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Michael Graham, CFA | Analyst | Canaccord Genuity Inc. (US) | MGraham@canaccordgenuity.com | 212.849.3924
US Equity Research Austin Moldow | Associate | Canaccord Genuity Inc. (US) | AMoldow@canaccordgenuity.com | 212.849.3931
14 November 2017 Scott Suh | Associate | Canaccord Genuity Inc. (US) | SSuh@canaccordgenuity.com | 212.389.8360

$8,000
BitcoinYTDperformance Industry Update
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$4,000
Crypto Quarterly Q4/17
In this inaugural edition of our Crypto Quarterly, we explore the major developments
$2,000
since publishing our revised white paper on blockchain and cryptocurrencies in early
October. Key updates within include:
Thinking through the ICO boomlet The topic of whether the world needs a few
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Jan-17 May-17 Sep-17

digital currencies to enable a more friction-free remittance process for certain types of
transactions is somewhat controversial, but nowhere near as contentious as the ICO
boomlet which has created over 1,000 crypto coins that range from "utility tokens" to
equity proxies. We provide historical perspective and examine the key issues surround
the ICO market.
Update of recent events As cryptocurrencies have drawn in an increasing number
of enthusiasts and institutional investors alike, governments around the world have
ramped up their efforts to regulate the still-nascent industry in recent months.
Following in China's footsteps, South Korea announced its ban on initial coin offerings
in late September, while Russia declared its intent to block access to cryptocurrency
exchanges. Meanwhile, the much-anticipated Segwit2x bitcoin fork was called off on
11/8, sending shockwaves within the blockchain community and causing the price of
Bitcoin Cash to skyrocket in the days following the announcement.
Update on key developments We highlight several notable thematic developments
over the last several months, including the cancellation of the Segwit2x Bitcoin fork,
Japan's rise as the predominant leader by bitcoin transaction volume, and hedge
funds' increased participation in ICO pre-sales.
Update on major cryptocurrencies Bitcoin is up ~580% YTD, while altcoins such as
Ethereum (up ~3,870%) and Ripple (up ~3,060%) have amassed even more outsized
gains so far this year. While there are now over 1,200 cryptocurrencies in existence
with a total market cap of ~$210B, Bitcoin has gained market share in 2017, and
currently commands 53% of the entire market.
Update on ICO market Through October, companies have raised ~$3.3B via initial
Source: CoinMarketCap, CoinSchedule, Canaccord Genuity coin offerings YTD. After a record ~$800M was raised in August, the ICO market cooled
somewhat in October to ~$375M.
Cryptocurrency valuation framework Our revised valuation framework accounts
for Bitcoin Cash's recent market share gains owing to the cancellation of the Segwit2x
Bitcoin fork and for the higher prices of all six cryptocurrencies that we assess.
Notably, our framework now utilizes slightly lower discount rates relative to our
previous iteration published in early October, in a nod to the apparent increasing
acceptance of cryptocurrencies as a new asset class by retail and institutional
investors.

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.

For important information, please see the Important Disclosures beginning on page 23 of this document.
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Industry Update

Thinking through the ICO boomlet


At Money2020 (the fintech mecca) in Las Vegas in 2016, there was a lot of talk about
Bitcoin, but not in a good way. Bitcoin had recently depreciated from ~$750 to ~$500
and many talked about how it was over and that we were lucky to have that whole
thing behind us. Fast forward a year to October 2017, and one Bitcoin was
commanding nearly $5,000 USD. The crypto crowd was cool again, and the most
packed sessions were the ones focused on the new digital currencies.

Figure 1: Bitcoin 2017 performance, as of 11/13/17

$8,000

$6,000

$4,000

$2,000

$0
Jan-17 May-17 Sep-17

Source: CoinMarketCap, Canaccord Genuity

One session on the burgeoning wave of ICOs (Initial Coin Offerings) stood out in
particular. It featured a panel including Ted Livingston, founder of messaging platform
Kik (beneficiary of a recent $100m ICO), and Dan Morehead, founder and CIO of
Pantera Capital, a money management firm with a $100M fund focused exclusively on
ICOs.

Boomlet or Bubble?
As we laid out in our recent whitepaper, we tend to agree with the crypto crowd that
the world will likely benefit from one or a few digital currencies that can find a middle
ground between gold and fiat as a medium of exchange, combining the qualities of
limited and visible supply with high trust (liquidity), but layering in the convenience of
being digital and widely accepted globally. The best example we can offer is a cross-
border B2B payment from a company in, say, Sweden to a supplier in Sri Lanka.
Making this payment with fiat currencies and the SWIFT system would require time
and expense, whereas the same payment in Bitcoin could be free and happen
instantly.

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It is less obvious to us that we need all of the over 1,000 crypto coins that have been
created to date, raising over $3.3 billion via ICOs so far in 2017 alone. In our opinion,
there is clearly a great deal of froth, wishful thinking, and less-than-ethical behavior
surrounding many of these coins. That said, however, the great thing about market
prices is that they are accurate in the sufficiently short-term 100% of the time.
Therefore, we have no quarrel with this estimate; these ICOs have created billions in
market value in a very short time, and therefore this definitely qualifies as a boomlet,
perhaps on its way to becoming a boom. Is it also a bubble? Maybe but bubbles can
take a long time to pop.

Coin vs Common
The easiest analogy for crypto coins is common stock, although there are significant
differences between the two.
Some observers have commented that, unlike common stock, the tokens an investor
receives from an ICO are worthless because they typically will not confer any right of
economic ownership or any portion of the future cash flows of the underlying
company. When thinking this through, we should begin by highlighting that not all
coins are created equal, and we have seen coins that give the holder a right to receive
a portion of a companys revenue or net income. Most coins, however, rely on
underlying demand for the companys products or services to, when set against a
fixed supply of coins, drive the value of these coins higher. More on this later.
We also likely should partition our thinking between small and large (activist)
shareholders, and between dividend-paying and non-dividend-paying stocks. Large
activist shareholders can have considerable influence over companies governance. It
is not unusual for these shareholders to demand that the value of certain assets
within a company be realized through sale or otherwise. Similarly, dividend-paying
stocks do provide the holder with steady income (although of course, this is only true
so long as the companys financial performance makes such a dividend prudent, and
there is almost never a guarantee). In addition, the dividend is typically only part of the
reason investors own a stock; usually there is a hope of capital appreciation as well.
Excepting these two somewhat special cases, however, the vast majority of ownership
situations for common equity will never fully benefit from a right of ownership. Lets
consider that share of common stock you might own in, say, GOOGL. We never like to
say never, but we deem it HIGHLY unlikely that the management team is going to
listen to your views on how to run the company. We deem it HIGHLY unlikely that you
could convince the board to exchange your share of stock for 1x10-9 % (your
fractional ownership of GOOGLs 692M shares outstanding) of the companys office
furniture, intellectual property, cash, accounts receivable, etc. We deem it HIGHLY
unlikely that the company is going to pay you a dividend any time soon (although they
may buy back stock, which can also more or less happen in coin).
If we are correct that all these events are quite unlikely, then what good is that right of
ownership? Of course, the share of stock has value going back to our market
dynamic, it has value because you could very likely sell it for close to the $1,041 that
GOOGL stock commands as we write this. In turn, this price typically depends upon
the judgement of the incremental buyer / seller regarding two items: 1) the future
operating performance of Alphabet the company (i.e., happy customers, market share,
innovative products, revenue, earnings, cash flow, ROIC, ROIC/IC essentially how
well the company will compete, deploy capital, and serve as a prudent steward of that
capital); and 2) what market participants think that operating performance is worth
(typically based on some valuation metric like P/E which is a short-cut to considering

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risk, size and duration of competitive advantage, investment time horizon, and the
like).

