CoinDesk's State of Blockchain Report Reveals Crypto Industry Q2 2018 Analysis

CoinDesk Unveils The Q2 2018 State of Blockchain Report – What Do We Know About it?

CoinDesk has released the second report on the State of Blockchain Technology, which seems to be very positive for those that were building their portfolios. Individuals that were holding their assets, may have suffered more, but let’s see what the State of Blockchain for the second quarter has to offer.

During this period, between April and July, 2018, most of the virtual currencies remained flat in terms of market capitalization. Indeed, we see that the total market value of cryptocurrencies was around $250 billion dollars and ended around $245 billion dollars, which shows that there is small (1.25%) decrease.

The report highlights the most important headlines during this period, which include the Indian ban on banking transfers to cryptocurrency exchanges, the release of the Amazon blockchain as-a-service, Facebook launching its new blockchain team, the Consensus conference in may, Bitcoin Gold’s 51% attack, the SEC saying that BTC and ETH are not considered securities and the Bithumb hack.

The price of Bitcoin during this period has seen a decrease of 11%. May has been the month with the highest number of Bitcoin transaction volume ($200 billion dollars), while June experienced the lowers BTC transaction volume.

This situation repeats itself when we see what happened with the number of transactions and exchange volume. May has been the most active month, and June the one with the lowest activity.

Other currencies such as Bitcoin Cash (BCH), Litecoin (LTC) and Ethereum (ETH), had different performances. BCH, for example, grew 4 percent, LTC lost 32% and ETH grew 10%. Surprisingly, Ethereum (.93) has been the currency with the highest correlation with Bitcoin and EOS has been the one with the lowest correlation (.61). The interest in cryptocurrencies as appears in Google Search Trends has been decreasing since April until July.

But which were the best performing cryptocurrencies in the market? Well, EOS grew 44% in that period of time, Ethereum Classic (ETC) registered a 19% increase, ETH 10%, and BCH 4%. At the same time, Ripple (XRP) lost 4%, Bitcoin 11%, ZCash (ZEC) 12%, Dash 23%, Monero (XMR) 29% and Litecoin 33%.

Transaction fees remained low, with the exception of some specific moment when they skyrocketed up to $7 dollars in the case of BTC. Indeed, Dash, Monero, Litecoin, ZCash and Bitcoin registered a decrease in the average fee processed during this second quarter. Bitcoin Cash and Ethereum have seen a substantial increase, Bitcoin Cash 47% and Ethereum 653%.

The Bitcoin hashrate has also increased, but slower than the first quarter. It grew 26% from April until July.

Altcoins have also increased their presence in the market, indeed, their market dominance grew more than 3% compared to this of Bitcoin. Indeed, BTC’s dominance has been reduced 4%.

The lightning network has been growing after receiving an important support from developers working on it. There are 77% more nodes, 108% more number of channels, 74% more nodes with active channels, 200% increase in the network capacity in Bitcoin and 171% increase in the network capacity in USD.

Hacks and Attacks

This quarter there were different attacks and hacks to platforms and cryptocurrencies. In May 2016, Bitcoin Gold experienced a 51% attack that resulted in the loss of $18 million dollars. In June the 20th, Bithumb was hacked and lost $31 million dollars. The biggest hack was experienced by Coinrail, an important crypto exchange, that lost $40 million dollars.

Indeed,the number of funds stolen since the beginning of Bitcoin’s history is now reaching new highs at $1.6 billion dollars.

51% attacks were also present this quarter with the most important case being the one of Bitcoin Gold (BTG), registering a loss of $18 million dollars. Monachain experienced $90,000 dollars just a day before Bitcoin Gold. Verge (XVG) was attacked on may the 22nd, and lost $2.7 million dollars. Finally, Zencash experienced the same 51% attack and 500,000 have been stolen.

The hardest cryptocurrency to attack are Bitcoin, Ethereum, Bitcoin Cash, Litecoin and ZCash. The easiest ones to attack are Bitcoin Gold, Monachain, Zencash, Dash and Monero.

