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1State of Bitcoin Q1 2015 Sponsored by Gem
State of Bitcoin Q1 2015
10th April 2015
2State of Bitcoin Q1 2015 Sponsored by Gem
About CoinDesk
• World leader in digital currency news, prices and information
• The Bitcoin Price Index serves as an industry reference point
• International team headquartered in London• Editors based in London, New York, San Francisco and Tokyo
3State of Bitcoin Q1 2015 Sponsored by Gem
Sponsored by
4State of Bitcoin Q1 2015 Sponsored by Gem
State of Bitcoin Credits
• Creator and Producer: Garrick Hileman (@GarrickHileman)
• Statistical assistance: Danqing Ying (@DanqingYing)
Garrick Hileman Danqing Ying
5State of Bitcoin Q1 2015 Sponsored by Gem
Contents
• Summary and Adoption Dashboard
• Valuation• Media• VC Investment• Commerce• Technology• Regulation and
Macro
Sponsored by Gem 6State of Bitcoin Q1 2015
Summary and Adoption
Dashboard
7State of Bitcoin Q1 2015 Sponsored by Gem
Q1 2015 Summary
Sustained pressure on bitcoin’s price, which is due to the current demand-supply imbalances, is winnowing the mining and exchange sectors
Q1 was bitcoin’s largest VC investment quarter yet with $226m raised; all-time bitcoin VC investment now totals $676m
21 Inc, which announced $116m in new funding, surpassed Coinbase as the best-capitalized bitcoin startup
Improved regulatory clarity (ie NY BitLicense revisions, UK’s favorable posture) are building industry confidence and attracting Wall Street
Blockchain’s total wallets passed three million; merchant adoption slowed due to bitcoin’s underwhelming value proposition for mainstream consumers
Bitcoin’s price briefly dropped to $177 in January 2015, and is down 24% so far in 2015
8State of Bitcoin Q1 2015 Sponsored by Gem
Key Bitcoin Adoption Metrics
Data sources and notes: CoinDesk, Blockchain.info, BitcoinPulse, Github, Coin ATM Radar. Figures are cumulative from start of records, except unique bitcoin addresses and media mentions, which are figures for the quarter ending that month.
Quarterly Last 12 Months Mar-15 Dec-14 Q/Q Δ Mar-14 ΔCommerce
Wallets 8,457,207 7,396,772 14% 4,448,142 2xMerchants 88,000 82,000 7% 52,704 2xMerchants’ annual revenue ($bn) 180 180 0% 2 78xATMs 374 342 9% 47 8xUnique bitcoin addresses 203,189 157,377 29% 137,342 1x
IndustryAll-time VC investment ($m) $676 $447 51% $164 4xNumber of VC-backed startups 103 89 16% 47 2x
MediaMainstream media mentions 458 580 -10% 2,594 -82%
TechnologyNetwork hash rate (billion/second) 346,028,956 313,142,289 11% 41,813,922 8xGithub no. of updated repositories 27,857 23,249 20% 9,915 3x
ValuationBitcoin market capitalization ($bn) $3.4 $4.3 -21% $5.3 -36%
9Sponsored by GemState of Bitcoin Q1 2015
Price and Valuation
10State of Bitcoin Q1 2015 Sponsored by Gem
CoinDesk Bitcoin Price Index – Q1 & YTD by the Numbers
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
31st Dec Close $319.7031st Mar Close $243.39ΔQ1/Q4 Close -23.9%31st Mar Market Cap $3.4bn
High (2nd Jan) $314.59Low (14th Jan) $177.28YTD High-Low Δ -43.6%Average $250.68Median $246.85
Q1 Price Summary
YTD Price Summary
11State of Bitcoin Q1 2015 Sponsored by Gem
1-Jan 8-Jan 15-Jan 22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 5-Mar 12-Mar 19-Mar 26-Mar$150
$170
$190
$210
$230
$250
$270
$290
$310
$330
Bitcoin’s Price in Q1 Remained Volatile Amid a Mix of Positive and Negative News
14th JanBitcoin’s price plunges, breaks $200 mark
18th MarUK Chancellor Osborne announces favorable regulatory environment and research investment
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
5th JanBitstamp suffers $5m hot wallet hack
Hong Kong's MyCoin disappears with up to $387m, reports claim
9th Feb
25th JanCoinbase launches US bitcoin exchange
10th MarBitcoin startup 21 Inc announces $116m raised, all-star investor roster
20th JanMainstream financial institutions join Coinbase's record $75m funding round
4th FebRoss Ulbricht found guilty in NY court of operating Silk Road; Ben Lawsky releases revised NY BitLicense
12State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin’s Price Decline Has Not Stopped Exchange Trading Volume From Trending Up
Data sources: Blockchain, CoinDesk, Bitcoinity
Monthly Bitcoin Trading Volume
Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-150
1000000000
2000000000
3000000000
4000000000
5000000000
6000000000
7000000000
0
5000000
10000000
15000000
20000000
25000000
Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)
Sponsored by Gem
Industry Rationalization: Bitcoin’s Price Plunge, Other Issues are Thinning the Ranks of
Exchanges and Mining
13State of Bitcoin Q1 2015
Source: CoinDesk
Min
ing
Aquifer LLCEx
chan
ges
• A number of well-known exchanges and mining operators have recently gone bankrupt or shuttered operations for various reasons
14State of Bitcoin Q1 2015 Sponsored by Gem
• While mining is the only bitcoin sector to date to generate significant revenues, at current (or lower) price levels, further sector consolidation is anticipated
Diminishing Incentives to Mine Bitcoins Will Result in Further Mining Sector Consolidation
Data source: Blockchain. Note: Miners revenue = (number of bitcoins mined per day + transaction fees) * market price.