Put more succinctly, the vast majority of common equity ownership situations are
primarily bets on how the secondary market will value the future operating
performance of the company. It is true and valid that a baseline amount of regulation,
accounting standards, and the like, foster trust in the stock market that is currently
missing in the crypto world. However, when comparing the stock market with the coin
market, to our eye there are way more similarities than differences.

Precedent for financial innovation has this happened before?


Figure 2: Code of Hammurabi
Well, yes, of course it has. For a long time in many places, there was no ability for
people or companies to access capital with which to invest and grow. Then, along
came bankers and loans. Some accounts report that the first known bond in history
dates back to 2400 BC and was discovered in present-day Iraq, and was transacted in
corn, the common currency of the period. Mesopotamia continued as the first fintech
capital of the world about 700 years later with the development of the Code of
Hammurabi. This famous code was harsh (take someones slave outside the city gates
and you would be put to death; and of course, taking the eye of another man would
cost you one of our own), but it also laid out the basic principles of investing, including
collateral for loans and the requirement to pay ones debts. Secondary trading of
these debt commitments began in earnest in 14th century Venice, and picked up
steam in 1693 when Britain issued the first government bonds.
Equity (no promise of repayment, but a share of the upside) came along much later.
By some accounts, the first equity investment happened in 13th century France, when
an investor bought a portion of the Socit des Moulins du Bazacle, which was traded
at a value derived from the profitability of the societys mills. In the 1600s, this trend
exploded with the East India companies, which were formed to share profits from all
the voyages made by an entity, rather than from just individual trading trips (the first
joint stock companies). Since then, it has pretty much been off to the races with
equity and secondary trading markets.
In the more recent past, financial innovators have brought forth a sizeable number of
Source: Wikipedia new financial products (see a partial list below), but they are all merely different
flavors of, or derivatives for, the two big investment vehicles humanity has come up
with so far: debt and equity.

Figure 3: Notable financial instruments created between the 1970s-2010s

1970s-1980s 1990s-2000s 2010s


First money-market mutual funds Collateralized Debt Obligations (CDOs) Accelerated Return Notes (ARNs)
Foreign currency futures Credit Default Swaps (CDS) Bitcoin Investment Trust (GBTC)
Gold futures Exchanged-Traded Funds (ETFs) Bitcoin futures
Debt-for-equity swaps Long Term Equity Anticipation Securities
Eurodollar futures (LEAPS)
Collateralized Mortgage Obligations Exchange-traded notes (ETNs)
(CMOs)
Source: Canaccord Genuity

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If, over the next 1-2 decades, the coin market evolves to a more mature state such
that one day most coins are attached to well-established companies and trade with
sufficient liquidity so as to reduce risk, we believe the gap between ICOs and IPOs will
look fairly small. We are obviously not there yet, so in our opinion, while ICOs may hold
a great deal of promise, they have to be viewed as extremely risky.

ICOs and different types of coins


What is a coin? A coin (synonymous with cryptocurrency and token) is a digital
asset that can be bought, sold, and used as a medium of exchange. Importantly, the
method of exchange is often digital and machine-to-machine (see examples below).
How does an ICO work? Typically, a company wishing to establish a new crypto coin
and sell it to investors will put together a whitepaper that lays out the market need for
its coin, how the technology behind the coin will work, the supply schedule for the
coin, and what activities might drive future demand for the coin (this is analogous to a
prospectus, but with limitations as these coins have been deemed by their issuers as
NOT being securities, therefore not registered with the SEC, and therefore the
whitepapers are not subject to any regulatory content requirements). Then, the
company sets a date for the ICO to commence, the price of a coin, how much money is
to be raised, and what currencies are accepted (most often ETH or BTC, but
sometimes USD and other fiat currencies). These terms are posted on various ICO
sites like CoinSchedule or ICO Tracker, or they are sent to known ICO investors, and
the company keeps the offering open until it is filled, or until they want to stop it.

Figure 4: Summary of Eidoo ICO

Source: ICO Drops, Canaccord Genuity

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While all crypto coins meet the definitional criteria mentioned above, there are several
different flavors of coins (perhaps like there is voting and non-voting common stock,
preferred stock, warrants, etc.). To our thinking, they can be divided into three broad
categories:
1. Currencies The primary intended uses are as a store of value like gold or as
a means to pay for something;
2. Equity-like investments in a companys future prospects;
3. Utility tokens that industry participants need to operate or consume a
companys products, thereby creating demand.
And, while some coins fit nicely into one of these three categories, others are clearly
hybrids of two or all three. One notable example is Kik.

Kik, based in Canada, is a popular messaging platform that boasts over 15 million
MAUs (Monthly Active Users), 57% of which are 18-24 years old and 64% of which are
in the US. Over 250 million messages are sent on Kik each day, and the average user
sends 55 messages and spends 37 minutes on the platform daily.
Kik also has experimented with an on-platform currency (Kik Points) in the past. In the
below example, users could earn Kik Points by viewing ads, and then redeem them for
various items like emoji sticker packs. During its two-year experimental life, the Kik
Points program experienced over 300k transactions per day on average.

Figure 5: Example Legacy Kik Points uses

Source: Kik

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In May 2017, Kik published the whitepaper for the ICO of its Kin token (crypto coin).
Then, Kik raised $50M in a token pre-sale to institutional investors, and raised
another $48 million over an approximate two-week period via a public ICO which saw
purchases from over 10k buyers in over 100 countries. Importantly, Kik did not allow
Canadians to participate, likely for regulatory reasons.
Kik created 10 trillion total Kin tokens and sold 1 trillion (10%) to investors in the pre-
sale and ICO. 3 trillion KIN (30%) was issued to Kik (and by pass-through to its
shareholders, including founders and employees). The remaining 60% of Kin tokens
were held in reserve by the Kin Foundation to be slowly introduced into the ecosystem
as rewards to users at the rate of 20% of remaining tokens per year (i.e.
asymptotically approaching full distribution).
Kin tokens can be transferred into and out of the Kik ecosystem via ETH, and are kept
in each users Kin wallets. Kin can also be earned, and can be spent on various goods
and services both within and outside of the messaging platform. In the examples
below, restaurants that accept Kin and ostensibly are engaged in a user acquisition
campaign are curated for Kik users, and a Kik user is selling a song she created to
other users for Kin tokens.

