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Bitcoin’s Killer App
How We’ll Achieve Mainstream Adoption
BTC Miami – January 2016
Sean M. Walsh - sean@redwoodcityventur...
Sean M. Walsh
Background:
• Redwood City Ventures
• Bitcoin/Blockchain Investments (e.g. - BlockC.co)
• China/US Business ...
Bitcoin – A Fascinating Intersection
Ecommerce
Monetary
Factors
Social
Networking
1. Ecommerce/Online User
Acquisition
2. ...
Question…
What if Bitcoin’s “Killer App”
is not an app at all?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin...
My Objective
1. Propose my thesis on how we can achieve mainstream
adoption for Bitcoin (in 17 minutes, or less).
Note: I ...
Where To Start? First Principles
1. What is the product? What is Bitcoin?
2. What is the current market situation?
3. What...
1st Principle – The Current Situation?
• About 400k people with 1+ BTC
To me, these are our “Users”
• $400 per BTC (and ab...
1st Principle – What Is Our Goal?
1. Reach 1 million people owning 1+ BTC
2. Add 100k new Users per month
• This requires ...
1st Principle – What Is Product-Market Fit?
MP
A product that meets some burning needs of the target market(s)
sean@redwoo...
1st Principle – What Is Bitcoin?
• The best form of money ever invented
• But… what is money?
1. Unit of Account
2. Means ...
1. Scarcity: limited, predictable supply
2. Durability: won’t decay
3. Divisibility: easy to subdivide
4. Recognizability:...
0
1
2
3
4
Scarcity
Durability
Divisibility
Recognizability
Fungibility
Transportability
1st Principle – “Moneyness”- The 6...
S
Dur.
Div.
R
F
T
Gold = 18
S
Dur.
Div.
R
F
T
USD = 13
S
Dur.
Div.
R
F
T
Arg Peso = 10
S
Dur.
Div.
R
F
T
Frequent Flier Mi...
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
0
5
10
15
20
25
Frequent
Flier Miles
Starbuck...
1st Principle – What Transactions Can Bitcoin Improve?
For now…
– forget about scalability
concerns
– focus on Go-To-Marke...
1st Principle – What Transactions Can Bitcoin
Improve?
Note: there are thousands of use-case archetypes across these Categ...
1st Principle – Who Are The Target Users?
1. Investors / Savers
2. International Workers (from ~10 Countries)
3. Coupon Cl...
Target #1 – Investors / Savers
Why Bitcoin?
1. Store of Value
2. Non correlated asset class
3. Incredibly asymmetric retur...
50.00
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90.00
100.00
110.00
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130.00
Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 A...
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2...
-0.144
0.063
0.319
0.877
0.588
0.066
0.487
-0.190
0.289
0.200
0.099
-1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0...
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
-0.144
-0.411
-0.330
0.001
-0.316
0.054
-0.35...
Target #1 – The Investing Public
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
Target #2 – International Workers
From: USA, UK, China, Philippines, Mexico, Colombia, India,
Brazil, Argentina
Elevator P...
3.9M
3.4M
2.9M
1M
.6M
1.2M
1.2M
11.2M
3.5M
http://www.oecd.org/els/mig/World-Migration-in-Figures.pdf
International Worker...
Target #2 – International Workers
Graphics courtesy of http://www.visualcapitalist.com/its-official-bitcoin-was-the-top-pe...
Target #3 – USA Coupon Clippers
http://www.slideshare.net/InmarInc/2015-inmar-coupontrends-presentation-2014-yearendreport
1st Principle – What Resources Do We
Have?
1. $400 million in annual miner revenue
2. A team of evangelists (maybe 10,000 ...
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
Total TTM Miner Expense + OpEx $409,000,000
T...
$50M
$100M
$150M
$200M
$250M
$300M
$350M
$400M
17% 20% 30% 50% 75% 100%
Bitcoin Price Growth
ROI – User Acquisition Campai...
Strategies For Growth?
1. Refine the message / accelerate Word of
Mouth
- Think “Ashton Kutcher tweet”
2. People love game...
Strategies For Growth?
STEPPS:
1. Social Currency
Koreatown bar’s nightly code word
2. Trigger Moments
Budweiser “wazzap?”...
Strategies For Growth
We need to think like so-called “Growth Hackers”
We need K > 1.0
sean@redwoodcityventures.com - @Sea...
User Acquisition Campaign Details
1. Can be seen as a typical user acquisition play, except that the benefits to the
indus...
Review: What Are The “Killer Apps”?
