State of Bitcoin Q1 2015

Sponsored by Gem State of Bitcoin Q1 2015 10th April 2015 State of Bitcoin Q1 2015 1

Sponsored by Gem About CoinDesk • World leader in digital currency news, prices and information • The Bitcoin Price Index serves as an industry reference point • International team headquartered in London • Editors based in London, New York, San Francisco and Tokyo 2State of Bitcoin Q1 2015

Sponsored by Gem Sponsored by 3State of Bitcoin Q1 2015

Sponsored by Gem State of Bitcoin Credits • Creator and Producer: Garrick Hileman (@GarrickHileman) • Statistical assistance: Danqing Ying (@DanqingYing) 4State of Bitcoin Q1 2015 Garrick Hileman Danqing Ying

Sponsored by Gem Contents • Summary and Adoption Dashboard • Valuation • Media • VC Investment • Commerce • Technology • Regulation and Macro 5State of Bitcoin Q1 2015

Sponsored by Gem 6State of Bitcoin Q1 2015 Summary and Adoption Dashboard

Sponsored by Gem Q1 2015 Summary 7State of Bitcoin Q1 2015 Sustained pressure on bitcoin’s price, which is due to the current demand- supply imbalances, is winnowing the mining and exchange sectors Q1 was bitcoin’s largest VC investment quarter yet with $226m raised; all-time bitcoin VC investment now totals $676m 21 Inc, which announced $116m in new funding, surpassed Coinbase as the best-capitalized bitcoin startup Improved regulatory clarity (ie NY BitLicense revisions, UK’s favorable posture) are building industry confidence and attracting Wall Street Blockchain’s total wallets passed three million; merchant adoption slowed due to bitcoin’s underwhelming value proposition for mainstream consumers Bitcoin’s price briefly dropped to $177 in January 2015, and is down 24% so far in 2015

Sponsored by Gem Key Bitcoin Adoption Metrics 8State of Bitcoin Q1 2015 Data sources and notes: CoinDesk, Blockchain.info, BitcoinPulse, Github, Coin ATM Radar. Figures are cumulative from start of records, except unique bitcoin addresses and media mentions, which are figures for the quarter ending that month. Quarterly Last 12 Months Mar-15 Dec-14 Q/Q Δ Mar-14 Δ Commerce Wallets 8,457,207 7,396,772 14% 4,448,142 2x Merchants 88,000 82,000 7% 52,704 2x Merchants’ annual revenue ($bn) 180 180 0% 2 78x ATMs 374 342 9% 47 8x Unique bitcoin addresses 203,189 157,377 29% 137,342 1x Industry All-time VC investment ($m) $676 $447 51% $164 4x Number of VC-backed startups 103 89 16% 47 2x Media Mainstream media mentions 458 580 -10% 2,594 -82% Technology Network hash rate (billion/second) 346,028,956 313,142,289 11% 41,813,922 8x Github no. of updated repositories 27,857 23,249 20% 9,915 3x Valuation Bitcoin market capitalization ($bn) $3.4 $4.3 -21% $5.3 -36%

Sponsored by Gem 9State of Bitcoin Q1 2015 Price and Valuation

Sponsored by Gem CoinDesk Bitcoin Price Index – Q1 & YTD by the Numbers 10State of Bitcoin Q1 2015 Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC 31st Dec Close $319.70 31st Mar Close $243.39 ΔQ1/Q4 Close -23.9% 31st Mar Market Cap $3.4bn High (2nd Jan) $314.59 Low (14th Jan) $177.28 YTD High-Low Δ -43.6% Average $250.68 Median $246.85 Q1 Price Summary YTD Price Summary

Sponsored by Gem $150 $170 $190 $210 $230 $250 $270 $290 $310 $330 1-Jan 8-Jan 15-Jan 22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 5-Mar 12-Mar 19-Mar 26-Mar Bitcoin’s Price in Q1 Remained Volatile Amid a Mix of Positive and Negative News 11State of Bitcoin Q1 2015 14th Jan Bitcoin’s price plunges, breaks $200 mark 18th Mar UK Chancellor Osborne announces favorable regulatory environment and research investment Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC 5th Jan Bitstamp suffers $5m hot wallet hack Hong Kong's MyCoin disappears with up to $387m, reports claim 9th Feb 25th Jan Coinbase launches US bitcoin exchange 10th Mar Bitcoin startup 21 Inc announces $116m raised, all-star investor roster 20th Jan Mainstream financial institutions join Coinbase's record $75m funding round 4th Feb Ross Ulbricht found guilty in NY court of operating Silk Road; Ben Lawsky releases revised NY BitLicense

Sponsored by Gem Bitcoin’s Price Decline Has Not Stopped Exchange Trading Volume From Trending Up 12State of Bitcoin Q1 2015 Data sources: Blockchain, CoinDesk, Bitcoinity Monthly Bitcoin Trading Volume 0 5 10 15 20 25 0 1 2 3 4 5 6 7 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 BTCMillions $Billions Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)