Figure 6: Kin wallet and example use case

Source: Kik

In these examples, we find evidence of Kin being a utility token (the token has
usefulness in helping Kik users navigate and benefit from the platform), as a currency
(Kin can be used to purchase goods outside of the Kik platform), and as an equity
proxy (ostensibly as usage of the Kik platform expands, demand for Kin would grow,
and the value of Kin would rise). Please see our whitepaper for a more detailed look at
how various demand sources can drive the value of a crypto (or any) currency higher.

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Utility tokens or securities?


This leads us to the last point we would like to make on ICOs, which is the great
lengths all coin issuers have taken to avoid being perceived as securities and
therefore subject to registration with the SEC.
In a joint project between Protocol Labs and the Cooley law firm, authors Juan Batiz-
Benet, Marco Santori, and Jesse Clayburgh set forth a thoughtful framework for
thinking of certain coins as utility tokens rather than as securities. The framework
hinges around the Howey Test, a legal test that requires an asset to be considered a
security if it meets all of the following criteria:
1. There exists an investment of money;
2. There exists a common enterprise;
3. There exists an expectation of profit;
4. Whether this expectation is solely from the efforts of others.
The analysis goes on to assert that utility tokens (perhaps like Kin) fail this last part of
the Howey Test and are therefore not securities. So far, regulators have been fairly
quiet on these topics, and there is no clear timeline for resolution. Earlier this year,
the SEC issued a report pertaining to the Decentralized Autonomous Organization
(DAO) token that have been deemed to be securities, but so far we are not aware of
any word from regulators regarding how they are thinking about utility tokens.
Clearly, if/when this happens, it will be an important milestone in the ICO journey. A
stamp of approval for utility tokens could accelerate the wave of ICOs, whereas
anything less could create turbulence in this market and potentially drive this method
of capital formation away from the US.

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Update on recent events


9/29/17 Chinese media outlet Jinse reports that China will begin regulating
cryptocurrencies as virtual property beginning as early as October 1.
Despite the lack of an official determination from the Chinese government,
the price of Bitcoin continues to rebound from its mid-September lows
following Chinas decision to ban initial coin offerings and cryptocurrency
exchanges.
9/29/17 South Korea bans initial coin offerings and margin trading in
cryptocurrencies. In addition, the practice of loaning funds to trade
cryptocurrencies is banned.
9/30/17 Japan grants approval to 11 Bitcoin exchanges to operate in the
country under its new regulatory framework. Japan previously recognized
Bitcoin as legal tender and eliminated the consumption tax on Bitcoin
purchases from exchanges as part of a bill introduced in April.
10/10/17 Russia announces intent to block access to cryptocurrency
exchanges as President Vladimir Putin denounces digital currencies as
pyramid schemes that can be used to finance terrorism and support money
laundering.
10/15/17 Russian president Vladimir Putin calls for a state-issued
cryptocurrency called the cryptoruble. While details remain scarce, the
cryptocurrency is expected to serve as legal tender in Russia.
10/16/17 Ethereum successfully executes the first phase of its two-part
fork called Byzantium, which enacts a batch of Ethereum improvement
protocols, or EIPs, to make the Ethereum platform faster, lighter, and more
secure.
10/24/17 Bitcoin is forked at block 491,407 of its original blockchain,
creating Bitcoin Gold. Bitcoin Gold aims to resolve the perceived issue that
current Bitcoin miners have too much influence given mining has evolved to
require expensive application-specific integrated circuits (ASICs) that only
large companies can afford.
10/31/17 CME, the leading global exchange for options and futures
trading, announces plans to launch Bitcoin futures by the end of the year,
pending regulatory review.
11/8/17 Segwit2x is called off after initial supporters of the controversial
Bitcoin fork announce via email that it lacks sufficient consensus to proceed
with the split to Bitcoins blockchain. Bitcoins price temporarily trades to an
all-time high of ~$7,800 before falling to $7,200 in the 24 hours following
the announcement.

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Update on key developments


Cancellation of Segwit2x Bitcoin fork removes uncertainty
After months of build-up in anticipation of the biggest potential change ever to
Bitcoins blockchain, organizers of the controversial software update known as
Segwit2x called off its implementation on November 8. In the immediate hours
following the announcement, Bitcoin traded to an all-time high around ~$7,800,
before falling to the ~$7,200 level approximately 24 hours later, as enthusiasts and
institutional investors alike sought to sort out the implications arising from the
decision.
Arising from what is known as the New York Agreement, led by Digital Currency Group
founder Barry Silbert, Segwit2x was a proposal signed in May 2017 to upgrade the
Bitcoin blockchain, specifically by increasing its block size from 1 MB to 2 MB. While
Segwit2x gained the initial backing of a large number of miners and exchanges, who
claimed that Bitcoins blockchain needed to implement the Segwit2x update to further
scale, support waned in the following months as developers and node operators
expressed the risks involved with such a significant change to the network. Among
those to back out of the New York Agreement included cryptocurrency mining pool
F2Pool and South Koreas largest Bitcoin community Seoul Bitcoin Meetup.
Following months of speculation leading up to the planned upgrade at block 494,784,
expected to occur around November 16, Mike Belshe, CEO and co-founder of Bitcoin
wallet software provider BitGo, announced via email that Segwit2x would not proceed
as previously planned under the New York Agreement. Among those to sign Belshes
email included Blockchain CEO and co-founder Peter Smith, Shapeshift CEO and
founder Erik Voorhees, and Bloq co-founder Jeff Garzik.
While it remains to be seen whether the decision to call off Segwit2x will be a
permanent one or be pursued again in the future, the November 8 decision at least
temporarily removed a significant level of uncertainty regarding the future of Bitcoin.
Immediate reaction from Bitcoin investors ranged from disappointment that current
holders would not receive a dividend in the form of the newly-forked form of Bitcoin
(Bitcoin holders received an equal amount of Bitcoin Cash upon Bitcoins earlier fork
in August) to optimism that Bitcoin could continue to rally after putting to bed talks of
the controversial change to the cryptocurrencys blockchain network.

Japan overtakes China as the #1 country by trading volume


Perhaps the most notable development arising from increased regulation and
uncertainty regarding ICOs and cryptocurrencies in China has been Japans rise as the
definitive leader by Bitcoin transaction volume. According to CryptoCompare, Japans
exchange market now handles 55% of Bitcoins trading volume, followed by U.S.
exchanges at 24% and South Korean exchanges at 12%, compared to less than 1%
for Chinese exchanges. Given Chinas decision to ban ICOs and exchanges this past
September, cryptocurrency traders have flocked to Japan in recent months, where
currently 11 Bitcoin exchanges operate with approval from the countrys Financial
Services Agency (FSA).

