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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 London, New York, San Francisco and Tokyo
2 State of Bitcoin Q1 2015
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State of Bitcoin Credits
• Creator and Producer: Garrick Hileman (@GarrickHileman)
• Statistical assistance: Danqing Ying (@DanqingYing)
4 State of Bitcoin Q1 2015
Garrick Hileman Danqing Ying
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Contents
• Summary and Adoption Dashboard
• Valuation • Media • VC Investment • Commerce • Technology • Regulation and Macro
5 State of Bitcoin Q1 2015
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Q1 2015 Summary
7 State of Bitcoin Q1 2015
Sustained pressure on bitcoin’s price, which is due to the current demand-supply imbalances, is winnowing the mining and exchange sectors
Q1 was bitcoin’s largest VC investment quarter yet with $226m raised; all-time bitcoin VC investment now totals $676m
21 Inc, which announced $116m in new funding, surpassed Coinbase as the best-capitalized bitcoin startup
Improved regulatory clarity (ie NY BitLicense revisions, UK’s favorable posture) are building industry confidence and attracting Wall Street
Blockchain’s total wallets passed three million; merchant adoption slowed due to bitcoin’s underwhelming value proposition for mainstream consumers
Bitcoin’s price briefly dropped to $177 in January 2015, and is down 24% so far in 2015
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Key Bitcoin Adoption Metrics
8 State of Bitcoin Q1 2015
Data sources and notes: CoinDesk, Blockchain.info, BitcoinPulse, Github, Coin ATM Radar. Figures are cumulative from start of records, except unique bitcoin addresses and media mentions, which are figures for the quarter ending that month.
Quarterly Last 12 Months Mar-15 Dec-14 Q/Q Δ Mar-14 Δ Commerce
Wallets 8,457,207 7,396,772 14% 4,448,142 2x Merchants 88,000 82,000 7% 52,704 2x Merchants’ annual revenue ($bn) 180 180 0% 2 78x ATMs 374 342 9% 47 8x Unique bitcoin addresses 203,189 157,377 29% 137,342 1x
Industry All-time VC investment ($m) $676 $447 51% $164 4x Number of VC-backed startups 103 89 16% 47 2x
Media Mainstream media mentions 458 580 -10% 2,594 -82%
Technology Network hash rate (billion/second) 346,028,956 313,142,289 11% 41,813,922 8x Github no. of updated repositories 27,857 23,249 20% 9,915 3x
Valuation Bitcoin market capitalization ($bn) $3.4 $4.3 -21% $5.3 -36%
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CoinDesk Bitcoin Price Index – Q1 & YTD by the Numbers
10 State of Bitcoin Q1 2015
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
31st Dec Close $319.70
31st Mar Close $243.39
ΔQ1/Q4 Close -23.9%
31st Mar Market Cap $3.4bn
High (2nd Jan) $314.59 Low (14th Jan) $177.28
YTD High-Low Δ -43.6%
Average $250.68
Median $246.85
Q1 Price Summary
YTD Price Summary
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$150
$170
$190
$210
$230
$250
$270
$290
$310
$330
1-Jan 8-Jan 15-Jan 22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 5-Mar 12-Mar 19-Mar 26-Mar
Bitcoin’s Price in Q1 Remained Volatile Amid a Mix of Positive and Negative News
11 State of Bitcoin Q1 2015
14th Jan Bitcoin’s price plunges, breaks $200 mark
18th Mar UK Chancellor Osborne announces favorable regulatory environment and research investment
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
5th Jan Bitstamp suffers $5m hot wallet hack
Hong Kong's MyCoin disappears with up to $387m, reports claim
9th Feb
25th Jan Coinbase launches US bitcoin exchange
10th Mar Bitcoin startup 21 Inc announces $116m raised, all-star investor roster
20th Jan Mainstream financial institutions join Coinbase's record $75m funding round
4th Feb Ross Ulbricht found guilty in NY court of operating Silk Road; Ben Lawsky releases revised NY BitLicense
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Bitcoin’s Price Decline Has Not Stopped Exchange Trading Volume From Trending Up
12 State of Bitcoin Q1 2015
Data sources: Blockchain, CoinDesk, Bitcoinity
Monthly Bitcoin Trading Volume
0
5
10
15
20
25
0
1
2
3
4
5
6
7
Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15
BTC
Mill
ions
$ B
illio
ns
Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)
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Industry Rationalization: Bitcoin’s Price Plunge, Other Issues are Thinning the Ranks of Exchanges and Mining
13 State of Bitcoin Q1 2015
Source: CoinDesk
Min
ing
Aquifer LLC E
xcha
nges
• A number of well-known exchanges and mining operators have recently gone bankrupt or shuttered operations for various reasons
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• While mining is the only bitcoin sector to date to generate significant revenues, at current (or lower) price levels, further sector consolidation is anticipated
Diminishing Incentives to Mine Bitcoins Will Result in Further Mining Sector Consolidation
14 State of Bitcoin Q1 2015
Data source: Blockchain. Note: Miners revenue = (number of bitcoins mined per day + transaction fees) * market price.
