State of the Token Market

The State of the TOKEN MARKET 9 Months into 2018 1

Fabric Ventures Contents Fabric is a VC fund adapting the early, technical, and patient approach of venture capital to Part I: Nine Months investing in decentralised data networks. It is building on OpenOcean’s peerless open source Into 2018 pedigree and Firestartr’s background in seed investing & blockchain focus, and is backing the boldest projects forming the foundation of Web 3.0. 06 - 07 Timeline of the past year www.fabric.vc 08 - 09 Overview of 2018 year-to-date @fabric.vc 10 - 13 Token returns and model portfolio 14 - 15 Pick and shovels first: • Sector breakdown • Tech stack development timeline 16-21 Geographical Distribution of Token Sales: • Overview • Regulation Anastasiya Belyaeva Max Mersch Richard Muirhead Maciej Rymarz Julien Thevenard • Project formation Partner, Head of General Partner General Partner Data Gandalf Investment Analyst 22-25 Fundraising Trends Venture Platform 25-27 Analysis of developer activity @Anastasiya_B94 @MerschMax_ @RichardMuirhead @MaciejRymarz @JulienThevenard Part II: Fabric Ventures Investment Thesis 28 - 38 A Generational Platform Shift 39 What’s at Stake for Investors 40 - 41 Europe: a Prime Mover 44 Conclusion 2 3

Fabric Ventures Contents Fabric is a VC fund adapting the early, technical, and patient approach of venture capital to Part I: Nine Months investing in decentralised data networks. It is building on OpenOcean’s peerless open source Into 2018 pedigree and Firestartr’s background in seed investing & blockchain focus, and is backing the boldest projects forming the foundation of Web 3.0. 06 - 07Timeline of the past year www.fabric.vc 08 - 09 Overview of 2018 year-to-date @fabric.vc 10 - 13 Token returns and model portfolio 14 - 15 Pick and shovels first: • Sector breakdown • Tech stack development timeline 16-21 Geographical Distribution of Token Sales: • Overview • Regulation Anastasiya BelyaevaMax MerschRichard MuirheadMaciej RymarzJulien Thevenard• Project formation Partner, Head of General PartnerGeneral PartnerData GandalfInvestment Analyst22-25Fundraising Trends Venture Platform 25-27 Analysis of developer activity @Anastasiya_B94@MerschMax_@RichardMuirhead@MaciejRymarz@JulienThevenard Part II: Fabric Ventures Investment Thesis 28 - 38 A Generational Platform Shift 39 What’s at Stake for Investors 40 - 41 Europe: a Prime Mover 44 Conclusion 2 3

PART I: Nine Months Into 2018 4 5

PART I: Nine Months Into 2018 4 5

TIMELINE of JAN 18 The Token Rally • ETH @ $1,103.65 the past year • ICOs raise $2.4B A TON of Fundraising Start of the ICO Craze, Fastest ICO Ever FEB 18 • ETH @ $873.12 MAY 17 • Telegram notifies SEC of 1st $850M private sale • ETH average price @ $125.75 • ICOs raise $200M Alt Coin Correction • Basic Attention Token (BAT) ICO sells out in 2 blocks, starting the ICO craze. MAR 18 • ETH @ $625.76 Ethereum Congestion • Telegram notifies SEC of 2nd $850M private sale JUN 17 • Token prices drop by >30% • ETH average price @ $313.73 • ICOs still raise $2B • ICOs raise $650M • Bancor and Status raise >$100M each, clogging the Ethereum network An ICO slump? APR 18 Regulators Are Watching • ETH @ $521.10 JUL 17 • Token prices continue declining by further 20% • ETH @ $224.12 • ICOs “only” raise $1.1B • ICOs raise: $650M • Tezos raises $230M Crossing the $10B yearly mark MAY 18 • ETH @ $678.80 • U.S. SEC publishes the report stating DAO tokens were securities Summer Slump • EOS raises $900M in one month AUG 17 • Large (>$100M) deals out of Israel and Asia • ETH @ $301.61 • ICOs raise $2B • ICOs raise: $330M • Bitcoin Cash mined its first block; Top-Notch Institutional VCs Join The Game JUN 18 • ETH @ $451.88 SEP 17 Rise of the SAFT • ICOs raise $585M • ETH @ $293.05 • Andreessen Horowitz closed a $300m dedicated crypto fund • ICOs raise $775M • Filecoin closes $200M SAFT round JUL 18 ETF Hopes • China announces an ICOs ban • ETH @ $433.61 All Hands on Deck with Devcon 3 • ICOs raise $415M OCT 17 • ETH @ $306.25 • Release of the Augur dApp • ICOs raise $829M AUG 18 ETF Disillusion • Polkadot raises $144.3M • ETH @ $279.18 Calm Before the Storm • ICOs taise $498M NOV 17 • SEC rejects multiple Bitcoin ETF applications due to risk of market manipilation • ETH @ $357.94 • ICOs raise $823M SEP 18 Stamp of Approval from Endowment Funds • ETH @ $235.39 Billion Dollar Month DEC 17 • ETH @ $640.21 • ICOs raise $181M • ICOs raise $1.7B • Harvard, Stanford, MIT, Datrmouth, and University of North Carolina invest in at least • Blockstack raises $52M one specialist crypto fund 6 7

TIMELINE of JAN 18 The Token Rally • ETH @ $1,103.65 the past year • ICOs raise $2.4B A TON of Fundraising Start of the ICO Craze, Fastest ICO EverFEB 18• ETH @ $873.12 MAY 17 • Telegram notifies SEC of 1st $850M private sale • ETH average price @ $125.75 • ICOs raise $200M Alt Coin Correction • Basic Attention Token (BAT) ICO sells out in 2 blocks, starting the ICO craze. MAR 18• ETH @ $625.76 Ethereum Congestion • Telegram notifies SEC of 2nd $850M private sale JUN 17 • Token prices drop by >30% • ETH average price @ $313.73 • ICOs still raise $2B • ICOs raise $650M • Bancor and Status raise >$100M each, clogging the Ethereum network An ICO slump? APR 18 Regulators Are Watching• ETH @ $521.10 JUL 17 • Token prices continue declining by further 20% • ETH @ $224.12 • ICOs “only” raise $1.1B • ICOs raise: $650M • Tezos raises $230MCrossing the $10B yearly mark MAY 18 • ETH @ $678.80 • U.S. SEC publishes the report stating DAO tokens were securities Summer Slump • EOS raises $900M in one month AUG 17 • Large (>$100M) deals out of Israel and Asia • ETH @ $301.61 • ICOs raise $2B • ICOs raise: $330M • Bitcoin Cash mined its first block; Top-Notch Institutional VCs Join The Game JUN 18 • ETH @ $451.88 SEP 17Rise of the SAFT• ICOs raise $585M • ETH @ $293.05 • Andreessen Horowitz closed a $300m dedicated crypto fund • ICOs raise $775M • Filecoin closes $200M SAFT roundJUL 18ETF Hopes • China announces an ICOs ban• ETH @ $433.61 All Hands on Deck with Devcon 3 • ICOs raise $415M OCT 17• ETH @ $306.25• Release of the Augur dApp • ICOs raise $829MAUG 18ETF Disillusion • Polkadot raises $144.3M • ETH @ $279.18 Calm Before the Storm • ICOs taise $498M NOV 17 • SEC rejects multiple Bitcoin ETF applications due to risk of market manipilation • ETH @ $357.94 • ICOs raise $823M SEP 18Stamp of Approval from Endowment Funds • ETH @ $235.39 Billion Dollar Month DEC 17• ETH @ $640.21• ICOs raise $181M • ICOs raise $1.7B • Harvard, Stanford, MIT, Datrmouth, and University of North Carolina invest in at least • Blockstack raises $52M one specialist crypto fund 6 7

...but 58% of token sales failed to raise capital, 2018 YEAR-TO-DATE disappeared, or refunded participants Breakdown of token sale status: Token Sale Descriptive Statistics: • Time Period: January 1st - September 31st • 414 (42%) “Successful” token sales: token sales with public data on • USD Raised: $12.3 billion proceeds • Nr of Token Sales: 981 • 567 (58%) “Failures”: token sales that either reported a full refund of token sale pro- ceeds to participants, or failed to disclose any data on the completion of fundraising at 1 • Nr of “Completed” Token Sales: 414 2 • Nr of “Failed” Token Sales: 567 all. • Average Capital Raised: $29.7M • Median Capital Raised: $12.9M Besides the significant increase of capital raised in 2018, the number of token sales that have taken place by the end of September (981) is already ahead of the 900 token sales Token sales in the first nine months of that occured in all of 2017. Unfortunately, to the most port, it is a surge in low quality projects that accounted for the increase, leading to a higher percentage of “failed” 2018 amounted to over double the capi- token sales - rising from 48% in 2017 to 58% in 2018. tal raised in 2017 - and there’s still three Ten Token Sales Raised 47% of All Capital months to go... Token sales (ICOs) raised $5.6 billion in 2017. The momentum of the 2017 “ICO hype” acce- A closer look at the largest token sales shows that over 47% of all capital raised came lerated into 2018 with more than $7 billion raised in the first quarter alone. The following from the 10 largest token sales (1% of the total number of active token sales). Moreover, two quarters, however, saw a drastic downfall of capital raised, bringing the total for the close to 40% of all capital came from two token sales: Telegram and EOS. first nine months of 2018 to $12.3 billion. USD Raised vs. Month Project Sector Raise EOS Infrastructure $3,165,000,000 $ 2,566 Telegram Open Network Infrastructure $1,700,000,000 $ 2,422 $ 2,060 Bankera Finance $150,000,000 $ 1,890 t0 Trading $134,000,000 $ 1,655 Basis Infrastructure $125,000,000 Orbs Infrastructure $118,000,000 $ 585 $ 415 $ 498 PumaPay Finance $117,019,041 $ 181 Envion Finance $100,012,279 Hedera Hasgraph Infrastructure $100,000,000 un 18 ul 18 ug 18 ep 18 Flashmoni Finance $72,000,000 J J A S Source: Token Data Source: Token Data 2 1 This includes token sales that claim success, but have not published information about funds raised and/or Token sales with publicly available information about capital raised. token sale contract. 8 9

...but 58% of token sales failed to raise capital, 2018 YEAR-TO-DATE disappeared, or refunded participants Breakdown of token sale status: Token Sale Descriptive Statistics: • Time Period: January 1st - September 31st• 414 (42%) “Successful” token sales: token sales with public data on • USD Raised: $12.3 billionproceeds • Nr of Token Sales: 981• 567 (58%) “Failures”: token sales that either reported a full refund of token sale pro- ceeds to participants, or failed to disclose any data on the completion of fundraising at • Nr of “Completed” Token Sales1: 414 2 • Nr of “Failed” Token Sales: 567all. • Average Capital Raised: $29.7M • Median Capital Raised: $12.9MBesides the significant increase of capital raised in 2018, the number of token sales that have taken place by the end of September (981) is already ahead of the 900 token sales Token sales in the first nine months of that occured in all of 2017. Unfortunately, to the most port, it is a surge in low quality projects that accounted for the increase, leading to a higher percentage of “failed” 2018 amounted to over double the capi-token sales - rising from 48% in 2017 to 58% in 2018. tal raised in 2017 - and there’s still three Ten Token Sales Raised 47% of All Capital months to go... Token sales (ICOs) raised $5.6 billion in 2017. The momentum of the 2017 “ICO hype” acce-A closer look at the largest token sales shows that over 47% of all capital raised came lerated into 2018 with more than $7 billion raised in the first quarter alone. The following from the 10 largest token sales (1% of the total number of active token sales). Moreover, two quarters, however, saw a drastic downfall of capital raised, bringing the total for the close to 40% of all capital came from two token sales: Telegram and EOS. first nine months of 2018 to $12.3 billion. USD Raised vs. MonthProject Sector Raise EOS Infrastructure $3,165,000,000 $ 2,566 Telegram Open Network Infrastructure $1,700,000,000 $ 2,422 $ 2,060 Bankera Finance $150,000,000 $ 1,890 t0 Trading $134,000,000 $ 1,655 Basis Infrastructure $125,000,000 Orbs Infrastructure $118,000,000 $ 585 $ 415 $ 498 PumaPay Finance $117,019,041 $ 181 Envion Finance $100,012,279 Hedera Hasgraph Infrastructure $100,000,000 un 18ul 18ug 18ep 18Flashmoni Finance $72,000,000 JJAS Source: Token DataSource: Token Data 2 1 This includes token sales that claim success, but have not published information about funds raised and/or Token sales with publicly available information about capital raised.token sale contract. 8 9

