7 interesting observations about the global cryptoasset ecosystem

Posted by Jun on May 08, 2019

The Cambridge Centre of Alternative Finance (based at the University of Cambridge Judge Business School) recently released its Global Cryptoasset Benchmarking Study 2018. The lengthy 96-page report, which was a culmination of surveys conducted over several months from more than 180 entities in 47 different countries, provides an excellent overview of the global cryptoasset ecosystem. The survey data was collected by the research team between May and July 2018.

Some interesting statistics and observations from the study:

Note: Text and charts quoted from the study

1. Users

Total user accounts at service providers have exceeded 139 million with at least 35 million identity-verified users, the latter growing nearly 4X in 2017 and doubling again in the first three quarters of 2018. Only 38% of all users can be considered active, although definitions and criteria of activity levels vary significantly across service providers.

2. Mining energy

Over half of identified mining facilities, weighted by megawatts of electricity consumed, have some share of renewable energy as part of their total energy mix. An increasing number of hashing facilities are moving to regions with abundant low-cost electricity generated by hydroelectric power. Less than a quarter of identified miners do not use any forms of renewable energy sources at all, although the energy mix of one quarter of facilities could not be identified.

3. Mining Concentration

Cryptoasset mining appears to be less concentrated geographically, in hash power ownership, and in manufacturer options than commonly depicted: the mining map exhibits that hashing facilities and pool operators are distributed globally, with growing operations in the USA and Canada.

4. IT Security

The study observed a lack of transparency on both external and internal security audits: more than 80% of firms do not publicly share information about security audits, indicating a general unwillingness to divulge security-critical information.

5. Fiat-Crypto

The cryptoasset ecosystem is becoming more connected to traditional finance due to the emergence and growth of gateways bridging both systems, as well as growing regulatory clarity. Bank wires dominate supported methods for both deposits and withdrawals; the use of physical cash is more popular in Asia-Pacific than in other world regions.

6. Storage and custody

In the event of customer funds being lost or stolen, a growing number of custodial service providers have put a refund procedure in place: 64% of custodians have a written refund procedure, as opposed to 62% in 2017.

However, the figure below reveals that there are significant differences between specialised exchanges and multi-segment companies: only one third of custodial exchange-only firms have an existing refund procedure, compared to three quarters of multi-segment firms.

7. Compliance

Cryptoasset service providers are fostering their compliance efforts, even when not explicitly subject to regulatory oversight: 37% of cryptoasset-only service providers have an in-house compliance team and more than half perform KYC/AML checks.

       

While an average of 14% of KYC/AML checks result in service providers not opening new accounts or closing existing accounts, some firms claim figures between 50% and 80% - well above comparable traditional finance benchmarks.

The majority of entities that support both cryptoasset and fiat currency use third-party support for KYC/AML; thereby relying primarily on traditional service providers (62%) rather than blockchain analytics companies. Overall, only one third of surveyed service providers reported using the services of blockchain analytics companies that provide on-chain forensics of blockchain.

In terms of the future outlook, the study concludes that that the speculation of the death of the cryptoasset market and ecosystem has been greatly exaggerated. Indeed, it is likely that the expansion plans of industry participants will, at most, be delayed.