2015 04 10 state of bitcoin coindesk

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State of Bitcoin Q1 2015

10th April 2015

State of Bitcoin Q1 2015 1

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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

2 State of Bitcoin Q1 2015

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State of Bitcoin Credits

•  Creator and Producer: Garrick Hileman (@GarrickHileman)

•  Statistical assistance: Danqing Ying (@DanqingYing)


Garrick Hileman Danqing Ying

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Contents

•  Summary and Adoption Dashboard

•  Valuation •  Media •  VC Investment •  Commerce •  Technology •  Regulation and Macro


Sponsored by Gem 6 State of Bitcoin Q1 2015

Summary and Adoption Dashboard

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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

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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 Δ Commerce

Wallets 8,457,207 7,396,772 14% 4,448,142 2x Merchants 88,000 82,000 7% 52,704 2x Merchants’ annual revenue ($bn) 180 180 0% 2 78x ATMs 374 342 9% 47 8x Unique bitcoin addresses 203,189 157,377 29% 137,342 1x

Industry All-time VC investment ($m) $676 $447 51% $164 4x Number of VC-backed startups 103 89 16% 47 2x

Media Mainstream media mentions 458 580 -10% 2,594 -82%

Technology Network hash rate (billion/second) 346,028,956 313,142,289 11% 41,813,922 8x Github no. of updated repositories 27,857 23,249 20% 9,915 3x

Valuation Bitcoin market capitalization ($bn) $3.4 $4.3 -21% $5.3 -36%


Price and Valuation

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CoinDesk Bitcoin Price Index – Q1 & YTD by the Numbers


Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC

31st Dec Close $319.70

31st Mar Close $243.39

ΔQ1/Q4 Close -23.9%

31st Mar Market Cap $3.4bn

High (2nd Jan) $314.59 Low (14th Jan) $177.28

YTD High-Low Δ -43.6%

Average $250.68

Median $246.85

Q1 Price Summary

YTD Price Summary

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$150

$170

$190

$210

$230

$250

$270

$290

$310

$330

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

Bitcoin’s Price in Q1 Remained Volatile Amid a Mix of Positive and Negative News


14th Jan Bitcoin’s price plunges, breaks $200 mark

18th Mar UK Chancellor Osborne announces favorable regulatory environment and research investment

Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC

5th Jan Bitstamp suffers $5m hot wallet hack

Hong Kong's MyCoin disappears with up to $387m, reports claim

9th Feb

25th Jan Coinbase launches US bitcoin exchange

10th Mar Bitcoin startup 21 Inc announces $116m raised, all-star investor roster

20th Jan Mainstream financial institutions join Coinbase's record $75m funding round

4th Feb Ross Ulbricht found guilty in NY court of operating Silk Road; Ben Lawsky releases revised NY BitLicense

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Bitcoin’s Price Decline Has Not Stopped Exchange Trading Volume From Trending Up


Data sources: Blockchain, CoinDesk, Bitcoinity

Monthly Bitcoin Trading Volume

0

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Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15

BTC

Mill

ions

$ B

illio

ns

Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)

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Industry Rationalization: Bitcoin’s Price Plunge, Other Issues are Thinning the Ranks of Exchanges and Mining


Source: CoinDesk

Min

ing

Aquifer LLC E

xcha

nges

•  A number of well-known exchanges and mining operators have recently gone bankrupt or shuttered operations for various reasons

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•  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.

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01/01/2014 01/04/2014 30/06/2014 28/09/2014 27/12/2014

$ Th

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$ M

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Miners Revenue and Transaction Fee (USD)

Miners Revenue Transaction Fee

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Bitcoin Primarily Functions as a Store of Value, Less Frequently Used as a Medium of Exchange


Data sources: Bitcoinity, Blockchain

0

1

2

3

4

5

6

7

Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

Total Trading Volume vs Transaction Ratio

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Peak Altcoin? For the First Time, Quarter-over-Quarter Altcoin Growth Was Flat


Data source: CoinMarketCap

64

216

347

483

590 594

9%

23%

7% 8% 9%

7%

0%

5%

10%

15%

20%

25%

0

100

200

300

400

500

600

700

Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

Total Number of Altcoins Altcoin 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.

