State of Bitcoin Q1 2015
10th April 2015
State of Bitcoin Q1 2015 Sponsored by Gem 1 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
State of Bitcoin Q1 2015 Sponsored by Gem 2 Sponsored by
State of Bitcoin Q1 2015 Sponsored by Gem 3 State of Bitcoin Credits
• Creator and Producer: Garrick Hileman (@GarrickHileman)
• Statistical assistance: Danqing Ying (@DanqingYing)
Garrick Hileman Danqing Ying
State of Bitcoin Q1 2015 Sponsored by Gem 4 Contents
• Summary and Adoption Dashboard • Valuation • Media • VC Investment • Commerce • Technology • Regulation and Macro
State of Bitcoin Q1 2015 Sponsored by Gem 5 Summary and Adoption Dashboard
State of Bitcoin Q1 2015 Sponsored by Gem 6 Q1 2015 Summary
Q1 was bitcoin’s largest VC Sustained pressure on bitcoin’s price, investment quarter yet with $226m which is due to the current demand- raised; all-time bitcoin VC investment supply imbalances, is winnowing the now totals $676m mining and exchange sectors
Bitcoin’s price briefly dropped to 21 Inc, which announced $116m in $177 in January 2015, and is down new funding, surpassed Coinbase as 24% so far in 2015 the best-capitalized bitcoin startup
Blockchain’s total wallets passed three million; merchant adoption slowed due Improved regulatory clarity (ie NY to bitcoin’s underwhelming value BitLicense revisions, UK’s favorable proposition for mainstream consumers posture) are building industry confidence and attracting Wall Street
State of Bitcoin Q1 2015 Sponsored by Gem 7 Key Bitcoin Adoption Metrics
Quarterly Last 12 Months Mar-15 Dec-14 Q/Q Δ Mar-14 Δ Commerce Wallets 8,457,207 7,396,772 14% 4,448,142 2x Merchants 88,000 82,000 7% 52,704 2x Merchants’ annual revenue ($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%
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.
State of Bitcoin Q1 2015 Sponsored by Gem 8 Price and Valuation
State of Bitcoin Q1 2015 Sponsored by Gem 9 CoinDesk Bitcoin Price Index – Q1 & YTD by the Numbers
Q1 Price Summary
31st Dec Close $319.70 31st Mar Close $243.39 ΔQ1/Q4 Close -23.9% 31st Mar Market Cap $3.4bn
YTD Price Summary
High (2nd Jan) $314.59 Low (14th Jan) $177.28 YTD High-Low Δ -43.6% Average $250.68 Median $246.85 Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
State of Bitcoin Q1 2015 Sponsored by Gem 10 Bitcoin’s Price in Q1 Remained Volatile Amid a Mix of Positive and Negative News
th 5 Jan 10th Mar $330 Bitstamp Bitcoin startup 21 suffers $5m Inc announces $310 hot wallet 25th Jan th $116m raised, hack 4 Feb all-star investor $290 Coinbase Ross Ulbricht roster launches US found guilty in NY bitcoin $270 court of operating exchange Silk Road; Ben Lawsky releases $250 revised NY BitLicense 18th Mar $230 UK Chancellor Osborne announces th favorable regulatory $210 14 Jan th 9 Feb environment and Bitcoin’s price th 20 Jan Hong Kong's research investment $190 plunges, breaks $200 Mainstream financial MyCoin mark institutions join disappears with $170 Coinbase's record up to $387m, $75m funding round reports claim $150 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
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
State of Bitcoin Q1 2015 Sponsored by Gem 11 Bitcoin’s Price Decline Has Not Stopped Exchange Trading Volume From Trending Up
Monthly Bitcoin Trading Volume 7 25
6 $ Billions $
20 BTC Millions BTC
5
15 4
3 10
2
5 1
0 0 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15
Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)
Data sources: Blockchain, CoinDesk, Bitcoinity
State of Bitcoin Q1 2015 Sponsored by Gem 12 Industry Rationalization: Bitcoin’s Price Plunge, Other
Issues are Thinning the Ranks of Exchanges and Mining
Mining Exchanges
Aquifer LLC
• A number of well-known exchanges and mining operators have recently gone bankrupt or shuttered operations for various reasons
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 13 Diminishing Incentives to Mine Bitcoins Will Result in Further Mining Sector Consolidation
Miners Revenue and Transaction Fee (USD) 5.0 30 4.5 25
4.0 $ Millions $
3.5 Thousands$ 20 3.0 2.5 15 2.0 10 1.5 1.0 5 0.5 0.0 0 01/01/2014 01/04/2014 30/06/2014 28/09/2014 27/12/2014
Miners Revenue Transaction Fee • While mining is the only bitcoin sector to date to generate significant revenues, at current (or lower) price levels, further sector consolidation is anticipated
Data source: Blockchain. Note: Miners revenue = (number of bitcoins mined per day + transaction fees) * market price.
