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State of Bitcoin Q2 2014Presented 10th July 2014 at CoinSummit LondonState of Bitcoin Q2 20141

Contents1.2.3.4.5.6.7.State of Bitcoin Q2 2014SummaryPrice and ValuationMediaEcosystem and VC InvestmentCommerceTechnologyEmerging Markets and Macro2

About CoinDesk World leader in digital currency news, prices and informationOur Bitcoin Price Index serves as an industry reference pointLondon-based and remote team with a global focusOur editors are based in London, Boston, San Francisco, and TokyoState of Bitcoin Q2 20143

Q2 2014 SummaryBitcoin’s price has bounced back:up 39.4% from end of Q1 but stilldown 16% from start of yearStories mentioning ‘bitcoin’ in themainstream media rose 439%from 2012/13 to 2013/14All-time bitcoin VC investment of 240m; 2014 run rate of 280m Approximately 63,000 businessnow accept bitcoin; 5.3m totalwalletsLarger, more established consumerbrands are adopting bitcoin (egDish, Expedia)Regulatory environment continues tosee positives (eg California) andsetbacks (eg Bolivia)State of Bitcoin Q2 20144

Key Bitcoin Adoption MetricsCommerceWalletsMerchantsATMsUnique bitcoin addresses used per dayMediaMentions in mainstream mediaTechnologyNetwork hash rate (billion/second)Github No. of updated repositoriesInvestmentBitcoin market capitalization ( bn)IndustryVC investment over last 12 months( m)Number of VC-backed startupsState of Bitcoin Q2 AN/A41,271YoY 6685x17x8.31.08x200.74817.1712x7x5

Price and ValuationState of Bitcoin Q2 20146

Four of the Most Popular CoinDesk NewsStories in Q2 2014 About Bitcoin’s PriceStory1. CEO of Bitcoin Official Bans China [April Fools’ article]2. List of Possible Silk Road Bitcoin Bidders Leaked by US Marshalls3. Why Bitcoin’s Price Has Leapt 64% Since April4. New Colorado Marijuana Vending Machines Will Accept Bitcoin5. Renewed Optimism as Bitcoin Price Nears 500Date1st Apr18th Jun28th May16th Apr20th May6. Bitcoin Price Drops 10% as Chinese Exchanges Stop Bank Deposits10th Apr7. Mark T. Williams to Bitcoin Bulls: Time Will Vindicate My Prediction31st May8. 500 Million Dogecoins Mined by Unknown Hacker in Malware Attack17th Jun9. Bitcoin Price Falls Below 600 as Govt. Prepares for 30,000 BTC Selloff13th Jun10. Is it Too Late to Get Involved in Bitcoin?26th AprState of Bitcoin Q2 20147

CoinDesk Bitcoin Price Index – Q2 &YTD 2014 by the NumbersSource: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTCState of Bitcoin Q2 20148

Significant Bitcoin Events and PriceResponse – Q2 2014 7005 Jun29 May 650DISH becomeslargest companyto accept bitcoin 6002 Jun 55013 MayApple AppStore allowsbitcoin appsBitPay announceslargest bitcoin VCround to date ( 30m) 500 45011 Apr 30011 JunExpediaannounces it willaccept bitcoin27 JunFBIannouncesauction of SilkRoad bitcoins15 May 400 350All-timebitcoin VCinvestment 200mPBOC officialsays China willnot ban bitcoinBitcoin 2014 conference inAmsterdamSource: CoinDesk Bitcoin Price Index daily closing price (taken at 00:00 UTC)State of Bitcoin Q2 20149

If Recent Bitcoin Price Trends Continue Following HistoricalPattern, Then Further Upside is AnticipatedSource: Pantera CapitalState of Bitcoin Q2 201410

Bitcoin’s Price is Now on Yahoo Finance,Google Finance and BloombergState of Bitcoin Q2 201411

Bitcoin Now Represents 93.4% of Total CryptocurrencyMarket Cap, 3.4% Change from 16th AprilBitcoin market cap35x larger thanlitecoin, up from18x two monthsagoMarket capitalizations: 8.5bn – bitcoin(Δ of 31% from 16th April) 9.1bn – all cryptocurrencies(Δ of 28% from 16th April)Source: CoinMarketCap.com 1 July 2014State of Bitcoin Q2 201412

