State of Bitcoin Q2 2015

1State of Bitcoin Q2 2015
State of Bitcoin Q2 2015
16th July 2015

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

State of Bitcoin Credits
• Creator and producer: Garrick Hileman
• Statistical assistance: Danqing Ying
@GarrickHileman @DanqingYing

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. Technology
7. Regulation and Macro

1. Summary and
Adoption Dashboard

Q2 2015 Summary
Increasing competition and cost
pressure are driving consolidation in
the bitcoin ecosystem, a trend we
anticipate continuing
VC investment remained robust in Q2
with average deal size comparable to
Q1
Notable financial institutions like
Nasdaq began trialing bitcoin
technology; many major banks actively
examining blockchain use cases
Mixed industry view of final NY
BitLicense regulations; Xapo
decamps from US to Switzerland
citing customer privacy concerns
Merchant adoption continues to lag
due to bitcoin’s underwhelming value
proposition for mainstream consumers
First positive quarter since Q2 2014
for bitcoin’s price amid a return of
macroeconomic and banking
system concerns

Key Bitcoin Adoption Metrics
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. Number of VC-backed startups and VC investment
unadjusted for closed companies: Melotic, Buttercoin, BitInstant, and TradeHill.
Quarterly Year Ago
June-15 March-15 Q2/Q1Δ Q1/Q4Δ June-14 Δ
Commerce
Wallets 9,345,510 8,457,207 11% 14% 5,467,263 2x
Merchants 100,000 88,000 14% 7% 65,640 2x
Merchants’ annual revenue ($bn) 187 187 0% 4% 30 6x
ATMs 426 374 14% 9% 126 3x
Unique bitcoin addresses 261,770 203,189 29% 29% 136,152 2x
Industry
All-time VC investment ($m) $832 $687 21% 50% $252 3x
Number of VC-backed startups 113 105 8% 15% 58 2x
Media
Mainstream media mentions 371 458 -19% -10% 1035 -64%
Technology
Network hash rate (billion/second) 351,177,610 346,028,956 1% 11% 104,506,281 3x
Valuation
Bitcoin market capitalization ($bn) $3.8 $3.4 11% -22% $8.0 -53%

2. Price and Valuation

CoinDesk Bitcoin Price Index –
Q2 & YTD by the Numbers
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC

$200
$210
$220
$230
$240
$250
$260
$270
1-Apr 8-Apr 15-Apr 22-Apr 29-Apr 6-May 13-May 20-May 27-May 3-Jun 10-Jun 17-Jun 24-Jun
Bitcoin’s Price Was Less Volatile Amid
a Mix of Positive and Negative News
29 May
Silk Road operator
Ross Ulbricht
sentenced to life in
prison
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
6 April
Bitcoin
marketplace
Buttercoin
folds despite
having raised
capital from
high-profile
investors
Xapo moves HQ
to Switzerland
citing customer
privacy concerns
15 May
3 June
Final BitLicense
regulations released
amid generally
negative industry
feedback
7 May
ItBit nets $25m
investment,
launches
NYDFS-licensed
bitcoin
exchange
11 May
Nasdaq becomes
latest firm to trial
blockchain
technology
6 June
Overstock to
issue ‘digital
corporate bond’
on bitcoin’s
blockchain
7 May
Isle of Man trials
first government-
run blockchain
project

Bitcoin’s Price in Q2 Saw the Lowest Peak-to-Trough
Price Variation of Any Recent Quarter
Source: CoinDesk
Date Quarterly Price High Quarterly Price Low
Peak-to-Trough
Percentage Δ
Q1 2014 $951.39 (6 January) $458.50 (31 March) 52%
Q2 2014 $665.73 (3 June) $360.84 (10 April) 84%
Q3 2014 $647.34 (2 July) $374.73 (29 September) 42%
Q4 2014 $427.24 (12 November) $309.87 (30 December) 27%
Q1 2015 $314.59 (2 January) $177.28 (14 January) 44%
Q2 2015 $262.48 (30 June) $218.27 (14 April) 20%

Reduced Bitcoin Price Volatility = Lower Exchange
Trading Volume, Which Continues Downward Trend
Data sources: CoinDesk, Bitcoinity
Monthly Bitcoin Trading Volume
0
5
10
15
20
25
0
1
2
3
4
5
6
7
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
BTCMillions
$Billions
Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)

2015Apr May Jun
Melotic shut down its
digital asset exchange
4 May
itBit raised $25m
7 May
Bitso closed a funding
round led by Bitcoin
Opportunity Corp
26 June
Buttercoin closed
6 Apr
Cryex raised $10m
7 May
BTCXIndia to close after losing bank account
8 May
Exchange Sector in Flux: New Exchanges are Still
Raising Money Even as Others Close, Merge or Pivot
Source: CoinDesk
• The ‘no fee’ business model employed by many Asian exchanges is
unsustainable
• Many exchanges are diversifying their products and services (eg BTC
China added a mining pool and merchant payment services last year)

