Jodie Gunzberg, CFA, is the Managing Director of CoinDesk Indices.

Max Good, senior index research analyst at CoinDesk Indices, contributed writing for this report.

Introduction

In December 2021, CoinDesk Indices launched its digital asset classification standard (DACS) to set the standard for defining the industries of digital assets. Each of the top 500 digital assets by market capitalization is assigned to an industry defined by DACS, and then at least one industry is assigned to an industry group. Finally, at least one industry group is assigned to a sector.

There are now six sectors defined by DACS, including currency, computing, DeFi (decentralized finance), digitization, culture and entertainment and smart contract platform. The Currency sector is the largest in DACS with 146 assets representing 59.4% of the digital asset market, which was worth about $1 trillion in market capitalization as of April 30.

In this paper, we describe the Currency sector in further detail by discussing its definition, constituents and significance in the broader digital asset market.

Exhibit 1: CoinDesk Indices DACS

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CoinDesk Indices' six sector as of May 13. The market cap data is based on prices as of April 30.

Defining the Currency sector in DACS

Currency is the sector with the first digital asset, bitcoin. Bitcoin was launched in 2009. It paved the way for the development of many other digital assets.

Fundamentally, the Currency sector represents the purest and most basic form of peer-to-peer payment in the digital asset market, but it can take on the other traditional monetary characteristics, namely as a store of value and unit of account. As the crypto business evolves, other properties such as privacy and special-purpose permissioned blockchains grow in demand.

The DACS glossary defines the Currency Sector as follows:

The Currency sector refers to any digital asset acting primarily as a medium of exchange and unit of account running on a blockchain network with the ability to complete cross-border transactions without restriction. Digital assets in the Currency sector don't necessarily act as a store of value.

Industry groups inside the Currency sector in DACS

The industry assignments of digital assets in the Currency sector can be consolidated into four industry groups: transparent, stablecoin, blockchain as a service (BaaS) and private.

Transparent is the most traditional type of digital asset in the Currency sector and includes any digital asset that uses an open, permissionless and trustless blockchain. As opposed to private currencies, transparent currencies display the deposit addresses and token balances of both senders and receivers on the ledger. Transparent currencies can serve a range of different purposes, but fundamentally, they empower users to take control over their own finances.

Stablecoin refers to protocols whose native token is pegged to a fiat currency, most commonly the U.S. dollar. Stablecoins enable frictionless transfer and exchange of fiat-pegged assets on a blockchain. Stablecoin issuers may use one of several methods to maintain their peg, such as 1:1 dollar-backed reserves, multi-asset treasuries, collateralized lending, mint-and-burn mechanisms, etc.

Blockchain as a service describes protocols that are typically more centralized and use permissioned blockchains for narrowly defined purposes.

Private refers to protocols whose primary purpose is to maintain the anonymity of users and conceal their wallet balances. While typical blockchains have open, traceable and transparent ledgers, privacy-focused blockchains like Monero3 use a range of encryption techniques to obfuscate user-specific information without losing trust in network security, transaction finality and ledger verifiability.

All four industry groups in the Currency sector continue to see active growth and development as censorship-resistant and cross-border payment needs continue to grow and evolve around the globe.

Exhibit 2: Currency Sector Breakdown by Industry Group

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(Market capitalization data is based on prices on April 30, 2022.)

Exhibit 3: Industry Groups Under Currency Sector

Industry Group
Market Capitalization ($)
Number of Assets
% of Market Capitalization
Transparent
796,200,620,493
73
76.9%
Stablecoin
185,977,260,037
20
18.0%
Baas
44,847,154,995
42
4.3%
Private
8,814,251,620
11
0.9%

(Market capitalization data is based prices on April 30, 2022)

Industries inside the Currency sector in DACS

Each of the 146 assets in the Currency sector is assigned to a single industry before the industry is assigned to an industry group in the sector. There are eight industries that feed into the four industry groups that are mentioned above. Transparent DeFi currency, transparent CeFi (centralized finance) currency and transparent (other) are the three industries that are assigned to the transparent industry group, Stablecoin is the only industry that is assigned to the stablecoin industry group. Payments, supply chain/commerce and BaaS (other) are the three industries assigned to the BaaS industry group, and private is the only industry that is assigned to the private industry group.

The industries that make up the transparent industry group are dependent upon how they are distributed and controlled. Transparent DeFi currencies such as bitcoin are fully decentralized, transparent CeFi currencies are distributed by a central entity, and transparent (other) is made up of all digital assets that fall into the transparent industry group but couldn't be further classified.

As of April 30, transparent DeFi was the largest industry by market capitalization under the industry group with 31 assets totaling $765 billion in market cap, followed by transparent CeFi and transparent (other).