Sponsored by Gem Industry Rationalization: Bitcoin’s Price Plunge, Other Issues are Thinning the Ranks of Exchanges and Mining 13State of Bitcoin Q1 2015 Source: CoinDesk Mining Aquifer LLC Exchanges • A number of well-known exchanges and mining operators have recently gone bankrupt or shuttered operations for various reasons

Sponsored by Gem • While mining is the only bitcoin sector to date to generate significant revenues, at current (or lower) price levels, further sector consolidation is anticipated Diminishing Incentives to Mine Bitcoins Will Result in Further Mining Sector Consolidation 14State of Bitcoin Q1 2015 Data source: Blockchain. Note: Miners revenue = (number of bitcoins mined per day + transaction fees) * market price. 0 5 10 15 20 25 30 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 01/01/2014 01/04/2014 30/06/2014 28/09/2014 27/12/2014 $Thousands $Millions Miners Revenue and Transaction Fee (USD) Miners Revenue Transaction Fee

Sponsored by Gem Bitcoin Primarily Functions as a Store of Value, Less Frequently Used as a Medium of Exchange 15State of Bitcoin Q1 2015 Data sources: Bitcoinity, Blockchain 0 1 2 3 4 5 6 7 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Total Trading Volume vs Transaction Ratio

Sponsored by Gem Peak Altcoin? For the First Time, Quarter-over- Quarter Altcoin Growth Was Flat 16State of Bitcoin Q1 2015 Data source: CoinMarketCap 64 216 347 483 590 594 9% 23% 7% 8% 9% 7% 0% 5% 10% 15% 20% 25% 0 100 200 300 400 500 600 700 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Total Number of Altcoins Altcoin Market Cap Share (%) *Note: Altcoin market cap share is calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by all cryptocurrency market caps (including bitcoin). For example, a market value share of 7% for altcoins indicates that bitcoin by itself represents 93% of the market cap of all cryptocurrencies combined.

Sponsored by Gem Bitcoin’s Market Cap is 14x Larger Than the Next Altcoin, up 6x from End of 2014 17State of Bitcoin Q1 2015 Data source: CoinMarketCap data as of 1st Apr 2015 Rank Name Market Cap 1 Bitcoin $ 3,428,547,561 2 Ripple $ 245,984,620 3 Litecoin $ 62,695,671 4 Dash $ 20,785,772 5 BitShares $ 16,084,946 6 Dogecoin $ 12,518,429 7 Stellar $ 12,222,510 8 Nxt $ 9,887,171 9 MaidSafeCoin $ 8,090,823 10 Paycoin $ 7,683,946

Sponsored by Gem 18State of Bitcoin Q1 2015 Media

Sponsored by Gem Q1 Negative News 19State of Bitcoin Q1 2015 Bitstamp claims at least $5m lost in hot wallet hack Bitcoin mining firm CoinTerra heads for Chapter 7 bankruptcy battle amid acrimonious claims on both legal sides Hong Kong's MyCoin disappears with an initially reported $387m Steady stories of bitcoin-related crime undermine mainstream user trust in bitcoin Source: CoinDesk

Sponsored by Gem Q1 Positive News 20State of Bitcoin Q1 2015 Coinbase's record $75m funding round, opening of US-based exchange Bitcoin Core 0.10 gives developers simplified tools and sophisticated fee suggestions Blockchain reports its total number of wallets passes three million Bitcoin startup 21 Inc announces $116m raised, with all-star VC backing Source: CoinDesk

Sponsored by Gem Q1 Most-Viewed CoinDesk Articles: Relative Interest in Bitcoin’s Price Articles Continues to Decline 21State of Bitcoin Q1 2015 Rank Title Date 1 Roger Ver Denied US Visa to Attend Miami Bitcoin Conference 7th Jan 2 IBM Reveals Proof of Concept for Blockchain-Powered Internet of Things 17th Jan 3 Bitstamp Claims $5 Million Lost in Hot Wallet Hack 5th Jan 4 Bitcoin Price Continues to Fall, Breaks $200 Mark 14th Jan 5 State of Bitcoin 2015: Ecosystem Grows Despite Price Decline 7th Jan 6 Research: Hackers Could Install Backdoor in Bitcoin Cold Storage 16th Jan 7 Hong Kong's MyCoin Disappears with up to $387 Million, Reports Claim 9th Feb 8 Bitcoin Price Crashes Through $250 Mark 13th Jan 9 Apple Approves iOS Game That Tips Players in Bitcoin 8th Jan 10 Goldman Sachs Report Says Bitcoin Could Shape ‘Future of Finance' 11th Mar Source: CoinDesk top 10 Q1 stories based on pageviews CoinDesk’s Top 10 Most Viewed Stories in Q1

Sponsored by Gem Mainstream Bitcoin Media Coverage Dropped Quarter-Over-Quarter 22State of Bitcoin Q1 2015 News Published Mentioning Bitcoin Note: Numbers of stories obtained by searching ‘bitcoin’ on respective publishers’ websites Sources: Financial Times, New York Times, Wall Street Journal and Sina websites 235 156 76 41 180 127 73 78 0 50 100 150 200 250 Sina WSJ NYT FT Q1 2015 Q4 2014

