State of Bitcoin and Blockchain 2016
28th January 2016
State of Bitcoin and Blockchain 2016 1 About CoinDesk
• World leader in digital currency news, prices and information • The Bitcoin Price Index serves as an industry reference point • Offices in New York, Boston and London • Consensus 2016 conference will be held on 2–4 May in New York in collaboration with Digital Currency Group and Coin Center
State of Bitcoin and Blockchain 2016 2 State of Bitcoin and Blockchain Credits
Creator and producer: Dr. Garrick Hileman London School of Economics and University of Cambridge
Statistical assistance: Danqing Ying London School of Economics
@GarrickHileman @DanqingYing
State of Bitcoin and Blockchain 2016 3 Contents
1. 2015 Year in Review 2. Q4 2015 State of Bitcoin a. Price and Trading b. Media and Sentiment c. Investment and M&A d. Use Cases and Commerce e. Technology f. Regulation and Macro 3. Q4 2015 State of Blockchain a. Overview b. Private (Permissioned) Blockchains c. Public (Permissionless) Blockchains 4. 2016 Thought Leader Survey & Forecasts
State of Bitcoin and Blockchain 2016 4 1. 2015 Year in Review
State of Bitcoin and Blockchain 2016 5 2015 Industry Summary
“All about Blockchain”; major financial VC investment slowed, growth rate services firms invest and explore dipped to 3% in Q4; too early to say distributed ledger tech; bitcoin whether this is industry specific or part companies pivot of overall downturn in all VC funding
Bitcoin price up 35% in 2015; China Payment processor and wallet dominates bitcoin trading and sectors stagnate with little new VC mining, while Chinese financial investment; most consumers still lack instability drives bitcoin price gains compelling reason to use bitcoin
Regulatory tempo slows in 2015; NY Issues like block size and BitLicense finalised as some concentration of mining pools draw companies apply, others abandon NY heated debate among bitcoin market; Circle granted first license community on scalability and security
State of Bitcoin and Blockchain 2016 6 2015 Price Chart and Key Bitcoin & Blockchain Events
17th $500 29th May December Silk Road operator 11th March Ross Ulbricht R3’s distributed $450 sentenced to life in ledger initiative Former JP Morgan prison grows to 42 th exec Blythe Masters 5 th members joins blockchain startup 11th May 5 November $400 January Final US government Bitstamp Nasdaq becomes first th auction of over 44,000 claims it lost 10 March major Wall St firm to publicly announce trial of Silk Road bitcoins $350 $5m in hot Bitcoin startup 21 bitcoin network wallet hack announces $116m 15th August all-star VC backing 3rd June Bitcoin 'fork' 16th $300 New York proposed in releases final controversial bid to November BitLicense resolve scalability Amazon starts $250 question shipping 21 bitcoin computers 20th January 15th April 23rd June 9th September $200 BBVA, USAA join MIT Media Lab Bitcoin network Visa, Capital One back Coinbase's $75m launched Digital survives surprise blockchain startup Chain Series B Currency Initiative stress test in $30m round $150 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
State of Bitcoin and Blockchain 2016 7 Key Bitcoin And Blockchain Adoption Metrics: Price Up 82%, Trading Volume Increased 424%
Quarterly Total or End-of-Quarter (EoQ) Year Ago Q4 2015 Q3 2015 Q4/Q3Δ Q3/Q2Δ Q4 2014 Δ Commerce Wallets (EoQ) 12,768,681 11,051,719 16% 18% 7,396,772 2x Transaction Volume (BTC) 384,835,478 350,286,741 10% 7% 291,817,718 1x Merchants’ annual revenue ($bn) (EoQ) $197 $190 4% 0% $180 1x ATMs (EoQ) 536 475 13% 12% 342 2x Price Price (EoQ) $430.05 $236.25 82% -10% $319.7 1x Exchange trading volume (BTC) 150,025,305 28,615,261 424% 17% 40,041,026 4x Bitcoin market capitalization ($bn) (EoQ) $6.5 $3.5 86% -8% $4.4 1x Industry All-time VC investment ($m) (EoQ) $949 $923 3% 10% $459 2x Number of VC-backed startups (EoQ) 127 120 6% 6% 90 1x Media Mainstream media mentions 521 411 27% 11% 508 1x Blockchain Number of blockchain companies (EoQ) 54 42 29% 40% 14 4x Technology Network hashrate (billion/second) (EoQ) 743,604,444 457,184,328 63% 30% 313,142,289 2x
State of Bitcoin and Blockchain 2016 8 2015 Bitcoin and Blockchain Metric Highlights
Up 2X • New wallets and ATMs both doubled from end of 2014 • Network hashrate doubled from end of 2014
• Total VC investment doubled from end of 2014
Up 4X • Exchange trading volume in Q4 2015 is four times greater than Q4 2014
• Number of large firms interested in blockchain technology is four times greater than end of 2014
Data sources and notes: CoinDesk, Blockchain, BitcoinPulse, Github, Coin ATM Radar. Figures are cumulative from start of records, except transaction volume, exchange trading volume 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.
