
- 14. WHAT HAVE WE LIVED THROUGH? The peaks and troughs of the blockchain market…
- 15. ICO Funding Summary: 2017 = $5.8 Billion 2017 = 913 projects 2018 = $12.3 Billion (YTD) 2018 = 1224+ projects
- 16. GBTC Investment Trust -GBTC = fund offering up the opportunity to bet on bitcoin by buying its shares - GBTC investment trust lost roughly $4.2 billion in value from the beginning of the year until today.
- 17. Miners Revenue Summary: - Peaked in Dec 2017 with $41M paid in rewards - -Down to $6.2M today
- 18. Transaction Fees Summary: - Peaked in Dec 2017 with $41M paid in rewards - -Down to $6.2M today
- 19. NVIDIA Shares Summary: - Delayed reaction - Peaked at around October 2018 - Down around 40%
- 20. Trading Volume is down in 2018
- 21. WHERE ARE WE GOING? What do the trends tell us?
- 22. Month over Month Developer Adoption of Ethereum Summary: Truffle Lifetime Downloads: 1.2M Nov 2018:Crossed 1 Million Downloads Since then 200,000 more downloads Drizzle = up 56% (over the past 3 months) Ganache = up 39% (over the past 3 months)
- 24. Blockchain Wallets Summary: -Exponential growth from Q1 ‘15 through Q3’ 18 -As of Q3’ 18 we reached almost 30M blockchain wallets -Still early days, but demonstrated sign of growing adoption
- 25. COINBASE USERS & APP DOWNLOADS ARE ON THE RISE
- 26. STOs are on the rise - -While ICOs are down, a new form of financing, SecurityToken Offerings are on the rise
- 27. Equity Funding Summary: 2017 = $800M 2018 = $1.6+ Billion (YTD) Notable Equity Deals 2018: - Robinhood ($250M) - Circle ($110M) - Ledger ($75M)
- 28. Incumbents Feel the Threat or See an Opportunity ? - Facebook announced a 30-40 person engineering team to launch crypto offerings - Most come from PayPal and relevant background - -Likely incorporate crypto-payment component
- 29. Remember Overstock? It's basically a crypto company now… • Overstock surges 26% after CEO says it will sell retail business by February to focus on crypto
- 30. COINBASE TO HIT $1.3+ BILLION IN REVENUE…
- 31. WHAT TO WATCH FOR? Leading Indicators…
- 32. Four Roles of Blockchain Technology 1 Digital Gold •High friction (transaction fee, latency) is acceptable. •Goal is "store of value." 2 Digital Cash •Low friction and ubiquity are important. 3 Cryptoassets/Tokens •Speculative "fool's gold” •The ICO bubble has burst. 4 Blockchain Platform •A technology foundation for decentralized solutions for decentralized business ecosystems.
- 33. What will determine long-term success of blockchain technology? ▪ DecentralizedTrust: A trusted record in an untrusted environment of "Byzantine" (dishonest) actors ▪ Valued Digital Assets: An immutable log of significant events — monetary transactions, property records, or any other valued data ▪ Fine-Grain Dynamism: Not just a passive data, but optional dynamic programmed behavior tied to transactions ("smart contracts")
- 35. Blockchain to solve “Privacy Paradox” • As the number of data breaches going up, the value of personal data is becoming more important • Blockchain is well positioned to solve this problem • For example, private, secure, and fast browsing with Brave -> Brave to cross 4 million monthly active users this fall Chart:Value of DataThrough 2027
- 36. Ford 1903 – Ford & Malcolmson –at 51%, John S. Gray 10.5%, and other 9 cofounders in total 38.5% - total ownership of 100% Standard oil 1870 – Rockefeller and partners had 73.34% of equity Uber 2009 – Travis and Team 54% Google 2015 – Larry Page and Sergey Brin has the voting power of 54.3% EOS 2017 – 90% of tokens for investors Penta 2018 – 80% of tokens for investors Democratization of Value Capture via alignments of Incentives (aka Tokens)
- 37. Three Phases of Blockchain Development Block Storming (1-3 years) Block Forming (3-5 years) Block Norming (7-10 years)
- 39. Key Takeaways & Lessons Learned While Popularity (aka community) Matters, Popularity Does Not Equal Profit Speculation vs. Fundamentals Technology progress is not linear, it’s exponential. But it takes time to develop… It’s not a war for tech, it’s a war for talent… First doesn’t mean best…
- 40. Who will emerge with the throne in 2019? “The speed of technological disruption is accelerating. It took about 80 years for Americans to adopt a dishwasher.The consumer internet became commonplace in less than a decade”
- 41. QUESTIONS & ANSWERS “The night is the darkest right before the dawn….”
