State of Bitcoin Q2 2015
Click here to load reader
Transcript of State of Bitcoin Q2 2015
1State of Bitcoin Q2 2015
State of Bitcoin Q2 2015
16th July 2015
2State of Bitcoin Q2 2015
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 the UK and US
3State of Bitcoin Q2 2015
State of Bitcoin Credits
• Creator and producer: Garrick Hileman
• Statistical assistance: Danqing Ying
@GarrickHileman @DanqingYing
4State of Bitcoin Q2 2015
Contents
1. Summary and Adoption Dashboard
2. Price and Valuation3. Media and Sentiment4. Investment and M&A5. Use Cases and
Commerce6. Technology7. Regulation and
Macro
5State of Bitcoin Q2 2015
1. Summary and Adoption Dashboard
6State of Bitcoin Q2 2015
Q2 2015 Summary
Increasing competition and cost pressure are driving consolidation in the bitcoin ecosystem, a trend we anticipate continuing
VC investment remained robust in Q2 with average deal size comparable to Q1
Notable financial institutions like Nasdaq began trialing bitcoin technology; many major banks actively examining blockchain use cases
Mixed industry view of final NY BitLicense regulations; Xapo decamps from US to Switzerland citing customer privacy concerns
Merchant adoption continues to lag due to bitcoin’s underwhelming value proposition for mainstream consumers
First positive quarter since Q2 2014 for bitcoin’s price amid a return of macroeconomic and banking system concerns
7State of Bitcoin Q2 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. Number of VC-backed startups and VC investment unadjusted for closed companies: Melotic, Buttercoin, BitInstant, and TradeHill.
Quarterly Year Ago
June-15 March-15Q2/Q1Δ
Q1/Q4
Δ June-14 ΔCommerce
Wallets 9,345,510 8,457,207 11% 14% 5,467,263 2xMerchants 100,000 88,000 14% 7% 65,640 2xMerchants’ annual revenue ($bn) 187 187 0% 4% 30 6xATMs 426 374 14% 9% 126 3xUnique bitcoin addresses 261,770 203,189 29% 29% 136,152 2x
IndustryAll-time VC investment ($m) $832 $687 21% 50% $252 3xNumber of VC-backed startups 113 105 8% 15% 58 2x
MediaMainstream media mentions 371 458 -19% -10% 1035 -64%
TechnologyNetwork hash rate (billion/second)
351,177,610 346,028,956 1% 11%
104,506,281 3x
ValuationBitcoin market capitalization ($bn) $3.8 $3.4 11% -22% $8.0 -53%
8State of Bitcoin Q2 2015
2. Price and Valuation
9State of Bitcoin Q2 2015
CoinDesk Bitcoin Price Index – Q2 & YTD by the Numbers
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
10State of Bitcoin Q2 2015
1-Apr 8-Apr 15-Apr 22-Apr 29-Apr 6-May 13-May 20-May 27-May 3-Jun 10-Jun 17-Jun 24-Jun$200
$210
$220
$230
$240
$250
$260
$270
Bitcoin’s Price Was Less Volatile Amid a Mix of Positive and Negative News
29 MaySilk Road operator Ross Ulbricht sentenced to life in prison
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
6 AprilBitcoin marketplace Buttercoin folds despite having raised capital from high-profile investors
Xapo moves HQ to Switzerland citing customer privacy concerns
15 May
3 JuneFinal BitLicense regulations released amid generally negative industry feedback
7 MayItBit nets $25m investment, launches NYDFS-licensed bitcoin exchange
11 MayNasdaq becomes latest firm to trial blockchain technology
6 JuneOverstock to issue ‘digital corporate bond’ on bitcoin’s blockchain
7 MayIsle of Man trials first government-run blockchain project
11State of Bitcoin Q2 2015
Bitcoin’s Price in Q2 Saw the Lowest Peak-to-Trough Price Variation of Any Recent Quarter
Source: CoinDesk
Date Quarterly Price High Quarterly Price LowPeak-to-Trough
Percentage Δ
Q1 2014 $951.39 (6 January) $458.50 (31 March) 52%
Q2 2014 $665.73 (3 June) $360.84 (10 April) 84%
Q3 2014 $647.34 (2 July) $374.73 (29 September) 42%
Q4 2014 $427.24 (12 November)
$309.87 (30 December) 27%
Q1 2015 $314.59 (2 January) $177.28 (14 January) 44%
Q2 2015 $262.48 (30 June) $218.27 (14 April) 20%
12State of Bitcoin Q2 2015
Reduced Bitcoin Price Volatility = Lower Exchange Trading Volume, Which Continues Downward
Trend
Data sources: CoinDesk, Bitcoinity
Monthly Bitcoin Trading Volume
Jul-1
4
Aug-1
4
Sep-
14
Oct-1
4
Nov-1
4
Dec-1
4
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
150
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
0
5000000
10000000
15000000
20000000
25000000
Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)
13State of Bitcoin Q2 2015
2015
Apr May Jun
Melotic shut down its digital asset exchange4 May
itBit raised $25m7 May
Bitso closed a funding round led by Bitcoin Opportunity Corp26 June
Buttercoin closed6 Apr
Cryex raised $10m7 May
BTCXIndia to close after losing bank account
8 May
Exchange Sector in Flux: New Exchanges are Still Raising Money Even as Others Close, Merge or
Pivot
Source: CoinDesk
• The ‘no fee’ business model employed by many Asian exchanges is unsustainable
• Many exchanges are diversifying their products and services (eg BTC China added a mining pool and merchant payment services last year)
14State of Bitcoin Q2 2015
What is Behind the Recent Surge in Bitcoin’s Price?