State of Bitcoin Q1 2015 Sponsored by Gem 14 Bitcoin Primarily Functions as a Store of Value, Less Frequently Used as a Medium of Exchange
Total Trading Volume vs Transaction Ratio 7
6
5
4
3
2
1
0 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Data sources: Bitcoinity, Blockchain
State of Bitcoin Q1 2015 Sponsored by Gem 15 Peak Altcoin? For the First Time, Quarter-over- Quarter Altcoin Growth Was Flat
700 25%
23% 590 594 600 20%
500 483
15% 400 347
300 10% 9% 216 9% 200 8% 7% 7% 5% 100 64
0 0% 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.
Data source: CoinMarketCap
State of Bitcoin Q1 2015 Sponsored by Gem 16 Bitcoin’s Market Cap is 14x Larger Than the Next Altcoin, up 6x from End of 2014
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
Data source: CoinMarketCap data as of 1st Apr 2015
State of Bitcoin Q1 2015 Sponsored by Gem 17 Media
State of Bitcoin Q1 2015 Sponsored by Gem 18 Q1 Negative News
Bitstamp claims at least $5m lost in hot wallet hack
Hong Kong's MyCoin disappears with an initially reported $387m
Bitcoin mining firm CoinTerra heads for Steady stories of bitcoin-related crime Chapter 7 bankruptcy battle amid undermine mainstream user trust in bitcoin acrimonious claims on both legal sides
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 19 Q1 Positive News
Coinbase's record $75m funding round, Bitcoin startup 21 Inc announces $116m opening of US-based exchange raised, with all-star VC backing
Blockchain reports its total number of wallets passes three million Bitcoin Core 0.10 gives developers simplified tools and sophisticated fee suggestions
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 20 Q1 Most-Viewed CoinDesk Articles: Relative Interest in Bitcoin’s Price Articles Continues to Decline
CoinDesk’s Top 10 Most Viewed Stories in Q1 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
State of Bitcoin Q1 2015 Sponsored by Gem 21 Mainstream Bitcoin Media Coverage Dropped Quarter-Over-Quarter
News Published Mentioning Bitcoin
78 FT 41
73 NYT 76
127 WSJ 156
180 Sina 235
0 50 100 150 200 250
Q1 2015 Q4 2014
Note: Numbers of stories obtained by searching ‘bitcoin’ on respective publishers’ websites Sources: Financial Times, New York Times, Wall Street Journal and Sina websites
State of Bitcoin Q1 2015 Sponsored by Gem 22 ‘Bitcoin Price’ Continues to be the Top Search Term; Utorrent Mining Malware Scare Rising
Related Searches: Top Related Searches: Rising
Past 90 Days
Past 12 Months
Source: Google Trends data as of 1st Jan 2015
State of Bitcoin Q1 2015 Sponsored by Gem 23 VC Investment
State of Bitcoin Q1 2015 Sponsored by Gem 24 Two Biggest Bitcoin VC Deals in Q1…
$116m $75m (Series A) March 2015* (Series C) January 2015
*Note: The precise timing of when the $116m was raised, or whether it was raised in various individual stages, has not been revealed.
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 25 …Both Deals Broke the Previous Record for Largest Single VC Investment Round
Top Five All-Time VC Investment Deals
$120 $116
Millions “The Coinbase $75m $100 raise does sound like a Pre-IPO round. A $80 $75 Bitcoin IPO such as Coinbase could $60 trigger mainstream merchant adoption” $40 $31 $30 $25 - Bernard Lunn, $20 Bank Innovation
$0
Sources: CoinDesk, Crunchbase, Bank Innovation
State of Bitcoin Q1 2015 Sponsored by Gem 26 Bitcoin’s $121 Million Question
Is it a supercharged mining operation? Is it a hardware wallet?
