State of Bitcoin and Blockchain Q3 2015

1. Sponsored by 1State of Bitcoin Q3 2015 State of Bitcoin and Blockchain Q3 2015 15th October 2015

2. Sponsored by 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 the UK and US 2State of Bitcoin Q3 2015

3. Sponsored by State of Bitcoin Credits Creator and producer: Dr Garrick Hileman London School of Economics Statistical assistance: Danqing Ying London School of Economics 3State of Bitcoin Q3 2015 @GarrickHileman @DanqingYing

4. Sponsored by Sponsored by 4State of Bitcoin Q3 2015

5. Sponsored by Contents 1. Summary and Adoption Dashboard 2. Price and Valuation 3. Media and Sentiment 4. Investment and M&A 5. Use Cases and Commerce 6. State of Blockchain 7. Technology 8. Regulation and Macro 5State of Bitcoin Q3 2015

6. Sponsored by 6State of Bitcoin Q3 2015 1. Summary and Adoption Dashboard

7. Sponsored by Q3 2015 Summary 7State of Bitcoin Q3 2015 BitLicense regulation splits industry: many companies submit applications, others abandon NY market; Circle first license approved VC investment growth rate dropped from 21% to 11% in Q3; unclear if seasonally driven or early signal of a deteriorating funding environment “It’s all about blockchain”; many major financial services firms exploring distributed ledgers; bitcoin companies begin to pivot (eg itBit’s ‘Bankchain’) Block size debate on-going, concerns over bitcoin protocol governance persist Payment processor and wallet sectors stagnate with little-to-no new VC investment over last several quarters; first major startup cuts staff (BitPay) Bitcoin price volatility returns amid macroeconomic and financial stability concerns; exchange trading volume increases Q/Q

8. Sponsored by Key Bitcoin and Blockchain Adoption Metrics 8State of Bitcoin Q3 2015 Data sources and notes: CoinDesk, Blockchain, 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. Number of VC-backed startups and VC investment unadjusted for closed companies: Melotic, Buttercoin, BitInstant, and TradeHill. Number of merchants is based on the figures from BitPay and Coinbase. Quarterly Year Ago September-15 June-15 Q3/Q2Δ Q2/Q1Δ September-14 Δ Commerce Wallets 11,051,719 9,345,510 18% 11% 6,559,978 2x Merchants 106,000 100,000 6% 14% 76,000 1x Merchants’ annual revenue ($bn) $190 $189 0% 1% $90 2x ATMs 475 426 12% 14% 238 2x Unique bitcoin addresses 272,223 261,770 4% 29% 184,554 1x Industry All-time VC investment ($m) $921 $832 11% 21% $326 3x Number of VC-backed startups 119 113 5% 8% 73 2x Media Mainstream media mentions 411 371 11% -19% 631 -35% Blockchain Companies trial blockchain 41 20 105% 200% 3 14x Technology Network hashrate (billion/second) 457,184,328 351,177,610 30% 1% 261,900,382 2x Valuation Bitcoin market capitalization ($bn) $3.5 $3.8 -8% 11% $5.2 -33%

9. Sponsored by 9State of Bitcoin Q3 2015 2. Price and Valuation

10. Sponsored by CoinDesk Bitcoin Price Index – Q3 & YTD by the Numbers 10State of Bitcoin Q3 2015 Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC. 30th June Close $262.48 30th September Close $236.17 ΔQ3/Q2 Close -10% 30th September Market Cap $3.5bn High (2nd January) $314.59 Low (14th January) $177.28 YTD High-Low Δ -43.6% Average $247.22 Median $239.54 Q3 Price Summary YTD Price Summary

11. Sponsored by $200 $220 $240 $260 $280 $300 $320 1-Jul 8-Jul 15-Jul 22-Jul 29-Jul 5-Aug 12-Aug 19-Aug 26-Aug 2-Sep 9-Sep 16-Sep 23-Sep 30-Sep Bitcoin’s Price Volatility Returned in Q3 21st September 21 Inc announces 'bitcoin computer' for developers Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC. Circle granted first BitLicense by NYDFS 14th July Bitcoin price rallies amid financial uncertainty in China and Greece 22nd September 21st July Bitcoin exchange itBit launches OTC trading desk 30th July Ethereum launches long-awaited decentralized app network 17th August Bitcoin ‘hard fork’ proposed in controversial bid to resolve scalability question State of Bitcoin Q3 2015 11 19th August Bitcoin price falls 14% following Bitfinex 'flash crash' 25th September BitPay reduces staff in cost-cutting effort

