SEPT. 20 2016

The Future of Money An Introduction to Bitcoin and Digital Assets

Meltem Demirors - @Melt_Dem - @DCGco

•  Introduction

•  What is Money

•  Overview of Digital Assets and Blockchain Technology

•  Key Themes and Trends

AGENDA

INTRODUCTION TO DCG

Companies

Strategic Investors Academia Policy

Co-Investors

NETWORK INSIGHTS ACCESS TO CAPITAL

Corporate Partners

•  Invested in 70+ companies •  Own 3 subsidiaries

Family Offices & Funds

At DCG, it is our mission to accelerate the development of a better financial system. We build, buy, and support bitcoin and blockchain companies by

leveraging our insights, network, and access to capital.

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Overview The past, present, and future of money

WHAT IS MONEY?

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3000 BC - Ancient Egypt This society had no form of coinage, but this model found in a tomb shows accountants tallying grain balances Balances were tracked using a complex system of colored strings which represented credits and debits

1500 AD – Rai Stones on Yap Carved stones of varying shapes and sizes were used as a form of currency. No phsyical movement of the stones required, instead ownership relied on oral history. In fact, a large stone sank and it was still kept in “circulation” based on consensus between tribal elders.

Today – The Bristol Pound A local community currency that was created by the city of Bristol to incentivize spending with local businesses. Part of a non-profit enterprise, the City also accepts payment of taxes and fees in Bristol Pounds.

WHAT IS THE ROLE OF MONEY

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•  Global medium of exchange

-  Generally acceptable proxy for trust in an exchange – allows easy exchange and global pricing in common denominations

•  Store of value, similar to gold, silver, or other precious metal

-  Limited supply, has utility in jewelry / electronics applications, globally acknowledged as valuable, priced in various markets

•  Proxy for power

-  Economic power has become synonymous with other forms of political, social, and cultural power

MONEY TODAY

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•  Central governments control money supply – destructive monetary policies and excessive seignorage leads to rapid devaluation

•  Global currency wars enable competition and manipulation of global trade balances and purchasing parity

•  Banks and governments have created massive barriers to entry with excessive and cumbersome regulation that limits disruptive innovation and imposes extremely high costs

•  Very difficult to transact peer to peer – many intermediaries extract rents from the process of facilitating the transfer of money

•  Centralization makes it far too easy to abuse, like LIBOR fixing, price rigging, and other harmful or discriminatory practices

Money itself is ready for disruptive innovation

RE-IMAGINING MONEY

•  Decentralized (peer to peer network, no central party in control)

•  Digital (accessible anytime the internet or a local network is accessible)

•  Highly divisible (incredibly precise to infinitesimally small amounts)

•  Confidential and pseudonymous (ability to transact in opaque ways)

•  Frictionless (low costs to move money globally, no barriers to entry)

•  Scarce (limited quantity)

•  Verifiable (can confirm ownership digitally)

•  Irrevocable (can’t take back transactions)

Welcome to Bitcoin

Bitcoin and Blockchain Technology Re-imagining money and markets

USE CASES FOR THIS TECHNOLOGY

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Ledger Technology Store of Value Payment Rail

STORE OF VALUE

Digital currency can be an electronic store of value, especially in countries where local currencies are volatile or losing value

Attributes

Limited Supply ü  Easy to Move ü  No Storage Cost ü 

Durable ü 

Highly Divisible ü 

Use Case

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OTHER DIGITAL CURRENCIES

Over 600 digital currencies and many different types of blockchain technologies have been created for specific reasons

Currency Key Use Cases

•  Store of value •  Payment network •  Distributed ledger

•  Smart contracts •  Programmable transactions •  Distributed applications

•  Real time settlement •  Cross currency transactions •  Shared, private database

Key Features

•  Supply fixed at 21 million bitcoin •  In existence since 2009 •  Public – anyone can access

•  Supply not fixed, 1-2% inflation •  In existence since 2014 •  Public – anyone can access