Sources: CoinDesk, Dizzynomics, Hileman (2013) ‘History and Prospects for Alternative Currencies’, LSE working paper
Alternative currencies act as a hedge against banking system problems and uncertainty surrounding national currencies
Turmoil in the China’s stock market appears to have re-ignited Chinese interest in bitcoin
Regulated exchanges and new publicly traded investment options now exist, opening the door to new investors
• Another tailwind behind bitcoin’s price is the upcoming reduction in new bitcoin supply, scheduled to take place by approximately summer 2016, when the block reward will halve from 25 new bitcoins to 12.5 new bitcoins
15State of Bitcoin Q2 2015
Wedbush Securities Projects the Bitcoin Price Will Reach $400 by 2016
Source: Wedbush Equity Research Report
• Wedbush expects bitcoin to account for 10% of the $5.9tn online payments market, 20% of the $744bn remittance market and 20% of the $924bn micro-transactions market by 2025.
Bitcoin Valuation Framework
Outcome $/BTCProbabili
ty
Probability
Weighed
‘Napster’Outcome
- Overtaken by another coin- Fatal flaw uncovered- Broadly made illegal with strict enforcement
$0 50% $0
‘PayPal’Outcome
- Specific use cases take hold (eg remittance, micro-transactions, machine-to-machine, etc.)
$400 49.98% $200
‘Internet’Outcome
- Bitcoin becomes global working capital of trade ($20tn monetary base) $1m 0.02% $200
Probability weighed outcome $400
16State of Bitcoin Q2 2015
Bitcoin’s Market Cap is Still Well Below Peak, but
Total ‘Industry Value’ Remains High
Source: Pantera
• With over $800m in venture investment, the value of bitcoin’s currency alone is not a complete reflection of bitcoin’s total value
17State of Bitcoin Q2 2015
In Q2, Number of New Altcoins Increased by 9%, Market Value Share Increased 2%
Data source: CoinMarketCap
*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.
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-150
100
200
300
400
500
600
700
0%
5%
10%
15%
20%
25%
64
216
347
483
590 594
648
9%
23%
7% 8%9%
7%
9%
Total Number of Altcoins Altcoin Market Cap Share (%)
State of Bitcoin Q2 2015
Relatively Little Change in Q2 Amongst Top 10 Altcoins;
Paycoin was Q2’s Biggest Loser
18
Data source: CoinMarketCap data as end of quarter (ie 31 March and 30 June 2015, respectively)
Q2 Rank Name Market Cap
Q1 Rank
Δ
1 Bitcoin $3,764,067,688 -
2 Ripple $377,494,120 -
3 Litecoin $166,725,659 -
4 Dogecoin $20,653,353 +2
5 BitShares $17,342,951 -
6 Stellar $16,864,960 +1
7 Dash $15,362,982 -3
8 Nxt $12,765,963 -
9 Peercoin $10,864,693 +2
10 BanxShares $10,412,582 +3
19State of Bitcoin Q2 2015
3. Media and Sentiment
State of Bitcoin Q2 2015
Q2 Positive News
20
NASDAQ follows other Wall Street firms such as UBS in employing blockchain technology
ItBit became first US-based exchange to receive a New York banking charter, granting it approval from the NYDFS to launch services nationwide
Banks and Wall Street executives are embracing blockchain technology
Source: CoinDesk. Images from business2community and LinkedIn
State of Bitcoin Q2 2015
Q2 Negative News
21
Bitcoin marketplace Buttercoin folded despite $1.3m in venture funding from Google and other high-profile investors
The FBI received reports of more than $18m in losses in the past year stemming from the spread of bitcoin ransomware Cryptowall
Source: CoinDesk
Ross Ulbricht’s high-profile trial and sentencing continued, drawing attention to illegal bitcoin use
22State of Bitcoin Q2 2015
Q2 Most-Viewed CoinDesk Articles; Only One Article is Related to Bitcoin’s Price
Rank Title Date
1 Inside 21's Plans to Bring Bitcoin to the Masses 12 May
2 Richard Branson to Host Bitcoin Summit on Private Island 28 April
3 My Life Inside a Remote Chinese Bitcoin Mine 8 June
4 State of Bitcoin Q1 2015: Record Investment Buoys Ecosystem 10 April
5 New York Stock Exchange Launches Bitcoin Price Index 19 May
6 Dogecoin Founder Exits Crypto Community Citing ‘Toxic’ Culture
24 April
7 Is Greece Really Behind Bitcoin's Latest Price Surge? 18 June
8 New CoinDesk Report Reveals Who Really Uses Bitcoin 10 June
9 Payments VP: One Thing Stands Between Bitcoin and Mass Adoption
8 April
10 Bitfury to Release Light Bulbs that Mine Bitcoin in 2015 2 June
Source: CoinDesk top 10 Q2 stories based on page views
CoinDesk’s Top 10 Most Viewed Stories in Q2
State of Bitcoin Q2 2015
Mainstream Media Coverage of Bitcoin Dropped Quarter-Over-Quarter
23
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
Sina
WSJ
NYT
FT
0 20 40 60 80 100 120 140 160 180 200
180
127
73
78
144
121
59
47
Q2 2015 Q1 2015
24State of Bitcoin Q2 2015
Google Searches: ‘Bitcoin Greece’ and ‘Bitcoin Argentina’ Rising Fast in Past Three Months
Past 90 Days
Related Searches: Top
Related Searches: Rising
Past 12 Months
Source: Google Trends data as of 30 June 2015
5% of Millennials Surveyed Said They Had Used Bitcoin, But Did Not Intend to Use it Again
25State of Bitcoin Q2 2015
51%of respondents had never used bitcoin nor did they have any
plans to do so
22%of respondents used it at the
time or had used it in the past, and intended to use it again
22%of respondents had never used bitcoin before, but planned on
using the digital currency
5%of respondents said they had
used bitcoin, but did not intend to use it again
Source: Goldman Sachs Survey
‘Cost’ is Major Factor in Financial Preferences of Millennials, ‘Privacy’ Less
Important
26State of Bitcoin Q2 2015
Source: Goldman Sachs Survey
Fees
Security
Privacy
• 22% favored sacrificing privacy for the sake of security
• 13% were happy to accept loss of privacy for higher security
• 11% didn’t care about privacy because they presumed the government was already monitoring their transactions
• 20% weren’t willing to give up financial privacy
Order of Importance
27State of Bitcoin Q2 2015
Who Uses Bitcoin: Almost 60% of Bitcoin Users are Under 35 Years Old
Source: ‘Who Really Uses Bitcoin?’ by CoinDesk
28State of Bitcoin Q2 2015
Who Uses Bitcoin: Largely Balanced Spread Across Different Earning Brackets
Source: ‘Who Really Uses Bitcoin?’ by CoinDesk
29State of Bitcoin Q2 2015
Who Uses Bitcoin: Many Bitcoin Users are Well Educated, >20% Possess Advanced
Degrees
Source: ‘Who Really Uses Bitcoin?’ by CoinDesk
30State of Bitcoin Q2 2015
Who Uses Bitcoin: Estimated <10% of All Bitcoin Users are Female
Source: ‘Who Really Uses Bitcoin?’ by CoinDesk
31State of Bitcoin Q2 2015
4. Investment and M&A
32State of Bitcoin Q2 2015
Competition and Cost Pressure in Exchange and Mining Sectors is Driving Consolidation
Source: CoinDesk. *Note: The deal between BTCS and Spondoolies-Tech was a merger of equals.