12. Sponsored by Bitcoin’s Price Volatility Increased Q/Q, But Still Well Below Prior Quarters 12State of Bitcoin Q3 2015 Source: CoinDesk. Date Quarterly Price High Quarterly Price Low Peak-to-Trough Percentage Δ Q1 2014 $951.39 (6th January) $458.50 (31st March) 52% Q2 2014 $665.73 (3rd June) $360.84 (10th April) 84% Q3 2014 $647.34 (2nd July) $374.73 (29th September) 42% Q4 2014 $427.24 (12th November) $309.87 (30th December) 27% Q1 2015 $314.59 (2nd January) $177.28 (14th January) 44% Q2 2015 $262.48 (30th June) $218.27 (14th April) 20% Q3 2015 $309.98 (12th July) $209.13 (24th August) 33%

13. Sponsored by Increased Q3 Bitcoin Price Volatility = Greater Exchange Trading Volume Q/Q 13State of Bitcoin Q3 2015 Data sources: CoinDesk, Bitcoinity Monthly Bitcoin Trading Volume 0 1 2 3 4 5 6 7 0 5 10 15 20 25 10/1/14 11/1/14 12/1/14 1/1/15 2/1/15 3/1/15 4/1/15 5/1/15 6/1/15 7/1/15 8/1/15 9/1/15 USDBillion BTCMillion Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)

14. Sponsored by In Q3, Total Number of New Altcoins Increased by 7%; Total Altcoin Market Cap Share Remains <10% 14State of Bitcoin Q3 2015 Data source: CoinMarketCap *Note: Altcoin market cap share is calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by the combined market caps of all cryptocurrencies (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. 64 216 347 483 590 594 648 693 9% 23% 7% 8% 9% 7% 9% 9% 0% 5% 10% 15% 20% 25% 0 100 200 300 400 500 600 700 800 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Total Number of Altcoins Altcoin Market Cap Share (%)

15. Sponsored by Dropped from Top 10 Q3 Rank Q2 Rank Nxt 12 -4 Consistency in Valuation Rankings of Top 10 Altcoins; Ethereum Debuts at Number Four Data source: CoinMarketCap data as end of quarter (1st July and 1st October 2015, respectively) Q3 Rank Name Market Cap Q2 Rank Δ 1 Bitcoin $3,462,051,780 Same 2 Ripple $178,602,840 Same 3 Litecoin $126,330,136 Same 4 Ethereum $49,022,999 N.A. 5 Bitshares $15,452,430 Same 6 Dash $13,534,288 +1 7 BanxShares $12,812,440 +3 8 Dogecoin $12,347,890 -4 9 Stellar $9,504,342 -3 10 Peercoin $8,660,024 -1 State of Bitcoin Q3 2015 15

16. Sponsored by 16State of Bitcoin Q3 2015 3. Media and Sentiment

17. Sponsored by Q3 Positive News 17State of Bitcoin Q3 2015 21 Inc announces its first product, the $399.99 Bitcoin Computer, which will include a custom mining chip, datacenter backend, and custom Linux-based OS Leading global credit card processing firm Visa invests in bitcoin and blockchain technology, announces active exploration of technology Bitcoin wallet Circle became the first company to receive a BitLicense from the New York State Department of Financial Services Source: CoinDesk Large venture capital investments continue to be made in bitcoin startups; investment by traditional financial services continues to expand

18. Sponsored by Q3 Negative News 18State of Bitcoin Q3 2015 Source: CoinDesk Banks have sent letters to founders of Australian bitcoin exchanges, including Bit Trade and Buyabitcoin, informing them their accounts will be closed, without further explanation BitPay has reduced the size of its staff in an effort to "reduce costs" and "better align with the pace of growth" in the industry Bitfinex experiences technical issues, causing bitcoin’s price to slump Miscellaneous bitcoin Ponzi schemes, fraud, theft and other crimes continue to make headlines

19. Sponsored by Q3 Most-Viewed CoinDesk Articles: Price Catches Most of the Attention Again 19State of Bitcoin Q3 2015 Source: CoinDesk top 10 Q3 stories based on page views CoinDesk’s Top 10 Most Viewed Stories in Q3 Rank Title Date 1 Bitcoin Price Falls 14% Following Bitfinex ‘Flash Crash' 19th August 2 Wedbush Report Projects $400 Bitcoin Price by 2016 10th July 3 Poll: What Will Bitcoin's Price Be at the End of 2015? 14th July 4 Bitcoin Price Falls Below $200, Hits Six-Month Low 25th August 5 Bitcoin Price Slumps Following Bitfinex Outage 24th August 6 Blackmailers Demand Bitcoin from Ashley Madison Users 21st August 7 8 Banking Giants Embracing Bitcoin and Blockchain Tech 27th July 8 Bitcoin ‘Forked' in Controversial Bid to Resolve Scalability Question 17th August 9 How Can I Buy Bitcoins? 20th March 10 Coin.Mx Execs Arrested for Operating Illegal Bitcoin Exchange 21st July

