State of Bitcoin Q3 2014
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1State of Bitcoin Q3 2014
State of Bitcoin Q3 2014
7th October 2014
2State of Bitcoin Q3 2014
Contents
1. Summary and Adoption Dashboard
2. Price and Valuation3. Media4. VC Investment5. Commerce6. Technology7. Regulation and Macro
3State of Bitcoin Q3 2014
About CoinDesk
• World leader in digital currency news, prices and information• Our Bitcoin Price Index serves as an industry reference point• London-based and remote team with a global focus• Our editors are based in London, Boston, San Francisco and Tokyo
4State of Bitcoin Q3 2014
Summary and Adoption
Dashboard
5State of Bitcoin Q3 2014
Q3 2014 Summary
Bitcoin is further integrating with existing payment infrastructure (eg PayPal, Square) and some banks
Overall, the bitcoin ecosystem appears to have entered a relatively ‘quiet building’ phase in Q3
All-time bitcoin VC investment up to $317m; 2014 run rate on track to well exceed 1995 Internet
Regulatory environment continues to see challenges (eg NY BitLicenses, Kyrgyzstan ban)
Ever larger businesses continue to adopt bitcoin (eg Dell, which is offering 10% off certain products with bitcoin)
Bitcoin’s price down 40% in Q3, down another 10% at start of Q4 amid much debate about causes
6State of Bitcoin Q3 2014
Key Bitcoin Adoption MetricsQuarterly Last 12 Months
Sep-14 Jun-14 Q/Q Δ Sep-13 ΔCommerce
Wallets 6,559,978 5,427,688 21% 1,353,201 5xMerchants 76,000 63,000 21% 10,000 8xMerchants’ annual revenue ($bn) 86 29 196% 0 N/AATMs 251 103 144% 0 N/AUnique bitcoin addresses 184,554 136,152 36% 61,734 3x
IndustryAll-time VC investment ($m) 317.0* 225.3 41% 30.4 10xNumber of VC-backed startups 66* 50 32% 14 5x
MediaMainstream media mentions 9,398 9,024 4% 1,794 5x
TechnologyNetwork Hash Rate (billion/second)
261,900,382
111,194,683 136% 1,213,246 216x
Github no. of updated repositories 18,753 15,109 24% 1,573 12xValuation
Bitcoin market capitalization ($bn) 5.2 8.3 -37% 1.5 3x
Sources: CoinDesk, Blockchain.info, BitcoinPulse, Github, Coin ATM Radar. Figures used are as of end of quarter.
*Includes recent Q4 deals (eg Blockchain $30.5m).
7State of Bitcoin Q3 2014
Price and Valuation
8
CoinDesk Bitcoin Price Index – Q3 & YTD by the Numbers
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTCwww.coindesk.com/price
9State of Bitcoin Q3 2014
A Remarkable Coincidence?
+39.4%
-39.6%
Bitcoin’s price dropped in Q3 by an almost identical % as its rise in Q2
%Δ of Q3/Q2 Close Price %Δ of Q2/Q1 Close Price
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC www.coindesk.com/price
10State of Bitcoin Q3 2014
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4 0:00$300
$350
$400
$450
$500
$550
$600
$650
$700
Bitcoin’s Price Has Been Declining on Steadily Rising Trading Volume
18 Aug
Bitcoin price suddenly drops in ‘flash crash’
11 Aug
18 JulDell announces it will accept bitcoin
Blockchain first company to pass over 2m bitcoin wallets
22-23 SepPayPal and Square announce bitcoin integration
8 JulXapo announces $20m funding round
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC www.coindesk.com/price
9 JulBitcoin industry discussion of concerns over mining pool 51% network control
Following complaints, NY extends BitLicense comment period
21 Aug
9 SepSupposed Satoshi Nakamoto email account ‘hack’, blackmail attempt
11State of Bitcoin Q3 2014
Total Exchange Trading Volume Sees Steady Growth
Source: CoinDesk, Bitcoinity
Aug-0
9
Sep-
09
Oct-0
9
Oct-0
9
Nov-0
9
Dec-0
9
Dec-0
9
Jan-
10
Jan-
10
Feb-
10
Mar
-10
Mar
-10
Apr-1
0
May
-10
May
-10
Jun-
10
Jul-1
0
Jul-1
0
Aug-1
0
Aug-1
00
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
Cumulative Trading Volume (bitcoins)
12State of Bitcoin Q3 2014
Chinese Yuan (Renminbi) Denominated Bitcoin Trading Continues to Gain Share
on US DollarCNY vs USD Denominated Bitcoin Trading Market
Share, Monthly BTC (unit) volume, April – September 2014
Source: Bitcoinity. Based on exchange data from ANXBTC, Bitfinex, Bitstamp, BTC China, BTC-e, Huobi, LakeBTC, and OKCoin.