0
5
10
15
20
25
30
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
01/01/2014 01/04/2014 30/06/2014 28/09/2014 27/12/2014
$ Th
ousa
nds
$ M
illio
ns
Miners Revenue and Transaction Fee (USD)
Miners Revenue Transaction Fee
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Bitcoin Primarily Functions as a Store of Value, Less Frequently Used as a Medium of Exchange
15 State of Bitcoin Q1 2015
Data sources: Bitcoinity, Blockchain
0
1
2
3
4
5
6
7
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Total Trading Volume vs Transaction Ratio
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Peak Altcoin? For the First Time, Quarter-over-Quarter Altcoin Growth Was Flat
16 State of Bitcoin Q1 2015
Data source: CoinMarketCap
64
216
347
483
590 594
9%
23%
7% 8% 9%
7%
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
Total Number of Altcoins Altcoin Market Cap Share (%)
*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.
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Bitcoin’s Market Cap is 14x Larger Than the Next Altcoin, up 6x from End of 2014
17 State of Bitcoin Q1 2015
Data source: CoinMarketCap data as of 1st Apr 2015
Rank Name Market Cap
1 Bitcoin $ 3,428,547,561
2 Ripple $ 245,984,620
3 Litecoin $ 62,695,671
4 Dash $ 20,785,772
5 BitShares $ 16,084,946
6 Dogecoin $ 12,518,429
7 Stellar $ 12,222,510
8 Nxt $ 9,887,171
9 MaidSafeCoin $ 8,090,823
10 Paycoin $ 7,683,946
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Q1 Negative News
19 State of Bitcoin Q1 2015
Bitstamp claims at least $5m lost in hot wallet hack
Bitcoin mining firm CoinTerra heads for Chapter 7 bankruptcy battle amid acrimonious claims on both legal sides
Hong Kong's MyCoin disappears with an initially reported $387m
Steady stories of bitcoin-related crime undermine mainstream user trust in bitcoin
Source: CoinDesk
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Q1 Positive News
20 State of Bitcoin Q1 2015
Coinbase's record $75m funding round, opening of US-based exchange
Bitcoin Core 0.10 gives developers simplified tools and sophisticated fee suggestions
Blockchain reports its total number of wallets passes three million
Bitcoin startup 21 Inc announces $116m raised, with all-star VC backing
Source: CoinDesk
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Q1 Most-Viewed CoinDesk Articles: Relative Interest in Bitcoin’s Price Articles Continues to Decline
21 State of Bitcoin Q1 2015
Rank Title Date
1 Roger Ver Denied US Visa to Attend Miami Bitcoin Conference 7th Jan
2 IBM Reveals Proof of Concept for Blockchain-Powered Internet of Things 17th Jan
3 Bitstamp Claims $5 Million Lost in Hot Wallet Hack 5th Jan
4 Bitcoin Price Continues to Fall, Breaks $200 Mark 14th Jan
5 State of Bitcoin 2015: Ecosystem Grows Despite Price Decline 7th Jan
6 Research: Hackers Could Install Backdoor in Bitcoin Cold Storage 16th Jan
7 Hong Kong's MyCoin Disappears with up to $387 Million, Reports Claim 9th Feb
8 Bitcoin Price Crashes Through $250 Mark 13th Jan
9 Apple Approves iOS Game That Tips Players in Bitcoin 8th Jan
10 Goldman Sachs Report Says Bitcoin Could Shape ‘Future of Finance' 11th Mar
Source: CoinDesk top 10 Q1 stories based on pageviews
CoinDesk’s Top 10 Most Viewed Stories in Q1
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Mainstream Bitcoin Media Coverage Dropped Quarter-Over-Quarter
22 State of Bitcoin Q1 2015
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 websites
235
156
76
41
180
127
73
78
0 50 100 150 200 250
Sina
WSJ
NYT
FT
Q1 2015 Q4 2014
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‘Bitcoin Price’ Continues to be the Top Search Term; Utorrent Mining Malware Scare Rising
23 State of Bitcoin Q1 2015
Past 90 Days
Related Searches: Top Related Searches: Rising
Past 12 Months
Source: Google Trends data as of 1st Jan 2015
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Two Biggest Bitcoin VC Deals in Q1…
25 State of Bitcoin Q1 2015
$116m $75m (Series C) January 2015 (Series A) March 2015*
Source: CoinDesk
*Note: The precise timing of when the $116m was raised, or whether it was raised in various individual stages, has not been revealed.