State of Bitcoin and Blockchain 2016 9 Biggest VC Deals in 2015
$116m* $75m $50m
(Series A) March 2015 (Series C) January 2015 (Series C) April 2015
Investors: Andreessen Horowitz,Investors: New York Stock Investors: Goldman Sachs, Data Collective, Khosla Exchange, USAA, BBVA, IDG Capital Partners, Breyer Ventures, RRE Ventures and Andreessen Horowitz Capital Yuan Capital
*Note: Exact timing of when 21 Inc raised $116m has not been revealed and it’s likely that much of the funding was raised in 2014. Source: CoinDesk
State of Bitcoin and Blockchain 2016 10 Annual VC Investment in 2015 Increased 36% Over VC Investment in 2014
$362m $490m VC investment in 2014 VC investment in 2015*
*Note: Exact timing of when 21 Inc raised $116m has not been revealed and it’s likely that much of the funding was raised in 2014. Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 11 While 2015 VC Investment Was Greater Than 2014, the Growth Rate Slowed in 2015
$600 300% 280%
$490
$500 250% Millions
$400 200% $362
$300 150%
$200 100%
$100 50% 36%
$0 0% 2014 2015 Total VC Investment ($M) Annual Percentage Growth
Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 12 By Comparison, Annual Internet VC Investment Increased to 155% in 1996, Slowed to 41% in 1997
Annual Internet VC Investment
$10 350% 308% $9.08 Billions $9 300% $8
$7 250%
$6 200% $5 155% $4.39 150% $4 107% $3 100% 71% $2 41% $1.08 50% $1 $0.45 $0.63 $0.17 $0 0% 1995 1996 1997 1998 1999 2000 Annual Investment ($b) Annual percentage increase
Data source: PricewaterhouseCoopers
State of Bitcoin and Blockchain 2016 13 Growth Rate of Quarterly Bitcoin and Blockchain VC Investment Slowing, But…
Quarterly Percentage Growth in All-Time VC Investment 80% • Some of the slowdown in 70% 68% growth rate could be 60% 54% explained by 50% the ‘law of 50% large numbers’ 41% for business, 40% where 29% achieving the 30% same % growth 22% rate on a larger 20% base can 10% steadily 10% 3% become more difficult 0% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 14 …Bitcoin/Blockchain Industry Not Alone; Overall VC Funding Environment Softened in 2015
US Venture Capital Investment ($bn)
• Total VC investment across all tech sectors decreased 9% from $31.1bn in 2014 to $28.2bn 2015; number of deals decreased 13% from 2014
Data source: Bloomberg
State of Bitcoin and Blockchain 2016 15 Blockchain Startups Still Lag Behind Bitcoin Startups in VC Investment
Distribution of Investment Among Bitcoin, Blockchain and Hybrid Companies 100% 98%
80%
64% 60% 53% 53% 47% 47%
40% 36%
20%
2% 0% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Percentage of Bitcoin Company Investment Percentage of Blockchain and Hybrid Company Investment
Data source: CoinDesk
State of Bitcoin and Blockchain 2016 16 Bitcoin ‘Deadpool’ Grows to 26 Startups; Besides Funding, ‘Security’ Also Commonly Cited Cause of Death
30
25
20 Agora
15 Bit121
10
5
0 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 17 Notable 2015 Bitcoin Announcements by Major Financial Firms
• Visa Europe is working to leverage bitcoin blockchain for remittance services
• MasterCard and American Express invested in Digital Currency Group (DCG) and Abra, respectively
• PayPal adds Xapo CEO to Board of Directors
Source: CoinDesk
State of Bitcoin and Blockchain 2016 18 Notable 2015 Blockchain Announcements by Major Financial Firms
• Nasdaq debuted its blockchain-based private markets product, Nasdaq Linq
• CME and London Stock Exchange form blockchain settlement group
• Australian Securities Exchange selects Digital Asset to develop distributed ledger solutions
Source: CoinDesk
State of Bitcoin and Blockchain 2016 19 Notable Regulatory Developments in 2015
UK Treasury: AML rules for Bank Secrecy Act (BSA) wallets and prudential audits: FinCEN is serious regulations for exchanges about anti-money laundering enforcement European Court of Justice (ECJ): Bitcoin sales are not Commodity Futures Trade subject to VAT Commission (CFTC): Bitcoins are commodities itBit Trust Company is chartered under New York Banking Law by Hong Kong: No need for the New York State Department bitcoin regulation of Financial Services (NYDFS)
New York: The NY BitLicense New Jersey: Digital Currency became effective in August Jobs Creation Act introduced
Securities and Exchange Commission (SEC): Some mining contracts are securities
Source: CoinDesk
State of Bitcoin and Blockchain 2016 20 Scaling Bitcoin Debate Draws Causalities on Both Sides, “Stress Tests” Hamper Network
Three significant stress tests (or spam attacks) took place in the 2nd half of 2015
June July October
• Conducted by • Conducted by • Stress test CoinWallet.eu an unknown rumoured to • Spent 20 BTC party be carried out (around • Largest bitcoin by a hired $5,000) on transaction of Russian transactions all time was named “Alister totaling about created to Maclin” 200MB in data “clean up the mess”
• Number of reachable nodes declined following the October stress test
• The bitcoin network stress tests orchestrated by CoinWallet may have breached UK technology law
Sources: MotherBoard, CoinDesk
State of Bitcoin and Blockchain 2016 21 Unknown Pools Dropped Significantly from 11% to 1%, Mining Pools Become More Concentrated
2014 2015 BW.COM 6%
Unknown KnCMiner 11% BTCC Pool Slush AntPool 11% 6% 5% 2% 21 Inc. KnCMiner Discus Fish 2% 3% 31% BitFury Slush 14% 4% Unknown with 1AcAj9p Address 4% Polmine 4% Unknown with F2Pool 1BX5YoL Address Eligius BTC 24% AntPool 4% 5% GHash.IO 25% Guild 22% 5%
• Antpool and F2Pool have grown significantly, from 2% to 50% in 2015; both now maintain a consistent 25% share of bitcoin’s hashing power
Note: Labels for mining pools with 1% or less share are removed. Data source: Four-day average as of 2nd October 2014 and 6th January 2016 on Blockchain
State of Bitcoin and Blockchain 2016 22 2. Q4 2015 State of Bitcoin
State of Bitcoin and Blockchain 2016 23 Q4 2015 Summary
VC investment growth rate dropped “It’s all about blockchain”; 42 major from 11% in Q3 to 3% in Q4; unclear if financial services firms partner with this is sector specific or driven by R3CEV to explore blockchain overall VC environment applications
Bitcoin price volatility reaches two- Bitcoin is exempt from VAT by the year high amid price rally and high European Court of Justice - ‘A big exchange trading volume; bitcoin milestone’ according to European price up 82% exchanges
Developing-world VC investment Media attention returns to sector with stagnates; debate emerges over cost interest in blockchain technology, advantages and overall value price rally and new speculation on proposition of ‘rebittances’ Satoshi Nakamoto’s real identity
State of Bitcoin and Blockchain 2016 24 2.a Price and Trading
State of Bitcoin and Blockchain 2016 25 CoinDesk Bitcoin Price Index – Q4 & 2015 by the Numbers
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
State of Bitcoin and Blockchain 2016 26 Bitcoin Price Rallied in Q4
9th December 11th December $500 10th November Supposed Satoshi Bitcoin price climbs to Bitcoin price drops Nakamoto 'unmasking' one-year high on record 13% to below $350 might be driving bitcoin's volume $450 after hitting $450 for price rally the first time in 2015 19th November 5th November 17th $400 EU announces Final US government December possible “crack auction of over 44,000 down” on bitcoin R3’s distributed Silk Road bitcoins after Paris attacks ledger initiative $350 grows to 42 3rd November 5th bank members Bitcoin price breaks December $300 $400 amid 12% surge 16th Visa Europe on China concerns November demos bitcoin remittance app Amazon starts $250 shipping 21 bitcoin computers
$200 1-Oct 8-Oct 15-Oct 22-Oct 29-Oct 5-Nov 12-Nov 19-Nov 26-Nov 3-Dec 10-Dec 17-Dec 24-Dec 31-Dec
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
State of Bitcoin and Blockchain 2016 27 Bitcoin Rebounded From the Worst Performing Currency in 2014 (-67%) to Best in 2015 (+35%)
• Bitcoin was also the world’s top performing currency in 2013
Data uses USD as a base currency. Source: the Money Project
State of Bitcoin and Blockchain 2016 28 Bitcoin vs. FinTech: Bitcoin’s 2015 Appreciation (+35%) Surpasses Publicly Traded FinTech Stocks (+12%)
Bitcoin Price Index: +35% 150
140 FinTech Portfolio Index: +12% 130
120
110
100
90
80
70
60
50 1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 FinTech Portforlio Index BPI
Notes: BPI is CoinDesk’s price index. The full list of FinTech portfolio stocks can be found at Bank Innovation. The FinTech stock index is an unweighted index. Both CoinDesk BPI and FinTech portfolio index are normalised to 100 on 1st January 2015. Data sources: BPI, OTCMarkets, eoddata
State of Bitcoin and Blockchain 2016 29 Main Drivers Behind the Price Rally
• Positive media coverage and US • European Court of Justice exempted Marshalls auction bitcoin from VAT across EU
• Bobby Lee, CEO of BTCC, noted that bitcoin’s price was trading up to 10% higher in the Chinese market
• “As China's government steps up capital controls to limit one widely used avoidance path, its citizens appear to be shifting resources to the next best option, cryptocurrencies.” - Robert Viglione, PHD, Darla Moore School of Business
Sources: Viglione (2015), CoinDesk, itBit
State of Bitcoin and Blockchain 2016 30 Some Measures Show a Decrease in Bitcoin Volatility…
“Volatility has been on the decline since bitcoin’s inception. In 2015, bitcoin volatility fell by 21%. More specifically, BTC/USD exchange volatility (trailing 30-day average) fell from 3.98% to 3.15% this year.”