Month CNY USD
April 63.6% 36.4%
May 66.7% 33.3%
June 65.3% 34.7%
July 68.9% 31.1%
August 67.5% 32.5%
September 71.5% 28.5%
13State of Bitcoin Q3 2014
Growing Merchant Adoption Should Not Drive Down Bitcoin’s Price
Consumer converts fiat
to bitcoin
Consumer spends
bitcoin at merchant
Merchant utilizes
payment processor
Payment processor converts bitcoin to
fiat
‘The Virtuous Bitcoin Commerce Cycle’ • Right now, there are too few merchant transactions to have a significant influence on price (eg Overstock.com is only averaging $15k/day in sales conducted in bitcoin*)
• In the short-term, it’s true that timing differences may lead to commerce supply-demand imbalances
• Over the medium term, however, bitcoin-to-fiat conversions by payment processors should be balanced by fiat-to-bitcoin conversions by bitcoin-spending consumers
*Source: http://www.coindesk.com/overstock-reveals-bitcoin-sales-averaging-15000-per-day/
14State of Bitcoin Q3 2014
The Mining Arms Race: A More Plausible Bitcoin Price Drop Theory?
• To remain competitive, miners – who possess perhaps the largest (and ever-growing) supply of bitcoins – must sell bitcoins to finance running costs and hardware upgrades
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
Bitcoin Network Hash Rate (billions of hashes/second), 2010 – Present
Source: Blockchain.info
15State of Bitcoin Q2 2014
Other Possible Explanations for Bitcoin’s
Price Decline Include …
• Early adopter sales
• Technology equities
correction
• Strong US dollar
• Technical (chart) trends
• 51% attack concerns
• Global instability
• Lower bitcoin price
volatility = fewer
speculators
• Seasonal factors (eg “sell
in May and go away”)
• Regulatory concerns (eg
NY BitLicenses)
• Competition concerns (eg
Apple Pay)
16State of Bitcoin Q3 2014
State of Altcoins: Number of Altcoins Up 2x in Last Six Months, but Market Cap Share Down 65%*
Sources: CoinMarketCap, Internet Archive
*Note: altcoin market cap share calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by all cryptocurrency market caps (including bitcoin). For example, if altcoins have 8% market value share, then bitcoin has 92%
market value share.
Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-140
100
200
300
400
500
600
0%
5%
10%
15%
20%
25%
216
262282
347362
478 483
23%
9%
2%
7%6%
5%
8%
Total number of altcoins Altcoins Market Cap Share (%)
17State of Bitcoin Q3 2014
While Significantly Below March 2014 High, Current Relative Value of Altcoins is in Line With Historical
Average
Note: altcoin market cap share calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by all cryptocurrency market caps (including bitcoin). For example, if altcoins have 8% market value share then bitcoin has 92%
market value share.
Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-140
100
200
300
400
500
600
0%
5%
10%
15%
20%
25%
38 3764
83
140
216
262282
347362
478 483
4%
9%9%
9%
12%
23%
9%
2%
7%6%
5%
8%
Total number of altcoins Altcoins Market Cap Share (%)
Sources: CoinMarketCap, Internet Archive
18State of Bitcoin Q3 2014
Media
19State of Bitcoin Q3 2014
Selection of Q3’s Biggest Bitcoin Stories
Debate about causes of mid-August bitcoin price crash and downward price trend
Mainstream payments services announce bitcoin integration Dell becomes
the largest company to accept bitcoins as a means of payment
Google integrates bitcoin price into search
20State of Bitcoin Q3 2014
Seven of the Most Popular CoinDesk Q3 Stories About Bitcoin’s Price (vs Four in
Q2)Rank Title Date
1 Tim Draper: Bitcoin’s Price Still Headed to $10k 12th Sep
2Downward Pressures Persist as Bitcoin’s Price Declines to Near $400 19th Sep
3State of Bitcoin Q3 2014 Report Reveals Expanding Bitcoin Economy 10th Jul
4 Did Margin Trading Crash the Price of Bitcoin? 15th Aug
5US Marshals: One Auction Bidder Claimed All 30,000 Silk Road Bitcoins 1st Jul
6 Price of Bitcoin Drops Below $400 in BTC-e Flash Crash 18th Aug
7 Litecoin Price Decouples from Bitcoin, Slump Continues 2nd Jul
8 Bitcoin Price Drops Below $600 After Relative Stability 24th Jul
9 Price of Bitcoin Falls to $500, Lowest Level Since May 14th Aug
10 PayPal Announces First Partnerships in Bitcoin Space 23rd SepSource: CoinDesk
21State of Bitcoin Q3 2014
Continued Mainstream Media Interestin Bitcoin
Source: respective publishers’ websites
WSJ
NYT
FT
Bloomberg
Guardian
Sina
Reuters
0 1000 2000 3000 4000 5000 6000
Stories Published Mentioning Bitcoin
Q3 2012 to Q3 2013 Q3 2013 to Q3 2014
22State of Bitcoin Q3 2014
Innovative Tools are Emerging to Monitor Attitudes Towards Bitcoin
Sources: CoinDesk, Qriously http://www.coindesk.com/sentiment-index/
CoinDesk Bitcoin Sentiment Index (BSI)
• The Bitcoin Sentiment Index is a measure of whether individuals feel the digital currency’s prospects are increasing or decreasing on any given day
• Powered by mobile ad data, the index provides a snapshot of the general attitude towards bitcoin in the US and UK
23State of Bitcoin Q3 2014
‘Bitcoin’ Searches During Q3 Stayed Relatively Constant, but Still Well Below
Earlier Peaks
Past 90 Days
Past 12 Months
Source: Google Trends data as of 2 Oct 2014
24State of Bitcoin Q3 2014
Related ‘Bitcoin’ Searches Are Becoming More Sophisticated, Evolving Beyond ‘What is
Bitcoin?’
Source: Google Trends data as of 2 Oct. 2014
Past 90 Days
Past 12 Months
Related Searches: Top
Related Searches: Rising
25State of Bitcoin Q3 2014
VC Investment
26State of Bitcoin Q3 2014
Two Biggest Bitcoin VC Deals in Q3
$20m
$14m (Series A) September 2014
(Series A) July 2014
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
27State of Bitcoin Q3 2014
Q3 Bitcoin Venture Capital Investment Down From Q2, Up Slightly Over Q1
$317m
$60m
Total VC investment in cryptocurrency startups to date*:
Q3 2014 bitcoin VC investment:
$73m
Q2 2014 bitcoin VC investment:
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
+41%
Increase in total to-date VC investment from end of Q2*:
*Q3 figure excludes recent Q4 deals (eg Blockchain $30.5m) but all-time figure of $317m and % growth includes these Q4 deals.
Europe Heats Up: Gained Overall Investment Share Again in Q3 and Saw the Largest Q/Q % Increase
28State of Bitcoin Q3 2014
Regions
Q3 ($m)
Q2 ($m)
Q/Q Δ ($m)
Q/Q Δ
US & Canada 201.1 165.8 35.3 21%
Europe 48.9 30.6 18.3 60%
Asia 26.5 20.8 5.7 27%
Middle East 5.5 5.5 0.0 0%
L. America 3.1 2.3 0.8 35%
Total 285.0 225.3 59.8 27%
$ Invested as of Q2
• Latin America had the second largest Q/Q % increase in investment• US & Canada share declined slightly, but still dominates with 71% of
all VC $ to dateNote: $ invested represents all-time total bitcoin VC investment at the end of each respective
quarter.Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
$ Invested as of Q3
Europe 17%
Asia 9%
Middle East 2%Latin
America 1%
US & Canada 71%
Europe 13%Asia 9%
Middle East 2%
Latin America 1%US & Canada
78%
29State of Bitcoin Q3 2014
While the US Continues to Dominate Bitcoin VC Investment, its Total Share Declined 7%
in Q3
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Luxe
mbo
urg
India
Germ
any