Hinweis der Redaktion
- Kate: Thanks for joining us here today. It is certainly not surprise that 2018 was a hell of a year for blockchain….It started out with the almost $600 billion valuation of all digital assets to come down almost 90% by the end of 2018. So….Right before heading for the holidays Ray and I wanted to share some thoughts with you about what has been going on in the blockchain world for the past 12 months, and what this all means as we are heading into 2019… By means of introduction, I am the CEO and founder of a blockchain fund and an accelerator, Bloccelerate VC – we are a thesis driven fund, and our hypothesis is that, despite the fear that permeates the blockchain air today, this technology is going to generate trillions of dollars worth of value over the next several years, and our goal is to capture that value by investing in the best companies and helping them grow and develop. Ray…
- Kate: Firstly, please note that none of the following information presented should be taken as investment advice. The purpose of this webinar is 100% educational. Secondly, the content of this webinar will be uploaded on slideshare and the link will be shared on twitter right after the webinar today. 3. if you have any questions, feel free to tweet as us or use the zoom chat room – we will be monitoring regularly
- Kate: We have a packed agenda today – lot of data and insights to share with you….for the sake of time limits, we will go very quickly. Essentially there are five topics that we will cover…including the past, the present, and the future…we will also share some thoughts on who might emerge as winners.
- Kate: before we dive into the last couple of years of what we have lived through, we thought it would be worthwhile to see if the so call blockchain bubble in any way, shape or form resembles the internet bubble of the 2000.. Ray: lived through the internet bubble…we’ve seen this movie before….technology adoption curve…goes from lack of awareness to overexcitment…there are some parallel.
- Kate: So what was 2000 like? That was the internet ten years in. - In 2000, fewer than 300 million people had access to the internet, less than 5% of the world’s population at the time. With a glorious 56k modem, page loading wasn’t fast either, and at 7 kB/s, forget downloads. It took another 20 years to (or a total of 30 years of commercial web) to reach about 50% global penetration. Fun facts: Amazon in 2000 = 20 million accounts -Amazon in 2018 = 304 million accounts Ray….
- Ray: Kate: The dotcom market crash cost investors a whopping $5 trillion Why did the market collapse: Many investors foolishly ignored the key metrics - fundamental rules of investing in the stock market, such as analyzing P/E ratios, studying market trends, and reviewing business plans. Analysis tended to overestimate the value of stocks (e.g. Yahoo’s valuation in 2000 was about $125 billion, while it generated about 200M in revenue) Similar to dot com…more hot air..surprising thing that it didn’t deflate sooner….
- Kate: So how did the market evolve after the crash? This is what the dotcom bubble looks like in the grand scheme of things….the market correction lasted roughly 15 years, and finally surpassed the initial valuations in 2015 - 2016…
- Suffice to say…similar level of buzz was generated by the blockchain in 2017..from calling it the next panacea solving all of the world problems.. Popularity drove awareness, and awareness drove adoptions, and adoption drove speculation…
- Kate: The first striking similarity is in the shape of the graph, but the starking difference is that we have lived through a number of these bubbles...from 2011, to the one in 2013…to the one in 2014….each one of them becomes less noticeable as the time goes one, because each is dwarfed by another…
- Kate: As we can see here, the 2014 bubble looks like a glitch in comparison to what we just lived through in 2017 and 2018….In 2018 the market lost about $500B….compared to $5 trillion in the internet bubble – it’s 10 x less that!!!