The Telegram and EOS token sales have been the subject of much controversy. The team behind the EOS blockchain (Block One) ran a token sale that started in June 2017 and concluded in June 2018, raising $1 billion in 2017 and more than $3 billion over 5 months of 2018. The team behind Telegram raised $1.7 billion in two private rounds and canceled their initial plans for a public token sale in Q1 2018. Token Returns and Model Portfolio The following graph maps the performance of ICO-issued tokens with sufficient historical data against investments in ETH and BTC. Since January 2017 inception, a portfolio Only 1/3 of invested in ICO-issued tokens would have, on average, outperformed a portfolio holding only ETH or BTC in dollar terms as of Q2 2018. Compared to 2017 year end and Q1 2018 performance, however, the relative outperformance of ICOs has become marginal as a result of the market correction. all 319 tokens actually 4000 outperformed 3000 2000 both ETH 1000 and BTC 0 1/1/2017 4/1/2017 7/1/2017 10/1/2017 1/1/2018 4/1/2018 BTC ETH Tokens USD invested Crypto Returns Analysis from their Listing Time Source: Token Data We analyzed close to 2,000 cryptocurrencies from their public market perspective, looking *Dataset consists of all ICOs that have raised over $1m since 2017 and have publicly available at their returns behaviour from the first day of being listed on crypto exchanges, and issuance and trading data (319 tokens in total). aggregating tokens into cohorts based on their listing year (Graph 1) and highest market **Returns are calculated assuming an investment of $1 in each ICO, and $1 in ETH and BTC at capitalisation ever achieved by the token (Graph 2). the same time as each ICO. No rebalancing or weighting has been applied. 10 11

The Telegram and EOS token sales have been the subject of much controversy. The team behind the EOS blockchain (Block One) ran a token sale that started in June 2017 and concluded in June 2018, raising $1 billion in 2017 and more than $3 billion over 5 months of 2018. The team behind Telegram raised $1.7 billion in two private rounds and canceled their initial plans for a public token sale in Q1 2018. Token Returns and Model Portfolio The following graph maps the performance of ICO-issued tokens with sufficient historical data against investments in ETH and BTC. Since January 2017 inception, a portfolio Only 1/3 of invested in ICO-issued tokens would have, on average, outperformed a portfolio holding only ETH or BTC in dollar terms as of Q2 2018. Compared to 2017 year end and Q1 2018 performance, however, the relative outperformance of ICOs has become marginal as a result of the market correction. all 319 tokens actually 4000 outperformed 3000 2000 both ETH 1000 and BTC 0 1/1/20174/1/20177/1/201710/1/20171/1/20184/1/2018 BTCETHTokensUSD investedCrypto Returns Analysis from their Listing Time Source: Token Data We analyzed close to 2,000 cryptocurrencies from their public market perspective, looking *Dataset consists of all ICOs that have raised over $1m since 2017 and have publicly available at their returns behaviour from the first day of being listed on crypto exchanges, and issuance and trading data (319 tokens in total).aggregating tokens into cohorts based on their listing year (Graph 1) and highest market **Returns are calculated assuming an investment of $1 in each ICO, and $1 in ETH and BTC at capitalisation ever achieved by the token (Graph 2). the same time as each ICO. No rebalancing or weighting has been applied. 10 11

Graph 1 Graph 2 The return behaviour across listing yests differs drastically for various Narrowing down the focus on tokens that remained listed for at least 250 reasons, including current public sentiment, media attention, and overall days, the average price performance of tokens listed in 2018 appears to be information availability. Compared with Bitcoin and Litecoin as the oldest the lowest. In a similar fashion, year 2011 (Litecoin) ended up in negative coins available, only year that managed to sustain its return close to those during it’s first 250 days. Tokens listed in 2017 achieved the highest average was 2016. return of over 10x, followed closely by year 2010 (Bitcoin), and average returns in 2012, 2013, 2015, and 2016. Tokens listed in 2014 resulted in null returns in their first 250 days from listing. 5 10 2013 2010 2017 4 1 10 10 2012 2011 2016 3 2010 2015 10 r r le le p p i i t t l l u u 2014 2 0 M 10 2016 2013 M 10 n n r r u 2015 u et 2012 et R R 1 10 2017 2011 2014 0 -1 10 10 2018 -1 10 2018 0 500 1000 1500 2000 2500 3000 0 50 100 150 200 250 Days since listing Days since listing 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Fabric Ventures analysis Source: Fabric Ventures analysis 12 13

Graph 1 Graph 2 The return behaviour across listing yests differs drastically for various Narrowing down the focus on tokens that remained listed for at least 250 reasons, including current public sentiment, media attention, and overall days, the average price performance of tokens listed in 2018 appears to be information availability. Compared with Bitcoin and Litecoin as the oldest the lowest. In a similar fashion, year 2011 (Litecoin) ended up in negative coins available, only year that managed to sustain its return close to those during it’s first 250 days. Tokens listed in 2017 achieved the highest average was 2016. return of over 10x, followed closely by year 2010 (Bitcoin), and average returns in 2012, 2013, 2015, and 2016. Tokens listed in 2014 resulted in null returns in their first 250 days from listing. 5 10 2013 2010 2017 4 1 10 10 2012 2011 2016 3 2010 2015 10 r r le le p p i i t t l l u u 2014 2 0 M1020162013 M 10 n n r r u2015 u et2012 et R R 1 102017 2011 2014 0 -1 10 10 2018 -1 10 2018 050010001500200025003000 0 50 100 150 200 250 Days since listing Days since listing 20102011201220132014201520162017201820102011 2012 2013 2014 2015 2016 2017 2018 Source: Fabric Ventures analysisSource: Fabric Ventures analysis 12 13

PICKS AND SHOVELS Timing to Match Tech Stack Development first: The Majority of Funding Goes into Infrastructure Projects 2028 ed alis * * tr ations en * ec Applic D t Sovereign Identity * 19,9 % Other 40,4 % Infrastructure Data Exchanges * * a Managemen at Data Oracles D 10,2 % Trading e Developer Tools * oscoin * ur t uc Scalability * 14,1 % 15,4 % tr as r Finance Consumer/DApp f al In Privacy * * Source: Token Data echnic T Governance In 2017, nearly 32% of capital raised in the 10 largest token sales went to decentralised infrastructure projects. It is reassuring to see there continues to be a large influx of capital to “picks and shovels”, as more investors focus on Exchanges developer tools and networks forming the core infrastructure layer of the Web e ur t * 3.0 stack. In the first nine months of 2018, 5 of the 10 largest token sales were uc Custody tr held by infrastructure projects. as r f The infrastructure segment stands out also when looking at the overall Institutional Tagomi* number of completed token sales - taking up 40.4% of all ICOs. ading In r T * Compliance Zeppelin TPL ols oc t o UnderlyingPr * Fabric Ventures investments 2008 Source: Fabric Ventures analysis 14 15

PICKS AND SHOVELS Timing to Match Tech Stack Development first: The Majority of Funding Goes into Infrastructure Projects 2028 ed alis * * tr ations en * ec Applic D t Sovereign Identity * 19,9 % Other40,4 % Infrastructure Data Exchanges * * a Managemen at Data Oracles D 10,2 % Trading e Developer Tools * oscoin * ur t uc Scalability * 14,1 %15,4 % tr as r FinanceConsumer/DApp f al In Privacy * * Source: Token Data echnic T Governance In 2017, nearly 32% of capital raised in the 10 largest token sales went to decentralised infrastructure projects. It is reassuring to see there continues to be a large influx of capital to “picks and shovels”, as more investors focus on Exchanges developer tools and networks forming the core infrastructure layer of the Web e ur t * 3.0 stack. In the first nine months of 2018, 5 of the 10 largest token sales were ucCustody tr held by infrastructure projects.as r f The infrastructure segment stands out also when looking at the overall Institutional Tagomi* number of completed token sales - taking up 40.4% of all ICOs. ading In r T * Compliance Zeppelin TPL ols oc t o UnderlyingPr * Fabric Ventures investments 2008 Source: Fabric Ventures analysis 14 15

Geographical Distribution of TOKEN SALES Russia Canada Estonia $235,645,439 $178,179,428 $150,091,116 UK Lithuania $489,933,552 $271,306,113 Germany $110,487,179 China USA Switzerland $491,401,737 $1,600,497,754 $555,638,503 Korea Israel $382,019,041 $245,862,871 Gibraltar $157,254,525 Hong Kong $272,136,161 Singapore $657,629,032 From a $ 4,000,000,000 Overview of capital raised in token $ 3,000,000,000 sales globally Legal Domicile (based on $ 2,000,000,000 3 legal domicile) Perspective $ 1,000,000,000 2017 $ 0 2018 Source: Token Data Europe Asia Americas 3 The EOS token sale has been excluded due to the outlier nature of its size. The EOS token sale had its legal do- micile in the Cayman Islands. 16 17

Geographical Distribution of TOKEN SALES Russia Canada Estonia $235,645,439 $178,179,428 $150,091,116 UK Lithuania $489,933,552$271,306,113 Germany $110,487,179 China USASwitzerland $491,401,737 $1,600,497,754$555,638,503 Korea Israel $382,019,041 $245,862,871 Gibraltar $157,254,525 Hong Kong $272,136,161 Singapore $657,629,032 From a $ 4,000,000,000 Overview of capital raised in token $ 3,000,000,000 sales globally Legal Domicile (based on $ 2,000,000,000 3 legal domicile) Perspective $ 1,000,000,000 2017 $ 0 2018 Source: Token Data Europe Asia Americas 3 The EOS token sale has been excluded due to the outlier nature of its size. The EOS token sale had its legal do- micile in the Cayman Islands. 16 17

Shift to a More Crypto-Friendly Regulation A closer look at some of the most popular emerging domiciliations - and actions taken in respect to regulation of crypto assets. HONG KONG ZUG, SWITZERLAND Action: Multiple warnings have been issued hinting that tokens may Action: Became a “crypto nation” by announcing a set of positive be subject to the securities law of Hong Kong. No clear guidelines have guidelines, differentiating between payment, utility, and asset been published so far. tokens. ICO Approach: Allowed; cautious regulation ICO Approach: Allowed; methodical and forward-thinking approach Capital raised in ICOs in 2018: $272M Capital raised in ICOs in 2018: $556M SINGAPORE UNITED KINGDOM Action: Singapore government stated that cryptocurrencies are “capital Action: Launched a special “crypto assets task force” alongside the Bank market products” and may be subject to regulation under the securities of England & the FCA, striving to make the country the “global centre” for law. ICO issuers who structure security tokens must obtain a licence. crypto projects. ICO Approach: Allowed; heavy regulation ICO Approach: Not yet regulated; approaches being evaluated Capital raised in ICOs in 2018: $658M Capital raised in ICOs in 2018: $490M MALTA FRANCE Action: “Blockchain Island” passed three cryptocurrency/blockchain bills Action: France pledged not to “miss out on the blockchain revolution” and in June 2018 and became the first country to approve a full framework for has launched the “PACTE” regulatory project. The new legal scheme - if distributed ledger technology regulation, that are due to come into effect approved by the parliament - will introduce legal definitions of Tokens and in Q4 2018. Malta’s transparent approach has attracted major exchanges ICOs, as well as a set of rules for securing the AMF’s “license” - certifying such as Binance, OKex, ZB.com, and Bitbay. transparency and diligence towards investors. ICO Approach: Allowed; transparent and forward-thinking regulation ICO Approach: Not yet regulated; new legislation in development Capital raised in ICOs in 2018: £105M Capital raised in ICOs in 2018: $63M GIBRALTAR LITHUANIA Action: Government launched DLT regulatory framework in January 2018, Action: Lithuania issues a comprehensive set of “ICO Guidelines” covering with plans to set up a legal framework for ICOs and be the first country to regulation, taxation, accounting, and Anti-Money Laundering/ Combating offer proper regulatory oversight for token sales. the Financing of Terrorism (AML/CFT). The new regulation clearly ICO Approach: Allowed; transparent and forward-thinking regulation distinguishes between security and utility tokens, and provides guidelines Number of successful ICO projects to date: $157M on corresponding laws already in place. ICO Approach: Allowed; transparent and forward-thinking approach Capital raised in ICOs in 2018: $271M 18 19

Shift to a More Crypto-Friendly Regulation A closer look at some of the most popular emerging domiciliations - and actions taken in respect to regulation of crypto assets. HONG KONG ZUG, SWITZERLAND Action: Multiple warnings have been issued hinting that tokens may Action: Became a “crypto nation” by announcing a set of positive be subject to the securities law of Hong Kong. No clear guidelines have guidelines, differentiating between payment, utility, and asset been published so far.tokens. ICO Approach: Allowed; cautious regulationICO Approach: Allowed; methodical and forward-thinking approach Capital raised in ICOs in 2018: $272MCapital raised in ICOs in 2018: $556M SINGAPORE UNITED KINGDOM Action: Singapore government stated that cryptocurrencies are “capital Action: Launched a special “crypto assets task force” alongside the Bank market products” and may be subject to regulation under the securities of England & the FCA, striving to make the country the “global centre” for law. ICO issuers who structure security tokens must obtain a licence. crypto projects. ICO Approach: Allowed; heavy regulationICO Approach: Not yet regulated; approaches being evaluated Capital raised in ICOs in 2018: $658MCapital raised in ICOs in 2018: $490M MALTA FRANCE Action: “Blockchain Island” passed three cryptocurrency/blockchain bills Action: France pledged not to “miss out on the blockchain revolution” and in June 2018 and became the first country to approve a full framework for has launched the “PACTE” regulatory project. The new legal scheme - if distributed ledger technology regulation, that are due to come into effect approved by the parliament - will introduce legal definitions of Tokens and in Q4 2018. Malta’s transparent approach has attracted major exchanges ICOs, as well as a set of rules for securing the AMF’s “license” - certifying such as Binance, OKex, ZB.com, and Bitbay. transparency and diligence towards investors. ICO Approach: Allowed; transparent and forward-thinking regulationICO Approach: Not yet regulated; new legislation in development Capital raised in ICOs in 2018: £105MCapital raised in ICOs in 2018: $63M GIBRALTAR LITHUANIA Action: Government launched DLT regulatory framework in January 2018, Action: Lithuania issues a comprehensive set of “ICO Guidelines” covering with plans to set up a legal framework for ICOs and be the first country to regulation, taxation, accounting, and Anti-Money Laundering/ Combating offer proper regulatory oversight for token sales.the Financing of Terrorism (AML/CFT). The new regulation clearly ICO Approach: Allowed; transparent and forward-thinking regulationdistinguishes between security and utility tokens, and provides guidelines Number of successful ICO projects to date: $157Mon corresponding laws already in place. ICO Approach: Allowed; transparent and forward-thinking approach Capital raised in ICOs in 2018: $271M 18 19