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Figure 7: Bitcoin volume by currency, as of 11/14/17

60%
55.4%

50%

40%

30%
24.4%

20%
11.9%
10%
5.2%
3.2%

0%
JPY USD KRW EUR Other

Source: CryptoCompare, Canaccord Genuity

Hedge funds increasingly participating in ICO pre-sales


As momentum for ICO funding has gained steam throughout 2017, hedge funds have
increasingly begun to invest in pre-sales offered by startups pursuing initial coin
offerings, often receiving preferential discounts and terms in the process. Today, it is
believed that over 80% of ICOs engage in pre-sales, as startups seek to lock in initial
funding from hedge funds before opening up their token crowd sales to a wider
audience of investors. For example, in messaging app Kiks recent ICO completed this
past September, three ICO-focused funds together accounted for more than half of
Kiks ~$100M total raise via a pre-sale, receiving a 30% discount for the Kin tokens in
the process.
This growing practice of institutions demanding discounts on token pre-sales has been
controversial as it relates to retail investors who participate in ICOs at a higher token
offering price. However, proponents contend that such methods have accelerated the
growth of low-quality ICOs, as it has provided a relatively easy avenue for startups to
raise tens of millions of dollars, even those with minimal business progress. While
some institutions have stated that they do not necessarily invest in ICOs with the
intention of immediately exiting their position, this possibility seems to have the
attention of regulators.

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Update on major cryptocurrencies


Cryptocurrencies as a whole have continued to build momentum in the second half of
2017 and now have a combined market cap of over $200B. While Bitcoin has
recovered all of its losses stemming from increased Chinese regulation in September
and sits near all-time highs, others (e.g., Ethereum) have successfully navigated forks
and other notable events to drive the total market cap of cryptocurrencies to new
heights.

Figure 8: Top cryptocurrencies by market cap, as of 11/14/17

$32.5B

$3.3B

$8.0B

$108.6B
$22.2B

$31.5B

Bitcoin Ethereum Bitcoin Cash Ripple Litecoin Other

Source: CoinMarketCap, Canaccord Genuity

One of the most significant developments in 2017 has been the return to dominance
of Bitcoin over all other altcoins, as Bitcoin now constitutes 53% of the total market
cap of all cryptocurrencies. Meanwhile, Ethereum remains the closest competitor to
Bitcoin by market cap with a market cap of $31.5B.
We also note the meteoric rise of Bitcoin Cash, which recently overtook Ripple as the
third-largest cryptocurrency and currently has a market cap of $22.2B. After launching
as a fork of Bitcoin on 8/1, Bitcoin Cashs market cap increased as much as seven-
fold following the cancellation of the much-anticipated Segwit2x Bitcoin fork, as
developers have begun to speculate that Bitcoin Cash will become more widely
adopted given its larger block size (up to 8 MB, versus 1 MB for Bitcoin).

We highlight below the top 10 cryptocurrencies by market cap:

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Figure 9: Top cryptocurrencies by market cap, as of 11/14/17

Name YTD Performance Price Market Cap Comments


$8,000
Cancellation of Segwit2x fork on 11/8 initially led to all-time
high of ~$7800 before significant pullback to ~$5500 level
$6,000
$6508.98 $108.6B
$4,000 Prior to the Segwit2x decision, Bitcoin had rallied following the
CMEs announcement on 10/31 that it plans to launch Bitcoin
Bitcoin $2,000
futures by the end of 2017
$0
Jan-17 May-17 Sep-17

$450
Ethereum successfully navigated its own fork, called
Byzantium, in mid-October; it is expected to fork again,
$328.59 $31.5B
$300
although a timeline has not been determined

$150
Parity, a wallet service company, announced on 11/7 that a
Ethereum vulnerability has frozen hundreds of millions of dollars of
$0
Ethereum
Jan-17 May-17 Sep-17

$1,600
Bitcoin Cashs price skyrocketed from ~$300 to as high as
~$2400 in the days following the cancellation of Bitcoins
$1,200
$1322.85 $22.2B
Segwit2x fork before retreating to ~$1200
$800

Bitcoin Cash forked from Bitcoin on 8/1 and has a block size
Bitcoin Cash $400
limit of 8 MB, compared to 1 MB for Bitcoin
$0
Jul-17 Aug-17 Sep-17 Oct-17

$0.50
Ripple was launched in 2012 and focuses on payments
$0.40 between fiat currencies, cryptocurrencies, etc.
$0.206585 $8.0B
Ripples price has hovered around ~$0.20 in recent weeks
$0.30

$0.20
after the lack of any notable announcements from its highly
Ripple $0.10 anticipated Swell conference in mid-October
$0.00
Jan-17 May-17 Sep-17

$100
Often considered the silver to Bitcoins gold, Litecoin was
released by Charlie Lee, the brother of Bobby Lee, CEO of
$61.23 $3.3B
$80

$60
BTCC, Chinas first Bitcoin exchange
$40
Litecoin traded to ~$65 from ~$60 after Coinone, the second-
Litecoin $20 largest South Korean exchange, added Litecoin on its platform
$0
in early November
Jan-17 May-17 Sep-17

Source: CoinMarketCap, Canaccord Genuity

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Figure 10: Top cryptocurrencies by market cap, as of 11/14/17

Name YTD Performance Price Market Cap Comments


$600
Dash was created from a fork of Litecoin in 2014, and has
transaction speeds of just several seconds, making it one of
$450
$414.88 $3.2B
the fastest cryptocurrencies today
$300

After trading below $300 in recent weeks, Dash has


Dash $150
skyrocketed above $500 within a one-week stretch
$0
Jan-17 May-17 Sep-17

$160
Monero was created in April 2014 and focuses on providing
anonymity for its users
$120
$121.36 $1.9B
$80 Key features include ring signatures, used to protect the
identity of both senders and recipients, and stealth addresses,
Monero $40
which are generated for a specific transaction and cannot be
$0
linked to prior transactions
Jan-17 May-17 Sep-17

$50
Often referred to as the Chinese Ethereum, NEO is the first
$40 decentralized, open-source blockchain platform and
$28.45 $1.8B
$30
cryptocurrency launched in China
$20
Like Ethereum, NEO utilizes smart contracts and supports the
NEO $10 development of decentralized applications, or DApps
$0
Jan-17 May-17 Sep-17

$0.40
NEM was launched in March 2015 in Japan by Makoto
Takeyima, who also introduced the Hyperledger Project
$0.30
$0.189739 $1.7B
$0.20 Features include its proof-of-importance (POI) algorithm to
timestamp transactions, and multi-signature accounts, which
NEM $0.10
require a certain percentage of signatures before a transaction
$0.00
can be added to NEMs blockchain
Jan-17 May-17 Sep-17

$30
Ethereum Classic, the alternative version of Ethereums
blockchain, was created following a fork in July 2016
$20
$17.38 $1.7B
As a fork of Ethereum, Ethereum Classic does not receive all of
$10
the updates to Ethereums blockchain, e.g. transition from a
Ethereum proof-of-work to proof-of-stake model
Classic
$0
Jan-17 May-17 Sep-17

Source: CoinMarketCap, Canaccord Genuity

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Update on ICO market


The topic of initial coin offerings continues to be perhaps the most controversial in the
broader cryptocurrency space, as startups with often nothing more than a white paper
continue to readily raise millions of dollars and break from the traditional venture
capital fundraising model. While speculation persists that ICOs will face more
significant regulation in the U.S. and abroad in the not-too-distant future, startups
continue to pursue ICOs today, teaming up with celebrities (e.g., Floyd Mayweather,
Paris Hilton) and cryptocurrency funds such as Pantera Capital in the process.