EOS

An important network and cryptocurrency is EOS, which has landed to the crypto market during this second quarter. The elected block producers are EOS Cannon, LiquidEOS, EOS Canada, EOS Beijing BP, EOS Authority, EOS DAC, EOS.Store, EOS Cafe Block, EOS New York, EOS Gravity, Bitfinex, EOS.42, Cypherglass, Argentina EOS, EOS Sweden, EOS South Korea, Huobi Pool, EOS Rio Brazil, EOS Seoul, ZB EOS, and EOS Asia.

At the beginning of the second quarter, each EOS token was traded around $5.5 dollars, while now has a price of $8 dollars. In May, this famous virtual currency reached $20 dollars per coin. The market capitalization moved from $4.5 to $7.1 billion dollars.

It will be very important to see how EOS will be developing in the next quarter and if it is able to sustain the gains it had during this second quarter.

Ethereum

The SEC Director of Corporate Finance, William Hinman, commented:

“Based on my understanding of the present state of ether, the ethereum network and its decentralized structure, current offers and sales of ether are not securities transaction.”

This may be one of the most important news during this second quarter and the whole year. The argument is based on the fact that at the beginning, when it started to operate, Ethereum was centralized and heavily depended on what Vitalik Buterin was doing. Later, it was able to become decentralized and host an important number of decentralized applications and ICOs. Ethereum is not centralized anymore.

When Mr. Hinman said that about Ethereum, the cryptocurrency spiked 9% in a moment that was very needed for the entire crypto community.

Ethereum is preparing important things for the future. As the community debates about the scalability issues around the network, a solution known as sharding, is coming to the market. After this implementation it will be possible to enjoy an Ethereum network with less fees and fast transaction times.

Investment

2018 has seen an incredible number of ICOs. Indeed, the biggest ICOs of all time took place this year, and it can be seen that it was the year with the most ICOs ever. During the second quarter, there have been $7.2 billion dollars funding 192 ICOs.

EOS has raised more funds during this second quarter than all the other ICOs combined. Block.One's EOS gathered $4.200 M dollars while all the rest $3.086 M dollars.

Most of the ICOs this quarter (96) have received less than $10 million dollars. 62 received between $10 to $25 million dollars. 27 gathered between $25 to $50 million dollars, and only four were able to get fundraised for $50 to $100 million dollars. Just one ICO received more than $100 but less than $200 million dollars. Finally, 2 ICOs received more than $500 million dollars.

Blockchain Technology

There is an important number of Startups around the world, but there are countries that are more important than others. The United States is the country with the highest number of startups, followed by the United Kingdom, Singapore, Switzerland,Canada, China, Australia, Germany, Israel and The Netherlands.

Most of the startups have been created in 2017, and just a small part during this 2018. Several companies launched live pilots, including Ripple, R3, JP Morgan, IBM, Hyperledger, Consensys, Microsoft and the Ethereum Blockchain Alliance.

In addition to it, there are some tech companies that entered the blockchain market. We can mention Facebook, oracle, Amazon and SalesForce. In Asia, the situation is similar, Baidu, Alibaba, Tencent and JD.com are some of the companies that are entering the distributed ledger technology market in different ways.

Regulations

It is important to mention that regulations around the world keep expanding. There are just some countries were virtual currencies are considered illegal, including Bolivia, Ecuador, and some other Asian countries. But most of the world considers them legal.

In June the 28th, the Bank of England warned finance firms over cryptocurrency risks. In April the 20th, the EU parliament voted to bring crypto exchanges into its AML framework. In the United States, in June the 14th, the SEC ruled that Ethereum is not a security. In June the 30th, China decided to open a new Digital Currency Research Institute.

Sentiment Survey

28% percent of those who answered the survey own between $10k and 50k worth of cryptocurrencies. 17% own between $1k and $5k, and 11% own between $100k to $500k. 84% of the investors check the price on a daily basis, but only 17% are accredited investors.

The community is based 3% in Central and South America, 6% in Asia, 2% in Africa, 33% in Europe and 48% in US and Canada.

48% of those who answered the survey do not believe that the bear market will last long. 25% believes that it is likely that it will last longer, 11% have no opinion, 11% think that it is very unlikeñy and just 5% said that it is very likely.