Matthew Pauker CEO, 21 Inc
No, it’s bitcoin’s newest universal, 21 Inc!*
*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
State of Bitcoin Q1 2015 Sponsored by Gem 27 Q1 Set a Record for Bitcoin Venture Capital Investment, Nearly Doubling Q4 2014
Quarterly Total VC Investment (USD Millions) $250
$229 Millions
$200
$150 $133
$100 $84 $66 $66
$50
$0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
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.
Data sources: CoinDesk, CrunchBase
State of Bitcoin Q1 2015 Sponsored by Gem 28 All-Time Bitcoin Venture Capital Investment Increased 51% from End of 2014 to $676m
Q1 2015 bitcoin VC investment: Total VC investment in cryptocurrency startups to date: $229m $676m
Q4 2014 bitcoin VC investment: Increase in total to-date VC investment from end of Q4: $133m +51%
Data sources: CoinDesk, CrunchBase
State of Bitcoin Q1 2015 Sponsored by Gem 29 Bitcoin VC Investment Projected to Continue Outpacing Early-Stage Internet Investment
Bitcoin vs early Internet VC investment ($ millions)
1000 $916
900 $ Millions $ 800
700 $638
600
500
400 $349
300 $250
200
100
0 2014 Bitcoin 1995 Internet 2015 Bitcoin - projected 1996 Internet
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
State of Bitcoin Q1 2015 Sponsored by Gem 30 US Continues to Dominate Bitcoin VC Investment; First VC Funded Africa-Based Startup in Q1
$ Invested as of Q1 $ Invested as of Q4 2014 Q4 Q/Q Δ Regions Q1 ($m) Q/Q Δ ($m) ($m)
US & Europe Africa 0% 492.3 289.7 202.6 70% Europe Canada 18% 22% Africa Europe Asia 6% 119.1 99.2 19.9 20% 0% Middle Asia 42.1 41.0 1.1 3% East 2% Middle Asia 9% 14.0 11.1 2.9 26% East US & Latin US & Latin Middle Canada America 7.5 6.0 1.5 25% Canada America East 3% 73% 1% 65% Africa 1.1 0.0 1.1 N.A. Latin America Total 676.1 447.0 229.1 51% 1%
• 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
State of Bitcoin Q1 2015 Sponsored by Gem 31 Startups in 4 New Countries Received VC Investments; 22 Countries in Total Have a VC-Backed Bitcoin Startup
Barbados France
Kenya Switzerland
Data source: CoinDesk (www.coindesk.com/bitcoin-venture-capital/)
State of Bitcoin Q1 2015 Sponsored by Gem 32 US-Based Bitcoin Venture Capital Investment Nearly 2x Greater Than Rest of the World Combined
Total Funding by Country (USD Millions) $500
Millions $400
$300
$200
$100
$0
India
Israel
China
Japan
Kenya
France
Mexico
Canada
Sweden
Panama
Australia
Denmark
Germany
Barbados Argentina
Singapore
Switzerland
Luxembourg South Korea
United United States United Kingdom Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase TheNetherlands
State of Bitcoin Q1 2015 Sponsored by Gem 33 Silicon Valley Pulling Away: Share of All-Time Bitcoin VC Investment Jumped from 45% in Q4 to 59% in Q1
$ Invested No. of Companies
No. of Location Value ($m) companies Rest of Silicon Valley 29% World Silicon Valley $400.0 30 41% Silicon Rest of Valley Rest of World $276.1 73 59% World 71% 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
Note: Prior State of Bitcoin data may differ due to new funding information obtained. Date sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
State of Bitcoin Q1 2015 Sponsored by Gem 34 Q1 Deal Summary: Acquisitions and Reverse Merger Activity Accelerates Acquisitions
Jan 2015
Jan 2015
Apr 2015
Reverse Mergers
Jan 2015 Loma Vista Capital
MGT Capital Feb 2015 Investment
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 35 Keeping Bitcoin’s Size in Perspective - FinTech Investments Dwarfed Bitcoin in 2014
FinTech Bitcoin FinTech 216 100 Deals $3bn invested in 2014 Deals Biggest Deal Biggest Deal $150m $31m* $0.3bn invested in 2014
Data sources: CoinDesk, Medium (https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677) *Note: All data are 2014 only.