Source: Coinbase blog, 31st Dec 2015
State of Bitcoin and Blockchain 2016 31 …While Other Measures Show Q4 Bitcoin Volatility is at a Two-Year High
Peak-to-Trough Date Quarterly Price High Quarterly Price Low Percentage Δ
Q1 2014 $951.39 (6th January) $458.50 (31st March) 52%
Q2 2014 $665.73 (3rd June) $360.84 (10th April) 84%
Q3 2014 $647.34 (2nd July) $374.73 (29th September) 42%
Q4 2014 $427.24 (12th November) $309.87 (30th December) 27%
Q1 2015 $314.59 (2nd January) $177.28 (14th January) 44%
Q2 2015 $262.48 (30th June) $218.27 (14th April) 20%
Q3 2015 $309.98 (12th July) $209.13 (24th August) 33%
Q4 2015 $237.4 (2nd October) $465.5 (15th December) 96%
Source: CoinDesk
State of Bitcoin and Blockchain 2016 32 High Volatility = More Trading: Q4 Bitcoin Trading Volumes Hit One-Year High
Monthly Bitcoin Trading Volume 90 40
80 Billion
Million 35
70 USD BTC 30 60 25 50 20 40 15 30 10 20
10 5
0 0
Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)
Data sources: CoinDesk, Bitcoinity Note: Bitcoinity has removed Mt Gox data, so trading volume chart may look different from those in previous State of Bitcoin reports.
State of Bitcoin and Blockchain 2016 33 Trading Volume in Bitcoin Investment Trust (GBTC) is Positively Correlated (0.53) With Exchange Trading
Weekly Indexed Bitcoin and GBTC Trading Volume 1200
1000
800
600
400
200
0 5/4/15 6/4/15 7/4/15 8/4/15 9/4/15 10/4/15 11/4/15 12/4/15 BTC Volume GBTC Volume
Data sources: OTCMarket, Bitcoinity
State of Bitcoin and Blockchain 2016 34 Percentage of Bitcoin Owned by the Top 500 Richest Addresses Decreases From 33% to 30%
Percent of Bitcoins Owned by Richest Addresses Over Time Percent of Bitcoins Owned
Note: Block 335,000 is the block roughly one year ago and Block 390,000 is around the current block Data Source: Bitcoin Rich List
State of Bitcoin and Blockchain 2016 35 Total Number of Altcoins Decreased by 3% in Q4; Altcoin Market Cap Share Decreased to 6%
800 25%
23% 693 700 675 648 20% 590 594 600
500 483 15%
400 347 10% 300 9% 9% 9% 9% 216 7% 8% 200 7% 6% 5% 100 64
0 0% Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-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 the combined market caps of all cryptocurrencies (including bitcoin). For example, a market cap 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 and Blockchain 2016 36 Top Altcoins Prove Consistency, but…
Q4 Q3 Name Market Cap Rank Rank Δ 1 Bitcoin $6,757,260,784 Same 2 Ripple $203,373,383 Same
3 Litecoin $154,072,197 Same Dropped from Q4 Q3 4 Ethereum $72,555,828 Same Top 10 Rank Rank BanxShares 588 7 5 Dash $20,865,697 +1 6 Dogecoin $14,462,829 +2 7 Peercoin $9,946,601 +3 8 Stellar $8,321,801 +1 9 MaidSafeCoin $6,946,499 +2 10 Bitshare $6,632,485 -5
Data source: CoinMarketCap data as at end of quarter (7th January 2016 and 1st October 2015, respectively)
State of Bitcoin and Blockchain 2016 37 …There Are Now Over 400 ‘Dead’ Altcoins
2chcoin AphroditeCoin Binarycoin Bountycoin Citizencoin 66coin Appcoin Birdcoin Boxxycoin ClockCoin 8coin AppleByte Bitcoin2 Boycoin Clockwisecoin 99cents Arkhash Bitcoin2.0 Brokebackmountaincoin CloudCoin Acros Armoredcoin Bitcoin3.0 BTCTalkCoin Cnote AeroCoin AstroCoin BiteCoin Bumbacoin Cococoin Aircoin AustraliaCoin Bitinium Burbucoin Coffeecoin Alcohoin Babycoin Bitland ButterflyCoin Coiledcoin Alicoin BaconBitsCoin Bitleu Californiacoin Coin Aliencoin Badcoin Bitpeso Cancercurecoin Coin2.0 AllAgesCoin Basecoin Bitpug Capitalcoin Coincoin Allahcoin BatCoin Bitraam CataloniaCoin CoinyeCoin AlphaCoin BeaoCoin Blazecoin Catedoge ColbertCoin AlphaOmegaCoin Beatlecoin BlobbyCoin Championcoin CollegeCoin Altrocoin BeeCoin Bluechip Charitycoin Cometcoin AmericanCoin BeerCoin Bones Chichicoin Compasscoin AmeriCoin BeliCoin BonusCoins Chicoin Cooperationcoin AminaCoin Bells Boomcoin Chococoin CopperBars AmKoin BestCoin Boringcoin ChoomCoin CopyCoin Apecoin Billaume Bosscoin ChuckCoin …
Note: An altcoin is counted as dead when it does not have any reported market cap. Sources: bitcointalk, CoinMarketCap
State of Bitcoin and Blockchain 2016 38 2.b Media and Sentiment
State of Bitcoin and Blockchain 2016 39 Q4 Positive News
Bitcoin price rockets to one-year high on record volumes
Visa Europe demos remittance app built using bitcoin blockchain Amazon starts shipping 21 Bitcoin Computers
Source: CoinDesk
State of Bitcoin and Blockchain 2016 40 Q4 Negative News
Increasing number of bitcoin companies VC investment growth rate dropped from enter dead pool 11% in Q3 to 3% in Q4; companies focused on wallets and payment processors report no new funding
Digital currency exchange Cryptsy has SEC charged GAW Miners, ZenMiner and suspended withdrawals and faces problems CEO Josh Garza with the fraudulent sale of with allegations of fraud and unlicensed securities and the operation of a mismanagement Ponzi scheme
Source: CoinDesk
State of Bitcoin and Blockchain 2016 41 Q4 Most-Viewed CoinDesk Articles: 60% Are Price- Related
CoinDesk’s Top 10 Most Viewed Stories in Q4 Rank Title Date 1 Bitcoin's Price Rise Explained by Industry Insiders 31st October 2 Poll: What Will Bitcoin's Price Be at the End of 2015? 2nd November 3 US Government to Sell Over 44,000 Bitcoins Today 5th November 4 Vote for 2015's Most Influential People in Bitcoin and Blockchain 24th November 5 Bitcoin Price Rockets to One-Year High on Record Volumes 11th December 6 Satoshi Nakamoto ‘Unmasking’ Might Be Driving Bitcoin's Price Rally 9th December 7 Bitcoin Price Breaks $400 Amid 12% Surge 3rd November 8 Jamie Dimon: Bitcoin Will Not Survive 5th November 9 Ben Bernanke: Bitcoin Has ‘Serious Problems' 19th November 10 Bitcoin Price Drops 13% to Fall Below $350 10th November