What is Behind the Recent Surge in Bitcoin’s Price?
Sources: CoinDesk, Dizzynomics, Hileman (2013) ‘History and Prospects for Alternative Currencies’, LSE working paper
Alternative currencies act
as a hedge against banking
system problems and
uncertainty surrounding
national currencies
Turmoil in the China’s
stock market appears to
have re-ignited Chinese
interest in bitcoin
Regulated exchanges and
new publicly traded
investment options now
exist, opening the door to
new investors
• Another tailwind behind bitcoin’s price is the upcoming reduction in new bitcoin
supply, scheduled to take place by approximately summer 2016, when the
block reward will halve from 25 new bitcoins to 12.5 new bitcoins

Wedbush Securities Projects the Bitcoin Price Will
Reach $400 by 2016
Source: Wedbush Equity Research Report
• Wedbush expects bitcoin to account for 10% of the $5.9tn online payments
market, 20% of the $744bn remittance market and 20% of the $924bn
micro-transactions market by 2025.
Bitcoin Valuation Framework
Outcome $/BTC Probability
Probability
Weighed
‘Napster’
Outcome
- Overtaken by another coin
- Fatal flaw uncovered
- Broadly made illegal with strict enforcement
$0 50% $0
‘PayPal’
Outcome
- Specific use cases take hold (eg remittance,
micro-transactions, machine-to-machine, etc.)
$400 49.98% $200
‘Internet’
Outcome
- Bitcoin becomes global working capital of
trade ($20tn monetary base)
$1m 0.02% $200
Probability weighed outcome $400

Bitcoin’s Market Cap is Still Well Below Peak, but
Total ‘Industry Value’ Remains High
Source: Pantera
• With over $800m in venture investment, the value of bitcoin’s currency
alone is not a complete reflection of bitcoin’s total value

In Q2, Number of New Altcoins Increased by 9%,
Market Value Share Increased 2%
Data source: CoinMarketCap
*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.
64
216
347
483
590 594
648
9%
23%
7% 8%
9%
7%
9%
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 Jun-15
Total Number of Altcoins Altcoin Market Cap Share (%)

Relatively Little Change in Q2 Amongst Top 10 Altcoins;
Paycoin was Q2’s Biggest Loser
Data source: CoinMarketCap data as end of quarter (ie 31 March and 30 June 2015, respectively)
Q2
Rank
Name Market Cap
Q1
Rank Δ
1 Bitcoin $3,764,067,688 -
2 Ripple $377,494,120 -
3 Litecoin $166,725,659 -
4 Dogecoin $20,653,353 +2
5 BitShares $17,342,951 -
6 Stellar $16,864,960 +1
7 Dash $15,362,982 -3
8 Nxt $12,765,963 -
9 Peercoin $10,864,693 +2
10 BanxShares $10,412,582 +3

3. Media and
Sentiment

Q2 Positive News
NASDAQ follows other Wall Street firms
such as UBS in employing blockchain
technology
ItBit became first US-based exchange to
receive a New York banking charter,
granting it approval from the NYDFS to
launch services nationwide
Banks and Wall Street executives are embracing blockchain technology
Source: CoinDesk. Images from business2community and LinkedIn

Q2 Negative News
Bitcoin marketplace
Buttercoin folded despite
$1.3m in venture funding
from Google and other
high-profile investors
The FBI received reports of more than $18m in
losses in the past year stemming from the
spread of bitcoin ransomware Cryptowall
Source: CoinDesk
Ross Ulbricht’s high-profile trial and
sentencing continued, drawing attention
to illegal bitcoin use

Q2 Most-Viewed CoinDesk Articles;
Only One Article is Related to Bitcoin’s Price
Rank Title Date
1 Inside 21's Plans to Bring Bitcoin to the Masses 12 May
2 Richard Branson to Host Bitcoin Summit on Private Island 28 April
3 My Life Inside a Remote Chinese Bitcoin Mine 8 June
4 State of Bitcoin Q1 2015: Record Investment Buoys Ecosystem 10 April
5 New York Stock Exchange Launches Bitcoin Price Index 19 May
6 Dogecoin Founder Exits Crypto Community Citing ‘Toxic’ Culture 24 April
7 Is Greece Really Behind Bitcoin's Latest Price Surge? 18 June
8 New CoinDesk Report Reveals Who Really Uses Bitcoin 10 June
9 Payments VP: One Thing Stands Between Bitcoin and Mass Adoption 8 April
10 Bitfury to Release Light Bulbs that Mine Bitcoin in 2015 2 June
Source: CoinDesk top 10 Q2 stories based on page views
CoinDesk’s Top 10 Most Viewed Stories in Q2

Mainstream Media Coverage of Bitcoin Dropped
Quarter-Over-Quarter
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
180
127
73
78
144
121
59
47
0 20 40 60 80 100 120 140 160 180 200
Sina
WSJ
NYT
FT
Q2 2015 Q1 2015

Google Searches: ‘Bitcoin Greece’ and ‘Bitcoin
Argentina’ Rising Fast in Past Three Months
Past 90
Days
Related Searches: Top Related Searches: Rising
Past 12
Months
Source: Google Trends data as of 30 June 2015