Figure 11: 2017 ICO fundraising

$900M

$800M

$700M

$600M

$500M

$400M

$300M

$200M

$100M

$0M
Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Source: CoinSchedule, Canaccord Genuity

After eclipsing $800M in amount raised this past September, the ICO market cooled
somewhat in October, raising ~$375M, according to CoinSchedule. Through October,
companies have together raised ~$3.3B via ICOs in 2017 despite increased
regulation and warnings about investing in initial coin offerings from some
governments and outright bans from others.

We highlight below selected ICOs (ICOs that have been self-reported by the companies
on CoinSchedule) since 8/15/17 that have raised over $10M:

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Figure 12: Selected ICOs raising $10M+ (since 8/15/17), as of 11/14/17


Date Ended Name $ Raised Token Price % change in USD Company Overview
exchange rate
10/31/17 Enjin (ENJ) $22,900,620 $0.023990 19.8% Customizable virtual goods platform for gaming
10/30/17 Cryptopay (CPAY) $17,950,455 NA NA Offers Bitcoin wallet and prepaid cards
10/25/17 BlockV (VEE) $21,599,100 NA NA Platform enabling creation of digital objects on blockchains
10/23/17 Unikoin Gold (UKG) $31,400,000 $0.187943 -9.8% Fully-regulated and licensed e-sports bookmaker
10/20/17 Electroneum (ETN) $40,000,000 $0.024541 -47.3% Mobile app with token wallet and mining services
10/17/17 Request Network (REQ) $32,500,000 $0.057330 -5.7% Decentralized network for payment requests
10/16/17 Eidoo (EDO) $26,771,007 $2.04 -14.3% Multicurrency wallet and hybrid exchange
10/15/17 Paragon (PRG) $183,157,275 $0.323955 -57.1% To support the legal marijuana industry in the U.S.
10/12/17 doc.ai (NRN) $11,058,297 NA NA AI-powered healthcare services platform
10/11/17 DomRaider (DRT) $30,987,919 $0.034785 -46.4% Decentralized network for auctions worldwide
10/10/17 LAToken (LA) $19,600,000 $0.110825 -54.0% Blockchain platform to create and trade tokens
10/10/17 Wolk Pre Sale (WLK) $11,770,500 NA NA To build the next internet using decentralized databases
10/7/17 Maecenas (ART) $15,730,640 $0.373615 -20.2% To democratize access to fine art for all individuals
10/6/17 Power Ledger (POWR) $26,454,022 $0.146313 215.9% Allows users to sell surplus solar power to neighbors
10/6/17 FinShi Capital (FINS) $21,420,275 NA NA Venture fund created on blockchain technology
9/30/17 REAL (REAL) $11,046,562 $0.256335 -68.3% Crowdfunding platform for real estate investments
9/26/17 Kin Kik (KIN) $97,041,936 $0.000050 -54.3% Social media chat app with 15M MAUs
9/22/17 PeerBanks (IRA) $42,590,100 NA NA Allows companies to manage retirement accounts
9/20/17 ICON (ICX) $42,750,000 $1.04 92.6% Blockchain for ID verification, payments & exchange
9/20/17 ChainLink (LINK) $32,000,000 $0.170898 -3.2% Connects smart contracts to off-chain data and APIs
9/19/17 Bankera Pre-ICO (BNK) $29,600,000 NA NA Bank platform offering payments, loans, deposits, etc.
9/16/17 KICKICO (KICK) $20,143,130 $0.032311 -86.7% Fundraising platform for ICOs, crowdfunding, etc.
9/15/17 KyberNetwork (KNC) $48,000,000 $1.03 -40.5% Allows for exchange and conversion of digital assets

Source: CoinMarketCap, CoinSchedule, Canaccord Genuity

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Figure 13: Selected ICOs raising $10M+ (since 8/15/17), as of 11/14/17


Date Ended Name $ Raised Token Price % change in USD Overview
exchange rate
9/15/17 Propy (PRO) $15,000,000 $0.255121 -58.5% International real-estate marketplace
9/15/17 ICOBox (ICOS) $13,650,000 $44.18 8.7% Facilitates ICOs crowdfunding for companies
9/14/17 Substratum (SUB) $13,800,000 $0.104423 150.4% Allows individuals to allocate spare computing resources
9/13/17 Blackmoon (BMC) $30,000,000 $0.450344 -36.4% Allows asset managers to create tokenized funds
9/11/17 Enigma Catalyst (ENG) $45,000,000 $0.389165 -36.9% Allows users to share data-driven investment strategies
9/10/17 Rivetz (RVT) $19,710,000 $0.306566 -37.9% Provides cybersecurity solutions for mobile
9/7/17 Filecoin (FIL) $257,000,000 NA NA Allows users to share unused hard drive storage
9/6/17 Aventus (AVT) $18,700,000 $2.40 -40.0% Blockchain platform for ticketing companies
9/5/17 Viberate (VIB) $10,714,285 $0.134466 -46.2% Marketplace to match musicians with event organizers
9/1/17 ATB Coin (ATB) $20,400,000 $0.600475 -45.8% Investment platform to organize financial assets
8/31/17 Monetha (MTH) $36,600,000 $0.072016 -73.3% Allows merchants to accept digital token payments
8/31/17 Everex (EVX) $26,442,734 $1.64 -9.4% Platform to send, receive, and borrow money
8/31/17 Target Coin (TGT) $20,711,412 $0.034582 -17.2% Closed-end fund to invest in blockchain technology
8/27/17 DIMCOIN (DIM) $14,005,746 NA NA Trading platform based on NEMs blockchain
8/25/17 Centra Tech (CTR) $18,522,078 $0.560738 69.8% Allows users to spend digital tokens using credit cards
8/25/17 BitBounce (CREDO) $11,330,707 $0.019845 -62.4% Integrated tool to reduce spam emails
8/21/17 DMarket (DMT) $10,929,925 NA NA Decentralized market to turn virtual items to real assets
8/18/17 Lampix (PIX) $12,071,695 $0.074319 -28.8% Blockchain to hold datasets of real-world objects
8/17/17 Agrello (DELTA) $29,368,234 NA NA To build smart contract-powered legal agreements
8/17/17 Decentraland (MANA) $26,203,082 $0.010505 -54.2% Virtual reality platform powered by Ethereum blockchain
8/17/17 CoinDash (CDT) $20,000,000 $0.034398 -30.3% Cryptocurrency social trading platform
8/16/17 Loopring (LRC) $45,000,000 $0.130133 36.3% To facilitate trades across cryptocurrency exchanges
8/16/17 0x (ZRX) $24,000,000 $0.187900 -12.3% Protocol for the exchange of Ethereum-based assets

Source: CoinMarketCap, CoinSchedule, Canaccord Genuity

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Cryptocurrency valuation framework

Below, we update our cryptocurrency valuation framework. For a detailed description


of this framework, please see our whitepaper.

