Introduction Project Overview Network Analysis Mining Ecosystem Appendix Nov 6th 2019 PROJECT RESEARCH Digital Asset Research Bitcoin SV believes its protocol best represents the original vision for Bitcoin. Specifically, this means that Bitcoin SV Alex Kern AC does not limit its block size and believes that developers have too much power relative to miners. Today, the network is [email protected] primarily used for storing metadata. BSV’s goal over the long-term is to provide usage both as a payments network and 212-293-7133 commodity data ledger (metadata storage). With its ambitious goals, Bitcoin SV is contributing to the necessary protocol Sam Doctor design experimentation in crypto. No cryptocurrency has achieved global adoption, thus the space needs projects to [email protected] continue tinkering with protocol designs to find the optimal one that can accommodate global adoption. • Bitcoin SV believes its protocol more closely reflects the original Bitcoin design than does Bitcoin Core or Bitcoin SV TL;DR Bitcoin Cash. Specifically, BSV believes BCH was wrong to add opcodes and make other changes not in the original protocol and will soon be removing its block size limit; BTC and BCH limit block sizes to ~2MB and 32MB, respectively (though BTC now technically uses a “block weight” limit) (Slide 14). The challenge for BSV will be to • Split of Bitcoin Cash (which prove that its protocol is not only the original Bitcoin design, but the best design for wide consumer and business itself came from split of Bitcoin adoption (Slide 9). Core) • Protocol design requires tradeoffs between scalability, security, and decentralization. Bitcoin SV can • Current block size limit = 2GB achieve ~700 TPS at 256MB miner-chosen block limit (slide 14), but mining is concentrated with two pools >40% of total network hash power. Vitalik Buterin famously coined this idea of the “blockchain trilemma.” For • Genesis upgrade in Feb ’20 to example, BSV’s hash power concentration and cost to run a full node are such that its network security is ensured remove block size cap entirely through a small group of ecosystem supporters. The differences between BSV, BTC, and BCH can be similarly • Believes its protocol design is broken out between use case, balance of power, and scalability (Slide 10). the closest representation to • BSV is the biggest block Bitcoin. BSV believes corporates will require network throughput capacity much higher the original Bitcoin protocol than what is currently needed before they are comfortable using the network. Daily transaction value on the network • Competes with Bitcoin Core averages ~$25mm with blocks 0.43% full vs. BTC daily value ~$2.6B and its blocks typically ~50% full (Slide 14). and Bitcoin Cash to own the • Today, the network is primarily used for storing metadata. Over the long-term BSV wants to be a commodity “Bitcoin” brand data ledger for the internet. For example, the two most active apps on BSV are WeatherSV and Preev. The former records weather data on-chain, while the latter is a crypto exchange rate calculator. These transactions are low • On-chain activity is low at value but high volume; these microtransactions are supported by BSV’s low fees as a percentage of on-chain $4.5mm daily volume vs. volume (Slide 21). $1,400mm for BTC and $76mm for BCH • BSV could be more profitable to mine due to the higher risk associated with a smaller project. Though, mining revenues are currently very small at ~$0.30mm per day compared to BTC $17mm and BCH $0.50mm (Slide • BSV has similar number of daily 28). But, currently BTC is slightly more profitable to mine than BSV (1.2x vs. 1.1x price-to-breakeven). transactions to BTC (~300k) Bottom line: It’s still very early days for cryptocurrency technology and there is little certainty around what the ThisThis document document is preparedis prepared solely solely for Fundstrat for clients. winning implementation could be. BSV is contributing to the necessary experimentation to test which protocol Forclients inquiries, of Fundstrat please contact Global Sales Advisors. at 212-293-7140 or via design is most likely to achieve broad adoption. The data shows that the network lags BTC and BCH email [email protected]. Bloomberg:For inquiries, RESP please FSGA contact <<GO>> Sales at 212-293- transacted value, but it’s go-to-market strategy has advantages that could give it an edge in the enterprise Click7140 here or viafor researchemail [email protected] library. Bloomberg: FSGA <<GO>> market over the long-term. November1 6, 2019 For Reg AC certification and other important disclosures see Slide 39. www.fundstrat.com Introduction Project Overview Network Analysis Mining Ecosystem Appendix BSV emerged after a contentious split of the BCH network. BSV supporters disagreed with protocol changes to Bitcoin Cash, which they contend deviate from the original Bitcoin protocol. BCH had itself emerged after a chain split with Bitcoin Core (BTC) following BTC’s addition of SegWit. These protocol disputes represent clashing visions over how best to scale (or not scale) Bitcoin. 