Sponsored by Gem ‘Bitcoin Price’ Continues to be the Top Search Term; Utorrent Mining Malware Scare Rising 23State of Bitcoin Q1 2015 Past 90 Days Related Searches: Top Related Searches: Rising Past 12 Months Source: Google Trends data as of 1st Jan 2015

Sponsored by Gem 24State of Bitcoin Q1 2015 VC Investment

Sponsored by Gem Two Biggest Bitcoin VC Deals in Q1… 25State of Bitcoin Q1 2015 $116m $75m (Series C) January 2015(Series A) March 2015* Source: CoinDesk *Note: The precise timing of when the $116m was raised, or whether it was raised in various individual stages, has not been revealed.

Sponsored by Gem …Both Deals Broke the Previous Record for Largest Single VC Investment Round 26State of Bitcoin Q1 2015 Sources: CoinDesk, Crunchbase, Bank Innovation “The Coinbase $75m raise does sound like a Pre-IPO round. A Bitcoin IPO such as Coinbase could trigger mainstream merchant adoption” - Bernard Lunn, Bank Innovation $116 $75 $31 $30 $25 $0 $20 $40 $60 $80 $100 $120 Millions Top Five All-Time VC Investment Deals

Sponsored by Gem Bitcoin’s $121 Million Question 27State of Bitcoin Q1 2015 *No announcement has been made on 21 Inc’s exact business strategy beyond confirmation that it meets CoinDesk’s definition of a universal bitcoin company. Sources: CoinDesk, Crunchbase. Superman artwork courtesy of Tattoosales.com, trademark owned by DC Comics Is it a supercharged mining operation? Is it a hardware wallet? No, it’s bitcoin’s newest universal, 21 Inc!* Matthew Pauker CEO, 21 Inc

Sponsored by Gem Q1 Set a Record for Bitcoin Venture Capital Investment, Nearly Doubling Q4 2014 28State of Bitcoin Q1 2015 Data sources: CoinDesk, CrunchBase $66 $84 $66 $133 $229 $0 $50 $100 $150 $200 $250 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Millions Quarterly Total VC Investment (USD Millions) Note: The precise timing of when 21 Inc raised the $116m it announced in Q1 is unclear; 21 Inc’s full $116m is included in the Q1 2015 total.

Sponsored by Gem All-Time Bitcoin Venture Capital Investment Increased 51% from End of 2014 to $676m 29State of Bitcoin Q1 2015 $676m$229m Total VC investment in cryptocurrency startups to date: Q1 2015 bitcoin VC investment: $133m Q4 2014 bitcoin VC investment: Data sources: CoinDesk, CrunchBase +51% Increase in total to-date VC investment from end of Q4:

Sponsored by Gem Bitcoin VC Investment Projected to Continue Outpacing Early-Stage Internet Investment 30State of Bitcoin Q1 2015 Note: Internet figures include only first sequence venture deals. All figures unadjusted for inflation, changes in the cost of launching a startup over last two decades, etc. Further methodology discussion. Data sources: CoinDesk, PricewaterhouseCoopers $349 $916 $250 $638 0 100 200 300 400 500 600 700 800 900 1000 Bitcoin vs early Internet VC investment ($ millions) $Millions 2014 Bitcoin 2015 Bitcoin - projected1995 Internet 1996 Internet

Sponsored by Gem US Continues to Dominate Bitcoin VC Investment; First VC Funded Africa-Based Startup in Q1 31State of Bitcoin Q1 2015 Regions Q1 ($m) Q4 ($m) Q/Q Δ ($m) Q/Q Δ US & Canada 492.3 289.7 202.6 70% Europe 119.1 99.2 19.9 20% Asia 42.1 41.0 1.1 3% Middle East 14.0 11.1 2.9 26% Latin America 7.5 6.0 1.5 25% Africa 1.1 0.0 1.1 N.A. Total 676.1 447.0 229.1 51% $ Invested as of Q4 2014 • US & Canada had the largest Q/Q% increase in investment • Asia saw almost no investment in Q1 Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase $ Invested as of Q1 Europe 18% Africa 0% Asia 6% Middle East 2% Latin America 1% US & Canada 73% Europe 22% Africa 0% Asia 9% Middle East 3% Latin America 1% US & Canada 65%

Sponsored by Gem Startups in 4 New Countries Received VC Investments; 22 Countries in Total Have a VC-Backed Bitcoin Startup 32State of Bitcoin Q1 2015 Data source: CoinDesk (www.coindesk.com/bitcoin-venture-capital/) Barbados Switzerland France Kenya

Sponsored by Gem US-Based Bitcoin Venture Capital Investment Nearly 2x Greater Than Rest of the World Combined 33State of Bitcoin Q1 2015 Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase $0 $100 $200 $300 $400 $500 Luxembourg India Germany Denmark Australia Switzerland Panama Kenya Mexico Barbados Japan Singapore France Argentina Canada SouthKorea Israel China Sweden TheNetherlands UnitedKingdom UnitedStates Millions Total Funding by Country (USD Millions)

Sponsored by Gem Silicon Valley Pulling Away: Share of All-Time Bitcoin VC Investment Jumped from 45% in Q4 to 59% in Q1 34State of Bitcoin Q1 2015 Location Value ($m) No. of companies Silicon Valley $400.0 30 Rest of World $276.1 73 Total $676.1 103 • 87% of the total Q1 bitcoin VC funding went to Silicon Valley-based startups • Total number of VC-backed bitcoin companies increased from 89 in Q4 2014 to 103 in Q1, a 16% increase $ Invested No. of Companies Note: Prior State of Bitcoin data may differ due to new funding information obtained. Date sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase Silicon Valley 59% Rest of World 41% Silicon Valley 29% Rest of World 71%

Sponsored by Gem Q1 Deal Summary: Acquisitions and Reverse Merger Activity Accelerates 35State of Bitcoin Q1 2015 Source: CoinDesk Jan 2015 Jan 2015 Acquisitions Reverse Mergers Jan 2015 Feb 2015 Loma Vista Capital MGT Capital Investment Apr 2015

Sponsored by Gem Keeping Bitcoin’s Size in Perspective - FinTech Investments Dwarfed Bitcoin in 2014 36State of Bitcoin Q1 2015 BitcoinFinTech Data sources: CoinDesk, Medium (https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677) *Note: All data are 2014 only. FinTech $3bn invested in 2014 $0.3bn invested in 2014 100 Deals Biggest Deal $31m* 216 Deals Biggest Deal $150m

Sponsored by Gem The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company Categories 37State of Bitcoin Q1 2015 Payment Processing Wallets Mining Financial Services Exchanges Infrastructure Universal Source: CoinDesk

Sponsored by Gem A New Ecosystem Category Takes Shape: Infrastructure 38State of Bitcoin Q1 2015 Sources: CoinDesk • Bitcoin infrastructure companies build security tools, develop protocol enhancements and provide APIs for other bitcoin businesses to build on • The eight companies in the infrastructure category have raised a combined $56m to date

Sponsored by Gem Ecosystem Sector Trends: Universals Raised Most Funding in Q1, Followed by Mining and Infrastructure 39State of Bitcoin Q1 2015 Q1 VC Investment by Ecosystem Category (USD Millions) Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase $1.1 $2.0 $3.8 $5.0 $6.1 $20.0 $191.0 $0 $40 $80 $120 $160 $200 Millions Payment Processor Wallet Exchange Financial Services Infrastructure Mining Universal

Sponsored by Gem Universals Are Pulling Away From Other Sectors in Total VC Investment 40State of Bitcoin Q1 2015 2013 to 2015 VC Investment by Ecosystem Category (USD Millions) Data source: CoinDesk $0 $50 $100 $150 $200 $250 $300 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Millions Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure

Sponsored by Gem Universals Now Command Nearly 40% of VC Investment; Mining and Wallets at 14% Each 41State of Bitcoin Q1 2015 • 83% of Q1 investment was made in Universals • The number of Universals also continues to climb, now up to 10 $ Invested as of Q4 2014$ Invested as of Q1 Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter. Data Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase Payment Processor 12% Infrastructure 11% Exchange 14% Financial Services 10% Mining 17% Universal 16% Wallet 20% Sector Q1 Q4 Q/Q Δ ($m) Q/Q Δ ($m) ($m) Payment Processor 55.4 54.3 1.1 2% Infrastructure 55.7 49.6 6.1 12% Exchange 65.8 62.0 3.8 6% Financial Services 48.5 43.5 5.0 12% Mining 96.5 76.5 20.0 26% Universal 262.6 71.6 191.0 267% Wallet 91.6 89.6 2.0 2% Total 676.1 447.3 229.0 51%

Sponsored by Gem Q1 2015 Investment Rounds in Bitcoin Startups 42State of Bitcoin Q1 2015 Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/) Close Date Company Size ($m) Round Select Investors Headquartered Mar-15 PeerNova 5.00 First OverStock San Jose Mar-15 Bitt 1.50 Seed Avatar Capital Christ Church Mar-15 TabTrader 0.07 Seed Rockstart Amsterdam Mar-15 Coinigy 0.10 Seed Undisclosed Milwaukee Mar-15 21 Inc 116.00 First Andreessen Horowitz, Data Collective, Khosla Ventures San Francisco Mar-15 ShapeShift 0.53 Seed Barry Silbert and Roger Ver Zug Feb-15 Ledger 1.50 Seed XAnge Private Equity, Hi-Pay (Hi- Media group), Fred Potter Paris Feb-15 BitPesa 1.10 Second Pantera Capital, Bitcoin Opportunity Corp, Crypto Currency Partners Nairobi