Jun 2015
Jun 2015
Apr 2015
Jun 2015
Apr 2015
Q2 Merger & Acquisitions
CoinBR
Acquirer Acquiree
*
33State of Bitcoin Q2 2015
Two Biggest VC Deals in Q2
$50m$28m (Series A) May 2015 (Series C) April 2015
Source: CoinDesk
State of Bitcoin Q2 2015
Ripple Has Secured Seven Banking Partnerships
34
Source: CoinDesk
• Two of Australia's 'big four' banks, Westpac Banking Corporation and the Australia and New Zealand Banking Group, are experimenting with peer-to-peer transfers on the Ripple protocol
• Commonwealth Bank of Australia (CBA) – another 'big four' rival – is trialing the tech for transfers between its subsidiaries
35State of Bitcoin Q2 2015
Total Q2 VC Investment Dropped Significantly From Q1; However, Q1 Was Skewed by 21 Inc
Announcement*
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015$0
$50
$100
$150
$200
$250
$88$74
$133
$228
$145
Quarterly Total VC Investment ($m)
Mill
ions
*The precise timing of when 21 Inc raised $116m has not been revealed and has therefore been included in the quarter it was announced (Q1 2015).
Data sources: CoinDesk, Crunchbase
36State of Bitcoin Q2 2015
Average Q2 Venture Deal Size Was Comparable to Q1
Data sources: CoinDesk, CrunchBase
Mill
ions
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015$0
$2
$4
$6
$8
$10
$12
$4.0
$3.1
$4.4
$9.5 $9.7
Quarterly Average VC Investment Deal Size ($m)
37State of Bitcoin Q2 2015
All-Time Bitcoin Venture Capital Investment Increased 21% Q/Q to $832m
$832m
$145mTotal VC investment in cryptocurrency startups to date:
Q2 2015 bitcoin VC investment:
$228mQ1 2015 bitcoin VC investment:
Data sources: CoinDesk, CrunchBase
+21%
Increase in total to-date VC investment from end of Q1:
38State of Bitcoin Q2 2015
Bitcoin VC Investment Projected to Continue Outpacing Early-Stage Internet Investment
Note: Internet figures include only first sequence venture deals. All figures unadjusted for inflation, changes in the cost of launching a startup over last two decades, etc. Further methodology discussion. In calculation of ‘2015 bitcoin – projected’, latest Q3 BitFury deal is included.