20. Sponsored by Mainstream Media Coverage of Bitcoin Increased Quarter-Over-Quarter 20State of Bitcoin Q3 2015 News Stories 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 202 87 76 46 144 121 59 47 0 50 100 150 200 250 Sina WSJ NYT FT Q2 2015 Q3 2015

21. Sponsored by Google Searches: ‘Bitcoin Greece’ and ‘Bitcoin XT’ Rising Fast in Past Three Months 21State of Bitcoin Q3 2015 Past 90 Days Related Searches: Top Related Searches: Rising Past 12 Months Source: Google Trends data as of 1st October 2015

22. Sponsored by Bitcoin Academic Research Increased Exponentially in 2014, 33% of Publications Economics Related Note: Run rate calculated for 2015 total research. Sources: Brett Scott , Peer-to-Peer Review: The State of Academic Bitcoin Research 2014 , search ‘Bitcoin’ on JSTOR, Science Direct, Ingenta, Microsoft academic search, SpringerLink, SSRN, Taylor and Francis, Wiley, ArXiv, Oxford Journals and Cambridge Journals. Number of Bitcoin Academic Research Papers in Each Year Distribution of Bitcoin Academic Research State of Bitcoin Q3 2015 22 Economics 33% Finance 8% Accounting 0% Computer Science & Engineering 15% Cryptography and security 13% Environment 1% Law 20% Politics 2% Sociology 8% 0 50 100 150 200 250 2008 2009 2010 2011 2012 2013 2014 2015

23. Sponsored by 23State of Bitcoin Q3 2015 4. Investment and M&A

24. Sponsored by Global Bitcoin Entrepreneurship: 23 Countries Now Have VC-backed Bitcoin Startups Sources: CoinDesk, CrunchBase. Images from Wikipedia Switzerland Sweden Philippines South Korea Kenya Singapore Panama Japan Canada The Netherlands India Barbados Mexico France Australia Luxembourg United States Israel Denmark Argentina Germany United Kingdom China State of Bitcoin Q3 2015 24

25. Sponsored by Bitcoin Investment Outpaces Other Fast-Growing Startup Sectors Source: Tomasz Tunguz State of Bitcoin Q3 2015 25

26. Sponsored by YTD Investment in 2015 More Than Double 2014 $230m $462m 2014 VC investment (1st January – 6th October) 2015 YTD VC investment Data sources: CoinDesk, CrunchBase State of Bitcoin Q3 2015 26

27. Sponsored by All-Time Bitcoin Venture Capital Investment Increased 11% Q/Q to $921m 27State of Bitcoin Q3 2015 $921m$85m Total VC investment in cryptocurrency startups to date: Q3 2015 bitcoin VC investment: $145m Q2 2015 bitcoin VC investment: Data sources: CoinDesk, CrunchBase +11% Increase in total to-date VC investment from end of Q2:

28. Sponsored by Biggest VC Deals in Q3 28State of Bitcoin Q3 2015 Source: CoinDesk $30m $20m (Series C) July 2015(Series A) September 2015

29. Sponsored by 25 20 30 20 30.5 75 50 30 10 20 30 40 50 60 70 80 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 Continuation of Large VC Deals Suggests Healthy Funding Environment, But … *Note: 21 Inc Is excluded because the precise timing of the $116m investment has not been revealed. Source: CoinDesk Millions * State of Bitcoin Q3 2015 29 Largest Quarterly VC Deals

30. Sponsored by … Both Total VC Investment and Average VC Deal Size Dropped Q/Q, Possibly Due to Seasonal Factors Data sources: CoinDesk, CrunchBase Millions Millions State of Bitcoin Q3 2015 30 $74 $133 $228 $145 $85 $3 $4 $10 $10 $6 0 2 4 6 8 10 12 0 50 100 150 200 250 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Quaterly VC Investment ($m) Quarterly Total VC Investment ($m) Quarterly Average VC Investment Deal Size ($m)

31. Sponsored by Bitcoin VC Investment No Longer Outpacing Early- Stage Internet Investment 31State of Bitcoin Q3 2015 Note: Internet figures include only first sequence venture deals. Year end projection extrapolated from YTD run rate. 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 Bitcoin vs Early Internet VC Investment ($m) Millions 2014 Bitcoin 2015 Bitcoin - Projected 1995 Internet 1996 Internet $362 $607 $250 $639 0 100 200 300 400 500 600 700

