This month I wrote overview of the whole blockchain economy. You can enjoy my previous analysis.
Or If you are looking for info on August crowdsales follow Vitaly's cool post.
The analysis is based on the data provided by cyber • Fund on the top 25 blockchain systems with the largest market cap and the cyber • Rating not lower than 1.4 as of 31 August 2016. Data source.
This month, the economy has grown smaller in USD by $862 mln or 7% but added 618,000 BTC or 3%. The explosive growth occurred on the part of Monero (+ 431% in BTC). Factom (+ 94%), Synereo (+ 50%) and Safe Network (+ 37%) have shown moderate growth. It is worth mentioning that Augur started trading on Gatecoin and immediately returned to the rankings. However, this month brought a predictable failure for Steem: -48% in USD, which is a correction not surprising after the almost 20-fold increase.
On Evaluation of Blockchains
I would like to say a few words concerning cap evaluation on CoinMarketcap, Coincap, Cryptocompare and other resources. The evaluation provided there for some systems is not correct, which results in a large number of incompetent investors making false assumptions based on these data.
Here is the list of the systems or which those sites provide false cap figures: Ripple, Stellar, Synereo, Storj. In general, capitalisation for these systems is deeply understated because CoinMarketcap distorts the concept of current supply, which in this case is calculated following some mysterious logic. For example, 65% XRP controlled by Ripple Labs is somehow excluded from the current total number of tokens, the same with the 96% AMP controlled by Synereo team, 95% LUM controlled by Stellar Foundation, 90% Storj controlled by Storj Inc.
If one takes a closer look at the concept of Shares Outstanding, from the point of view of conventional finances this approach makes no sense at all. As a result, a large number of ignorant investors decide, say, to invest in Synereo thinking that its evaluation is $10 mln, while the actual cap is nearly $300 mln (shares are issued and even allocated for special purposes). Even Ripple shows its capitalisation on Ripple Charts as it should be, while the industry still cannot accept the fact that pre-mine is a normal thing and there is no any other magical logic for the evaluation.
This results in no less than industrial-scale deception of investors. We will do all we can to bring this mess to order. Be careful with blockchain projects evaluation and thoroughly check all basic parameters of the analysed system.
About Anonymous Systems
This month has brought success to Monero, therefore, it is worth to dwell a bit on blockchain systems focused on privacy. Anonymous blockchain systems are of particular interest. There are several of them in the segment:
Monero. The most proven solution on the market based on the Cryptonote protocol. It uses ring signatures to create the most private of blockchains. The community is made up of high-class cryptographers. Over the time it exists, Monero Labs has released 5 papers for protocol improvements while the community itself made a lot of improvements to the client, including implementation of the anonymous I2P network for customer communication. I consider Monero blockchain the most balanced solution in the case when privacy and anonymity of transactions are really important. For instance, it features the most adequate scheme of distribution of basic tokens XMR (or moneroj) in the whole history of the blockchain.
Dash. To ensure privacy, it uses the mechanism CoinJoin run by a decentralized network of masternodes. At the same time, the Dash blockchain cannot be considered private by default because most of the transactions in the system are not mixed. At the moment, the mixer system needs to be subsidised and the speed of such mixing is far from efficient. All this makes Dash not very competitive in this niche compared with Monero.
Bytecoin. The history of the CryptoNote protocol stems from this blockchain. In a few weeks after the Bytecoin project was published on Bitcointalk, it became clear that the story that this system had been active in the darknet for more than 2 years and over this time 82% of its tokens were distributed, is something more than just a piece of nonsense. The community decided to fork this wonderful thing and call the project Monero. The community featured very experienced cryptographers who were developing Monero over the last 2 years. Meanwhile, Bytcoin ended up somewhat redundant. Well, greed was their undoing.
Vcash. It was written from scratch in C++ and uses a mixer called ChainBlender similar to Dash. The project is led by a developer who proudly calls himself John Connor. The network is stable, fast, and there is a feeling that it is reliable. I cannot say anything about the competitiveness, as I have not examined it thoroughly.
Zcash. It will be launched in the coming months and uses the most advanced cryptography, the so-called Zero knowledge proof. Despite the revolutionary method it has its drawbacks: this cryptography class is complex and hard to comprehend even for experts. What we know for sure, that this cryptography is only accessible to a small number of mathematicians and, unlike the ring signatures, it does not have decades of testing behind. There is also one peculiar moment in Zcash design. The system will require trusted setup, which means that those who will be launching the system will be able to issue an additional amount of coins whenever they want with the help of a special installation parameter. Given that there is no way to detect the amount of released coins in Zcash, it gives the project a special highlight. And there is no way to make sure that these bright people would not exploit this option. I have decided to abstain from the investment. Though technically, the project is very interesting, one might even call it revolutionary.
To sum it all up, currently, the segment of anonymous systems does not exceed $200 mln, which is no more than 2% of cybernomics. Considering that current fiat economy has at least 20% in the shadow, the segment seems to have a serious potential for growth.
Decentralized Storage
The segment has grown this month by 7% in USD and 18% in BTC to $116 million. Safenetwork has increased by 37% in USD after the announcement of Alpha release and next crowdsale round. However, Storj and Sia have declined by 4% and 28% in USD respectively. While Sia remains the only working solution on the market, Storj Inc. MaidSafe are running steadily towards the finish line showing some really impressive demos.
It is worth noting that the LBRY project was not considered in the calculations of the segment because it falls short in rating. But in the recent months, its market evaluation is nearing more appropriate figures. When the client will be available to see on Github, I will want to test the project and explore it in detail. Yet, as for right now, we can see that the network utilisation is at a default stage, and the situation with distribution is not improving. So, let's just wait and see.