Source: CoinDesk top 10 Q3 stories based on pageviews
State of Bitcoin and Blockchain 2016 42 Mainstream Media Coverage of Bitcoin on China’s Sina Increased 42% QoQ, Largely Flat in Western Media
News Published Mentioning Bitcoin
46 FT 77
76 NYT 76
87 WSJ 81
202 Sina 287
0 50 100 150 200 250 300 350 Q3 2015 Q4 2015
Note: Numbers of stories obtained by searching ‘bitcoin’ on respective publishers’ websites Sources: Financial Times, New York Times, Wall Street Journal and Sina
State of Bitcoin and Blockchain 2016 43 China Bitcoin Exchange Market Share Almost 90%; CNY/BTC Captures 95% of Total Volume
Currency Share by Exchange Volume (BTC) Exchange Market Share
bitfinex, bitstamp, 2.45% lakebtc, 1.63% USD, 3.91% 2.10% others, 3.13% btcchina, 4.10%
huobi, 42.85%
CNY, 95.05% okcoin, 41.21%
Note: Labels for currencies and exchanges with less than 1% market share are omitted. Data source: Bitcoinity
State of Bitcoin and Blockchain 2016 44 Google Searches: ‘Gemini Bitcoin’ and ‘mmm Bitcoin’ (Notorious Ponzi Scheme) Have Been Rising Fast in Past Three Months
Related Searches: Top Related Searches: Rising
Q4 2015
2015
Source: Google Trends search bitcoin
State of Bitcoin and Blockchain 2016 45 Bitcoin Academic Research Increased by 8% in 2015, Economics Discipline Leads with 25% of Publications
Discipline Distribution of Publications Number of New Bitcoin Academic Research Publications Each Year Sociology Politics 8% 1% 300 267 248 Law Economics 250 15% 25% 200 Environment 1% 150 Cryptography Finance 100 and Security 10% 71 17% 50 23 Computer 8 Science & 1 0 1 Accounting 0 Engineering 0% 23% 2008 2009 2010 2011 2012 2013 2014 2015
Note: Run rate calculated for 2015 total research. Sources: Brett Scott , Peer-to-Peer Review: The State of Academic Bitcoin Research 2014, JSTOR, Science Direct, Ingenta, Microsoft academic search, SpringerLink, SSRN, Taylor and Francis, Wiley, ArXiv, Oxford Journals , deepdyve, researchgate, seekdl, dblp, Cryptology ePrint Archive, Freesearch and Cambridge Journals.
State of Bitcoin and Blockchain 2016 46 2.c Investment and M&A
State of Bitcoin and Blockchain 2016 47 Biggest VC Deals in Q4
$13m $5m (Series A) November 2015 (Series B) October 2015
Source: CoinDesk
State of Bitcoin and Blockchain 2016 48 VC Deal Sizes Continue Declining
Largest Quarterly VC Deals $80 $75*
Millions $70
$60
$50 $50
$40
$30 $30 $31 $30 $25 $20 $20 $20
$13 $10
$0 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4
*Note: 21 Inc. is excluded because the precise timing of when it raised the $116m, which occurred in various individual stages, has not been revealed. Source: CoinDesk
State of Bitcoin and Blockchain 2016 49 No New Countries Added a VC-backed Bitcoin Startup in Q4 Keeping Total at 23 Countries
Argentina India Philippines
Australia Singapore Israel
Barbados South Korea Japan Canada Sweden Kenya China Luxembourg Switzerland
Denmark Mexico United Kingdom The France United States Netherlands
Germany Panama
Sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 50 Both Total VC Investment and Average VC Deal Size Dropped QoQ
Quarterly VC Investment ($m) $250 $12
$228
Millions Millions $10 $200 $10 $10
$8 $150 $145 $133 $6 $6 $100 $4 $85 $74 $4 $3 $50 $3 $2 $26
$0 $0 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Quarterly Total VC Investment ($m) Quarterly Average VC Investment Deal Size ($m)
Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 51 Bitcoin VC Investment Now Falling Behind Early- Stage Internet Investment
Bitcoin vs Early Internet VC Investment ($m)
$700 $639
Millions $600
$490 $500
$400 $362
$300 $250
$200
$100
$0 2014 1995 2015 1996 Bitcoin Internet Bitcoin Internet Note: Internet figures include only first-sequence venture deals. Year-end projection extrapolated from YTD run rate. 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 and Blockchain 2016 52 Asia Saw Largest Q4 % Increase; New Investment in Middle East, Latin America and Africa Has Evaporated
$ Invested as of Q4 $ Invested as of Q3 Regions Q4 ($m) Q3 ($m) Q/Q Δ ($m) Q/Q Δ Africa 0% Africa 0% Europe US & 16% 710.7 694.3 16.5 2.4% Europe Canada 17% Europe 156.4 155.8 0.57 0.4% Asia 6% Asia 5% Middle East Asia 59.5 50.2 9.3 18.5% Middle East 1% Middle 2% 14.0 14.0 0.0 0.0% East Latin US & 7.5 7.5 0.0 0.0% Canada America US & 75% Canada Africa 1.1 1.1 0.0 0.0% 75% Latin America Latin 1% Total 949.2 922.9 26.3 2.9% America 1%
• No VC investment in Middle East, Latin America and Africa for three consecutive quarters • US continues to dominate bitcoin VC investment
Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 53 US VC Investment is 2.6x the Rest of World Combined
Total Funding by Country ($m) $70
$60 Millions $50
$40
$30
$20
$10
$0
Note: US is excluded from above chart. Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 54 Share of VC Investment in Silicon Valley Remained Relatively Constant Over Past Quarters
$ Invested No. of Companies
No. of Location Value ($m) companies Silicon Valley Rest of Silicon Valley 30% World 47% 507.8 38
Silicon Rest of World 449.5 90 Rest of World Valley 53% 70% Total 957.3 128
• Total number of VC-backed bitcoin companies increased steadily over the past quarters
Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 55 Venture Investment Falls Into Seven Distinct Bitcoin Industry Sectors
Infrastructure
Wallets Exchanges
Universal
Payment Financial Processing Services
Mining Source: CoinDesk
