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What Does University of Cambridge’s New Cryptocurrency Study Say About The Market?

The University of Cambridge and the school’s Centre for Alternative Finance published its third “Global Cryptocurrency Benchmarking Study.” The study examines crypto’s overall growth, as well as the niches of mining, off chain activity, crypto asset user profiling, regulation, and security. 

The September 2020 study highlights in particular mining, payments, custody, and exchange. Apolline Blandin, Gina Pieters, Yue Wu, Thomas Eisermann, Anton Dek, Sean Taylor, and Damaris Njoki co-authored the proposal. 

The University of Cambridge (UC) sought out a large number of individuals from the cryptocurrency industry, such as wallet providers, exchanges, miners, cloud miners, crypto custodians, and more. The UC report gathered the metrics from two surveys conducted from March and May 2020.

The UC report first details the employment figures in the crypto industry, finding a decline in industry employment figures dating back to the end of 2017. “Respondents across all market segments, reported year-on-year growth of 21% in 2019, down from 57% in 2018,” states the report. 

Mining sector-based survey participants endured the largest  rise in unemployment as its aggregated employment fell 37 points. Alternatively, respondents in Asia-Pacific (APAC) reported the highest share of high-growth enterprises in 2019, the study found. Younger firms (3-4 years old) represent the highest share (49%) of high growth firms. 

“Industry-wide, the growth in FTE employment declined by 36 percentage points between 2017 and 2019, whereas the median firm reported a 75-percentage point downward change in employment growth,” the study notes.

The UC study also highlights the cryptocurrency mining ecosystem, suggesting that this particular niche reached “industrial scale.” The utility cost for most miners is approximately 79% of the aggregate operational expenditures. According to the report, bitcoin (BTC)  is the most popular coin with 89% mining the coin, followed by Ethereum (35%), and Bitcoin Cash (30%). There are regional differences between what’s mined where. 

“For instance, Ethereum mining appears to be particularly popular among Latin American hashers, whereas bitcoin cash is more popular in APAC and North America,” the authors detail. “The mining of privacy coins in Western regions also differs from the global average: 28% and 19% of European and North American hashers report mining zcash, and as many North American hashers also engaged in monero mining.”

The report found global laws can impact the cost of mining. “For instance, since the introduction of new tariffs on Chinese imports, US hashers have to pay 28% tariffs on ASICs shipped to the USA.”

The study suggests that median Asian and North American miners pay about the same for their electricity. The mining section analyzes the Proof-of-Work’s (PoW) energy consumption, as well as subsidies and tax exemptions provided by governments. 28% of miners reported receiving government support. The UC study found 39% of miners’ total energy consumption comes from renewables with 76% of respondents using a “mix” of traditional fuels, such as coal and renewables like hydropower. 

“Hydropower is listed as the number one source of energy, with 62% of surveyed hashers indicating that their mining operations are powered by hydroelectric energy. Other types of clean energies (e.g. wind and solar) rank further down, behind coal and natural gas, which respectively account for 38% and 36% of respondents’ power sources.”

The UC study also delved into the topic of stablecoins, IT security, and government regulations. Stablecoins, including tether (USDT), have grown to prominence and become “increasingly available,” according to the report. 

“Tether support [grew] from 4% to 32% of service providers and all non-Tether stablecoins [grew] from 11% to 55%. This increase is not simply from service providers holding stablecoins diversifying their holdings, but rather more service providers offering stablecoins.” 

The report also concluded that regulations changing the crypto landscape as the “decoupling of duties, such as between custody, clearing and settlement responsibilities, appears to be underway.” 

Over the past two years, the number of crypto companies following know your customer and anti-money laundering laws to 13% from 48%.   The UC study claimed that the standards enforced by the Financial Action Task Force (FATF) invoked this significant change. Defi has enjoyed a re-emergency, as the report found defi has introduced  “more risky and experimental innovations.” Crypto service providers might see their business models disrupted  “in the next 12 months.”