01/01/201403/03/201403/05/201403/07/201402/09/201402/11/201402/01/201504/03/20150.0 500,000.0
1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 3,000,000.0 3,500,000.0 4,000,000.0 4,500,000.0 5,000,000.0
0
5000
10000
15000
20000
25000
30000Miners Revenue and Transaction Fee (USD)
Miners Revenue Transaction Fee
15State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin Primarily Functions as a Store of Value, Less Frequently Used as a Medium of Exchange
Data sources: Bitcoinity, Blockchain
Mar-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-150
1
2
3
4
5
6
7 Total Trading Volume vs Transaction Ratio
16State of Bitcoin Q1 2015 Sponsored by Gem
Peak Altcoin? For the First Time, Quarter-over-Quarter Altcoin Growth Was Flat
Data source: CoinMarketCap
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-150
100
200
300
400
500
600
700
0%
5%
10%
15%
20%
25%
64
216
347
483
590 594
9%
23%
7% 8%9%
7%
Total Number of AltcoinsAltcoin Market Cap Share (%)
*Note: Altcoin market cap share is calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by all cryptocurrency market caps (including bitcoin). For example, a market value share of 7% for altcoins indicates that bitcoin by itself represents 93% of the market cap of all cryptocurrencies combined.
State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin’s Market Cap is 14x Larger Than the Next Altcoin, up 6x from End of 2014
17
Data source: CoinMarketCap data as of 1st Apr 2015
Rank Name Market Cap1 Bitcoin $ 3,428,547,5612 Ripple $ 245,984,6203 Litecoin $ 62,695,6714 Dash $ 20,785,7725 BitShares $ 16,084,9466 Dogecoin $ 12,518,4297 Stellar $ 12,222,5108 Nxt $ 9,887,1719 MaidSafeCoin $ 8,090,823
10 Paycoin $ 7,683,946
18State of Bitcoin Q1 2015 Sponsored by Gem
Media
State of Bitcoin Q1 2015 Sponsored by Gem
Q1 Negative News
19
Bitstamp claims at least $5m lost in hot wallet hack
Bitcoin mining firm CoinTerra heads for Chapter 7 bankruptcy battle amid acrimonious claims on both legal sides
Hong Kong's MyCoin disappears with an initially reported $387m
Steady stories of bitcoin-related crime undermine mainstream user trust in bitcoin Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem
Q1 Positive News
20
Coinbase's record $75m funding round, opening of US-based exchange
Bitcoin Core 0.10 gives developers simplified tools and sophisticated fee suggestions
Blockchain reports its total number of wallets passes three million
Bitcoin startup 21 Inc announces $116m raised, with all-star VC backing
Source: CoinDesk
21State of Bitcoin Q1 2015 Sponsored by Gem
Q1 Most-Viewed CoinDesk Articles: Relative Interest in Bitcoin’s Price Articles Continues to
DeclineRank Title Date
1 Roger Ver Denied US Visa to Attend Miami Bitcoin Conference 7th Jan2 IBM Reveals Proof of Concept for Blockchain-Powered Internet of
Things17th Jan
3 Bitstamp Claims $5 Million Lost in Hot Wallet Hack 5th Jan4 Bitcoin Price Continues to Fall, Breaks $200 Mark 14th Jan5 State of Bitcoin 2015: Ecosystem Grows Despite Price Decline 7th Jan6 Research: Hackers Could Install Backdoor in Bitcoin Cold Storage 16th Jan7 Hong Kong's MyCoin Disappears with up to $387 Million, Reports
Claim9th Feb
8 Bitcoin Price Crashes Through $250 Mark 13th Jan9 Apple Approves iOS Game That Tips Players in Bitcoin 8th Jan
10 Goldman Sachs Report Says Bitcoin Could Shape ‘Future of Finance'
11th Mar
Source: CoinDesk top 10 Q1 stories based on pageviews
CoinDesk’s Top 10 Most Viewed Stories in Q1
State of Bitcoin Q1 2015 Sponsored by Gem
Mainstream Bitcoin Media Coverage Dropped Quarter-Over-Quarter
22
News Published Mentioning Bitcoin
Note: Numbers of stories obtained by searching ‘bitcoin’ on respective publishers’ websitesSources: Financial Times, New York Times, Wall Street Journal and Sina websites
Sina
WSJ
NYT
FT
0 50 100 150 200 250
235
156
76
41
180
127
73
78
Q1 2015 Q4 2014
23State of Bitcoin Q1 2015 Sponsored by Gem
‘Bitcoin Price’ Continues to be the Top Search Term; Utorrent Mining Malware Scare Rising
Past 90 Days
Related Searches: Top
Related Searches: Rising
Past 12 Months
Source: Google Trends data as of 1st Jan 2015
24State of Bitcoin Q1 2015 Sponsored by Gem
VC Investment
25State of Bitcoin Q1 2015 Sponsored by Gem
Two Biggest Bitcoin VC Deals in Q1…
$116m$75m (Series C) January 2015 (Series A) March 2015*
Source: CoinDesk
*Note: The precise timing of when the $116m was raised, or whether it was raised in various individual stages, has not been revealed.