1 • The BSV community disagreed with BCH’s proposed changes, such as adding opcodes not in the original Bitcoin protocol and maintaining protocol limits (ex. block size) that BSV believed were temporary by design. • BSV instead proposed (1) increasing max block size to 128MB from 32MB (2) restoring Satoshi opcodes from version 0.11 and (3) removing the 201 opcodes per script limit2. 2 Figure: Timeline of BTC, BCH, and BSV protocol disputes Per Fundstrat Early Late BSV believes its project is Jan ‘09 Dec ‘15 Aug ‘17 Aug ‘17 continuing the original protocol 3 BTC Core BIP125: BIP141: Early released Replace-by-fee SegWit Aug ‘18 Nov ‘18 4 BCH and BTC split BCH community Mid disagrees on desired Nov ‘18 protocol changes 5 BSV and BCH split “Hash war” lasts 11 days 1. Opcodes: a set of commands used to construct the small range of operations that Script performs in the Bitcoin protocol. Script is the programming language within the Bitcoin protocol used for transaction processing (ex. verifying transactions). 2. 201 opcode per script limit: defends network against cyber attacks invoking high computational load by limiting the number of opcodes contained within one script (operations) Source: https://bitcoin.org/bitcoin.pdf November 6, 2019 Slide 2 Introduction Project Overview Network Analysis Mining Ecosystem Appendix The Bitcoin SV (BSV) community believes BSV is the closest representation of Satoshi Nakamoto’s original vision for the Bitcoin protocol, undoubtedly a controversial belief. Their view of what Bitcoin was meant to be includes a raised block limit, greater power with miners relative to developers, and fewer major edits to the project source code. • Scalability, stakeholder balance of power, and use case are areas where BSV has taken its network in a different 1 direction than either BTC or BCH. • The challenge for BSV will be convincing the broader crypto community not just that BSV is the original vision for Bitcoin, but that it’s the best vision for gaining mass adoption. 2 Satoshi’s Vision? 3 • P2P Electronic cash • Decentralized network • Fixed monetary policy • Predictable inflation 4 • Scalable • Open source code ...BTC, BCH, BSV have 5 conflicting views Source: https://bitcoin.org/bitcoin.pdf November 6, 2019 Slide 3 Introduction Project Overview Network Analysis Mining Ecosystem Appendix BSV’s strategy is to make blocks significantly larger than what is currently needed in order to attract corporate partners. Post- Genesis upgrade, BSV’s block size limit is 2GB (though most miners are setting their block template size to 256MB). • Although we estimate transactions per second (TPS) for BSV could reach 1500, this does not account for larger transaction sizes (ex. document storage) and bandwidth needs. 600 tps is a more practical limit, especially since 1 most BSV miners currently set their block limit to 256MB. At full 2GB blocks, BSV could reach >5000 TPS depending on transaction size. • Further, at 1.1MB, BSV’s blocks are larger than BTC’s. Being 0.43% full, they can still accommodate future growth. 2 Figure: BSV is the “big block” Bitcoin in MB, 30 day moving average BSV BTC BCH What block size is just right? (a) 24H Transactions 236,479 319,354 42,363 BSV miners are setting their 3 (b) 24H Blocks 145 146 144 block limits to 256MB (c) = (b) / (a) Transactions / Block 1,636 2,189 294 32MB 2GB (d) Average Block Size (MB) 1.10 0.98 0.10 4 2MB (e) = (d) / (c) Average transaction size (MB) 0.000670 0.000448 0.000356 (f) Miner chosen block limit (MB) 256 2 32 5 BSV chose biggest blocks for highest theoretical TPS... (g) = (f) / (e) * 144 / (24 * 3600) TPS with 256MB chosen block limit 636.8 7.4 149.8 (h) = (d) / (f) Block fill % 0.43% 49.08% 0.33% ...but low on-chain activity results in nearly empty blocks (i) = (a) / 24 / 3600 Actual TPS 2.7 3.7 0.5 and low actual TPS Source: https://bitcoin.org/bitcoin.pdf November 6, 2019 Slide 4 Introduction Project Overview Network Analysis Mining Ecosystem Appendix Using the Bitmain Antminer S9 and S17 Pro mining rigs as a reference, we show that both the BCH and BSV Networks are operating at slightly lower profitability than BTC. We also note that a 3rd party, coin.dance, has often shown BSV to be more profitable to mine than BTC or BCH (in our view reflecting the project’s higher risk). • Miners are acting rationally, with little arbitrage available; we expect smaller projects to deliver higher profitability to compensate miners for taking on higher risk on higher volatility of both price and hash power, 1 and lower network security.