32. Sponsored by No VC Investment in Middle East, Latin America Or Africa Startups for Two Consecutive Quarters 32State of Bitcoin Q3 2015 $ Invested as of Q2 • Europe and Asia had the largest Q/Q% increase in investment. • Overall, US continues to dominate bitcoin VC investment. Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk, CrunchBase $ Invested as of Q3 Europe 16% Africa 0% Asia 5% Middle East 2% Latin America 1% US & Canada 76% Europe 17% Africa 0% Asia 5%Middle East 2% Latin America 1% US & Canada 75% Regions Q3($m) Q2 ($m) Q/Q Δ ($m) Q/Q Δ US & Canada 687.5 635.7 51.7 8.1% Europe 155.8 130.8 25.0 19.1% Asia 50.2 42.2 8.0 19.0% Middle East 14.0 14.0 0.0 0.0% Latin America 7.5 7.5 0.0 0.0% Africa 1.1 1.1 0.0 0.0% Total 916.1 831.3 84.7 10.2%

33. Sponsored by 23 Countries Have a VC-Backed Bitcoin Startup; US Investment Almost 3x Rest of World Combined 33State of Bitcoin Q3 2015 Millions Data sources: CoinDesk, CrunchBase $0 $10 $20 $30 $40 $50 $60 $70 Total Funding by Country ($m) • US is excluded from the chart above.

34. Sponsored by Silicon Valley 30% Rest of World 71% Silicon Valley Slips: Share of All-Time Bitcoin VC Investment Decreased from 59% in Q1 to 53% in Q3 34State of Bitcoin Q3 2015 • Total number of VC-backed bitcoin companies increased from 113 in Q2 to 119 in Q3, a 5% increase. $ Invested No. of Companies Data sources: CoinDesk, CrunchBase Location Value ($m) No. of companies Silicon Valley $489.2 35 Rest of World $431.9 84 Total $921.1 119 Silicon Valley 53% Rest of World 47%

35. Sponsored by Venture Investment Falls Into Seven Bitcoin Industry Sectors 35State of Bitcoin Q3 2015 Payment Processing Wallets Mining Financial Services Exchanges Infrastructure Universal Source: CoinDesk

36. Sponsored by Sector Trends: Infrastructure Raised Most Funding in Q3, Followed by Mining and Financial Services 36State of Bitcoin Q3 2015 Q3 VC Investment by Ecosystem Category ($m) Data sources: CoinDesk, CrunchBase Millions Mining InfrastructureWallet Payment Processor Exchange Financial Services Universal $1 $1 $4 $6 $14 $20 $39 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45

37. Sponsored by Investment in Universal Bitcoin Companies Has Flattened, While Infrastructure Grew 70% QoQ 37State of Bitcoin Q3 2015 2013 to 2015 VC Investment by Ecosystem Category ($m) Data source: CoinDesk Millions $0 $50 $100 $150 $200 $250 $300 $350 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure

38. Sponsored by Payment Processor and Wallet Investment Nearly Flat for Last Three/Four Quarters 38State of Bitcoin Q3 2015 • Infrastructure received highest growth in VC investment at 69.5%. • Three new VC backed infrastructure startups added this quarter. $ Invested as of Q2$ Invested as of Q3 Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter Data sources: CoinDesk, CrunchBase Payment Processor 9% Infrastructure 7% Exchange 12% Financial Services 12% Mining 12% Universal 38% Wallet 11% Payment Processor 8% Infrastructur e 10% Exchange 12% Financial Services 12% Mining 13% Universal 35% Wallet 10% Sector Q3 Q2 Q/Q Δ ($m) Q/Q Δ ($m) ($m) Payment Processor 77.6 76.4 1.1 1.5% Infrastructure 94.4 55.7 38.7 69.5% Exchange 105.7 100.1 5.6 5.6% Financial Services 111.4 97.1 13.2 14.7% Mining 116.5 96.5 20 20.7% Universal 316.7 312.7 4.0 1.3% Wallet 93.8 92.8 1.0 1.1% Total 916.1 831.3 84.7 10.2%

39. Sponsored by Competition and Cost Pressure in Exchange and Mining Sectors Continues to Drive Consolidation 39State of Bitcoin Q3 2015 Source: CoinDesk Q3 Merger & Acquisitions Acquirer Acquiree Aug 2015 Aug 2015 Sep 2015