26State of Bitcoin Q1 2015 Sponsored by Gem
…Both Deals Broke the Previous Record for Largest Single VC Investment Round
Sources: CoinDesk, Crunchbase, Bank Innovation
“The Coinbase $75m raise does sound like a Pre-IPO round. A Bitcoin IPO such as Coinbase could trigger mainstream merchant adoption”
- Bernard Lunn, Bank Innovation
$0
$20
$40
$60
$80
$100
$120 $116
$75
$31 $30 $25
Milli
ons
Top Five All-Time VC Investment Deals
27State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin’s $121 Million Question
*No announcement has been made on 21 Inc’s exact business strategy beyond confirmation that it meets CoinDesk’s definition of a universal bitcoin company.
Sources: CoinDesk, Crunchbase. Superman artwork courtesy of Tattoosales.com, trademark owned by DC Comics
Is it a supercharged mining operation? Is it a hardware wallet?
No, it’s bitcoin’s newest universal, 21 Inc!*
Matthew PaukerCEO, 21 Inc
28State of Bitcoin Q1 2015 Sponsored by Gem
Q1 Set a Record for Bitcoin Venture Capital Investment, Nearly Doubling Q4 2014
Data sources: CoinDesk, CrunchBase
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015$0
$50
$100
$150
$200
$250
$66 $84
$66
$133
$229
Quarterly Total VC Investment (USD Millions)
Mill
ions
Note: The precise timing of when 21 Inc raised the $116m it announced in Q1 is unclear; 21 Inc’s full $116m is included in the Q1 2015 total.
29State of Bitcoin Q1 2015 Sponsored by Gem
All-Time Bitcoin Venture Capital Investment Increased 51% from End of 2014 to $676m
$676m
$229mTotal VC investment in cryptocurrency startups to date:
Q1 2015 bitcoin VC investment:
$133mQ4 2014 bitcoin VC investment:
Data sources: CoinDesk, CrunchBase
+51%
Increase in total to-date VC investment from end of Q4:
30State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin VC Investment Projected to Continue Outpacing Early-Stage Internet Investment
Note: Internet figures include only first sequence venture deals. All figures unadjusted for inflation, changes in the cost of launching a startup over last two decades, etc. Further methodology discussion.
Data sources: CoinDesk, PricewaterhouseCoopers
0
100
200
300
400
500
600
700
800
900
1000
$349
$916
$250
$638
Bitcoin vs early Internet VC investment ($ millions)
$ M
illion
s
2014 Bitcoin 2015 Bitcoin - projected1995 Internet 1996 Internet
Sponsored by Gem
US Continues to Dominate Bitcoin VC Investment; First VC Funded Africa-Based Startup in Q1
31State of Bitcoin Q1 2015
Regions Q1 ($m)
Q4 ($m)
Q/Q Δ ($m) Q/Q Δ
US & Canada 492.3 289.7 202.6 70%
Europe 119.1 99.2 19.9 20%Asia 42.1 41.0 1.1 3%
Middle East 14.0 11.1 2.9 26%Latin
America 7.5 6.0 1.5 25%
Africa 1.1 0.0 1.1 N.A.
Total 676.1 447.0 229.1 51%
$ Invested as of Q4 2014
• US & Canada had the largest Q/Q% increase in investment• Asia saw almost no investment in Q1
Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter.Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
$ Invested as of Q1Europe
18%Africa 0%
Asia 6%Middle
East 2%
Latin America
1%
US & Canada
73%
Europe 22%
Asia 9%Middle East 2%
Latin Amer-ica 1%
US & Canada
65%
32State of Bitcoin Q1 2015 Sponsored by Gem
Startups in 4 New Countries Received VC Investments; 22 Countries in Total Have a VC-
Backed Bitcoin Startup
Data source: CoinDesk (www.coindesk.com/bitcoin-venture-capital/)
Barbados
Switzerland
France
Kenya
33State of Bitcoin Q1 2015 Sponsored by Gem
US-Based Bitcoin Venture Capital Investment Nearly 2x Greater Than Rest of the World
Combined
Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
Luxem
bourg
German
y
Austr
alia
Pana
maMexi
coJap
anFra
nce
Canad
aIsr
ael
Swed
en
United
King
dom
$0
$100
$200
$300
$400
$500
Total Funding by Country (USD Millions)
Mill
ions
34State of Bitcoin Q1 2015 Sponsored by Gem
Silicon Valley Pulling Away: Share of All-Time Bitcoin VC Investment Jumped from 45% in Q4
to 59% in Q1
Location Value ($m)
No. of companie
sSilicon Valley $400.0 30
Rest of World $276.1 73
Total $676.1 103
• 87% of the total Q1 bitcoin VC funding went to Silicon Valley-based startups
• Total number of VC-backed bitcoin companies increased from 89 in Q4 2014 to 103 in Q1, a 16% increase
$ Invested No. of Companies
Note: Prior State of Bitcoin data may differ due to new funding information obtained.Date sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
Silicon Valley 59%
Rest of World 41%
Silicon Valley 29%
Rest of World 71%
35State of Bitcoin Q1 2015 Sponsored by Gem
Q1 Deal Summary: Acquisitions and Reverse Merger Activity Accelerates
Source: CoinDesk
Jan 2015
Jan 2015
Acquisitions
Reverse MergersJan 2015
Feb 2015
Loma Vista Capital
MGT Capital Investment
Apr 2015
State of Bitcoin Q1 2015 Sponsored by Gem
Keeping Bitcoin’s Size in Perspective - FinTech Investments Dwarfed Bitcoin in 2014
36
BitcoinFinTech
Data sources: CoinDesk, Medium (https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677)
*Note: All data are 2014 only.
