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An Introduction to Blockchain

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VCs have for the most part retreated from investing in Bitcoin and Blockchain. The appetite for blockchain products however has only increased. Corporations have formed consortiums such as R3 and the Hyperledger Project to learn more about the technology. Numerous enterprises have rolled out internal pilots to test and explore the applications of blockchain.

At Thomvest, we believe blockchain adoption is about to take off - making it a prime time for VCs to begin making early stage bets.

Take a look at our most recent research report which delves into the current state of blockchain.

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An Introduction to Blockchain

  1. 1. An Introduction to Blockchain October 2016 1
  2. 2. Agenda Review of blockchain protocols: bitcoin, public, and private blockchains Assessment of adoption trends and notable players Appendix 2
  3. 3. Today’s transactional systems rely on outdated infrastructure to establish trust between parties 3 Computers enabled efficiency gains via databases and on premise computing solutions, dominated by SAP, Oracle, Microsoft, and similar companies 1970s: Internal Databases The Internet enabled a new generation of distributed platforms running in the cloud, enabling the outsourcing of certain processes and the more efficient storage of information 2000s: The Internet & Cloud Solutions With current systems, many transactional processes still require a third party to establish trust – such as an escrow, law firm, or clearinghouse – resulting in high costs, fraud, and inefficiencies Present Day: Inefficient Transactions Blockchains combines cryptography & distributed computing to deliver secure, direct peer-to-peer transactions without the need for a central party Think of it as another type of database for recording transactions What is a blockchain? Voting: Constituent votes cast via a blockchain code on a private device would offer immediately verifiable results Healthcare: Patient’s encrypted health information could be shared with multiple providers without the risk of privacy breaches Property Registration: A digital, transparent, and immutable land title registry can reduce land title fraud in countries like Honduras Financial Services: Faster, cheaper settlements could shave billions of dollars from transaction costs while improving transparency
  4. 4. 4 Think of blockchain as a transformative way to establish trust, transparency, and efficiency within P2P systems 4 A continually updated, network hosted ‘database’ of all transactions on a blockchain. Comprised of blocks of transactions (with metadata) chained together by cryptography Digital Ledger Programmed into each blockchain protocol, and responsible for verifying and updating transactions on the network’s digital ledger; not necessary in private blockchains Consensus Mechanism The good transacted on a blockchain; cryptocurrency provided the initial proof of concept, with the industry now looking to “color tokens” – i.e. any other form of digital asset Digital Asset Computing nodes with access to the blockchain, able to manipulate the ledger and view past transactions; may be pre-approved or verified by a consensus mechanism Network Participants A blockchain is a horizontal technology comprised of 4 basic components Data Source: Satoshi Nakamoto Whitepaper; Deloitte; CoinDesk
  5. 5. Bitcoin offered a PoC for blockchain by creating an alternative to fiat currency Bitcoin relies upon blockchain, its underlying technology, in order to transact a digital currency – cryptocurrency – between individuals without the need for a trusted central authority. Cryptocurrency is one of several assets that can be transacted on a blockchain, with different types of blockchains – known as “protocols” – offering different functionality 5 What’s in a block? All transactions are logged, including information on the time, date, participants, and amount of each transaction. How does it work? Programmed mathematical principles – the “protocol” - govern the method for verifying transactions and establishing consensus. Cryptography allows each participant on the network to manipulate the ledger in a secure way. Is it restricted to currency? The ledger can record any type of unit – currency, property, commodity, vote, rewards points, etc. – each of which is individually identifiable and programmable. Smart contracts build upon this. Core strength? Eliminates the need for trusted third parties, such as banks, governments, clearinghouses, accountants, and notaries Data Source: CoinDesk; pwc; Deloitte; Oliver Wyman Blockchain Proof-of-Concept 2009 Centralized Authority for P2P Interactions Various Blockchain Protocols, 2015+