40. Sponsored by Q3 2015 Investment Rounds 40State of Bitcoin Q3 2015 Source: CoinDesk Close Date Company Size ($m) Round Select Investors Headquartered Sep-15 Safe Cash Payment Technologies 1.12 Seed Bialla Ventures, Naveen Jain, Vuk Bulajic, Vinh Vo, Chris Kitze San Francisco Sep-15 Pey 0.3 Seed Marc Junker, Frank Biedka, Hartmut A Borchers, Jürgen Pleteit, Olav Vier genannt Strawe, Tobias Jankowiak Hanover Sep-15 Coinalytics 1.1 Seed The Hive San Francisco Sep-15 Abra 12.0 First Arbor Ventures, RRE Ventures, First Round Capital San Francisco Sep-15 Case 1.0 Seed FuturePerfect Ventures New York Sep-15 Chain 30.0 First Khosla Ventures, Pantera Capital, Barry Silbert, RRE Ventures, SV Angel, Thrive Capital, 500 Startups, Kevin Ryan, Scott Banister, Homebrew San Francisco

41. Sponsored by Q3 2015 Investment Rounds (continued) 41State of Bitcoin Q3 2015 Close Date Company Size ($m) Round Select Investors Headquartered Sep-15 ShapeShift 1.6 First Digital Currency Group, Roger Ver, Bruce Fenton, Michael Terpin, Trevor Koverko Zug Sep-15 Paymium 1.1 Seed Newfund, Kima Ventures, Galitt Paris Aug-15 Filament 5.0 First Bullpen Capital, Verizon Ventures, Samsung Ventures, Crosslink Capital, Digital Currency Group, Haystack, Working Lab Capital, TechStars Reno Aug-15 BitFlyer 4.0 First Mitsubishi UFJ Capital Co, Venture Labo Investment Co, Mitsui Sumitomo Insurance Venture Capital Co, Dentsu Digital Holdings Inc, Quick Corp Tokyo Jul-15 Challenger Deep 1.9 Seed Pascal Gauthier London Source: CoinDesk

42. Sponsored by Q3 2015 Investment Rounds (continued) 42State of Bitcoin Q3 2015 Close Date Company Size ($m) Round Select Investors Headquartered Jul-15 BitX 4.0 Second The Naspers Group, Digital Currency Group Singapore Jul-15 ShoCard 1.5 Seed AME Cloud Ventures, Digital Currency Group, Enspire Capital, Morado Venture Partners. San Francisco Jul-15 TabTrader 0.1 Seed Impact Amsterdam Jul-15 BitFury 20.0 Third The Georgian Co-Investment Fund, DRW Venture Capital, iTech Capital Amsterdam Source: CoinDesk

43. Sponsored by 43State of Bitcoin Q3 2015 5. Use Cases and Commerce

44. Sponsored by Bitcoin Transactions Continue Rising Steadily 44State of Bitcoin Q3 2015 Source and note: Blockchain, *100 most popular addresses. Number of Transactions Per Day 40 90 140 190 240 01/07/2014 30/08/2014 29/10/2014 28/12/2014 26/02/2015 27/04/2015 26/06/2015 25/08/2015 Thousand Total no. of daily transactions No. of daily transactions excluding popular addresses

45. Sponsored by Forecast for Total Bitcoin Wallets by End of 2015 Maintained at 12 Million, But … 45State of Bitcoin Q3 2015 Data sources and notes: Total wallets based on data from Blockchain, MultiBit, Coinbase, Andreas Schildbach (Android bitcoin wallet developer). Historical Coinbase data provided by BitcoinPulse. Q2 MultiBit figures note made available, held constant as end of March. R² = 0.9867 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 Total bitcoin wallets Forecasted bitcoin wallets

46. Sponsored by … Does Spike in Blockchain.info’s Q3 New Wallets Signal Anything Significant? 46State of Bitcoin Q3 2015 Data source: Blockchain 118.286 514.583 481.258 343.121 480.715 451.294 454.435 488.303 706.209 0 100 200 300 400 500 600 700 800 Thousand Number of New Wallets Added Each Quarter

47. Sponsored by BitPay Cuts ‘Free and Unlimited’ Bitcoin Processing and Reduces Staff in Cost-Cutting Effort Sources: CoinDesk, CoinDesk State of Bitcoin Q3 2015 47 • BitPay will no longer offer its “free and unlimited” introductory service to new merchants looking to accept bitcoin as payment. • BitPay has cut the size of its staff in an effort to "reduce costs" and "better align with the pace of growth" in the industry, according to an email sent by CEO Stephen Pair to the firm's employees.

