State of Stablecoins report released

Update: the 2019 State of Stablecoins report, which at 140-pages significantly expands on the earlier-2018 report described below, has now been released. Download the full report and slides and read the summary findings blog.

We are very pleased to release our first State of Stablecoins (2018) report, the first comprehensive research study of the rapidly growing world of stablecoins. 

Download the full report and slides and read the summary findings blog.

The approximately 80-page report includes data and analysis on 57 stablecoins (live and pre-launch projects), and over 1,600 data points were collected for the analysis. The report also provides primers on some of the more prominent stablecoins. Some key highlights from the report include:

• Stablecoins can be broadly divided into two main stability mechanism categories: algorithmic (e.g., Basis) and asset-backed (e.g., Tether), with 77% of stablecoins asset-backed.

• Live stablecoins have had mixed results to date in achieving price stability, with asset-backed coins (e.g., Tether) generally delivering on their stability promise and outperforming algorithmic coins (e.g., NuBits).

• Fewer than two-thirds of all stablecoin projects (60%) are building just on Ethereum (ETH), perhaps lending support to growing concerns over Ethereum’s ability to scale its transaction capacity.

• Asset-backed stablecoins (e.g., US dollar-backed coins like TrueUSD, the second most actively traded stablecoin after Tether) have raised slightly more project funding ($177m) than algorithmic stablecoins such as Basis ($174m), highlighting lingering questions over whether ‘algorithmic central banks’ can ultimately be successful.

• To drive network effects and achieve price stability, 51% of stablecoins offer some type of profit incentive for users, or ‘dividend’ mechanism, built into the design of the stablecoin system (e.g., ‘seigniorage shares’, transaction fee dividends).

• Stablecoin designs presented to date all feature trade-offs (e.g., the more decentralized the system, the less confidence in the price stability mechanism).

Global Blockchain Benchmarking Study released

We are very pleased to release the Global Blockchain Benchmarking Study, which is a follow-up to our Global Cryptocurrency Study.  

The full blockchain report PDF can be downloaded here. 

Presentation slides with approximately 100 figures and tables from the study can be viewed and downloaded here.

The 122-page report presents a systematic and comprehensive picture of a rapidly evolving industry, examining how blockchain and distributed ledger technology (DLT) are being used in the public sector and enterprise. The study analysed non-publicly available data gathered from over 200 central banks, other public sector institutions, DLT start-ups, and well established companies. The study explores targeted use cases, emerging revenue models, timing of deployment, and key challenges.

Study highlights include: 

• which protocols central banks and are testing (57% of surveyed central banks are experimenting with the Ethereum codebase)
• The number of enterprise DLT startups has trebled since 2014, from 37 to at least 115
• Approximately 47 per cent of all enterprise DLT startups are based in North America (primarily in the US), followed by Europe (28 per cent) and Asia-Pacific (19 per cent)
• Banking and finance account for 30 per cent of publicly reported DLT use cases, followed by government at 13 per cent, insurance at 12 per cent and healthcare at eight per cent
• “Immature” technology is still considered one of the key challenges to broader DLT adoption
• There is significant public sector DLT activity at the local, regional, national and multilateral institution level
• 58 per cent of public sector institutions (excluding central banks) have planned advanced DLT trials this year compared to only one quarter of central banks; 42 per cent of central banks cannot yet predict when trials might begin
• Only limited network and application deployment has been observed to date: the vast majority of users are experimenting with small-scale, isolated networks

We hope you find the study findings useful, and as we will be benchmarking the cryptocurrency industry on annual basis we very much welcome your suggestions and feedback.

Will the world's 'unbanked' lead cryptocurrency adoption? New research suggests possibly not

The subject of bitcoin adoption by the world's 'unbanked' has been of interest for some time now to cryptocurrency entrepreneurs thinking about which markets to focus on, policymakers looking to boost financial inclusion, and others.

It has been suggested that those lacking access to a bank account, and the financial system more generally, could drive proportionately greater cryptocurrency adoption over people in advanced economies who already have access to financial services.

A paper analyzing empirical crowdfunding data found that being unbanked* was negatively correlated with crowdfunding adoption. In other words, markets with more developed financial participation (generally, advanced economies) are where the greatest amount of crowdfunding activity is taking place.

Now, what does data from crowdfunding adoption have to do with cryptocurrency adoption? 

For one, both are forms of alternative finance, which can be defined as any new financial instrument, channel or system that emerges outside of traditional financial services (e.g., banks, capital markets, etc). What happens in one area of alternative finance may be relevant to other areas, although this relationship needs further exploration.

A second reason why this result may matter for cryptocurrency adoption is that this finding lends support to the fact that already possessing a bank account can reduce on-boarding frictions associated with participating in alternative finance. For example, one of the easiest ways to acquire bitcoin is through a cryptocurrency exchange, and transferring funds into a cryptocurrency exchange can be difficult if not impossible without a bank account.