State of Bitcoin Q1 2015 Sponsored by Gem 36 The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company Categories
Infrastructure
Wallets Exchanges
Universal
Payment Financial Processing Services
Mining Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 37 A New Ecosystem Category Takes Shape: Infrastructure
• 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
Sources: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 38 Ecosystem Sector Trends: Universals Raised Most Funding in Q1, Followed by Mining and Infrastructure
Q1 VC Investment by Ecosystem Category (USD Millions)
$200 $191.0 Millions
$160
$120
$80
$40 $20.0
$5.0 $6.1 $1.1 $2.0 $3.8 $0
Payment Processor Wallet Exchange Financial Services Infrastructure Mining Universal
Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
State of Bitcoin Q1 2015 Sponsored by Gem 39 Universals Are Pulling Away From Other Sectors in Total VC Investment
2013 to 2015 VC Investment by Ecosystem Category (USD Millions)
$300 Millions $250
$200
$150
$100
$50
$0 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure
Data source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 40 Universals Now Command Nearly 40% of VC Investment; Mining and Wallets at 14% Each
$ Invested as of Q1 $ Invested as of Q4 2014
Q1 Q4 Q/Q Δ Sector Q/Q Δ ($m) ($m) ($m) Payment Payment Processor 55.4 54.3 1.1 2% Processor Wallet 12% 20% Infrastructure 55.7 49.6 6.1 12% Infrastructure 11% Exchange 65.8 62.0 3.8 6% Financial 48.5 43.5 5.0 12% Universal Services Exchange 16% Mining 96.5 76.5 20.0 26% 14% Universal 262.6 71.6 191.0 267% Wallet 91.6 89.6 2.0 2% Mining Financial Total 676.1 447.3 229.0 51% 17% Services 10% • 83% of Q1 investment was made in Universals
• The number of Universals also continues to climb, now up to 10
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
State of Bitcoin Q1 2015 Sponsored by Gem 41 Q1 2015 Investment Rounds in Bitcoin Startups
Close Date Company Size ($m) Round Select Investors Headquartered Mar-15 PeerNova 5.00 First OverStock San Jose
Mar-15 Bitt 1.50 Seed Avatar Capital Christ Church
Mar-15 TabTrader 0.07 Seed Rockstart Amsterdam
Mar-15 Coinigy 0.10 Seed Undisclosed Milwaukee
Andreessen Horowitz, Data Mar-15 21 Inc 116.00 First San Francisco Collective, Khosla Ventures Mar-15 ShapeShift 0.53 Seed Barry Silbert and Roger Ver Zug XAnge Private Equity, Hi-Pay (Hi- Feb-15 Ledger 1.50 Seed Paris Media group), Fred Potter
Pantera Capital, Bitcoin Opportunity Feb-15 BitPesa 1.10 Second Nairobi Corp, Crypto Currency Partners
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
State of Bitcoin Q1 2015 Sponsored by Gem 42 Q1 2015 Investment Rounds in Bitcoin Startups (contd.)
Close Date Company Size ($m) Round Select Investors Headquartered
Draper Associates, Feb-15 HashRabbit 0.50 Seed San Francisco VegasTechFund Accel Partners, GP Bullhound, Feb-15 KnCMiner 15.00 Second Stockholm Creandum, Martin Wattin Patrik Stymne, Emil Michael, Feb-15 NeuCoin 1.25 Seed Paris Henrik Kjellberg Feb-15 Ziftr 0.85 Seed 10x Venture Partners Milford Bonafide Quest Venture Partners, Crypto Feb-15 0.85 Seed New York (Bonifide.io) Currency Partners
Bitcoin Opportunity Corp, RSP Jan-15 BitFlyer 1.10 Seed Tokyo Fund No. 5, GMO Venture Partners Aleph, Spark Capital, Bitcoin Jan-15 Colu 2.50 Seed Tel Aviv Opportunity Corp, Box Group Jan-15 Anycoin Direct 0.56 Seed Undisclosed Veghel
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
State of Bitcoin Q1 2015 Sponsored by Gem 43 Q1 2015 Investment Rounds in Bitcoin Startups (contd.)
