As a tokenization strategist, I will write weekly posts on the anatomy of the token market. In my first piece, I would like to offer a general token market analysis to provide answers to the following questions:
What kind of tokens are demanded by investors?
What kind of tokens are supplied by startups?
How balanced is the token market?
Demand is Driven Towards Basic tech (IT Infrastructure) Tokens
Generic technologies are the tokens most in demand. After analyzing the whitepapers of the 200 most valuable (by market cap on March 10 to March 20) tokens listed on coinmarketcap.com and Tokens24, I found out that 53% of total market capitalization consists of tokens that are used in basic technologies or IT infrastructure such as blockchains, computing power, frameworks, etc. I counted 73 such basic technology (industry agnostic) tokens among the top 200 tokens by market cap.
The next most significant token category is tokens used in technological applications for crypto markets – like crypto exchanges, trading platforms, stable tokens, etc. I counted 36 cryptocurrency tokens, and these tokens absorb around one-quarter or 26% of the total token market cap.
The anatomy of the current Tokens Market, as portrayed by @Murins of @iconiqlab for @tokens24. Read Report: https://goo.gl/EkfvfX Click To Tweet
The third largest category regarding market capitalization (41 tokens that account for 10% of market cap) is blockchain applications for the financial markets, e.g., invoice factorings, lending, etc. These tokens absorb 10% of the total market cap. The last category is blockchain applications for all other industries (50 tokens). These 50 tokens consume 11 % of the total market capitalization.
Supply is Dominated by Industry Tokens
The token supply significantly differs from the token demand. Token supply is dominated by industry application tokens. This can be easily observed looking into ICO stats for the year 2018 in coinschedule.com. The majority of the token supply consists of industry tokens. They (except finance) represent 70% of the total ICO funding requests, finance & payments – 20%. But basic technology, e.g., infrastructure, data storage, machine learning, represent only 10% of total ICO funding request.
Demand Exceeded Supply for Basic Tech & Crypto Market Tokens
Token buyers demand tokenization of emerging technologies at the foundational level, but supply is over saturated with industry focused application based tokens. Demand for basic tech and crypto market tokens may significantly exceed supply. It means that now is the golden time for those who build and tokenize emerging technologies. As of now, it’s mostly blockchain and crypto-infrastructure, but I believe that the next big thing is the tokenization of machine learning & artificial intelligence. But those who are issuing industry application based tokens are facing more severe competition. They need to spend more money and time in marketing. It is more important to enter the token market with smaller funding requests, and for them, it would be crucial to look for good token underwriters and/or token accelerators.
About the Author
I am the strategy director and co-founder of Iconiq Lab. We are a Frankfurt-based decentralized venture capital club that provides token buyers with the access to well-sourced token deal flow. We are issuing the ICNQ token on public sale which is live now. The ICNQ token is like the passport to pre-sales of well sourced and heavily vetted startup tokens. Check our website – www.iconiqlab.com to explore more.