Data sources: CoinDesk, PricewaterhouseCoopers
Bitcoin vs Early Internet VC Investment ($m)M
illio
ns
2014 Bitcoin2015 Bitcoin - Projected
1995 Internet 1996 Internet
$0
$100
$200
$300
$400
$500
$600
$700
$800
$362
$786
$250
$639
Europe 23%
Asia 6%Middle East 2%
Latin Amer-ica 1%
US & Canada 68%
Even With Xapo’s Move to Europe, the US Continues to Dominate Bitcoin VC Investment
39State of Bitcoin Q2 2015
RegionsQ2
($m)Q1
($m)Q/Q Δ ($m)
Q/Q Δ
US & Canada 596.0 463.9 132.1 28%
Europe 170.8 158.1 12.7 8%
Asia 42.2 42.1 0.1 0%
Middle East 14.0 14.0 0 0%
Latin America 7.5 7.5 0 0%
Africa 1.1 1.1 0 0%
Total 831.6 686.8 229.1 21%
$ Invested as of Q1
• US and Canada had the largest Q/Q% increase in investment
• Only US and Canada, Europe and Asia received investment in Q2
Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk, CrunchBase
$ Invested as of Q2
Europe 21%
Asia 5%Middle East 2%
Latin America 1%
US & Canada
72%
40State of Bitcoin Q2 2015
23 Countries Have a VC-Backed Bitcoin Startup; US Investment Almost 3x Rest of World
CombinedMillions
Data sources: CoinDesk, CrunchBase
Philip
pine
s
Luxe
mbo
urg
India
Denm
ark
Austra
lia
Pana
ma
Keny
a
Mex
ico
Barba
dos
Fran
ce
Germ
any
Japa
n
Sing
apor
e
Argen
tina
Sout
h Ko
rea
Israe
l
Canad
a
China
Swed
en
Switz
erland
The
Nethe
rland
s
Unite
d King
dom
Unite
d St
ates
$0
$100
$200
$300
$400
$500
$600
0.1 0.2 0.3 0.3 0.5 0.8 1.1 1.2 1.5 2.8 2.9 2.9 3.4 4.0 6.9 14.0 26.9 28.1 39.9 40.5 41.3 42.9
569.1
Total Funding by Country ($m)
41State of Bitcoin Q2 2015
The Philippines Was the Only New Country to Add a VC-Backed Bitcoin Startup in Q2
Data source: CoinDesk, Image from Wikipedia
Philippines
42State of Bitcoin Q2 2015
Silicon Valley’s Share of All-Time Bitcoin VC Investment Drops from 59% in Q1 to 49% in Q2
• Xapo’s relocation to Switzerland in Q2 significantly reduced Silicon Valley’s share
• Total number of VC-backed bitcoin companies increased from 105 in Q1 to 113 in Q2, an 8% increase
$ Invested No. of Companies
Note: Prior State of Bitcoin data may differ due to new funding information obtained. Date sources: CoinDesk, CrunchBase
LocationValue ($m)
No. of companie
s
Silicon Valley $403.9 32
Rest of World $427.7 81
Total $831.6 113
Silicon Valley 49%
Rest of World 51%
Silicon Valley 28%
Rest of World 72%
State of Bitcoin Q2 2015
Venture Investment Falls Into Seven Different Bitcoin Industry Sectors
43
Payment Processin
g
Wallets
Mining
Financial
Services
Exchanges
Infrastructure
Universal
Source: CoinDesk
44State of Bitcoin Q2 2015
Industry Sector Trends: Universals Raised Most Funding in Q2, Followed by Financial Services and
ExchangesQ2 VC Investment by Ecosystem Category ($m)
Data sources: CoinDesk, CrunchBase
$0
$10
$20
$30
$40
$50
$60
$0.0 $0.0$1.5
$12.5
$35.0
$45.7
$50.1
Mill
ions
Mining Infrastructure Wallet Payment Processor
Exchange FinancialServices
Universal
45State of Bitcoin Q2 2015
Universals Continue Pulling Away From Other Sectors in Total VC Investment
2013 to 2015 VC Investment by Ecosystem Category ($m)
Data source: CoinDesk
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015$0
$50
$100
$150
$200
$250
$300
$350
Payment Processor Exchange Universal MiningFinancial Services Wallet Infrastructure
Mill
ions
46State of Bitcoin Q2 2015
Payment Processor9%
Infrastructure8%
Exchange9%
Financial Services
7%
Mining14%
Universal38%
Wallet13%
Universals Command Nearly 40% of VC Investment Followed by Mining, Financial
Services, Exchanges
• Financial Services received highest growth in VC investment at 89%
• Five new VC backed Financial Services startups added this quarter
• Mining and Infrastructure did not receive VC investment in Q2
$ Invested as of Q1 2015
$ Invested as of Q2
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter Data sources: CoinDesk, CrunchBase
SectorQ2 Q1
Q/Q Δ ($m)
Q/Q Δ($m) ($m)
Payment Processor
76.4 63.9 12.5 20%
Infrastructure 55.7 55.7 0.0 0%
Exchange 100.1 65.1 35.0 54%Financial Services
97.1 51.4 45.7 89%
Mining 96.5 96.5 0.0 0%Universal 312.7 262.6 50.1 19%
Wallet 93.1 91.6 1.5 2%
Total 831.6686.
7144.8 21%
Payment Pro-cessor 9%
Infrastruc-ture 7%
Exchange 12%
Financial Services
12%
Mining 12%
Universal 38%
Wallet 11%
47State of Bitcoin Q2 2015
Q2 2015 Investment Rounds
Source: CoinDesk
Close Date
Company Size ($m) Round Select InvestorsHeadquarter
ed
June-15 Ascribe 2 SeedEarlybird Venture Capital, Digital
Currency Group, Freelands Ventures, angel investors
Berlin
June-15 Vogogo 12.5 SecondBeacon Securities, Clarus
Securities, Salmon PartnersCalgary
June-15 Case 1.5 Seed
Future\Perfect Ventures, RRE Ventures, the Rochester Institute
of Technology Fund, High Line Venture Partners
New York
June-15 Reveal 1.5 SeedMike Hirshland, Boost VC, Digital
Currency Group, the Stanford StartX Fund, Barry Silbert
San Francisco
June-15OpenBaza
ar1 Seed
Andreessen Horowitz and Union Square Ventures, William Mougayar, angel investor
Washington, D.C.
48State of Bitcoin Q2 2015
Q2 2015 Investment Rounds (contd.)
Close Date
Company
Size ($m)
Round Select InvestorsHeadquarter
ed
June-15Symbion
t1.25 Seed Duncan Niederauer, Matt Andresen New York
June-15 Mirror 8.8 FirstRoute 66 Ventures, Battery Ventures, Crosslink Capital, RRE Ventures, Tim
DraperPalo Alto
May-15 Bitbond 0.67 Seed Point Nine Capital, Christian Vollmann Berlin
May-15Ripple Labs
28 First
US futures, CME Group, Seagate Technology, AME Cloud Ventures,
ChinaRock Capital Management, China Growth Capital, Wicklow Capital, Bitcoin
Opportunity Corp., Core Innovation Capital, Route 66 Ventures, RRE Ventures,
Vast Ventures, Venture 51
San Francisco
May-15 itBit 25 FirstRRE Ventures, Liberty City Ventures, Jay W
Jordan II, James PallottaNew York
Source: CoinDesk
49State of Bitcoin Q2 2015
Q2 2015 Investment Rounds (contd.)