Sponsored by Gem Q1 2015 Investment Rounds in Bitcoin Startups (contd.) 43State of Bitcoin Q1 2015 Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/) Close Date Company Size ($m) Round Select Investors Headquartered Feb-15 HashRabbit 0.50 Seed Draper Associates, VegasTechFund San Francisco Feb-15 KnCMiner 15.00 Second Accel Partners, GP Bullhound, Creandum, Martin Wattin Stockholm Feb-15 NeuCoin 1.25 Seed Patrik Stymne, Emil Michael, Henrik Kjellberg Paris Feb-15 Ziftr 0.85 Seed 10x Venture Partners Milford Feb-15 Bonafide (Bonifide.io) 0.85 Seed Quest Venture Partners, Crypto Currency Partners New York Jan-15 BitFlyer 1.10 Seed Bitcoin Opportunity Corp, RSP Fund No. 5, GMO Venture Partners Tokyo Jan-15 Colu 2.50 Seed Aleph, Spark Capital, Bitcoin Opportunity Corp, Box Group Tel Aviv Jan-15 Anycoin Direct 0.56 Seed Undisclosed Veghel

Sponsored by Gem Q1 2015 Investment Rounds in Bitcoin Startups (contd.) 44State of Bitcoin Q1 2015 Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/) Close Date Company Size ($m) Round Select Investors Headquartered Jan-15 Coinbase 75.00 Third New York Stock Exchange (NYSE), USAA, BBVA, DoCoMo San Francisco Jan-15 TrustAtom 0.10 Seed Brian Cartmell, Vinny Lingham Vancouver Jan-15 Ciphrex 0.50 First Undisclosed San Diego Jan-15 BlockCypher 3.10 Seed Tim Draper, AME Cloud Ventures, Boost VC, 500 Startups San Mateo Jan-15 Airbitz 0.03 Seed Plug and Play Tech Center San Diego Jan-15 LibertyX 0.40 Seed Project 11 Boston Jan-15 GetGems 0.40 Seed Magma VC Unknown Jan-15 CoinOutlet 0.10 Seed BitcoinShop New York

Sponsored by Gem 45State of Bitcoin Q1 2015 Commerce

Sponsored by Gem Everyday Items Rank Above Consumer Tech on Overstock’s List of ‘Most Often Bought with Bitcoin’ 46State of Bitcoin Q1 2015 Sources: CoinDesk, Overstock 1. Sheets 2. Donations to non-profits 3. Headphones 6. Cables and tools 5. Area rugs4. Cases and holders 7. Mattresses 8. Coffee tables 10. Fashion sunglasses 9. A/V cables

Sponsored by Gem Growth of New Bitcoin-Accepting Merchants Remained Slow in Q1 47State of Bitcoin Q1 2015 Sources: CoinDesk, CoinBase, BitPay, International Business Times Number of New Bitcoin-Accepting Businesses Added Each Quarter 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Sponsored by Gem More than 88,000 Merchants Now Accept Bitcoin, up from 82,000 in Q4 (+7%) 48State of Bitcoin Q1 2015 50K 38K Data sources: Coinbase, BitPay

Sponsored by Gem Total merchants Forecasted merchants Bitcoin-Accepting Merchant Forecast Slashed to Approximately 120,000 by End of 2015 49State of Bitcoin Q1 2015 Data 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. R² = 0.9586 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15

Sponsored by Gem Bitcoin’s Lack of Use in Commerce is Not Just a ‘Chicken and Egg’ Problem 50State of Bitcoin Q1 2015 Sources: Pantera Capital, ZepChain, CoinDesk (http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/) "I believe merchants have been widely disappointed by the number of transactions they see in bitcoin. Most merchants have taken a passive approach to integrating bitcoin as a payment method, instead of strategically testing and optimizing checkout flows to encourage consumer adoption."Steve Beauregard, CEO of GoCoin • Merchants generally welcome bitcoin adoption • Lack of consumer adoption is the fundamental problem • Consumers need compelling reasons to use the volatile and still relatively hard to acquire bitcoin over alternatives

Sponsored by Gem CoinCenter’s Public Sentiment Survey Indicates Low Bitcoin Awareness in US 51State of Bitcoin Q1 2015 Source: CoinCenter 64.3% of the general American population are not familiar at all with bitcoin 6.2% of the general American population say they have used bitcoin Distrust in bitcoin decreases from 50% to 37% as familiarity with bitcoin increases People who are familiar with bitcoin are more likely to think it is useful But the distrust in bitcoin is similar (47%) among those who frequently use bitcoin and those who never use 53.1% of those who are very familiar with bitcoin have never used it

Sponsored by Gem Blockchain’s Quarterly New Wallet Growth Rate Has Been Remarkably Consistent 52State of Bitcoin Q1 2015 Data Source: Blockchain.info 120 515 481 343 481 451 454 0 100 200 300 400 500 600 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Thousands No. of New Wallets Added Each Quarter

