Financial Research

Deep Research

For a full copy of this report in PDF format, click this link. Horizen (ZEN) (“Horizen”) is a next-generation internet platform structured as a publicly traded Distributed Ledger Technology (“DLT”) cryptonetwork that was launched in Q2 2017. Horizen gives users control over their online data with its blockchain cloud computing platform for money, messages, media, and third-party decentralized applications (“DApps”). Web 3.0 decentralized internet alternatives like Horizen have the potential to become disruptive over the next decade by solving many issues plaguing Big Tech. Horizen’s fintech imbedded emerging internet application ecosystem offers a glimpse at what an early WeChat 2.0 crypto super app platform may resemble. While material DApp, user and revenue growth is key to reaching such long-term prominence, Horizen’s unique advantages and highly undervalued user-base vs. its crypto peers may already imply unicorn potential. Horizen is building a platform for the next era of the web. A blockchain computing network, analogous to a decentralized AWS, comprised of ~40k nodes, the largest among peers, forms the platform’s infrastructure backbone (Slide 53). A smart contract capable open network allows any developer to build trustless DApps that aren’t controlled by any organization (Slide 22). Natively imbedded crypto Decentralized Finance (DeFi) capabilities (Slide 43) enable an ecosystem of interoperable fintech e-commerce DApps, analogous to WeChat mini programs and WeChat Pay (Slide 44). Optional privacy features give users control over their data (Slide 28). Governed as a community-owned-and-controlled cryptonetwork Web 3.0 protocol (Slide 34). Web 3.0 networks offer Big Tech crypto super app disruption potential. As FAAMGs (Facebook, Amazon, Apple, Microsoft, Google) have risen to dominance (Slide 31), cryptonetworks have been rapidly gaining share (Slide 32) and may offer the next wave of innovation and growth (Slide 33). Web 3.0 is a vision for a better internet (Slide 35) where crypto protocols replace application companies (Slide 36). Cryptonetworks further past business model evolutions (Slide 39), trends in computing (Slide 41), and software automation stages (Slide 40), potentially leaving 56% or $530B of FAAMG revenue disruptable (Slide 48). Super app capable crypto platforms are emerging (Slide 45) alongside DApp ecosystems that resemble tech giants (Slide 46). Impressive tech, team, backers, and rapid community growth. Differentiated tech combining ZK SNARK privacy (Slide 57), security enhancements (Slide 54), a highly decentralized network (Slide 69) and a novel sidechain design for scalable, payment interoperable DApps (Slide 56). Team continues to execute (Slide 25). Key investors and partners support Horizen (Slide 64). Community growth CAGR of 75%-170% (Slide 67), 2.3k developers (Slide 70) and 250k monthly active users (MAUs) (Slide 66). Undervalued user-base vs. peers may imply unicorn potential. ZEN is an income generating productive asset (Slide 60), and we believe fee cash flows (ZEN/USD) should drive value long-term, but we see users as a leading metric to watch today. Horizen’s current MAUs are valued in line with Big Tech comps (Slide 74), while forward MAUs may imply a $122M to $440M market cap by 2022 (Slide 75). Valuing Horizen’s user base against crypto peers may imply a market cap of ~$1.8B (Slide 77). Long-term macro and asset specific catalysts unfolding. Big Tech headwinds offer macro catalysts for Web 3.0 (Slide 50), while new DApp launches, partnerships, exchange listings, and the November halvening could drive Horizen higher (Slide 78). What could go wrong? Web 3.0 disruption, market size or winning solutions may not materialize. Horizen DApps, users, and fee revenue may fail to grow. Competing solutions may win. Investors may value Horizen differently. Crypto related risks (Slide 15). Bottom line: Horizen is a new type of internet platform that’s a competitor to watch in the race to replace Big Tech. It offers differentiated tech, a rapidly growing ecosystem and a relatively undervalued user-base, which may create an opportunity. We believe its modest market cap, team culture of execution over hype, and recent transition from a privacy coin to a Web 3.0 network contribute to it being relatively unnoticed, but we see reasons to be bullish on Horizen over the next decade. Key slides from this report… Horizen: Web 3.0 Platform Targeting Big Tech Super App Disruption (Slide 1)... Building platforms for the next era of the web (Slide 34)... Building a crypto tech platform offering a new evolution beyond currency (Slide 20)... Standing apart as the only live privacy focused Web 3.0 cryptonetwork (Slide 21)... Next generation organizational tech business models (Slide 39)... Early innings of crypto tech platforms absorbing Big Tech (Slide 32)... Over 50% of FAAMG revenue or ~$530B could be at risk of crypto disruption (Slide 48)... Community centric culture, new tech and targeted marketing fueling user growth (Slide 67)... MAU growth trend with traditional tech rates may imply ~$125M-450M in value by 2022 (Slide 75)... Horizen would become a new unicorn if its users were priced in line with crypto peers (Slide 77)...