Close Date
Company Size ($m) Round Select InvestorsHeadquarter
ed
May-15 Cryex 10 FirstWhite Star Capital, Northzone
VenturesStockholm
May-15Satoshi Citadel Industries Inc.
0.1 Seed Joe Maristela Makati
April-15 Hedgy 1.2 SeedTim Draper, Marc Benioff, Sand
Hill Ventures, Adam Draper, Brayton Williams
San Francisco
April-15Circle Internet
Financial50 Third
Goldman Sachs, IDG Capital Partners, Breyer Capital, General Catalyst Partners, Accel Partners
Boston
April-15 Gem 1.3 SecondKEC Ventures, First Round
Capital, RRE Ventures, Robert Wolfson
Venice
Source: CoinDesk
50State of Bitcoin Q2 2015
5. Use Cases and Commerce
51State of Bitcoin Q2 2015
Notable Q2 Public Announcements of Blockchain Initiatives by Governments and Financial Services
Factom partners with Honduras government on a new land title registry initiative
Source: CoinDesk
Isle of Man trials the first government-run blockchain project – a registry of digital currency companies operating on the island
NASDAQ explores how a blockchain-based solution could change the way shares are transferred and sold
Estonia’s LHV Bank has backed a project to create a financial services platform and money-transfer app that will utilize bitcoin to facilitate transactions
52State of Bitcoin Q2 2015
Select Firms Investigating Blockchain Use Cases
Exploring blockchain potential
Blockchain firms at accelerator
Researching blockchain in London lab
Experimenting with bitcoin-like rewards
Blockchain-based ‘Internet of Things’ on digital cash
Hired decentralized ledger employee
Enterprise-wide blockchain initiative
Planning blockchain-based stock exchange
Invested in 21 Inc
Invested in Ripple Labs for blockchain exposure
US Federal Reserve Reportedly talking with IBM about digital cash
Exploring program with Ripple
Exploring how to incorporate blockchain technologySource: CNBC
53State of Bitcoin Q2 2015
Overstock and UBS are Experimenting With Bonds on the Blockchain
Sources: CoinDesk, Bitcoin Magazine
• UBS’s smart-bonds, as described by Alex Batlin, are bonds where “risk-free interest rates and payment streams were fully automated, creating a self-paying instrument”
• He said: “The key attraction is that there is no middle or back office and no registry, so clearly a major impact on costs”
Alex BatlinUBS Bank’s chief information officer for innovation
54State of Bitcoin Q2 2015
Digital Identity: Blockchain-Based Identity Solutions Could Significantly Change Commerce
and Government
• Verifiable identity is key to accessing many financial services
• Blockchains may enable people to control their own identity rather than outsource control to governments, banks, Facebook, etc.
• Personal control of identity may fundamentally change the relationship between government/corporations and individuals
Source: Bank Innovation
“10 years from now it may be harder to change identity providers than it is to change countries”
Vitalik Buterin,Ethereum
55State of Bitcoin Q2 2015
Prediction Markets: Blockchain Technology Enables New Kinds of Decentralized Forecasting
Platforms
Sources: CoinDesk ‘Cryptocurrency 2.0 Report', Bank Innovation, Ethereum
• In the past, centralized prediction markets have been subject to regulation or banned (eg Intrade)
• Augur has developed a decentralized prediction market that can be used to harness the power of crowds
• Participants ask questions about future events, which the broader community can bet on, by purchasing and trading a shares in that prediction
56State of Bitcoin Q2 2015
More than 100,000 Merchants Now Accept Bitcoin, Up from 88,000 in Q1 (+14%)
60K 40K
Data sources: Coinbase, BitPay
57State of Bitcoin Q2 2015
Growth in New Bitcoin-Accepting Merchants Picked-up in Q2, But Still Below Previous
Quarters
Sources: CoinBase, BitPay
Number of New Bitcoin-Accepting Businesses Added Each Quarter
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 20150
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,00016,800
12,936
10,360
6,000 6,000
12,000
Bitcoin-Accepting Merchant Forecast Remained at Approximately 120,000 by End of 2015
58State of Bitcoin Q2 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 (16
September 2013), 20,000 (13 January 2014) and 30,000 (28 May 2014), respectively, calculated using linear interpolation.
Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-150
20,000
40,000
60,000
80,000
100,000
120,000
R² = 0.959303783797982
Series1 Linear (Series1)Total Merchants Total Merchants
59State of Bitcoin Q2 2015
North America and Europe Continue to Have the Most Bitcoin-Accepting Businesses
Source: Coinmap.org (screenshot on 30 June)
60State of Bitcoin Q2 2015
Number of Drug Listings on Bitcoin-Accepting Websites Remains High in spite of Silk Road
Prosecution
Source: Economist
61State of Bitcoin Q2 2015
Forecast for Total Bitcoin Wallets by End of 2015 Maintained at 12 Million, but …
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. Q2 MultiBit figures note made available, held constant as
end of March.