Mex
ico
Canad
a
Austra
lia
Pana
ma
Denm
ark
Japa
n
Argen
tina
Sing
apor
e
Sout
h Ko
rea
Israe
l
Unite
d King
dom
Swed
en
China
Nethe
rland
s
Unite
d St
ates
$0
$50
$100
$150
$200
$0 $0 $0 $0 $1 $1 $1 $1 $2 $2 $3 $4 $6 $12 $15 $17 $21
$201
Total Funding (millions)
30State of Bitcoin Q3 2014
Silicon Valley’s Share of All-Time Bitcoin VC Investment Slipped Slightly From 48% in Q2 to
44%
Tech hub concentratio
n
Value ($m)
No. of companie
s
Silicon Valley 126.5 21
Rest of World 158.5 43
Total 285.0 64
• Share of VC-backed bitcoin companies based in Silicon Valley continues to slide, down from 37% in Q2 to 33% in Q3
• Total number of VC-backed bitcoin companies increased from 49 in Q2 to 64 in Q3, a 31% increase
$ Invested No. of Companies
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Silicon Valley 44%
Rest of World 56%
Silicon Valley 33%
Rest of World 67%
31State of Bitcoin Q3 2014
Bitcoin VC Investment is Broadening Around the Globe
• Six new countries (Germany, Denmark, India, Japan, Luxembourg and Panama) added their first VC-backed bitcoin startups in Q3, a 2x increase over the number of new countries in Q2
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
32State of Bitcoin Q3 2014
2014 Bitcoin VC Investment Projected to Surpass Early-Stage Internet
Investments
*Includes first sequence venture deals but excludes late-stage 1995 internet investments ($257.6m). For additional disclosure on methodology see
http://www.coindesk.com/following-money-trends-bitcoin-venture-capital-investment/Source: CoinDesk, PricewaterhouseCoopers
2013 Bitcoin 2014 Bitcoin Run Rate 1995 Internet*$0
$50
$100
$150
$200
$250
$300
$350
$91.8
$290.0
$250.1
Bitcoin vs Early Internet VC Investment (millions)
33State of Bitcoin Q3 2014
The Bitcoin Startup Ecosystem: Six Different Bitcoin Company Categories
Universal
Payment Processing
Wallets
Mining
Financial Services
Exchanges
34State of Bitcoin Q3 2014
Wallets Raised the Most Funding in Q3, Followed by Financial Services and
MiningQ3 VC Investment by Ecosystem Category (millions)
35State of Bitcoin Q3 2014
Pay-ment
Proces-sor 16%
Ex-change
16%Fi-nan-cial Ser-vices 9%Mining 12%
Universal 25%
Wallet 22%
Universals Still Command the Most VC Investment, but Share Slipped by 3% in Q3
SectorQ3
($m)Q2
($m)Q/Q Δ ($m)
Q/Q Δ (%)
Universal 63.9 59.4 4.4 8%Financial Services 49.8 33.5 16.2 48%
Mining 48.0 34.0 14.0 41%
Wallet 44.2 21.4 22.8 107%Exchang
e 41.1 39.0 2.1 5%Payment Processo
r 38.2 38.0 0.2 0.6%
Total 285.0 225.3 59.8 27%
• Wallets, Financial Services, and Mining sectors continued to receive the lion’s share of investment in Q3
• Exchanges have only received a combined $4 million over the last two quarters
$ Invested as of Q2$ Invested as of Q3
Payment Proces-sor 13% Ex-
change 14%
Financial Services
17%Mining 17%
Universal 22%
Wallet 15%
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter.
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
36State of Bitcoin Q3 2014
Increasing Number of Universal Bitcoin Companies (Up Over 2x Q/Q)
• As we correctly forecasted in the Q2 State of Bitcoin, “more and more bitcoin startups will pursue the universal model”
• Universals operate across more than one aspect of the bitcoin value chain (eg Coinplug provides payment processing, wallet and ATM)
• Universal bitcoin companies leverage two key elements of financial services: efficiency and trust
The Universals
37State of Bitcoin Q3 2014
Q3 Investment Rounds in Bitcoin Startups (contd.)
Close Date
Company Size ($m) Round Select InvestorsHeadquartere
d
Sep-14 Coinapult 0.78 SeedBitcoin Opportunity Corp, Roger
Ver, FirstMark Capital, Erik Voorhees, Ira Miller
Panama City
Sep-14 Coinify* 0.34 Seed SEED Capital Copenhagen
Sep-14 CoinPlus 0.22 Seed Unknown Luxembourg
Sep-14 Koinify 1.20 FirstIDG Capital Partners, Brock
Pierce, zPark Ventures, Danhua Ventures
Mountain View
Sep-14 Gem 2.00 Seed
First Round Capital, Tekton Ventures, RRE Ventures, Mesa+,
Amplify.LA, Idealab, Baroda Ventures, Crypto Currency
Partners, QED Associates, Bitcoin Shop, James Joaquin
Venice
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
*In instances where only an approximate round size is provided (eg Coinify reporting that it raised "several million DKK" then the low end of the round range estimate is used (eg 2 million DKK for Coinify).