  6. 6. The bitcoin blockchain lacks initial interest from early adopters given a variety of concerns 6 • Strict policy in Russia, the US, and other markets hinders expansion of key players, particularly given concerns over the use of bitcoin payment by illegal participants –Today, roughly 90% of mining operations and trading volume occur in China • Uncertain regulatory outlook presents risk for application-specific companies Regulation • Cryptocurrencies lack strong use-cases in developed countries such as the US, resulting in stronger adoption in countries with unstable economies, such as Argentina • Bitcoin is not a Turing-complete platform, meaning it lacks the programmability of other platforms such as Ethereum and private protocols Restrictive Use-Cases • The use of mining for consensus, albeit the most secure mechanism for public blockchains, reduces throughput, creating scalability issues for certain applications • Data privacy and security in the ledger presents concerns for sensitive information – particularly at nodes on the network, as with Bitfinex and Mt. Gox • Network updates are open-source and must be approved by a majority of miners Technology Constraints Insiders view a need for a compelling exit to re-validate the space and jumpstart investor and consumer trust in Bitcoin – many investors made their bets 3-4 years ago, and suffered significant losses and are waiting for returns Efforts to improve bitcoin’s scalability, such as Lightning Networks and Sidechains, represent notable progress, but early applications for blockchain remain heavily privatized Many founders express strong confidence in the need for a public blockchain, similar to the Internet Data Source: CoinDesk; Assorted Founder Calls
  7. 7. Blockchain protocols may be classified as either public or private – think Internet vs. intranet / IT 7 Public Private Access Open read/write access to database Permissioned read and/or write access to database Speed Slower Faster Security Proof-of-Work / Proof-of-Stake Pre-approved participants Identity Anonymous/ pseudonymous Known identities Asset Native assets Any asset Sample Companies PlatformSoftware Here, we describe platforms as enabling outside developers to build applications on top, while software is often run privately inside an organization Financial institutions (market operators, banks, etc.) are drawn to private blockchain solutions Data Source: CoinDesk; Assorted Founder Calls
  8. 8. Expanding the analogy, many insiders forecast a future of one public and several private chains 8 Internet / Intranet Blockchain Protocols Interoperability Public Private One rail, similar to the Internet Initial traction in risk-adverse internal systems Future: multiple chains per company from different vendors for each asset (like on-prem solutions)
  9. 9. Insurance Healthcare Government PropertyManagement Blockchain companies are pursuing horizontal and vertical plays, with mixed success 9 FinancialServices Blockchain Horizontal Platforms Vertical Platforms Sample Industries Data Source: CoinDesk, Assorted Founder Calls
  10. 10. Vertical plays for blockchain to date span a wide variety of industries and use-cases 10 Data Source: Venture Radar; Bitcoin Shop Inc. DISTRIBUTED LEDGER
  11. 11. Agenda Review of blockchain protocols: bitcoin, public, and private blockchains Assessment of adoption trends and notable players Appendix 11
  12. 12. A variety of general and vertical-focused VCs have placed investments in Bitcoin & blockchain 12 General Funds*: Blockchain-Specific: FinTech-Specific Funds: *Note: many general funds have funded FinTech startups, but are not exclusively committed to FinTech investments Data Source: Pitchbook
  13. 13. Corporate VCs and strategics demonstrate aggressive investments in blockchain startups 13 While bitcoin investment predominantly originated with VCs, blockchain deals are dominated by corporate VCs and strategics Blockchain firms with notable involvement: Data Source: CoinDesk
  14. 14. 14 Date of First Investment for Financial Services Firms (pre-2016) Acceleration of investment in blockchain by financial institutions in 2015 and beyond Data Source: CB Insights; CoinDesk Number of Blockchain Announcements by Traditional Institutions Continued to Increase in Q1 ‘16 *Note: ’Traditional institutions’ include governments, central banks, financial institutions, and other large firms
  15. 15. 15 Consortia and open-source projects receive strong participation from financial institutions Data Source: CB Insights; CoinBase Dec 2015 Feb 2016 May 2016  Open-source hyperledger project has grown to 40+ participants  Combined with Ethereum’s recent progress, this highlights the possible importance of founders to open-source innovation and governance – similar perhaps to Linux | R3 CEV Consortium  Members include 50+ banks with combined $600B+ market cap  Facilitated 5 blockchain pilots on Chain, Ethereum, IBM, Intel, and Eris Industries for 40 of the world’s biggest banks in March 2016  Onboarding other asset managers, such as insurance firms and hedge funds, to their service in 2016; planning to raise $200M