•  Supply fixed at 21 million bitcoin •  In existence since 2013 •  Private – must be “trusted” party

We believe in a future where many digital currencies and assets will serve many different purposes

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PAYMENT RAIL

Digital currencies can be used as a global payment rail, without exposing either the sender or receiver to the underlying asset

•  Fast transaction times – 10 min •  Low network fees •  No banks or intermediaries needed

Example: Sending money via the bitcoin network today

Wallet

Bank Account

Bill Pay or Credits

P2P FX Teller

Payment Network

Agent

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Payout Options

ON AND OFF RAMPS ARE CRITICAL

Build a robust, integrated exchange ecosystem to create a frictionless, highly efficient open financial

network using BITCOIN

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MONEY TRANSFER

Money transfer companies will require strategic partners to facilitate both cash in and cash out across the globe

•  Simplified international payments for SMBs

•  Lowest cost routing

•  Digital, P2P payment wallet on mobile phones

•  Fund by using bank account or P2P network “teller”

•  Send and collect business payments across Africa

•  Leverages existing mobile money networks

DISTRIBUTED LEDGER

The “blockchain” is a database or a ledger that maintains a continuously growing list of data records or transactions, with a few special features:

Shared by Parties Distributed Secure Trusted Immutable

Provenance Tracking

Reputation Platforms Digital Identity

Blockchain Use Cases Anti-Counterfeit

Measures

Digital Assets and Securities Data Storage and

Record Management 11

Key Themes and Trends Where we’re seeing opportunity

ADOPTION TRENDS

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Ledger Technology

Store of Value

Payment Rail

Clients can “sell” bitcoin and deposit fiat currency in PayPal accounts

Enabling frictionless, instant peer to peer payments using bitcoin as (invisible) rail

Corporation Startup Details

Some of the world’s largest financial institutions are using bitcoin and blockchain technology to serve their customers

Using blockchain to digitize & issue private company shares to investors

THE DCG PERSPECTIVE – OUR PORTFOLIO

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Digital Asset Trading & Tools

Digital Asset Core Infrastructure

Enterprise Blockchain

Blockchain Registry Identity & Compliance Smart Contracts

Payments 2.0

WHO IS INVESTING IN IT?

Banks and Financial Institutions Venture Capital

Corporate Venture

Non-Financial Corporations

Stakeholders

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May 2013

July 2014

June 2015

October 2015

January 2016

Bitcoin Opportunity

Corp

$95M $362M $620M $130M YTD

REGULATORY OVERVIEW

New York BitLicense California developing

regulation

   

•  Many agencies involved in bitcoin and blockchain regulation

•  “Wait and see” is prevalent

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US Most Developed Europe Growing

•  UK FCA working with companies, but Brexit?

•  Other EU member states not actively regulating

Asia Uncertain

•  Little guidance or action from central banks or regulators

•  Large mandates to support tech development

   

Russia, Africa Cautious

   

NC Bill

Get Involved! Opportunities

READ ALL THE TIME

I probably read 3 to 4 hours a day. Hands down, the best way to learn.

•  Reddit – r/bitcoin and the many permutations thereof

•  If you like books – The Innovator’s Dilemma (Christensen), Crossing the Chasm (Geoffrey Moore), The Master Switch (Tim Wu), The Ascent of Money (Niall Ferguson)

•  Industry publications like CoinDesk, CoinTelegraph, Bitcoin Magazine

•  Stay up to date on bitcoin dev forums / bitcoin community slack chats

•  Attend meetups, conferences, and events and read the white papers!

Engaging with new technology requires discipline - it’s not enough to approach this as an academic study. There are real opportunities in your everyday life where you can experiment and find amazing use cases for these technologies. 

WE’RE ALWAYS HIRING!

We have the largest network and are constantly hiring!

•  AngelList: Digital Currency Group

•  Send your resume to meltem@dcg.co or careers@dcg.co

•  Connect with us on Twitter - @Melt_Dem and @DCGCo

•  Let us know how we can be helpful!