The Timing and Scale of Bitcoin’sDisruptive Potential “Bitcoin-related technologies will disruptpayments markets and other trust-basedmarkets within the next few years and fordecades to follow.” “US bank fees generate 250 billion a yearand global payments-related revenuesexceed 300 billion a year.” “We also see an emerging bitcoinopportunity within the Internet of Things.”State of Bitcoin Q2 2014Gil LuriaWedbush Securities13

Fees and Other Financial Services CostsThat Could be Impacted by Bitcoin Payment processing Title insurance Deposit Exchange trading Withdrawal/Overdraft Escrow Foreign exchange Trust management Float Collections Transfer/Wire NotarySource: Wedbush Securities, CoinDeskState of Bitcoin Q2 201414

3.4 Trillion, or 21% of US GDP From Trust-BasedService Sectors Could be ImpactedState of Bitcoin Q2 201415

Total Potential Market Cap Disrupted byBitcoin of 546bnMarket Caps (millions) as of 1st July 2014ProcessorsVisa IncAmerican Express CoMasterCard IncCapital One Financial CorpDiscover Financial ServicesAlliance Data Systems CorpTotal System Services IncGlobal Payments IncEuronet Worldwide IncHeartland Payment Systems IncGreen Dot CorpTotalMarket Cap 105,228 100,430 82,558 47,213 28,900 15,246 5,928 5,232 2,458 1,477 753 395,422Money Transfer/ATM OutsourcingWestern Union CoEuronet Worldwide IncCardtronics IncMoneyGram International IncXoom CorpTotalMarket Cap 9,345 2,458 1,516 804 1,001 15,124Trust/EscrowM&T Bank CorpAssociated Banc-CorpPrivateBancorp IncTotalMarket Cap 16,311 2,883 2,268 21,462State of Bitcoin Q2 2014Payment HardwareNCR CorpMICROS Systems IncVeriFone Systems IncIngenicoDiebold IncOuterwall IncWincor Nixdorf AGAgilysys IncOn Track Innovations LtdTotalMarket Cap 5,892 5,080 4,106 4,802 2,595 1,210 1,895 316 79 25,975Bank SoftwareFidelity National Information Services IncFiserv IncJack Henry & Associates IncACI Worldwide IncTotalMarket Cap 15,754 15,033 5,025 2,117 37,930Securities ExchangesIntercontinental Exchange IncCME Group IncNASDAQ OMX Group IncTotalMarket Cap 21,753 23,824 6,591 52,169Source: Wedbush Securities, CoinDesk16

MediaState of Bitcoin Q2 201417

Selection of Q2’s Biggest Bitcoin StoriesApple’s App Store allows return ofbitcoin appsTim Draper successfully bids on 30,000BTC at Silk Road bitcoin auctionScale of bitcoin VC investmenttracking the early InternetMore seasoned entrepreneurs set theirsights on bitcoin [Halsey Minor pictured]State of Bitcoin Q2 201418

Accelerating Mainstream Media Interestin BitcoinStories Published Mentioning YTFTWSJ01,0002,0003,0004,0005,0006,000Source: Respective publishers’ websites. Date range used is 1st June to 31st May.State of Bitcoin Q2 201419

“Bitcoin” is the 89th Most Heavily TraffickedWikipedia Page, 889k Views in Last 90 DaysSource: Wikipedia 1st July 2014State of Bitcoin Q2 201420

Google Search Interest in “bitcoin” During Q2 HasRemained Relatively ConstantSource: Google TrendsState of Bitcoin Q2 201421

Some Intellectuals Remain Skeptical, WhileOthers Recognize Bitcoin’s PotentialKen RogoffLarry SummersNiall Ferguson“Not a currency; it isn’tgoing to be a currency.”“I think bitcoin has thepotential to be a very,very importantdevelopment.”“It would be unwise toassume, as some do,that it poses nochallenge at all.”State of Bitcoin Q2 201422

Ecosystem and VC InvestmentState of Bitcoin Q2 201423

Two Biggest Bitcoin VC Deals inQ2 30m 20m(Series A) May 2014(Series A) May 2014Source: CoinDesk State of Bitcoin Q2 201424

BitPay’s 30m Round was the LargestBitcoin VC Deal to Date More than 30,000 total merchants As of January 2014, adding more than 1,000 merchantsto its network each week Processing 1m in bitcoin payments every day Processed more than 100m in bitcoin payments in 2013 Most recent VC round valued BitPay at 160mState of Bitcoin Q2 201425