And, of course, there is the fact that someone who already has resources and savings in an existing bank account will probably also have greater financial wherewithal to participate in crowdfunding or adopt cryptocurrency.

Having said all that, one thing that the paper does not address, and which an earlier paper of mine focused on, is the quality of the financial services available in different countries. 

My paper (downloadable here) suggested that those lacking access to quality financial services, as indicated by data on banking and currency crises, sound monetary policy, cost of cross-border transactions, financial repression, and so on, may be relatively more likely to adopt cryptocurrencies such as bitcoin.

As the regions with relatively low-quality financial services - Sub-Saharan Africa, Latin America, and the former-Soviet countries - are also the same regions with the largest unbanked populations, the question of how likely underbanked regions are to adopt cryptocurrency remains an open question and warrants further study. But certainly one possibility is that it is the already banked - and not the unbanked - within countries with low quality financial services that will be the most likely to adopt cryptocurrencies.


*Note: the term 'unbanked' is represented here by a World Bank measure of the percentage of people in a country that hold an "account at a formal financial institution" such as a "bank, credit union, another financial institution (e.g., cooperative, microfinance institution), or the post office (if applicable) including respondents who reported having a debit card".

Presentation slides with 100+ figures and tables from our 2017 Global Cryptocurrency Benchmarking Study

Note: a PDF version of these slides, which includes high-resolution images of the figures and tables, can be downloaded here (annoyingly, SlideShare downscales the resolution of uploads).

And the full 114-page written report can be downloaded here.

2017 Global Cryptocurrency Benchmarking Study from Garrick Hileman

Global Cryptocurrency Benchmarking Study released

We are very pleased to release the Global Cryptocurrency Benchmarking Study.  The full report PDF can be downloaded here.

The 114-page report presents findings from the first major empirical research study of the cryptocurrency industry that utilises non-public ‘off-chain’ data. It is based on data gathered from nearly 150 cryptocurrency companies and individual operators in 38 countries, and covers four key industry sectors — exchanges, wallets, payments and mining. 

Study highlights include: 

• our estimate that between 5.8 million and 11.5 million cryptocurrency wallets are ‘active’ as of today
• transaction volume from users of the largest wallets generally ranges between 10-25% of total bitcoin transaction volume
• detailed information about security and compliance practices at cryptocurrency companies 
• a global map of cryptocurrency mining by country

We hope you find the study findings useful, and as we will be benchmarking the cryptocurrency industry on annual basis we very much welcome your suggestions and feedback.

"La revolución del bitcoin"

Full El Mercurio article here

Why participate in Cambridge's cryptocurrency and blockchain benchmarking study?

Below is an edited transcript of remarks I delivered at the Bitcoin and Blockchain Leadership Forum meeting on 9 December, 2016.

Collecting data helps us to develop and inform research questions, such as what is the relationship between blockchain activity and economic growth? This question is not only interesting from an academic perspective, it may have significant policy implications. Many policymakers are thinking about how to balance a desire for increasing economic growth with regulating the blockchain industry, and our research has shaped the policy discussion around this topic.

However, we are not able to address such research questions unless we have strong participation from you in our research surveys.

It’s important to make clear that the data published in our studies is aggregate data, not individual organization data. For example, we show country level data, or sector level data (e.g., data for all wallets, or all exchanges) but never _____ organization’s individual data. We take data privacy and confidentiality very seriously and work hard to ensure that our research does not threaten trade secrets or security in any way.

We are currently running our first global blockchain and cryptocurrency benchmarking study. On the blockchain side we’re looking at permissioned distributed ledgers and non-monetary use cases, such as provenance, as well as public sector blockchains (e.g., central bank digital currency) and what’s happening with distributed ledger technology in U.S. states like Delaware. For cryptocurrencies we’re examining exchanges (specifically security), payments, wallets, and mining.

There are many good reasons for organizations to support this research by completing our surveys. Firms can benefit from the wide exposure these reports receive as we offer all participants the opportunity to have their logo included in the report. This study will also help with the formation of key performance indicators. 

But perhaps the biggest reason for cryptocurrency and blockchain firms to participate in our benchmarking study is that this study can help the industry constructively engage regulators and policymakers. Many regulators are keen to learn more about the alternative finance sector without burdening companies with invasive and time consuming data requests. Benchmarking is a time honoured way to achieve this goal, and participation in this study is a way to signal to the world that the blockchain and cryptocurrency space is maturing.

Thank you for supporting this research by completing our surveys. You can find more information about the study, including a video of my study kickoff presentation at Shanghai Blockchain Week, in a prior blog post here. Please also feel free to get in touch if you have any questions.

El Pais Video Interview (with Spanish translation): Bitcoin, the miracle of creating a currency from nowhere

Accompanying El Pais article and transcript here.

Video: Introducing the Cambridge Global Blockchain Benchmarking Study

This presentation was given at Shanghai Blockchain Week in September 2016. The slides for this presentation can be viewed here.

Video: Consensus State of Blockchain Presentation, May 2016, New York

Video can also be viewed here.