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-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
9,000,000
10,000,000
R² = 0.985356551076598
Series1 Linear (Series1)Total Wallets Forecast Wallets
State of Bitcoin Q2 2015
… New Wallet Growth Rate Remains ‘Remarkably Consistent’ for Blockchain.info
62
Data source: Blockchain.info
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-150
100000
200000
300000
400000
500000
600000
118,286
514,583
481,258
343,121
480,715 451,294 454,435
488,303
Number of New Wallets Added Each Quarter
63State of Bitcoin Q2 2015
While New Bitcoin ATM Growth Remains Below Previous Levels …
Data source: CoinATMRadar
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 20150
20
40
60
80
100
120
43
79
112
104
32
52
Increase in Number of ATMs Each Quarter
64State of Bitcoin Q2 2015
… New Methods for AcquiringBitcoins In-Person are Emerging
• Taiwanese startup Maicoin has launched a system that lets users buy bitcoin at 10,000 convenience stores in the territory
• Users set up a bitcoin purchase on MaiWallet app or web interface, which displays a barcode for a convenience store cashier to scan
• Maicoin customers need not provide any ID to use the service due to limit imposed according to AML regulation
• The system is purchase-only at this stage and does not allow users to sell bitcoins in return for cash
Sources: CoinDesk, Reddit
65State of Bitcoin Q2 2015
Ways to Pay Cash for Bitcoins Other than Using Bitcoin ATMs Continue to Grow
Location and Method
Description and Network SizeDirection
Fees
Lithuania: Foxbox terminals
70 units Buy up to 16%
Taiwan: BitoEX at convenience stores
5,000 stores Buy1% and standard NT$25 fee
Ukraine: BTCU >4,000 terminals Buy3.5% (official), 10-15% (non-official)
Romania: Zebrapay terminals
>800 terminals Buy 4%
US: LibertyX 2,500 stores Buy 0%
Mexico: SendBitcoin.mx 6,000 bank ATMs Sell 1%
Philippines: Coins.ph 450 bank ATMs Sell free for Coins.ph users
Czech Republic: WBTCB 8,000 terminals and post offices Buy 7-10% + 10 Kč (0.4 USD)
Spain: Chip Chap and Halcash
10,000 bank ATMs Sell 1% + €1.5
Austria: Bitcoinbon from Coinfinity
600 Tobaco kiosks Buy ~10%
Thailand: Coins.co.th9,000 Krungthai bank ATMs (sell), ~3,000 Kasikorn bank cash deposit machines (buy)
Buy/Sell N/A
South Korea: Coinplug8,000 7-11 stores (24,000 planned) + 7,000 regular ATMs
Buy N/A
Poland: Chip Chap App 4,000 bank ATMs Sell 1% + €1.5Source: Coin ATM Radar
66State of Bitcoin Q2 2015
Bitcoin Lending: The US, Canada, Brazil and India are the Most Popular Markets for Loans
Data source: BTCJam
67State of Bitcoin Q2 2015
Bitcoin Lending: ‘Business’ is Dominant Use of Bitcoin Loans
Data source: BTCJam
68State of Bitcoin Q2 2015
6. Technology
69State of Bitcoin Q2 2015
Bitcoin Can be Visualized as the Missing Piece of the Online Protocol Puzzle
Source: Pantera
• Compared to other online protocols, bitcoin is unique in that users have an opportunity to own part of the protocol
70State of Bitcoin Q2 2015
Open Assets Protocol Powering First Publicly Disclosed Blockchain Implementation by Wall
Street Firm
Sources: CoinDesk, Coinprism
• NASDAQ announced it is working with Chain to use Open Assets, which is managed by Coinprism, for its Private Market Platform
• Adam Ludwin, CEO and founder of Chain, said: “The shares will move on the Open Assets protocol, a colored coins implementation that allows users to augment small amounts of bitcoin to represent shares.”
• Shares can then be transferred and tracked across the bitcoin blockchain through the use of a ‘barcode’ added to a bitcoin transaction note field
71State of Bitcoin Q2 2015
Contentious Debate Amongst Bitcoin Core Developers Over Whether to Increase the
Block Size
• Raising the block size will enable more transaction throughput, allowing bitcoin to grow into a potential competitor for other major transaction networks
Sources: hashingit.com, Reddit, Inside Bitcoins, gavinandresen.ninja, CoinGecko
• Raising the block size will increase mining centralization; other solutions are available to scale-up the network
YES NO
Gavin Andresen Gregory MaxwellMike Hearn Peter Todd
72State of Bitcoin Q2 2015
Number of Bitcoin Nodes Continues Declining, Down 8% from 6,480 at End of Q1
Data sources: Bitnodes
73State of Bitcoin Q2 2015
Bitcoin Network Survives Q2 ‘Stress Test’
• What was the bitcoin ‘stress test’?– CoinWallet, a bitcoin broker, planned the stress test starting 22
June. It sought to spend 20 BTC (around $5,000) on transactions totaling about 200MB in data, but was only able to send 15% due to a server crash
• What was the purpose?– To flood the bitcoin network with transactions to see if the current
1MB block size limit was adequate and whether the network could recover quickly from a surge
• What was the result?– While CoinWallet faced criticism for launching the test live on an
unsuspecting bitcoin network, with some calling it an “attack”, the network passed the test without major incident
• What’s next?– Debate over whether to increase the block size continues …
Sources: CoinDesk
74State of Bitcoin Q2 2015
Bitcoin Transactions Continue Rising Steadily
Source and note: Blockchain.info, *100 most popular addresses.