Bitcoin Venture Capital InvestmentAccelerated in Q2, Up 28% QoQQ1 2014 bitcoin VC investment: 57mQ2 2014 bitcoin VC investment: 73mTotal VC investmentin cryptocurrencystartups to date: 240m*Note: Q2 figure excludes recent July deals (eg Xapo 20 million) but all-time figure of 240m includes these deals.Source: CoinDesk State of Bitcoin Q2 201426

2014 VC Investment in Bitcoin OvertakingVC Early-Stage Internet InvestmentsBitcoin vs. Early Internet VC investment ( millions) 284.5 300 250.1 250 200 150 100 87.8 50 02013 Bitcoin2014 Bitcoin Run Rate1995 Internet*Note: *Includes first sequence venture deals but excludes late-stage 1995 internet investments ( 257.6m). For additionaldisclosure on methodology see coin-venture-capital-investment/Source: CoinDesk, PriceWaterhouseState of Bitcoin Q2 201427

8 Startups With 10m VC Funding;22 Startups 1m 40Total Funding (millions) 35 30 25 20 15 10 5 0*Note: excludes companies with less than 1 million in publicly announced VC funding.Source: CoinDesk State of Bitcoin Q2 201428

2014 YTD Investment in Bitcoin Startups of 150mRecently Announced Investment RoundsCloseDateCompanySize ( m)RoundSelect InvestorsHeadquarteredJul-14TBC0.25SeedIndividual ashPlex0.40SeedJun-14Index Ventures, Greylock Partners,Emergence Capital Partners, Yuri Milner, MaxPalo AltoLevchin, Jerry YangBattery Ventures, Lightspeed VenturePartners, Boost VC, New Atlantic Ventures,Palo AltoKhosla Ventures, Y CombinatorPantera Capital, Boost Bitcoin Fund, 8capita,South Ventures, NXTP Labs, Tim Draper,Palo AltoBarry Silbert, Individual InvestorsRedpoint Ventures, Bitcoin OpportunityCorporation, Radar Partners, Liberty CitySan FranciscoVentures, Crypto Currency Partners, A-GradeInvestmentsBarry Silbert, Jason Prado, IndividualInvestorsSeattleSource: CoinDesk State of Bitcoin Q2 201429

2014 YTD Investment in Bitcoin Startups of 150mRecently Announced Investment RoundsCloseDateCompanySize ( m)RoundSelect irstBinary Financial, Crypto Currency Partners,Georgian Co-Investment Fund,Queensbridge Venture Partners and ZADInvestment Company, Jonathan Teo, Bill TaiMay-14Bitex.la2.00FirstUndisclosed UK-based investorBuenos AiresAtlantaSan MateoMay-14BitPay30.00FirstIndex Ventures, AME Cloud Ventures, FelicisVentures, Founders Fund, HorizonsVentures, RRE Ventures, Sir RichardBranson, TTV CapitalMay-14Vaurum4.00SeedBattery Ventures, Tim Draper, Steve CaseSource: CoinDesk State of Bitcoin Q2 201430

2014 YTD Bitcoin VC Investments (contd.)CloseDateCompanySize ( m)RoundSelect InvestorsHeadquarteredApr-14GogoCoin0.10Seed500 StartupsMountain ViewApr-14Bonifide.io0.10Seed500 StartupsMountain ViewApr-14Coinalytics0.10Seed500 StartupsMountain ViewApr-14Neuroware0.10Seed500 StartupsMountain ViewApr-14Monetsu0.10Seed500 StartupsMountain ViewApr-14Coinplug0.40SeedTim DraperSeoulApr-14PayStand1.00SeedCervin Ventures, Serra Ventures, CentralCoast Angels, TiE LaunchPadSanta CruzMar-14Circle InternetFinancial17.00SecondBreyer Capital, Accel Partners, GeneralCatalyst Partners, Oak Investment Partners,Pantera Capital, Bitcoin Opportunity FundBostonMar-14GoCoin1.50FirstBitcoin Shop, Owen Van Natta, CryptoCurrency PartnersSingaporeMar-14Hive0.19SeedRoger Ver, SeedcoinHong KongSource: CoinDesk State of Bitcoin Q2 201431

