From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd

1. APRIL 2017 BLOCKCHAIN DISRUPTIVE INDUSTRY REVIEW

2. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT LTD APRIL 2017 Together with traditional financial analysis, OLMA Next Fund commissions independent researchers to prepare challenging studies relating to current and future potential investments. This case study has been prepared by Frederic Bonelli at the request of OLMA Next Fund. OLMA Next is pleased to provide this review of the promising blockchain industry and hope it will shed light on this revolutionary development for transactions, financial and otherwise. 2 ABOUT THIS WORK Distribute & Adapt: You are free to share and adapt the work. Attribution: You must give appropriate credit, provide a link to the license, and indicate if changes were made. Please cite this document as follow: fredbonelli.com, Blockchain Industry Review, April 2017 Non Commercial: You may not use the material for commercial purposes. Share-alike: You must distribute your contribution under the same license. OLMA Next is contemplating the launch of a fund that will focus on current and future disruptive market leaders. With its combination of youth and experience, OLMA Next plans to scrutinize high performing businesses in developed and emerging markets. adm@olmafund.com OLMA Next Fund Frederic Bonelli is an independent research consultant and VC entrepreneur who prepares content about trends and companies for funds and investors. He also helps start-ups and SMEs to produce corporate support materials to help with fundraising and other promotional activities. contact@fredbonelli.com Frédéric Bonelli

3. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 3 KEY FACTS $210M TOTAL REVENUE FOR THE BLOCKCHAIN TECHNOLOGY MARKET $18.1B TOTAL BITCOIN CAPITALISATION 90% OF MA JOR NORTH AMERICAN AND EUROPEAN BANKS ARE EXPLORING BLOCKCHAIN SOLUTIONS $1.4B TOTAL AMOUNT INVESTED IN BLOCKCHAIN TECHNOLOGY IN 2016

4. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 4 INTRODUCTION Blockchain: The Next Big Thing? Building on the foundation of the Internet of Information, the blockchain concept has initiated an “Internet of Transactions” that is already revolutionising the digital transaction world. INTERNET OF THINGS BIG DATA DRONES & ROBOTICS BLOCKCHAIN MOBILITY THE CLOUD SOCIAL NETWORKS ARTIFICIAL INTELLIGENCE Blockchain: the Next Big Thing?

5. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 5 INTRODUCTION In 2008, an individual, disguised as username “Satoshi Nakamoto”, published a research paper called Bitcoin: A Peer-to-Peer Electronic Cash System. This paper is considered to be the first written trace of the blockchain concept. The identity of Satoshi Nakamoto remains unclear. The paper described a transactional system that avoids centralised financial intermediaries by promulgating a peer-to-peer electronic cash network that uses cryptocurrencies (e.g. bitcoins). This blockchain peer-to-peer network securely authorises and legitimises each transaction, and the ownership of a bitcoin over a shared public ledger known as a blockchain. Over the past decade, cryptocurrencies and blockchains have created the basis for a technological revolution for financial transactions. Blockchain techniques are now being applied to other types of transactions such as securities settlements. The blockchain provides a distributed ledger that enforces uniform transactional rules in a secure manner that foils attempts to cheat the system. Since 2013, more than $1.8B has been invested in ventures that develop blockchain based systems. Banks, insurance companies, and large corporations have announced multi-million dollar collaborations with blockchain startups in order to find applications in their respective sectors. The blockchain concept challenges established commercial and institutional models across borders throughout various parts of the world. The terms bitcoin and blockchain, though often used synonymously, are not: blockchain is the technology that enables secure cryptocurrency transactions, and bitcoin is the moniker for the cryptocurrency described in the Nakamoto research paper.

6. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 The appearance and development of blockchain technology was due to two main factors Limits of financial Infrastructures in the new digital world With institutional (central bank) control of the monetary order, payment transaction systems must ensure that: 1) Those who are party to a transaction are truly in possession of the assets subject to the transaction; 2) Ownership of the assets (e.g. bitcoin and a good or service) has truly changed after the transaction; 3) Each monetary unit is spent just once (i.e. the original holder cannot twice spend the bitcoin). In a traditional financial system, trust comes from the guarantee provided by central banks for their state currencies. The financial crisis of 2007-2008 challenged established public trust for central bank institutions because they failed to properly regulate the financial system. Blockchain based systems emerged as a new means to arrange financial transactions free of central bank control and international borders. Blockchain has the potential to bring transparency to the ownership of assets. The monitoring of the ownership of alternative assets has always been opaque. Bitcoin challenges the traditional monetary order that is based upon the powers of central banks, and the concept of their currencies as sovereign and territorially centralised Transparency of ownership of assets 6 EMERGENCE OF BLOCKCHAIN Centralised Payment System Blockchain Distributed Ledger System

7. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 7 EMERGENCE OF BLOCKCHAIN The Role of the World Wide Web The convergence of several Internet technologies has had a pivotal role in the emergence of blockchain technology. Rapid and secure online payments were one of the first imagined uses of the Internet, however double spending has been a difficult problem for developers. With a physical currency (coin or paper) the act of spending transfers it to the new owner; so how does a digital system enforce this process?. The first electronic money platforms took months to develop and implement and encountered many obstacles such as fraud and transaction record-keeping. DigiCash, the first secure online electronic money system, used a system similar to that now used by airlines for in- flight credit cards: payers and receivers exchange serial numbers and, once electronically connected to the central registrar, the transaction is verified. DigiCash went bankrupt in 1998, though not due to technological fault, but because of timing and poor management. The blockchain and bitcoin concepts were primarily inspired by two technologies: 1) A method to discourage spam and piracy: the commonly used method to avoid spam is to require a sender to solve a digital puzzle before a message is sent. This requires insignificant computer power and it makes sending spam messages uneconomical. Also, because many forms of piracy require "brute force" techniques to exploit systems, an integrated retardant such as puzzle solving provides a considerable increase in security. This technique is an essential aspect of blockchain technology. 2) The Tor anonymous decentralised network: The 1990s saw the emergence of anonymous communication on the Tor network, which was developed by research teams in partnership with the United States military. The Tor network encrypts data and sends it via a network of nodes that make tracking impossible. This enables user anonymity because the traffic is widely distributed throughout the network. Rather than relying upon a centralised server chain, traffic is routed through nodes that have the resources available to manage bandwidth. The Tor network has paved the way for private document sharing and communication. Blockchain: IoT Network Revolution When the Blockchain Technology meets the Internet of Things

8. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 8 BLOCKCHAIN INDUSTRY OVERVIEW (1/2) TO DATE The blockchain market is growing rapidly ... The blockchain market is rapidly growing and had a turnover of $210 million in 2016. Projected total market revenue in 2021 is $2.3 billion. The number of FinTech startups, and in particular blockchain startups, is growing exponentially. The blockchain market remains dominated by the United States (75%), largely driven by Silicon Valley investments (27.1%). Europe is second (16%) followed by Asia (6%). … but the market is changing Two major trends stand out in the blockchain universe: 1) Cryptocurrencies: the majority of investments in the blockchain universe are bitcoin related. The three startups that received the largest investments in 2016 were all involved with Bitcoin (21 Inc., Coinbase and Circle). However, non-bitcoin-related investments within the blockchain universe have accelerated in recent years. In 2013, only four of 76 major blockchain investments were not associated to bitcoin. In the first three quarters of 2016, this increased to 26 out of 87 deals. Ethereum and other similar platforms will continue to increase the attractiveness of blockchain technology and will make possible a range of previously theoretical business models. Investments in blockchain technology are expected to accelerate. 2) Blockchain Types: There are three main types of blockchain: • Public blockchains, which allow users to carry out transactions without intermediaries thanks to a virtual currency; • Corporate blockchains, which function in the same way but on a corporate scale and without virtual money; • Hybrids, which are built on public blockhouses and operate on closed networks. Hybrid blockchains captured the bulk of investment in the third quarter of 2016, but public blockchains remain the most significant for investment. Blockchain Technology Market Worldwide (2016-2021) Bitcoin vs. Blockchain % of Total Activity (only equity investments included)

9. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 9 BLOCKCHAIN INDUSTRY OVERVIEW (2/2) Commitment from Investors Blockchain startups have attracted investor interest once the price of the bitcoin surpassed the $200 in 2013. A new wave of investors surfaced in this developing market, and peaked in 2014 with a total of 381 investors. In addition to venture capitalists, corporate investors, business angels and banks participated. Digital Currency Group (64 transactions) and Blockchain Capital (42 transactions) are the most active investors in the market. Equity Investment Since 2013, over $1.8 billion has been invested through 550 deals. Investor interest peaked in the first quarter of 2015, with 67 companies funded with $210 million. Business is down in 2016 with a fall of 18% in transactions as compared with 2015. Four fundraisers surpassed $50 million in 2016: Circle ($60M, Series D), Digital Asset Holdings ($60M, Series A), Ripple ($55M, Series B) and Blockstream ($55M, Series A). Investment targets are gradually becoming more mature. While investments were solely seed capital in 2012, 2015 was marked by investments in Series A (8.7%), B (4.3%) and C (2.5%). The year 2016 saw the first Series D blockchain funding. Development of Proof-of-Concept Projects At present, nearly seventy proof-of-concept blockchain projects (POCs) have been announced by major global companies. Businesses in the banking, insurance and trading sectors are most interested in blockchain technology. Almost half of the world's major banks are working on a POC project including Société Générale, ING, and HSBC. Within the R3 consortium, seventy banks, including France's Natixis, have deployed an Ethereum infrastructure to exchange virtual currency between them. Bitcoin & Blockchain Annual Global Financing (only equity investments included) 2012-2016 Best funded Blockchain Startups

10. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 - Ecosystem simplification - Faster interbank clearing & settlement - Lower transaction costs - Reduced counter-party risk - Transparency and auditability - Ease of software development   and integration - Unproven technology - Untested capacity / scalability - Low transaction speed - Possible consensus protocol flaws - Cryptocurrency price volatility - Uncertain regulatory status 10 INTRODUCTION TO THE BLOCKCHAIN PROTOCOL The Anatomy of a Transaction Blockchain: Balancing the Benefits Introduction to the Blockchain Protocol A blockchain is an information storage and transmission technology that is transparent, secure, and operates without a central control device. By extension, a blockchain is a database that contains the history of all exchanges between its users since its creation. This registry is decentralized and stored on the servers of its users. It operates without a central intermediary, thus eliminating infrastructure costs. The security of a blockchain is guaranteed by a cryptographic protocol and it is updated in real time independently by decentralized computational power and a network contributed and conducted by users. In the case of bitcoins, these users are called “bitcoin miners”. Bitcoin miners check the validity of bitcoin transactions, and graft a new line to a block, which forms an unbroken chain: the blockchain. The “miners” are rewarded for their work though issuance of new bitcoins for a “block” of transactions. The legitimacy of a blockchain cryptocurrency is ensured by recording all prior transactions on the blockchain and within the network. New transactions are distributed to each node. The complexity of the blockchain protocol algorithms makes transactions unfalsifiable. Each node collects the new transactions in a block. For the bitcoin there are an average of 1,500 transactions per block every 10 minutes. Blockchain components 1) The currency: The medium for transaction settlement within the network and rewarding miners. Cryptographically generated, protocol rules determine issuance and destruction. May be tradable   “off the network” or only exist on network. 2) The ledger: A public record of all transactions – stored across a distributed P2P network of servers. 3) Consensus: Prevents “double spend” or validation of fraudulent transactions: • Proof of work: Miners compete to validate blocks by solving highly processor/RAM intensive cryptographic problems for reward; - • Distributed consensus: Majority validation by trusted subnetworks of peer nodes within the network; • Proof of stake: Achieves distributed consensus by network users proving their ownership of currency.

11. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 11 THE BLOCKCHAIN ECOSYSTEM TECHNOLOGICAL LAYER “BLOCKCHAIN-AS-A-SERVICE” USERS BLOCKCHAINS Bitcoin Ethereum CryptoNote Bitshare NXT Colu Ripple Chain Goochain Filament R3 Backfeed Startumm Enigma Factom Linq Notaries Logistics Crowdfunding Data Storage Payments Insurance Energy Culture IoT Governments International organisations Political parties and associations Companies Individuals Storj.jo JetCoin ThingChain Stanmpd.io OneName Augur Solarcoin UjoMusic Tileplay 1 2 3 4 1 2 3 4 The public ledger that records users and transactions for a given service; Companies that act as the technical interface between a blockchain and end users (transacting parties). They process the information contained in a blockchain on behalf of the transacting parties; Applications for the transacting parties; State organizations, private actors, associations and individuals that beneﬁt from blockchain services.

12. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 12 FOCUS ON THE BITCOIN The bitcoin was the name of the cryptocurrency used by Satoshi Nakamoto; it was put into circulation in 2009. The bitcoin gained popularity when its price rose from $217 in January 2015 to $697 in October 2016. There were more than 830 bitcoin ATM's around the world at the end of 2016, with the majority located in North America (73%) and Europe (20%). The leader in this market is Genesis Coin with 35% market share. The figures below highlight the power of the bitcoin network: Twenty thousand times the most powerful computer The bitcoin blockchain is currently a 50-gigabyte file. The total computer power currently devoted to bitcoin mining is 2,250,000 petaflops. This is more than 20,000 times the power of the world's most powerful computer, China's Sunway TianheLight (rated at 93 petaflops) and is well over 100 times the cumulative power of the 500 most powerful computers. The bid for 21 million BTC There are currently nearly 16 million bitcoins. The bitcoin rewards that are given to bitcoin miners increase the number of bitcoins in circulation, like a treasury does when it prints new currency. The Nakamoto protocol provides that the amount distributed to the winners of the mining should be halved every four years. The reward was initially 50 bitcoins per block but it is now 12.5 bitcoins. This reward will be reduced by half again by July 2020. The process of issuing new bitcoins will have ceased in 2140 leaving a total of 21 million bitcoins in circulation. Bitcoin Capitalisation, in $B Bitcoin : Top Currency in 2016 Bitcoin capitalisation December 2016 Wallet owners of the capital value of all cryptocurrencies Market price Transaction volume Number of transactions $15.5B 10M 90% $1145 $55.4M 281k

13. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 13 CURRENT APPLICATIONS AND MARKET DEVELOPMENT (1/5) Today there are four major applications of blockchain technology as a means of transferring monetary value: 1) Payment Systems 2) International Fund Transfers 3) Micropayments 4) Interbank Transactions Payment Systems Reduced transaction costs: To accept credit card transactions, a merchant pays a discount rate of approximately 3% for each transaction. These processing fees are lower for large retailers and debit card transactions, and more important for premium credit cards. This discount rate consists largely of bank exchange fees, which go entirely to the issuer of the card. For bitcoin, the overhead for transfer of money is free in 99% of the cases. Thus the blockchain allows traders to improve their margins. Transaction security: MasterCard and Visa payment processors (which process 88% of transactions) are known for their anti-competitive practices aimed at maintaining their commission level. Exclusivity agreements prevent merchants from offering alternative and cheaper payment methods, such as American Express and Discover. However, these high royalties do not protect merchants, who lost about 1.47% of their turnover due to fraud in Q1 2016. Bitcoin offers a secure way to make transactions. Simplification of the payment system: With the blockchain, no registration is required. The user simply downloads an “electronic wallet” and creates a free bitcoin (or other crypto-currency) address. Digital portfolios are user-friendly platforms for initiating and receiving transactions. Traders are usually charged a fixed fee of about 1% by companies that specialize in bitcoin such as BitPay or Coinbase. These portfolio services offer immediate spot price conversions and the bitcoin network ensures pseudo-anonymity. The Various Cyptocurrencies Bitcoin First working cryptocurrency. It remains dominant but lack of scalability and other inherent flaws that will likely prevent mass adoptions Validation: Proof of work Latency: 10 minutes Currency: BTC (on and of network) Issuance: Mining reward.   21M limit Ripple Consensus based protocol designed specifically for existing financial institutions. Supplements existing processes and directly supports flat currencies. Validation: Distributed consensus Latency: 3 seconds Currency: XRP (on network only) Issuance: At inception – 100BN units created Ether Smart contract and distributed app focus. Validation: Proof of work Latency: 12 seconds Currency: ETH (on network only) Issuance: Mining Reward Lifecoin Consensus: Proof of work Latency: 2.5 minutes Currency: LTC (on and off network) Issuance: Mining Reward.   84M limit Dogcoin Consensus: Proof of work Latency: 1 minute Currency: Doge (on and off network) Issuance: Mining reward  Unlimited Stellar Ripple derivative. Financial focus Validation: Distributed consensus Latency: 2-5 seconds Currency: Lumens (on network only) Issuance: 100 BN   then 1% issued PA

14. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 14 CURRENT APPLICATIONS AND MARKET DEVELOPMENT (2/5) International Fund Transfers The sending of money from person-to-person and from one country to another has become common practice. The total annual remittance volume of such transfers is expected to exceed $600 billion by 2017. However, annual international remittance market turnover is now just over $40 billion. Current Solutions The traditional players, Western Union, MoneyGram and Euronet Worldwide, dominate the market with franchise systems around the world. They manage compliance and money transfer operations while providing local traders with a complementary service and revenue source. The transfer fee is generally between 2% and 6% of the transaction amount. Banks also oﬀer this service, but it requires on average three days, and bank transfers are more expensive, with fees of up to 10-15%. Another limitation is that banks may operate only in areas where they have a strong branch network, thus making access to these services impossible in other locales. Blockchain Potential In recent years, several specialized bitcoin remittance services to speciﬁc countries have appeared: Palarin for the Philippines, BitPesa for Africa, CoinPip for several countries (Australia, Brazil, Canada, China). Most of these bitcoin remittance services operate in a similar way: bitcoins are sent to the country of origin and then immediately converted to the local currency. By using blockchain technology to bypass traditional actors, individuals can theoretically send money faster and at lower cost. However, these companies continue to face regulatory constraints that vary from country to country including KYC (Know Your Customer) and money laundering regulation. They also face liquidity problems. The fact that the use and exchange of bitcoins is limited is still a major obstacle to wider adoption. Main Players for International Transfers Rising volumes and improving liquidity on regional exchanges are driving growth in cross–border payments

15. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 15 CURRENT APPLICATIONS AND MARKET DEVELOPMENT (3/5) Micro-payments Expanding Horizons Some of the most disrupted industries could be reborn through online micro-payments, for instance music and online media, which have business models based upon advertising and subscriptions. These models often provide poor quality content and do not allow the user to solely purchase content that is of interest. Single item purchases of some types of content have been rare because payment fees make small payments prohibitive (e.g. PayPal has a minimum transaction fee of €0.28). Only strong distributors such as Apple iTunes have been able to sell individual digital content by grouping multiple purchases into one payment to reduce fixed fee costs. Micro-payments can impact such business models by enabling monetization of previously untenable services. The Potential for Blockchain The very low transaction costs of bitcoin technology and the decimalisation of transactions make micro-payments possible. This makes viable business models based on a high volume of small transactions. Micro-payments create the possibility for very effective subscription and tailor-made services of many types. A current example is BitMonet, which provides a platform for content creators to be paid directly by consumers with micro-payments through bitcoins. However, how can a multitude of micro-payments be achieved without polluting the blockchain with so many micro-transactions? A new technology called sideblock provides a mechanism for micro-payments via a second blockchain that records embedded transactions at the top of the primary blockchain. These systems, developed by the startups 21 Inc and Blockstream enable the opening of sidechain "channels" between the parties that register only the opening and closing transactions in the primary blockchain. Bitmonet: Enabling Micro-payments

16. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 16 CURRENT APPLICATIONS AND MARKET DEVELOPMENT (4/5) Interbank Transactions Institutions are increasingly interested in the potential for using blockchain technology for interbank transfers: 1) Security: Central banks have explored blockchain technology with great interest. The piracy that allowed the theft of hundreds of millions of dollars from the Bank of Bangladesh's account with the US Federal Reserve via the SWIFT system demonstrated that existing protocols had enormous loopholes. While the Federal Reserve has only met with industry leaders and lobbyists, the People's Bank of China, the Bank of Canada and the Bank of England are exploring the possibilities for implementing distributed accounting systems. 2) Systems control: Experiments have focused on private blockchains, where a limited number of players can register transactions or have access to the registry. Partnerships involving major players in financial services, technology and industry were formed by R3, the Digital Asset Holdings project and Hyper Ledger. The Ripple Network was founded in 2012 to provide institutions with a private, fast and secure blockchain network. More recently, UBS announced the opening of a research center for blockchain technology in London and Citibank has its own project to issue a proprietary digital currency, the Citicoin. 3) Cost reduction: Banks are also interested in the potential for using blockchain to facilitate trade and validate ownership for their back-office operations. A blockchain could, for example, enable them to dispense with clearing and clearing chambers, which are complex, centralized and costly. Business centers need to boost their profit margins and the potential of the blockchain in this area is considerable. The use of blockchain could save banks 15 to 20 billion dollars a year by 2022 thanks to lower infrastructure costs related to international payments, trading and compliance. Top Banks Tackle Blockchain Proof-of-Concept In 2016, 14 of the top 30 banks engaged in blockchain Proof-of-Concept Estimated Bank Spending on Blockchain Tech

17. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 Illustration in the Energy Sector: TRANSACTIVE GRID 17 CURRENT APPLICATIONS AND MARKET DEVELOPMENT (5/5) The Power of Blockchain Disruption Beyond the transfer of monetary value, blockchain technology has revolutionised contracts. For example, Smart-Property uses blockchain to enable the transfer of real property. Since 2014, Blockchain 2.0 has included Smart Contracts. Examples of Blockchain Applications In addition to applications for digital transactions such as real estate transactions, crowdfunding, and cryptocurrencies, there are two new application categories: • Record-keeping: a blockchain may be used as a storage register to deposit data that requires guarantee of existence and information such as date of creation and ownership. Examples include patents and medical data. • Smart-contracts: a blockchain may be used to develop and retain stand-alone contracts, for example contracts between several parties that are in digital format and that have been executed without human intervention according to their terms and conditions. Any situation involving an expensive or fallible trusted third party is an opportunity to create a blockchain application. Banking, real estate, health and transportation are sectors that are currently considering the opportunities oﬀered by blockchain to improve or replace current models. Power of Blockchain Disruption Blockchain technology invalidates economic, political or social power derived from technical or regulatory control. It does so without added costs perceptible by the end user since it enables the development of an equivalent autonomous service at a lower cost. Blockchain technology enables creativity with little constraint and its application is virtually limitless. It obliges annuity managers to fundamentally question themselves or be "disrupted" - anteriority is no longer a guarantee of legitimacy. Blockchain Pops Up in Numerous Sectors Works on top of existing infrastructure Utilities can receive transaction & maintenance fees. Local Transactive Microgrid Regional Renewable Provider Smart Meter Produces Surplus Regular Meter Consumes Surplus Consumers can choose where to buy renewables: Monthly bills: 10% from regional 10% from Local Microgrid

18. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 18 BLOCKCHAIN 2.0 (1/3) BLOCKCHAIN 2.0: Smart Contracts and Decentralized Autonomous Organizations (DAO) Distributed applications are the future of the blockchain. Two new tools are available to register exchanges in a blockchain: Smart Contracts and Decentralized Autonomous Organizations (DAO). Smart contracts A smart contract is a computer algorithm of the "If This Then That" (IFTTT) type; it executes a contract once given parameters and conditions have been achieved. The verification and application of the terms of the contract are carried out by the technology itself, not by a trusted third party. A smart contract executed using a blockchain makes possible the automated and secure transfer of digital assets. Smart contracts are a powerful tool to connect the digital world and the physical world in a reliable way, without going through costly and imperfect human control. The underlying contracts can be intangible or physical Intangible Assets: These include property titles or financial asset shares. Derivatives markets have weakened since the financial crisis due to high management and compliance costs. The automatic execution of transactions which is enabled by smart contracts could allow a return to profitability. A public register of exposures to derivatives could reduce the types of counter-party risk that led to the fall of Bear Stearns and Lehman Brothers. Physical Assets: With a smart contract, connected objects provide information intended to activate the contract. There are numerous examples: • Driver access to the on-board computer of a connected car for a car rental; • A smart contract that binds the payment for a property to a lock so that when the funds have been received, the private key to the lock is transmitted to the new owner; • Geolocation data for a package delivery can automatically trigger a payment when it arrives at its destination; • A moisture controller could check the quality of a cargo and cause a payment without any agent intervention. Evolution: Traditional to Smart Contracts Traditional contracts Smart contracts

19. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 19 BLOCKCHAIN 2.0 (2/3) Blockchain 2.0: Smart Contracts and DAO Decentralized Autonomous Organizations and Instruments of Coordination A Decentralized Autonomous Organization (DAO) is a computer process that seals the set of rules that govern a transactional or operations system in a blockchain for an organization. The protocols of operation (membership, hierarchy, retribution) are defined upstream by the community at the origin of the organization. They are then registered in the blockchain in the form of lines of code and executed automatically. This is a tool for transferring the properties of the blockchain to the scale of an organization: security, transparency, fluidity. DAO eliminates error and human arbitrariness in trade. It can be likened to a matrix that articulates a multitude of smart contracts between them. In this configuration, Lawrence Lessing's phrase "Code is Law" extends from cyberspace to the world in its entirety. For now, the users of DAO blockchain technology are primarily listed venture capitalists, which use it to automate their investment process. Some organizations publish their own stand- alone contracts in the form of tokens to remunerate users. This remuneration allows the organization to set its own infrastructure requirements thus eliminating "2/20" management and performance fees. TheDAO is the only DAO on Ethereum; it carried out $117 million of crowdfunding in 2016. Other potential applications of DAO are numerous. An organization such as the Social Security Administration could use a DAO that would consist of thousands of smart contracts to respond to the specific situation of each insured. Automation of transactions would generate productivity gains (processing time), avoid fraud and maximize security. In the short term, the Internet of objects will become a major field of application for DAOs. The multiplication of connected objects will increase the need for intelligent, automated, secure protocols with little computer power consumption. DAOs offer the appropriate technological foundation for "machine-to-machine" exchanges. DAO Illustration: OpenBazaar.org - dCommerce • Free Market for all. No fees. No restrictions. With total anonymity • Open-source p2p markets without any middlemen • No Amazon, eBay or Paypal payment processors. Runs from desktop apps

20. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 20 BLOCKCHAIN 2.0 (3/3) Etherureum and the Future of Blockchain Although bitcoin promises to revolutionise payments, its range of programmable functions does not make it possible to take blockchain technology to its full potential. New protocols that use blockchain concepts are emerging. An example is Ethereum, which enables the use of smart contracts and DAO. Ethereum is an open source blockchain platform that that is widely used for smart contracts. It was developed by Vitalik Buterin and is owned by the Ethereum Foundation. In 2014, the Ethereum team raised €14 million and broke the funding record for a crowdfunding platform. Ethereum has been available to the public since spring 2015 and brings together an extensive community of independent developers. The Ethereum cryptocurrency is called Ether but it is also a distributed global computer network that uses blockchain technology. The Ether has grown rapidly to become the second largest digital currency with a total market capitalization of more than one billion dollars. Ethereum’s competitive advantage lies in a dedicated programming language with its own cryptocurrency. These together allow it to build its own autonomous decentralized applications. By structuring the access layers to its blockchain, Ethereum has played a key role in the adoption of alternate blockchain technology. The Ether can be traded as a currency or used inside Ethereum to run applications or monetize the work. Developers can code intelligent contracts and other applications, and pay peers with Ether to run the code. Due to its lead over the rest of the market, the majority of the most successful blockchain projects are now written with Ethereum. Will this domination turn into a monopoly? In this age of digital innovation where networks promote their own emergence, one thinks the achievements by Google with search engines, Amazon for e-commerce or Facebook for social networks. Protocol Complete protocol Limited script language Duration of transaction 12 seconds 10 minutes Creation of new currency Ether emitted in blocks of 5 ET. Amount emitted per year constant at 15.6 M units of ether Reward divided by 2 every 4 years Size of a block No limit 1 MB Proof of work Ghost protocol - discourages mining by centralized pools:  no advantage to associate to gain success probability for issuing new blocks. Centralised pools of professional miners Hash algorithm Encourages mining with graphics processing units Bitcoin rewards application specific integrated circuits, ASIC built specifically for bitcoin mining Ether - Price Evolution (in $)

21. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 Crossing the Chasm – Blockchain Hyper Cycle Bitcoin Experiment BaaS Widening of Vertical use cases Use-case crossover Aligned markets 21 FACING CHALLENGES The large potential for disruption by blockchain technology is not yet reflected in technological advances. At this stage the most significant uses of blockchain technology are the bitcoin and experimentation by institutions. This paradox, with expectations higher than current capacity of technology, is recurrent and expressed in the Gartner Hyper Cycle. The challenges for blockchain technology are: 1) Performance and scalability: With the exception of the bitcoin, and to a lesser extent some of the projects on Ethereum and NXT, blockchain initiatives remain on a relatively limited scale. Also, the capacity of blockchain technology remains yet to be proven. By way of example, the bitcoin network makes it possible to record seven transactions per second, compared with the current 2,000 transactions per second for VISA.  The overall weight of the bitcoin blockchain, on the order of 50gb, testifies to the current limits of the technology. To develop new cases for its use and to make the technology accessible to all, blockchain technology must be able to improve its performance. 2) User experience: Blockchain services are handicapped by a route that users find too complex, and that limits the value perceived by users. To enter the blockchain universe, the user must install several software components to enjoy even basic services. These prerequisites limit the adoption of the blockchain to a population of savvy technology enthusiasts. 3) Ecology: By 2015, the electricity consumption of the bitcoin network was equivalent to 280,000 US households. With the increase in the size of the bitcoin blockchain and the expansion of cryptocurrencies, the energy impact of the blockchain will become much more consequential. 4) Regulation: The blockchain ecosystem must find its place in the world of regulation to convince; the regulation of blockchain services is still a blank page. For example, it is not certain that a smart contract has legal value. However, progress is being made and several court decisions in Europe and the United States recognize the bitcoin and admit de facto the dynamics of disintermediation of the blockchain. In France, the Caisse des Dépôts et Consignations has sided with the banks. Also, the standards for governmental surveillance and security could be a major barrier to the universal adoption of cryptocurrencies. “From a currency perspective, the state-by-state licensing regime is by far the biggest hurdle to anyone trying to use bitcoin as a payment instrument.” Perianne Boring, Chamber of Digital Commerce Open Ledger Standards

22. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 22 BLOCKCHAIN : CONFIDENCE WITHOUT LIMITS? General confidence in the system is the greatest risk for adoption of blockchain technology. Bitcoin and Ethereum each have had negative publicity due to incidents of piracy or pure theft. There have been two major piracies of the bitcoin to date that raised concerns over the platforms: • Mt. Gox in 2013 ($500M loss); • Bitfinex in 2016 ($53M loss). These two examples relate more to rapidly changing individual societies than to fundamental flaws in the protocol, but this does not mean that fundamental security risks do not exist. The greatest vulnerability to an attack is when an actor controls the majority of computing power of the mining. In reality, the large size of the bitcoin network makes it difficult to capture a significant market share. At one point, the BTC group controlled 20% of the bitcoin network, but the consortium voluntarily dissolved since the perceived security vulnerability could considerably reduce the value of BTC’s massive bitcoin holdings. The consequences of a coding error can be catastrophic and hardly reversible, as evidenced by The DAO. Due to a vulnerability discovered in the source code of the smart contract, a member of the network drained the main account of the application to the tune of $50 million. Although the sum is impressive, this was not the heart of the problem. With this incident, investors were confronted with a dilemma: lose their stake or agree to manually modify the blockchain code (which was considered inviolable) to return the funds to safety. The second option prevailed and the funds were partly recovered following an operation called a "hard fork". This event requires rethinking the limitations of human intervention. A blockchain system was considered safe by nature, but the attacks have shown otherwise. The nature of the platforms used by blockchain, the complexity of smart contracts, and the number of blockchain miners are all factors that can influence the security of the services that use blockchain technology. THE DAO ATTACK – Times and Figures The 51% Attack, or the limits of the principle of consensus The attacker mines alternative blocks, from the previous block The attacker publishes the string he obtains on the network since it is longer than the existing string (which is possible because it has more than 51% of the network power) As the channel is longer and uses the consensus principle, it replaces the existing string and the transactions contained in it are canceled 1 3 An attacker wants to rewrite the Blockchain in order to cancel certain transactions present in a block: 2 FIRST PART OF THE CHAIN MAIN CHAIN SECONDARY CHAIN, BUILT BY STRIKER Has at least 51% of mining computing power Transaction Transaction selected by striker to be deleted

23. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 23 CONCLUSION Blockchain technology has paved the way for an Internet of Transactions. Blockchain technology has already proved its worth in such areas as means of payment, interbank exchanges and international remittances. Touted as the next digital revolution, blockchain technology has the potential to transform traditional industries and alter society through disintermediation of trade. Any situation that involves an intermediary that is expensive or fallible represents an opportunity to create a blockchain application case. No industry is immune to the blockchain’s disruption potential. In 2017, the blockchain technology is at an inflection point. The industry is in a state of transition and must move to Blockchain 2.0, which means the adoption of more sophisticated applications, such as micro-payments and smart contracts. Having outgrown its original bitcoin community, the majority of blockchain applications have yet to pass beyond the prototype stage to make blockchain technology the greatest restructuring technology of the next decade. The current state of the blockchain technology is similar to the state of the Internet of the early 1990s, which suggests that the future of the blockchain is very promising. However, many obstacles must be overcome to allow a wider adoption of the blockchain, in particular the terms of performance, regulation and environment. Trust in this system must also be strengthened since its reputation has been repeatedly undermined following scandals and piracy in recent years.

24. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 24 Q&A Bitcoin – Direct Investment in Cryptocurrency The Bitcoin: Which asset class? Opinions differ as to the asset class of the bitcoin: • Since the function of the bitcoin is to process and store value, many investors consider it a financial investment. • The US Commodity Futures Trading Commission classifies the bitcoin as a raw material. However, the bitcoin has no other real world application, unlike traditional commodities such as gold, which can be used in the production of computers, jewelry, mirrors and batteries as well as money. • The bitcoin is often seen as an emerging technology with a risk/return profile similar to a venture capital investment. However, the bitcoin is liquid, while venture capital investments can often take years for liquidity. Indeed, the bitcoin has the same liquidity as the largest Exchange Traded Fund: Gold (GLD). Principal features of the bitcoin as an investment • Deflationary asset: The bitcoin is deflationary by nature due to its future rarity. Its growth is capped at 21 million units, which means that by 2040 the cessation of bitcoin mining will naturally increase its value. Conversely, cash is inflationary by nature, particularly because of central bank manipulation. • Volatility: Due to its decentralized nature and the lack of government regulation, the volatility of the bitcoin is very high. Speculators in China have turned to bitcoin trade to exploit this volatility. More than 94% of the volume of trade in bitcoin was in Yuan in August 2016. • Low market capitalization: The bitcoin’s relatively small market capitalization, which is equivalent to that of companies such as Foot Locker, hampers investment in the bitcoin. It is difficult for institutional investors to take a stake. Thus, it is often combined with other assets in management of a portfolio. • The lack of correlation of the bitcoin with traditional asset classes and its risk/return profile make it a medium of choice for a diversification of a portfolio. Sharpe Ratio: Bitcoin Risk-Reward Profile Bitcoin Weekly Volatility

25. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT FUND APRIL 2017 25 Q&A , How the Safety of the Bitcoin System is Assured? The security of the bitcoin protocol is ensured by   advanced cryptographic techniques The stages of the bitcoin mining process When a new transaction is issued, it is not directly registered in the blockchain. "Miners" perform a validation and transaction certification process (“Proof of Work”). This process is mainly based upon solving a complex cryptographic formula: • The miner must first verify the authenticity of the transaction: this step could be compared to the verification of a check transaction (verifying funds as well as the signature of the owner). Each blockchain transaction has a “signature” that is based upon a cryptographic key. • The bitcoin miner then attaches the transaction to a “block” of transactions. This step requires substantial computational power since the miner must create a robust encryption hash (a sequence of letters and numbers) to link a new block of transactions to the blockchain. • Once a miner calculates the hash of the new block, he adds it to the blockchain and distributes the new version to the whole network. The network then attests to its validity during a process called the distributed consensus. • This process ensures the chronology of transactions and provides security against modifications to the blockchain. Any modification of a block would change its “hash” and therefore break its link to other blocks and compromise the integrity of the entire blockchain. Incentive for miners to lend their computing power Computational power is the principal resource required for proper functioning of a transaction network. The bitcoin protocol allows miners to monetize their computing power. Miners are remunerated with a quantum of a cryptocurrency. Bitcoin senders typically attach between 5 and 20 basis points to a transaction to entice miners to attach it to the next block. The miner who first solves the cryptographic problem necessary to create the hash for the block is paid. There is an additional incentive for miners to check each block. Mining - A Key Step in the Bitcoin Process Blockchain Mining Center C7 (Utah, USA) Transaction 1 Transaction 5 Transaction 34 Transaction 54 Transaction 65 Memory pool Block header Transaction list Block hash (Block ID) Previous block id Transactions hash (Merkle root) Number of transactions Transaction 1 Transaction 5 Transaction 34 Transaction 54 Transaction 65 Bitcoin block Block is added to the node’s blockchain Miner 4. Bitcoin user Validates all transactions and creates a block Transaction 1 Transaction 5 Transaction 34 Transaction 54 Transaction 65 Transaction 86 1. 3.2. Node

26. BLOCKCHAIN CASE STUDY OLMA NEXT LTD APRIL 2016 CASE STUDY: BLOCKCHAIN REAL ESTATE TRANSACTION MAP This process map summarizes how a typical real estate transaction can occur using a blockchain to simplify and disintermediate the process (no need of physical signature, meeting or contact between seller and buyer).

27. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT LTD APRIL 2017 27 SOURCES (1/2) PAGE 3 https://www.statista.com/statistics/647374/worldwide-blockchain-wallet-users/ http://expandedramblings.com/index.php/blockchain-statistics/ PAGE 4 http://www.pexels.com http://www.depositphotos.com http://free-images.gatag.net/en/2013/02/03/200000.html PAGE 5 http://media.wix.com/ugd/6efe00_8492143fe6434e858d80b77631635355.pdf http://www.fondapol.org/wp-content/uploads/2016/06/083-SOUDOPLATOF-2016-05-26-webDEF.pdf http://www.finyear.com/La-blockchain-une-technologie-avec-un-potentiel-immense-Partie-1_a34432.html PAGE 6 https://www.alumneye.fr/blockchain-la-plus-grosse-revolution-depuis-internet/ https://regulation.revues.org/11489 http://www.leconomiste.com/article/1002828-le-protocole-blockchain-revolution-ou-mirage http://www.imf.org/external/pubs/ft/fandd/2016/06/adriano.htm PAGE 7 https://www.rs-online.com/designspark/when-the-blockchain-technology-meets-the-internet-of-things PAGE 8 http://www.frenchweb.fr/bitcoin-ethereumque-pese-reellement-le-secteur-de-la-blockchain/267530 https://www.statista.com/statistics/647374/worldwide-blockchain-wallet-users/ http://www.coindesk.com/research/state-of-blockchain-q3-2016/ PAGE 9 https://www.cryptocoinsnews.com/pwc-expert-1-4-billion-invested-blockchain-2016/ http://www.frenchweb.fr/bitcoin-ethereumque-pese-reellement-le-secteur-de-la-blockchain/267530 http://www.journaldunet.com/economie/finance/1178652-blockchain-paiement/ https://www.cbinsights.com/blog/bitcoin-blockchain-startup-funding/#head1 PAGE 10 https://blogs.thomsonreuters.com/answerson/blockchain-technology/ https://www.toptal.com/bitcoin/blockchain-technology-powering-bitcoin http://firstpartner.net/content/2016-blockchain-ecosystem-market-map https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/Innovation/deloitte-uk-blockchain-full-report.pdf PAGE 11 http://www.finyear.com/Comprendre-la-blockchain-livre-blanc-par-U_a35431.html PAGE 12 https://blockchain.info/stats http://www.societe-informatique-de-france.fr/wp-content/uploads/2014/10/1024-4-delahaye.pdf http://coinjournal.net/bitcoin-dominance-index-approaches-90-ethereum-steem-decline/ https://www.statista.com/topics/2308/bitcoin/ https://fr.statista.com/statistiques/665756/nombre-detenteurs-portefeuille-bitcoin-sur-blockchain-monde/ https://blockchain.info/fr/charts/market-cap?timespan=all PAGE 13 http://www.monnaie-bitcoin.com/comparaison-paypal-bitcoin PAGE 14 https://wazaonline.com/fr/economie/vous-en-avez-assez-de-western-union-essayez-le-bitcoin https://www.infosys.com/industries/cards-and-payments/resources/Documents/money-transfer-industry-2016.pdf https://bitcoin.fr/quel-est-l-interet-de-bitcoin-pour-les-transferts-de-fonds-internationaux/ PAGE 15 http://blkchain.fr/micropaiement-et-empowerment-de-lutilisateur/ https://blockchainfrance.net/2016/12/09/la-blockchain-sauvera-t-elle-lindustrie-musicale/ https://bitcoin.fr/fabrice-drouin-lightning-network-video/ https://letstalkpayments.com/how-bitcoin-lightening-network-could-solve-blockchain-scalability-problem/ PAGE 16 http://www.finyear.com/La-blockchain-une-technologie-avec-un-potentiel-immense-Partie-1_a34432.html https://blockchainfrance.net/2016/08/17/quels-impacts-de-la-blockchain-sur-les-banques/ https://www.theatlas.com/charts/Vy6mu6sHl http://www.nasdaq.com/article/banks-are-turning-to-the-blockchain-in-a-big-way-cm681111 PAGE 17 https://www.ethereum-france.com/livre-blanc-white-paper-ethereum-traduction-francaise/ https://www.cbinsights.com/blog/bitcoin-blockchain-startup-market-map/ PAGE 18 https://www.ethereum-france.com/slock-it-la-promesse-des-objets-connectes-sur-la-blockchain/ http://www.fondapol.org/wp-content/uploads/2016/06/083-SOUDOPLATOF-2016-05-26-webDEF.pdf https://www.niceideas.ch/roller2/badtrash/entry/blockchain-2-0-from-bitcoin http://www.pwc.com/us/en/technology-forecast/blockchain/digital-business.html PAGE 19 https://www.ethereum-france.com/deploiement-du-projet-the-dao-mere-de-toutes-les-dao/ https://epicenterbitcoin.com/podcast/142/ http://www.finyear.com/Blockchain-OpenBazaar-ouvre-ses-portes_a35884.html PAGE 20 https://www.ethereum-france.com/livre-blanc-white-paper-ethereum-traduction-francaise/ http://blogchaincafe.com/ethereum-vs-bitcoin-les-differences https://etherchain.org/statistics/basic

28. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT LTD APRIL 2017 28 PAGE 21 https://business.lesechos.fr/directions-numeriques/technologie/open-source/021648126173-la-blockchain-aussi- revolutionnaire-que-le-web-206635.php http://smallbusinessfrontiers.com/2015/11/16/other-applications-for-the-technology-behind-bitcoin/ http://tempsreel.nouvelobs.com/rue89/rue89-planete/20160720.RUE3462/le-bitcoin-et-la-blockchain-des-gouffres- energetiques.html https://www.forbes.com/sites/peterdetwiler/2016/07/21/mining-bitcoins-is-a-surprisingly-energy-intensive-endeavor/ #5291d6525bbf http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp PAGE 22 http://www.kwm.com/en/knowledge/insights/smart-contracts-open-source-model-dna-digital-analogue- human-20160630 http://www.lefigaro.fr/secteur/high-tech/2016/06/27/32001-20160627ARTFIG00068-dans-la-blockchain-le-code-ne- fait-plus-la-loi.php http://www.zdnet.fr/actualites/un-nouveau-piratage-fait-plonger-le-cours-du-bitcoin-39840488.htm PAGE 24 https://qz.com/754875/chinas-risk-loving-mom-and-pop-investors-have-abandoned-local-stock-markets-for-bitcoin/ https://www.forbes.com/sites/laurashin/2016/06/02/4-reasons-why-bitcoin-represents-a-new-asset-class/ #7a75bb453426 PAGE 25 https://www.google.fr/search? q=mining+bitcoin+illustrator&biw=1920&bih=940&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi_uOHct7XSAhUH1 RoKHRKQDEwQ_AUIBygC#tbm=isch&q=blockchain+mining+explained&*&imgrc=W6xzC34hJQ1yiM: General : http://reports.pitchbook.com/fintech-analyst-report-part-2-bitcoin-blockchain/ http://www.coindesk.com/research/state-of-blockchain-q3-2016/ https://www.wavestone.com/app/uploads/2016/12/Wavestone-BankInsight-10_VF.pdf http://www.frenchweb.fr/quest-ce-que-la-blockchain/237579 https://fr.slideshare.net/JrmeKehrli/the-blockchain-the-technology-behind-bitcoin https://medium.com/@LetsTalkPayments/know-more-about-blockchain-overview-technology-application-areas-and- use-cases-b48d10874293#.9hgzoq4pu https://fr.slideshare.net/KudrenkoOleg/blockchain-bitcoin-and-smart-contracts-oleg-kudrenko https://www.niceideas.ch/blockchain_explained.pdf http://www.finyear.com/Comprendre-la-blockchain-livre-blanc-par-U_a35431.html https://outlierventures.io/wp-content/uploads/2016/03/European-Blockchain-Angels-VCs-Meetup-11_02_16.pdf http://www.mckinsey.com/industries/high-tech/our-insights/how-blockchains-could-change-the-world The content of this document has been researched and implemented with a high degree of care. However, the possibility of errors in the processing of sources acknowledgement and copyright respect for external content use cannot be fully excluded. Please send any remarks or corrections to contact@fredbonelli.com SOURCES (2/2)

29. BLOCKCHAIN INDUSTRY REVIEW OLMA NEXT LTD APRIL 2017 Subscribe to OLMA Next’s free newsletter to get access to study Nº5 29 CONTACT DETAILS All data and information provided on this document is for informational purposes only. Frédéric Bonelli makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this document and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis. fb@olmafund.com +336 86 86 90 55 FREDERIC BONELLI Head of research www.olmafund.com TECH REVIEW cwb@olmafund.com +7 985 768 8505 CHARLES BORDEN Chief Editor adm@olmafund.com +44 78 2632 5316 ALEX DER MEGREDITCHIAN Financial Analyst tm@olmafund.com +44 20 7848 5464 TOM MATTHEWSON Research Analyst

From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd

OLMA Capital Management

From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd