OCT 25 2017

Welcome to DCG’s fourthInfrastructure Workshop

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AGENDA

Details Time

Introductions 10:00 - 10:15 am

Infrastructure Stack and Key Issues 10:15 - 11:00 am

Discussion Group 1: Key Management and Custody 11:00 - 12:15 pm

Discussion Group 2: Payments Solutions & Identity (KYC / AML)

11:00 - 12:15 pm

Discussion Group 3: Liquidity, Market Making, and Order Book Pricing

11:00 - 12:15 pm

Discussion Group 4: Crypto to Wall Street 11:00 - 12:15 pm

Sharing and Next Steps 12:15 - 12:30 pm

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WHO WE ARE

SUBSIDIARIES INVESTMENT PORTFOLIO DIGITAL CURRENCIES

At DCG, we build, buy, and support bitcoin and blockchain technology companies leveraging our insights, network, and access to capital

Digital asset broker dealer

Asset management business

Media, events, and research platform 97 companies across 26 countries Invest directly in established and emerging digital currencies

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CORE INFRASTRUCTURE

ENTERPRISE BLOCKCHAIN

PAYMENTS 2.0TRADING & TOOLS

BLOCKCHAIN REGISTRYIDENTITY & COMPLIANCE

OUR PORTFOLIO BY THEME

YOURS

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BUILDING AN EXCHANGE ECOSYSTEM

Build a robust, integrated exchange ecosystem to create a frictionless, highly efficient open financial network using digital currencies

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DIGITAL CURRENCIES AS AN EMERGING ASSET CLASS

0

25

50

75 Over 1,100 digital currencies

Total market cap of ~ $150B USD

Top 15 represent 90% of the market cap

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BITCOIN GROWTH

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ETHER GROWTH

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WHAT IT FEELS LIKE

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USING DIGITAL CURRENCIES IS NOT EASY

Question: How do you buy a million dollars worth of bitcoin?

• What counterparty would you use?

• How would you send USD?

• Where would you store it?

• How would you manage reporting and taxes?

• How would you track asset performance?

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DIGITAL CURRENCY INFRASTRUCTURE

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TRADING VOLUME IS GROWING

Daily exchange traded volume from $3 - $6 billion• 50% BTC, 10% ETH, remainder is fragmented• Some exchanges offer fiat to digital currency, but many are digital currency to

digital currency

Daily OTC volume estimated at $50 – 100 million• Primarily driven by BTC and ETH• Few large OTC desks have sufficient liquidity and infrastructure to facilitate

institutional buying activity

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BUT CHALLENGES REMAIN

• Evaluating counter party risk is still challenging – short operating history and little transparency into company financials

• Capital efficiency and capital flows constrained – banks may block wires

• Security, custody, and key management solutions are still being developed

• Liquidity can be difficult to source – small volumes can move market prices in adverse ways

• Regulation and rules are poorly defined, often inconsistent across jurisdictions

• Doing KYC and AML at scale is difficult

• Banking relationships are challenging to maintain, and there is constant education and advocacy required to keep regulators at bay

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DISCUSSION GROUPS

1.

2.

3.

KEY MANAGEMENT & CUSTODY

LED BY BITGO, LEDGER

PAYMENTS SOLUTIONS & IDENTITY

LED BY NETKI

LIQUIDITY AND MARKET MAKING

LED BY GENESIS TRADING

4. CRYPTO TO WALL ST

LED BY GRAYSCALE, SFOX, ZCASH

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KEY MANAGEMENT AND CUSTODY

Bitcoin and digital currencies are hard to store once traded. This discussion focuses on answering key questions related to key management and custody:

• What products and services exist today? Who is providing software? Who is providing hardware?

• Can institutions custody their own bitcoin? Their customer’s funds? What are the limitations on what can be done?

• What are the challenges institutions are facing as they look at introducing digital currencies to their business? The most common pain point we hear is around security and custody, but what is the set of conditions they’re trying to satisfy?

• Is there theft or loss insurance that’s being provided today? What are the costs of insurance for companies in the key management or custodial space? Does that insurance cover the right types of theft?

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LIQUIDITY AND MARKET MAKING

When it comes to trading digital currencies, challenges include moving fiat quickly from one exchange to another, as well as getting comfortable with the exchange operators’ own solvency / liquidity, In a way, some of these issues might be solved if people could “trust” exchanges more. But since they can’t, they don’t. This discussion will focus on understanding the challenges related to liquidity and market making.

• How is liquidity managed today in the digital currency space? What are the key constraints around liquidity in bitcoin? What about new, emerging asset classes that are thinly traded?

• What if there was a more efficient way to manage float? What are the issues around capital float with bitcoin today? How do you think about beginning to resolve some of these issues?

• What data oracles are you using for market pricing?

• Are there consistent intervals for orderbook pricing? If so, how are these denominated?

• Who are the market makers in today’s crypto landscape? How do you get in touch with them, and what types of services do they provide?

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PAYMENTS AND IDENTITY

Many people don’t realize that digital currencies are actually being used to facilitate all sorts of payments, including new payments business models like micropayments and more. However, the challenges related to identity, KYC / AML, and digital currency regulation constrain the growth of these new payments business models. In this session, we’ll explore the challenges related to identity and payments.

• What are the most common open blockchain protocols being used for payments? (bitcoin, stellar, etc).

• What are the set of services needed to enable safe, secure, and compliant payments using bitcoin and other digital currencies? You need wallets, exchange capability, account / identity management, KYC / AML software, regulatory reporting competency, risk management and transaction monitoring tools - what else?

• From a compliance perspective, is there an opportunity to automate identity management / KYC / KYCC at scale? How about across platforms?

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CRYPTO TO WALL ST

What excites Wall Street about bitcoin? Is it the price appreciation or technology? Cost savings? Real-time settlement? Innovator's dilemma? Staying relevant? In this session, we’ll talk about digital currencies moving to Wall St. and what this may mean for businesses on both sides.

• What worries Wall Street about crypto currency? What are the concerns or roadblocks for firms interacting with digital currencies? Is it infrastructure, regulation, liquidity, security, or something else?

• Is Wall Street interested in trading Bitcoin, top 5 or everything else?

• Wall street has risk management / compliance / regulatory while crypto firms have technology / new user base. How do we get companies to work together to leverage their strengths while learning from one another?

• What are the technical requirements to connect with wall street trading platforms or are they open adopting current infrastructures today?

• What big projects in the cryptocurrency space excite Wall street?

• What type of product is a bank interested in to trade cryptocurrency?

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NEXT STEPS

• Digital Currency Banking Alliance

• Continuing to expand Infrastructure Workshops to include new audiences, possibly creating working groups for specific topics or areas of expertise

• Defining how DCG can be a partner to both digital currency companies and banks to help aggregate and bring people together