2014 YTD Bitcoin VC investments (contd.)CloseDateCompanySize ( m)RoundSelect InvestorsHeadquarteredMar-14Payward, Inc.(Kraken)5.00FirstHummingbird VenturesSan FranciscoMar-14BTC.sx0.30SeedSeedcoin, Joe LeeSingaporeMar-14MexBT0.34SeedSeedcoin, Individual InvestorsMexico 14Tembusu Terminals0.20SeedIndividual InvestorsSingaporeStockholmCeyuan Ventures, Mandra Capital,VenturesLabBenchmark, Fortress Investment Group,Ribbit CapitalBeijingPalo AltoFeb-14Safello0.60SeedNicolas Cary, Roger Ver, Erik Voorhees, IraMiller, Jan Rees, Anders Bruzelius, Victor& VictorFeb-14BitSim0.50SeedSeedcoin, Individual InvestorsHong gibleCryptography(BitSimple)0.60SeedUndisclosed Investor(s)WilmingtonJan-14Korbit0.40SeedStrong Ventures, Bitcoin Opportunity Fund,Tim Draper, David Lee, Naval RavikantSeoulSource: CoinDesk State of Bitcoin Q2 201432

Europe Passed Asia in Total Bitcoin VC Investmentin Q2, Both Still Lag North AmericaNo. of Companies InvestedAsia 9%Europe13%SouthAmerica1%NorthAmerica78%Asia 27%RegionsValueNo. of( m) companiesAsia20.813Europe30.95S. America2.01N. America186.330Total 240.049NorthAmerica61%Europe10%SouthAmerica2% Over a quarter of VC-backed bitcoin companies are based in Asia 78% of all bitcoin VC s have been invested in North America to date,but only 61% of the companies are based thereSource: CoinDesk State of Bitcoin Q2 201433

US Continues to Dominate Bitcoin VC Investment,Total Share Increased in Q2 InvestedNo. of CompaniesSingapore1%Argentina1%China7% gentinaAustraliaCanadaChinaMexicoSingaporeSouth KoreaSwedenHollandUnitedKingdomUnited StatesTotalArgentinaValueNo. of2%( m) 59%0.9120.0110.1185.5 240.0Australia 2%China 12%Canada 2%Mexico 2%Singapore6%UnitedKingdom 6%SouthKorea 4%Sweden 2%Holland 2%32949 Mexico, Holland and Argentina added their first VC-backed bitcoin startupsin Q2 Greatest number of VC-backed bitcoin companies are in the US and ChinaSource: CoinDesk State of Bitcoin Q2 201434

Silicon Valley’s Share of Bitcoin VC InvestmentClimbed Slightly From 46% in Q1 to 48%No. of Companies InvestedRest ofWorld52%SiliconValley48%Tech hubNo. ofValue ( m)concentrationcompaniesSilicon Valley115.818Rest of World124.331Total 240.049SiliconValley37%Rest ofWorld63% 63% of VC-backed bitcoin companies are based outside Silicon Valley, but havejust over one-third of all bitcoin fundingSource: CoinDesk State of Bitcoin Q2 201435

Investor Views on Bitcoin“like the Internet disrupted the publishing industry, we’re going“Justto see bitcoin micropayments creating some very interestingopportunities for pay-as-you-go, pay-based-on-time onlinebusinesses, and, frankly, some risks as well to the traditionalbusiness model as to how things get sold online.”Barry SilbertSecondMarket, Bitcoin Investment Trustthe question of whether bitcoin will replace money, a good“Onanalogy is the postal service and email. Email didn’t replacetraditional mail, and we still send the same amount of mail todayas we did before. But today we have totally new ways ofcommunicating – chat, text, Facebook – things we didn’t imaginewhen the Internet first arrived.”Dan MoreheadPantera Capital ManagementSource: CoinDesk, Absolute ReturnState of Bitcoin Q2 201436

The Bitcoin Startup Ecosystem: Six DifferentBitcoin Company rvicesPaymentProcessingMiningState of Bitcoin Q2 201437

Universals Command the Most VC Investment l25%FinancialServices9%Mining12%No. of CompaniesAvg/co.( hange16%ValueNo. of( m) companiesFinancialServices22.3131.7Total 240.049 Exchange27%FinancialServices27% Payment Processor (5.3x), Wallet (2.5x), Mining (2.2x) and FinancialServices (1.5x) saw the largest Q1 over Q2 investment increaseSource: CoinDesk, Dow Jones VentureSource, VentureScanner.comState of Bitcoin Q2 201438