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Bitcoin’s Market Cap is 14x Larger Than the Next Altcoin, up 6x from End of 2014


Data source: CoinMarketCap data as of 1st Apr 2015

Rank Name Market Cap

1 Bitcoin $ 3,428,547,561

2 Ripple $ 245,984,620

3 Litecoin $ 62,695,671

4 Dash $ 20,785,772

5 BitShares $ 16,084,946

6 Dogecoin $ 12,518,429

7 Stellar $ 12,222,510

8 Nxt $ 9,887,171

9 MaidSafeCoin $ 8,090,823

10 Paycoin $ 7,683,946


Media

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Q1 Negative News


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

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Q1 Positive News


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

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Q1 Most-Viewed CoinDesk Articles: Relative Interest in Bitcoin’s Price Articles Continues to Decline


Rank Title Date

1 Roger Ver Denied US Visa to Attend Miami Bitcoin Conference 7th Jan

2 IBM Reveals Proof of Concept for Blockchain-Powered Internet of Things 17th Jan

3 Bitstamp Claims $5 Million Lost in Hot Wallet Hack 5th Jan

4 Bitcoin Price Continues to Fall, Breaks $200 Mark 14th Jan

5 State of Bitcoin 2015: Ecosystem Grows Despite Price Decline 7th Jan

6 Research: Hackers Could Install Backdoor in Bitcoin Cold Storage 16th Jan

7 Hong Kong's MyCoin Disappears with up to $387 Million, Reports Claim 9th Feb

8 Bitcoin Price Crashes Through $250 Mark 13th Jan

9 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

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Mainstream Bitcoin Media Coverage Dropped Quarter-Over-Quarter


News Published Mentioning Bitcoin

Note: Numbers of stories obtained by searching ‘bitcoin’ on respective publishers’ websites Sources: Financial Times, New York Times, Wall Street Journal and Sina websites

235

156

76

41

180

127

73

78

0 50 100 150 200 250

Sina

WSJ

NYT

FT

Q1 2015 Q4 2014

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‘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

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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.

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…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

$116

$75

$31 $30 $25

$0

$20

$40

$60

$80

$100

$120

Mill

ions

Top Five All-Time VC Investment Deals

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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 Pauker CEO, 21 Inc

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Q1 Set a Record for Bitcoin Venture Capital Investment, Nearly Doubling Q4 2014


Data sources: CoinDesk, CrunchBase

$66

$84

$66

$133

$229

$0

$50

$100

$150

$200

$250

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Mill

ions

Quarterly Total VC Investment (USD Millions)

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.

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All-Time Bitcoin Venture Capital Investment Increased 51% from End of 2014 to $676m


$676m $229m Total VC investment in cryptocurrency startups to date:

Q1 2015 bitcoin VC investment:

$133m Q4 2014 bitcoin VC investment:

Data sources: CoinDesk, CrunchBase

+51% Increase in total to-date VC investment from end of Q4:

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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

$349

$916

$250

$638

0

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Bitcoin vs early Internet VC investment ($ millions)

$ M

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2014 Bitcoin 2015 Bitcoin - projected 1995 Internet 1996 Internet

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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 Q1

Europe 18%

Africa 0%

Asia 6%

Middle East 2%

Latin America

1%

US & Canada

73%

Europe 22%

Africa 0%

Asia 9%

Middle East 3%

Latin America

1%

US & Canada

65%

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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

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US-Based Bitcoin Venture Capital Investment Nearly 2x Greater Than Rest of the World Combined


Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase

$0

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Total Funding by Country (USD Millions)

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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 companies

Silicon 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%

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Q1 Deal Summary: Acquisitions and Reverse Merger Activity Accelerates


Source: CoinDesk

Jan 2015

Jan 2015

Acquisitions

Reverse Mergers

Jan 2015

Feb 2015

Loma Vista Capital

MGT Capital Investment

Apr 2015

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Keeping Bitcoin’s Size in Perspective - FinTech Investments Dwarfed Bitcoin in 2014


Bitcoin FinTech

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*

216 Deals

Biggest Deal

$150m

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The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company Categories


Payment Processing

Wallets

Mining

Financial Services

Exchanges

Infrastructure

Universal

Source: CoinDesk

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A New Ecosystem Category Takes Shape: Infrastructure


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

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Ecosystem Sector Trends: Universals Raised Most Funding in Q1, Followed by Mining and Infrastructure


Q1 VC Investment by Ecosystem Category (USD Millions)

Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase

$1.1 $2.0 $3.8 $5.0 $6.1

$20.0

$191.0

$0

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Payment Processor Wallet Exchange Financial Services Infrastructure Mining Universal

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Universals Are Pulling Away From Other Sectors in Total VC Investment


2013 to 2015 VC Investment by Ecosystem Category (USD Millions)

Data source: CoinDesk

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Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

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Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure

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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 Processor

12%

Infrastructure 11%

Exchange 14%

Financial Services

10%

Mining 17%

Universal 16%

Wallet 20%

Sector Q1 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%

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Q1 2015 Investment Rounds in Bitcoin Startups


Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)

Close Date Company Size ($m) Round 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 Partners Nairobi

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Q1 2015 Investment Rounds in Bitcoin Startups (contd.)