48. Sponsored by Bitcoin-Accepting Merchant Growth Down in Q3 Sources: CoinBase, BitPay Number of New Bitcoin-Accepting Businesses Added Each Quarter 12,936 10,360 6,000 6,000 12,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 State of Bitcoin Q3 2015 48 6,000

49. Sponsored by Expedia: Purchases With Bitcoin Are Down 40% • The lack of overall understanding regarding bitcoin was again an inhibiting factor. • "If we give [suppliers] a bitcoin payment, they don't know what to do with it, it's not a currency they understand.” • "We accept bitcoin as a way of just allowing customers to pay with whatever method they want to pay. For us, bitcoin is on an even playing field with the other payment types we offer." Source: CoinDesk Connie Chung Senior payments product manager at Expedia State of Bitcoin Q3 2015 49

50. Sponsored by Dark Market Bitcoin Transactions Approximately Equal to BitPay Transaction Volume Sources: Soska and Christin (2015) ‘Measuring the Longitudinal Evolution of the Online Anonymous Marketplace Ecosystem’, CoinDesk BitPay Dark Market State of Bitcoin Q3 2015 50

51. Sponsored by Bitcoin-Accepting Merchant Forecast Remained at Approximately 120,000 by End of 2015 51State of Bitcoin Q3 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 September 2013), 20,000 (13th January 2014) and 30,000 (28th May 2014), respectively, calculated using linear interpolation. R² = 0.9552 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 Total merchants accepting bitcoin Forecasted total merchants

52. Sponsored by Bitcoin Challenges Not Unique: As iPhone 6 Launch Hype Waned, So Did Apple Pay Usage Sources: Pymnts.com, Bank Innovation March 2015 June 2015 Percentage of eligible Apple Pay users who had tried the service 15.1% 13.1% Usage of Apple Pay in transactions 39.3% 23% Committed user 48% 33% Not sure how it works 31% 34% Forgot to use 32% 34% Concern about security 15% 19% Fears about it working 1% 4% When it comes to using a new payment rail, people have similar concerns about security and how it works, regardless of whether it is Apple Pay or Bitcoin. State of Bitcoin Q3 2015 52

53. Sponsored by North America and Western Europe Continue to Have the Most Bitcoin-Accepting Businesses… 53State of Bitcoin Q3 2015 Source: coinmap.org (screenshot on 1st October)

54. Sponsored by … But Western Europe and North America are the Least Fertile Regions for Bitcoin Adoption Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper Announcement article: http://www.coindesk.com/argentina-most-likely-adopt-bitcoin/ Markets with Greatest Potential for Bitcoin Adoption – Top 30 Markets with Greatest Potential for Bitcoin Adoption - Top 10 Post-Soviet/ Communist , 10% Sub-Saharan Africa, 40% US & Canada, 10% Latin America, 20% Middle East & North Africa, 10% Europe, 10% Asia, 0% Post-Soviet/ Communist , 17% Sub-Saharan Africa, 40% US & Canada, 3% Latin America, 17% Middle East & North Africa, 13% Europe, 3% Asia, 7% State of Bitcoin Q3 2015 54

55. Sponsored by • Inertia • Require extra steps (eg currency conversion) • Not ‘free’; the ‘last mile’ particularly expensive & challenging • Incumbent updates (eg Western Union has cut fees) • Focus on consumer rather than B2B use • Trust (eg bitcoin brand/marketing) • Miscellaneous barriers (eg regulation, access to banks) Why Bitcoin Remittance Firms Have Struggled to Date State of Bitcoin Q3 2015 55

56. Sponsored by Bitcoin’s ‘Last Mile’ Problem Remains; New Bitcoin ATM Deployments Still Well Below Previous Levels 56State of Bitcoin Q3 2015 Data source: CoinATMRadar 43 79 112 104 32 49 52 0 20 40 60 80 100 120 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Increase in ATMs in Each Quarter

57. Sponsored by Abra Deploying ‘Human ATMs’, Seeks to Become the Uber of Bitcoin Payments and Remittances 57State of Bitcoin Q3 2015 Source: Pantera September Investor Letter • Individuals known as “tellers” act as “human ATMs” to enable digital-to- paper money withdrawals and paper-to-digital deposits.

58. Sponsored by 58State of Bitcoin Q3 2015 6. State of Blockchain

59. Sponsored by Jan. 2014 Source: Bloomberg Oct. 2015 State of Bitcoin Q3 2015 59 Earlier Hype Surrounding Bitcoin Supplanted by Blockchain and Distributed Ledgers

60. Sponsored by Google Search of Blockchain Slowly Trending Up Over the Past Year Source: Google Trend search “blockchain” on 1st October 2015 State of Bitcoin Q3 2015 60

61. Sponsored by Myriad of Use Cases Have Stoked Enthusiasm for Blockchain/Distributed Ledger Tech Source: Let’s Talk Payments State of Bitcoin Q3 2015 61

62. Sponsored by Engaged in independent experiment or partnered with bitcoin startups Published reports on blockchain or bitcoin Invested in bitcoin startups Banks Embracing Blockchain Technology in Three Ways Sources: Fidor Bank, CBW Bank, RBS, ANZ, Westpac, Commonwealth Bank , Santander, Lloyds Bank, BNP Paribas, Goldman Sachs, BBVA, Barclays, Let’s Talk Payment, CoinDesk State of Bitcoin Q3 2015 62