38State of Bitcoin Q3 2014
Q3 Investment Rounds in Bitcoin Startups (contd.)
Close Date
Company Size ($m) Round Select InvestorsHeadquartere
d
Sep-14 KnCMiner 14.00 Seed Creandum Stockholm
Aug-14 Korbit 3.00 Seed
Softbank Ventures Korea, Pantera Capital, BAM Ventures, Bitcoin Opportunity Corp, Tim Draper, Pietro Dova, Strong Ventures
Seoul
Aug-14 Chain 9.50 Seed
Khosla Ventures, Pantera Capital, Barry Silbert, RRE Ventures, SV
Angel, Thrive Capital, 500 Startups
San Francisco
Aug-14 BitX 0.85 SeedBitcoin Opportunity Corp, Carol
Realini, Ariadne CapitalSingapore
Aug-14 BlockTrail 0.65 Seed Lev Leviev Amsterdam
Aug-14 Bitbond 0.27 First Point Nine Capital Berlin
Aug-14 Unocoin 0.25 First Bitcoin Opportunity Corp Bangalore
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
39State of Bitcoin Q3 2014
Q3 Investment Rounds in Bitcoin Startups (contd.)
Close Date
Company Size ($m) Round Select InvestorsHeadquartere
d
Jul-14 Volabit 0.25 First Bitcoin Opportunity CorpPuerto Vallarta
Jul-14 BitFlyer 1.60 FirstUnnamed Japan-based venture
capital firmTokyo
Jul-14 Elliptic 2.00 First Octopus Investments London
Jul-14 TradeBlock 2.80 FirstAndreessen Horowitz, Barry
Silbert, Devonshire Investors, FinTech Collective
New York
Jul-14 Safello 0.25 Seed Bitcoin Opportunity Corp Stockholm
Jul-14 Xapo 20.00 Seed
Index Ventures, Greylock Partners, Emergence Capital
Partners, Yuri Milner, Max Levchin, Jerry Yang
Palo Alto
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
40State of Bitcoin Q3 2014
Commerce
41State of Bitcoin Q3 2014
>75K Merchants Now Accept Bitcoin, Up From 63K in Q2 (+19%)
40K 35K
Source: Coinbase and BitPay
42State of Bitcoin Q3 2014
Nov-1
3
Nov-1
3
Dec-1
3
Dec-1
3
Jan-
14
Jan-
14
Feb-
14
Feb-
14
Mar
-14
Mar
-14
Apr-1
4
Apr-1
4
May
-14
May
-14
Jun-
14
Jun-
14
Jul-1
4
Jul-1
4
Aug-1
4
Aug-1
4
Sep-
14
Sep-
140
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000R² = 0.977717429988309
Total merchants Forecasted merchants
Forecast Cut for Bitcoin-Accepting Merchants by 10K to 90K by End of
Year
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.
43State of Bitcoin Q3 2014
Dell is by Far the Largest Retailer to Date to Accept Bitcoin
@Dell tweet:
If you’re a retailer, there’s really no
reason not to accept bitcoin at
this point
“
”
Source: CoinDesk, Absolute Return
$56.9 billion annual revenue
44State of Bitcoin Q3 2014
Companies Representing >$85 Billion in Annual Revenue Now Accept Bitcoin
Largest Bitcoin-Accepting Retailers
*Monprix is a private company, most recent revenue data available used from 2005. TigerDirect estimate provided by parent company investor relations. Other divisions that are part of a larger parent organization, but do not break out individual divisional revenues, are
excluded.
Rank CompanyAnnual Revenue
($bn)1 Dell 56.92 Dish Network 13.93 Expedia 5.04 Monprix* 4.35 NewEgg 2.86 Overstock 1.37 TigerDirect* 1.08 1-800 Flowers 0.8
Total 85.9
45State of Bitcoin Q3 2014
Some Merchants are Seeing Significant Sales in Bitcoin
• Overstock.com is averaging $15k per day in goods sold for bitcoin and is forecasting over $1m per month by fourth quarter in 2014
Q1 Monthly Avg. Projected Q4 Monthly Avg.