Figure 14: Cryptocurrencies valuation framework: Digital Payments use cases and Store of Value

C ryptocurrency Econom ic F ram ew ork 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Digital Paym ents
Intra-country B2 C e-com m erce ($ B) $ 6 ,3 1 2 .2 $ 7 ,0 3 8 .1 $ 7 ,7 4 1 .9 $ 8 ,3 6 1 .2 $ 8 ,8 6 2 .9 $ 9 ,3 0 6 .1 $ 9 ,6 7 8 .3 $ 1 0 ,0 1 7 .0 $ 1 0 ,3 1 7 .6
Intra-country B2C e-commerce growth % 13.0% 11.5% 10.0% 8.0% 6.0% 5.0% 4.0% 3.5% 3.0%
N on-U.S. Intra-country e-com m erce $ 3 ,7 8 7 .3 $ 4 ,2 2 2 .8 $ 4 ,6 4 5 .1 $ 5 ,0 1 6 .7 $ 5 ,3 1 7 .7 $ 5 ,5 8 3 .6 $ 5 ,8 0 7 .0 $ 6 ,0 1 0 .2 $ 6 ,1 9 0 .5
U.S. Share 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Cryptocurrency ($B) share $0.2 $21.1 $37.2 $50.2 $159.5 $279.2 $406.5 $540.9 $742.9
Cryptocurrency penetration 0.0% 0.5% 0.8% 1.0% 3.0% 5.0% 7.0% 9.0% 12.0%
Velocity of Intra-country e-commerce 2.0 2.0 2.0 2.0 2.1 2.2 2.3 2.4 2.5
C ryptocurrency required ($ B) $ 0 .1 $ 1 0 .6 $ 1 8 .6 $ 2 5 .1 $ 7 6 .0 $ 1 2 6 .9 $ 1 7 6 .7 $ 2 2 5 .4 $ 2 9 7 .1

C ross-border B2 C e-com m erce ($ B) $ 2 3 3 .2 $ 2 7 4 .4 $ 3 2 0 .9 $ 3 7 1 .0 $ 4 2 4 .0 $ 4 8 1 .2 $ 5 4 3 .8 $ 6 1 1 .8 $ 6 8 5 .2


Cross-border B2C e-commerce growth % 19.0% 17.6% 17.0% 15.6% 14.3% 13.5% 13.0% 12.5% 12.0%
Cryptocurrency ($B) share $0.0 $0.3 $1.6 $3.7 $12.7 $24.1 $43.5 $73.4 $102.8
Cryptocurrency penetration 0.0% 0.1% 0.5% 1.0% 3.0% 5.0% 8.0% 12.0% 15.0%
Velocity of Cross-Border B2C e-commerce 4.0 4.0 4.0 4.0 4.1 4.2 4.3 4.4 4.5
C ryptocurrency required ($ B) $ 0 .0 $ 0 .1 $ 0 .4 $ 0 .9 $ 3 .1 $ 5 .7 $ 1 0 .1 $ 1 6 .7 $ 2 2 .8

M icropaym ents ($ B) $ 2 0 .0 $ 2 3 .4 $ 2 7 .1 $ 3 1 .2 $ 3 5 .9 $ 4 1 .2 $ 4 7 .4 $ 5 4 .5 $ 6 2 .7
Micropayments growth % 18.0% 17.0% 16.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Cryptocurrency ($B) share $0.02 $0.12 $0.27 $0.94 $1.79 $3.30 $5.69 $8.18 $12.55
Cryptocurrency penetration 0.1% 0.5% 1.0% 3.0% 5.0% 8.0% 12.0% 15.0% 20.0%
Velocity of Cross-Border B2C e-commerce 11.2 11.4 11.5 11.7 11.8 12.0 12.0 12.0 12.0
C ryptocurrency required ($ B) $ 0 .0 0 $ 0 .0 1 $ 0 .0 2 $ 0 .0 8 $ 0 .1 5 $ 0 .2 7 $ 0 .4 7 $ 0 .6 8 $ 1 .0 5

Personal Rem ittances ($ B) $ 5 9 6 .0 $ 6 1 2 .4 $ 6 2 7 .7 $ 6 4 1 .8 $ 6 5 4 .7 $ 6 6 7 .8 $ 6 8 1 .1 $ 6 9 4 .7 $ 7 0 8 .6


Remittance growth % 3.5% 2.8% 2.5% 2.3% 2.0% 2.0% 2.0% 2.0% 2.0%
Cryptocurrency ($B) share $14.9 $18.4 $22.0 $25.7 $32.7 $53.4 $81.7 $111.2 $141.7
Cryptocurrency penetration 2.5% 3.0% 3.5% 4.0% 5.0% 8.0% 12.0% 16.0% 20.0%
Velocity of Remittances 11.1 11.3 11.5 11.6 11.7 11.9 12.0 12.0 12.0
C ryptocurrency required ($ B) $ 1 .3 $ 1 .6 $ 1 .9 $ 2 .2 $ 2 .8 $ 4 .5 $ 6 .8 $ 9 .3 $ 1 1 .8

B2 B and other cross-border paym ents ($ B) $ 3 2 ,4 0 1 $ 3 7 ,0 9 0 $ 4 1 ,5 2 4 $ 4 5 ,9 5 6 $ 4 9 ,8 8 5 $ 5 3 ,6 1 0 $ 5 5 ,5 5 4 $ 5 6 ,6 9 3 $ 5 6 ,9 3 7


Remittance growth % 16.9% 14.5% 12.0% 10.7% 8.6% 7.5% 6.0% 4.5% 3.0%
Cryptocurrency ($B) share $48.6 $185.4 $311.4 $459.6 $997.7 $1,608.3 $2,499.9 $3,401.6 $4,555.0
Cryptocurrency penetration 0.15% 0.50% 0.75% 1.00% 2.00% 3.00% 4.50% 6.00% 8.00%
Velocity of Cross-border payments 5.0 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7
C ryptocurrency required ($ B) $ 9 .7 $ 3 7 .1 $ 6 1 .1 $ 8 8 .4 $ 1 8 8 .2 $ 2 9 7 .8 $ 4 5 4 .5 $ 6 0 7 .4 $ 7 9 9 .1
Total C ryptocurrency Required for Paym ents ($ B) $ 1 1 .2 $ 4 9 .4 $ 8 2 .0 $ 1 1 6 .7 $ 2 7 0 .3 $ 4 3 5 .2 $ 6 4 8 .7 $ 8 5 9 .4 $ 1 ,1 3 2 .0