5% of Millennials Surveyed Said They Had Used
Bitcoin, But Did Not Intend to Use it Again
51%
of respondents had never used
bitcoin nor did they have any plans
to do so
22%
of respondents used it at the time or
had used it in the past, and
intended to use it again
22%
of respondents had never used
bitcoin before, but planned on using
the digital currency
5%
of respondents said they had used
bitcoin, but did not intend to use it
again
Source: Goldman Sachs Survey

‘Cost’ is Major Factor in Financial Preferences of
Millennials, ‘Privacy’ Less Important
Source: Goldman Sachs Survey
Fees
Security
Privacy
• 22% favored sacrificing privacy
for the sake of security
• 13% were happy to accept loss
of privacy for higher security
• 11% didn’t care about privacy
because they presumed the
government was already
monitoring their transactions
• 20% weren’t willing to give up
financial privacy
Order of Importance

Who Uses Bitcoin: Almost 60% of Bitcoin Users are
Under 35 Years Old
Source: ‘Who Really Uses Bitcoin?’ by CoinDesk

Who Uses Bitcoin: Largely Balanced Spread
Across Different Earning Brackets

Who Uses Bitcoin: Many Bitcoin Users are
Well Educated, >20% Possess Advanced Degrees

Who Uses Bitcoin: Estimated <10% of All Bitcoin
Users are Female

4. Investment and M&A

Competition and Cost Pressure in Exchange and
Mining Sectors is Driving Consolidation
Source: CoinDesk. *Note: The deal between BTCS and Spondoolies-Tech was a merger of equals.
Jun 2015
Jun 2015
Apr 2015
Jun 2015
Apr 2015
Q2 Merger & Acquisitions
CoinBR
Acquirer Acquiree
*

Two Biggest VC Deals in Q2
$50m $28m
(Series A) May 2015(Series C) April 2015
Source: CoinDesk

Ripple Has Secured Seven Banking Partnerships
Source: CoinDesk
• Two of Australia's 'big four' banks, Westpac Banking Corporation and the Australia and
New Zealand Banking Group, are experimenting with peer-to-peer transfers on the
Ripple protocol
• Commonwealth Bank of Australia (CBA) – another 'big four' rival – is trialing the tech for
transfers between its subsidiaries

Total Q2 VC Investment Dropped Significantly From Q1;
However, Q1 Was Skewed by 21 Inc Announcement*
$88
$74
$133
$228
$145
$0
$50
$100
$150
$200
$250
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Quarterly Total VC Investment ($m)
Millions
*The precise timing of when 21 Inc raised $116m has not been revealed and has therefore been included in the quarter it was announced (Q1 2015).
Data sources: CoinDesk, Crunchbase

Average Q2 Venture Deal Size Was Comparable to Q1
Data sources: CoinDesk, CrunchBase
Millions
$4.0
$3.1
$4.4
$9.5 $9.7
$0
$2
$4
$6
$8
$10
$12
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Quarterly Average VC Investment Deal Size ($m)

All-Time Bitcoin Venture Capital Investment Increased
21% Q/Q to $832m
$832m$145m
Total VC investment in
cryptocurrency startups to date:
Q2 2015 bitcoin VC investment:
$228m
Q1 2015 bitcoin VC investment:
+21%
Increase in total to-date VC
investment from end of Q1:

Bitcoin VC Investment Projected to Continue
Outpacing Early-Stage Internet Investment
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. In calculation of ‘2015 bitcoin – projected’, latest Q3 BitFury deal is included.
Data sources: CoinDesk, PricewaterhouseCoopers
Bitcoin vs Early Internet VC Investment ($m)
Millions
2014 Bitcoin
2015 Bitcoin -
Projected
1995 Internet 1996 Internet
$362
$786
$250
$639
$0
$100
$200
$300
$400
$500
$600
$700
$800

Europe
23%
Asia 6%
Middle
East 2%
Latin
America
1%
US &
Canada
68%
Even With Xapo’s Move to Europe, the US Continues
to Dominate Bitcoin VC Investment
Regions Q2 ($m) Q1 ($m) Q/Q Δ ($m) Q/Q Δ
US &
Canada
596.0 463.9 132.1 28%
Europe 170.8 158.1 12.7 8%
Asia 42.2 42.1 0.1 0%
Middle
East
14.0 14.0 0 0%
Latin
America
7.5 7.5 0 0%
Africa 1.1 1.1 0 0%
Total 831.6 686.8 229.1 21%
$ Invested as of Q1
• US and Canada had the largest Q/Q% increase in investment
• Only US and Canada, Europe and Asia received investment in Q2
Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk, CrunchBase
$ Invested as of Q2
Europe
21%
Asia 5%
Middle
East 2%
Latin
America
1%
US &
Canada
72%

23 Countries Have a VC-Backed Bitcoin Startup;
US Investment Almost 3x Rest of World Combined
Millions
0.1 0.2 0.3 0.3 0.5 0.8 1.1 1.2 1.5 2.8 2.9 2.9 3.4 4.0 6.9 14.0
26.9 28.1
39.9 40.5 41.3 42.9
569.1
$0
$100
$200
$300
$400
$500
$600
Total Funding by Country ($m)