Close Date Company Size ($m) Round Select Investors Headquartered
New York Stock Exchange (NYSE), Jan-15 Coinbase 75.00 Third San Francisco USAA, BBVA, DoCoMo
Jan-15 TrustAtom 0.10 Seed Brian Cartmell, Vinny Lingham Vancouver
Jan-15 Ciphrex 0.50 First Undisclosed San Diego Tim Draper, AME Cloud Ventures, Jan-15 BlockCypher 3.10 Seed San Mateo Boost VC, 500 Startups
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
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
State of Bitcoin Q1 2015 Sponsored by Gem 44 Commerce
State of Bitcoin Q1 2015 Sponsored by Gem 45 Everyday Items Rank Above Consumer Tech on Overstock’s List of ‘Most Often Bought with Bitcoin’
1. Sheets 2. Donations 3. Headphones 4. Cases and 5. Area rugs to non-profits holders
6. Cables and 7. Mattresses 8. Coffee tables 9. A/V cables 10. Fashion tools sunglasses
Sources: CoinDesk, Overstock
State of Bitcoin Q1 2015 Sponsored by Gem 46 Growth of New Bitcoin-Accepting Merchants Remained Slow in Q1
Number of New Bitcoin-Accepting Businesses Added Each Quarter
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Sources: CoinDesk, CoinBase, BitPay, International Business Times
State of Bitcoin Q1 2015 Sponsored by Gem 47 More than 88,000 Merchants Now Accept Bitcoin, up from 82,000 in Q4 (+7%)
50K 38K
Data sources: Coinbase, BitPay
State of Bitcoin Q1 2015 Sponsored by Gem 48 Bitcoin-Accepting Merchant Forecast Slashed to Approximately 120,000 by End of 2015
140,000 R² = 0.9586 120,000
100,000
80,000
60,000
40,000
20,000
0 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Total merchants Forecasted merchants
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.
State of Bitcoin Q1 2015 Sponsored by Gem 49 Bitcoin’s Lack of Use in Commerce is Not Just a ‘Chicken and Egg’ Problem
• 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
"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 Steve Beauregard, flows to encourage consumer adoption." CEO of GoCoin
Sources: Pantera Capital, ZepChain, CoinDesk (http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/)
State of Bitcoin Q1 2015 Sponsored by Gem 50 CoinCenter’s Public Sentiment Survey Indicates Low Bitcoin Awareness in US
64.3% Distrust in of the general American population bitcoin People are not familiar at all with bitcoin who are decreases familiar from 50% with to 37% as 6.2% bitcoin familiarity of the general American population are more with say they have used bitcoin likely to bitcoin think it is increases useful 53.1% of those who are very familiar with bitcoin have never used it But the distrust in bitcoin is similar (47%) among those who frequently use bitcoin and those who never use Source: CoinCenter
State of Bitcoin Q1 2015 Sponsored by Gem 51 Blockchain’s Quarterly New Wallet Growth Rate Has Been Remarkably Consistent
No. of New Wallets Added Each Quarter 600
515 500 481 481 Thousands 451 454
400 343
300
200
120 100
0 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015
Data Source: Blockchain.info
State of Bitcoin Q1 2015 Sponsored by Gem 52 Forecast for Total Bitcoin Wallets by End of 2015 Maintained at 12 million
14
Millions R² = 0.9807 12
10
8
6
4
2
0 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
Total Wallets Forecasted Wallets 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.
State of Bitcoin Q1 2015 Sponsored by Gem 53 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
State of Bitcoin Q1 2015 Sponsored by Gem 54 Bitcoin Transactions Have Been Rising; Average of 10,000 Daily Transactions by Popular Addresses*
Number of Transactions per Day 120,000
100,000
80,000
60,000
40,000 Apr-14 Jul-14 Oct-14 Jan-15
Total no. of daily transactions No. of daily transactions excluding 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 Source and note: Blockchain.info, *100 most popular addresses.