  16. 16. Blockchain and hybrid startup funding will continue to outpace Bitcoin startups  Bitcoin startups focus on payments, exchange trading, remittances, or any other ‘currency’ activity (e.g. bitpay)  Blockchain startups focus on non-currency activities, such as securities settlement, property title, asset provenance, etc. (e.g. factom)  Hybrids do both (e.g. itBit) In Q1 2016, blockchain and hybrid startups overtook bitcoin startups in total VC investment for first time Data Source: CoinDesk16 Investment Sector Distribution 53% 53% 98% 16% 47% 47% 2% 84% 0% 20% 40% 60% 80% 100% Q2 2015 Q3 2015 Q4 2015 Q1 2016 Percentage of Bitcoin Company Investment Percentage of Blockchain and Hybrid Company Investment Many traditional bitcoin startups are shifting towards hybrid or blockchain strategies
  17. 17. Bitcoin startups rank highly among top-funded, with blockchain gaining traction 17 Company Product Summary Cum. Funding Most Recent Raise Post-Val. Notable Investors* 21 Inc. Software and hardware solutions to achieve bitcoin- accelerated computing, whereby bitcoin-payable APIs deliver digital goods and services on a per-call basis $116.05M $52M Series C, Feb. 2015 $362M Andreessen Horowitz, Drew Houston, Peter Thiel, Khosla Ventures, Data Collective Coinbase World’s largest exchange for Bitcoin and other digital currencies $106.71M $75M Series C, Jan. 2015 $490M Andreessen Horowitz, Union Square Ventures, DFJ Growth, NYSE, USAA BlockStream Sidechains to Bitcoin blockchain to optimize cryptocurrency, open asset, and smart contract technology $77.28M $55M Series A, Feb. 2016 N/A Reid Hoffman, Real Ventures, Blockstream Capital, Horizons Ventures Circle Payment tools for bitcoin and digital currency services $76M $50M Series C, Apr. 2015 $250M Goldman Sachs, Accel Partners, IDG Capital Partners, General Catalyst Partners, Oak Investment Partners Digital Asset Holdings Digital ledgers to track and settle financial assets securely $62M $62M Series A, Feb. 2016 N/A J.P. Morgan, The Depository Trust and Clearing Corporation (DTCC), Deutsche Bank, BNP Paribas BitFury Software and hardware solutions for asset transactions via blockchain (formerly manufactured bitcoin mining hardware) $60M $20M Later Stage, Jul. 2015 N/A Georgian Co-Investment Fund, Blockchain Capital Chain Open blockchain protocol & purpose-built enterprise blockchain software $43.9M $30M Series C, Sep. 2015 $130M Khosla Ventures, RRE Ventures, SV Angel, Blockchain Capital, Citi Ventures, NASDAQ, Orange, Visa, and several other strategics / corporate VCs Ripple Blockchain-based settlement system, currency exchange, and remittance network $40.5M $32M Series A, Oct. 2015 N/A Core Innovation Capital, IDG Capital Partners, Lightspeed Venture Partners, Google Ventures, Andreessen Horowitz Xapo Bitcoin wallet, storage vault, & debit card $40M $20M Series A1, Jun. 2014 N/A Benchmark Capital, Greylock Partners, Index Ventures, Ribbit Capital The DAO Blockchain-based, autonomous investor-directed VC fund > $150M $150M, May 2016 N/A Entirely crowdfunded *Notable Investors were identified through involvement as a board member, significant follow-on investor, or lead Bitcoin Company Blockchain or Hybrid Company Data Source: PitchBook
  18. 18. 18 FundraisingActivity, 10LargestFirms Select timeline of activity with Bitcoin and blockchain startups Other Activity $60M Stolen In Hack Series B, $59M Series C, $30M Series B, $9.5M Series C, $75M Series C, $52M First Inter-Bank Debt Traded via Blockchain Seed, $21M Series A, $55MRound 2, $20M Series A, $30M Series B, $17M Round 1, $20M Series A, $25M Round 3, $20M Series C, $50M Series A, $12.5M Acquired by NASDAQ First Private Securities Issuance Documented via Blockchain Series A, $62M Data Source: CB Insights; Pitchbook; CoinBase In Q1 2016, the largest Bitcoin-related VC deals were significantly smaller than blockchain deals Jan 2014 July 2014 Jan 2015 July 2015 Jan 2016
  19. 19. 19 Select highlights: 2016 blockchain adoption, acquisitions, and risks • Working with ASX, Australia’s largest exchange operator, to speed up settlement of securities • Working with DTCC, a firm at the center of Wall Street’s trading infrastructure, to test distributed ledger technology for the $2.6T repo market Digital Asset Holdings • NASDAQ acquired SecondMarket in 2015 to bolster its private market services using blockchain • Dec. 2015: first private securities issuance via blockchain, reducing settlement exposure by 99% • Feb. 2016: deploying the Linq distributed ledger in Estonia to facilitate corporate e-voting NASDAQ Linq • Leading a consortium partnership with 50+ leading global financial institutions to research, experiment, design, and deliver advanced distributed ledger technologies to financial markets • Feb. 2016: 40 investment banks traded debt instruments in R3’s “sandbox” environment using blockchain solutions offered by Eris Industries, IBM, Intel, and Microsoft-hosted Ethereumasd R3 CEV • The Decentralized Autonomous Organization is an investment fund that exists as a set of smart contracts residing on the Ethereum blockchain, wherein investors “vote” on VC-like investments • Crowdfunded in May 2016, raising $150M+ from over 20,000 investors in just 28 days • A hack exploited a bug in the DAO smart contract code in June ’16, steeling $60M from investors The DAO Suggests strong initial traction for private blockchain among financial institutions to eliminate counterparty risk, decrease P2P transaction costs and latency, and automate highly manual and Byzantine records-keeping. Transformation of incomplete and inefficient public data records, such as property titles and voting, appear to represent early POCs of blockchain beyond financial services. Public blockchains exhibit stronger security risks than their private counterparts – not due to the underlying blockchain protocol, which has yet to be hacked, but rather publicly accessible applications such as the DAO. Data Source: CoinDesk; R3 CEV; The DAO