CRYPTO SPECIAL REPORT - Bitwise: Leading Crypto Index Funds & New Alpha Opportunity

For a full copy of this report in PDF format, click this link. Bitwise Asset Management, Inc. (“Bitwise” or “Company”) is a San Francisco-based specialist asset manager founded in 2017. The Company pioneered the first and largest cryptocurrency index fund and is a rising-star provider of liquid, low-cost crypto funds. Bitwise is moving to have its flagship Bitwise 10 Crypto Index Fund and Bitwise Bitcoin Fund publicly tradable. Comparable products have traded at sustained premiums to fund Net Asset Value (NAV) ranging from 40% to 200%, with maximums as high as 2,000%. If listed, we believe Bitwise’s products could justify trading with premiums corresponding to comps, creating a new potential alpha opportunity for funds & accredited investors. This report outlines approaches for capitalizing on such an opportunity (Slide 30). Bitwise’s professional organization resembles The Vanguard of crypto. Bitwise has a strong team (Slide 8) managing a professionalized firm (Slide 3) that’s well capitalized with backing from leading VCs (Slide 9). The Company’s cutting-edge research (Slide 11) has allowed it to pioneer a robust index methodology (Slide 17) and best-in-class smart beta funds (Slide 5). Bitwise has institutional-grade operations (Slide 4), industry-leading service providers (Slide 10) and an ongoing dialogue with top regulators (Slide 6). These factors offer signs that point to industry leadership and should instill investors’ trust in the firm. Funds are attractive passive vehicles for convenient, long-term exposure. Bitwise 10 Crypto Index Fund (Slide 21), Bitwise Bitcoin Fund (Slide 26) and Bitwise Ethereum Fund (Slide 39) offer compelling ways to capture the long-term growth of crypto assets as a category. The funds charge no performance fee and have all in expense ratios below comparable crypto products (Slide 40). We believe low-cost beta products deserve a core place in investors portfolios (Slide 7) and see Bitwise as a leading solution for professionally managed, audited, custodial-insured crypto exposure via a traditional vehicle. Bitwise 10 Crypto Index Fund offers smart beta exposure to large cap crypto winners. Selecting the top performing assets or active fund managers is challenging. Bitwise 10 Crypto Index Fund offers market cap weighted passive exposure to ~80% of the market. A robust rules-based monthly rebalancing methodology provides exposure to large cap assets outperforming Bitcoin (Slide 18) while the index has outperformed the Eurekahedge Crypto Hedge Fund Index by 350% since inception (Slide 16). Publicly listing Bitwise shares would open the door for retail and financial advisors. Investors in the US have limited means for gaining convenient crypto exposure due to structural constraints (Slide 28). Bitwise is pursuing approval to have shares of its Bitwise 10 Crypto Index and Bitwise Bitcoin Fund publicly quoted and tradable in traditional brokerage accounts (Schwab, E*TRADE, etc.) via OTCQX (Slide 42). Shares have potential to trade at NAV premiums corresponding to GBTC and ETHE. Bitwise’s listed funds most comparable products would likely be GBTC & ETHE due to similar structures and ~90% - 100% underlying asset overlap. GBTC & ETHE have NAV premiums that currently sit at 24% and 102%, respectively, while both have sizable market caps and trading volume that evidence real demand (Slide 29). Listed Bitwise funds could trade at corresponding premiums. Multiple Bitwise alpha strategies exist for hedge funds and accredited investors. Investors could capitalize on a possible premium by purchasing Bitwise funds’ shares in a private placement at NAV and selling them on the open market once tradable. We illustrate a range of hypothetical opportunistic, long-term, and crypto-hedged trade scenarios (Slide 31, Slide 32, Slide 33). What could go wrong? Listing approval delays or failure. Lack of secondary market liquidity. Negative or lower than expected NAV premiums. Actual returns may differ from our simplified hypothetical model. Crypto volatility. Hedging basis (Slide 34) Bottom line: Bitwise has an industry leading team and organization. Professionally managed passive products like Bitwise’s have a core place in a portfolio. Bitwise 10 Crypto Index Fund offers a differentiated and attractive solution. Plans to list Bitwise funds create an opportunity for traders and hedge funds. Bitwise funds have NAV premium alpha potential. Key slides from this report... Bitwise: Leading Crypto Index Funds & New Alpha Opportunity (Slide 1)... Offering cutting-edge investable products, indices and research (Slide 5)... Bitwise 10 Crypto Index has outperformed many active crypto hedge funds (Slide 16)... Bitwise 10 Crypto Index captures assets that are outperforming Bitcoin (Slide 18)... Bitwise plans to list its Bitwise 10 Crypto Index & Bitcoin Funds' shares for trading (Slide 28)... Bitwise funds offer an opportunity for investors across several strategies (Slide 30)...