The Philippines Was the Only New Country to Add
a VC-Backed Bitcoin Startup in Q2
Data source: CoinDesk, Image from Wikipedia
Philippines

Silicon Valley’s Share of All-Time Bitcoin VC
Investment Drops from 59% in Q1 to 49% in Q2
• Xapo’s relocation to Switzerland in Q2 significantly reduced Silicon Valley’s
share
• Total number of VC-backed bitcoin companies increased from 105 in Q1 to
113 in Q2, an 8% increase
$ Invested No. of Companies
Note: Prior State of Bitcoin data may differ due to new funding information obtained. Date sources: CoinDesk, CrunchBase
Location Value ($m)
No. of
companies
Silicon Valley $403.9 32
Rest of World $427.7 81
Total $831.6 113
Silicon
Valley 49%Rest of
World 51%
Silicon Valley
28%
Rest of World
72%

Venture Investment Falls Into
Seven Different Bitcoin Industry Sectors
Payment
Processing
Wallets
Mining
Financial
Services
Exchanges
Infrastructure
Universal
Source: CoinDesk

Industry Sector Trends: Universals Raised Most Funding
in Q2, Followed by Financial Services and Exchanges
Q2 VC Investment by Ecosystem Category ($m)
$0.0 $0.0
$1.5
$12.5
$35.0
$45.7
$50.1
$0
$10
$20
$30
$40
$50
$60
Millions
Mining Infrastructure Wallet Payment
Processor
Exchange Financial
Services
Universal

Universals Continue Pulling Away From Other
Sectors in Total VC Investment
2013 to 2015 VC Investment by Ecosystem Category ($m)
Data source: CoinDesk
$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
Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure
Millions

Payment
Processor
9%
Infrastructure
8%
Exchange
10%
Financial
Services
8%
Mining
14%
Universal
38%
Wallet
13%
Universals Command Nearly 40% of VC Investment
Followed by Mining, Financial Services, Exchanges
• Financial Services received highest growth in VC investment at 89%
• Five new VC backed Financial Services startups added this quarter
• Mining and Infrastructure did not receive VC investment in Q2
$ Invested as of Q1 2015$ Invested as of Q2
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter
Sector
Q2 Q1 Q/Q Δ
($m)
Q/Q Δ
($m) ($m)
Payment
Processor
76.4 63.9 12.5 20%
Infrastructure 55.7 55.7 0.0 0%
Exchange 100.1 65.1 35.0 54%
Financial
Services
97.1 51.4 45.7 89%
Mining 96.5 96.5 0.0 0%
Universal 312.7 262.6 50.1 19%
Wallet 93.1 91.6 1.5 2%
Total 831.6 686.7 144.8 21%
Payment
Processor
9%
Infrastructure
7%
Exchange
12%
Financial
Services 12%
Mining
12%
Universal
38%
Wallet
11%

Q2 2015 Investment Rounds
Source: CoinDesk
Close Date Company Size ($m) Round Select Investors Headquartered
June-15 Ascribe 2 Seed
Earlybird Venture Capital, Digital
Currency Group, Freelands Ventures,
angel investors
Berlin
June-15 Vogogo 12.5 Second
Beacon Securities, Clarus Securities,
Salmon Partners
Calgary
June-15 Case 1.5 Seed
FuturePerfect Ventures, RRE
Ventures, the Rochester Institute of
Technology Fund, High Line Venture
Partners
New York
June-15 Reveal 1.5 Seed
Mike Hirshland, Boost VC, Digital
Currency Group, the Stanford StartX
Fund, Barry Silbert
San Francisco
June-15 OpenBazaar 1 Seed
Andreessen Horowitz and Union
Square Ventures, William Mougayar,
angel investor
Washington,
D.C.

Q2 2015 Investment Rounds (contd.)
June-15 Symbiont 1.25 Seed Duncan Niederauer, Matt Andresen New York
June-15 Mirror 8.8 First
Route 66 Ventures, Battery Ventures, Crosslink
Capital, RRE Ventures, Tim Draper
Palo Alto
May-15 Bitbond 0.67 Seed Point Nine Capital, Christian Vollmann Berlin
May-15
Ripple
Labs
28 First
US futures, CME Group, Seagate Technology,
AME Cloud Ventures, ChinaRock Capital
Management, China Growth Capital, Wicklow
Capital, Bitcoin Opportunity Corp., Core
Innovation Capital, Route 66 Ventures, RRE
Ventures, Vast Ventures, Venture 51
San Francisco
May-15 itBit 25 First
RRE Ventures, Liberty City Ventures, Jay W
Jordan II, James Pallotta
New York
Source: CoinDesk

Q2 2015 Investment Rounds (contd.)
May-15 Cryex 10 First
White Star Capital, Northzone
Ventures
Stockholm
May-15
Satoshi Citadel
Industries Inc.
0.1 Seed Joe Maristela Makati
April-15 Hedgy 1.2 Seed
Tim Draper, Marc Benioff, Sand Hill
Ventures, Adam Draper, Brayton
Williams
San Francisco
April-15
Circle Internet
Financial
50 Third
Goldman Sachs, IDG Capital Partners,
Breyer Capital, General Catalyst
Partners, Accel Partners
Boston
April-15 Gem 1.3 Second
KEC Ventures, First Round
Capital, RRE Ventures, Robert
Wolfson
Venice
Source: CoinDesk