  20. 20. Consortia groups and Fortune 500 offerings have been key in generating incumbent interest 20 • Ripple: vertically-integrated, blockchain-based payment transaction infrastructure • Chain: enterprise blockchain solution; early-stage with 25 employees, and still in POC with innovation labs • Blockstream: sidechains to improve Bitcoin scalability; also offers open asset and smart contract technology • ConsenSys: financial advisory firm helping companies adopt enterprise blockchain; provides services, not products • BitFury: software and hardware solutions for asset transactions via blockchain (formerly manufactured bitcoin mining hardware) Leading Startups • R3: consultancy helping companies to deploy blockchain; protocol agnostic • Digital Asset Holdings: blockchain for securities; considered by many to lack a real product despite massive funding and interest • Hyperledger Project: open- source effort with code contribution from over 40 blockchain companies; lacks notable progress; originally run by DAH, and increasingly led by IBM in recent months Consortia Groups • Microsoft: hosts a cloud dev environment on their cloud (Azure); protocol agnostic, • including Ethereum Blockchain as a Service (EBaaS), Eris, and others • IBM: hosts a dev environment on their cloud; recently announced a “highly secure” blockchain solution intended to meet enterprise needs • Intel: Hyperledger contributor, with early-stage efforts within the space Fortune 500 • Bitcoin: most secure and widely used public blockchain; largest cryptocurrency by market cap and volume • Ethereum: leading open- source public blockchain for smart contracts; administered by a non-profit, with no clear plan for monetization; offers proprietary programming language and integrations to encourage adoption Public Blockchains Data Source: CoinDesk; Pitchbook; Assorted Founder Calls
  21. 21. Findings informed based on a variety of founder, investor, and customer discussions 2121 Completed: Planned / Scheduled:
  22. 22. Review of key risks when assessing blockchain companies 22 Infrastructure Constraints Many companies working in the application layer are building upon underlying infrastructure that isn’t ready with regard to scalability and security Minimal Real-World Viability Many use-cases are nice-to-haves that make little sense in reality for a variety of factors (e.g. authenticity for artwork, sneaker tracking for verifying authenticity) due to need for network affect, adoption cost, sales cycle timelines, etc. Slow Traction from Incumbents for Moon-Shot Implementations Many companies are trying for “moon-shot” implementations of the technology, which creates issues with long-stage enterprise contracts given a lack of trust around the unproven tech – hence, many of these approaches fail to mature from POC/pilot to production deals and live implementations, while ones that try to do the dirty work in less sexy industries, like Ripple, have been able to get their leg in the door Difficulty Converting POCs / Pilots to Live Production Deals Companies focusing on infrastructure struggle converting clients to production because they are “forcing” the technology on companies that don’t understand it, don’t clearly identify the need, or struggle with integration due to cost, time, and risk-adversity Limited Domain Expertise Many solutions companies in the space have no experience selling to enterprises, resulting in issues with taking their product to market and harming adoption Network Affects Transactions operate best when parties all run the same system – creating a need for network affects to kick in before a platform can take off; however, this is the chicken and the egg problem, since adoption will be slow until critical mass is reached Funding Considerations While insiders expect M&A activity to accelerate within the next 12-24 months – i.e. enterprise companies acquiring blockchain service providers to expand their product offerings – exit opportunities to date are marginal, made riskier given high valuations and crowdfunded projects, which complicate cap tables Data Source: Assorted Founder and Investor Calls