FinTech$3bn invested in 2014
$0.3bn invested in
2014
100 Deals
Biggest Deal
$31m*
216Deals
Biggest Deal
$150m
State of Bitcoin Q1 2015 Sponsored by Gem
The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company Categories
37
Payment Processin
g
Wallets
Mining
Financial
Services
Exchanges
Infrastructure
Universal
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem
A New Ecosystem Category Takes Shape: Infrastructure
38
Sources: CoinDesk
• Bitcoin infrastructure companies build security tools, develop protocol enhancements and provide APIs for other bitcoin businesses to build on
• The eight companies in the infrastructure category have raised a combined $56m to date
39State of Bitcoin Q1 2015 Sponsored by Gem
Ecosystem Sector Trends: Universals Raised Most Funding in Q1, Followed by Mining and
InfrastructureQ1 VC Investment by Ecosystem Category (USD
Millions)
Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
$0
$40
$80
$120
$160
$200
$1.1 $2.0 $3.8 $5.0 $6.1 $20.0
$191.0
Payment Processor Wallet Exchange Financial Services Infrastructure Mining Universal
Mill
ions
40State of Bitcoin Q1 2015 Sponsored by Gem
Universals Are Pulling Away From Other Sectors in Total VC Investment
2013 to 2015 VC Investment by Ecosystem Category (USD Millions)
Data source: CoinDesk
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015$0
$50
$100
$150
$200
$250
$300
Payment Processor Exchange Universal MiningFinancial Services Wallet Infrastructure
Mill
ions
41State of Bitcoin Q1 2015 Sponsored by Gem
Universals Now Command Nearly 40% of VC Investment; Mining and Wallets at 14% Each
• 83% of Q1 investment was made in Universals
• The number of Universals also continues to climb, now up to 10
$ Invested as of Q4 2014$ Invested as of Q1
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter. Data Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
Payment Processor12%
Infrastructure11%
Exchange14%
Financial Services
9%
Mining17%
Universal16%
Wallet20%
SectorQ1 Q4 Q/Q Δ
($m) Q/Q Δ($m) ($m)Payment Processor 55.4 54.3 1.1 2%
Infrastructure 55.7 49.6 6.1 12%Exchange 65.8 62.0 3.8 6%Financial Services 48.5 43.5 5.0 12%Mining 96.5 76.5 20.0 26%
Universal 262.6 71.6 191.0 267%Wallet 91.6 89.6 2.0 2%Total 676.1 447.
3 229.0 51%
42State of Bitcoin Q1 2015 Sponsored by Gem
Q1 2015 Investment Rounds in Bitcoin Startups
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Close Date Company Size ($m) Roun
d Select Investors Headquartered
Mar-15 PeerNova 5.00 First OverStock San Jose
Mar-15 Bitt 1.50 Seed Avatar Capital Christ Church
Mar-15 TabTrader 0.07 Seed Rockstart Amsterdam
Mar-15 Coinigy 0.10 Seed Undisclosed Milwaukee
Mar-15 21 Inc 116.00 First Andreessen Horowitz, Data Collective, Khosla Ventures San Francisco
Mar-15 ShapeShift 0.53 Seed Barry Silbert and Roger Ver Zug
Feb-15 Ledger 1.50 Seed XAnge Private Equity, Hi-Pay (Hi-Media group), Fred Potter Paris
Feb-15 BitPesa 1.10 Second
Pantera Capital, Bitcoin Opportunity Corp, Crypto
Currency PartnersNairobi
43State of Bitcoin Q1 2015 Sponsored by Gem
Q1 2015 Investment Rounds in Bitcoin Startups (contd.)