5. Use Cases and
Commerce

Notable Q2 Public Announcements of Blockchain
Initiatives by Governments and Financial Services
Factom partners with Honduras government on
a new land title registry initiative
Source: CoinDesk
Isle of Man trials the first government-run
blockchain project – a registry of digital currency
companies operating on the island
NASDAQ explores how a blockchain-based
solution could change the way shares are
transferred and sold
Estonia’s LHV Bank has backed a project to
create a financial services platform and
money-transfer app that will utilize bitcoin to
facilitate transactions

Select Firms Investigating Blockchain Use Cases
Exploring blockchain potential
Blockchain firms at accelerator
Researching blockchain in London lab
Experimenting with bitcoin-like rewards
Blockchain-based ‘Internet of Things’ on digital cash
Hired decentralized ledger employee
Enterprise-wide blockchain initiative
Planning blockchain-based stock exchange
Invested in 21 Inc
Invested in Ripple Labs for blockchain exposure
US Federal Reserve Reportedly talking with IBM about digital cash
Exploring program with Ripple
Exploring how to incorporate blockchain technology Source: CNBC

Overstock and UBS are Experimenting With Bonds
on the Blockchain
Sources: CoinDesk, Bitcoin Magazine
• UBS’s smart-bonds, as described by Alex Batlin,
are bonds where “risk-free interest rates and
payment streams were fully automated, creating a
self-paying instrument”
• He said: “The key attraction is that there is no
middle or back office and no registry, so clearly a
major impact on costs”
Alex Batlin
UBS Bank’s chief
information officer for
innovation

Digital Identity: Blockchain-Based Identity Solutions
Could Significantly Change Commerce and Government
• Verifiable identity is key
to accessing many
financial services
• Blockchains may enable
people to control their
own identity rather than
outsource control to
governments, banks,
Facebook, etc.
• Personal control of
identity may
fundamentally change the
relationship between
government/corporations
and individuals
Source: Bank Innovation
“10 years from now it
may be harder to
change identity
providers than it is to
change countries”
Vitalik Buterin,
Ethereum

Prediction Markets: Blockchain Technology Enables
New Kinds of Decentralized Forecasting Platforms
Sources: CoinDesk ‘Cryptocurrency 2.0 Report', Bank Innovation, Ethereum
• In the past, centralized prediction markets have been subject to regulation
or banned (eg Intrade)
• Augur has developed a decentralized prediction market that can be used
to harness the power of crowds
• Participants ask questions about future events, which the broader
community can bet on, by purchasing and trading a shares in that
prediction

More than 100,000 Merchants Now Accept Bitcoin,
Up from 88,000 in Q1 (+14%)
60K 40K
Data sources: Coinbase, BitPay

Growth in New Bitcoin-Accepting Merchants
Picked-up in Q2, But Still Below Previous Quarters
Sources: CoinBase, BitPay
Number of New Bitcoin-Accepting Businesses Added Each Quarter
16,800
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
16,000
18,000
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

Bitcoin-Accepting Merchant Forecast Remained at
Approximately 120,000 by End of 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 (16 September 2013), 20,000 (13
January 2014) and 30,000 (28 May 2014), respectively, calculated using linear interpolation.
R² = 0.9593
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
Series1 Linear (Series1)Total Merchants Total Merchants

North America and Europe Continue to Have the
Most Bitcoin-Accepting Businesses
Source: Coinmap.org (screenshot on 30 June)

Number of Drug Listings on Bitcoin-Accepting Websites
Remains High in spite of Silk Road Prosecution
Source: Economist

Forecast for Total Bitcoin Wallets by End of 2015
Maintained at 12 Million, but …
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. Q2 MultiBit figures note made available, held constant as end of March.
R² = 0.9854
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
Millions
Series5 Linear (Series5)Total Wallets Forecast Wallets

… New Wallet Growth Rate Remains ‘Remarkably
Consistent’ for Blockchain.info
Data source: Blockchain.info
118
515
481
343
481
451 454
488
0
100
200
300
400
500
600
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Thousands
Number of New Wallets Added Each Quarter

While New Bitcoin ATM Growth Remains Below
Previous Levels …
Data source: CoinATMRadar
43
79
112
104
32
52
0
20
40
60
80
100
120
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Increase in Number of ATMs Each Quarter

… New Methods for Acquiring
Bitcoins In-Person are Emerging
• Taiwanese startup Maicoin has launched
a system that lets users buy bitcoin at
10,000 convenience stores in the territory
• Users set up a bitcoin purchase on
MaiWallet app or web interface, which
displays a barcode for a convenience
store cashier to scan
• Maicoin customers need not provide any
ID to use the service due to limit imposed
according to AML regulation
• The system is purchase-only at this stage
and does not allow users to sell bitcoins in
return for cash
Sources: CoinDesk, Reddit