- Kate: there are many theories for what caused the crash….people argue it’s everything from uncertainty in regulation, speculation, governance, weal infrastructure,poor UI, etc…the answer is not so simple… Version # 1: BTC core dev team fault “if the BTC core dev team just increased the block size cap to 2MB, BCH & BSV would never have been created. The crypto dark age we’re in right now is 100% their fault. Set us all back 3 years” + BTC core dev team limited throughput to 7 transactions per second- @Mike Relentless (Twitter) Weak Infrastructure? - Ether collapsed with Cryptokitties --- Regulatory Uncertainty? 90% of enterprise blockchain projects are centralized designs. They don't need blockchain technology to meet requirements. The project can be done more quickly, at lower cost, with lower risk and better quality — by avoiding blockchain technology.
- Ray: In reality, we have predicted this before….we said winter was coming 20 months ago…
- Kate: So let’s dive a little deeper into what exactly we just lived through….
- Kate: The most obvious collapse that we have seen is in ICO funding….thought it carried through to 2018, It slowed down significantly in the second half of 2018….and is still trending upward
- Kate: How much value was lost int his trust alone….GBTC (Bitcoin Investment Trust) has lost roughly $4.2 billion dollars from the beginning of the year until today.
- Kate: Summary..miners revenue is significantly down…which peaked at $41M paid in rewards…down to $6.2M in rewards today
- What do transaction fee tell us? How serious people are about recording data on the blockchain, the public chains have limited capacity, thousands of machines work together to create an immutable record…as the capacity of the network gets saturated.
- As a result, shares of one of the most popular graphic card manufacturer, NVIDIA, are down 30%+
- Last but not least….the trading volumes are down…and that means more and more crypto exchanges will be going out of business….. Other charts follow this trend…
- Kate: So we talked about the past…let’s see what are some of the trends tell us about the future….
- Kate: On the positive note, in this space is all about talent, and talent keeps on BUILDing… Some evidence: 1M+ Truffle Suite downloads (leading developer tool and the framework that is used by 90% or more of developers) 1M+ MetaMask downloads (MetaMask is a wallet that is often used by solution built on Ethereum) 12K+ live Ethereum nodes
- - 90+ central banks are experimenting with blockchain technologies Hundreds of countries are adjusting their regulation to attract some blockchain talent… Examples: Japan’s e-voting system Dubai 2020 initiative Japan’s e-voting system -- Enterprises are continuing with the POCs Ray: we are in the world of diminishing trust….a lot of governments are still grappling with trying to understnad the fundamental concepts of blockchain. Deep seeded need to control things…growing interest..in
- Another sign of growing adoption is the number of blockchain wallets that is going up… Reached $30M wallets…signs of adoption..but compared to the internet…still early days…as I mentioned in 2000 we had a total of 300 million users
- Another metric of consumer adoption – number of coinbase users continues to grow despite the downturn….In 2017, coinbase was the #1 most downloaded app on the app store.
- - While ICOs are down, a new form of financing, Security Token Offerings are on the rise -this serves as an intermediate step for companies looking to raise money leveraging legitimate means…
- VC funding continues to go up. Validation that the institutional floodgate is about to open is the Yale, Harvard, and Stanford funds are starting to pour money into the VC funds….
- While the ICO bear market forces start-ups to lose talent, big incumbents are there to pick them up….evident in new initiatives such as this..we think it’s one of many more to come… -Ray…adoption of blockchain by major internet giants…Tencent, Alibaba, Baidu – several year head starts…Alibaba ..more patents in blockchain than any company in the world… US is playing catch-up…IBM are enterprise not consumer….interesting dynamic. Kate – I am struggling to believe how Facebook is going to decentralize itself…it’s value is in the data that it sells to advertisers…who will disrupt the disrupt????