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Close Date Company Size ($m) Roun
d Select Investors Headquartered
Feb-15 HashRabbit 0.50 Seed Draper Associates, VegasTechFund San Francisco
Feb-15 KnCMiner 15.00 Second
Accel Partners, GP Bullhound, Creandum, Martin Wattin Stockholm
Feb-15 NeuCoin 1.25 Seed Patrik Stymne, Emil Michael, Henrik Kjellberg Paris
Feb-15 Ziftr 0.85 Seed 10x Venture Partners Milford
Feb-15 Bonafide (Bonifide.io) 0.85 Seed Quest Venture Partners, Crypto
Currency Partners New York
Jan-15 BitFlyer 1.10 SeedBitcoin Opportunity Corp, RSP
Fund No. 5, GMO Venture Partners
Tokyo
Jan-15 Colu 2.50 Seed Aleph, Spark Capital, Bitcoin Opportunity Corp, Box Group Tel Aviv
Jan-15 Anycoin Direct 0.56 Seed Undisclosed Veghel
44State of Bitcoin Q1 2015 Sponsored by Gem
Q1 2015 Investment Rounds in Bitcoin Startups (contd.)
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Close Date Company Size ($m) Roun
d Select Investors Headquartered
Jan-15 Coinbase 75.00 Third New York Stock Exchange (NYSE), USAA, BBVA, DoCoMo San Francisco
Jan-15 TrustAtom 0.10 Seed Brian Cartmell, Vinny Lingham Vancouver
Jan-15 Ciphrex 0.50 First Undisclosed San Diego
Jan-15 BlockCypher 3.10 SeedTim Draper, AME Cloud Ventures, Boost VC, 500
StartupsSan Mateo
Jan-15 Airbitz 0.03 Seed Plug and Play Tech Center San Diego
Jan-15 LibertyX 0.40 Seed Project 11 Boston
Jan-15 GetGems 0.40 Seed Magma VC Unknown
Jan-15 CoinOutlet 0.10 Seed BitcoinShop New York
45State of Bitcoin Q1 2015 Sponsored by Gem
Commerce
46State of Bitcoin Q1 2015 Sponsored by Gem
Everyday Items Rank Above Consumer Tech on Overstock’s List of ‘Most Often Bought
with Bitcoin’
Sources: CoinDesk, Overstock
1. Sheets 2. Donations to non-profits
3. Headphones
6. Cables and tools
5. Area rugs4. Cases and holders
7. Mattresses
8. Coffee tables 10. Fashion sunglasses
9. A/V cables
Sponsored by Gem
Growth of New Bitcoin-Accepting Merchants Remained Slow in Q1
47State of Bitcoin Q1 2015
Sources: CoinDesk, CoinBase, BitPay, International Business Times
Number of New Bitcoin-Accepting Businesses Added Each Quarter
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 20150
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
48State of Bitcoin Q1 2015 Sponsored by Gem
More than 88,000 Merchants Now Accept Bitcoin, up from 82,000 in Q4 (+7%)
50K 38K
Data sources: Coinbase, BitPay
Sponsored by Gem
Total merchants Forecasted merchants
Bitcoin-Accepting Merchant Forecast Slashed to Approximately 120,000 by End of 2015
49State of Bitcoin Q1 2015
Data sources and notes: Total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided by BitcoinPulse. BitPay historical data between new merchant press release announcements of 10,000 (16th Sep
2013), 20,000 (13th Jan 2014) and 30,000 (28th May 2014), respectively, calculated using linear interpolation.
Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-150
10,00020,00030,00040,00050,00060,00070,00080,00090,000
100,000R² = 0.958606798946255
50State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin’s Lack of Use in Commerce is Not Just a ‘Chicken and Egg’ Problem
Sources: Pantera Capital, ZepChain, CoinDesk (http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/)
"I believe merchants have been widely disappointed by the number of transactions they see in bitcoin. Most merchants have taken a passive approach to integrating bitcoin as a payment method, instead of strategically testing and optimizing checkout flows to encourage consumer adoption."
Steve Beauregard,CEO of GoCoin
• Merchants generally welcome bitcoin adoption• Lack of consumer adoption is the fundamental
problem• Consumers need compelling reasons to use the
volatile and still relatively hard to acquire bitcoin over alternatives
Sponsored by Gem
CoinCenter’s Public Sentiment Survey Indicates Low Bitcoin Awareness in US
51State of Bitcoin Q1 2015
Source: CoinCenter
64.3%of the general American
population are not familiar at all with bitcoin
6.2%of the general American
population say they have used bitcoin
Distrust in bitcoin decrease
s from 50% to 37% as
familiarity with bitcoin
increases
People who are familiar
with bitcoin
are more
likely to think it
is useful But the distrust in
bitcoin is similar (47%) among those who frequently use bitcoin and those who never use
53.1%of those who are very familiar with bitcoin have never used it
State of Bitcoin Q1 2015 Sponsored by Gem
Blockchain’s Quarterly New Wallet Growth Rate Has Been Remarkably Consistent
52
Data Source: Blockchain.info
Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-20150
100,000
200,000
300,000
400,000
500,000
600,000
120,262
514,583 481,258
343,121
480,715 451,294 454,435
No. of New Wallets Added Each Quarter
53State of Bitcoin Q1 2015 Sponsored by Gem
Total Wallets Forecasted Wallets
Forecast for Total Bitcoin Wallets by End of 2015 Maintained at 12 million
Data Sources and notes: total wallets based on data from Blockchain.info, MultiBit, Coinbase, Andreas Schildbach (Android Bitcoin Wallet developer). Historical Coinbase data provided by BitcoinPulse.
