Magister Advisors, financial advisors to international FinTech companies, has carried out a survey of a number of bitcoin and blockchain companies and reported on the findings, with predictions of what this meant for the future. Jeremy Millar, partner at Magister Advisors and Etienne Brunet, analyst at Magister Advisors, provided the report, which was titled ‘Blockchain and Bitcoin in 2016 A Survey of Global Leaders’.
To start, the report summarised a few key points, noting the fast maturation of bitcoin compliance and regulation. Additionally, the lack of clear bitcoin ‘native’ use cases in developed markets was mentioned as giving way to consumer finance apps with ‘bitcoin inside’, along with surge of developing economy applications. It also highlighted Magister Advisors’ estimate of investment in blockchain technology by financial institutions in the next 2 years.
On the investment side of blockchain, Magister Advisers estimate that over $1billion will be spent by large financial institutions in next 2 years. Trends over the past 3 years were noted as seeing a huge growth in investment, with the total reaching almost $1bn (majority in North America), with a lot of interest from financial institutions. The majority of investment was found to be raised by the top 11 companies, which include such names as Coinbase, BitPay and ripple. European scene was noted as being smaller; however, there were still a number of companies, like BitFury, which had raised a considerable amount of investment funding.
Magister Advisors said the past 12-18 months had seen a division between bitcoin and blockchain, with the cryptocurrency becoming the leading digital currency where blockchain is being investigated for its uses in other applications. Each are heading in their own direction, with bitcoin growing as a means for transactions and a rapid adoption in developing economies, whereas blockchain is being investigated by financial institutions to see whether it can replace or enhance existing infrastructure and if it can be used to cut down on costs. Blockchain is providing software and data to ecosystems; bitcoin is being used for a variety of purposes from remittance to global micropaymemts.
The research gave an overview of bitcoin’s history, both the development and value, stating that whilst bitcoin price had fluctuated wildly previously, it had been relatively stable in 2015 and, noting the Central Bank of Barbados’ paper, predicted that by 2030, bitcoin had the potential to become the 6th largest reserve currency. An increase in liquidity and confidence was also speculated. Other statistics found by surveys Magister Advisors carried out pointed to the difference in its use, with 90% of transactions being for commercial purposes vs. 90% of the value held for speculation.
On the issues bitcoin has faced with its image and association with crime and fraud, the report noted that the ‘leaders’ are attempting to address concerns as quickly as possible. Related to this, the speed at which regulation is being churned out was picked out as being very high.
The state of the different areas of the market were analysed. Mining was found to be moving towards a monopoly, with 5 miner companies (including 2 European ones) generating almost 80% of the revenue. In contrast to this, exchanges were noted as having become an oligopolistic market with a number of consolidations having already occurred – something Magister Advisors expect to continue over the next 12 months. Wallets, with Coinbase being used as an example, were described as evolving into banks, with Shift even issuing Coinbase a bitcoin debit card.
Emerging areas in bitcoin use were noted as including financial products such as hedge funds, ETFs, savings accounts and derivatives. For blockchain, different types of blockchain were identified as being tested with financial institutions, with any of them having the potential to be used depending on how the results turn out; however processes such as repurchasing agreements and making international payments were mentioned as being areas that blockchain had the potential to streamline. Citing The FinTech 2.0 Paper: Rebooting Financial Services, the survey highlighted the potential billions of dollars of saving that blockchain technology could bring in the next few years; a fact banks are aware of as a number of large financial institutions like Barclays were mentioned as having started projects to take advantage of the new technology. The report predicts that many of the companies used by these early adopters (and, by extension, the financial institutions that back them) may prove successful.
Bitcoin companies involved in the survey were: Abra, Bitcurex, Bitex.la, Bitonic, Bitstamp, Blockchain.info, Chainalysis, Circle, Coinbase, Coinfloor, Cryptopay, Elliptic, Fuzo Limited, KnCMiner, Magnr, Rivetz, Safello, SoftSwiss and Xapo. Blockchain companies involved were: ascribe.io, Chain, ConsenSys, Credits, Eris Industries, Everledger, Factom, Funderbeam, Guardtime, R3 CEV and Ripple.