State of Bitcoin and Blockchain 2016 56 Sector Trends: 69% of This Quarter’s Total Investment Is Raised by Financial Services Companies
VC Investment by Ecosystem Category ($m)
$250.0
illions M $200.0
$150.0
$100.0
$50.0
$0.0 Payment Exchange Universal Mining Financial Wallet Infrastructure Processor Services Q1 Q2 Q3 Q4
Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 57 Wallets, Payment Processors Have Raised No New Investment for Several Quarters
2013 to 2015 VC Investment by Ecosystem Category ($m) $350
illions $300 M
$250
$200
$150
$100
$50
$0 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure
Data source: CoinDesk
State of Bitcoin and Blockchain 2016 58 Payment Processor and Wallet Investment Nearly Flat Over Last Four Quarters
$ Invested as of Q4 $ Invested as of Q3
Payment Q4 Q3 Q/Q Δ Payment Processor Sector Q/Q Δ Wallet 10% Processor ($m) ($m) ($m) 8% 8% Wallet Payment 10% 78.9 77.6 1.4 2% Infrastructure Infrastructure Processor 10% 10% Infrastructure 94.8 94.4 0.4 0% Exchange 105.7 105.7 0 0% Exchange Exchange Financial Universal 12% Universal 11% 133.6 115.4 18.1 16% 35% Services Financial 34% Mining 120.8 119.3 1.4 1% Services Financial Universal 321.7 316.7 5.0 2% 12% Services Wallet 93.8 93.8 0 0% 14% Total 949.2 922.9 26.3 3% Mining 13% Mining 13%
• Financial Services received highest growth in VC investment at 16% • Five new VC-backed financial services startups added this quarter
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter. Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 59 Q4 2015 Investment Rounds
Close Date Company Size ($m) Round Select Investors Headquartered
Shinhan Bank, Shinhan Data Systems, Dec-2015 Streami 2.00 Seed South Korea ICB, Bluepoint Partners
Dec-2015 BTCS 1.45 N/A Cavalry Fund I LP Virginia
Dec-2015 Purse.io 1.00 Seed Digital Currency Group San Francisco
Orange Telecom, Draper Associates, Nov-2015 Bitwage 0.76 Seed San Francisco Cloud Money Ventures, Saeed Amidi Kleiner Perkins Caufield & Byers, Align Nov-2015 12.50 First Digital Currency Group, FS Venture San Francisco Commerce Capital, Pantera Capital
Source: CoinDesk
State of Bitcoin and Blockchain 2016 60 Q4 2015 Investment Rounds (cont.)
Size Close Date Company Round Select Investors Headquartered ($m)
Nov-2015 Zapchain 0.35 Seed Adam Draper, Tim Draper, Boost Bitcoin Fund San Francisco
Oct-2015 ScoreChain 0.57 Seed Undisclosed Luxembourg
Adways Inc, Ceres, Monex Ventures, SBI Oct-2015 Orb 2.30 Seed Tokyo Investment
KB Investment, SBI Investment, Atinum Oct-2015 Coinplug 5.00 Second Seoul Investment Co. Ltd.
Source: CoinDesk
State of Bitcoin and Blockchain 2016 61 2.d Use Cases and Commerce
State of Bitcoin and Blockchain 2016 62 While Average Daily Bitcoin Transactions Increased 81% in 2015…
Number of Transactions Per Day 300 2014 daily average: 69,200
250 Thousand 2015 daily average: 125,100 200
150
100
50
0
Total no. of daily transactions No. of daily transactions excluding popular addresses Note: 100 most popular addresses. Source: Blockchain
State of Bitcoin and Blockchain 2016 63 …Once Long-chains* Are Removed, Growth Since 2014 Has Been Only 50% Per Year
*Long-chain transactions comprised of spam, wallet shuffling, coin mixing, mining payouts, faucets, etc. Sources: Coinbase, A Proxy for Users, Neighbourhood Pool Watch
State of Bitcoin and Blockchain 2016 64 Coinbase Off-chain* Transaction Volume Is Roughly Same Across All of 2015
*An off-chain transaction is one on an internal database rather than movement of value on the blockchain. Sources: A Proxy for Users, Coinbase
State of Bitcoin and Blockchain 2016 65 16 Million Bitcoin Wallets Forecasted by 2016 (+25% YoY), YE 2015 Forecast Exceeded by 0.8m
18,000,000
16,000,000 R² = 0.9864
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
Total bitcoin wallets Forecasted bitcoin wallets Data sources and notes: total wallets based on data from Blockchain, MultiBit, Coinbase, Andreas Schildbach (Android bitcoin wallet developer). Historical Coinbase data provided by BitcoinPulse. 2015 Q2 MultiBit figures note made available, held constant as end of March 2015 onwards.
State of Bitcoin and Blockchain 2016 66 Blockchain’s New Wallet Growth Rate Has Climbed Last Two Quarters
Number of New Wallets Added Each Quarter 1,200,000 120% 1,066,962 114% 1,000,000 100%
800,000 80% 706,209
600,000 60% 514,583 481,258 480,715 488,303 451,294 454,435 50% 400,000 343,121 40% 35% 200,000 27% 20% 118,286 24% 24% 20% 19% 17% 15% 0 0% Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Quarterly Increase in Wallets Quarterly Percentage Growth
Data source: Blockchain
State of Bitcoin and Blockchain 2016 67 Zero Q4 Growth Reported in New Bitcoin-Accepting Merchants by Coinbase or BitPay
14,000
12,000 12,000 10,360 10,000
8,000
6,000 6,000 6,000 6,000
4,000
2,000
0 0 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
Note: Data reflects number of new merchants, as self-reported by BitPay and Coinbase. The startups either declined to provide data to the report or reported no change. Sources: Coinbase, BitPay
State of Bitcoin and Blockchain 2016 68 150k Merchants Accepting Bitcoin Forecasted by 2016 (+42% YoY), YE 2015 Forecast Fell Short by 34k
160,000 R² = 0.9709 140,000
120,000
100,000
80,000
60,000
40,000
20,000
0 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Total merchants accepting bitcoin Forecasted total merchants Data sources and notes: Total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided by BitcoinPulse. Daily merchant increase is calculated using linear interpolation.