Strong Project Formation in Europe Emergence of Four Core Hubs While an increasing number of countries strive to attract crypto projects by creating a regulatory ‘sandbox’, the majority of founding teams and developer talent remain Europe- based. London, Zug, Berlin, and Tallinn are just a handful of cities leading Europe with robust blockchain talent. It comes as no surprise that these cities have historically been hubs for attracting top fintech startups. LONDON Projects: Colony, Ntropy, Flying Carpet, Verisart, Everledger, Provenance, Electron, Blockchain.com, Elliptic Legal Domicile vs Founders’ Domicile People: Vinay Gupta, Pamir Gelenbe, Richard Muirhead, Ben Livshits, Jack du Rose, Stephen Tual, Jeremy Millar, Azeem Azhar, Vlad Zamfir Funds: Fabric Ventures, Libertus Capital, Outlier Ventures, KR1 $4.500,000,000 Hubs: London Blockchain Labs, Consensys (opening soon), Fabric House (opening soon) Associations: Consensys, Coinsilium Events & media: On Deck, CogX, Coinscrum, Christie’s Art + Tech Summit, Blockchain Live $4.000,000,000 $3.500,000,000 SAN FRANCISCO Projects: Ripple, Coinbase, 0x, Civic, Dfinity, Stellar, Litecoin, Orchid, Keep Network, Kraken $3.000,000,000 People: Naval Ravikant, Olaf Carlson-Wee, Brian Armstrong, Fred Ehrsam, Matt Huang, Kathleen Breitman, Juan Benet, Balaji Srinivasan, Jesse Powell, Stefan Thomas, Steven Waterhouse Funds: Metastable, a16z crypto, Polychain, 1Confirmation, Blockchain Capital, Pantera Capital, Paradigm $2.500,000,000 Hubs: Node Associations: Blockchain at Berkeley, Events & media: CESC, ETH San Francisco, TechCrunch Disrupt, Global Blockchain Forum $2.000,000,000 $1.500,000,000 NEW YORK Projects: Blockstack, Basis, R3, LO3’s Exergy, Messari $1.000,000,000 People: Albert Wenger, Barry Silbert, Joseph Lubin, Laura Shin, Chris Burniske, Jake Brukhman, Amber Baldet, Mike Novogratz, Karl Floersch, Ryan Selkis, Erik Voorhees Europe Asia Americas Funds: Digital Currency Group, Boost VC, Union Square Ventures, Galaxy Digital, Coinfund Hubs: Crypto NYC, NYC Blockchain Resource Center Legal Domicile Founders’ Domicile Associations: Coindesk, Cointelegraph, Laura Shin’s Unchained and Unconfirmed Events & media: Blockchain Week NYC, Ethereal Summit, F0256, Consensus, Token Summit, The Block Source: Token Data BERLIN Projects: Gnosis, Ocean Protocol, Parity Technologies, Golem, Slock.it, Raiden, Lisk, Cosmos, Centrifuge, Energy Web Foundation People: Carl Bennetts, Jutta Steiner, Gavin Wood, Trent McConaghy, Maria Paula Fernandez, Stefan George, Brian Fabian Crain Funds: BlueYard, Neufund, 1kx Hubs: FullNode, Factory Berlin Associations: Web 3 Foundation, Grid Singularity, Ethereum Foundation Events & media: Web 3 Summit, EthBerlin, Dezentral, Blockstack Berlin, Blueyard events, Tech Open Air, Epicenter, Zero Knowledge Podcast 20 21

Strong Project Formation in Europe Emergence of Four Core Hubs While an increasing number of countries strive to attract crypto projects by creating a regulatory ‘sandbox’, the majority of founding teams and developer talent remain Europe- based. London, Zug, Berlin, and Tallinn are just a handful of cities leading Europe with robust blockchain talent. It comes as no surprise that these cities have historically been hubs for attracting top fintech startups. LONDON Projects: Colony, Ntropy, Flying Carpet, Verisart, Everledger, Provenance, Electron, Blockchain.com, Elliptic Legal Domicile vs Founders’ DomicilePeople: Vinay Gupta, Pamir Gelenbe, Richard Muirhead, Ben Livshits, Jack du Rose, Stephen Tual, Jeremy Millar, Azeem Azhar, Vlad Zamfir Funds: Fabric Ventures, Libertus Capital, Outlier Ventures, KR1 $4.500,000,000 Hubs: London Blockchain Labs, Consensys (opening soon), Fabric House (opening soon) Associations: Consensys, Coinsilium Events & media: On Deck, CogX, Coinscrum, Christie’s Art + Tech Summit, Blockchain Live $4.000,000,000 $3.500,000,000 SAN FRANCISCO Projects: Ripple, Coinbase, 0x, Civic, Dfinity, Stellar, Litecoin, Orchid, Keep Network, Kraken $3.000,000,000 People: Naval Ravikant, Olaf Carlson-Wee, Brian Armstrong, Fred Ehrsam, Matt Huang, Kathleen Breitman, Juan Benet, Balaji Srinivasan, Jesse Powell, Stefan Thomas, Steven Waterhouse Funds: Metastable, a16z crypto, Polychain, 1Confirmation, Blockchain Capital, Pantera Capital, Paradigm $2.500,000,000 Hubs: Node Associations: Blockchain at Berkeley, Events & media: CESC, ETH San Francisco, TechCrunch Disrupt, Global Blockchain Forum $2.000,000,000 $1.500,000,000 NEW YORK Projects: Blockstack, Basis, R3, LO3’s Exergy, Messari $1.000,000,000 People: Albert Wenger, Barry Silbert, Joseph Lubin, Laura Shin, Chris Burniske, Jake Brukhman, Amber Baldet, Mike Novogratz, Karl Floersch, Ryan Selkis, Erik Voorhees EuropeAsiaAmericas Funds: Digital Currency Group, Boost VC, Union Square Ventures, Galaxy Digital, Coinfund Hubs: Crypto NYC, NYC Blockchain Resource Center Legal DomicileFounders’ DomicileAssociations: Coindesk, Cointelegraph, Laura Shin’s Unchained and Unconfirmed Events & media: Blockchain Week NYC, Ethereal Summit, F0256, Consensus, Token Summit, The Block Source: Token Data BERLIN Projects: Gnosis, Ocean Protocol, Parity Technologies, Golem, Slock.it, Raiden, Lisk, Cosmos, Centrifuge, Energy Web Foundation People: Carl Bennetts, Jutta Steiner, Gavin Wood, Trent McConaghy, Maria Paula Fernandez, Stefan George, Brian Fabian Crain Funds: BlueYard, Neufund, 1kx Hubs: FullNode, Factory Berlin Associations: Web 3 Foundation, Grid Singularity, Ethereum Foundation Events & media: Web 3 Summit, EthBerlin, Dezentral, Blockstack Berlin, Blueyard events, Tech Open Air, Epicenter, Zero Knowledge Podcast 20 21

Fundraising Trends VC funding The dominance of private rounds and pre-sales A continuous growth in Venture Capital funding into blockchain projects over the past 7 years The $1.7 billion Telegram token sale is an example of one of the biggest trends that took 1.800 4 place in 2018: the dominance of private rounds and presales . 1.600 Private rounds have the following characteristics: 1.400 • Timing: the round takes place before the actual (public) token sale 1.200 • Size: the contribution is large but with a big range (from a few thousand to tens of 1000 millions of dollars) • Accredited Investors Only/KYC requirements: KYC and attestation of investor status 800 is mandatory 600 • Discounts/Bonus: token buyers usually receive a discounted exchange rate 400 • Vesting/Lock-Up: tokens are released in tranches over an agreed time period 200 0 Although private rounds aren’t new, the data for 2018 shows their significant role for the 2012 2013 2014 2015 2016 2017 2018 average token sale: Numbers of Rounds Round Size ($m) Source: Coindesk • 85% of all Token Sales used private rounds. 10 Biggest Venture Rounds • Projects that utilise private rounds raise two thirds of their capital in the private Robinhood - 2018 > $350m round. DST Global, Sequoia Capital, Kleiner Perkins, ICONIQ Capital, CapitalG • 34% is the average discount or “bonus” that a private round investor received for par- 21 Inc - 2015 > $116m ticipating Andreessen Horowitz, Data Collective, Khosla Ventures, RRE Ventures, Yuan Capital, Qualcomm Ventures, Pantera Capital, Jeff Skoll Group, Founders Fund, and others Circle - 2018 > $110m 5 Accel, General Catalyst, IDG Capital, Breyer Capital, Bitmain, Pantera Capital, BlockChain Capital, DCG, There are a number of drivers behind the shift towards private rounds . Tusk Ventures Coinbase - 2017 > $108m • Regulation: some token sales sell tokens exclusively to accredited investors because of Institutional Venture Partners, Battery Ventures, Draper Associates, Greylock Partners, Section 32, Spark Capital, Tusk Ventures, Kindred Ventyres, Balyasny Asset Management, Expanding Capital, Shanti Bergel pending securities regulation. R3 - 2017 > $107m • Focus on building the product: more and more projects strive to hit critical develop- Bank of America Merrill Lynch, HSBC, Intel, SBI Group, Temasek Holdings, Banco Bradesco, Barclays PLC, ment milestones and test their products prior to a public sale. ING Group, Itau Unibanco, Natixis, UBC, Wells Fargo, and others PINTEC - 2018 > $103m • Institutional and Venture Capital: projects are increasingly keen on attacting VC Zhong Capital Fund, SINA Corporation, Shunwei Capital, Mandra Capital, STI Financial Group funding from the right partners - both to secure stronger reputation, and use the opera- Coinbase - 2015 > $75m tional and streategic support from specialised funds. DFJ, Union Square Ventures, New York Stock Exchange, Vayner/ RSE, Valor Capital Group, USAA, Reinventure Group, BBVA, DoCoMo, Tim Draper, Ribbit Capital, Andreessen Horowitz, Vikram Pandit, • Cryptocurrency Price Volatility: the volatility in cryptocurrency prices leads to a proj- Tom Glocer, Kindred Ventures, Fueled, Propel Venture Partners ect hitting its fiat-denominated fundraising milestones before the public sale is sched- Ledger - 2018 > $75m Draper Esprit, Draper Dragon, Draper Associates, DCG, Korelya Capital, XAnge, MAIF, GDTRE, FirstMark, uled to start. Cathay Innovation, Boost VC, CapHorn Investments Paxos - 2018 > $65m RRE Ventures, Liberty City Ventures, Jay Jordan 4 Out of practicality we will use the term “private rounds” for both the private round and pre-sale phase of a DFINITY - 2018 > $61m token sale. The main distinction between a private round and pre-sale is that the private round often happens before a token sale has been announced. Andreessen Horowitz, Scalar Capital, Polychain, Multicoin Capital, KR1, Amino Capital, Aspect Ventures, Eterna Capital, SV Angel, Village Global 5 https://tokeneconomy.co/%EF%B8%8F-token-economy-34-rip-ico-c893d45d3fd6 Source: Coindesk 22 23

