The CB Insights blockchain report reviews the past year in the blockchain sector and offers insights into where the industry is heading. ICOs have long faded, and decentralized finance (DeFi) has emerged as the new growth trend.
According to the March 19 report, assets held in decentralized finance platforms rose more than 200% from January 2019 to their peak in February 2020 — increasing from under $300 million to over $1.2 billion. At the same time, ICO fundraising fell sharply in 2019, dropping by 95% from 2018 levels. Total ICO funding fell from more than $7.8 billion to just $371 million, the report notes.
Notable winners in the DeFi space included the Maker protocol, which issues a stablecoin, and the DeFi lending protocol Compound. By March 2020, Maker secured more than $280 million in assets, while Compound followed with roughly $70 million. Although DeFi remains experimental and volatile, several companies have taken significant steps to protect users.
The report highlights that an increasing number of crypto custody services — including Ledger, Anchorage, and Knox — are now purchasing insurance policies to protect client holdings. Major exchanges such as Coinbase and Gemini now insure customers against criminal loss for more than $200 million. Toward the end of the year, cryptocurrency tax services also gained traction, signaling that DeFi is becoming a more established sector. Early-stage funding for tax and reporting tools like ZenLedger, TaxBit, and Verady’s Ledgible platform reached at least $8.4 million, according to CB Insights.
CB Insights also finds that the United States and China have dominated blockchain project financing since 2015, accounting for nearly 70% of funds raised in that period. The geographic distribution of funding continued shifting eastward in 2019: 30% of blockchain financing came from the U.S. in 2019, down from 41% in 2017, while China’s share rose to 22% in 2019 from just 10% in 2017.
Significant deals in 2019 included $294 million for Ripple, $100 million for the IP-tokenization project Proxicoin, and $1.2 billion for Figure Technologies, which tokenizes home equity and other mortgage products. CB Insights further notes that investors consistently provided less capital to enterprise blockchain solutions than to decentralized crypto projects.
The trend continued through 2019: enterprises raised only $434 million from venture capitalists, compared with $2.4 billion directed to decentralized crypto products and infrastructure projects. CB Insights highlights payment platform Celo and blockchain infrastructure manager Bison Trails as major winners in the development of crypto infrastructure and protocols.
Globally, CB Insights observes growing interest from national central banks in developing their own digital currencies. China leads the field and expected to roll out its digital currency in 2020, while France, Turkey, and the Bahamas have launched or planned pilot programs. Other countries are at various stages of researching and developing central bank digital currencies (CBDCs). The United States, by contrast, has signaled less urgency than China.
In a House Committee hearing in December 2019, U.S. Treasury Secretary Steven Mnuchin said:
“…[Federal Reserve Chair] Powell and I have discussed this at length — we both agree that we do not see a need for the Fed to issue a digital currency in the near term, in the next five years.”
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