Ways to Pay Cash for Bitcoins Other than Using
Bitcoin ATMs Continue to Grow
Location and Method Description and Network Size Direction Fees
Lithuania: Foxbox terminals 70 units Buy up to 16%
Taiwan: BitoEX at
convenience stores
5,000 stores Buy 1% and standard NT$25 fee
Ukraine: BTCU >4,000 terminals Buy
3.5% (official), 10-15% (non-
official)
Romania: Zebrapay
terminals
>800 terminals Buy 4%
US: LibertyX 2,500 stores Buy 0%
Mexico: SendBitcoin.mx 6,000 bank ATMs Sell 1%
Philippines: Coins.ph 450 bank ATMs Sell free for Coins.ph users
Czech Republic: WBTCB 8,000 terminals and post offices Buy 7-10% + 10 Kč (0.4 USD)
Spain: Chip Chap and
Halcash
10,000 bank ATMs Sell 1% + €1.5
Austria: Bitcoinbon from
Coinfinity
600 Tobaco kiosks Buy ~10%
Thailand: Coins.co.th
9,000 Krungthai bank ATMs (sell), ~3,000
Kasikorn bank cash deposit machines (buy)
Buy/Sell N/A
South Korea: Coinplug
8,000 7-11 stores (24,000 planned) + 7,000
regular ATMs
Buy N/A
Poland: Chip Chap App 4,000 bank ATMs Sell 1% + €1.5
Source: Coin ATM Radar

Bitcoin Lending: The US, Canada, Brazil and India
are the Most Popular Markets for Loans
Data source: BTCJam

Bitcoin Lending: ‘Business’ is Dominant Use of
Bitcoin Loans
Data source: BTCJam

6. Technology

Bitcoin Can be Visualized as the Missing Piece of
the Online Protocol Puzzle
Source: Pantera
• Compared to
other online
protocols,
bitcoin is
unique in that
users have an
opportunity to
own part of the
protocol

Open Assets Protocol Powering First Publicly Disclosed
Blockchain Implementation by Wall Street Firm
Sources: CoinDesk, Coinprism
• NASDAQ announced it is working with Chain to use Open Assets, which is
managed by Coinprism, for its Private Market Platform
• Adam Ludwin, CEO and founder of Chain, said: “The shares will move on
the Open Assets protocol, a colored coins implementation that allows users
to augment small amounts of bitcoin to represent shares.”
• Shares can then be transferred and tracked across the bitcoin blockchain
through the use of a ‘barcode’ added to a bitcoin transaction note field

Contentious Debate Amongst Bitcoin Core
Developers Over Whether to Increase the Block Size
• Raising the block size will enable
more transaction throughput, allowing
bitcoin to grow into a potential
competitor for other major transaction
networks
Sources: hashingit.com, Reddit, Inside Bitcoins, gavinandresen.ninja, CoinGecko
• Raising the block size will increase
mining centralization; other
solutions are available to scale-up
the network
YES NO
Gavin Andresen Gregory MaxwellMike Hearn Peter Todd

Number of Bitcoin Nodes Continues Declining,
Down 8% from 6,480 at End of Q1
Data sources: Bitnodes

Bitcoin Network Survives Q2 ‘Stress Test’
• What was the bitcoin ‘stress test’?
– CoinWallet, a bitcoin broker, planned the stress test starting 22 June. It
sought to spend 20 BTC (around $5,000) on transactions totaling about
200MB in data, but was only able to send 15% due to a server crash
• What was the purpose?
– To flood the bitcoin network with transactions to see if the current 1MB block
size limit was adequate and whether the network could recover quickly from a
surge
• What was the result?
– While CoinWallet faced criticism for launching the test live on an
unsuspecting bitcoin network, with some calling it an “attack”, the network
passed the test without major incident
• What’s next?
– Debate over whether to increase the block size continues …
Sources: CoinDesk

Bitcoin Transactions Continue Rising Steadily
Source and note: Blockchain.info, *100 most popular addresses.
Number of Transactions Per Day
40,000
60,000
80,000
100,000
120,000
140,000
160,000
01/07/2014 29/09/2014 28/12/2014 28/03/2015 26/06/2015
Total no. of daily transactions No. of daily transactions excluding popular addresses

F2Pool
AntPool
BitFury
BTC China Pool
BW.COM
21 Inc.
KnCMiner
Eligius
Slush
BTC Guild
Telco 214
GHash.IO
BitMinter BTC Nuggets
Unknown
China-Based Miners with Low-Cost Electricity Now
Represent Over 50% of Total Bitcoin Network
Data source: Four-day average as of 30 June 2015 on Blockchain.info

Bitcoin’s Network Difficulty Q/Q Growth Rate Halved
Amid Bitcoin Price Weakness for Most of Q2
Notes: Difficulty represents the number of necessary hash calculations to mine a new block.
Data source: CoinDesk
11.8
17.8
6.0 6.1
3.0
236%
106%
17% 15%
6% 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 Q2 2015
Billions
Quarterly Increase in Bitcoin Mining Difficulty
Quarterly Increase in Mining Difficulty Percentage Increase in Mining Difficulty
Hashrate

