State of Bitcoin Q1 2015

1State of Bitcoin Q1 2015 Sponsored by Gem

State of Bitcoin Q1 2015

10th April 2015

https://gem.co/?utm_source=CoinDesk&utm_medium=BannerSOB&utm_content=Topright&utm_campaign=SOBLogo



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• The Bitcoin Price Index serves as an industry reference point

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State of Bitcoin Credits

• Creator and Producer: Garrick Hileman (@GarrickHileman)

• Statistical assistance: Danqing Ying (@DanqingYing)

Garrick Hileman Danqing Ying




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




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




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%

http://www.blockchain.info/

http://www.bitcoinpulse.com/

http://www.github.com/

http://coinatmradar.com/




9Sponsored by GemState of Bitcoin Q1 2015

Price and Valuation




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

http://www.coindesk.com/price





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







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)

https://blockchain.info/

http://bitcoinity.org/markets



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

http://www.coindesk.com/news/




• 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

https://blockchain.info/charts




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

https://bitcoinity.org/markets





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.

http://coinmarketcap.com/



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

http://coinmarketcap.com/




Media




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





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





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

http://www.coindesk.com/roger-ver-denied-us-visa-attend-miami-bitcoin-conference/

http://www.coindesk.com/ibm-reveals-proof-concept-blockchain-powered-internet-things/

http://www.coindesk.com/ibm-reveals-proof-concept-blockchain-powered-internet-things/

http://www.coindesk.com/bitstamp-claims-roughly-19000-btc-lost-hot-wallet-hack/

http://www.coindesk.com/bitcoin-price-continues-fall-breaks-200-mark/

http://www.coindesk.com/state-bitcoin-2015-ecosystem-grows-despite-price-decline/

http://www.coindesk.com/research-hackers-install-backdoor-bitcoin-cold-storage/

http://www.coindesk.com/hong-kong-exchange-mycoin-disappears-387m-reports-claim/

http://www.coindesk.com/hong-kong-exchange-mycoin-disappears-387m-reports-claim/

http://www.coindesk.com/bitcoin-price-crashes-250-mark/

http://www.coindesk.com/apple-approves-ios-game-tips-players-bitcoin/

http://www.coindesk.com/goldman-sachs-report-says-bitcoin-could-shape-future-of-finance/

http://www.coindesk.com/goldman-sachs-report-says-bitcoin-could-shape-future-of-finance/






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




‘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




VC Investment




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.

http://www.coindesk.com/bitcoin-venture-capital/




…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

http://www.coindesk.com/

https://www.crunchbase.com/

http://bankinnovation.net/




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



http://www.tattoosales.com/




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.






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:






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

http://www.coindesk.com/following-money-trends-bitcoin-venture-capital-investment/


http://pwc.blogs.com/press_room/a-brief-history-of-pwc.html



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US Continues to Dominate Bitcoin VC Investment; First VC Funded Africa-Based Startup in Q1


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%







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






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







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%







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




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

https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677




The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company Categories

37

Payment Processin

g

Wallets

Mining

Financial

Services

Exchanges

Infrastructure

Universal

Source: CoinDesk




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




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







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





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%







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









Q1 2015 Investment Rounds in Bitcoin Startups (contd.)




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





Q1 2015 Investment Rounds in Bitcoin Startups (contd.)




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









Commerce




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



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Growth of New Bitcoin-Accepting Merchants Remained Slow in Q1


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




More than 88,000 Merchants Now Accept Bitcoin, up from 82,000 in Q4 (+7%)

50K 38K

Data sources: Coinbase, BitPay

http://www.coinbase.com/

http://www.bitpay.com/



Sponsored by Gem

Total merchants Forecasted merchants

Bitcoin-Accepting Merchant Forecast Slashed to Approximately 120,000 by End of 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


http://www.bitpay.com/





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

http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/

http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/



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CoinCenter’s Public Sentiment Survey Indicates Low Bitcoin Awareness in US


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

http://coincenter.org/survey/




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





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


https://multibit.org/





Sponsored by Gem

The Five Types of Bitcoin User


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

https://blog.coinbase.com/2015/03/12/four-types-of-bitcoin-users/




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


https://blockchain.info/popular-addresses




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




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





High Transaction Fees May be Discouraging People from Using Bitcoin ATMs

Sources: CoinDesk, Reddit, CoinATMRadar

Social media comments on bitcoin ATM fees





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




Technology



Sponsored by Gem

Profiles of Four Alternative Uses of Blockchain Technology


1. Property title

2. Smart contracts

3. Voting

4. Notary services

Sources: CoinDesk, Coinbase Blog




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




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




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




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.




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




Functional Bitcoin Applications Can Be Grouped into 10 Categories

67

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




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




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




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

http://www.blockchain.info/pools




Software Developer Interest in Bitcoin Continues Steady Growth

Number of Created Repositories in Github with Bitcoin in the Name or Description

Data source: BitcoinPulse





Nodes: Levelling Off in Node Numbers Eases Bitcoin Network Centralization Concerns

Data sources: Bitnodes

https://getaddr.bitnodes.io/dashboard/?days=90




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’


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




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




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




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

http://www.coindesk.com/uk-bank-closes-safello-accounts-6-weeks-entering-partnership/




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




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




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




… 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/)

http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/

http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/




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




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.”




Sponsored by






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

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reports are available here

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mailto:[email protected]

mailto:[email protected]

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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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Economy & Finance

State of Bitcoin Q1 2015