Fundraising Trends VC funding The dominance of private rounds and pre-sales A continuous growth in Venture Capital funding into blockchain projects over the past 7 years The $1.7 billion Telegram token sale is an example of one of the biggest trends that took 1.800 4 place in 2018: the dominance of private rounds and presales . 1.600 Private rounds have the following characteristics:1.400 • Timing: the round takes place before the actual (public) token sale1.200 • Size: the contribution is large but with a big range (from a few thousand to tens of 1000 millions of dollars) • Accredited Investors Only/KYC requirements: KYC and attestation of investor status 800 is mandatory 600 • Discounts/Bonus: token buyers usually receive a discounted exchange rate 400 • Vesting/Lock-Up: tokens are released in tranches over an agreed time period200 0 Although private rounds aren’t new, the data for 2018 shows their significant role for the 20122013201420152016 2017 2018 average token sale: Numbers of Rounds Round Size ($m) Source: Coindesk • 85% of all Token Sales used private rounds. 10 Biggest Venture Rounds • Projects that utilise private rounds raise two thirds of their capital in the private Robinhood - 2018 > $350m round. DST Global, Sequoia Capital, Kleiner Perkins, ICONIQ Capital, CapitalG • 34% is the average discount or “bonus” that a private round investor received for par-21 Inc - 2015 > $116m ticipating Andreessen Horowitz, Data Collective, Khosla Ventures, RRE Ventures, Yuan Capital, Qualcomm Ventures, Pantera Capital, Jeff Skoll Group, Founders Fund, and others Circle - 2018 > $110m 5 Accel, General Catalyst, IDG Capital, Breyer Capital, Bitmain, Pantera Capital, BlockChain Capital, DCG, There are a number of drivers behind the shift towards private rounds .Tusk Ventures Coinbase - 2017 > $108m • Regulation: some token sales sell tokens exclusively to accredited investors because of Institutional Venture Partners, Battery Ventures, Draper Associates, Greylock Partners, Section 32, Spark Capital, Tusk Ventures, Kindred Ventyres, Balyasny Asset Management, Expanding Capital, Shanti Bergel pending securities regulation.R3 - 2017 > $107m • Focus on building the product: more and more projects strive to hit critical develop-Bank of America Merrill Lynch, HSBC, Intel, SBI Group, Temasek Holdings, Banco Bradesco, Barclays PLC, ment milestones and test their products prior to a public sale.ING Group, Itau Unibanco, Natixis, UBC, Wells Fargo, and others PINTEC - 2018 > $103m • Institutional and Venture Capital: projects are increasingly keen on attacting VC Zhong Capital Fund, SINA Corporation, Shunwei Capital, Mandra Capital, STI Financial Group funding from the right partners - both to secure stronger reputation, and use the opera-Coinbase - 2015 > $75m tional and streategic support from specialised funds. DFJ, Union Square Ventures, New York Stock Exchange, Vayner/ RSE, Valor Capital Group, USAA, Reinventure Group, BBVA, DoCoMo, Tim Draper, Ribbit Capital, Andreessen Horowitz, Vikram Pandit, • Cryptocurrency Price Volatility: the volatility in cryptocurrency prices leads to a proj-Tom Glocer, Kindred Ventures, Fueled, Propel Venture Partners ect hitting its fiat-denominated fundraising milestones before the public sale is sched-Ledger - 2018 > $75m Draper Esprit, Draper Dragon, Draper Associates, DCG, Korelya Capital, XAnge, MAIF, GDTRE, FirstMark, uled to start. Cathay Innovation, Boost VC, CapHorn Investments Paxos - 2018 > $65m RRE Ventures, Liberty City Ventures, Jay Jordan 4 Out of practicality we will use the term “private rounds” for both the private round and pre-sale phase of a DFINITY - 2018> $61m token sale. The main distinction between a private round and pre-sale is that the private round often happens before a token sale has been announced.Andreessen Horowitz, Scalar Capital, Polychain, Multicoin Capital, KR1, Amino Capital, Aspect Ventures, Eterna Capital, SV Angel, Village Global 5 https://tokeneconomy.co/%EF%B8%8F-token-economy-34-rip-ico-c893d45d3fd6Source: Coindesk 22 23

Airdrops as Extras Another token distribution mechanism that has gained popularity in token projects is TokenAnalyst looked at 20 popular ICOs from 2017 and found that their token Airdrop - a “free” distribution of tokens to a network of select wallets. The economic distributions across wallets were fairly centralised. On average, the top 10 wallets rationale behind the airdrop is that it increases the user base and populates the hold 60% of the tokens (50% market cap weighted average). Those wallets are network prior to launch. The data for 2018 shows that a third of all completed sales mostly owned by the project teams, exchanges, and pre-sale investors. This announced airdrops in addition to their token sale. percentage is high relative to Bitcoin’s 6% and Ethereum’s 11% ownership across top 10 wallet addresses. A handful of projects even used airdrops as a replacement for a public sale after they raised a large private round. The long term efficacy, as well as the regulatory position of airdrops is still uncertain - but they remain a strong marketing tool for generating communities around a project. BITCOIN TOP 10 Holders Width of Distribution 11- 100 Biggest Holders Token centralisation remained a primary topic of focus from a risk and valuation ETHEREUM Rest of Users perspective. Most Centralised Biggest Tail of Distribution 0,00 % 25.00% 50.00% 75.00% 100.00% Gnosis Icon Source: Fabric Ventures analysis Airswap OmiseGo MKR Numeraire Civic REQ Status Quantsamp Github activity analysis MANA EOS Tron ZRX Time to fundraise from Github creation Aragon Golem REQ VEChain Looking at time interval between a project creating its Github repository and ZRX Aragon launching its (public) fundraising, we can see that more than half of analysed Bancor Digix Dao projects (57%) created the code repository just 3 months or less before token Quantstamp Bancor sale. Golem Civic FunFair FunFair OmiseGo Status 60% Total ICOs % Numeraire MANA 57% Digix Dao Airswap EOS Tron 40% Icon MKR VEChain Gnosis 28% 20% 0,00 % 20.00% 40.00% 60.00% 80.00% 100.00% 0,00 % 20.00% 40.00% 60.00% 80.00% 100.00% Percentage of tokens held Percentage of tokens held 9% 7% 0% TOP 10 Holders 11- 100 Biggest Holders Rest of Users Over 12 months 6-12 months 3-6 months Less than 3 months Source: TokenAnalyst analysis of 20 popular token projects as of May 2018 Source: Fabric Ventures analysis 24 25

Airdrops as Extras Another token distribution mechanism that has gained popularity in token projects is TokenAnalyst looked at 20 popular ICOs from 2017 and found that their token Airdrop - a “free” distribution of tokens to a network of select wallets. The economic distributions across wallets were fairly centralised. On average, the top 10 wallets rationale behind the airdrop is that it increases the user base and populates the hold 60% of the tokens (50% market cap weighted average). Those wallets are network prior to launch. The data for 2018 shows that a third of all completed sales mostly owned by the project teams, exchanges, and pre-sale investors. This announced airdrops in addition to their token sale.percentage is high relative to Bitcoin’s 6% and Ethereum’s 11% ownership across top 10 wallet addresses. A handful of projects even used airdrops as a replacement for a public sale after they raised a large private round. The long term efficacy, as well as the regulatory position of airdrops is still uncertain - but they remain a strong marketing tool for generating communities around a project. BITCOIN TOP 10 Holders Width of Distribution 11- 100 Biggest Holders Token centralisation remained a primary topic of focus from a risk and valuation ETHEREUMRest of Users perspective. Most CentralisedBiggest Tail of Distribution 0,00 % 25.00% 50.00% 75.00% 100.00% GnosisIcon Source: Fabric Ventures analysis AirswapOmiseGo MKRNumeraire CivicREQ StatusQuantsamp Github activity analysis MANAEOS TronZRX Time to fundraise from Github creation AragonGolem REQVEChain Looking at time interval between a project creating its Github repository and ZRXAragon launching its (public) fundraising, we can see that more than half of analysed BancorDigix Dao projects (57%) created the code repository just 3 months or less before token QuantstampBancor sale. GolemCivic FunFairFunFair OmiseGoStatus 60% Total ICOs % NumeraireMANA 57% Digix DaoAirswap EOSTron 40% IconMKR VEChainGnosis 28% 20% 0,00 %20.00%40.00%60.00%80.00%100.00%0,00 %20.00%40.00%60.00%80.00%100.00% Percentage of tokens heldPercentage of tokens held9%7% 0% TOP 10 Holders11- 100 Biggest HoldersRest of UsersOver 12 months6-12 months3-6 monthsLess than 3 months Source: TokenAnalyst analysis of 20 popular token projects as of May 2018Source: Fabric Ventures analysis 24 25

100% Successful ICOs 33% 60% 64% 74% Github commit activity Failed ICOs 75% BEFORE and AFTER 67% 50% fundraising start : 40% 36% 25% 26% Weekly ICO repository activity pre- and post- fundraising shows a clear increase in 0% the number of active repositories during the weeks leading up to the fundraising Over 12 months 6-12 months 3-6 months Less than date. For successful ICOs, code commits spiked typically between 2 - 4 weeks prior 3 months Source: Fabric Ventures analysis to the token sale date, suggesting many of these projects had a last minute push for Our analysis also shows, unsurprisingly, that the success of an ICO project is highly code finalisations prior to fundraising. For failed ICOs, in turn, the noticeable drop in dependent on the amount of time developers spend working on code - which is code commits over the fundraising period likely suggests a lack of funding and, as normally reflected in the Github repository activity. That is, the more mature the such, interest in the project. Failed projects with continued activity can be attributed Github project, the more likely it is to be successful when fundraising. 74% of projects to developers choosing to carry out the project despite insufficient funding. that created their repositories in 3 months or less before fundraising failed to raise money. Many of these projects did not have working code to show to investors, and failed initial investor due diligence. Code commits pre- and post- fundraising Along the same vein, ICO projects with less repository contributors have a drastically higher likelihood of failure. Of all analysed ICOs, 76% had 1- 3 contributors. This number raises to a staggering 89% viewed within the scope of failed ICOs. 60% Successful ICOs tend to have large communities of contributors s O C I l 40% a t o 60% t Failed ICO f o e g a Completed ICO t n 20% e s c O r C e I 40% P l a t o t f 0% o e g -5 0 5 10 a t n 20% e Number of weeks to fundraising start c r e P 0% Completed ICOs % Failed ICOs % 1 1-3 3-5 5-10 10-20 more than 20 Number of contributors Source: Fabric Ventures Github analysis of 140 ICOs (109 had <= 3 contributors, 31 had > 3 contributors) Source: Fabric Ventures analysis 26 27

100%Successful ICOs 33%60%64%74% Github commit activity Failed ICOs 75% BEFORE and AFTER 67% 50% fundraising start : 40%36% 25%26% Weekly ICO repository activity pre- and post- fundraising shows a clear increase in 0% the number of active repositories during the weeks leading up to the fundraising Over 12 months6-12 months3-6 monthsLess thandate. For successful ICOs, code commits spiked typically between 2 - 4 weeks prior 3 months Source: Fabric Ventures analysisto the token sale date, suggesting many of these projects had a last minute push for Our analysis also shows, unsurprisingly, that the success of an ICO project is highly code finalisations prior to fundraising. For failed ICOs, in turn, the noticeable drop in dependent on the amount of time developers spend working on code - which is code commits over the fundraising period likely suggests a lack of funding and, as normally reflected in the Github repository activity. That is, the more mature the such, interest in the project. Failed projects with continued activity can be attributed Github project, the more likely it is to be successful when fundraising. 74% of projects to developers choosing to carry out the project despite insufficient funding. that created their repositories in 3 months or less before fundraising failed to raise money. Many of these projects did not have working code to show to investors, and failed initial investor due diligence. Code commits pre- and post- fundraising Along the same vein, ICO projects with less repository contributors have a drastically higher likelihood of failure. Of all analysed ICOs, 76% had 1- 3 contributors. This number raises to a staggering 89% viewed within the scope of failed ICOs. 60% Successful ICOs tend to have large communities of contributors s O C I l 40% a t o 60% t Failed ICO f o e g a Completed ICO t n 20% e s c O r C e I40% P l a t o t f 0% o e g -5 0 5 10 a t n20% e Number of weeks to fundraising start c r e P 0% Completed ICOs % Failed ICOs % 11-3 3-55-1010-20more than 20 Number of contributors Source: Fabric Ventures Github analysis of 140 ICOs (109 had <= 3 contributors, 31 had > 3 contributors)Source: Fabric Ventures analysis 26 27

