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Outlier Ventures Weekly Brief Issue #2 |   View Online
 
  contact@outlierventures.io
State of Blockchains - Q3
Markets Turn To Professionals
 
The total market capitalisation of all actively traded tokens has reduced to a low of $141 billion from a high of close to $800 billion at the beginning of the year. While the pace and extent of the “dip” may have come as a surprise to many, we had anticipated a winter. The fall in token prices have also affected how startups in the space have been raising money and deploying them too. Token sale events raised a little over $1 billion this quarter, a decline of over 74% from Q1 2018.  Estimates also indicate that September saw only $150 million being raised through token sales. Would this mean the ecosystem is all set for doom and gloom? Data suggests otherwise.

Our quarterly state of blockchains deck recently explored the maturing of the ecosystem by putting venture capital in the space in the context of the changing funding landscape around token sales.

Here are some key findings.

1. VC Investments have surged from a total of $900 million in 2017 to $2.85 billion this year.
2. VCs are active across all funding stages with 119 deals disclosed this quarter, the most ever as good projects
3. The US continues to dominate investments in the industry.
 
Our Partners, Eden and Aron have a few thoughts on the matter

“This quarter saw significant negative sentiment around utility tokens from an investment standpoint. Many investors have grown frustrated over-regulation and exasperated over valuations of tokenized networks. This represents a new cycle back towards equity-based blockchain investments until the crypto community makes advances in validating tokens as a new asset class with viable business models. That said, projects with well designed token economies are still finding support from the community and increasingly from VCs.”
- Eden Dhaliwal, Partner and Head of Crypto-economics

“As we see the focus of early-stage investment into tokens shift away from tech-savvy retail investors toward VCs, hedge funds and ultimately larger institutional investors, we’re seeing a large growth in new businesses and services enabling the larger institutional investors to enter the space. Self-sovereignty means self-responsibility, and when your private keys are lost or stolen there is no broker to call. Institutional investors have a need to reduce that technical complexity and risk. New players solve that problem; from institutional-grade custody providers to trading platforms offered by the financial incumbents.”
- Aron Van Ammers, Founding Partner of Outlier Ventures

In other words, as the ecosystem matures, it is likely that traditional forms of capital play a key role in venture building and helping networks capture their initial userbases. The funding landscape within the blockchain community has consistently backed and helped scale companies that have found their product-market fits. As token sales decline in the count and raise, we will see more teams turning towards venture capital to launch their projects.

Read the entire State of Blockchains Report here for more on the matter.
 
While much of the market has been keeping its eyes peeled on the charts, the team at Outlier Ventures has been hard at work. Here are some updates from the team

1. Evaluation of Privacy-Preserving Technologies for Machine Learning
Florian Apfelbeck explored approaches for preserving privacy as applicable to machine learning in Fetch as a part of our on-going research programme with Imperial Centre for Cryptocurrency Research and Engineering. Read the post here.

2. Reading between the lines of the UK Crypto-assets task force report
Our head of legal - Jocelyn Roberts provides inputs on what the crypto-asset task force report could mean for the industry and how the regulatory landscape could evolve in the year to come. More here. 

3.Outlier Ventures and Imperial College Hackathon: Blockchain, Smart Contracts & Token Economy

ChainHack24 brought together the 50 brightest minds from Imperial College. Outlier Ventures was a sponsor for the event. Learn more about what the leading teams built from Catherine's post here. 
 
 
 
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Blockchains are the next step after open source, as they provide open data & open execution. You don’t just see the source code with something like Bitcoin or Ethereum. With a full node you see all historical data, all pending writes, and can retrace every step of code execution.
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