Distributed Computation
The segment declined slightly by 9% in USD but has been almost stable in BTC. As before, it is just over $1 bln. This month has not seen any notable events on the market. The Devcon2 is taking place in Shanghai in September. There are about 100 teams registered working on decentralised apps. That would be very interesting.
Lisk finally starts releasing, though very slowly, and is already asking some correct but very complex questions, which will take years to resolve (concerning the trust in private chains). However, the situation with delegates remains unchanged. What the fuck?
What also makes this month interesting is that Synereo decided that the social network is now only one of the apps of the system to be based on Rholang, which is a verifiable language for smart contracts. We do not include it in the segment because it does not really work yet.
Decentralized Social Networks
Social segment declined by 9% in USD last month and remained unchanged in BTC. Now, it equals $395 mln. Despite the fact that average prices have not changed much, various projects saw different results: Steem -48% in USD and Synereo +37%.
On one hand, it may seem that Steem is in bad condition. In fact, its fall is no more than quite an adequate correction after a rapid growth. The project needs time to absorb such a rapid capitalisation and correct errors inevitably arising after an explosive increase of user base. Steemit Inc. continues to deliver with an amazing speed and already starts to solve the problems associated with the users' retention slowdown. The team is very responsive to the problems, which is very important in our business. Soon the time will come to buy with confidence.
Meanwhile, Synereo, despite the increase in interest and the obvious expansion of the project's scope to the level of Ethereum, can hardly be a convenient target for investment as of now. Almost $300 million for the team developing a piece that will start working no one knows when, means $15 million to each, which is way too much even taking advisers into account. In addition, the market where the team operates is already highly competitive, and in this case, they will have to compete with Ethereum.
Settlement Systems
I finally feel like writing about the segment of settlements recording and finalisation. The nature of these systems is that they help to take into account obligations of a large number of counterparties, effectively clear payments and facilitate finding ways to convert one obligation into another. The closest use case is the accounting of fiat obligations.
To give you a clue about the condition of this segment, I quote key figures from the Ripple Charts:
Ripple system is interesting as it is getting better every day. But, with issued obligations for $10 mln and the daily trading volume at around $1 mln, the total cap of the system at around $600 mln seems seriously overvalued. This is not surprising since about 65% of tokens is controlled by Ripple Labs with no declared plans for further distribution. The system at the moment has 33 validators, of which only 15 are known. This sets the cap for one validating node at $20 mln, which is huge. For bitcoins, the figure does not exceed $2 mln. It should be noted that the XRP token does not take part in the consensus but makes its value protecting the network from spam and operating as a bridge currency.
Unlike Ripple, Stellar looks more like a startup that has significantly improved the consensus algorithm, given up (so far) the financial focus and is looking towards various web applications. That is why the network has good documentation and an excellent set of libraries. Stellar has developers from Stripe behind their back and, therefore, the team is apparently planning a similar scheme as Stripe, that is, to focus on developers and their needs. Let's see if it works, because their distribution is awful. According to the single block explorer, the network is only used by the project developers, which means zero-level transaction activity. There is no proper analytics on this blockchain. All this makes Stellar interesting as a technology but, for now, hardly an attractive investment – $200 mln is not a joke.
To sum up, the segment is at its primary stage but is one of the leaders in terms of capitalisation. The potential of the systems is huge. Ripple is the leader as a matter of fact with nearly $500,000 of daily transactions. Corda by R3 is the leader in expectations - 50 largest banks promise to use this marvel. Recently, R3 published a paper on Corda promising the upcoming release of the code and enhanced technical paper. Even Visa recently announced its proprietary solution BTL which is private and, therefore, closed for analysis. We'll keep watching as eventually, it will obviously result in a technological leap in the segment.
About Template Smart Contracts
This month, the segment lost 6% in USD and increased by 15% in BTC, and still is around $100 mln. I honestly do not know how to distinguish between the segment of private chains and the public infrastructure for smart contracts. It seems the potential customer base is the same: SMB and Enterprise. This is especially interesting, because there are the first instances of functional integration into existing ERP systems (BlockPay and Odoo), and even SAP does not want to miss the trend. It is quite obvious that a demand is growing for a new generation of accounting systems, which allows counterparties to share accounting.
It is not easy to segment and evaluate all this. There is a segment of private blockchains which we did not consider for investment merely due to the absence of actual projects. But this month, Antshares has collected more than $3 mln. The project is mainly interesting in that it will be based on Hyperledger.
Hyperledger is the undisputed leader among the developers - 1400 stars on Github. This month they launched a block explorer for Hyperledger. Meanwhile, 17 new members, have joined the alliance, including Samsung.
It is worth noting that there is already quite a lot of frameworks to deploy private blockchains. Apart from Hyperledger, it is Scorex, BigChainDB, Juno, Hydrachain, ErisDB, OpenChain, Multichain, Graphene, Corda (no code available yet) and others.
Besides, there is a new project called Urbit which is not about blockchain at all, but in my humble opinion, it has a number of revolutionary features, which can over time change the whole perception of the industry.
As for me, it is the most underestimated segment. After all, private blockchains is a cool feature for the segment of the hidden champions whose cumulative impact on the economy is very significant.
Big thanks @coinfox for translation
Original was posted in Blockchain Boom
About me: Dima Starodubcev or 21xhipster. Architecting cyber • Fund, Managing Investments in Satoshi • Pie, researching tech and economy of consensus algorithms.