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-150
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000R² = 0.980691972885584
Sponsored by Gem
The Five Types of Bitcoin User
54State of Bitcoin Q1 2015
1. People who want a cheap, fast, global online payment experience
2. People who want access to a new suite of consumer payment applications
3. People who want to connect to the global economy for the first time
4. People who believe bitcoin is an attractive investment
5. People who value financial privacySources: CoinDesk, Coinbase Blog
55State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin Transactions Have Been Rising; Average of 10,000 Daily Transactions by Popular
Addresses*
Apr-14 Jul-14 Oct-14 Jan-1540,000
60,000
80,000
100,000
120,000
Total no. of daily transactionsNo. of daily transactions excluding popular addresses
Source and note: Blockchain.info, *100 most popular addresses.
• The milestone of 100,000 daily transactions by ‘addresses excluding popular ones’ was reached in February, which is two months later than total transactions
Number of Transactions per Day
56State of Bitcoin Q1 2015 Sponsored by Gem
Now Over 374 Bitcoin ATMs Around the World, but Growth in New ATMs is Slowing
Data source: CoinATMRadar
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 20150
20
40
60
80
100
120
43
79
112104
32
Increase in Number of Bitcoin ATMs
57State of Bitcoin Q1 2015 Sponsored by Gem
Break Even for Bitcoin ATM Owners is 11 Months; Average ATM Generates $5,520 profit per year
Sources: CoinDesk, BitAccess, Reddit, CoinATMRadar
Notes: Annual profits vary significantly depending on transaction volume. BitAccess machines are doing about $30,000 in transactions per month (Montreal installed machine). Skyhook Bitcoin ATM in Philippines has on average 40-50 transactions per month. However, the average bitcoin purchase size is not revealed.
Operation MetricsNumber of transactions/month 100Average transaction size ($) 200Transaction fee revenue (%) 5Revenue per year ($) 12,000Cost MetricsBitcoin ATM acquisition cost ($)
5,000
Place rent/month ($) 200Exchange fee (%) 0.2Cash logistics/month ($) 300Costs per year ($) 6,480Profits per Year ($) 5,520
58State of Bitcoin Q1 2015 Sponsored by Gem
High Transaction Fees May be Discouraging People from Using Bitcoin ATMs
Sources: CoinDesk, Reddit, CoinATMRadar
Social media comments on bitcoin ATM fees
59State of Bitcoin Q1 2015 Sponsored by Gem
North America50%
Europe32%
Asia11%
Oceania6%
Latin America1%
Africa0%
Bitcoin ATMs by Continent
Half of Bitcoin ATMs are Located in North America, Nearly One-Third are in Europe
Data source: CoinATMRadar
60State of Bitcoin Q1 2015 Sponsored by Gem
Technology
Sponsored by Gem
Profiles of Four Alternative Uses of Blockchain Technology
61State of Bitcoin Q1 2015
1. Property title
2. Smart contracts
3. Voting
4. Notary services
Sources: CoinDesk, Coinbase Blog
62State of Bitcoin Q1 2015 Sponsored by Gem
Property Title: Blockchain Technology Could Empower the Poor, Reduce Global Inequality
• With protected property title, people could better engage in economic activities such as investment and infrastructure construction.
Sources: Hernando de Soto (2002) Law and Property Outside the West, Housing Finance International June 1994, de Soto, Hernando. 2000. The Mystery of Capital. UK: Black Swan.
“An elite minority enjoys the economic benefits of the law and globalization, while the majority of entrepreneurs are stuck in poverty, where their assets – adding up to more than $10tn worldwide – languish as dead capital in the shadows of the law.”
- Hernando de Soto, economist Lima, Peru
“Blockchain technology could 'parachute' property title services into many poverty stricken countries.” - Balaji S. Srinivasan, 21 Inc
63State of Bitcoin Q1 2015 Sponsored by Gem
Financial Automation: Smart Contracts are Being Deployed by a Number of Companies
Sample smart contract: A dog with a GPS chip in his collar is walked by a dog walker. On completing the walk the collar sends a network signal, and the contract automatically executes a cryptocurrency payment to the walker.
Sources: CoinDesk, Ripple Labs, BitHalo, Reality Keys, Fast Co.labs, Morton Fraser
64State of Bitcoin Q1 2015 Sponsored by Gem
Voting: Blockchain-Based Tech is Already Being Used in Elections
• In a traditional voting system, you have no idea about whether your vote is counted. However, blockchain voting allows you to have the ability to audit whether your vote is counted by viewing your vote using a public ledger.
• At the same time, anonymity is also protected.Source: CoinDesk
65State of Bitcoin Q1 2015 Sponsored by Gem
Notary: Blockchain Technology Could Reshape Notarization Services and Reduce Inefficiency
Sources: The Economist, Proof of Existence, CoinDesk
• A study carried out for the European Commission in 2007 found that house buyers in countries with highly regulated notarial systems paid much higher legal fees than house buyers elsewhere (see chart).
• Blockchains can store and certify the existence of documents without relying on a central authority. Companies like CoinSpark and Proof of Existence are providing the service.