Number of Transactions Per Day
01/07/2014 12/08/2014 23/09/2014 04/11/2014 16/12/2014 27/01/2015 10/03/2015 21/04/2015 02/06/201540,000
60,000
80,000
100,000
120,000
140,000
160,000
Total no. of daily transactions No. of daily transactions excluding popular addresses
75State of Bitcoin Q2 2015
F2Pool
AntPool
BitFury
BTC China Pool
BW.COM
21 Inc.KnCMiner
Eligius
Slush
BTC Guild
Telco 214GHash.IO
BitMinterBTC Nuggets
Unknown
China-Based Miners with Low-Cost Electricity Now Represent Over 50% of Total Bitcoin Network
Data source: Four-day average as of 30 June 2015 on Blockchain.info
76State of Bitcoin Q2 2015
Bitcoin’s Network Difficulty Q/Q Growth Rate Halved Amid Bitcoin Price Weakness for Most of
Q2
Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 20150
2000000000
4000000000
6000000000
8000000000
10000000000
12000000000
14000000000
16000000000
18000000000
20000000000
0%
50%
100%
150%
200%
250%
11,811,600,782.0
17,842,964,553.0
5,979,529,093.0 6,076,594,628.0
2,974,835,635.0
236%
106%
17% 15%6%
Quarterly Increase in Bitcoin Mining Difficulty
Quarterly Increase in Mining Difficulty Percentage Increase in Mining Difficulty
Hash
rate
77State of Bitcoin Q2 2015
21 Inc Update: the Most Well-Capitalized Bitcoin Startup Reveals Audacious Business Model
Sources: Medium, WSJ
21’s BitShare chip:• Can be “embedded into an
Internet-connected device as a standalone chip or integrated into an existing chipset as a block of IP to generate a continuous stream of digital currency for use in a wide variety of applications”
• New approach to micropayments• Chips can continuously generate
revenue (automatically pay people in bitcoin)
• Decentralized device authentication
• Facilitate device coordination• Devices that can pay for
associated services
78State of Bitcoin Q2 2015
21 Inc Update: Growing Revenue Faster Than Facebook and Google Did
Source: FT Alphaville
Balaji S Srinivasan,CEO of 21 Inc
• "Bitcoin is bigger than Google. If they [Google] turned off all their data centers and pointed them at bitcoin, they'd be less than 1% of the network."
79State of Bitcoin Q2 2015
Overall Findings From Bitcoin Wallet Study Suggest Privacy “Not Well” Protected
Usability Quality Feedback
Source: Spring 2015 Wallet Privacy Rating Report
80State of Bitcoin Q2 2015
Application Developers Can Choose From a Growing Variety of Blockchain Platforms to
Develop onFundin
gSource of Funding
Currency Unit Partners/Apps
Blocksteam $21m Venture Bitcoin Unknown
Chain $14m Venture None Nasdaq
Counterparty
Unknown
Community funded Counterparty Swarm
Epiphyte $20k Venture None Unknown
Eris $10k Venture None Decerver
Ethereum $18m Crowd Ether Mist, Augur
Hyperledger
Unknown
Unknown None Unknown
Maidsafe $11m Equity and crowd Maidsafe The Safe network
PeerNova $14m Venture None Overstock
Ripple $37m Venture Ripple Codius, RBS
Stellar $3m Venture Stellar Unknown
Sources: Crunchbase, CoinDesk 'Cryptocurrency 2.0 Report', Bank Innovation
• Other factors affecting developer preferences include: trust, commercial model, ease of development and performance and reliability
81State of Bitcoin Q2 2015
‘Ether’, the currency unit,
will be used for transaction fees, smart contracts,
etc.
Ethereum blockchain is
fully programmable
(‘Turing complete’) and
more economically efficient than
bitcoin
Ethereum will evolve from
proof-of-work to “proof-of-stake”,
which is more environmentally
friendly and energy efficient than bitcoin’s proof-of-work
Ethereum’s mining can be
done by ‘regular’ computers,
making it more affordable and accessible than bitcoin mining
Ethereum is One of the Most Hyped ‘Altchains’; Some Key Advertised Differences
from Bitcoin
1. Cryptocurrency 2. Blockchain 3. DecentralizedConsensus Mechanism
4. Mining
Source: Ethereum
82State of Bitcoin Q2 2015
7. Regulation and Macro
83State of Bitcoin Q2 2015
Escalation of Greek Crisis Reinforces Bitcoin Status as a Macro Hedge for Financial Instability
Sources: CoinDesk, Reuters. Image from Pinterest
• Reuters: “Bitcoin surged by as much as 7% on Tuesday [30 June] and was on track for its longest winning streak in 18 months, as concerns that Greece could tumble out of the euro drove speculators and Greek depositors into the decentralized digital currency.”
• However, bitcoin’s price plummeted by over 10% on Monday 13 July following the preliminary announcement of a new bailout agreement between Greece and its creditors
84State of Bitcoin Q2 2015
While Greek Google Searches for ‘Bitcoin’ Have Skyrocketed, Little Evidence Greeks are Buying
Bitcoin
Source: Google Trends
“While a convenient narrative, there remains little evidence to suggest … that activity in Greece is actually at the root of the movement” in bitcoin’s price
• Nearly impossible for most Greeks to acquire bitcoins while banking system is closed; only two bitcoin ATMs in Greece
• Very few Greek businesses accept bitcoin for payment• An estimated 40% of Greeks have never used the
Internet
Paul Gordon, UK Digital Currency Association
85
Greece is Not Alone: 24 Countries Have an Ongoing Debt Crisis …
State of Bitcoin Q2 2015
Sources: Jubilee Debt Campaign, Guardian. Images from Wikipedia
Tunisia
St Vincent and the Grenadines
Portugal
Sri Lanka
Jamaica
Spain
Montenegro
Ireland
Croatia
Marshall Islands
Greece
Costa Rica
Macedonia
Zimbabwe
El Salvador
Belize
Lebanon
Sudan
Grenada
Dominican Republic
Armenia
The Gambia
Ukraine
Cyprus
86
… and 14 More Are Vulnerable to a Debt Crisis
State of Bitcoin Q2 2015
Samoa
Ethiopia
Laos
Mauritania
Dominica
Cape Verde Senegal
Bhutan
Ghana
Tanzania
Uganda
Sao Tome e Principe
Mozambique
Mongolia
Sources: Jubilee Debt Campaign, Guardian. Images from Wikipedia
87State of Bitcoin Q2 2015
Chinese Stock Bubble Crash Arguably More Significant Influence than Greece on Bitcoin’s Price
Source: dizzynomics. Image from JNLC
State of Bitcoin Q2 2015
Wall Street Should Take Blockchain Technology Seriously
88
Sources: YouTube, CoinDesk, LinkedIn
“Distributed ledger technology does have the potential to be disruptive in certain business models, but it has at least as much potential to be enormously empowering in existing middle business models in terms of making them lower cost, more efficient and less risky.”