Store of Value
Gold above ground (tonnes) 1 8 6 ,5 6 7 1 8 7 ,5 0 0 1 8 8 ,4 3 8 1 8 9 ,3 8 0 1 9 0 ,3 2 7 1 9 1 ,2 7 8 1 9 2 ,2 3 5 1 9 3 ,1 9 6 1 9 4 ,1 6 2
Gold above ground growth % 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
Portion used for tech, industrials, jewelry 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
Tech, industrials, jewelry 111,940.3 112,500.0 113,062.5 113,627.8 114,196.0 114,766.9 115,340.8 115,917.5 116,497.1
Portion used for central bank reserves 17.9% 17.9% 18.0% 18.1% 18.2% 18.3% 18.4% 18.5% 18.6%
Central bank reserves 33,307.8 33,640.9 33,977.3 34,317.0 34,660.2 35,006.8 35,356.9 35,710.4 36,067.6
Portion used for private value storage 22.1% 22.1% 22.0% 21.9% 21.8% 21.7% 21.6% 21.5% 21.4%

Gold leftover for private value storage (tonnes) 41,319 41,359 41,398 41,435 41,470 41,504 41,537 41,568 41,597
Gold Price, USD / tonne ('000s) $40,200 $40,200 $40,200 $40,200 $40,200 $40,200 $40,200 $40,200 $40,200
Gold available for private storage ($B) $1,661 $1,663 $1,664 $1,666 $1,667 $1,668 $1,670 $1,671 $1,672
Cryptocurrency penetration (of total private value storage) 1.0% 1.2% 1.5% 1.9% 2.4% 3.0% 3.7% 4.5% 5.5%
C ryptocurrency required for Store of Value ($ B) $ 1 6 .6 $ 2 0 .0 $ 2 5 .0 $ 3 1 .6 $ 4 0 .0 $ 5 0 .1 $ 6 1 .8 $ 7 5 .2 $ 9 2 .0

Source: Canaccord Genuity estimates

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Figure 15: Cryptocurrencies valuation framework: Market share, supply, and discount rates

2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E


Total C ryptocurrency Required for Paym ents ($ B) $ 1 1 .2 $ 4 9 .4 $ 8 2 .0 $ 1 1 6 .7 $ 2 7 0 .3 $ 4 3 5 .2 $ 6 4 8 .7 $ 8 5 9 .4 $ 1 ,1 3 2 .0
C ryptocurrency required for Store of Value ($ B) $ 1 6 .6 $ 2 0 .0 $ 2 5 .0 $ 3 1 .6 $ 4 0 .0 $ 5 0 .1 $ 6 1 .8 $ 7 5 .2 $ 9 2 .0
Total value of cryptocurrency required ($ B) $ 2 7 .8 $ 6 9 .3 $ 1 0 6 .9 $ 1 4 8 .3 $ 3 1 0 .3 $ 4 8 5 .3 $ 7 1 0 .5 $ 9 3 4 .6 $ 1 ,2 2 3 .9

Total bitcoin required 15.3 37.4 56.7 76.4 155.1 230.5 319.7 397.2 489.6
Share 55.0% 54.0% 53.0% 51.5% 50.0% 47.5% 45.0% 42.5% 40.0%
Total ethereum required 4.2 11.1 18.2 26.7 59.0 97.1 149.2 215.0 306.0
Share 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 23.0% 25.0%
Total Bitcoin Cash required 2.8 7.3 11.8 17.1 37.2 60.7 92.4 130.8 183.6
Share 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0% 14.0% 15.0%
Total Ripple required 1.1 3.1 5.3 8.2 18.6 34.0 56.8 84.1 122.4
Share 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 8.0% 9.0% 10.0%
Total Litecoin required 0.4 1.2 2.0 3.1 7.1 12.1 19.9 29.0 42.8
Share 1.5% 1.7% 1.9% 2.1% 2.3% 2.5% 2.8% 3.1% 3.5%
Total Dash required 0.3 0.8 1.5 2.4 5.6 9.7 16.3 24.3 36.7
Share 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 2.3% 2.6% 3.0%
Total Other Cryptocurrencies required 3.7 8.4 11.4 14.5 27.6 41.2 56.1 54.2 42.8
Share 13.5% 12.1% 10.7% 9.8% 8.9% 8.5% 7.9% 5.8% 3.5%

Supply of bitcoin mined (millions) - year end 16.6 17.2 17.8 18.4 18.9 19.3 19.5 19.7 19.9
Growth rate 4.1% 3.5% 3.2% 2.5% 2.0% 1.5% 1.0% 0.9%
Current price >> $6,508.98 Implied discount rate >> 17.8%
Supply of ethereum mined (millions) - year end 94.8 96.0 97.0 97.4 97.7 97.9 98.1 98.3 98.5
Growth rate 1.3% 1.0% 0.5% 0.3% 0.2% 0.2% 0.2% 0.2%
Current price >> $328.59 Implied discount rate >> 31.8%
Supply of Bitcoin Cash mined (millions) - year end 16.6 17.3 17.9 18.5 18.9 19.3 19.6 19.8 19.9
Growth rate 4.1% 3.5% 3.2% 2.5% 2.0% 1.5% 1.0% 0.9%
Current price >> $1,322.85 Implied discount rate >> 27.0%
Supply of Ripple mined (millions) - year end 38,343.8 46,012.6 52,914.5 59,264.2 65,190.7 70,405.9 73,926.2 76,144.0 78,428.3
Growth rate 20.0% 15.0% 12.0% 10.0% 8.0% 5.0% 3.0% 3.0%
Current price >> $0.21 Implied discount rate >> 28.0%
Supply of Dash mined (millions) - year end 7.6 7.9 8.2 8.4 8.6 8.8 8.9 9.0 9.1
Growth rate 4.1% 3.5% 3.2% 2.5% 2.0% 1.5% 1.0% 0.9%
Current price >> $414.88 Implied discount rate >> 32.3%
Supply of Litecoin mined (millions) - year end 53.0 55.2 57.2 59.0 60.5 61.7 62.6 63.2 63.7
Growth rate 4.1% 3.5% 3.2% 2.5% 2.0% 1.5% 1.0% 0.9%
Current price >> $61.23 Implied discount rate >> 34.5%

Source: Canaccord Genuity estimates

In our updated valuation framework, we account for 1) the gain in market share of
Bitcoin Cash and 2) the higher prices for all six cryptocurrencies since our last
published version in early October. Specifically, we project Bitcoin Cashs share of the
market cap of all cryptocurrencies to reach 15.0% by 2025 (up from 9.0%) given the
recent speculation that Bitcoin Cash will become more widely adopted following the
cancellation of Bitcoins Segwit2x fork to increase its block size from 1 MB to 2 MB.
Meanwhile, our revised valuation framework now uses slightly lower discount rates for
each of the top-six cryptocurrencies given their growing levels of general acceptance.

Note: We reiterate that our valuation framework does not attempt to set a price target
for the six cryptocurrencies in the future, but rather backs into their current values by
taking into consideration their potential use cases, projecting their market share and
supply in 2025, and applying the necessary discount rate to arrive at todays prices
for each cryptocurrency. We also note that our market share estimates for some
currencies are over-simplified, as some of the top six cryptos are only designed to be
used for a small subset of the use cases we lay out.