PART II: Fabric Ventures Investment Thesis 28 29

PART II: Fabric Ventures Investment Thesis 28 29

A Generational Platform Shift sets within certain commercial or governmental organisations may be tempting History them to master and personalise this technique to a degree hitherto unimagined. We We are at the start of a paradigm shift in software architecture: the wave of need organisational structures, data architectures, incentives and technologies that decentralised data networks. The movement we have seen build up over the past few neutralise this danger. Beyond eliminating the possibility that third parties behave years goes beyond Bitcoin and other crypto-assets, or even open source software and in an evil manner, the applications built upon these decentralised data networks will blockchains. Taking a broader view, it is the victory of peer-to-peer data networks based make possible a much more intimate bond of trust between each human individual on open standards, it reflects the power of properly aligned economic incentives, and it and the computing services delivered via an ever more complete envelope of devices. begins to harness the individual data centres in everyone’s pocket, desktop, car, living room and wrist. The movement is made possible by the proliferation of access to high A shift to more human-centric computing speed wireless broadband, rapidly maturing cloud-native software and a surge of recent While this trust layer has become a commonality between individuals and machine learning advancements. communities, it has proven difficult to create in human dealings with hardware devices and software applications. As the potential for software to serve us in Over the past few decades, technology architecture advancements have commoditised increasingly intimate and personalised ways expands, the imperative to deliver a operating systems and software packages by making them globally accessible via data trusted relationship increases. This becomes mandatory when one is sharing personal centres and cloud infrastructure. In this new wave, the data centre is being spread to genetic and physiological information, relying on algorithms to make split-second the very edge of the network and the data itself is being ‘open-sourced’, commoditised trade offs in moments of human peril or even when filtering the stream of news that into reusable trusted building blocks. Distributed users and machines interact with constitutes the factbase for our day to day decision-making. this data via a substrate of peer-to-peer networks. These peer-to-peer data networks become a ‘fabric’ that validates and curates information inputs without the need for In “Sapiens”, Yuval Harari also explores the idea that ultimately, on a historical third parties, while empowering individual users with their own data in a usable, secure scale, it is our ability to conceptualise abstract concepts through language and and scalable manner. share common beliefs that allowed strangers to cooperate and communities to rise. Technology now has the ability to abstract this trust, with the right incentives The Sovereign Individual encoded at the protocol level, allowing for cooperation and trade at a global scale. By empowering users with their own data, the decentralised data networks wave is breaking down the colossal data silos that have been the lifeblood, but increasingly the The forthcoming wave of decentralised data networks shifts us from zero-sum game untenable liability of today’s tech giants. Driven by central leaks such as Equifax’s data capitalism to the compounded benefits of collaborating communities. Perhaps a breach that cost 145m Americans their privacy or Facebook’s revelation that Cambridge good way to imagine such evolving coordination with minimal central control is the Analytica used personal data from 87m accounts and recently a further 50m logins technological feat that is the modern city. Distributed Autonomous Organisations were compromised, users are becoming weary of entrusting their personal data to built upon blockchain technology can achieve a balance of resilience & efficiency, these centralised silos. While Google quietly discarded its “Don’t be evil” motto1, here coordination & incentive on a whole range of new frontiers. The replacement of the at Fabric Ventures, we are much more interested in a new software architecture, where owner’s profit for a shared interest in the level of adoption of the network aligns 2 the motto becomes “Can’t be evil” : an architecture, in which all users control their data incentives across builders, service providers and users: the substitution of top down locally, therefore enabling the rise of the sovereign individual. As Yuval Harari posited at command and control power structures, with their high propensity for corruption, 3 a recent TED conference , totalitarianism is not the ugly force that is often depicted in with emergent structures. retrospect; instead, it presents itself as a seductively simple solution to the problems of the day that can seem foolish to resist. Harari argued that the concentration of data- 1 https://www.fastcompany.com/3056389/why-google-was-smart-to-drop-its-dont-be-evil-motto 2 https://medium.com/@muneeb/cant-be-evil-bc5ec16c6306 3 https://www.ted.com/talks/yuval_noah_harari_why_fascism_is_so_tempting_and_how_your_data_could_power_it?language=en 30 31

A Generational Platform Shiftsets within certain commercial or governmental organisations may be tempting History them to master and personalise this technique to a degree hitherto unimagined. We We are at the start of a paradigm shift in software architecture: the wave of need organisational structures, data architectures, incentives and technologies that decentralised data networks. The movement we have seen build up over the past few neutralise this danger. Beyond eliminating the possibility that third parties behave years goes beyond Bitcoin and other crypto-assets, or even open source software and in an evil manner, the applications built upon these decentralised data networks will blockchains. Taking a broader view, it is the victory of peer-to-peer data networks based make possible a much more intimate bond of trust between each human individual on open standards, it reflects the power of properly aligned economic incentives, and it and the computing services delivered via an ever more complete envelope of devices. begins to harness the individual data centres in everyone’s pocket, desktop, car, living room and wrist. The movement is made possible by the proliferation of access to high A shift to more human-centric computing speed wireless broadband, rapidly maturing cloud-native software and a surge of recent While this trust layer has become a commonality between individuals and machine learning advancements.communities, it has proven difficult to create in human dealings with hardware devices and software applications. As the potential for software to serve us in Over the past few decades, technology architecture advancements have commoditised increasingly intimate and personalised ways expands, the imperative to deliver a operating systems and software packages by making them globally accessible via data trusted relationship increases. This becomes mandatory when one is sharing personal centres and cloud infrastructure. In this new wave, the data centre is being spread to genetic and physiological information, relying on algorithms to make split-second the very edge of the network and the data itself is being ‘open-sourced’, commoditised trade offs in moments of human peril or even when filtering the stream of news that into reusable trusted building blocks. Distributed users and machines interact with constitutes the factbase for our day to day decision-making. this data via a substrate of peer-to-peer networks. These peer-to-peer data networks become a ‘fabric’ that validates and curates information inputs without the need for In “Sapiens”, Yuval Harari also explores the idea that ultimately, on a historical third parties, while empowering individual users with their own data in a usable, secure scale, it is our ability to conceptualise abstract concepts through language and and scalable manner. share common beliefs that allowed strangers to cooperate and communities to rise. Technology now has the ability to abstract this trust, with the right incentives The Sovereign Individual encoded at the protocol level, allowing for cooperation and trade at a global scale. By empowering users with their own data, the decentralised data networks wave is breaking down the colossal data silos that have been the lifeblood, but increasingly the The forthcoming wave of decentralised data networks shifts us from zero-sum game untenable liability of today’s tech giants. Driven by central leaks such as Equifax’s data capitalism to the compounded benefits of collaborating communities. Perhaps a breach that cost 145m Americans their privacy or Facebook’s revelation that Cambridge good way to imagine such evolving coordination with minimal central control is the Analytica used personal data from 87m accounts and recently a further 50m logins technological feat that is the modern city. Distributed Autonomous Organisations were compromised, users are becoming weary of entrusting their personal data to built upon blockchain technology can achieve a balance of resilience & efficiency, 1 these centralised silos. While Google quietly discarded its “Don’t be evil” motto , here coordination & incentive on a whole range of new frontiers. The replacement of the at Fabric Ventures, we are much more interested in a new software architecture, where owner’s profit for a shared interest in the level of adoption of the network aligns 2 the motto becomes “Can’t be evil” : an architecture, in which all users control their data incentives across builders, service providers and users: the substitution of top down locally, therefore enabling the rise of the sovereign individual. As Yuval Harari posited at command and control power structures, with their high propensity for corruption, 3 a recent TED conference , totalitarianism is not the ugly force that is often depicted in with emergent structures. retrospect; instead, it presents itself as a seductively simple solution to the problems of the day that can seem foolish to resist. Harari argued that the concentration of data- 1 https://www.fastcompany.com/3056389/why-google-was-smart-to-drop-its-dont-be-evil-motto 2 https://medium.com/@muneeb/cant-be-evil-bc5ec16c6306 3 https://www.ted.com/talks/yuval_noah_harari_why_fascism_is_so_tempting_and_how_your_data_could_power_it?language=en 30 31

Step back - This is the latest platform paradigm shift With the democratisation of access to personal computers, the 1970s and 1980s led Taking a step back and navigating through the business models of technology companies over the to a new wave in which technology companies shifted their business models to selling past century cheap hardware with a licensed operating system. With the fulgurant rise of Microsoft and its relentless focus on winning over developers, consumers chose the platforms To understand where the value might emerge and hence where as investors and with the greatest array of compatible applications, and the company’s Windows company builders we might fruitfully focus our efforts, it is useful to take the long view operating system began to propagate across hardware providers and unified almost over multiple eras of technology fuelled disruption. all software packages under one roof. By the year 2000, Microsoft’s market share was above 90% of all personal computers sold and it accrued most of its value from the operating software and application software layers. Value generated on the software protocol Decentralisation Decentralised data Bitcoin, However, while Microsoft held the desktop domination, it had never secured the level, through a network-native business Era centre, open source Ethereum model protocol & open data servers in the wiring closet and data centers - these remained the domain of the Value generated in the Digital network The Web closed cloud offerings using open source on top of free Google, Facebook, most successful Unix workstation companies of the 80’s (Sun, Silicon Graphics and software & user’s data protocol (HTTP) Amazon, Paypal Era IBM). In the early 90’s Linus Torvalds sought to undermine this expensive hegemony Value generated in the Mass market Microsoft & The PC with a cheaper & more open alternative: Linux - an open source version of the Unix proprietary business computers operating Intel Era system operating system for software servers. A new wave of technology businesses was on i t Mini DEC, Microprocessor Value generated in the unleashed by combining commodity hardware and the Linux operating system with a v computer IBM Wintel monopoly leveraging as ISV o Era ecosystem Apache web servers, MySQL and PHP. By 2012, Microsoft’s share of the compute Inn Smaller & more 4 Transistor market had fallen to 20% , while by 2017, Linux based Android captured 85% of the reliable IBM computers Era 5 mobile compute market . Digital, Vacuum Value generated in the general-purpose ENIAC Tubes proprietary hardware hub computer Era This democratisation of access to cheaper software coupled with widely available Polynominal Difference Mechanical networks, pushed technology businesses to shift their business models towards functions Engine Computers calculator Era offering free software & networks with the intent of monetising the data they gather. 1820s 1900s 1950s 1960s 1980s 1990s 2000s 2020s The tech titans of today have co-opted open source software, and combined it with Graphic 1: Fabric Ventures, Inspirated by Carlota Perez’s “Technological Revolutions and Financial Capital” & Thomas Kuhn’s “Paradigm massive monopolised silos of user data, to create competitive moats protecting Shifts”, and refined through conversations with Hermann Hauser and readings of Placeholder’s Investment thesis trillions of dollars of market capitalisation. However, as incumbents are facing more and more data usage issues, users are starting to scrutinise the ownership of their Let’s pick the story up in the postwar American boom of the 1950s and 1960s. As data and governments are pushing through extensive data protection regulation (e.g US firms became multinationals, the business model of technology companies was GDPR). primarily to take a margin on the expensive production of proprietary computer hardware. The result was that computers remained in the hands of a limited group of Following the democratisation of the hardware, the operating system, the software users, consisting of governments, businesses and wealthy individuals. As the production and the networks, the new paradigm shift we are observing will open up access costs of microprocessors plummeted, a new architecture for computing with radically to the data within networks. As the existing data silos break down, we will observe improved economics flipped the power in the industry from the proprietary hardware the commoditisation, in the sense of packaging and access, of the data itself. The systems to the chip manufacturers and software companies. Where Tom Watson at question remains - what will the business model of technology companies become, IBM had trouble imagining the need for more than a handful of computers, Bill Gates of once the data monopolisation angle has eroded or died? Microsoft understood the future would see a personal computer in every home. 4 http://old.seattletimes.com/html/microsoftpri0/2019853243_goldman_sachs_microsoft_os_has_gone_from_more_than.html 5 https://www.idc.com/promo/smartphone-market-share/os 32 33

Step back - This is the latest platform paradigm shiftWith the democratisation of access to personal computers, the 1970s and 1980s led Taking a step back and navigating through the business models of technology companies over the to a new wave in which technology companies shifted their business models to selling past century cheap hardware with a licensed operating system. With the fulgurant rise of Microsoft and its relentless focus on winning over developers, consumers chose the platforms To understand where the value might emerge and hence where as investors and with the greatest array of compatible applications, and the company’s Windows company builders we might fruitfully focus our efforts, it is useful to take the long view operating system began to propagate across hardware providers and unified almost over multiple eras of technology fuelled disruption. all software packages under one roof. By the year 2000, Microsoft’s market share was above 90% of all personal computers sold and it accrued most of its value from the operating software and application software layers. Value generated on the software protocol DecentralisationDecentralised data Bitcoin,However, while Microsoft held the desktop domination, it had never secured the level, through a network-native business Eracentre, open source Ethereum modelprotocol & open data servers in the wiring closet and data centers - these remained the domain of the Value generated in theDigital networkThe Web closed cloud offerings using open source on top of freeGoogle, Facebook,most successful Unix workstation companies of the 80’s (Sun, Silicon Graphics and software & user’s dataprotocol (HTTP)Amazon, PaypalEra IBM). In the early 90’s Linus Torvalds sought to undermine this expensive hegemony Value generated in theMass marketMicrosoft & The PCwith a cheaper & more open alternative: Linux - an open source version of the Unix proprietary business computersoperating IntelEra system operating system for software servers. A new wave of technology businesses was on i tMiniDEC,MicroprocessorValue generated in theunleashed by combining commodity hardware and the Linux operating system with a vcomputerIBMWintel monopoly leveraging as ISV oEraecosystem Apache web servers, MySQL and PHP. By 2012, Microsoft’s share of the compute Inn Smaller & more 4 Transistor market had fallen to 20% , while by 2017, Linux based Android captured 85% of the reliableIBM computers Era 5 mobile compute market . Digital, VacuumValue generated in the general-purposeENIACTubesproprietary hardware hub computerEra This democratisation of access to cheaper software coupled with widely available PolynominalDifferenceMechanicalnetworks, pushed technology businesses to shift their business models towards functionsEngineComputers calculatorEra offering free software & networks with the intent of monetising the data they gather. 1820s1900s1950s1960s1980s1990s2000s2020sThe tech titans of today have co-opted open source software, and combined it with Graphic 1: Fabric Ventures, Inspirated by Carlota Perez’s “Technological Revolutions and Financial Capital” & Thomas Kuhn’s “Paradigm massive monopolised silos of user data, to create competitive moats protecting Shifts”, and refined through conversations with Hermann Hauser and readings of Placeholder’s Investment thesistrillions of dollars of market capitalisation. However, as incumbents are facing more and more data usage issues, users are starting to scrutinise the ownership of their Let’s pick the story up in the postwar American boom of the 1950s and 1960s. As data and governments are pushing through extensive data protection regulation (e.g US firms became multinationals, the business model of technology companies was GDPR). primarily to take a margin on the expensive production of proprietary computer hardware. The result was that computers remained in the hands of a limited group of Following the democratisation of the hardware, the operating system, the software users, consisting of governments, businesses and wealthy individuals. As the production and the networks, the new paradigm shift we are observing will open up access costs of microprocessors plummeted, a new architecture for computing with radically to the data within networks. As the existing data silos break down, we will observe improved economics flipped the power in the industry from the proprietary hardware the commoditisation, in the sense of packaging and access, of the data itself. The systems to the chip manufacturers and software companies. Where Tom Watson at question remains - what will the business model of technology companies become, IBM had trouble imagining the need for more than a handful of computers, Bill Gates of once the data monopolisation angle has eroded or died? Microsoft understood the future would see a personal computer in every home. 4 http://old.seattletimes.com/html/microsoftpri0/2019853243_goldman_sachs_microsoft_os_has_gone_from_more_than.html 5 https://www.idc.com/promo/smartphone-market-share/os 32 33