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$300,000
$1,000,000
Patrick Byrne, Overstock
+233%
Source: http://www.coindesk.com/overstock-reveals-bitcoin-sales-averaging-15000-per-day/
46State of Bitcoin Q3 2014
A Growing Number of Compelling Reasons to Use Bitcoin to Make Purchases
Dell is offering up to 10% off certain products for purchases made with bitcoin
Purse.io customers often save 10-25% on Amazon Wish List items purchased by third parties seeking to acquire bitcoins for fiat
47State of Bitcoin Q3 2014
Total Wallets Forecasted Wallets
Approximately 8 Million Bitcoin Wallets Still Forecasted by End of
Year
R2 = 0.9365
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.
Jan-
13
Feb-
13
Mar
-13
Apr-1
3
May
-13
Jun-
13
Jul-1
3
Aug-1
3
Sep-
13
Oct-1
3
Nov-1
3
Dec-1
3
Jan-
14
Feb-
14
Mar
-14
Apr-1
4
May
-14
Jun-
14
Jul-1
4
Aug-1
4
Sep-
14
Oct-1
4
Nov-1
4
Dec-1
40
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
R² = 0.959957494156883
48State of Bitcoin Q3 2014
Bitcoin Remains the Coin of Choice in the Post-Silk Road Online Black Market
• The view that bitcoin would be quickly supplanted by DarkCoin or another theoretically more anonymous altcoin for black market use appears to be unfounded
Source: Wired http://www.wired.com/2014/09/agora-bigger-than-silk-road/
Agora, which is larger than Silk Road 2.0, only accepts bitcoins
49State of Bitcoin Q3 2014
More and More Bitcoin Companies are Advertising Their Insurance Protection to Customers
• However, the question remains whether companies that have bypassed insurance (eg Blockchain), or openly eschew it (eg BitReserve), will see lower customer adoption
Insured by Aon
Insured by Marsh Insured through London specialist market, brokered by CBC
Insurance
Insured by Meridian
50State of Bitcoin Q3 2014
Now Over 260 Bitcoin ATMsAround the World
Source: CoinDesk (http://www.coindesk.com/bitcoin-atm-map/)
51State of Bitcoin Q3 2014
Most Bitcoin ATMs Concentrated in North America and Europe
• Lamassu accounts for over a third of the bitcoin ATM marketSource: CoinDesk
52State of Bitcoin Q3 2014
Technology
53State of Bitcoin Q3 2014
Rise of Discus Fish Mining Pool as a GHash Counterbalance Has Tempered 51% Attack Concerns
Source: 4-day average as of 2 Oct 2014 blockchain.info/pools
54State of Bitcoin Q3 2014
Bitcoin Developer Ecosystem Continues to Grow, but Has Slowed Recently
• Developer engagement on open-source projects is tapering
Source: BitcoinPulse
55State of Bitcoin Q3 2014
Will the Decline in the Number of Bitcoin Nodes Leave Bitcoin Overly Centralized?
Source: BitcoinPulse
• Bitcoin network nodes are needed to ensure all valid bitcoin transactions that occur are broadcasted in a timely manner
• The number of bitcoin nodes has fallen from a peak of 250k at the end of 2013 to under 7k
56State of Bitcoin Q3 2014
Bitcoin’s Inverted Pyramid Problem Persists
• Mike Hearn, bitcoin core developer: “Basically, progress on the bitcoin protocol has ground to a halt.”