  23. 23. 2017 will mark an acceleration in live production deals by FIs in certain use-cases 23 • Driven by efforts to increase scalability, decrease latency, improve security, and drive use for asset transfer beyond cryptocurrency • Ethereum and Bitcoin appear to be the two dominant platforms Public Blockchains • Initially set up on-premise behind firewalls for deployments with sensitive data, as with Ripple Connect; hence, early adoption will be in low-risk, non-mission-critical transactions • Most organizations will eventually have several blockchains for different use-cases, similar to the large number of intranets from different vendors today • Interoperability between ledgers will become critical – this may require a public blockchain for inter-party transactions, or perhaps Ripple’s ILP will manage to meet the need • Within 2-5 years, new markets will emerge around blockchains, such as analytics of this new public data, new financial products adapted to this new enabler, etc. Private Blockchains Financial institutions and other customers are familiarizing themselves with the technology in risk-adverse use-cases on private blockchains Regarding verticals, financial services will be the first adopters, followed by insurance, healthcare, governments, and other regulated use-cases _____ "If 2015 was the year we work up to blockchain, 2016 is the year people are running their proof of concepts. 2017 is when you’ll see the first live applications. 2020 is when you’ll see significant adoption, and in 2025 we’ll see a tipping point in some markets. That’s 10 years out.” –CBDO of Digital Asset Holdings Data Source: CoinDesk
  24. 24. Agenda Review of blockchain protocols: bitcoin, public, and private blockchains Assessment of adoption trends and notable players Appendix 24
  25. 25. Collaboration drives the industry, while competition presents a long-term consideration 25 While many companies are targeting similar use-cases, customers, and channel partners, few blockchain providers have market-ready products, and thereby collaborate with other founders in order to prove the technology, educate customers, and facilitate adoption. Founders we have spoken with openly support this period of collective progress, and only expect to encounter competitive challenges once customer adoption expands beyond POCs and innovation labs towards production deals in 2017. Blockchain Solutions Shared Channel Partners Shared Customers Many developers and founders at leading startups – including ConsenSys, Eris, and Bloq – also actively contribute to the development of public networks such as Bitcoin and Ethereum. In many ways, today’s blockchain community is small and highly collaborative. Sample Study: Blockchain for Financial Services Data Source: Assorted Founder and Investor Calls
  26. 26. Early hype cycle enabled large raises, yet some companies struggled to deliver on product and customer integrations • Strong interest from enterprise customers results in long sales cycles paired with high burn rate for technical teams • Many operate in sectors prone to high compliance costs and regulation (e.g. bitpay), and sometimes even with unclear revenue opportunities given shifts in the industry Newer companies with strong emphasis on infrastructure exhibit ”scrappy” operations and long plays in the market • Small, yet highly technical and experienced teams keep burn low while the market develops • Developing beachhead markets via PoCs, “ambassador” companies, and channel partners for their technology as the groundwork to achieve a long-term vision Capital intensity varies widely based on timing, initial go-to-market, and company dynamics 26 1: Employees – costly dev teams, management, and sales teams 2: Compliance and regulation – key in heavily moderated verticals (e.g. currency, banking) 3: Integration – long timetable for enterprise sales paired with high burn necessitates large raises Typical Costs: Highly Capitalized with High Valuations Limited Funding, with Focus on Infrastructure Most blockchain companies fall in one of two camps: Data Source: Assorted Founder and Investor Calls; Pitchbook
  27. 27. Ethereum presents a compelling alternative to Bitcoin, albeit with notable drawbacks 27 Ethereum offers a powerful platform for smart contract applications, but remains in active development with large questions over the efficacy of its consensus mechanism following the DAO hack Ethereum Is The Most Widely Used Platform for Smart Contract Applications Unlike Bitcoin, it offers a high degree of programmability with its own Java-script-style language, Solidity, and is integrated with most cloud dev environments and consortia groups Ether Presents a Valid Alternative to Bitcoin The cryptocurrency Ether is the second largest by market cap (behind Bitcoin), and is traded on every major exchange globally Network Performance Raises Protocol Questions for the Non-Profit Developers of the ethereum protocol have been working to increase the network’s throughput and efficiency since its launch in 2013, with mixed progress (i.e. data sharding) Concerns Over Centralization Emerge After June 2016 Fork Following the DAO Hack in July 2016, the Ethereum community voted in favor of a “hard fork” to reclaim the funds – resulting in two active Ethereum blockchains and raising strong questions over the network’s security and decentralized nature Data Source: CoinDesk