maintained by Facebook while Google has made countless contributions to Android, Kubernetes and Go amongst others. Microsoft, which would have been considered as the primary opponent of open source less than 20 years ago, has reinvented itself into the company supporting the largest number of open source developers in 2017 and recently acquired Github for $7.5b. The tech giants have co-opted open source software, have mostly stopped charging for software, and have built their entire business around monetising their users’ data instead: creating trillions of dollars of market cap by using software that they don’t own, and data that isn’t theirs. Unfortunately, in this third wave of open source software development, the developers have lost the ethical aspirations and romantic motivations that drove the first wave, often without benefiting from the financial upside or the reputational rewards that drove the second wave. Graphic 2: “The Four Ages of Open Source”, Fabric Ventures With Satoshi Nakamoto’s 2008 release of the Bitcoin whitepaper, we’ve entered To answer this question, we re-trace the history of open source software development into the fourth age of open source software development: by solving the ‘double in relation to the motivations & monetisation methods that accompanied it. At its very spend’ problem and creating ‘digital scarcity’ in decentralised systems, Satoshi lay beginning, the free software movement emerged amongst privacy & security hobbyists, the foundation enabling the integration of a digital value transfer layer within peer hackers and government entities that realised they could not commercialise their to peer networks. This fundamental architecture breakthrough enables open source software. The movement was heavily hinged on the ethical belief that software should networks to reward and incentivise contributors without a central authority or be in the open domain, available and accessible to all. sponsor. The permissionless innovation on open platforms and ‘trustless’ peer to peer networks combined with token-driven incentive and governance systems has started Developers realised that, beyond making software freely available, the open source a Cambrian explosion of developers and ecosystems uniting around open source model fundamentally improved the software development process. Communities projects. We believe that the open source development movement has finally found established themselves around projects and reputation layers started settling within its elusive ‘business model’ - a model which doesn’t necessarily reward a single these communities, generating exponential growth in contributors, maintainers and central entity, but instead fairly incentivises all contributors and participants, creating users. With the ability to widely distribute software across the world, developers started a distributed digital economy within each network. forming companies that added very thin monetisation layers onto wide distribution networks. In 1993 Bob Young incorporated the ACC Corporation that sold Linux and A paradigm shift driven by 3 mega trends Unix accessories and later became Red Hat. Around the same time, in 1994, Monty The success of the Web 2.0 Era over the past two decades has largely been Widenius (Advisor to Fabric Ventures & Founder at OpenOcean) began working on dominated by three fundamental technologies: Cloud, Social & Mobile. We’re MySQL which consolidated itself into the Linux, Apache, MySQL & Python, or ‘LAMP’ convinced that the coming decades of technical innovation will be driven by the 6 interplay between Edge Computing, Machine Learning and Decentralised Data: stack and became the world’s most popular database before being acquired by Sun Microsystems for $1 billion in 2008. the edge computing on swarms of devices capturing millions of data points, the advancements in machine learning algorithms ingesting this wealth of data & Over the past two decades, as large corporations realised the viability and benefits a substrate of decentralised data enabling secure & scalable communication, of open source development, the entire world has become reliant on open source coordination and fair incentivisation. software. The React and React-native JavaScript development tools are primarily 6 https://en.wikipedia.org/wiki/LAMP_(software_bundle) 34 35

maintained by Facebook while Google has made countless contributions to Android, Kubernetes and Go amongst others. Microsoft, which would have been considered as the primary opponent of open source less than 20 years ago, has reinvented itself into the company supporting the largest number of open source developers in 2017 and recently acquired Github for $7.5b. The tech giants have co-opted open source software, have mostly stopped charging for software, and have built their entire business around monetising their users’ data instead: creating trillions of dollars of market cap by using software that they don’t own, and data that isn’t theirs. Unfortunately, in this third wave of open source software development, the developers have lost the ethical aspirations and romantic motivations that drove the first wave, often without benefiting from the financial upside or the reputational rewards that drove the second wave. Graphic 2: “The Four Ages of Open Source”, Fabric Ventures With Satoshi Nakamoto’s 2008 release of the Bitcoin whitepaper, we’ve entered To answer this question, we re-trace the history of open source software development into the fourth age of open source software development: by solving the ‘double in relation to the motivations & monetisation methods that accompanied it. At its very spend’ problem and creating ‘digital scarcity’ in decentralised systems, Satoshi lay beginning, the free software movement emerged amongst privacy & security hobbyists, the foundation enabling the integration of a digital value transfer layer within peer hackers and government entities that realised they could not commercialise their to peer networks. This fundamental architecture breakthrough enables open source software. The movement was heavily hinged on the ethical belief that software should networks to reward and incentivise contributors without a central authority or be in the open domain, available and accessible to all.sponsor. The permissionless innovation on open platforms and ‘trustless’ peer to peer networks combined with token-driven incentive and governance systems has started Developers realised that, beyond making software freely available, the open source a Cambrian explosion of developers and ecosystems uniting around open source model fundamentally improved the software development process. Communities projects. We believe that the open source development movement has finally found established themselves around projects and reputation layers started settling within its elusive ‘business model’ - a model which doesn’t necessarily reward a single these communities, generating exponential growth in contributors, maintainers and central entity, but instead fairly incentivises all contributors and participants, creating users. With the ability to widely distribute software across the world, developers started a distributed digital economy within each network. forming companies that added very thin monetisation layers onto wide distribution networks. In 1993 Bob Young incorporated the ACC Corporation that sold Linux and A paradigm shift driven by 3 mega trends Unix accessories and later became Red Hat. Around the same time, in 1994, Monty The success of the Web 2.0 Era over the past two decades has largely been Widenius (Advisor to Fabric Ventures & Founder at OpenOcean) began working on dominated by three fundamental technologies: Cloud, Social & Mobile. We’re MySQL which consolidated itself into the Linux, Apache, MySQL & Python, or ‘LAMP’ convinced that the coming decades of technical innovation will be driven by the 6 interplay between Edge Computing, Machine Learning and Decentralised Data: stack and became the world’s most popular database before being acquired by Sun Microsystems for $1 billion in 2008. the edge computing on swarms of devices capturing millions of data points, the advancements in machine learning algorithms ingesting this wealth of data & Over the past two decades, as large corporations realised the viability and benefits a substrate of decentralised data enabling secure & scalable communication, of open source development, the entire world has become reliant on open source coordination and fair incentivisation. software. The React and React-native JavaScript development tools are primarily 6 https://en.wikipedia.org/wiki/LAMP_(software_bundle) 34 35

DApps Novelty of tokens & cryptoeconomics A fundamental problem that has historically plagued network architects of all varieties can be simplified down to the mismatch between value creation by a Artificial network and value capture by an equity structure. Equity structures derive their value Intelligence from the future cash flows generated by the central company’s ability to extract revenues from its customers at a net profit. A system that worked well for companies Decentralised Data Layer selling goods and services: Apple selling premium hardware or Netflix and Spotify selling monthly memberships. The equity model does however result in a dangerous divergence of interests when applied to networks in which the core value lies within Hardware & Device the cheap distribution and user driven content creation: Twitter has had difficulties Eco-System monetising the content created by its user base, Facebook had to turn to an almost Next Gen Wireless dystopian & panoptical model to monetise their user base & open source networks Broadband never managed to properly monetise their full value creation. While the community Graphic 3: Intersection of megatrends powering the decentralised data ecosystem, Fabric Ventures generates the valuable content inside a network, the user transforms from the customer to the product itself. The fundamental mismatch lies in the fact that a central entity is attempting to capture the entire value created by the community of Compounding these three technological waves will open up a wealth of data that users, which receives no financial upside in return. is currently still locked away for privacy, trust, or competitive reasons. In 2010, the world produced around 1 zettabyte of data7 . According to McKinsey, in 2016, the world By moving away from a central equity company governing the network, and instead 8 produced 16 zettabytes of data, and yet only analysed 1% of it . By 2025, the world’s modeling the network as a digital economy with a native token, we can not only 9 data generation is expected to surpass 160 zettabytes . Previously untapped data increase the value captured, but also distribute it to the actual value creators. This sources, privacy preserving provenance and granular value distribution, will lead to digital economy uses tokens as manifestations of digital scarcity within a network, currently still inconceivable breakthroughs such as personalised medical predictions via which are used to incentivise distributed people, machines and other actors to genomic data, coordination of distributed autonomous agents and unlocking of new contribute and manage valuable resource, work and usage. Representing the digital unexplored monetisation methods for the data generators. scarcity of the network (e.g. compute power, human labour, content creation or governance) as a digital token renders it upgradable and infinitely flexible. These However, if the siloed data structures of today are not rapidly upgraded, the tokens become a programmable digital software link between humans and the proliferation of available data and the efficiency of machine learning algorithms could assets they own - both virtual (e.g. personal data) and physical (e.g. real estate). quickly lead us to a dystopian future of surveillance capitalism and politics capable of What these tokens enable, is a cleverly architected balance of network-intrinsic not only predicting, but tapping into our emotions to ‘benevolently’ prescribe decisions stake & utility for users, developers, resource providers (e.g. miners), and capital we are yet to make. In effect, acting on the future they have foreseen with immense providers (e.g. investors), achieved through Token Economics - the new frontier for precision and with objectives that are neither necessarily transparent nor aligned with incentive mechanisms design. As tokenisation allows a re-imagining of ownership our own. Decentralised data architectures will not only prevent tech giants and other on a wholesale basis even beyond pure digital assets, existing assets will enjoy the data monopolies from gaining such pervasive power, but will instead enable individual potential for improved liquidity, transparency, access, compliance and taxation which actors to enhance their lives with this new wave of applications whilst they both will drive their tokenisation and the ultimate supremacy of the new crypto capital maintain control over their privacy and gain financial returns from their participation. markets. 7 https://www.apixel.com.sg/blog/the-zettabyte-to-bring-more-business-and-success-to-singapores-economy/ A couple of decades back, we witnessed data and content shifting from analogue 8 http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-internet-of-things-the-value-of-digiti- zing-the-physical-world to digital distribution. This allowed everything from creation to distribution to 9 https://www.storagenewsletter.com/2017/04/05/total-ww-data-to-reach-163-zettabytes-by-2025-idc/digitizing-the-physi- cal-world 36 37