• Questions around how much the problem is due to a lack of funding and personnel vs governance issues
The multi-billion dollar bitcoin ecosystem,
comprised ofhundreds of
companies and thousands of
people …
… rests on the work of a small handful of core bitcoin
protocol developers
Source (Mike Hearn quote): Epicenter Bitcoin
57State of Bitcoin Q3 2014
Bitcoin 2.0: Possible ‘Native Apps’
• Allocating bandwidth, storage, compute: new ways to share and trade networked resources
• Smart marketplaces: open up access to crowdfunding and crowd labor services (oDesk, 99 Designs, Beacon Reader, Mechanical Turk) to anyone with a smartphone
• Micropayments: enabling micropayments on the web and not just for mobile in-app payments
• Incentivized social software: supplementing likes, followers, karma, upvotes etc with monetary incentives
Sources: http://avc.com/2014/09/the-bitcoin-hype-cycle/ and http://cdixon.org/2014/10/04/some-ideas-for-native-bitcoin-apps/
“I am thinking that we will start to see native applications of bitcoin. These would be things that simply could not exist without this
technology.” – Fred Wilson
58State of Bitcoin Q3 2014
Regulation and Macro
59State of Bitcoin Q3 2014
Launch of New Bitcoin Advocacy Groups Emphasizes Ongoing Regulatory
Challenges
Jerry Brito, Coin Center
• Questions exist around how related Coin Center’s launch is with ongoing controversy surrounding the Bitcoin Foundation
Jon Matonis, Bitcoin Foundation
Perianne Boring, Chamber of Digital Commerce
60State of Bitcoin Q3 2014
Bitcoin Businesses are Already Pulling Out of New York Due to BitLicense
Concerns
NY’s Ben Lawsky
UK’s George Osborne
New York vs
London
• Circle and others have announced they won’t accept NY-based customers if BitLicense rules are implemented in their current form
• UK Chancellor George Osborne has announced he is looking to make the UK attractive to bitcoin startups and capital
• Startups like Epiphyte have already relocated from NY to seemingly friendlier London
61State of Bitcoin Q3 2014
Well-Funded Bitcoin Startups are Able to Secure Banking
Relationships
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
$27.5m funding
$10.0m funding
$9.0m funding
$5.0m funding
Reasons banks hesitate on bitcoin:• bigger
risks• higher
costs• more work• Low ROI• regulatory
pressure• prohibited
by regulators
62State of Bitcoin Q3 2014
Secession Votes Prompt Monetary Questions and Could Create Openings for Alternative
Currencies
Debate over currency was at the forefront of Scotland’s independence campaign
Catalan independence vote scheduled to take place on 9th November
63State of Bitcoin Q3 2014
New Index Ranks 177 Countries by Relative Potential to Adopt Bitcoin
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper.
Announcement article: http://www.coindesk.com/argentina-most-likely-adopt-bitcoin/
Rank Country 1Argentina2Venezuela3Zimbabwe4India5Nigeria6Brazil7United States8Nicaragua9Russia10Iceland
Cristina Fernández de Kirchner’s Argentina is #1
The Bitcoin Market Potential Index™ (BMPI) – The Top 10
64State of Bitcoin Q3 2014
Index Rankings Determined by Seven Equally Weighted Categories
• Remittances • Inflation
• Technology penetration • Financial repression
• Bitcoin penetration• Financial crisis –
historical
• Black market
Index methodology: 39 differently weighted variables (and counting) grouped into the above seven equally weighted sub-index categories
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper
Announcement article: http://www.coindesk.com/argentina-most-likely-adopt-bitcoin/
‘Positive’ Index Ranking Drivers
‘Negative’ Index Ranking Drivers
65State of Bitcoin Q3 2014
Latin America Most Fertile Region for Bitcoin, Followed by Africa and Post-Soviet
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper
Announcement article: http://www.coindesk.com/argentina-most-likely-adopt-bitcoin/
BMPI Regional Distribution -
Top 30
BMPI Regional Distribution - Top 10
66State of Bitcoin Q3 2014
BMPI Heat Map (Interactive Version at BitcoinIQ.info)
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper.
Announcement article: http://www.coindesk.com/argentina-most-likely-adopt-bitcoin/
BitcoinIQ.info
67State of Bitcoin Q3 2014
When people write the history of this thing, of bitcoin, they are not going to write the story of 6 million to a billion. What is truly remarkable is the story of zero to 6 million. It has already happened! And we’re not paying attention! That’s incredible. That’s what had one chance in a million and it already happened.
Views on Bitcoin
Think of the cellphone. There were never more than 1.2 billion landlines. Then the cellphone came and we’re at 6.3 billion. Why? It’s not because only those people wanted to communicate. The landlines were all post-pay. You need to have credit to get one. The cell phones were pre-paid. Suddenly you could get one with cash. It had nothing to do with technology. It was an economic restriction. Now there are 1.5 billion bank accounts, same threshold as land lines. I think bitcoin will allow us to see 6.3 billion people banking on their cell phones.
“
“
”
Source: The Verge
Wences CasaresXapo
68State of Bitcoin Q3 2014
Appendix - 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
69State of Bitcoin Q3 2014
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.