State of Bitcoin Q1 2015 Sponsored by Gem 55 Now Over 374 Bitcoin ATMs Around the World, but Growth in New ATMs is Slowing
Increase in Number of Bitcoin ATMs 120 112 104 100
79 80
60
43 40 32
20
0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Data source: CoinATMRadar
State of Bitcoin Q1 2015 Sponsored by Gem 56 Break Even for Bitcoin ATM Owners is 11 Months; Average ATM Generates $5,520 profit per year
Operation Metrics Number of transactions/month 100 Average transaction size ($) 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
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. Sources: CoinDesk, BitAccess, Reddit, CoinATMRadar
State of Bitcoin Q1 2015 Sponsored by Gem 57 High Transaction Fees May be Discouraging People from Using Bitcoin ATMs
Social media comments on bitcoin ATM fees
Sources: CoinDesk, Reddit, CoinATMRadar
State of Bitcoin Q1 2015 Sponsored by Gem 58 Half of Bitcoin ATMs are Located in North America, Nearly One-Third are in Europe
Bitcoin ATMs by Continent
Europe Asia 11% 32% Oceania Latin 6% America 1% North Africa America 0% 50%
Data source: CoinATMRadar
State of Bitcoin Q1 2015 Sponsored by Gem 59 Technology
State of Bitcoin Q1 2015 Sponsored by Gem 60 Profiles of Four Alternative Uses of Blockchain Technology
1. Property title
2. Smart contracts
3. Voting
4. Notary services
Sources: CoinDesk, Coinbase Blog
State of Bitcoin Q1 2015 Sponsored by Gem 61 Property Title: Blockchain Technology Could Empower the Poor, Reduce Global Inequality
“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
• With protected property title, people could better engage in economic activities such as investment and infrastructure construction.
“Blockchain technology could 'parachute' property title services into many poverty stricken countries.” - Balaji S. Srinivasan, 21 Inc
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.
State of Bitcoin Q1 2015 Sponsored by Gem 62 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
State of Bitcoin Q1 2015 Sponsored by Gem 63 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
State of Bitcoin Q1 2015 Sponsored by Gem 64 Notary: Blockchain Technology Could Reshape Notarization Services and Reduce Inefficiency
• 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.
Sources: The Economist, Proof of Existence, CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 65 Views on the Application of Bitcoin Technology to the Internet of Things
“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 Paul Brody, consumables supply, performing self-service and Technology Strategy Consulting, IBM maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.”
Sources: CoinDesk, LinkedIn
State of Bitcoin Q1 2015 Sponsored by Gem 66 Functional Bitcoin Applications Can Be Grouped into 10 Categories
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
Source: CoinBase Blog
State of Bitcoin Q1 2015 Sponsored by Gem 67 Bitcoin Functional Applications (contd.)
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 Source: CoinBase Blog
State of Bitcoin Q1 2015 Sponsored by Gem 68 Bitcoin Mining Arms Race Slows: Bitcoin’s Network Difficulty QoQ Growth Rate Flattens
Quarterly Increase in Bitcoin Mining Difficulty
20 250% 236% 17.8
18
Billions Hashes 16 200%
14 11.8 12 150%
10 106% 8 100% 6.0 6.1 6
4 50%
2 17% 15%
0 0% Q2 2014 Q3 2014 Q4 2014 Q1 2015 Quarterly Increase in Mining Difficulty Qtr.-over-Qtr. Percentage Increase in Mining Difficulty
Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 69 Mining Pools: No News is Good News; Still No Permanent Fix for 51% Attack Risk
Unknown with AntPool 1BwZeHJ Unknown Address Ghash.io continues to BitMinter P2Pool shrink, down
Bitcoin to less than MegaBigPower F2Pool Affiliate 10% share NetworkEclipseMC Eligius from 50% in BTC Guild July 2014
BW.com Ghash.io Slush BTCChina Pool KnCMiner
Data source: Four-day average as of 1st Apr 2015 blockchain.info/pools
State of Bitcoin Q1 2015 Sponsored by Gem 70 Software Developer Interest in Bitcoin Continues Steady Growth
Number of Created Repositories in Github with Bitcoin in the Name or Description
Data source: BitcoinPulse
State of Bitcoin Q1 2015 Sponsored by Gem 71 Nodes: Levelling Off in Node Numbers Eases Bitcoin Network Centralization Concerns
Data sources: Bitnodes
State of Bitcoin Q1 2015 Sponsored by Gem 72 Quiet, Successful Update to the Bitcoin Core Protocol in Q1
New features added to Bitcoin Core software version 0.10 include:
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
State of Bitcoin Q1 2015 Sponsored by Gem 73 Regulation and Macro
State of Bitcoin Q1 2015 Sponsored by Gem 74 Bitcoin Startups Targeting the World’s 2.5 Billion ‘Unbanked’