Sponsored by Gem Total Wallets Forecasted Wallets Forecast for Total Bitcoin Wallets by End of 2015 Maintained at 12 million 53State of Bitcoin Q1 2015 Data 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. R² = 0.9807 0 2 4 6 8 10 12 14 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Millions

Sponsored by Gem The Five Types of Bitcoin User 54State of Bitcoin Q1 2015 1. People who want a cheap, fast, global online payment experience 2. People who want access to a new suite of consumer payment applications 3. People who want to connect to the global economy for the first time 4. People who believe bitcoin is an attractive investment 5. People who value financial privacy Sources: CoinDesk, Coinbase Blog

Sponsored by Gem Bitcoin Transactions Have Been Rising; Average of 10,000 Daily Transactions by Popular Addresses* 55State of Bitcoin Q1 2015 40,000 60,000 80,000 100,000 120,000 Apr-14 Jul-14 Oct-14 Jan-15 Total no. of daily transactions No. of daily transactions excluding popular addresses Source and note: Blockchain.info, *100 most popular addresses. • The milestone of 100,000 daily transactions by ‘addresses excluding popular ones’ was reached in February, which is two months later than total transactions Number of Transactions per Day

Sponsored by Gem Now Over 374 Bitcoin ATMs Around the World, but Growth in New ATMs is Slowing 56State of Bitcoin Q1 2015 Data source: CoinATMRadar 43 79 112 104 32 0 20 40 60 80 100 120 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Increase in Number of Bitcoin ATMs

Sponsored by Gem Break Even for Bitcoin ATM Owners is 11 Months; Average ATM Generates $5,520 profit per year 57State of Bitcoin Q1 2015 Sources: CoinDesk, BitAccess, Reddit, CoinATMRadar Notes: Annual profits vary significantly depending on transaction volume. BitAccess machines are doing about $30,000 in transactions per month (Montreal installed machine). Skyhook Bitcoin ATM in Philippines has on average 40-50 transactions per month. However, the average bitcoin purchase size is not revealed. Operation Metrics Number of transactions/month 100 Average transaction size ($) 200 Transaction fee revenue (%) 5 Revenue per year ($) 12,000 Cost Metrics Bitcoin ATM acquisition cost ($) 5,000 Place rent/month ($) 200 Exchange fee (%) 0.2 Cash logistics/month ($) 300 Costs per year ($) 6,480 Profits per Year ($) 5,520

Sponsored by Gem High Transaction Fees May be Discouraging People from Using Bitcoin ATMs 58State of Bitcoin Q1 2015 Sources: CoinDesk, Reddit, CoinATMRadar Social media comments on bitcoin ATM fees

Sponsored by Gem North America 50% Europe 32% Asia 11% Oceania 6% Latin America 1% Africa 0% Bitcoin ATMs by Continent Half of Bitcoin ATMs are Located in North America, Nearly One-Third are in Europe 59State of Bitcoin Q1 2015 Data source: CoinATMRadar

Sponsored by Gem 60State of Bitcoin Q1 2015 Technology

Sponsored by Gem Profiles of Four Alternative Uses of Blockchain Technology 61State of Bitcoin Q1 2015 1. Property title 2. Smart contracts 3. Voting 4. Notary services Sources: CoinDesk, Coinbase Blog

Sponsored by Gem Property Title: Blockchain Technology Could Empower the Poor, Reduce Global Inequality 62State of Bitcoin Q1 2015 • With protected property title, people could better engage in economic activities such as investment and infrastructure construction. Sources: Hernando de Soto (2002) Law and Property Outside the West, Housing Finance International June 1994, de Soto, Hernando. 2000. The Mystery of Capital. UK: Black Swan. “An elite minority enjoys the economic benefits of the law and globalization, while the majority of entrepreneurs are stuck in poverty, where their assets – adding up to more than $10tn worldwide – languish as dead capital in the shadows of the law.” - Hernando de Soto, economist Lima, Peru “Blockchain technology could 'parachute' property title services into many poverty stricken countries.” - Balaji S. Srinivasan, 21 Inc

Sponsored by Gem Financial Automation: Smart Contracts are Being Deployed by a Number of Companies 63State of Bitcoin Q1 2015 Sample smart contract: A dog with a GPS chip in his collar is walked by a dog walker. On completing the walk the collar sends a network signal, and the contract automatically executes a cryptocurrency payment to the walker. Sources: CoinDesk, Ripple Labs, BitHalo, Reality Keys, Fast Co.labs, Morton Fraser

Sponsored by Gem Voting: Blockchain-Based Tech is Already Being Used in Elections 64State of Bitcoin Q1 2015 • In a traditional voting system, you have no idea about whether your vote is counted. However, blockchain voting allows you to have the ability to audit whether your vote is counted by viewing your vote using a public ledger. • At the same time, anonymity is also protected. Source: CoinDesk

Sponsored by Gem Notary: Blockchain Technology Could Reshape Notarization Services and Reduce Inefficiency 65State of Bitcoin Q1 2015 Sources: The Economist, Proof of Existence, CoinDesk • A study carried out for the European Commission in 2007 found that house buyers in countries with highly regulated notarial systems paid much higher legal fees than house buyers elsewhere (see chart). • Blockchains can store and certify the existence of documents without relying on a central authority. Companies like CoinSpark and Proof of Existence are providing the service.