40% of those participating in the survey said that the price decline has been caused as a rebound from prior over-speculation. 28% percent think that this happened because traders were shorting the market. 9% said that the market experienced a decline because there was no place to spend virtual currencies, 7% said that it happened because there was a loss of users, 7% said that this situation happened because of taxes, and 3% explained that the bear market happened because traders had to exchange virtual currencies to pay capital costs of growth.

It is interesting to see that 75% of the users and cryptocurrency holders did not sell their currencies, but instead they kept their positions. 15% took a first position and 11% moved to a stable coin.

70% said that the most important is holding cryptocurrencies and 30% that it is better spending the assets.

It is surprising to see that those holding Bitcoin Cash, XRP, ZCash, Monero and Dash do not spend their currencies almost never in more than 93% of the cases. Litecoin users do not spend their coins almost never 89% of the times, and Ethereum holders do not spend their currencies almost never 82% of the times. 73% of those who answered the survey said that they do not spend Bitcoin almost never.

This time, it seems that crypto enthusiasts are more pessimistic than in the previous quarter. 72% percent of the respondents said that agree that merchant adoption of cryptocurrencies will increase in 2018, and 13% disagrees. In the last quarter, these numbers were 82% and 5% respectively.

43% of the investors said that they’ve participated in an ICO, 29% of them said that they did not do it, but they have tried to, and 28% of the respondents explained that they haven’t tried and did not want to do it.

29% of the respondents is bullish on decentralized exchanges, 24% on asset management tools, 19% on privacy focused transactions, 9% on identity, 7% on computation, 7% on storage, and 5% on prediction markets.

Binance is the exchange used by 37% of the respondents and Coinbase is used by 23% of the individuals that answered the survey. Other exchanges are Kraken (8%), Bitfinex (5%), Poloniex (4%), Gemini (3%), HitBTC (1%).

Furthermore, there is a more negative outlook on the overall state of Bitcoin compared to the last quarter. At the moment 18% of those answering the survey have a negative feeling about the current overall state of Bitcoin, while 70% answered that they feel positive about it.

31% of the respondents said that Bitcoin as a hedge against central bank monetary policy is the most important feature of it. Other important features selected where ‘it’s digital gold with counterfeit protection’ and ‘it’s uncensorable and immutable.’

To the question ‘Which of the following do you consider to be the most negative aspect of Bitcoin today,’ the options ‘scaling’ and ‘no transaction as consumer tool’ have been selected by 28% of the individuals respectively.

Satoshi.Place was neither a negative or positive development for Bitcoin’s Lightning Network.

66% of the respondents said that they are positive or extremely positive about the overall state of Ethereum. 20% has a negative feeling about it. 43.2% of those who answered the survey said that the most positive aspect of Ethereum is the Ethereum Protocol, 31.7% that it is the Ethereum dApp ecosystem, 15.4% that it is the ICOs, and 13.69% that it is the Enterprise Ethereum Alliance.

The most negative aspect of Ethereum today and marked by the users is related to the potentially buggy smart contracts, and the lack of scaling.

78% of the respondents said that regulated institutions will tokenize securities at least in 5 years. Just 22% said that institutions will never tokenize securities.

38% of the respondents said that they agree in a hard fork to prevent ASIC from being used in mining, and 21% disagrees on it. 40% said that they do not agree or disagree on the matter.

It is also important to mention that the community is divided in the matter of PoW vs PoS and the effects on the environment. 46% of the respondents believe that PoW shouldn’t be altered and 41% thinks that it should be changed.

An interesting point asked in the survey is the dominant political ideology of the respondents. 27% of the individuals have a liberal position, 24% describe themselves as libertarian, 9% as socialists, 9% centrists, and 8% as anarcho-capitalists. 3% said that they are nihilist.

One of the last question asks whether users became ‘crypto-millionaire’ in 2017 or not. The answer for this question was 92% negative and 8% positive.

The last question is:

Do you think you can become a ‘crypto-millionaire’ in 2018?

28% believes that yes, and 72% thinks that it will not be possible, at least this year.

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