63. Sponsored by Blockchain Use Cases Around Securities Transactions and Settlement are Receiving Particular Attention • US retail giant Overstock has sold a $5m "cryptobond" to FNY Managed Accounts, a New York-based trading firm. • The sale is part of a proof of concept from the Utah-based e-tailer showcasing how financial instruments can be digitized and traded on cryptographic distributed ledgers such as the bitcoin blockchain. • The cryptobond sold to FNY will pay 7% interest over a five-year period. Source: CoinDesk State of Bitcoin Q3 2015 63

64. Sponsored by Notable Q3 Public Announcements of Blockchain Initiatives by Governments and Financial Services 64State of Bitcoin Q3 2015 Source: CoinDesk Deloitte has partnered with an Australian digital currency trade group to develop new accounting guidelines for businesses that handle bitcoin. The UK government is exploring the use of blockchain technology in a bid to improve the transparency and accuracy of its record keeping. Barclays, UBS and BNP Paribas announced they are partnering with Ethereum to promote efficiency and social good.

65. Sponsored by Startups Are Pivoting from Currency-Focus to Blockchain (Non-Currency) and Hybrid Business Models Non-CurrencyCurrency Hybrid State of Bitcoin Q3 2015 65

66. Sponsored by Blockchain & Hybrid Startups Have Raised $285m of Total VC Funding to Date, Represent 22% of Companies Data sources: CoinDesk, CrunchBase State of Bitcoin Q3 2015 66 Currency, 69% Non- currency, 16% Hybrid, 15% Total VC Raised ($m) Currency, 78% Non- currency, 20% Hybrid, 2% No. of Companies

67. Sponsored by Blockchains/Distributed Ledgers Go By Many Different Names, But … 67State of Bitcoin Q3 2015 Distributed Ledger Permissioned Blockchain Blockchain Technology Mutual Ledger Open Ledger Shared Ledger Public Blockchain Consortium Blockchain Sources: Medium, Tim Swanson’s Blog, Richard Gendal Brown’s Blog. Image from Google. Journal

68. Sponsored by … the Main Distinction is Between ‘Public’ and ‘Private’ Blockchains Source: CoinDesk Private Blockchains “Write permissions are kept centralized to one organization” 1. Rule changing in areas like national land registry 2. Known validators avoid the risk of 51% attack 3. Cheaper transactions which only need to be verified by a few nodes 4. Well-connected nodes so that “faults can quickly be fixed by manual intervention” 5. Privacy Hybrid Blockchains 1. “Consensus process is controlled by a pre- selected set of nodes” 2. May be considered “partially decentralized” eg public read access Public Blockchains 1. Fully decentralised 2. Everyone can read, send transactions to and participate in “consensus process” 1. Users protected from developer as developers do not have full authority 2. Network effect (smart contract) State of Bitcoin Q3 2015 68

69. Sponsored by Blockchain vs Traditional Payment ‘Rails’ and Clearinghouses 69State of Bitcoin Q3 2015 Sources: Financial Services Club’s Blog, Money Banking, FedWire, Target 2 Annual Transaction Process Time Annual Revenue $1.6 quadrillion <5 minutes $1.5bn $234.6bn <5 minutes $7.9bn $20bn 10 minutes

70. Sponsored by Viewpoint: To be Widely Used by Wall St, Blockchain Technology Must be Divorced from Bitcoin Source: CoinDesk "To be used by financial institutions, including capital markets firms and insurers, blockchains must supplant the costly methods introduced by bitcoin with a mechanism that guarantees security, privacy and speed without paying for anonymous consensus.” Jeff Owen Managing director at Accenture Sigrid Seibold Managing director at Accenture State of Bitcoin Q3 2015 70

71. Sponsored by 71State of Bitcoin Q3 2015 7. Technology

72. Sponsored by Bitcoin’s Network Difficulty Q/Q Growth Rate Increased for First Time in a Year 72State of Bitcoin Q3 2015 Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk Hashrate(billion) 106% 17% 15% 6% 20% 0% 20% 40% 60% 80% 100% 120% 0 2 4 6 8 10 12 14 16 18 20 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Quarterly Increase in Bitcoin Mining Difficulty Quarterly Increase in Mining Difficulty Percentage Increase in Mining Difficulty

73. Sponsored by Number of Bitcoin Nodes Increased, Up 3% from 5,990 at End of Q2 73State of Bitcoin Q3 2015 Data sources: Bitnodes