DApps Novelty of tokens & cryptoeconomics A fundamental problem that has historically plagued network architects of all varieties can be simplified down to the mismatch between value creation by a Artificial network and value capture by an equity structure. Equity structures derive their value Intelligence from the future cash flows generated by the central company’s ability to extract revenues from its customers at a net profit. A system that worked well for companies Decentralised Data Layer selling goods and services: Apple selling premium hardware or Netflix and Spotify selling monthly memberships. The equity model does however result in a dangerous divergence of interests when applied to networks in which the core value lies within Hardware & Device the cheap distribution and user driven content creation: Twitter has had difficulties Eco-System monetising the content created by its user base, Facebook had to turn to an almost Next Gen Wireless dystopian & panoptical model to monetise their user base & open source networks Broadband never managed to properly monetise their full value creation. While the community Graphic 3: Intersection of megatrends powering the decentralised data ecosystem, Fabric Venturesgenerates the valuable content inside a network, the user transforms from the customer to the product itself. The fundamental mismatch lies in the fact that a central entity is attempting to capture the entire value created by the community of Compounding these three technological waves will open up a wealth of data that users, which receives no financial upside in return. is currently still locked away for privacy, trust, or competitive reasons. In 2010, the world produced around 1 zettabyte of data7 . According to McKinsey, in 2016, the world By moving away from a central equity company governing the network, and instead 8 produced 16 zettabytes of data, and yet only analysed 1% of it . By 2025, the world’s modeling the network as a digital economy with a native token, we can not only 9 data generation is expected to surpass 160 zettabytes . Previously untapped data increase the value captured, but also distribute it to the actual value creators. This sources, privacy preserving provenance and granular value distribution, will lead to digital economy uses tokens as manifestations of digital scarcity within a network, currently still inconceivable breakthroughs such as personalised medical predictions via which are used to incentivise distributed people, machines and other actors to genomic data, coordination of distributed autonomous agents and unlocking of new contribute and manage valuable resource, work and usage. Representing the digital unexplored monetisation methods for the data generators.scarcity of the network (e.g. compute power, human labour, content creation or governance) as a digital token renders it upgradable and infinitely flexible. These However, if the siloed data structures of today are not rapidly upgraded, the tokens become a programmable digital software link between humans and the proliferation of available data and the efficiency of machine learning algorithms could assets they own - both virtual (e.g. personal data) and physical (e.g. real estate). quickly lead us to a dystopian future of surveillance capitalism and politics capable of What these tokens enable, is a cleverly architected balance of network-intrinsic not only predicting, but tapping into our emotions to ‘benevolently’ prescribe decisions stake & utility for users, developers, resource providers (e.g. miners), and capital we are yet to make. In effect, acting on the future they have foreseen with immense providers (e.g. investors), achieved through Token Economics - the new frontier for precision and with objectives that are neither necessarily transparent nor aligned with incentive mechanisms design. As tokenisation allows a re-imagining of ownership our own. Decentralised data architectures will not only prevent tech giants and other on a wholesale basis even beyond pure digital assets, existing assets will enjoy the data monopolies from gaining such pervasive power, but will instead enable individual potential for improved liquidity, transparency, access, compliance and taxation which actors to enhance their lives with this new wave of applications whilst they both will drive their tokenisation and the ultimate supremacy of the new crypto capital maintain control over their privacy and gain financial returns from their participation.markets. 7 https://www.apixel.com.sg/blog/the-zettabyte-to-bring-more-business-and-success-to-singapores-economy/A couple of decades back, we witnessed data and content shifting from analogue 8 http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-internet-of-things-the-value-of-digiti- zing-the-physical-world to digital distribution. This allowed everything from creation to distribution to 9 https://www.storagenewsletter.com/2017/04/05/total-ww-data-to-reach-163-zettabytes-by-2025-idc/digitizing-the-physi- cal-world 36 37

monetization to be reimagined. The impact of digitisation on newspaper, television Store of Value (SoV) Tokens rely on their censorship resistant and peer to peer and movie content is well documented: new titans like Netflix and Spotify have arisen transaction features to ensure a store of value that is completely uncorrelated to any and firms like Blockbuster and Kodak are marginalised or gone. We have now become other market, commodity or currency. Examples include the likes of Bitcoin, Monero and convinced that tokenisation will be to ownership as digitisation was to content. Zcash which all have slight variations on speed of transactions, security of the network & privacy of the network. These come closest to being the equivalent of currencies “Tokenisation is to and when considering the quantitative theory of money, their dynamics might be understood with the equation of exchange (MV = PQ). OWNERSHIP Stablecoins aim to decouple the volatility from cryptoassets and provide a digital asset as digitisation was to that is pegged to a fiat counterpart (e.g. USD) and mainly used as a unit of account & medium of exchange. The 3 large categories include: content.” • Centralised IOU Issuance - kept stable by an equal reserve of fiat that is centrally held. • Collateral Backed - over-collateralised by cryptoassets such as Ether escrowed trustlessly. Types of tokens • Seignorage Shares - recreating an algorithmic central bank that keeps stability with levers on supply and demand. Diving into the universe of tokens, we classify the different characteristics into three core categories: Currencies & Commodities, Utility Tokens and Security Tokens. Bearing Payment Tokens have been the simplest and most iterated version - they’ve often been in mind that any individual token might exhibit several of the characteristics at the forcibly implemented into networks as the sole method of payment for the digital asset same time or even evolve their characteristics over their life cycle of the underlying provided by the network. As a result, they come close to being currencies within a digital network, we have summarised our view of these characteristics below: economy, without ever becoming investable, liquid or stable enough to become stores of value. Instead, at a future equilibrium, they’ll look closer to a form of working capital, which users will try to minimise due to the opportunity cost of capital. As a result, they A Taxonomy of Token are likely to end up with an extremely high velocity, but a low value accrual. Through the Characteristics nature of open source code (copyable & forkable), these token models run at a high risk of being forked and replaced by equivalent protocols that enable payments in a proper SoV token. Security Tokens are a tokenised representation of assets ranging from traditional commodities & equities, to pieces of art and all the way to pieces of virtual land in the form of crypto collectibles. The former rely on a strong guarantee of ownership of the underlying asset and can be valued by the worth of their underlying asset with a premium for liquidity, divisibility and accessibility. The latter often represents scarce digital assets that are valued like art or real estate - i.e. fame of creator, location in a digital landscape & overall demand for asset. Governance Tokens give the holders a vote in how a network is run, where developers focus their efforts & when software upgrades should be implemented. As the value of Graphic 4: Taxonomy of token characteristics, Fabric Ventures a network goes up - via the number of companies running on top of it or the number 38 39

monetization to be reimagined. The impact of digitisation on newspaper, television Store of Value (SoV) Tokens rely on their censorship resistant and peer to peer and movie content is well documented: new titans like Netflix and Spotify have arisen transaction features to ensure a store of value that is completely uncorrelated to any and firms like Blockbuster and Kodak are marginalised or gone. We have now become other market, commodity or currency. Examples include the likes of Bitcoin, Monero and convinced that tokenisation will be to ownership as digitisation was to content. Zcash which all have slight variations on speed of transactions, security of the network & privacy of the network. These come closest to being the equivalent of currencies “Tokenisation is to and when considering the quantitative theory of money, their dynamics might be understood with the equation of exchange (MV = PQ). OWNERSHIP Stablecoins aim to decouple the volatility from cryptoassets and provide a digital asset as digitisation was tothat is pegged to a fiat counterpart (e.g. USD) and mainly used as a unit of account & medium of exchange. The 3 large categories include: content.” • Centralised IOU Issuance - kept stable by an equal reserve of fiat that is centrally held. • Collateral Backed - over-collateralised by cryptoassets such as Ether escrowed trustlessly. Types of tokens • Seignorage Shares - recreating an algorithmic central bank that keeps stability with levers on supply and demand. Diving into the universe of tokens, we classify the different characteristics into three core categories: Currencies & Commodities, Utility Tokens and Security Tokens. Bearing Payment Tokens have been the simplest and most iterated version - they’ve often been in mind that any individual token might exhibit several of the characteristics at the forcibly implemented into networks as the sole method of payment for the digital asset same time or even evolve their characteristics over their life cycle of the underlying provided by the network. As a result, they come close to being currencies within a digital network, we have summarised our view of these characteristics below:economy, without ever becoming investable, liquid or stable enough to become stores of value. Instead, at a future equilibrium, they’ll look closer to a form of working capital, which users will try to minimise due to the opportunity cost of capital. As a result, they A Taxonomy of Token are likely to end up with an extremely high velocity, but a low value accrual. Through the Characteristics nature of open source code (copyable & forkable), these token models run at a high risk of being forked and replaced by equivalent protocols that enable payments in a proper SoV token. Security Tokens are a tokenised representation of assets ranging from traditional commodities & equities, to pieces of art and all the way to pieces of virtual land in the form of crypto collectibles. The former rely on a strong guarantee of ownership of the underlying asset and can be valued by the worth of their underlying asset with a premium for liquidity, divisibility and accessibility. The latter often represents scarce digital assets that are valued like art or real estate - i.e. fame of creator, location in a digital landscape & overall demand for asset. Governance Tokens give the holders a vote in how a network is run, where developers focus their efforts & when software upgrades should be implemented. As the value of Graphic 4: Taxonomy of token characteristics, Fabric Venturesa network goes up - via the number of companies running on top of it or the number 38 39

of transactions it handles - the ability to influence its development will become a What’s at Stake for Investors scarce resource. The price of the voting power in such a network is in fact likely to scale exponentially with the value it secures. This token feature is generally combined with one the aforementioned token designs. The role of an investor investing in this plethora of token models must evolve from a simple capital allocator to an active participant within the networks. From community Discount Tokens give owners the right to discounts on purchases of an asset provided building, to token engineering, to actively running nodes, to actively managing liquid by a digital network. Buying into a discount token can be equated to buying into a positions, venture capital funds active in this space will soon be required to become coop, and getting the right to a set discount percentage of all economic activity within operationally involved within networks. This fulfills their fiduciary duty to maximise the network. As the value and activity of the network grows, the holder of the token the financial return on capital for their LPs, and also helps bootstrap the networks in can claim a larger value of discount - effectively modelling a royalty fee that can only which they are invested. Ambitious founders who understand that the path to enduring be claimed in terms of network services (no monetary payouts). success will be one of twists and turns will initially turn towards patient institutional partners, that inject both capital and work into their networks, and only once the Work Tokens operate on the idea that service providers need to have ‘skin in the game’ networks are live with a minimum viable number of nodes, will they start attracting to be incentivised to provide high quality work for the network. Whether it’s objective specific user groups or other relevant stakeholders through targeted sales or air-drops of work such as computational resources or subjective work such as qualitative ratings, tokens. service providers are obliged to stake a certain amount of tokens into the network in exchange of the right to provide profitable work. If the work is done ‘correctly’ the The most active investors will continuously engage with networks on multiple fronts over service provider is awarded the fees paid by the user (not necessarily in the native the duration of their investment: token). In contrast, if the service provider acts maliciously, their stake is slashed & Staking: As Proof of Stake (PoS) or Delegated Proof of Stake (DPoS) networks go live distributed to other service providers. As the network grows in usage, there will be an on mainnet, token holders will have the ability to stake their tokens in order to provide increased amount of immediate and future profitable work to be delivered, leading to profitable work to the network (validating transactions, computing, arbitration, a rise in service providers desiring to deliver this work. As a result, the demand for these transcoding or providing security) and be rewarded by the network (e.g. block rewards) work tokens will increase and due to their fixed supply, the price of the tokens should or by the users (e.g. transaction fees). In DPoS networks, operators within the network rise with usage of the network. We’ve further explored the value derived by work tokens can do the work as a service for a share of payouts, and token holders can delegate/ in a dedicated post. bond their tokens to the operators. Voting: Numerous networks are using their tokens as a governance tool - whether Burn & Mint Equilibrium Tokens are architected on two simple characteristics: users of through simple token voting, quadratic voting or liquid democracy, the tokens give a the network pay for services with the tokens, but instead of paying fees, they burn their voice to their holders. Long term investors will participate in the governance process of tokens (denominated in USD) & at the same time there is a constant inflation process the network, and steer it in the direction of their best interest. of new tokens being minted (denominated in native token). As the service providers are Curating: With Token Curated Registries (TCR), early investors in such networks will referenced by the users of the network for each burned token, they receive an allocation need to actively participate in the curation process, simultaneously keeping the registry of the newly minted tokens as payment. As a result, when the platform usage increases at high quality, as well as signalling the quality of curators involved. and users burn more tokens than are issued through inflation, the supply will decrease Running Nodes & Simple Usage of Network: As investors might also be users of and push up the price per token. networks, they might actively build early iterations of use-cases for the networks. From running nodes within the network for their own data-driven tracking purposes to actively participating within the network’s economy (e.g. buying services/assets), these investors will initially seed the ecosystems built on top of the networks. Beyond simply committing to actively participate in portfolio networks, Fabric has already begun setting up the infrastructure within certain testnets. Some of our early experiments of running nodes within the Ocean Protocol testnet are documented in a dedicated blog post. 40 41

