Why Bitcoin Adoption Will Continue to Grow

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Unlike the lackluster adoption of existing mobile wallets, the adoption of Bitcoin-based mobile wallet will be driven by merchants this time. …

Unlike the lackluster adoption of existing mobile wallets, the adoption of Bitcoin-based mobile wallet will be driven by merchants this time.

Why will merchants lead adoption of Bitcoin network and its first application, digital currency? Why will consumer adoption of Bitcoin continue to grow? What makes Bitcoin-based mobile wallet superior to mobiles wallets currently available by Google, ISIS and and other payment networks?

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  • 1. Why Bitcoin Adoption Will Continue to Grow Taras Kuzin November 2013
  • 2. BITCOIN CURRENCY AS FIRST APPLICATION OF NETWORK AND A FEW CURRENT STATS Taras Kuzin
  • 3. Text is Bitcoin What Bitcoin is digital money used directly between people to buy goods and services. Cryptography is used to make it impossible for anyone to spend funds from another user's wallet and can be used to encrypt a wallet so it can't be used without a password. This type of security is also used for credit card transactions and electronic bank transfers. Similar to any other currency, such as US dollars, it requires a wallet - digital wallet to be precise. It is used to send and to receive payments using unique addresses. No coin can be reproduced or double spent. Unlike current digital wallet solutions, Bitcoin transactions are independent of card networks and cost a fraction of the traditional debit card interchange fees. Page 3 Taras Kuzin
  • 4. Text Ben Bernanke’s letter to Congress: Bitcoin and other virtual currencies “may hold long-term promise.” “We ought to uphold America’s position as center of technical innovation by welcoming the new currency - but that can’t be done without government safeguards and regulations.” Sen. Tom Carper Congressional Hearing on Virtual Currency Page 4 Taras Kuzin
  • 5. Text Transactional Network is Growing Rapidly Bitcoin FROM 0 TO 28 MILLION TRANSACTIONS ANNUALLY IN LESS THAN 3 YEARS Over 80K transactions take place daily and these numbers are growing rapidly, as awareness grows. Page 5 Proprietary & Confidential
  • 6. Sizing Up Today's Bitcoin Market and Growth Number of merchants accepting Bitcoins grew from 6K in 2012 to 20K in 2013. $120M BITCOIN MERCHANT PROCESSING Million USD $160B AUG $20B BITCOIN EXCHANGE MARKET $87B WORTH OF BITCOINS WERE TRANSFERRED WITHIN BITCOIN NETWORK AMONG USERS IN NOVEMBER 2013 The total Bitcoin market size was $87B in November and the exchange segment grew from $1.5B to $20B from August to November. Page 6 Taras Kuzin
  • 7. Dollar Volume is to Reach $160B in 5 Years Million USD $160B AUG The Bitcoin exchange market exploded from $50M to $20B in one year and is limited only by the lack of connection with brick and mortar banking financial systems. Page 7 Taras Kuzin
  • 8. ADOPTION DRIVERS FOR MERCHANTS AND CONSUMERS Taras Kuzin
  • 9. Why Merchants Will Lead Adoption of Bitcoin  Bitcoin network is low cost processing alternative (between 0.5 and 1 percent) to existing card networks.  There are no charge-backs with Bitcoins, because by design Bitcoin transactions are irreversible.  Bitcoin network provides low cost integration -- there are no costly multimillion dollar investments in POS.  No merchant account approval is needed, unless you work with a Bitcoin merchant processor.  Funds are instantly deposited in your Digital Currency account, unless you settle in fiat currencies.  There are no FX conversion on purchases made from outside your country of operations,  Currently, most merchants accepting Bitcoins are bringing in new clients.  Bitcoin can work like a Letter of Credit - payments are settled with certain conditions are met and confirmed by other parties.  No card database breaches (e.g. Target) are possible with Bitcoins. Unlike the lackluster adoption of existing mobile wallets, the adoption of Bitcoin-based mobile wallet will be driven by merchants this time! Page 9 Taras Kuzin