State of Bitcoin and Blockchain 2016 69 International Coinbase Users Grew from 44% to 51% of Total User Base in 2015
• The majority of Coinbase users now reside outside the US
• Countries like Brazil, the Philippines and Indonesia saw big growth
Source: Coinbase
State of Bitcoin and Blockchain 2016 70 New Bitcoin ATM Deployments Growth Rate at 13%; One ATM Producer Ends Bitcoin Business
Increase in ATMs in Each Quarter 120 112 104 100
79 80
62 60 52 48 43 40 32
20
0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 • Robocoin announced a shutdown of its bitcoin business and a move towards traditional payments. Robocoin ATMs represents 4% of total bitcoin ATMs Data source: CoinATMRadar, CoinDesk
State of Bitcoin and Blockchain 2016 71 2.e Technology
State of Bitcoin and Blockchain 2016 72 In Response to Bitcoin’s Q4 Price Spike, Network Difficulty Growth Rate Increased 67% QoQ
Quarterly Increase in Bitcoin Mining Difficulty 45 80%
Billion 40 67% 70%
Hashrate 39.8
Ten 35 60% 30 50% 25 40% 20 30% 15 20% 17% 20% 10 15% 9.9 5 6% 10% 6.0 6.1 2.7 0 0% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Quarterly Increase in Mining Difficulty 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 and Blockchain 2016 73 Bitcoin Payment Software Developer Ecosystem Grew 40% in 2015
Number of GitHub repositories that mention payment methods
Source: GitHub
State of Bitcoin and Blockchain 2016 74 While Battle Continues Over the First Major 'Post- Satoshi' Protocol Decision…
FAST
DECENTRALISED SECURE
Scalability is a trade-off between decentralisation and low fees
UNLIMITED CHEAP
Source: Medium
State of Bitcoin and Blockchain 2016 75 … A New Solution Proposed at Scaling Bitcoin Conference Has Support of Bitcoin Core
Pieter Wuille Core Dev and Tech Engineer, Blockstream • Segregated witness alters how signature data is handled by the network to increase transaction capacity without raising block size limit
• This will make transactions appear smaller to current nodes on the network, so more can be included in a bitcoin block
Sources: CoinDesk, Pieter Wuille (2015) Segregated witness and deploying it for Bitcoin Presentation
State of Bitcoin and Blockchain 2016 76 Number of Bitcoin Nodes Decreased, Down 6% from 6,030 at End of Q3
Data source: Bitnodes
State of Bitcoin and Blockchain 2016 77 2.f Regulation and Macro
State of Bitcoin and Blockchain 2016 78 Bank of England Examines Macroeconomic Consequences of New ‘Central Bank Digital Currency’
• Bank of England researchers “explore the macroeconomic consequences of central banks themselves issuing digital currency in sizeable amounts, in direct competition with privately-issued bank deposits.”
• Preliminary findings:
• “A sizeable increase in the steady- state level of GDP.”
Michael Kumhof John Barrdear • “Stabilise the business cycle by granting policymakers an additional policy instrument that controls either the price or the quantity of government-provided liquidity.”
Source: Kumhof and Barrdear (2016)
State of Bitcoin and Blockchain 2016 79 Difficulties Reported by Cryptocurreny Startups in Gaining Approvals From Swiss Authorities
• While Switzerland is advertising itself as a haven for cryptocurrency firms, a number of companies are reporting problems with getting approval from the Swiss financial market authority, as well as with getting banking accounts
• Opportunities are opening up in London, Luxembourg, and other friendlier jurisdictions
State of Bitcoin and Blockchain 2016 80 Bitcoin is Exempt from European VAT, ‘A Big Milestone’ According to Exchanges
“A big milestone for ”An impetus for the bitcoin in general.” development of crypto Nikolaus Kangas, The European Court of payments in the EU.” Founder of Justice decided to Filip Godecki, COO of Bitcurex LocalBitcoins exempt bitcoin transactions from Value Added Tax (VAT). In so “Brings additional “Reduction of risks and doing, the clarity and legal uncertainties surrounding certainty.” the adoption of an court effectively Nejc Kodric, CEO of innovation.” recognized bitcoin as a Bitstamp Pierre Noizat, Co-founder legitimate means of of Paymium payment in Europe, “Regulation is proving to be putting it in the same more efficient than the ”Absolutely reasonable group as other technology to organise the and quite expected.” currencies for tax rights and the correct functioning of the market.” Victoria Polyakova, purposes. Chief Legal Officer of Alberto Gomez Toribio, CEO CEX.io of Coinffeine
Source: CoinDesk
State of Bitcoin and Blockchain 2016 81 Select Country Regulatory Updates
Poland Japan
• Poland’s Ministry of Finance: • Japan’s Financial Services Agency: Regulating bitcoin should form "part of Financial regulators moving closer to initiatives at the EU level, due to the creating a system for registering and trans-border character of overseeing domestic digital currency cryptocurrency transactions" exchanges
Source: CoinDesk
State of Bitcoin and Blockchain 2016 82 Viewpoint: Why China Should Consider Promoting Bitcoin As a New Reserve Asset
• The emergence of a new reserve asset could weaken US dollar/US’s grip on global monetary system • Central banks are openly weighing pros/cons of acquiring bitcoin • In an effort to boost China’s global economic standing, for years the PBOC has acquired gold • However, China’s gold holdings still trail the US, Germany, IMF, etc • Gold is expensive (global market cap ~$7tn) compared to bitcoin ($6 bn) • With over half of all bitcoin mining inside ‘The Great Firewall of China’, China can exert influence over bitcoin
Sources: CoinDesk, World Gold Council
State of Bitcoin and Blockchain 2016 83 3. Q4 2015 State of Blockchain
State of Bitcoin and Blockchain 2016 84 3.a Overview
State of Bitcoin and Blockchain 2016 85 Distributed Ledger Technology (DLT) 101: ‘Blockchain Tech’ vs ‘The Bitcoin Blockchain’
“Blockchain technology” “The Bitcoin Blockchain”
private (intra-) public (inter-)
Intranets & IT The Internet
State of Bitcoin and Blockchain 2016 86 Startups Pivoting from Bitcoin (Currency) Focus to Blockchain (Non-currency) and Hybrid Business Models
Bitcoin Blockchain Hybrid
State of Bitcoin and Blockchain 2016 87 Blockchain vs Bitcoin: Blockchain and Hybrid (Currency + Non-Currency) Startups Raised 35% of All VC Funds
Total VC Raised ($m) No. of Companies
Hybrid Hybrid 1% 14% Blockchain 20%
Blockchain 20%
Bitcoin 66% Bitcoin 79%
Note: Three new deals in January (including the $50m raised by Digital Asset Holdings) are included in these two charts. Data sources: CoinDesk, CrunchBase
State of Bitcoin and Blockchain 2016 88 Q4 2015 Blockchain Investment Rounds
Size Close Date Company Round Select Investors Headquartered ($m)
Oct-2015 Factom 0.40 Seed Kuala Innovations Texas
Source: CoinDesk
State of Bitcoin and Blockchain 2016 89 Consolidation of Blockchain Companies Slows From Three Q3 Acquisitions to One in Q4
Q4 Merger & Acquisitions
Acquirer Acquiree
Oct 2015
Source: CoinDesk
State of Bitcoin and Blockchain 2016 90 Google Search of Blockchain Shows An Increasing Trend Over the Past One Year, Up 272%
100
0
Source: Google Trend search for “blockchain” from January 2015 to December 2015
State of Bitcoin and Blockchain 2016 91 Google Searches Show ‘Blockchain’ Joins the Top Bitcoin-Related Searches
Related Searches: Top Related Searches: Rising
Q4 2015
Past 12 Months
Source: Google Trends search for blockchain
State of Bitcoin and Blockchain 2016 92 Criticism of Blockchain Hype Raised
“Nasdaq's Linq blockchain can replace Microsoft “Private blockchain is Excel as a way to not ultimately wildly keep corporate cap conceptually different. tables. But why It's just some brokers would you want it getting together and to?” agreeing on who owns Matt Levine what and who sold Bloomberg View columnist what to whom.”