of transactions it handles - the ability to influence its development will become a What’s at Stake for Investors scarce resource. The price of the voting power in such a network is in fact likely to scale exponentially with the value it secures. This token feature is generally combined with one the aforementioned token designs.The role of an investor investing in this plethora of token models must evolve from a simple capital allocator to an active participant within the networks. From community Discount Tokens give owners the right to discounts on purchases of an asset provided building, to token engineering, to actively running nodes, to actively managing liquid by a digital network. Buying into a discount token can be equated to buying into a positions, venture capital funds active in this space will soon be required to become coop, and getting the right to a set discount percentage of all economic activity within operationally involved within networks. This fulfills their fiduciary duty to maximise the network. As the value and activity of the network grows, the holder of the token the financial return on capital for their LPs, and also helps bootstrap the networks in can claim a larger value of discount - effectively modelling a royalty fee that can only which they are invested. Ambitious founders who understand that the path to enduring be claimed in terms of network services (no monetary payouts). success will be one of twists and turns will initially turn towards patient institutional partners, that inject both capital and work into their networks, and only once the Work Tokens operate on the idea that service providers need to have ‘skin in the game’ networks are live with a minimum viable number of nodes, will they start attracting to be incentivised to provide high quality work for the network. Whether it’s objective specific user groups or other relevant stakeholders through targeted sales or air-drops of work such as computational resources or subjective work such as qualitative ratings, tokens. service providers are obliged to stake a certain amount of tokens into the network in exchange of the right to provide profitable work. If the work is done ‘correctly’ the The most active investors will continuously engage with networks on multiple fronts over service provider is awarded the fees paid by the user (not necessarily in the native the duration of their investment: token). In contrast, if the service provider acts maliciously, their stake is slashed & Staking: As Proof of Stake (PoS) or Delegated Proof of Stake (DPoS) networks go live distributed to other service providers. As the network grows in usage, there will be an on mainnet, token holders will have the ability to stake their tokens in order to provide increased amount of immediate and future profitable work to be delivered, leading to profitable work to the network (validating transactions, computing, arbitration, a rise in service providers desiring to deliver this work. As a result, the demand for these transcoding or providing security) and be rewarded by the network (e.g. block rewards) work tokens will increase and due to their fixed supply, the price of the tokens should or by the users (e.g. transaction fees). In DPoS networks, operators within the network rise with usage of the network. We’ve further explored the value derived by work tokens can do the work as a service for a share of payouts, and token holders can delegate/ in a dedicated post. bond their tokens to the operators. Voting: Numerous networks are using their tokens as a governance tool - whether Burn & Mint Equilibrium Tokens are architected on two simple characteristics: users of through simple token voting, quadratic voting or liquid democracy, the tokens give a the network pay for services with the tokens, but instead of paying fees, they burn their voice to their holders. Long term investors will participate in the governance process of tokens (denominated in USD) & at the same time there is a constant inflation process the network, and steer it in the direction of their best interest. of new tokens being minted (denominated in native token). As the service providers are Curating: With Token Curated Registries (TCR), early investors in such networks will referenced by the users of the network for each burned token, they receive an allocation need to actively participate in the curation process, simultaneously keeping the registry of the newly minted tokens as payment. As a result, when the platform usage increases at high quality, as well as signalling the quality of curators involved. and users burn more tokens than are issued through inflation, the supply will decrease Running Nodes & Simple Usage of Network: As investors might also be users of and push up the price per token. networks, they might actively build early iterations of use-cases for the networks. From running nodes within the network for their own data-driven tracking purposes to actively participating within the network’s economy (e.g. buying services/assets), these investors will initially seed the ecosystems built on top of the networks. Beyond simply committing to actively participate in portfolio networks, Fabric has already begun setting up the infrastructure within certain testnets. Some of our early experiments of running nodes within the Ocean Protocol testnet are documented in a dedicated blog post. 40 41

Europe: a Prime Mover Distributed teams from the start As a continent made of 50 vastly different countries, Europe is accustomed to working in distributed teams as well as building with a global outlook. Developer explosion & 100s of years of academic strength Any nascent company in Europe has always recognised the need to build an The army of developers and technical talent stems from Europe’s legacy spawning 100s international roadmap from day one to avoid the traps of small domestic of years of technical academic excellence. Europe is home to 5 of the top 10 technical economies. Diverse and multinational teams have become the standard and universities in the world and is year after year graduating twice as many STEM PhDs as London, Berlin, Paris and Amsterdam have all consolidated as hubs for technical 10 the US . According to Stack Overflow, Europe houses 5.5m developers compared to innovation. We call this the “Technaissance of the European City State”. 4.4m in the US. The technical talent has always been present in Europe - but historically the banking sector was the dominant developer employer, and only after 2008 did the Entrenched Counter Culture technical talent decide to flee its clutches. And now, for the first time, with this wave Europe’s largest advantage probably roots from its history spanning over the that’s democratising access to capital, the technical talent doesn’t need to migrate past centuries. While the centralised business model fit the Silicon Valley ideals to the US to raise venture capital and build global companies. As a result, the value of dense capital pools and narrowly aligned ideologies, the decentralised created by founders coming from different corners of Europe has significantly outraced network model fits Europe’s entrenched history of political fractures and ensuing any other geographic region: $4.1bn has been raised by European projects in 2018 alone counterculture movements. Europeans have lived through two unthinkably 11 - versus $2.3bn in Asia, and $2.6bn in the US . disastrous world wars fought on home soil. Europeans have been brought up in families that lived through communist and/or fascist dictatorships. Europeans were split through the cold war for over 40 years. Europeans have lived through totalitarian regimes that annihilated the idea of privacy and freedom of speech and regularly seized personal goods and assets from their own citizens. Token sales by USD raised in 2018 European tech talent growth Decentralised networks will certainly deliver tactical benefits to individuals Based on founders’ home base Developers & STEM PhDs graduates but also hold the promise of keeping in check society-wide nightmares that 58,941 Europeans have experienced directly and acutely over the past century. Europe 5,5m Regulation: 4,5m From a regulatory perspective, the EU has been on the forefront by pushing Americas 26,959 directives such as GDPR to protect the digital data rights of the consumer, and PSD2 to open up the financial system to the benefit of the user. Beyond that, a Asia race between countries has begun to provide the clearest and most welcoming Oceania regulatory framework for the new business models and governance structures of decentralised networks. France’s Minister of Economy has openly stated that Africa France will not “miss out on the blockchain revolution” and will become a global 12 $0 $1bn $2bn $3bn $4bn hub for ICOs . Switzerland has already issued a very clear regulatory framework Developers STEM PhDs per year 13 for token based networks . The UK Chancellor has announced a crypto asset Source: Fabric Ventures x Token Data analysis Source 2: Atomico State of European Tech 2017 14 task force to create a constructive regulatory framework for tokens . Smaller countries like Malta and Lichtenstein have sprinted ahead with open regulatory Europe United States approaches attempting to become global hubs for decentralised networks and related businesses. Throughout European countries, a competitive race has begun to provide the most founder friendly & forward thinking regulatory environment for decentralised networks and their native crypto-assets. 10 12 Atomico State of European Tech 2017 https://www.ft.com/content/2e7b2778-2d22-11e8-9b4b-bc4b9f08f381 11 13 Stack Overflow https://www.ft.com/content/52820f90-1307-11e8-940e-08320fc2a277 42 14 https://www.coindesk.com/the-uk-government-is-launching-a-cryptocurrency-task-force/ 43

Europe: a Prime Mover Distributed teams from the start As a continent made of 50 vastly different countries, Europe is accustomed to working in distributed teams as well as building with a global outlook. Developer explosion & 100s of years of academic strengthAny nascent company in Europe has always recognised the need to build an The army of developers and technical talent stems from Europe’s legacy spawning 100s international roadmap from day one to avoid the traps of small domestic of years of technical academic excellence. Europe is home to 5 of the top 10 technical economies. Diverse and multinational teams have become the standard and universities in the world and is year after year graduating twice as many STEM PhDs as London, Berlin, Paris and Amsterdam have all consolidated as hubs for technical 10 the US . According to Stack Overflow, Europe houses 5.5m developers compared to innovation. We call this the “Technaissance of the European City State”. 4.4m in the US. The technical talent has always been present in Europe - but historically the banking sector was the dominant developer employer, and only after 2008 did the Entrenched Counter Culture technical talent decide to flee its clutches. And now, for the first time, with this wave Europe’s largest advantage probably roots from its history spanning over the that’s democratising access to capital, the technical talent doesn’t need to migrate past centuries. While the centralised business model fit the Silicon Valley ideals to the US to raise venture capital and build global companies. As a result, the value of dense capital pools and narrowly aligned ideologies, the decentralised created by founders coming from different corners of Europe has significantly outraced network model fits Europe’s entrenched history of political fractures and ensuing any other geographic region: $4.1bn has been raised by European projects in 2018 alone counterculture movements. Europeans have lived through two unthinkably 11 - versus $2.3bn in Asia, and $2.6bn in the US . disastrous world wars fought on home soil. Europeans have been brought up in families that lived through communist and/or fascist dictatorships. Europeans were split through the cold war for over 40 years. Europeans have lived through totalitarian regimes that annihilated the idea of privacy and freedom of speech and regularly seized personal goods and assets from their own citizens. Token sales by USD raised in 2018European tech talent growthDecentralised networks will certainly deliver tactical benefits to individuals Based on founders’ home baseDevelopers & STEM PhDs graduatesbut also hold the promise of keeping in check society-wide nightmares that 58,941 Europeans have experienced directly and acutely over the past century. Europe5,5m Regulation: 4,5m From a regulatory perspective, the EU has been on the forefront by pushing Americas26,959 directives such as GDPR to protect the digital data rights of the consumer, and PSD2 to open up the financial system to the benefit of the user. Beyond that, a Asia race between countries has begun to provide the clearest and most welcoming Oceania regulatory framework for the new business models and governance structures of decentralised networks. France’s Minister of Economy has openly stated that Africa France will not “miss out on the blockchain revolution” and will become a global 12 $0$1bn$2bn$3bn$4bn hub for ICOs . Switzerland has already issued a very clear regulatory framework DevelopersSTEM PhDs per year 13 for token based networks . The UK Chancellor has announced a crypto asset Source: Fabric Ventures x Token Data analysis Source 2: Atomico State of European Tech 2017 14 task force to create a constructive regulatory framework for tokens . Smaller countries like Malta and Lichtenstein have sprinted ahead with open regulatory EuropeUnited States approaches attempting to become global hubs for decentralised networks and related businesses. Throughout European countries, a competitive race has begun to provide the most founder friendly & forward thinking regulatory environment for decentralised networks and their native crypto-assets. 10 12 Atomico State of European Tech 2017 https://www.ft.com/content/2e7b2778-2d22-11e8-9b4b-bc4b9f08f381 11 13 Stack Overflow https://www.ft.com/content/52820f90-1307-11e8-940e-08320fc2a277 42 14 43 https://www.coindesk.com/the-uk-government-is-launching-a-cryptocurrency-task-force/

Conclusion Contributors We have explored the thesis that we are at the start of a new era of computing resulting from the confluence of a number of megatrends (edge computing, AI/ML and decentralised data) and that value capture mechanisms for these cryptoassets As ever, we are grateful to our friends for inspiration, helpful discussions, and are steadily turning from an art to a science. These new tokenised representations of honest feedback on early drafts. All errors and omissions are ours. ownership, when deployed in networks of users, machines and other stakeholders, have birthed a whole cadre of decentralised value accrual models in addition to today’s well We are also grateful to Token Data and TokenAnalyst for providing their data & understood centralised business models. analysis for the quantitative part of the report. Just as Rome was not built in a day, we believe there is a long journey ahead to build a scalable, secure and private Web3.0 - starting with the technical infrastructure, Token Data is a free platform tracking all publicly available data (qualitative & developer tools and data management frameworks. To support this vision, Fabric quantitative) on token sales. TokenData is unaffiliated to mainstream media, Ventures is adapting the patient venture capital model to investing in decentralised crypto currency news outlets or token sales. They distribute a bi-weekly data networks: backing the boldest technologists & communities at the earliest stages, newsletter that is read by a wide spectrum of people interested in the supporting them throughout their journey and becoming active participants within the blockchain space, ranging from cryptocurrency hobbyists to prominent VCs networks they are building. and national regulators. www.tokendata.io In Part II we will share some of the nuts and bolts of how Fabric seeks to be selected as a partner by the most discerning entrepreneurs, deliver value to their networks and more generally push forward the Web3.0 vision. TokenAnalyst aims to bring transparency for the decentralized economy. They process and analyse every transaction on the blockchain itself, using cutting- edge machine learning techniques, deriving data-driven insights and metrics that enable investors, developers, and other stakeholders in this growing economy to fundamentally understand and value the plethora of crypto- assets available today. www.tokenanalyst.io 44 45

Conclusion Contributors We have explored the thesis that we are at the start of a new era of computing resulting from the confluence of a number of megatrends (edge computing, AI/ML and decentralised data) and that value capture mechanisms for these cryptoassets As ever, we are grateful to our friends for inspiration, helpful discussions, and are steadily turning from an art to a science. These new tokenised representations of honest feedback on early drafts. All errors and omissions are ours. ownership, when deployed in networks of users, machines and other stakeholders, have birthed a whole cadre of decentralised value accrual models in addition to today’s well We are also grateful to Token Data and TokenAnalyst for providing their data & understood centralised business models. analysis for the quantitative part of the report. Just as Rome was not built in a day, we believe there is a long journey ahead to build a scalable, secure and private Web3.0 - starting with the technical infrastructure, Token Data is a free platform tracking all publicly available data (qualitative & developer tools and data management frameworks. To support this vision, Fabric quantitative) on token sales. TokenData is unaffiliated to mainstream media, Ventures is adapting the patient venture capital model to investing in decentralised crypto currency news outlets or token sales. They distribute a bi-weekly data networks: backing the boldest technologists & communities at the earliest stages, newsletter that is read by a wide spectrum of people interested in the supporting them throughout their journey and becoming active participants within the blockchain space, ranging from cryptocurrency hobbyists to prominent VCs networks they are building. and national regulators. www.tokendata.io In Part II we will share some of the nuts and bolts of how Fabric seeks to be selected as a partner by the most discerning entrepreneurs, deliver value to their networks and more generally push forward the Web3.0 vision. TokenAnalyst aims to bring transparency for the decentralized economy. They process and analyse every transaction on the blockchain itself, using cutting- edge machine learning techniques, deriving data-driven insights and metrics that enable investors, developers, and other stakeholders in this growing economy to fundamentally understand and value the plethora of crypto- assets available today. www.tokenanalyst.io 44 45

Thank you! www.fabric.vc/report @fabric_vc If you would like to be on the mailing list for the next report, please email [email protected] If you notice any errors or omissions, please let us know! 46