1. A Federated User Acquisition Campaign
2. The ongoing regional monetary weakness tha...
Our Biggest Risks Ahead
1. Regulatory Crackdown
1. Renewed attempts at regulatory circumvention (illegal activities)
1. It...
Private Blockchains Are Not A Risk
1. There are plenty of use cases to go around
2. Refer to the early days of the World W...
Conclusion
1. Bitcoin already has a number of killer apps in the bag.
2. Let’s act like a single company seeking mainstrea...
Recent Breakdown of Wallet Balances
https://www.cryptocoinsnews.com/1-bitcoin-community-controls-99-bitcoin-wealth/
Annual Mining Industry Expenditures
Input Variables
Global Network, January, 2016 (PH) 811
Global Network, January 2015 (P...
Notes
BTC Price 1/1/2013 $ 13.41
BTC Price 1/1/2016 $ 433.59
Bitcoins Outstanding 1/1/2013 6,000,000excluding 4M "dead coi...
Bitcoins Killer App - Achieving Mainstream Adoption - Sean Walsh - DOWNLOAD FOR SPEAKER NOTES
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Bitcoins Killer App - Achieving Mainstream Adoption - Sean Walsh - DOWNLOAD FOR SPEAKER NOTES

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How will Bitcoin achieve mainstream adoption in 2016-2017? Here is our thesis.
By: Sean Walsh, Partner, Redwood City Ventures, 2016
Twitter: @SeanWalshBTC
www.redwoodcityventures.com

Published in: Economy & Finance
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Bitcoins Killer App - Achieving Mainstream Adoption - Sean Walsh - DOWNLOAD FOR SPEAKER NOTES

  1. 1. Bitcoin’s Killer App How We’ll Achieve Mainstream Adoption BTC Miami – January 2016 Sean M. Walsh - sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  2. 2. Sean M. Walsh Background: • Redwood City Ventures • Bitcoin/Blockchain Investments (e.g. - BlockC.co) • China/US Business & Investment Partnerships • Previously Vice President at Bertram Capital ($1B Silicon Valley Private Equity firm) Contact Information: • sean@RedwoodCityVentures.com • Twitter: @SeanWalshBTC • www.linkedin.com/in/SeanWalsh
  3. 3. Bitcoin – A Fascinating Intersection Ecommerce Monetary Factors Social Networking 1. Ecommerce/Online User Acquisition 2. Social Networking / Viral Marketing 3. Monetary/Economic Factors 1. Monetary History 2. Market speculation 3. Foreign exchange 4. Global trade sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  4. 4. Question… What if Bitcoin’s “Killer App” is not an app at all? sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  5. 5. My Objective 1. Propose my thesis on how we can achieve mainstream adoption for Bitcoin (in 17 minutes, or less). Note: I see this as a product Go To Market strategy challenge 2. Walk you through my thought process for narrowing down and identifying the most effective tactics to achieve our goal. My process: 1. Ask Root Questions 2. Find Key Evidence 3. Draw Actionable Conclusions sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  6. 6. Where To Start? First Principles 1. What is the product? What is Bitcoin? 2. What is the current market situation? 3. What is our goal? 4. What is Product-Market fit? 5. What transactions can Bitcoin improve? 6. Who are the target users? 7. What resources do we have? sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  7. 7. 1st Principle – The Current Situation? • About 400k people with 1+ BTC To me, these are our “Users” • $400 per BTC (and about 100k new BTC per month until Aug.) • 180k+ transactions per day • 2+ Million BTC traded per month on Top 10 exchanges • Developer turmoil (let’s ignore that for now) • What metrics should we measure for success? “That which is measured will improve” sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  8. 8. 1st Principle – What Is Our Goal? 1. Reach 1 million people owning 1+ BTC 2. Add 100k new Users per month • This requires giving people enough reason to go through the trouble of buying $400 in BTC. • What are those reasons going to be? We need to elicit emotional motives that will inspire our desired actions. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  9. 9. 1st Principle – What Is Product-Market Fit? MP A product that meets some burning needs of the target market(s) sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  10. 10. 1st Principle – What Is Bitcoin? • The best form of money ever invented • But… what is money? 1. Unit of Account 2. Means of Exchange 3. Store of Value • How to compare different monies? SDDRFT 1. Scarcity 2. Durability 3. Divisibility 4. Reconizability 5. Fungability 6. Transportability sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  11. 11. 1. Scarcity: limited, predictable supply 2. Durability: won’t decay 3. Divisibility: easy to subdivide 4. Recognizability:difficult to counterfeit 5. Fungibility: units is exchangeable 6. Transportability:easy to move They all boil down to trustworthiness of the money. 1st Principle – “Moneyness”- The 6 Characteristics of Money sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  12. 12. 0 1 2 3 4 Scarcity Durability Divisibility Recognizability Fungibility Transportability 1st Principle – “Moneyness”- The 6 Characteristics of Money Bitcoin SDDRFT Score = 22 (out of 24) sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  13. 13. S Dur. Div. R F T Gold = 18 S Dur. Div. R F T USD = 13 S Dur. Div. R F T Arg Peso = 10 S Dur. Div. R F T Frequent Flier Miles = 5 S Dur. Div. R F T Starbucks Cards = 6 S Dur. Div. R F T Cowry Shells = 11 sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  14. 14. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh 0 5 10 15 20 25 Frequent Flier Miles Starbucks Cards Arg Peso Cowry Shells USD Gold Bitcoin “Moneyness”
  15. 15. 1st Principle – What Transactions Can Bitcoin Improve? For now… – forget about scalability concerns – focus on Go-To-Market – focus on financial services What are the use cases? 1. Non-correlated asset class for storing value 2. Digital money for retail discounts 3. Global P2P Money Transmission sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  16. 16. 1st Principle – What Transactions Can Bitcoin Improve? Note: there are thousands of use-case archetypes across these Categories. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Consumer to Business Consumer to Consumer Business to Business "Financial Transcations"
  17. 17. 1st Principle – Who Are The Target Users? 1. Investors / Savers 2. International Workers (from ~10 Countries) 3. Coupon Clippers sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  18. 18. Target #1 – Investors / Savers Why Bitcoin? 1. Store of Value 2. Non correlated asset class 3. Incredibly asymmetric return profile 4. SDDRFT, best form of money ever 5. Portfolio diversification: 1% - 5% target 6. Almost inconceivably scarce 7. Value is up over 5,000% in 3 years Note: There are also over 250 Million people around the world who own Gold as a Store of Value. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  19. 19. 50.00 60.00 70.00 80.00 90.00 100.00 110.00 120.00 130.00 Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015 PriceIndex Asset Prices #1, Last 12 Months Arg Peso USD DXY 10YrUSTr Gold Case-Shiller WTI Oil BTC Price sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  20. 20. 50.00 60.00 70.00 80.00 90.00 100.00 110.00 120.00 130.00 140.00 150.00 Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015 PriceIndex Asset Prices #2, Last 12 Months S&P 500 NASDAQ SSE S&P 500 Corp MSCI EM BTC Price sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  21. 21. -0.144 0.063 0.319 0.877 0.588 0.066 0.487 -0.190 0.289 0.200 0.099 -1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800 1.000 BTC Price Gold S&P 500 Corp NASDAQ Shanghai Stock Exchange 10YrUSTr MSCI EM Case-Shiller WTI Oil USD DXY Arg Peso Asset Class Correlation – S&P 500 vs Others, 12-Month sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  22. 22. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh -0.144 -0.411 -0.330 0.001 -0.316 0.054 -0.357 0.154 -0.691 0.496 -0.651 -1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800 1.000 S&P 500 Gold S&P 500 Corp NASDAQ Shanghai Stock Exchange 10YrUSTr MSCI EM Case-Shiller WTI Oil USD DXY Arg Peso Asset Class Correlation – Bitcoin vs Others, 12-Month
  23. 23. Target #1 – The Investing Public sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  24. 24. Target #2 – International Workers From: USA, UK, China, Philippines, Mexico, Colombia, India, Brazil, Argentina Elevator Pitch: 1. Use Bitcoin to get money home quickly 2. Easily divide up your remittances among family members 3. Bitcoin is an interesting Store of Value, and is probably clobbering your home currency 4. Easy to sell Bitcoin and deposit into your home bank sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  25. 25. 3.9M 3.4M 2.9M 1M .6M 1.2M 1.2M 11.2M 3.5M http://www.oecd.org/els/mig/World-Migration-in-Figures.pdf International Workers by Origin Total = 28.9 Million People
  26. 26. Target #2 – International Workers Graphics courtesy of http://www.visualcapitalist.com/its-official-bitcoin-was-the-top-performing-currency-of-2015/
  27. 27. Target #3 – USA Coupon Clippers http://www.slideshare.net/InmarInc/2015-inmar-coupontrends-presentation-2014-yearendreport
  28. 28. 1st Principle – What Resources Do We Have? 1. $400 million in annual miner revenue 2. A team of evangelists (maybe 10,000 of us?) 3. 400k people with at least 1 BTC sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  29. 29. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Total TTM Miner Expense + OpEx $409,000,000 Total TTM Revenue, $ $360,000,000 % of the Industry Participants that Contribute 50% 15% of disposable expenditures $30,000,000 Target number of new users 600,000 Available User Acqusition Expense $51 Resultant Upward Price Movement 50% Incremental Mining Industry Revenue $190,000,000 Incremental Revenue to Participants $95,000,000 Breakeven BTC Price Increase 17% Profit to Participants $75,000,000
  30. 30. $50M $100M $150M $200M $250M $300M $350M $400M 17% 20% 30% 50% 75% 100% Bitcoin Price Growth ROI – User Acquisition Campaign Incr Mining Revenue Participant Profit sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  31. 31. Strategies For Growth? 1. Refine the message / accelerate Word of Mouth - Think “Ashton Kutcher tweet” 2. People love games and contests (gamification) 3. Direct Referrals (Selling) is very scalable 4. Starting in a small geography is proven (Boiling the ocean is difficult / quicker solution to empty-room problem) sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  32. 32. Strategies For Growth? STEPPS: 1. Social Currency Koreatown bar’s nightly code word 2. Trigger Moments Budweiser “wazzap?” campaign 3. Emotional Stimulation Level Emotion’s polarity is secondary 4. Public Displays Apple’s white headphones 5. Practical Value How-to Youtube videos 6. Stories Fundamental to humanity sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  33. 33. Strategies For Growth We need to think like so-called “Growth Hackers” We need K > 1.0 sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  34. 34. User Acquisition Campaign Details 1. Can be seen as a typical user acquisition play, except that the benefits to the industry are wildly amplified by the effect on BTC prices. 2. Funding Sources: 1. 5%-10% of mining equipment sales / mining revenue (over $30 million) 2. 2%-4% of BTC holdings of ~1,700 largest holders (over $70 million) 3. User Acquisition Channels: 1. Direct Sales 2. Online advertising 3. Sweepstakes 4. Games of Skill 4. The poetic beauty is that much of the compensation could be automated via Blockchain applications themselves to ensure fairness and execution. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  35. 35. Review: What Are The “Killer Apps”? 1. A Federated User Acquisition Campaign 2. The ongoing regional monetary weakness that is likely to intensify and spread over the next 12-months 3. Discounts for using BTC (e.g. – Fold, Purse.io) 4. A Direct Sales Execution 5. [Electronic money for 1 billion unbanked people in South America, Asia, and Africa] sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  36. 36. Our Biggest Risks Ahead 1. Regulatory Crackdown 1. Renewed attempts at regulatory circumvention (illegal activities) 1. It’s terrible publicity to our target Users 2. It intensifies regulatory scrutiny and crackdown risk 2. Developer infighting and stalemate? I think this is a bit of a false risk sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  37. 37. Private Blockchains Are Not A Risk 1. There are plenty of use cases to go around 2. Refer to the early days of the World Wide Web. 3. Refer to the early days of telephone networks sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  38. 38. Conclusion 1. Bitcoin already has a number of killer apps in the bag. 2. Let’s act like a single company seeking mainstream adoption for our product. – 1 million Users ( people owning 1+ BTC) 3. Let’s think more creatively about how to use our resources (like mining revenue) to hit 1 million Users. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
  39. 39. Recent Breakdown of Wallet Balances https://www.cryptocoinsnews.com/1-bitcoin-community-controls-99-bitcoin-wealth/
  40. 40. Annual Mining Industry Expenditures Input Variables Global Network, January, 2016 (PH) 811 Global Network, January 2015 (PH) 314 TTM Miners Retired/Failed, PH 250 Net Miners Produced, PH 747 Miner Design/Production Cost, per PH $200,000 PSU Cost, per PH $50,000 Subtotal $186,750,000 Datacenter Expansion, MW 200 Datacenter Expansion Cost, per MW $150,000 Subtotal $30,000,000 Power Cost, per MW per Year $525,600 Operating Cost, per MW per Year $262,800 TTM Average Miner Efficiency, MW/PH 0.5 TTM Average Miner Power Draw, MW 281.25 TTM Total Opex Expense, Global Network $221,737,500 Total TTM Miner + Opex Expense $408,487,500 Total TTM BTC Generated 1,200,000 TTM Average $ per BTC $300 Total TTM Revenue, $ $360,000,000 % of the industry participants that contribute 50% 15% of disposable expenditures $30,636,563 Target number of new users 600,000 Available User Acqusition Expense $51.06 Resultant upward price movement 100.00% Incremental Mining Industry Revenue $360,000,000 Incremental Revenue to Participants $180,000,000 Breakeven BTC Price Increase 17.02% Profit to Participants $149,363,438 Mining Expenditure Breakdown
  41. 41. Notes BTC Price 1/1/2013 $ 13.41 BTC Price 1/1/2016 $ 433.59 Bitcoins Outstanding 1/1/2013 6,000,000excluding 4M "dead coins" Bitcoins Outstanding 1/1/2016 11,000,000excluding 4M "dead coins" Total BTC Market Capitalization $ 80,460,000 Total BTC Market Capitalization $ 4,769,490,000 % Change 5828% Bitcoin Market Capitalization – 3 Year

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