“Uses approximately the same amount of “Certificate electricity as could Transparency is power an average more efficient in American solving the household for a day decentralized audit per transaction” Tony Arcieri log problem.” Platform security specialist at Square Sources: Motherboard, Bloomberg, Tony Arcieri’s blog
State of Bitcoin and Blockchain 2016 93 Regulators Show Interest in Using Blockchain to Monitor Systemic Risk
• “While I am not advocating for the adoption or effectiveness of blockchain technology, it appears to offer potential”
• “One can imagine a world in which securities lending, repo, and margin financing are all traceable through blockchain's transparent and open approach to tracking transactions”
Kara Stein • This “could revolutionize regulators’ approach to Commissioner of the monitoring systemic risk in these areas, including US Securities and the oversight of collateral reuse, to name just one Exchange Commission potential use”
Sources: Pantera BitFlash, Bloomberg
State of Bitcoin and Blockchain 2016 94 Bonds Are Ideal For Smart Contracts…
• UBS announced smart bonds platform built on Ethereum
• Bonds are well suited for smart contracts – fungible, relatively simple to code regularly scheduled principal/interest payments
• Can also be fully collateralized on the blockchain if the bond issuer fails
Source: International Business Times
State of Bitcoin and Blockchain 2016 95 Smart Contracts May Have a Negative Impact on Insurance Industry Profits
• There were 558,000 passengers who did not files insurance claims for delayed or cancelled flights in and out of the UK in a 12-month period
• A smart flight cancellation insurance contract - policy conditions held on a blockchain
• A delayed flight is a matter of fact and public record
• If event occurs, a smart contract is triggered and payout is automatic
Source: BankInnovation
State of Bitcoin and Blockchain 2016 96 3.b Private Blockchains
State of Bitcoin and Blockchain 2016 97 Q4 Blockchain Top News
R3’s distributed ledger initiative Nasdaq formally debuts its grows to 42 bank members blockchain product, Nasdaq Linq
Source: CoinDesk
State of Bitcoin and Blockchain 2016 98 R3 CEV’s Consortium: 42 Banks with Combined $600bn+ Market Cap; 60% Are Global SIFIs
Source: CoinDesk
State of Bitcoin and Blockchain 2016 99 Critical Mass: R3’s Wall St Founders Have the Formula For Attracting Top Blockchain Talent
David Rutter Jesse Edwards Todd McDonald CEO Co-founder Co-founder
Richard Brown Mike Hearn CTO Chief Platform Officer
Sources: R3 CEV, Diginomics 2016 Bitcoin Investor’s Report
State of Bitcoin and Blockchain 2016 100 Not Everyone is Thrilled About R3 and Megabank Blockchain Initiatives
“The problem is not the regulators. I think the regulators want this to happen. They don’t want to be under the thumb of Wall Street. They understand Wall Street has monopolistic power.”
“What’s happening is Wall Street is trying to slow us down while they come up with their own version, and that’s, I think, R3. That’s a consortium that’s really going to be there — so Wall Street comes up with their own version, and then they’re going to outlaw [the competition].” Patrick Bryne CEO of Overstock
Sources: Diginomics 2016 Bitcoin Investor’s Report , 2016 Bitcoin Investor's Report
State of Bitcoin and Blockchain 2016 101 Wall St Mainly Interested in ‘Private’ or ‘Permissioned’ Blockchains
• Many permissioned blockchain applications can be layered on top of permissionless blockchains (eg Ethereum, Bitcoin) using existing technology
• For example, ‘colored coins’, which aim to ease the transfer of assets on blockchains, could make public ledgers useful for financial institutions
Sources: CoinDesk, BitFury Group in collaboration with Jeff Garzik (2015) Public versus Private Blockchains Part 2: Permissionless Blockchains White Paper
State of Bitcoin and Blockchain 2016 102 Blockchain Companies and Financial Institutions Apply for Cryptocurrency Patents
• “Real-time conversion system” • “Cryptocurrency transaction payment system” • “Cryptocurrency suspicious user alert system”
• "Cryptographic Currency For Securities Settlement" that allows peer-to-peer participants to exchange cryptographic tokens representing securities with instant settlement
• “Mining circuitry” which described herein may be used for any digital medium of exchange such as digital currencies, rewards or points
Source: CoinDesk
State of Bitcoin and Blockchain 2016 103 Will Other Large Database Companies Remain Conspicuously Quiet in 2016 About Blockchain Tech?
2014 Total Revenue • Only two large database $38.60bn firms have made significant blockchain $29.09bn tech announcements: IBM and Microsoft
$16.13bn • In Nov 2015 Microsoft announced “Blockchain as a Service”, $10.64bn incorporating Ethereum and bitcoin into Azure $2.73bn • IBM recently announced support for the Open $0.30bn Ledger Project Sources: ServerWatch, Microsoft
State of Bitcoin and Blockchain 2016 104 3.c Public Blockchains
State of Bitcoin and Blockchain 2016 105 Too Many Blockchains?
Image via Tony Arcieri’s blog
State of Bitcoin and Blockchain 2016 106 Interledger Could Be Solution to the “Too Many Blockchains” Interoperability Dilemma
• A protocol for payments across payment systems
• Secure transfers between ledgers and allows anyone with accounts on two ledgers to create a connection between them
• No global coordinating system or blockchain required
• “Rather than trying to create a global ledger that everyone can agree on,” Ripple chief technology officer Stefan Thomas explains, “we’re trying to tie together all the ledgers that are already out there.” Sources: A Protocol for Interledger Payments, CoinDesk, Wired
State of Bitcoin and Blockchain 2016 107 Viewpoint: To Reap the Main Benefits of Distributed Ledgers, Banks Must Use ‘Permissionless’ Blockchains
• “Banks naturally hate the loss of power; it's extremely difficult for them to implement seamless global systems”
• "So they keep trying to re-inject points of control, and thus points of vulnerability, into blockchains, eg through 'permissioning’
Nick Szabo • However, “this nullifies the main benefits (of Smart contract and blockchains), which come from removing points cryptocurrency pioneer of vulnerability”
Source: International Business Times
State of Bitcoin and Blockchain 2016 108 Can the Linux Model Address Governance Issues That Have Stalled Blockchain Development?
• The Open Ledger Project is a development library that will allow businesses to build custom distributed ledger solutions, without having to rely on open, public blockchains like bitcoin and Ethereum
• Will use the Linux Foundation approach to provide governance
• But how will this approach work without a ‘benevolent dictator’ to settle contentious disputes?
