Unregulated ICOs were replaced by crypto-backed DeFi products in 2019, according to a CB Insights’ Blockchain 2020 Report.
According to the March 19 report, assets held in decentralized finance platforms grew by over 200% since January 2019 to their peak in February 2020—from under $300 million to over $1.2 billion. At the same time, ICOs in 2019 raised 95% less than they did in 2018, with total funding plummeting from over $7.8 billion to just $371 million, according to the report.
Winners in the DeFi space included the Maker protocol, which houses a stablecoin backed by crypto, and DeFi lending protocol Compound. As of March 2020, the Maker protocol was backed by over $280 million in assets; Compound followed with $70 million.
All Grown Up
Though DeFi is still a highly experimental and volatile space, some companies have made serious moves to protect their users—all signs of a maturing industry that’s starting to take itself seriously.
According to the report, a growing number of crypto custodial services, including Ledger, Anchorage, and Knox, now either maintain or plan to implement insurance policies to protect their client’s holdings. Coinbase and Gemini now insure customers for over $200 million against criminal activities.
And cryptocurrency tax services also started to gain traction toward the end of the year—all signs that DeFi’s committed to staying on the books. ZenLedger, Taxbit, and Verady’s Ledgible platform raised at least $8.4 million in early-stage funding, according to the report.
The CB Insights report also notes that the US and China have dominated funding for blockchain projects since 2015, making up nearly 70% of all funding offered during those years.
But the financial center of gravity continued to shift eastward in 2019. 30% of funding deals came from the US in 2019, down from 41% in 2017, while China captured 22% of 2019 deals, compared to just 10% in 2017.
Notable deals in 2019 included $294 million for Ripple; $100 million for IP tokenization project Proxicoin; and $1.2 billion for Figure Technologies, which tokenizes home equity and other mortgage products.
…But changing tack
The CB Insights report said that blockchain investors have consistently directed less funding at enterprise blockchain solutions. (CB Insights defines enterprise blockchains as those designed to improve business efficiency and reduce back-office expenses).
2019 was no different. Enterprise blockchains raised just $434 million from venture capital firms in 2019, compared to $2.4 billion raised for decentralized crypto products and infrastructure projects. CB Insights highlighted payment facilitator Celo and mining manager Bison Trails as examples of big winners in crypto infrastructure and protocol development.
Governments on the block
Across the globe, CB Insights reports growing interest from national central banks in developing their own digital currencies. China leads the pack and expects to launch its digital currency in 2020, while France, Turkey, and the Bahamas have undertaken or will shortly launch their own pilot programs.
Other nations are at varying stages of research and development on central bank digital currencies. The United States has indicated notably less urgency than its main rival, China.
In a December 2019 House Committee meeting, US Treasury Secretary Steven Mnuchin said:
“… [Federal Reserve] Chair Powell and I have discussed this at length – we both agree that in the near future, in the next five years, we see no need for the Fed to issue a digital currency.”
But economists and others think that the US must pick up the pace if they want to make sure that the dollar remains the world’s reserve currency.
ICOs: Gone Forever?
ICOs may have fallen out of fashion—raising less than 5 percent in 2019 than in 2018—but are they really gone for good?
CB Insights finds hope in a small selection of fundraisers conducted under new government regulations in France and Thailand, and in recent progress on legal frameworks being developed in the US.
The report indicates that such developments could be buoyed by the continued development of blockchain monitoring services like Chainalysis, Elliptic, and CipherTrace that raised more than $68 million in 2019.