21 Inc Update: the Most Well-Capitalized Bitcoin
Startup Reveals Audacious Business Model
Sources: Medium, WSJ
21’s BitShare chip:
• Can be “embedded into an Internet-
connected device as a standalone chip
or integrated into an existing chipset as
a block of IP to generate a continuous
stream of digital currency for use in a
wide variety of applications”
• New approach to micropayments
• Chips can continuously generate
revenue (automatically pay people in
bitcoin)
• Decentralized device authentication
• Facilitate device coordination
• Devices that can pay for associated
services

21 Inc Update: Growing Revenue Faster Than
Facebook and Google Did
Source: FT Alphaville
Balaji S Srinivasan,
CEO of 21 Inc
• "Bitcoin is bigger than Google. If they [Google] turned off
all their data centers and pointed them at bitcoin, they'd
be less than 1% of the network."

Overall Findings From Bitcoin Wallet Study
Suggest Privacy “Not Well” Protected
Usability Quality Feedback
Source: Spring 2015 Wallet Privacy Rating Report

Application Developers Can Choose From a Growing
Variety of Blockchain Platforms to Develop on
Funding Source of Funding Currency Unit Partners/Apps
Blocksteam $21m Venture Bitcoin Unknown
Chain $14m Venture None Nasdaq
Counterparty Unknown Community funded Counterparty Swarm
Epiphyte $20k Venture None Unknown
Eris $10k Venture None Decerver
Ethereum $18m Crowd Ether Mist, Augur
Hyperledger Unknown Unknown None Unknown
Maidsafe $11m Equity and crowd Maidsafe The Safe network
PeerNova $14m Venture None Overstock
Ripple $37m Venture Ripple Codius, RBS
Stellar $3m Venture Stellar Unknown
Sources: Crunchbase, CoinDesk 'Cryptocurrency 2.0 Report', Bank Innovation
• Other factors affecting developer preferences include: trust, commercial model,
ease of development and performance and reliability

‘Ether’, the
currency unit, will
be used for
transaction fees,
smart contracts,
etc.
Ethereum
blockchain is fully
programmable
(‘Turing complete’)
and more
economically
efficient than bitcoin
Ethereum will
evolve from proof-
of-work to “proof-of-
stake”, which is
more
environmentally
friendly and energy
efficient than
bitcoin’s proof-of-
work
Ethereum’s mining
can be done by
‘regular’ computers,
making it more
affordable and
accessible than
bitcoin mining
Ethereum is One of the Most Hyped ‘Altchains’;
Some Key Advertised Differences from Bitcoin
1. Cryptocurrency 2. Blockchain 3. Decentralized
Consensus
Mechanism
4. Mining
Source: Ethereum

7. Regulation and
Macro

Escalation of Greek Crisis Reinforces Bitcoin Status as
a Macro Hedge for Financial Instability
Sources: CoinDesk, Reuters. Image from Pinterest
• Reuters: “Bitcoin surged by as much as 7% on Tuesday [30 June] and was on
track for its longest winning streak in 18 months, as concerns that Greece could
tumble out of the euro drove speculators and Greek depositors into the
decentralized digital currency.”
• However, bitcoin’s price plummeted by over 10% on Monday 13 July following
the preliminary announcement of a new bailout agreement between Greece and
its creditors

While Greek Google Searches for ‘Bitcoin’ Have
Skyrocketed, Little Evidence Greeks are Buying Bitcoin
Source: Google Trends
“While a convenient
narrative, there remains
little evidence to
suggest … that activity in
Greece is actually at the
root of the movement” in
bitcoin’s price
• Nearly impossible for most Greeks to acquire bitcoins while
banking system is closed; only two bitcoin ATMs in Greece
• Very few Greek businesses accept bitcoin for payment
• An estimated 40% of Greeks have never used the Internet
Paul Gordon,
UK Digital
Currency
Association

Greece is Not Alone:
24 Countries Have an Ongoing Debt Crisis …
Sources: Jubilee Debt Campaign, Guardian. Images from Wikipedia
Tunisia
St Vincent and the
Grenadines
Portugal
Sri Lanka
Jamaica
Spain
Montenegro
Ireland
Croatia
Marshall
Islands
Greece
Costa Rica
Macedonia
Zimbabwe
El Salvador
Belize
Lebanon
Sudan
Grenada
Dominican
Republic
Armenia
The Gambia
Ukraine
Cyprus

… and 14 More Are Vulnerable to a Debt Crisis
Samoa
Ethiopia
Laos
Mauritania
Dominica
Cape Verde Senegal
Bhutan
Ghana
Tanzania
Uganda
Sao Tome e
Principe
Mozambique
Mongolia
Sources: Jubilee Debt Campaign, Guardian. Images from Wikipedia

Chinese Stock Bubble Crash Arguably More
Significant Influence than Greece on Bitcoin’s Price
Source: dizzynomics. Image from JNLC