Sponsored by Gem Views on the Application of Bitcoin Technology to the Internet of Things 66State of Bitcoin Q1 2015 Sources: CoinDesk, LinkedIn “Applying the blockchain concept to the world of the Internet of Things offers fascinating possibilities. Right from the time a product completes final assembly, it can be registered by the manufacturer into a universal blockchain representing its beginning of life. Once sold, a dealer or end customer can register it to a regional blockchain (a community, city or state).” “We demonstrate how a humble washer can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.” Paul Brody, Technology Strategy Consulting, IBM

Sponsored by Gem Functional Bitcoin Applications Can Be Grouped into 10 Categories 67State of Bitcoin Q1 2015 Source: CoinBase Blog Email – Email applications that eliminate spam by requiring BTC for email delivery Video – Video applications that require one-click micropayments to view video content News – News sites that eliminate advertising for users by requiring BTC for time spent viewing content Crowdfunding – Global crowdfunding applications that allow project creators to raise funds from around the world Payouts – Applications that allow creators or service providers anywhere in the world to get paid by a global audience

Sponsored by Gem Bitcoin Functional Applications (contd.) 68State of Bitcoin Q1 2015 Source: CoinBase Blog Remittances – Global remittance applications that enable worldwide cross-border payments Ecommerce – Bitcoin-focused merchant directories that offer a beautiful UI for consumers Communication Networks – Applications that incentivize nodes to provide resources to communications networks by rewarding BTC for participation Identity – Distributed identity applications that give people control of their own identity, built on top of a distributed identity protocol Attribution – Attribution applications that allow users to prove ownership of data, built on top of an attribution protocol

Sponsored by Gem Bitcoin Mining Arms Race Slows: Bitcoin’s Network Difficulty QoQ Growth Rate Flattens 69State of Bitcoin Q1 2015 Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk Quarterly Increase in Bitcoin Mining Difficulty 11.8 17.8 6.0 6.1 236% 106% 17% 15% 0% 50% 100% 150% 200% 250% 0 2 4 6 8 10 12 14 16 18 20 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Hashes Billions Quarterly Increase in Mining Difficulty Qtr.-over-Qtr. Percentage Increase in Mining Difficulty

Sponsored by Gem AntPool F2Pool BW.com BTCChina Pool KnCMiner Slush Ghash.io BTC Guild Eligius EclipseMC Bitcoin Affiliate Network MegaBigPower P2Pool BitMinter Unknown with 1BwZeHJ Address Unknown Mining Pools: No News is Good News; Still No Permanent Fix for 51% Attack Risk 70State of Bitcoin Q1 2015 Data source: Four-day average as of 1st Apr 2015 blockchain.info/pools Ghash.io continues to shrink, down to less than 10% share from 50% in July 2014

Sponsored by Gem Software Developer Interest in Bitcoin Continues Steady Growth 71State of Bitcoin Q1 2015 Number of Created Repositories in Github with Bitcoin in the Name or Description Data source: BitcoinPulse

Sponsored by Gem Nodes: Levelling Off in Node Numbers Eases Bitcoin Network Centralization Concerns 72State of Bitcoin Q1 2015 Data sources: Bitnodes

Sponsored by Gem Quiet, Successful Update to the Bitcoin Core Protocol in Q1 73State of Bitcoin Q1 2015 Consensus library: • The consensus library makes it easier to build competing full node implementations by reusing the most sensitive and difficult part of the Core source code Transaction fees: • Core wallet users are provided with an estimate of the fees to pay in order to get quicker confirmations Headers-first syncing: • A node first downloads parts of a block before proceeding to download the entire blockchain, which speeds up communications between nodes. This makes running a full node a more attractive prospect even as there are fears over a declining number of nodes in operation Source: CoinDesk New features added to Bitcoin Core software version 0.10 include:

Sponsored by Gem 74State of Bitcoin Q1 2015 Regulation and Macro

Sponsored by Gem Bitcoin Startups Targeting the World’s 2.5 Billion ‘Unbanked’ 75State of Bitcoin Q1 2015 Sources: CoinDesk, Mckinsey, Bitcoin for the Unbanked Percentage of total adult population that does not use formal or semiformal financial services 0-25% 26-50% 51-75% 76-100% Estimates used to calculate regional averages

Sponsored by Gem Wall Street Interest in Bitcoin is Growing 76State of Bitcoin Q1 2015 Three blockchain startups selected for Barclays Accelerator, with one aiming to provide blockchain solutions for the insurance industry Sources: CoinDesk, Bank Innovation Citi wants “to [accelerate] emerging technologies that have the potential to transform financial services experiences for Citi’s customers” UBS is set to open a London-based research lab to explore the application of blockchain technology in the financial services industry