State of Bitcoin Q1 2015 Sponsored by Gem
Views on the Application of Bitcoin Technology to the Internet of Things
66
Sources: CoinDesk, LinkedIn
“Applying the blockchain concept to the world of the Internet of Things offers fascinating possibilities. Right from the time a product completes final assembly, it can be registered by the manufacturer into a universal blockchain representing its beginning of life. Once sold, a dealer or end customer can register it to a regional blockchain (a community, city or state).”
“We demonstrate how a humble washer can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.”
Paul Brody,Technology Strategy Consulting, IBM
State of Bitcoin Q1 2015 Sponsored by Gem
Functional Bitcoin Applications Can Be Grouped into 10 Categories
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Source: CoinBase Blog
Email – Email applications that eliminate spam by requiring BTC for email delivery
Video – Video applications that require one-click micropayments to view video content
News – News sites that eliminate advertising for users by requiring BTC for time spent viewing content
Crowdfunding – Global crowdfunding applications that allow project creators to raise funds from around the world
Payouts – Applications that allow creators or service providers anywhere in the world to get paid by a global audience
State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin Functional Applications (contd.)
68
Source: CoinBase Blog
Remittances – Global remittance applications that enable worldwide cross-border payments
Ecommerce – Bitcoin-focused merchant directories that offer a beautiful UI for consumers
Communication Networks – Applications that incentivize nodes to provide resources to communications networks by rewarding BTC for participation
Identity – Distributed identity applications that give people control of their own identity, built on top of a distributed identity protocol
Attribution – Attribution applications that allow users to prove ownership of data, built on top of an attribution protocol
69State of Bitcoin Q1 2015 Sponsored by Gem
Bitcoin Mining Arms Race Slows: Bitcoin’s Network Difficulty QoQ Growth Rate
Flattens
Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk
Quarterly Increase in Bitcoin Mining Difficulty
Q2 2014 Q3 2014 Q4 2014 Q1 20150
2000000000
4000000000
6000000000
8000000000
10000000000
12000000000
14000000000
16000000000
18000000000
20000000000
0%
50%
100%
150%
200%
250%
11,811,600,896.0
17,842,963,456.0
5,979,529,216.0 6,076,596,224.0
236%
106%
17% 15%
Quarterly Increase in Mining Difficulty Qtr.-over-Qtr. Percentage Increase in Mining Difficulty
Hash
es
70State of Bitcoin Q1 2015 Sponsored by Gem
AntPool
F2Pool
BW.com
BTCChina PoolKnCMiner
SlushGhash.io
BTC Guild
Eligius
EclipseMC
Bitcoin Af -filiate Net-
work
MegaBigPower
P2PoolBitMinter
Unknown with
1BwZeHJ Address
Unknown
Mining Pools: No News is Good News; Still No Permanent Fix for 51% Attack Risk
Data source: Four-day average as of 1st Apr 2015 blockchain.info/pools
Ghash.io continues to shrink, down to less than
10% share from 50%
in July 2014
71State of Bitcoin Q1 2015 Sponsored by Gem
Software Developer Interest in Bitcoin Continues Steady Growth
Number of Created Repositories in Github with Bitcoin in the Name or Description
Data source: BitcoinPulse
72State of Bitcoin Q1 2015 Sponsored by Gem
Nodes: Levelling Off in Node Numbers Eases Bitcoin Network Centralization Concerns
Data sources: Bitnodes
73State of Bitcoin Q1 2015 Sponsored by Gem
Quiet, Successful Update to the Bitcoin Core Protocol in Q1
Consensus library:• The consensus library makes it easier to build competing full
node implementations by reusing the most sensitive and difficult part of the Core source code
Transaction fees:• Core wallet users are provided with an estimate of the fees to
pay in order to get quicker confirmations
Headers-first syncing:• A node first downloads parts of a block before proceeding to
download the entire blockchain, which speeds up communications between nodes. This makes running a full node a more attractive prospect even as there are fears over a declining number of nodes in operation Source: CoinDesk
New features added to Bitcoin Core software version 0.10 include:
State of Bitcoin Q1 2015 Sponsored by Gem 74
Regulation and Macro
Sponsored by Gem
Bitcoin Startups Targeting the World’s 2.5 Billion ‘Unbanked’
75State of Bitcoin Q1 2015
Sources: CoinDesk, Mckinsey, Bitcoin for the Unbanked
Percentage of total adult population that does not use formal or semiformal financial services
0-25% 26-50% 51-75% 76-100%
Estimates used to calculate regional averages
State of Bitcoin Q1 2015 Sponsored by Gem
Wall Street Interest in Bitcoin is Growing
76
Three blockchain startups selected for Barclays Accelerator, with one aiming to provide blockchain solutions for the insurance industry
Sources: CoinDesk, Bank Innovation
Citi wants “to [accelerate] emerging technologies that have the potential to transform financial services experiences for Citi’s customers”
UBS is set to open a London-based research lab to explore the application of blockchain technology in the financial services industry
77State of Bitcoin Q1 2015 Sponsored by Gem
Migration of Wall Street Executives to Bitcoin Companies Continues
Sources: WSJ, CoinDesk, LinkedIn
Blythe Masters,JP Morgan Chase. Now at Digital Assets Holdings LLC
Gene Sperling,National Economic Council. Now advisor at Ripple Labs
Duncan Niederauer, NYSE. Now advisor at TeraExchange
Paul Camp,JP Morgan Chase. Now at Circle
Arthur Levitt,SEC. Now advisor at BitPay and Vaurum
Arthur Hayes,Citi. Now at BitMEX
Jason Weinstein,US Department of Justice. Now advisor at BitFury
Timo Schlaefer,Goldman Sachs. Now at Crypto Facilities
State of Bitcoin Q1 2015 Sponsored by Gem
Nine Banks in Total Have Established Banking Relationships with Bitcoin Startups
to Date
78
Source: CoinDesk
• Securing banking partnerships has hindered the operations of bitcoin companies, often forcing them to halt part of their offerings
• However, partnership between banks and bitcoin companies could improve security and efficiency
24th Mar 2015
27th Mar 2015
Newly Announced Banking Relationships
State of Bitcoin Q1 2015 Sponsored by Gem
Views on How Bitcoin Technology Can Transform Financial Services
79
Sources: CoinDesk, LinkedIn
“Digital Assets has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology.”
“The possibilities for reducing cost and risk in settlement are enormous.”
Blythe Masters,CEO of Digital Assets Holdings LLC
State of Bitcoin Q1 2015 Sponsored by Gem
Select Country Regulatory Updates
80
Source: CoinDesk
The government does not see a need to regulate or ban bitcoin activities. Bitcoin does not pose a substantial threat to Hong Kong's financial system.
Spanish political party, Unión Progreso y Democracia (UPyD), has submitted a proposal to the country's Congress outlining why bitcoin regulation is needed.
Digital currency businesses will have to comply with the Isle of Man's anti-money laundering (AML) laws from 1st April.
Hong Kong
Isle of Man
Spain
State of Bitcoin Q1 2015 Sponsored by Gem
In Q1 There Were Positive Developments With the NY BitLicense Proposal, but …
81
• Businesses that “store”, “hold”, “issue”, “administer”, “exchange” or “control” digital currency on behalf of their customers require a license to operate
• An exemption added for companies engaging in mere software “development and dissemination”
• Eliminates the prohibition on digital currency investments, so long as they are held in an acceptable ratio
• Demands that the licensee must submit non-customer identities “to the extent practicable”
• NY regulators accepted new comments, further revisions are a possibilitySources: CoinDesk. Manhattan photo courtesy of Symmetry50
State of Bitcoin Q1 2015 Sponsored by Gem
… Problems Remain with BitLicense’s ‘Duplicative and Redundant’ Requirements
82
1. Anti-money laundering (AML) requirements: Virtual currency exchangers and administrators are already required to comply with federal AML regulations
2. State money transmission regulations are already in place and are applicable to all virtual currency businesses
“We should be mindful of this 'tax on innovation' that regulations place on the startup sector and high growth companies in general.”
Fred Wilson, Union Square Ventures
Source: CoinDesk (http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/)
State of Bitcoin Q1 2015 Sponsored by Gem
Generally Favorable Response to UK’s Initial Cryptocurrency Regulatory Framework
83
Sources: HM Treasury, CoinDesk
Core elements of the HM Treasury proposal:• Curb criminal activity via AML regulation• Allow cryptocurrency companies to opt-in
to standardized consumer protections • Proposed injecting £10m into digital
currencies research
• “A light touch approach” (Marc Warne, Bittylicious)
• “Help score banking relationships” (Hugh Halford-Thompson, QuickBitcoin)
• “[Should] limit this to fiat-to-crypto exchanges” (Marc Warne, Bittylicious)
• “Will force the UK's bitcoin companies to move abroad” (Akin Fernandez, Azteco)
Positive Reactions
Negative Reactions
State of Bitcoin Q1 2015 Sponsored by Gem
Views on Bitcoin Regulation and its Potential Positive Impact on Economic Growth
84
George OsborneChancellor of the Exchequer, Second Lord of the Treasury
Source: CoinDesk
“Among other things, [the programme] will look at whether regulation of the sector is required, so that virtual currency businesses can continue to be set up in the UK, and people and businesses can use [cryptocurrencies] safely.”
“It's only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we'll ensure Britain's financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future.”
85State of Bitcoin Q1 2015 Sponsored by Gem
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State of Bitcoin Q1 2015 Sponsored by Gem
About CoinDesk
• Find out more at www.coindesk.com• Follow us on Twitter: @CoinDesk• Subscribe to our email newsletters for the latest daily
cryptocurrency news, or updates on our research• If you have data you think should be included in future State of
Bitcoin reports, email stateofbitcoin@coindesk.com • We also welcome any feedback you have on the report• The State of Bitcoin reports and CoinDesk’s in-depth research
reports are available here
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State of Bitcoin Q1 2015 Sponsored by Gem
Disclaimer
• CoinDesk makes every effort to ensure that the information in this presentation is accurate and up to date. We cannot, however, accept responsibility for any loss or inconvenience caused by reliance on the material contained here.
• This presentation does not constitute financial advice or an investment recommendation in any way whatsoever. It is recommended that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
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