Wall Street Should Take Blockchain Technology
Seriously
Sources: YouTube, CoinDesk, LinkedIn
“Distributed ledger technology does have the
potential to be disruptive in certain business
models, but it has at least as much potential
to be enormously empowering in existing
middle business models in terms of making
them lower cost, more efficient and less risky.”
“So we won’t get there overnight but we will
get there. How seriously should you take this?
I would take it about as seriously as you
should’ve taken the concept of the Internet in
the early 1990s. It’s a big deal and it is going
to change the way that our financial world
operates.”Blythe Masters,
CEO of Digital Assets
Holdings LLC

According to a recent
report from the Euro
Banking Association
(EBA):
“Existing financial services
could be ‘powered by
cryptotechnologies’ offering
financial institutions
potentially lower costs,
better products and faster
time to market.”
Sources: CoinDesk, EBA's ‘Cryptotechnologies, a Major IT Innovation and Catalyst for Change’ report
Banks Should Take Bitcoin Seriously

Very Serious People: Financial and Economic
Leaders Continue to Join Bitcoin Companies
Sources: WSJ, CoinDesk, LinkedIn
Dee Hock,
Visa. Now with Xapo
Anja Manuel,
US Department of State.
Now with Ripple Labs
Larry Summers,
US Treasury. Now
with Xapo and 21 Inc
Bill Dennings,
MasterCard. Now
with Bitreserve
Donald Donahue,
DTCC. Now with Ripple
Labs
Sheila Bair,
FDIC. Now with itBit
John Reed,
Citi. Now with Xapo
Hernando de Soto
ILD. Now with BitFury

Views on Bitcoin’s Positive Impact on Economic Growth
Hernando de Soto
ILD. Now advisor at BitFury
Source: CoinDesk
Blockchain technology “may just be one of the
most significant contributions to the history of
organizing knowledge”.
Larry Summers,
US Treasury. Now advisor
at 21 Inc. and Xapo
“It seems to me that the people who confidently reject all
the innovation here [in new payment and monetary
systems] are on the wrong side of history.”
“I am much more confident that the world of payments will
look very different 20 years from now than I am about
how it will look.”

New York Releases Final BitLicense Regulations to
Mixed Industry Reaction
• Firms will no longer need approval for
each new software update or round of
VC funding
• Companies can now satisfy BitLicense
and money transmitter license
requirements simultaneously with a
"one-stop" application submission
• Notably absent were several proposals
put forth by the digital currency
community, including exemptions for
entities working on open-source
protocols, micropayments, and a 24-
month safe harbor period for early-
stage startups
Source: CoinDesk
"They changed
so little with this
version, it's
laughable”
- Elizabeth Stark,
Yale Law School
“It's an important
stake in the
ground”
- Jeremy Allaire,
Circle
“It's a mixed bag”
- Jerry Brito,
Coin Center
"It's troubling that this
nascent industry is being
subjected to more
onerous regulations“
- John Collins, Coinbase

Select Company Reactions to BitLicense Regulation
• ShapeShift would cease offering services to
New York residents due to the finalization of the
BitLicense digital currency regulatory
framework. Its founder and CEO Erik Voorhees
described the customer data requirements
imposed by the BitLicense as “Orwellian”
• Bitcoin mining pool BTC Guild to close following
BitLicense finalization. Owner ‘Eleuthria’ stated
“BTC Guild could not afford any legal threats
that may arise as a result of the New York
regulatory framework”
Sources: CoinDesk, BTC Guild

Select Country Regulatory Updates
Sources: CoinDesk, CoinDesk
Russia's central bank will meet
with representatives from the
country's financial markets to
discuss bitcoin regulation. A
prominent Moscow-based news
outlet says it is likely the bank will
be supportive of cryptocurrencies.
The Reserve Bank of Australia
has indicated it is not in favor of
regulating bitcoin and other digital
currencies, stating “it is currently
unlikely that any benefits of
regulation would outweigh the
potential costs”.
Russia Australia

Xapo Moves Headquarters from Silicon Valley to
Switzerland Citing Customer Privacy Concerns
Source: CoinDesk
• “This is not to facilitate crime, this is
to protect privacy”
• “There are some customers that will
bring more balances if we do this
and there are some customers who
have said ‘we will work with you if
you do this’”Wences Casares
Xapo CEO

Ripple’s Banking Relationships Appear to Have
Weathered FinCEN Fines
Source: CoinDesk
• Financial Crimes Enforcement
Network (FinCEN) fined Ripple
Labs and its subsidiary XRP II a
combined $700,000 for "willful
violations" of the Bank Secrecy
Act (BSA)
• FinCEN fine was reported in
May, but Ripple Labs
announced new deals with
three Australian banks (and a
new funding round) in June

Interest in Government-Backed Cryptocurrencies
and/or Ledger Systems Continues to Percolate
• Citi suggested UK government and banks should create their own digital
currency to reduce cost as well as improve efficiency and transparency
• David Andolfatto, Federal Reserve Bank of St. Louis has discussed the idea of a
‘Fedcoin’, citing benefits like greater efficiency, security and transparency
Sources: CoinDesk, MacroMania, Deloitte

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
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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.

State of Bitcoin Q2 2015

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