- Overstock Ceo is selling it’s retail business and going 100% crypto…though this is a good example of declining companies trying to save themselves via a new and shiny tool..such as crypto
- Last but not least, despite the bear market, coinbase is generating $1.3 billion in revenue this year. – Why because it is solving the fundamental problem for an average consumer…the ease of use the UI is driving adoption.
- So as we head into 2019, what do we have to watch four…
- Introduce smart contracts at this stage Cf. https://bitsonblocks.net/2016/02/01/a-gentle-introduction-to-smart-contracts/ Not just a passive record – script required to complete the tx. Bitcoin script (basic, give money to recipient, to slightly more complex scenarios, for eg. if 5 people sign the tx, then this can be completed eg. property contracts) or smart contracts (Ethereum – Java equivalent, ability to create a solution - whole application on the blockchain, but impact on tx.). Move from passive data to more complex business scenarios. -Bitcoin – store of value -Digital Cash – cashless society / not just the transaction fees Fools gold Blockchain platform…real solutions addressing real problems…beyond the database..internet
- Introduce smart contracts at this stage Cf. https://bitsonblocks.net/2016/02/01/a-gentle-introduction-to-smart-contracts/ Not just a passive record – script required to complete the tx. Bitcoin script (basic, give money to recipient, to slightly more complex scenarios, for eg. if 5 people sign the tx, then this can be completed eg. property contracts) or smart contracts (Ethereum – Java equivalent, ability to create a solution - whole application on the blockchain, but impact on tx.). Move from passive data to more complex business scenarios.
- -Multiple platforms are going to win, not just one (just like in the early days of the internet, markets begin with one hundred flowers blooming, but then consolidate, only a few persist) -It is not the platform that has the best scalability or technology, but has the highest number of developers building on it… -The one that is going to win is going to be the one that is likely not on the market yet…or at least in it’s current form
- “Tech companies are facing ‘privacy paradox’ … between using data to provide better consumer experience and violating consumer privacy”
- Block Storming Phase: This is the current phase where due to the philosophical shift have created a massive change and resulted in huge number of innovators and developers engaged in creating newer models of services and products. However, at the same time this can be dubbed as infancy stage and would result in a “boom and bust” scenario Block Forming Phase: Block Forming Phase: During the next 3-5 years, clear winners will emerge out of the storming phase. Along with that, few innovations will either disappear or evolve to meet emerging regulatory and legal compliance laws. During this stage major focus will be put on internal optimizations, as opposed to external disruptions. Furthermore, by the end of this phase blockchain will “cross the chasm” and reach the point of mainstream adoption stage. Block Norming Phase: During the next 7-10 years, blockchain platform development will be challenged by the emergence of external threats such as Quantum and Biological Computing. Furthermore, the blockchain leaders will consolidate their positions and thus lead the research & development of the technology. During this period, we will witness a new wave of ancillary providers to the existing blockchain leaders and further enhanced products and services.
- Source Gartner: G00325744
- Rather than focusing on which companies have the most buzz, it is better to investigate whether a company follows solid business fundamentals. Long-term investments have to have strong revenue potential… Fundamentals have mattered and will matter in the future. Avoid Speculative Mania, and rather focus on fundamentals. Sound business models are essential. Customers are what makes a business a business…without customers there would be no business. We often forget that. Technology progress is not linear it’s exponential….often human emotions and expectations can ahead of the curve. It takes time to build things… It’s not a war of tech, it’s a war for talent…whoever gets the development talent – will win. First doesn’t mean best…coinbase might have solved the UI problem prevalent in this space, but it doesn’t mean it will emerge as the winner in the long term.
- May be the answer is… No one we know if …at least not in the current form….but those who demonstrate the fundamentals of the business…customers, profits, revenues….at the moment, those are exchanges…in the future they will be protocols, applications, whose who are able to solve the UI problem so that we don’t know that it already happened.