Sources: Fortune, Wired, Bloomberg, CoinDesk
State of Bitcoin and Blockchain 2016 109 While Still Two Years Away From Providing a Robust Platform, Expect to Hear More About Ethereum in 2016
• Ethereum • Rent, sell or share development now anything - without focused on Slock.it middlemen • Use cases: washing decentralized apps machines and bikes
• General view remains • Get precise forecasts that if you need to on any topic Augur • Augur enables the deploy something on long tail of prediction a blockchain right markets now, use bitcoin, private DLT, etc; if • Trade your “virtual your time horizon is junk” that you two years, consider accumulate while Ethereum Vunk playing video games • Decentralized value exchange
Sources: Slock.it, Augur, FreeMyVunk, Bank Innovation, Medium, CoinDesk
State of Bitcoin and Blockchain 2016 110 Two Big Challenges for Public Blockchain Tech: Scalability and Privacy
Scalability
• Currently, the network process 3-20 transactions per second
• Several orders of magnitude away from mainstream payment systems such as VISA, which handles around 2,000 transactions per second
• Several solutions are available like Segregated Witness
Privacy
• Companies or individuals are unwilling to publish all of their information onto a public database which is accessible by government, competitors and family members.
• Difficult to provide solutions with privacy and full capability of blockchain
Sources: Ethereum, Bitcoin Wiki
State of Bitcoin and Blockchain 2016 111 4. Thought Leader Survey and 2016 Forecasts
State of Bitcoin and Blockchain 2016 112 Survey Highlights
What were the highlights for bitcoin and blockchain in 2015? • 43% mentioned blockchain initiatives by major established companies like Nasdaq • 21% mentioned the CoinDesk Consensus Conference • 14% mentioned transaction growth
What was the biggest challenge or setback for bitcoin and blockchain in 2015? • 23% mentioned the block size debate • 23% mentioned the slow adoption of bitcoin as an alternative payment method
Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 113 Survey Highlights (cont.)
What do you think is the main driver behind the price surge in October 2015? • 29% mentioned “China” and “Chinese economic worries” • 14% mentioned growing demand • Factors like “Fed interest rates”, “increased visibility” were also mentioned
What do you think about the slowdown in bitcoin and blockchain venture capital investment? • 29% mentioned lack of realization of the promises they made when they got funding initially • 21% believed it is cyclical and temporary
Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 114 Survey Highlights (cont.)
Which areas do you think blockchain technology will have the greatest impact in?
Finance (e.g.: Transaction settlement) 77%
Identity 54%
Property title 38%
Communication (e.g.: machine to machine) 23%
Decentralised coordination (e.g.: Prediction, 23% Voting)
Privacy 15%
other 15%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 115 Survey Highlights (cont.)
What are your views on industry regulation, both what's happened and what's to come?
• 36% expressed negative attitudes towards current regulations, saying they are “stifling innovation”, “poorly-crafted” and “not friendly”
• 29% expressed positive views, suggesting they believe the laws increase “transparency” and “awareness”
Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 116 Views on 2015 Events and What Lies Ahead in 2016
“(Block size debate) will only be resolved when participants recognize that this or any subsequent increases in block size are a continuing transaction fee subsidy provided by the network and financed ultimately by the bitcoin investors.”
Jon Matonis Former Executive Director, Bitcoin Foundation
“(Bitcoin and blockchain VC investment) will reaccelerate once some of the early ventures become successful.” Gil Luria Managing Director, Wedbush Securities
Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 117 Views on 2015 Events and What Lies Ahead in 2016
“In general, regulatory certainty is good, but the industry must work together to educate regulators so they don't act out of fear, anxiety or misinformation. I would look for more regulatory activity in Europe and for more enforcement activity in the US in 2016.”
Jason Weinstein Partner, Steptoe & Johnson LLP
“The established players are mostly acting out of fear and still do not trust the technology. Most of the initiatives to date exhibit an unwillingness to embrace the distributed ledger technology completely.” David Yermack Professor of Finance, New York Source: Bitcoin and Blockchain Thought Leaders Annual Survey University
State of Bitcoin and Blockchain 2016 118 Views on 2015 Events and What Lies Ahead in 2016
“Most of the regulation is not helping consumers and it's helping the industry even less. Smart regulators will watch what happens first, figure out if and where regulatory pain manifests itself and then respond in kind.”
Bill Barhydt CEO & Founder, Abra
“I think services like Purse.io and Fold will drive many more people to start using bitcoin simply because it is useful to them. We will also see bitcoin wallets become even easier for people to use.” Roger Ver CEO,
Source: Bitcoin and Blockchain Thought Leaders Annual Survey Bitcoin.com
State of Bitcoin and Blockchain 2016 119 Views on 2015 Events and What Lies Ahead in 2016
“(Slowdown in VC investment) is a telling sign that there’s not enough real use-cases and business cases yet. But, at the same time, new sectors are coming online who see potential in bitcoin and the blockchain all the time, for example, insurance, fine art, trade finance and supply chain.” Wong Joon Ian Tech Correspondent, Quartz
“I am supporting the growth of innovation in using bitcoin and blockchain, whether by bank or not. I believe the industry to be growing and that the legacy domains will need to change to account for the extremely fast-moving Scott Robinson ecosystem.” Founder & Director, Plug and Play FinTech Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 120 Views on 2015 Events and What Lies Ahead in 2016
“The UK will continue to be a leader in innovation-friendly policy for digital currency. In 2015, the UK released a policy that is much more amenable to innovation, and this will be put into place in 2016.
2016 will likely see more regulatory activity outside of just the money transmission realm, be it around securities or futures, or law enforcement efforts.
Elizabeth Stark We will also see more states in the US cement their Co-founder, digital currency-specific policy, but they will be competing Lightning to be the anti-New York.”
Source: Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 121 2016 Forecasts From Survey Participants
• More blockchain hype
• Bitcoin community will (at least temporarily) solve scalability challenges
• Private and public blockchains will co-exist
• There will be more blockchain proofs-of- concept and minimal viable product/experimentation from Fortune 500
• Regulators will come to understand (and love) blockchain technology
Sources: Bank Innovation, CoinDesk, Bitcoin and Blockchain Thought Leaders Annual Survey
State of Bitcoin and Blockchain 2016 122 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
State of Bitcoin and Blockchain 2016 123 Disclaimer
• CoinDesk makes every effort to ensure the information used these slides 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.
• CoinDesk is owned by Digital Currency Group, one of the most active investors in the bitcoin and blockchain technology industry. Many DCG investments are referenced in this report, and a full list can be reviewed at www.dcg.co. CoinDesk is run as an independent entity, and its editorial team does not give preferential treatment to DCG investments when they are referenced in research reports or news posts. DCG portfolio companies referenced in this report include Abra, Align Commerce, BitGo, Bitnet, BitPay, BitX, BTCC, Chain, Circle, Coinbase, Colu, itBit, Kraken, and Xapo.
State of Bitcoin and Blockchain 2016 124