74. Sponsored by Litecoin First Mining Reward Decline: Price Stays the Same, Hashrate Climbs Up Sources: Crypto Mining Blog, CoinDesk • After the mining reward fell from 50 LTC to 25 LTC per block, one would expect either the price to go up or the hashrate to drop. However, none of these has happened. • Litecoin creator Charlie Lee said he talked to some Chinese miners at the Scaling Bitcoin conference and “learned something interesting”, adding: “Most miners have found electricity for free or close to 0 cost. They make half as much, but still profitable.” State of Bitcoin Q3 2015 74 Average litecoin hashrate (hash/s) per day vs average price ($) per day

75. Sponsored by F2Pool 20% AntPool 16% BTCChina Pool 14% BitFury 13% KnCMiner 8% Slush 7% BW.COM 7% 21 Inc. 4% Telco 214 2% Eligius 2% GHash.IO 1% P2Pool 1%BitMinter 1% BitClub Network 1% Solo CKPool 0% Kano CKPool 0% EclipseMC 0% Unknown 2% China-Based Miners Now Represent Over 50% of Total Bitcoin Network 75State of Bitcoin Q3 2015 Data source: Four-day average as of 1st October 2015 on Blockchain

76. Sponsored by 21 Inc Releases First ‘Bitcoin Computer’ with Embedded Mining Chip, Other Features 76State of Bitcoin Q3 2015 Sources: Balaji Srinivasan’s blog, Amazon, CoinDesk “We want to make it possible for you to turn your bright idea into passive income by selling bitcoin-payable goods, games and services over the Internet through a 21 Bitcoin Computer,” said CEO Balaji Srinivasan.

77. Sponsored by No Barriers to Entry Drive Mining Profits Down to Zero Source: Federal Reserve Bank of New York • Free entry and high profits attract more miners while non-viable miners exit the market. As such, profit in the long run will be drive down to zero. • “Our most recent calculations suggest the long run may have arrived,” said Rodney Garratt. State of Bitcoin Q3 2015 77 Rodney Garratt Vice president, the Federal Reserve Bank of New York’s Research and Statistics Group

78. Sponsored by 78State of Bitcoin Q3 2015 8. Regulation and Macro

79. Sponsored by History Indicates Regulators Don’t Want to Kill the Goose that Lays the Golden Tax Eggs, But … Images from Google • Initial sales tax moratorium • Avoided costly phone company designation State of Bitcoin Q3 2015 79 • Granted money transmitter license

80. Sponsored by … NY BitLicense is Imposing High Costs on Startups, Leading Many to Exit New York Market Source: CoinDesk. Image from Bitstamp Bitstamp license application cost roughly George Frost Chief legal officer, Bitstamp Ceased NY Operations 15 BitLicense Applications 22 State of Bitcoin Q3 2015 80 $100,000

81. Sponsored by Regulation Should Distinguish Between Bitcoin and Blockchain Technology Source: CoinDesk • Bitcoin is a kind of financial asset and tool, while blockchain is a new information technology that can be widely applied in many fields. • “Legislation in the financial sector should be limited in purpose to preventing systemic risks to the financial system and preventing financial crimes. Regulations must not be too strict, or else the global competitiveness of Chinese enterprises will be inhibited.” Leon Li founder and CEO, Huobi State of Bitcoin Q3 2015 81

82. Sponsored by Select Country Regulatory Updates 82State of Bitcoin Q3 2015 Sources: CoinDesk, CoinDesk The Reserve Bank of India’s deputy governor Shri R Gandhi spoke at the FIBAC 2015 banking conference about technological disruption and financial inclusion. He said cryptocurrencies have the potential to be disruptive, but noted they could also have undesirable consequences if left unchecked. Nigeria's Central Bank has reportedly called for bitcoin regulation in an attempt to stop money laundering and avoid international penalties. India Nigeria

83. Sponsored by Bitcoin’s Price in Q3 Appeared to Respond to Macro Events in Europe (Greece) and China State of Bitcoin Q3 2015 83

84. Sponsored by US Interest Rate Hike and a Strong US Dollar May Negatively Impact Bitcoin’s Price Source: itBit report: Impact of US Interest Rate Hike on Bitcoin State of Bitcoin Q3 2015 84

85. Sponsored by About 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 stateofbitcoin@coindesk.com • We also welcome any feedback you have on the report 85State of Bitcoin Q3 2015

86. Sponsored by With thanks to our sponsor 86State of Bitcoin Q3 2015 Coinalytics enable enterprises to derive real-time business intelligence and risk assessment from blockchains and decentralised applications. http://coinalytics.co/

87. Sponsored by Disclaimer • CoinDesk makes every effort to ensure 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 you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions. 87State of Bitcoin Q3 2015