CRYPTO SPECIAL REPORT: BSV - Business Use Cases of the Bitcoin SV Blockchain

For a full copy of this full report in PDF format click this link. Bitcoin SV (BSV): Blockchain gets down for business by solving key challenges and enabling new opportunities. BSV envisions a world where all transactions, digital activity, and data exist on a single public blockchain that functions as a global electronic cash system and a commodity data ledger for enterprise applications. BSV believes that achieving their “Metanet” vision, where data and value interact seamlessly, requires a protocol designed with base layer stability that’s capable of enabling massive scaling. Eleven case studies in this report highlight how companies are deploying business applications leveraging BSV’s unique blockchain tech. Blockchains like BSV are enabling the next evolution of internet businesses. Platforms like BSV offer a solution to many internet issues. They challenge tech monopolies by replacing centralized infrastructure providers with decentralized networks and applications. They solve payment frictions using digital currency to seamlessly enable an internet of value. They reduce global business challenges by re-engineering the trust models underlying internet services using publicly verifiable, immutable, user-owned blockchain data and globally enforceable smart contracts. All these innovations open the door for next gen businesses. Bitcoin SV has a unique vision and differentiated blockchain technology approach. Blockchains come in many shapes and sizes. BSV’s February 2020 Genesis Upgrade laid the technical groundwork for advancing its Metanet vision. Genesis eliminated BSV’s software mandated default block size limit (2GB) and thus allowed for theoretically unbounded scaling. The upgrade also restored certain technical features to the Bitcoin protocol that allow for more complex smart contracting applications and unlock the potential of BSV’s blockchain for use cases beyond payments. BSV’s development team’s efforts remain laser focused on maintaining a platform for enterprise use that is stable, scalable, secure, and allows for safe instant transactions. Unlocking novel applications and enabling internet business model innovations. Companies are using BSV’s immutable data storage, micropayments, and smart contracting capabilities to redesign how value is delivered to customers across a range of industries. Monetization for much of the internet today relies on data intrusive advertising or wasteful bundled subscription models. BSV’s key features could unlock the potential for fundamental internet business model shifts to occur by replacing the current paradigms with new user permissioned data, streaming micropayments, and other unimagined monetization models. Bitcoin SV has a growing ecosystem of 320+ known companies & services. This report examines how nine  companies are using BSV across several industries: Healthcare Records Management, Supply Chain, Big Data & IoT, Casinos & iGaming, eSports, Web Browsing, Advertising API Monetization and Fintech & Investments. It also looks at how BSV’s Research and Development arm, nChain, is partnering with enterprises to help re-engineer their business models through its enterprise blockchain services offerings and how the Blockchain Mining & Transaction Processing Company, TAAL (OTCQX:TAALF; CSE:TAAL), is professionalizing the way blockchain computing services are delivered to make BSV more amenable to enterprises. Network stats are validating BSV’s approach towards enabling high volume, low fee, data intensive applications. BSV’s daily transaction count now regularly surpasses BTC, while its average transaction fees are orders of magnitude lower. These low fees enable micropayments and low-cost data storage applications. Given these low fees, median transaction values on BSV have been able to reach as low 1/100th of 1 cent on certain days. During a stress test, BSV processed the largest block in history on a public network that confirmed 1.3M individual transactions. That translates to a throughput level of ~2,200 transactions per second, thus highlighting BSV’s unique ability to offer high throughput in a production environment. Bottom line: Blockchain has moved from the idea phase to the implementation phase and businesses are now deploying novel applications. BSV’s technical decisions to date have positioned the platform with the scalability needed to service certain high throughput, enterprise applications. Growing PoCs and enterprise traction will offer signs of BSV’s potential. Key slides from this report...  BSV: Business Use Cases of the Bitcoin SV Blockchain (Slide 1)... Development team’s efforts focused on maintaining a platform for enterprise use (Slide 3)... Select companies building on BSV come from a wide range of industry verticals (Slide 9)... Case Study: EHR Data leveraging BSV in healthcare records management (Slide 10)... BSV's lower transaction fees enable micro transaction applications (Slide 23)...