The Emergence of the Universal BitcoinCompany Universals operate across more than oneaspect of the bitcoin value chain (egCoinplug offers payment processing,wallet, and ATM) Universal bitcoin companies leverage twokey elements of financial services:efficiency and trust It’s possible that more and more bitcoinstartups will pursue the universal model,be absorbed by universals, or fade awayUniversalState of Bitcoin Q2 201439

CommerceState of Bitcoin Q2 201440

New Applications and Services Announced in Q2Are Making Bitcoin Easier to Use and TrustInsured bitcoin walletsBitcoin-linked debit cardsTransparent balance sheetState of Bitcoin Q2 201441

Approximately 8 Million Bitcoin WalletsForecasted by Dec 20148,000,000R2 02,000,0001,000,0000Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15Total WalletsForecasted WalletsSources and notes: total wallets based on data from Blockchain.info, MultiBit.org, Coinbase, Andreas Schildbach (Android BitcoinWallet developer). Historical Coinbase data provided by BitcoinPulse.com.State of Bitcoin Q2 201442

Approx. 63,000 Merchants Now Accept Bitcoin,Vast Majority Are Online Businesses 5 billion annual revenue 13.9 billion annual revenue 2.8 billion annual revenueSource: Coinbase and BitPayState of Bitcoin Q2 201443

Approximately 100k Bitcoin-AcceptingMerchants Forecasted by Dec 2014100,000R2 0.970480,00060,00040,00020,000Total MerchantsForecasted MerchantsSources and notes: total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided byBitcoinPulse.com. BitPay historical data between new merchant press release announcements of 10,000 (16th Sept 2013), 20,000(13th Jan 2014) and 30,000 (28th May 2014), respectively, calculated using linear interpolation.State of Bitcoin Q2 201444

Bitcoin ATM Deployments Gained Pace inQ2 2014 Source: CoinDeskState of Bitcoin Q2 201445

Now Over 100 Bitcoin ATMsAround the WorldSource: CoinDesk.comState of Bitcoin Q2 201446

TechnologyState of Bitcoin Q2 201447

Bitcoin Developer Ecosystem Grows Developers continue to remain highly engaged with bitcoin projectsSource: BitcoinPulse.comState of Bitcoin Q2 201448

There Are Now Approximately 340 BitcoiniOS Apps State of Bitcoin Q2 201449

and 250 Bitcoin Apps on AndroidState of Bitcoin Q2 201450

Bitcoin is 4,000x Cheaper Than a TypicalRemittance TransactionRemittances:Average global remittance fee of 8.14% per 200( 16.28)Bitcoin:Median transaction fee is 0.004Remittances vs. bitcoin:Bitcoin is 4,070 times cheaper on a 200 transactionSource: World Bank Remittance Prices Worldwide; Blockchain.infoState of Bitcoin Q2 201451

Emerging Markets and MacroState of Bitcoin Q2 201452

Emerging Markets Love Mobile Money 74% of Kenya’s adult population uses M-Pesa and other mobile moneyservicesSources: GSM Association, Simone di Castri and Lara GidvaniState of Bitcoin Q2 201453

Bitcoin Dwarfed by Global Illicit MarketsSource: Global Financial Integrity, FBI. Full chart: http://cf.datawrapper.de/Gc83O/4/State of Bitcoin Q2 201454

Bitcoin’s Regulatory Environment isStabilizing and Trending Toward the Positive Recently released minutes from a Federal Reserve Advisory Counciland Board of Governors meeting suggest that “banking couldparticipate increasingly in bitcoin fund flows, especially asmulticurrency accounts proliferate and reputational concernssubside”. “The Advisory Committee can't dictate policy, but the minutes canshed light on what Fed policy might look like in the future.” [CNN] “A task force of US state regulators is working on the first bitcoin rulebook with the hope of protecting users of virtual currency from fraudwithout smothering the fledgling technology. Bitcoin users currentlyface a range of rules across the 50 states.” [Reuters]State of Bitcoin Q2 201455

Bitcoin Continues to See Regulatory Gains andSetbacks, But Overall Regulation Has SlowedCalifornia legalized bitcoin inJune 2014State of Bitcoin Q2 2014Bolivia made bitcoin and ot

Visa Inc 105,228 American Express Co 100,430 MICROS Systems Inc MasterCard Inc 82,558 Capital One Financial Corp 47,213 Discover Financial Services 28,900 Alliance Data Systems Corp Outerwall Inc 15,246 Total System Services Inc Wincor Nixdorf AG 5,928 Global Payments Inc Agilysys Inc 5,232

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