Exhibit 4: Industries Under the Transparent Industry Group

Industry
Market Capitalization ($)
Number of Assets
% of Market Capitalization
Transparent DeFi Currency
764,574,966,631
31
96.0%
Transparent CeFi Currency
29,752,296,684
38
3,7%
Transparent (Other)
1,873,357,179
4
0.2%

(Market capitalization data is based on prices from April 30, 2022)

Stablecoin refers to protocols whose native token is pegged to a fiat currency, most commonly the U.S. dollar. Stablecoins enable frictionless transfer and exchange of fiat-pegged assets on the blockchain. Stablecoin issuers may use one of several methods to maintain their peg, such as 1:1 dollar-backed reserves, multi-asset treasuries, collateralized lending, mint-and-burn mechanisms, etc.

In the BaaS industry group, payments such as Ripple tend to be geared toward businesses and governments, where decentralization is less of a concern and the blockchain can be streamlined for faster transaction speeds, lower fees and higher throughput.

Supply chain/commerce refers to protocols that enable producers, distributors and consumers to track, process and distribute goods and services using blockchain technology. BaaS (other) is made up of all digital assets that fall into the BaaS industry group but couldn't be further classified.

As of April 30, payments was the largest industry by market capitalization under the industry group with 14 assets totaling $35 billion in market cap, followed by supply chain/commerce and BaaS (other).

Exhibit 5: Industries Under the BaaS Industry Group

Industry
Market Capitalization ($)
Number of Assets
% of Market Capitalization
Payments
35,370,738,724
14
78.9%
Supply Chain / Commerce
4,989,517,864
15
11.1%
BaaS (Other)
4,486,898,407
13
10.0%

(Market capitalization data is based on prices on April 30.)

Private refers to protocols whose primary purpose is to maintain the anonymity of users and conceal their wallet balances. While typical blockchains have open, traceable and transparent ledgers, privacy-focused blockchains like Monero use a range of encryption techniques to obfuscate user-specific information without losing trust in network security, transaction finality and ledger verifiability.

Major assets in DACS Currency sector

There are 146 digital assets inside the Currency sector. The top asset, bitcoin (BTC), represents 69.3% of the sector, and the top 10 assets represent 92.7% of the sector. There are 146 assets in the transparent industry group, totaling $796 billion in market capitalization, with bitcoin being the largest. There are 20 assets in the stablecoin industry group, totaling $186 billion in market capitalization, with USD tether (USDT) being the largest. There are 42 assets in the BaaS industry group, totaling $45 billion in market capitalization with ripple (XRP) being the largest. In the private industry group, there are 11 tokens totaling around $9 billion in market capitalization with monero (XMR) being the largest.

Exhibit 6: Top 10 Assets Inside the DACS Currency Sector

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(Market capitalization data is based on prices on April 30.)


Conclusion

The Currency Sector is the largest sector with continuing growth and increasing institutional interest. As the primary means for cryptocurrency payments, innovation in this sector revolves around optimizing some combination of security, transaction speed and throughput, which takes place either through innovative protocols or scaling systems. With bitcoin leading the way, the Currency sector is likely to remain the largest sector by market capitalization for the foreseeable future and the sector with the most institutional demand both in terms of direct investment in assets and capital investments supporting bitcoin-related infrastructure.

References

1. Bitcoin (BTC) is the world’s first cryptocurrency, and the largest by market capitalization. Since launching in 2009, Bitcoin has revolutionized payments with its innovation in blockchain technology, creating a global, borderless, secure, censorship-resistant, pseudonymous, permissionless and trustless medium of exchange. Bitcoin’s proof-of-work consensus mechanism makes the Bitcoin network the most secure in the world. When proper security measures are taken, a bitcoin wallet is effectively un-hackable. These features have contributed to an explosion in usage and popularity, and bitcoin has seen a massive influx of institutional and retail adoption, positioning itself as a brand-new asset class and a legitimate store of value.

2. Ripple (XRP) is one of the oldest cryptocurrencies, and the largest BaaS asset by market capitalization. Ripple is a permissioned blockchain, largely secured by, and for, banks. This allows it to boast nearly instantaneous transaction speeds and near-zero fees. Ripple has positioned itself as a payments and settlements solution for financial institutions, targeting the SWIFT system as a competitor.

3. Monero (XMR) is the largest private cryptocurrency by market capitalization and one of the oldest. Monero uses innovative ring signature and stealth address technologies to fully mask the on-chain identities of senders and receivers, as well as wallet balances. This ensures true anonymity to all network participants while still maintaining a verifiable, immutable ledger. Monero is also secured via a proof-of-work consensus mechanism, though its algorithm is different from that used to secure Bitcoin.

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Jodie Gunzberg, CFA, is the Managing Director of CoinDesk Indices.

CoinDesk - Unknown

Jodie Gunzberg, CFA, is the Managing Director of CoinDesk Indices.

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