CRYPTO SPECIAL REPORT: Bitcoin SV - Metanet: Beyond digital money, towards an on-chain internet

Bitcoin SV (BSV) completed its “Genesis” protocol update on February 4th, 2020. According to BSV’s team, the successful hard fork implements changes that are primarily designed to 1) enable key technical capabilities that existed in the original Bitcoin protocol (client software version 0.1) and 2) expand the blockchain’s scaling potential. The BSV community believes these changes will restore its protocol implementation back to the original Bitcoin design. BSV stakeholders believe the software modifications will further enable its vision of a “Metanet”, which is a world where transactions, data and digital activity of all types can be on a single blockchain, just like the world operates online on a single internet. We view the Genesis protocol changes as positive steps towards building a Metanet that may position BSV for greater adoption, while also noting that it may take time before the design’s ultimate viability is fully proven out.  Bitcoin Core focused on financial transactions, Ethereum built a world computer, Bitcoin SV envisions a Metanet for both. The Metanet seeks to expand Bitcoin SV’s use cases beyond payments to advance an improved internet where value and data interact seamlessly. Genesis further enables nChain’s vision by enhancing BSV’s technical capabilities to allow for more complex smart contracting applications. The update restored programming language functions that were enabled in Bitcoin’s earlier design, but were later removed in the Bitcoin Core protocol, which drove developers to build Ethereum. Blockchain scaling takes different strokes for different folks and BSV’s unlimited block cap may allow the most. The BSV community believes their blockchain must offer unbounded scalability in order to achieve the Metanet vision. Genesis eliminates the 2GB software mandated default block cap and lets miners individually set any block size to achieve this goal. This allows for theoretically unbounded BSV scaling, while competitors like BTC, BCH and ETH are currently capped at around 7, 115 and 15 TPS, respectively. However, we believe miners will likely continue to impose caps which may limit scaling in practice. Nevertheless, the approach gives the network added flexibility, which may offer a valuable competitive advantage in the long run. Maxthon blockchain internet browser development and ecosystem growth offer encouraging signs. The global software company, Maxthon will be building the first BSV-powered blockchain internet browser that aims to provide fast and easy ways to search and view on-chain data and content. Additionally, ~400 projects are building applications for consumer reviews, social media, online games, identity monetization and consumer data on the BSV blockchain according to Bitcoin Association data. Network data suggests the BSV blockchain is already being used for data storage. BSV’s larger block size has enabled large and increasing daily transaction counts while maintaining relatively low fees compared to BTC and BCH. The data indicates BSV is already being used for data storage. We view this as an early indicator that BSV’s blockchain may be capable of acting as a universal server for hosting large amounts of website, user and other data on-chain. What could go wrong? More complex functionality may increase code vulnerability risks. Alternatively, developers may prefer building on a non-script code base that they feel allows for even more complex, Turing complete applications. Hardware requirements for scaling via bigger blocks may alienate non-enterprise users, which may hurt decentralization and reduce censorship resistance (tradeoffs BSV is intentionally accepting). High transaction counts may not materialize into high transaction value or economic value to the network or its miners.  Bottom line: It’s still early days for cryptocurrency technology and there is little certainty around what the winning implementation will be. The BSV community is taking steps to position BSV as a scalable and robust platform with a focus on growing network adoption.  Metanet: Beyond digital money, towards an on-chain internet (Slide 1)… Genesis hard fork on February 4th, 2020 enables key Metanet functionality (Slide 3)… BSV on-chain activity reflecting data transactions (Slide 5)…