Sponsored by Gem Migration of Wall Street Executives to Bitcoin Companies Continues 77State of Bitcoin Q1 2015 Sources: WSJ, CoinDesk, LinkedIn Blythe Masters, JP Morgan Chase. Now at Digital Assets Holdings LLC Gene Sperling, National Economic Council. Now advisor at Ripple Labs Duncan Niederauer, NYSE. Now advisor at TeraExchange Paul Camp, JP Morgan Chase. Now at Circle Arthur Levitt, SEC. Now advisor at BitPay and Vaurum Arthur Hayes, Citi. Now at BitMEX Jason Weinstein, US Department of Justice. Now advisor at BitFury Timo Schlaefer, Goldman Sachs. Now at Crypto Facilities

Sponsored by Gem Nine Banks in Total Have Established Banking Relationships with Bitcoin Startups to Date 78State of Bitcoin Q1 2015 Source: CoinDesk • Securing banking partnerships has hindered the operations of bitcoin companies, often forcing them to halt part of their offerings • However, partnership between banks and bitcoin companies could improve security and efficiency 24th Mar 2015 27th Mar 2015 Newly Announced Banking Relationships

Sponsored by Gem Views on How Bitcoin Technology Can Transform Financial Services 79State of Bitcoin Q1 2015 Sources: CoinDesk, LinkedIn “Digital Assets has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology.” “The possibilities for reducing cost and risk in settlement are enormous.” Blythe Masters, CEO of Digital Assets Holdings LLC

Sponsored by Gem Select Country Regulatory Updates 80State of Bitcoin Q1 2015 Source: CoinDesk The government does not see a need to regulate or ban bitcoin activities. Bitcoin does not pose a substantial threat to Hong Kong's financial system. Spanish political party, Unión Progreso y Democracia (UPyD), has submitted a proposal to the country's Congress outlining why bitcoin regulation is needed. Digital currency businesses will have to comply with the Isle of Man's anti-money laundering (AML) laws from 1st April. Hong Kong Isle of Man Spain

Sponsored by Gem In Q1 There Were Positive Developments With the NY BitLicense Proposal, but … 81State of Bitcoin Q1 2015 • Businesses that “store”, “hold”, “issue”, “administer”, “exchange” or “control” digital currency on behalf of their customers require a license to operate • An exemption added for companies engaging in mere software “development and dissemination” • Eliminates the prohibition on digital currency investments, so long as they are held in an acceptable ratio • Demands that the licensee must submit non- customer identities “to the extent practicable” • NY regulators accepted new comments, further revisions are a possibility Sources: CoinDesk. Manhattan photo courtesy of Symmetry50

Sponsored by Gem … Problems Remain with BitLicense’s ‘Duplicative and Redundant’ Requirements 82State of Bitcoin Q1 2015 1. Anti-money laundering (AML) requirements: Virtual currency exchangers and administrators are already required to comply with federal AML regulations 2. State money transmission regulations are already in place and are applicable to all virtual currency businesses “We should be mindful of this 'tax on innovation' that regulations place on the startup sector and high growth companies in general.” Fred Wilson, Union Square Ventures Source: CoinDesk (http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/)

Sponsored by Gem Generally Favorable Response to UK’s Initial Cryptocurrency Regulatory Framework 83State of Bitcoin Q1 2015 Sources: HM Treasury, CoinDesk Core elements of the HM Treasury proposal: • Curb criminal activity via AML regulation • Allow cryptocurrency companies to opt-in to standardized consumer protections • Proposed injecting £10m into digital currencies research • “A light touch approach” (Marc Warne, Bittylicious) • “Help score banking relationships” (Hugh Halford- Thompson, QuickBitcoin) • “[Should] limit this to fiat-to- crypto exchanges” (Marc Warne, Bittylicious) • “Will force the UK's bitcoin companies to move abroad” (Akin Fernandez, Azteco) Positive Reactions Negative Reactions

Sponsored by Gem Views on Bitcoin Regulation and its Potential Positive Impact on Economic Growth 84State of Bitcoin Q1 2015 George Osborne Chancellor of the Exchequer, Second Lord of the Treasury Source: CoinDesk “Among other things, [the programme] will look at whether regulation of the sector is required, so that virtual currency businesses can continue to be set up in the UK, and people and businesses can use [cryptocurrencies] safely.” “It's only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we'll ensure Britain's financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future.”

Sponsored by Gem Sponsored by 85State of Bitcoin Q1 2015

Sponsored by Gem About CoinDesk • Find out more at www.coindesk.com • Follow us on Twitter: @CoinDesk • Subscribe to our email newsletters for the latest daily cryptocurrency news, or updates on our research • If you have data you think should be included in future State of Bitcoin reports, email stateofbitcoin@coindesk.com • We also welcome any feedback you have on the report • The State of Bitcoin reports and CoinDesk’s in-depth research reports are available here 86State of Bitcoin Q1 2015

Sponsored by Gem 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. 87State of Bitcoin Q1 2015