3RD GLOBAL CRYPTOASSET BENCHMARKING STUDY Apolline Blandin, Dr. Gina Pieters, Yue Wu, Thomas Eisermann, Anton Dek, Sean Taylor, Damaris Njoki September 2020 supported by Disclaimer: Data for this report has been gathered primarily from online surveys. While every reasonable effort has been made to verify the accuracy of the data collected, the research team cannot exclude potential errors and omissions. This report should not be considered to provide legal or investment advice. Opinions expressed in this report reflect those of the authors and not necessarily those of their respective institutions. TABLE OF CONTENTS FOREWORDS ..................................................................................................................................................4 RESEARCH TEAM ..........................................................................................................................................6 ACKNOWLEDGEMENTS ............................................................................................................................7 EXECUTIVE SUMMARY ........................................................................................................................... 11 METHODOLOGY ........................................................................................................................................ 14 SECTION 1: INDUSTRY GROWTH INDICATORS .........................................................................17 Employment figures ..............................................................................................................................................................................................................17 High-growth enterprises ....................................................................................................................................................................................................18 Financial performance of service providers ..............................................................................................................................................................19 SECTION 2: MINING, THE BACKBONE OF THE INDUSTRY ...................................................21 Hashing as a business ...........................................................................................................................................................................................................21 Where are we on PoW’s energy consumption? .......................................................................................................................................................26 Mining pools ..............................................................................................................................................................................................................................28 Mining hardware manufacturing ....................................................................................................................................................................................32 The financialisation of mining............................................................................................................................................................................................34 SECTION 3: THE OFF-CHAIN STORY ................................................................................................36 On-chain and off-chain stories .......................................................................................................................................................................................36 Off-chain cryptoassets and fiat currency support ................................................................................................................................................37 Off-chain activity providers ..............................................................................................................................................................................................39 SECTION 4: PROFILING CRYPTOASSET USERS ...........................................................................44 User number and activity .................................................................................................................................................................................................. 44 User geography .......................................................................................................................................................................................................................45 User types ..................................................................................................................................................................................................................................46 SECTION 5: REGULATORY AND COMPLIANCE ..........................................................................49 Compliance benchmarks.....................................................................................................................................................................................................49 Authorisation of service providers ................................................................................................................................................................................52 AML and KYC procedures .................................................................................................................................................................................................54 Regulation impact: redefining geographies ...............................................................................................................................................................56 SECTION 6: IT SECURITY ........................................................................................................................ 59 The development of best market practices ...............................................................................................................................................................59 Resources allocation to IT security ................................................................................................................................................................................60 Security audits .........................................................................................................................................................................................................................61 Insurance ....................................................................................................................................................................................................................................62 SECTION 7: BALANCING BETWEEN INTEGRATION AND INNOVATION .......................64 Enhanced transparency and compliance ....................................................................................................................................................................64 A decoupling of functions across the value chain ..................................................................................................................................................65 The growth of ‘decentralised finance’ ..........................................................................................................................................................................65 APPENDIX ......................................................................................................................................................67 Miners’ influence ....................................................................................................................................................................................................................67 Operational risks for miners .............................................................................................................................................................................................67 Additional risks for miners .................................................................................................................................................................................................68 Operational risks for service providers .......................................................................................................................................................................69 Future developments ...........................................................................................................................................................................................................70 3rd Global Cryptoasset Benchmarking Study FOREWORDS The rapid pace of innovation and increased investment in the cryptoasset industry is increasing the need for information analysing these developments. With the publication of the first edition of the Global Cryptoasset Benchmarking Study three years ago, the CCAF set out to progressively track and take the pulse of this nascent industry by transparently collecting, analysing and disseminating knowledge about cryptoassets. Similarly, the 3rd Global Cryptoasset Benchmarking Study seeks to shed light on the market dynamics of the cryptoasset industry since late 2018. The report collates data from entities operating in four main segments of