“So we won’t get there overnight but we will get there. How seriously should you take this? I would take it about as seriously as you should’ve taken the concept of the Internet in the early 1990s. It’s a big deal and it is going to change the way that our financial world operates.”
Blythe Masters,CEO of Digital Assets Holdings LLC
89State of Bitcoin Q2 2015
According to a recent report from the Euro Banking Association (EBA): “Existing financial services could be ‘powered by cryptotechnologies’ offering financial institutions potentially lower costs, better products and faster time to market.”
Sources: CoinDesk, EBA's ‘Cryptotechnologies, a Major IT Innovation and Catalyst for Change’ report
Banks Should Take Bitcoin Seriously
90State of Bitcoin Q2 2015
Very Serious People: Financial and Economic Leaders Continue to Join Bitcoin Companies
Sources: WSJ, CoinDesk, LinkedIn
Dee Hock,Visa. Now with Xapo
Anja Manuel,US Department of State. Now with Ripple Labs
Larry Summers,US Treasury. Now with Xapo and 21 Inc
Bill Dennings,MasterCard. Now with Bitreserve
Donald Donahue,DTCC. Now with Ripple Labs
Sheila Bair,FDIC. Now with itBit
John Reed,Citi. Now with Xapo
Hernando de SotoILD. Now with BitFury
State of Bitcoin Q2 2015
Views on Bitcoin’s Positive Impact on Economic Growth
91
Hernando de SotoILD. Now advisor at BitFury
Source: CoinDesk
Blockchain technology “may just be one of the most significant contributions to the history of organizing knowledge”.
Larry Summers,US Treasury. Now advisor at 21 Inc. and Xapo
“It seems to me that the people who confidently reject all the innovation here [in new payment and monetary systems] are on the wrong side of history.”
“I am much more confident that the world of payments will look very different 20 years from now than I am about how it will look.”
State of Bitcoin Q2 2015
New York Releases Final BitLicense Regulations to Mixed Industry Reaction
92
• Firms will no longer need approval for each new software update or round of VC funding
• Companies can now satisfy BitLicense and money transmitter license requirements simultaneously with a "one-stop" application submission
• Notably absent were several proposals put forth by the digital currency community, including exemptions for entities working on open-source protocols, micropayments, and a 24-month safe harbor period for early-stage startups
Source: CoinDesk
"They changed so little with
this version, it's laughable”- Elizabeth
Stark, Yale Law School
“It's an important stake in the ground”
- Jeremy Allaire, Circle
“It's a mixed bag”- Jerry Brito, Coin Center
"It's troubling that this nascent industry is being subjected to
more onerous regulations“
- John Collins, Coinbase
State of Bitcoin Q2 2015
Select Company Reactions to BitLicense Regulation
93
• ShapeShift would cease offering services to New York residents due to the finalization of the BitLicense digital currency regulatory framework. Its founder and CEO Erik Voorhees described the customer data requirements imposed by the BitLicense as “Orwellian”
• Bitcoin mining pool BTC Guild to close following BitLicense finalization. Owner ‘Eleuthria’ stated “BTC Guild could not afford any legal threats that may arise as a result of the New York regulatory framework”
Sources: CoinDesk, BTC Guild
State of Bitcoin Q2 2015
Select Country Regulatory Updates
94
Sources: CoinDesk, CoinDesk
Russia's central bank will meet with representatives from the country's financial markets to discuss bitcoin regulation. A prominent Moscow-based news outlet says it is likely the bank will be supportive of cryptocurrencies.
The Reserve Bank of Australia has indicated it is not in favor of regulating bitcoin and other digital currencies, stating “it is currently unlikely that any benefits of regulation would outweigh the potential costs”.
Russia Australia
95State of Bitcoin Q2 2015
Xapo Moves Headquarters from Silicon Valley to Switzerland Citing Customer
Privacy Concerns
Source: CoinDesk
• “This is not to facilitate crime, this is to protect privacy”
• “There are some customers that will bring more balances if we do this and there are some customers who have said ‘we will work with you if you do this’”
Wences CasaresXapo CEO
State of Bitcoin Q2 2015
Ripple’s Banking Relationships Appear to Have Weathered FinCEN Fines
96
Source: CoinDesk
• Financial Crimes Enforcement Network (FinCEN) fined Ripple Labs and its subsidiary XRP II a combined $700,000 for "willful violations" of the Bank Secrecy Act (BSA)
• FinCEN fine was reported in May, but Ripple Labs announced new deals with three Australian banks (and a new funding round) in June
97State of Bitcoin Q2 2015
Interest in Government-Backed Cryptocurrencies and/or Ledger Systems
Continues to Percolate
• Citi suggested UK government and banks should create their own digital currency to reduce cost as well as improve efficiency and transparency
• David Andolfatto, Federal Reserve Bank of St. Louis has discussed the idea of a ‘Fedcoin’, citing benefits like greater efficiency, security and transparency
Sources: CoinDesk, MacroMania, Deloitte
State of Bitcoin Q2 2015
About CoinDesk
• Find out more at www.coindesk.com• Follow us on Twitter: @CoinDesk• Subscribe to our daily email newsletters for the latest digital
currency news• If you have data you think should be included in future State of
Bitcoin reports, email [email protected] • We also welcome any feedback you have on the report• If you would like to sponsor an upcoming CoinDesk report, email
98
State of Bitcoin Q2 2015
Disclaimer
• CoinDesk makes every effort to ensure 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 you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
99