  • 10. Why Consumer Adoption Will Continue to Grow  Digital currencies are always with you, wherever you have access to the Internet (e.g. mobile phone).  No inflation will affect the value of your Bitcoins, since no government can print more of them.  People who distrust banking systems (e.g. migrant workers) or can't get banked, can have safe and mobile savings accounts.  There is no need to convert your home country currencies, when you travel abroad.  No bank, PayPal, or government can arbitrarily freeze your funds.  When you need to pay your pal for your portion of something (dinner, event tickets), P2P payments are instant, cost less than 5 cents and never go through a third party bank.  You never have to worry about your credit card number being stolen.  Bitcoin payments are as anonymous as you want them to be. Value Proposition is even greater for consumers in the developing world with less developed banking infrastructure and corrupt governments. Page 10 Proprietary & Confidential
  • 11. A Trip Down Memory Lane (March 2011) Here are a few factors I outlined in 2011 that would have facilitated adoption of mobile wallet(s) in the United States: 1. Development of “Open Mobile Wallet” (open source software). 2. Use of Near Field Communications (NFC) contactless technology resident in a smart phone and merchant terminals. 3. Use of existing rails, including the ACH network for non-card payments, for mobile payments platform(s). 4. Dynamic data authentication for security and fraud mitigation. 5. Industry certification program to ensure both domestic and global interoperability. 6. Development of regulatory oversight model and compliance responsibilities by bank and non-bank regulators. 7. Creation of Trusted Service Managers that would oversee the provision of interoperable and shared security elements used in the mobile phone. Bitcoin network and its first application, Bitcoin currency, solve many of these problems.
  • 12. Why Bitcoin Foundation Won’t Hijack Bitcoin The Bitcoin Foundation has indeed a great deal of power to influence Bitcoin network rules. Nevertheless, there are still checks and balances to prevent Bitcoin Foundation from abusing its power. First, here is the group of individuals that determines directions of new developments and features of the Bitcoin network. http://bitcoin.org/en/development Moreover, even if these individuals conspired to rig the Bitcoin network, there would still be the final "guard" that will prevent the abuse of power by Bitcoin Foundation. Here is what needs to take place in order for the new rule/feature to affect the Bitcoin network. If Bitcoin Foundation tries to implement a new abusive or corrupt rule, by way of new software version, the new rule will not be implemented unless 51 percent of mining users (mining pools) install the latest version. Since individuals running mining pools are financially vested in Bitcoin network and are also smart guys, they will allow not allow new harmful system updates. That is, they will not update software running on their servers/computers, in order to prevent Bitcoin Foundation's abusive or corrupt new rules. Essentially, the process is like selling accounting software to banks - there will be 1,000's of security checks, before the software is installed and running. In summary, no one can introduce new rules without consent from the majority of the network. This rule is at the core of the Bitcoin technology and is fundamental to Bitcoin function. Page 12 Taras Kuzin
  • 13. Great Educational Bitcoin Videos Great video for basic understanding of Bitcoin network and digital currency https://www.youtube.com/watch?v=Um63OQz3bjo IBM executive's predictions http://www.finextra.com/Video/Video.aspx?videoid=513&goback=%2Egde_ 3721050_member_5801733873977024514#%21 Andreas Antonopoulos's view of Bitcoin industry https://www.youtube.com/watch?v=c2CsJ2HMA2I US Congress discussions pertaining to Bitcoin https://www.youtube.com/watch?v=CSTo9XgOgtY On November 22, daily dollar volume (principle) processed on Bitcoin network surpassed of those processed by Ria, MoneyGram and Western Union http://coinometrics.com/bitcoin/btix Page 13 Proprietary & Confidential
  • 14. TARAS KUZIN +1 (720) 431-2208 tkuzin@gmail.com Taras Kuzin