Percentage of total adult 0-25% 26-50% 51-75% 76-100% population that does not use formal or semiformal financial Estimates used to calculate regional averages services Sources: CoinDesk, Mckinsey, Bitcoin for the Unbanked
State of Bitcoin Q1 2015 Sponsored by Gem 75 Wall Street Interest in Bitcoin is Growing
Citi wants “to [accelerate] Three blockchain startups selected emerging technologies that for Barclays Accelerator, with one have the potential to transform aiming to provide blockchain financial services experiences solutions for the insurance industry 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
Sources: CoinDesk, Bank Innovation
State of Bitcoin Q1 2015 Sponsored by Gem 76 Migration of Wall Street Executives to Bitcoin Companies Continues
Duncan Niederauer, Jason Weinstein, Blythe Masters, Timo Schlaefer, NYSE. Now advisor US Department of JP Morgan Chase. Goldman Sachs. at TeraExchange Justice. Now advisor at Now at Digital Assets Now at Crypto BitFury Holdings LLC Facilities
Gene Sperling, Paul Camp, Arthur Levitt, Arthur Hayes, National Economic JP Morgan Chase. SEC. Now advisor at Citi. Now at BitMEX Council. Now advisor at Now at Circle BitPay and Vaurum Ripple Labs Sources: WSJ, CoinDesk, LinkedIn State of Bitcoin Q1 2015 Sponsored by Gem 77 Nine Banks in Total Have Established Banking Relationships with Bitcoin Startups to Date
Newly Announced Banking Relationships
27th Mar 2015
24th Mar 2015
• 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 Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 78 Views on How Bitcoin Technology Can Transform Financial Services
“Digital Assets has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology.”
Blythe Masters, CEO of Digital Assets “The possibilities for reducing cost Holdings LLC and risk in settlement are enormous.”
Sources: CoinDesk, LinkedIn
State of Bitcoin Q1 2015 Sponsored by Gem 79 Select Country Regulatory Updates
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.
Hong Kong
Spanish political party, Unión Progreso y Democracia (UPyD), has submitted a proposal to the country's Congress outlining why bitcoin regulation is needed. Spain Digital currency businesses will have to comply with the Isle of Man's anti-money laundering (AML) laws from 1st April.
Isle of Man Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 80 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
State of Bitcoin Q1 2015 Sponsored by Gem 81 … Problems Remain with BitLicense’s ‘Duplicative and Redundant’ Requirements
“We should be mindful of this 'tax on innovation' that regulations place on the startup sector and high growth companies in general.”
1. Anti-money laundering (AML) requirements: Virtual currency exchangers and administrators are already required to Fred Wilson, comply with federal AML regulations Union Square Ventures 2. State money transmission regulations are already in place and are applicable to all virtual currency businesses
Source: CoinDesk (http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/)
State of Bitcoin Q1 2015 Sponsored by Gem 82 Generally Favorable Response to UK’s Initial Cryptocurrency Regulatory Framework
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
Positive Reactions Negative Reactions • “[Should] limit this to fiat-to- • “A light touch approach” (Marc crypto exchanges” (Marc Warne, Bittylicious) Warne, Bittylicious) • “Help score banking • “Will force the UK's bitcoin relationships” (Hugh Halford- companies to move abroad” Thompson, QuickBitcoin) (Akin Fernandez, Azteco)
Sources: HM Treasury, CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 83 Views on Bitcoin Regulation and its Potential Positive Impact on Economic Growth
“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 George Osborne Chancellor of the Exchequer, jobs and growth we all want to see in the future.” Second Lord of the Treasury
Source: CoinDesk
State of Bitcoin Q1 2015 Sponsored by Gem 84 Sponsored by
State of Bitcoin Q1 2015 Sponsored by Gem 85 About CoinDesk
• Find out more at www.coindesk.com • Follow us on Twitter: @CoinDesk • Subscribe to our email newsletters for the latest daily cryptocurrency news, or updates on our research • If you have data you think should be included in future State of Bitcoin reports, email [email protected] • We also welcome any feedback you have on the report • The State of Bitcoin reports and CoinDesk’s in-depth research reports are available here
State of Bitcoin Q1 2015 Sponsored by Gem 86 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.
State of Bitcoin Q1 2015 Sponsored by Gem 87