Close Date Company Size ($m) Round 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 Seed Bitcoin 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

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Q1 2015 Investment Rounds in Bitcoin Startups (contd.)



Close Date Company Size ($m) Round 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 Seed Tim Draper, AME Cloud Ventures, Boost VC, 500 Startups San 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

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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 rugs 4. 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 Plummeted in Q1, Continuing Downward Trend


Sources: CoinDesk, CoinBase, BitPay, International Business Times

Number of New Bitcoin-Accepting Businesses Added Each Quarter

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

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


50K 38K Data sources: Coinbase, BitPay

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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.

R² = 0.95861

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15

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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

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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

decreases 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

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Blockchain’s Quarterly New Wallet Growth Rate Has Been Remarkably Consistent


Data Source: Blockchain.info

120

515 481

343

481 451 454

0

100

200

300

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500

600

Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015

Thou

sand

s

No. of New Wallets Added Each Quarter

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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.

R² = 0.98069

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Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16

Mill

ions

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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 privacy

Sources: CoinDesk, Coinbase Blog

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Bitcoin Transactions Have Been Rising; Average of 10,000 Daily Transactions by Popular Addresses*


40,000

60,000

80,000

100,000

120,000

Apr-14 Jul-14 Oct-14 Jan-15

Total no. of daily transactions No. 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

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Now Over 374 Bitcoin ATMs Around the World, but Growth in New ATMs is Slowing


Data source: CoinATMRadar

43

79

112

104

32

0

20

40

60

80

100

120

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Increase in Number of Bitcoin ATMs

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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 Metrics Number of transactions/month 100 Average transaction size ($) 200 Transaction fee revenue (%) 5 Revenue per year ($) 12,000 Cost Metrics Bitcoin ATM acquisition cost ($) 5,000 Place rent/month ($) 200 Exchange fee (%) 0.2 Cash logistics/month ($) 300 Costs per year ($) 6,480 Profits per Year ($) 5,520

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High Transaction Fees May be Discouraging People from Using Bitcoin ATMs


Sources: CoinDesk, Reddit, CoinATMRadar

Social media comments on bitcoin ATM fees

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North America

50%

Europe 32%

Asia 11%

Oceania 6%

Latin America

1%

Africa 0%

Bitcoin ATMs by Continent

Half of Bitcoin ATMs are Located in North America, Nearly One-Third are in Europe


Data source: CoinATMRadar


Technology

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Profiles of Four Alternative Uses of Blockchain Technology


1. Property title

2. Smart contracts

3. Voting

4. Notary services

Sources: CoinDesk, Coinbase Blog

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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

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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

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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

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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.

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Views on the Application of Bitcoin Technology to the Internet of Things


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

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Functional Bitcoin Applications Can Be Grouped into 10 Categories


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

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Bitcoin Functional Applications (contd.)


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

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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

11.8

17.8

6.0 6.1

236%

106%

17% 15%

0%

50%

100%

150%

200%

250%

0

2

4

6

8

10

12

14

16

18

20

Q2 2014 Q3 2014 Q4 2014 Q1 2015

Has

hes

Bill

ions

Quarterly Increase in Mining Difficulty Qtr.-over-Qtr. Percentage Increase in Mining Difficulty

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AntPool

F2Pool

BW.com

BTCChina Pool

KnCMiner

Slush Ghash.io

BTC Guild Eligius

EclipseMC Bitcoin Affiliate Network

MegaBigPower

P2Pool

BitMinter

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

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Software Developer Interest in Bitcoin Continues Steady Growth


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

Data source: BitcoinPulse

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


Data sources: Bitnodes

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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:


Regulation and Macro

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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

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Wall Street Interest in Bitcoin is Growing


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

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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

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Nine Banks in Total Have Established Banking Relationships with Bitcoin Startups to Date


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

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Views on How Bitcoin Technology Can Transform Financial Services


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

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Select Country Regulatory Updates


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

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In Q1 There Were Positive Developments With the NY BitLicense Proposal, but …


•  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 possibility

Sources: CoinDesk. Manhattan photo courtesy of Symmetry50

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… Problems Remain with BitLicense’s ‘Duplicative and Redundant’ Requirements


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/)

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Generally Favorable Response to UK’s Initial Cryptocurrency Regulatory Framework


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

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Views on Bitcoin Regulation and its Potential Positive Impact on Economic Growth


George Osborne Chancellor 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.”

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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


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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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