IOTA: Becoming an IoT standard could drive market adoption

IOTA is an alternative Distributed Ledger Technology (DLT), which uses “The Tangle”, a Directed Acyclic Graph or DAG, to implement fast, feeless and secure decentralized transaction confirmations, primarily for the Internet of Things (IoT). Should IOTA become adopted as standard, the network could grow to $700 Billion in value, which translates to a 20% share of an eventual  $3.3 trillion DLT market. As they work towards standardization, IOTA continues building applications on its network with large multi-national corporations and fortune 500 companies. IOTA is leading IoT standard adoption which is critical for its success. Interoperability is key to realizing at least 40% of the estimated $11 trillion value of the IoT economy, per McKinsey. This leads to the need for industry standards around data communication, encryption and security. IOTA is in the process of establishing standards and contributing its open source code to a contributor network in partnership with the standards body Object Management Group (adoption process expected to be completed by late 2020). We believe the winning standard will have dominant market share. Below we’ve highlighted three slides from our recent report on IOTA’s potential to become an IoT standard in the machine-machine economy. Please contact inquiry@fsinsight. com to find out how to access the full report. 20191119 IOTA Special ReportDownload IOTA_Special_Report_ArabicDownload IOTA_Special_Report_MandarinDownload IOTA_Special_Report_FrenchDownload IOTA_Special_Report_GermanDownload IOTA_Special_Report_ItalianDownload IOTA_Special_Report_JapaneseDownload IOTA_Special_Report_KoreanDownload

  • Deep Research
Dec 4, 2019

CRYPTO SPECIAL REPORT: Bitcoin SV — The “big block” Bitcoin targeting enterprise adoption

Bitcoin SV believes its protocol best represents the original vision for Bitcoin. Specifically, this means that Bitcoin SV does not limit its block size and believes that developers have too much power relative to miners. Today, the network is primarily used for storing metadata. BSV’s goal over the long-term is to provide usage both as a payments network and commodity data ledger (metadata storage). With its ambitious goals, Bitcoin SV is contributing to the necessary protocol design experimentation in crypto. No cryptocurrency has achieved global adoption, thus the space needs projects to continue tinkering with protocol designs to find the optimal one that can accommodate global adoption. Bitcoin SV believes its protocol more closely reflects the original Bitcoin design than does Bitcoin Core or Bitcoin Cash. Specifically, BSV believes BCH was wrong to add opcodes and make other changes not in the original protocol, and will soon be removing its block size limit; BTC and BCH limit block sizes to ~2MB and 32MB, respectively (though BTC now technically uses a “block weight” limit) (Slide 14). The challenge for BSV will be to prove that its protocol is not only the original Bitcoin design, but the best design for wide consumer and business adoption (Slide 9). Protocol design requires tradeoffs between scalability, security, and decentralization. Bitcoin SV can achieve ~700 TPS at 256MB miner-chosen block limit (slide 14), but mining is concentrated with two pools >40% of total network hash power. Vitalik Buterin famously coined this idea of the “blockchain trilemma.” For example, BSV’s hash power concentration and cost to run a full node are such that its network security is ensured through a small group of ecosystem supporters. The differences between BSV, BTC, and BCH can be similarly broken out between use case, balance of power, and scalability (Slide 10). BSV is the biggest block Bitcoin. BSV believes corporates will require network throughput capacity much higher than what is currently needed before they are comfortable using the network. Daily transaction value on the network averages ~$25mm with blocks 0.43% full vs. BTC daily value ~$2.6B and its blocks typically ~50% full (Slide 14). Today, the network is primarily used for storing metadata. Over the long-term BSV wants to be a commodity data ledger for the internet. For example, the two most active apps on BSV are WeatherSV and Preev. The former records weather data on-chain, while the latter is a crypto exchange rate calculator. These transactions are low value but high volume; these microtransactions are supported by BSV’s low fees as a percentage of on-chain volume (Slide 21). BSV could be more profitable to mine due to the higher risk associated with a smaller project. Though,  mining revenues are currently very small at ~$0.30mm per day compared to BTC $17mm and BCH $0.50mm (Slide 28). But, currently BTC is slightly more profitable to mine than BSV (1.2x vs. 1.1x price-to-breakeven). Bottom line: It’s still very early days for cryptocurrency technology and there is little certainty around what the winning implementation could be. BSV is contributing to the necessary experimentation to test which protocol design is most likely to achieve broad adoption. The data shows that the network lags BTC and BCH transacted value, but it’s go-to-market strategy has advantages that could give it an edge in the enterprise market over the long-term. Overview of Bitcoin SV  (slide 7)… ORIGINS: Irreconcilable protocol disputes caused hard forks (slide 8)… BSV is targeting market adoption with its “big block” strategy (Slide 14)…BSV mining profitability slightly lower than BTC, BCH (Slide 28)… 20191106 BitcoinSV Primer1Download

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