  28. 28. Blockchain-based smart contracts present a new paradigm in asset registry and transaction 28 Data Source: CoinDesk; pwc; Deloitte; Oliver Wyman Smart Contracts Distributed Ledger (i.e. the Blockchain) New Business Models Real-Time Transaction Distributed (P2P) Provenance Regulatory Inclusive New Cash Products Think of smart contracts as a new form of registering or transacting assets enabled by the blockchain, which in turn may be manifested in new business models
  29. 29. Review of blockchain’s core benefits and risks - Permanent, transparent ledger enables increased transparency and auditability while reducing risk of data loss or conflicting records - High divisibility of ‘units’ facilitates fee-less micro-transactions - Higher efficiency and reduced friction through the elimination of centralized authority for P2P interactions lowers transaction costs - Public or private, depending on the blockchain protocol, with customizable permissions allowing sensitive data to be managed - Identifiable and programmable units enable smart contracts for more effective management of digital assets and offline P2P agreement  For instance, cash flows within a company’s departments may be programmed for specific uses within a certain timeframe, thereby reducing counterparty risk and securing compliance up-front - Elimination of single points of failure and reduced need for trust Key Benefits - Variable throughput capacity between blockchain protocols suggests an uncertain scalability, and potential concerns over transaction latency - Possible consensus protocol flaws, i.e. in the event of malicious agents on the network, may result in a lack of complete asset security - Uncertain regulations in certain use-cases, particularly those handling sensitive assets such as healthcare, securities settlement, and contracts - High deployment costs, particularly in data sensitive, complex data operations, may prove an inhibiting factor in blockchain adoption, and at the very least extend the timetable for deployment - Shift from centralized authority to an autonomous, digital, and decentralized network for trusted P2P transactions challenges societal and industry norms, and may face sharp resistance - Irreversible transactions (e.g. the DAO hack) Primary Concerns 29 Data Source: CoinDesk; pwc; Deloitte; Mastering Bitcoin
  30. 30. Detailed analysis of the blockchain ecosystem 30 Data Source: Blockchain Angels Product/Service Category:Sectors: Confirms strong industry interest for blockchain in financial applications, underlying infrastructure, and bitcoin services. Nascent product categories hint at a broader interest that will likely grow into new sectors in the coming years.
  31. 31. Illustrating the bitcoin blockchain protocol Jim owes Alice money for lunch. He installs an app on his smartphone to create a new Bitcoin wallet. A wallet app is like a mobile banking app and a wallet is like a bank account. To pay her, he needs two pieces of information: his private key and her public key. Jim gets Alice’s public key by scanning a QR code from her phone, or by having her email him the payment address, a string of seemingly random numbers and letters.* The app alerts Bitcoin ‘miners’ around the world of the impending transaction. ‘Miners’ provide transaction verification services in exchange for bitcoin. 1 All pending transactions in the past 10 minutes are grouped for verification. The miners verify that Jim has enough bitcoins to make the payment by completing complex cryptographic computations. Once verified, the new block joins the prior block so a chain is made – the blockchain. This provides an immutable and permanent audit trail to prove occurrence and timing of transactions. *Note: a bitcoin address is a hash (i.e. condensed version) of the public key to add an additional layer of security by not showing the public key until a transaction occurs 31 All the transactions in the block are now fulfilled and Alice gets paid. 22 3 4 5 6 7 Transaction Requested Transaction Authorized Transaction Executed & Recorded Source: Deloitte, PWC
  32. 32. Bitcoin trading volume continues to grow despite volatility, competition 32 Bitcoin Trading Volume, 2015 - Present Despite rapid growth in alternative blockchain protocols for cryptocurrency, namely Ether, Bitcoin maintains a firm status as the leading challenge to traditional fiat currency Leading Cryptocurrencies, by Market Cap Source: CoinDesk
  33. 33. General applications of cryptocurrency Users Cryptocurrency Merchants Exchanges Miners Hardware manufacturers Mining Bitcoin PoS Bitcoin processing Risk & fraud management PSPs supporting bitcoin International remittance Bitcoin ATM Bitcoin debit cards Wallets 33 Bitcoin companies have traditionally operated within these sectors _____ However, many leading Bitcoin firms are beginning to shift to a “hybrid” model, meaning offering blockchain solutions in addition to their original core business

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