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Notable private blockchain companies


BitFury BitFury is one of the leading software and hardware providers to
enable businesses, governments, and organizations alike to integrate
blockchain technology into their systems. BitFurys hardware solutions
include ASIC chips and servers, while their software offerings include
transaction processing, Lightning Network (an overlay network to Bitcoins
blockchain enabling instantaneous microtransactions) and Platform as a
Service (PaaS), which allows various organizations to digitize assets and
securely transfer them via blockchain technology. BitFury was formed by a
global team of experts in technology, security, and civil society, and has
received funding from the likes of Blockchain Capital and Credit China
FinTech Holdings.


BitPay BitPay is an Atlanta-headquartered Bitcoin payment service provider
founded in 2011 by Tony Gallippi and Stephen Pair. BitPay works with
businesses to accept Bitcoins as a form of payment, processing over 200K
Bitcoin transactions monthly. In addition to payment processing, BitPay has
expanded to build an open-source platform to build the next applications of
Bitcoin in collaboration with Bitcore, while its BitPay secure Bitcoin wallet
allows individuals to store their Bitcoin holdings.


Blockchain Blockchain is a leading software platform for digital assets that
launched in August 2011. The companys production blockchain platform has
facilitated over 100M transactions among users in 140 countries, and
currently processes ~160K transactions daily. In addition to offering its
blockchain-related software platform, Blockchain also provides a variety of
data on Bitcoin, including transaction volume, mining costs, and hash rates.
Blockchain was co-founded by Nicolas Cary and Peter Smith, and has raised
$70M from investors including Digital Currency Group, Lightspeed Venture
Partners, and Mosaic Ventures.


Blockstack Founded in 2013 under the name Onename, Blockstack is a new,
decentralized internet that allows users to run their own data and apps
without remote servers. After becoming operational on the Bitcoin blockchain
in late 2015, Blockstack became the first implementation of a decentralized
Domain Name System, or DNS, on the blockchain, and later became
blockchains largest non-financial system user by transaction volume.
Blockstack was founded by Princeton graduates Muneeb Ali and Ryan Shea
following a $5.45M raise from investors including Union Square Ventures and
Digital Currency Group.

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Blockstream Blockstream offers software and hardware solutions and
provides consulting services to companies looking to integrate blockchain
technology through its core software platform, Elements. Blockchains
primary area of focus is in sidechains, a technology designed to extend the
capabilities of Bitcoins blockchain across various use cases. Among
sidechains unique features includes the ability for digital assets to be moved
from one blockchain to another and thereby increase liquidity through a
shared protocol. Blockstream is headed by Adam Back, Ph.D., its Chief
Executive Officer.


Bloq Bloq is a Chicago-headquartered provider of blockchain technology
solutions for global enterprises. Structured as an open-source model, Bloq
works with companies to integrate blockchain for a variety of settings,
including commerce, trading, security, identification, and supply chain. This
past October, Bloq announced that it will launch the sale of its own
cryptocurrency called Metronome in early December, to be utilized
immediately for use cases such as payments and transfers. Among Bloqs
enterprise partners include Circle, Deloitte, and Microsoft.


Chain Chain is an enterprise-grade blockchain infrastructure focused on
digitizing the worlds assets to enable a smarter and more efficient financial
system by working with financial institutions to deploy blockchain networks.
Founded in 2014 and based in San Francisco, Chain has raised over $40M in
funding from Khosla Ventures and RRE Ventures, among other strategic
partners. In May 2017, Citi announced a new integrated payment solution
that allows for straight through payment processing and automates
reconciliation leveraging Chains blockchain infrastructure platform. Among
the benefits for Citi include direct access to global payments from Nasdaqs
Linq platform and increased operational efficiency and ease of reconciliation
with real-time access of transactional activity on the blockchain ledger.


Coinbase Backed by investors including Andreessen Horowitz, Union Square
Ventures, and Y Combinator, Coinbase is a digital wallet and cryptocurrency
exchange that allows individuals to buy and sell digital currency. Using
Coinbase, users are able to connect their bank account and debit/credit
cards to exchange digital currency into and out of their respective local
currency. Furthermore, Coinbase can be accessed via its mobile app in
addition to its web browser, and offers insurance protection for digital
currency stored in its servers. Coinbase supports Bitcoin, Ethereum and
Litecoin transactions across 32 countries, and has supported over $20B in
transactions amongst over 10M customers thus far, as it has become the
most widely used digital wallet for individual investors.

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ConSensys ConsenSys aims to reduce transaction costs and barriers to entry
currently present when using traditional financial institutions, with a specific
focus on the Ethereum platform. ConsenSys focuses on building
decentralized applications and various developer and end-user tools
compatible on Ethereums blockchain ecosystem, with the ultimate goal of
enabling new services and business models to be developed within.
Meanwhile, ConsenSys has also partnered with the likes of Microsoft to offer
Ethereum Blockchain as a Service (EBaaS) to its enterprise clients and
developers.


Digital Asset Backed by the likes of Goldman Sachs and JP Morgan, Digital
Asset was created with a specific focus on developing a distributed ledger
platform that meets the production requirements of the worlds largest
financial institutions. Through a combination of a permissioned distributed
ledger and powerful financial modeling language, Digital Asset is able to
deliver flexible infrastructure for regulated financial institutions to share and
process data in a secure manner. Digital Asset is led by CEO Blythe Masters,
who had previously served in various roles during her 27 years at JP Morgan,
and now counts the Australian Stock Exchange (ASX) and DTCC among its
global clients.


Digital Currency Group Digital Currency Group was launched in 2015 by Barry
Silbert, an early investor of blockchain-related companies such as Coinbase,
BitPay, and Ripple. Digital Currency Group is a venture capital company that
operates three subsidiaries: Genesis Trading, a full-service institutional
trading firm focused on digital currencies, Grayscale Investments, a digital
currency asset management firm that also manages the publicly-traded
Bitcoin Investment Trust (GBTC), and CoinDesk, a news site focused on
blockchain and cryptocurrencies.

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Appendix: Important Disclosures


Analyst Certification
Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the
recommendations and opinions expressed in this research accurately reflect the authoring analysts personal, independent and
objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring
analysts coverage universe and (ii) no part of the authoring analysts compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of
Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications
with a subject company, public appearances and trading securities held by a research analyst account.
Sector Coverage
Individuals identified as Sector Coverage cover a subject companys industry in the identified jurisdiction, but are not authoring
analysts of the report.

Investment Recommendation
Date and time of first dissemination: November 14, 2017, 23:01 ET
Date and time of production: November 14, 2017, 22:14 ET
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Distribution of Ratings:
Global Stock Ratings (as of 11/14/17)
Rating Coverage Universe IB Clients
# % %
Buy 564 59.94% 40.25%
Hold 264 28.06% 25.76%
Sell 21 2.23% 9.52%
Speculative Buy 92 9.78% 66.30%
941* 100.0%
*Total includes stocks that are Under Review

Canaccord Genuity Ratings System


BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
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Risk Qualier
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12-Month Recommendation History (as of date same as the Global Stock Ratings table)
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mar.canaccordgenuity.com/EN/Pages/default.aspx

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considered susceptible to a downward price correction, or other factors may exist that lead the research analyst to suggest a sale over
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