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…Both Deals Broke the Previous Record for Largest Single VC Investment Round
26 State of Bitcoin Q1 2015
Sources: CoinDesk, Crunchbase, Bank Innovation
“The Coinbase $75m raise does sound like a Pre-IPO round. A Bitcoin IPO such as Coinbase could trigger mainstream merchant adoption”
- Bernard Lunn, Bank Innovation
$116
$75
$31 $30 $25
$0
$20
$40
$60
$80
$100
$120
Mill
ions
Top Five All-Time VC Investment Deals
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Bitcoin’s $121 Million Question
27 State of Bitcoin Q1 2015
*No announcement has been made on 21 Inc’s exact business strategy beyond confirmation that it meets CoinDesk’s definition of a universal bitcoin company. Sources: CoinDesk, Crunchbase. Superman artwork courtesy of Tattoosales.com, trademark owned by DC Comics
Is it a supercharged mining operation? Is it a hardware wallet?
No, it’s bitcoin’s newest universal, 21 Inc!*
Matthew Pauker CEO, 21 Inc
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Q1 Set a Record for Bitcoin Venture Capital Investment, Nearly Doubling Q4 2014
28 State of Bitcoin Q1 2015
Data sources: CoinDesk, CrunchBase
$66
$84
$66
$133
$229
$0
$50
$100
$150
$200
$250
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Mill
ions
Quarterly Total VC Investment (USD Millions)
Note: The precise timing of when 21 Inc raised the $116m it announced in Q1 is unclear; 21 Inc’s full $116m is included in the Q1 2015 total.
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All-Time Bitcoin Venture Capital Investment Increased 51% from End of 2014 to $676m
29 State of Bitcoin Q1 2015
$676m $229m Total VC investment in cryptocurrency startups to date:
Q1 2015 bitcoin VC investment:
$133m Q4 2014 bitcoin VC investment:
Data sources: CoinDesk, CrunchBase
+51% Increase in total to-date VC investment from end of Q4:
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Bitcoin VC Investment Projected to Continue Outpacing Early-Stage Internet Investment
30 State of Bitcoin Q1 2015
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.
Data sources: CoinDesk, PricewaterhouseCoopers
$349
$916
$250
$638
0
100
200
300
400
500
600
700
800
900
1000
Bitcoin vs early Internet VC investment ($ millions)
$ M
illio
ns
2014 Bitcoin 2015 Bitcoin - projected 1995 Internet 1996 Internet
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US Continues to Dominate Bitcoin VC Investment; First VC Funded Africa-Based Startup in Q1
31 State of Bitcoin Q1 2015
Regions Q1 ($m)
Q4 ($m)
Q/Q Δ ($m) Q/Q Δ
US & Canada 492.3 289.7 202.6 70%
Europe 119.1 99.2 19.9 20%
Asia 42.1 41.0 1.1 3%
Middle East 14.0 11.1 2.9 26%
Latin America 7.5 6.0 1.5 25%
Africa 1.1 0.0 1.1 N.A.
Total 676.1 447.0 229.1 51%
$ Invested as of Q4 2014
• US & Canada had the largest Q/Q% increase in investment • Asia saw almost no investment in Q1
Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
$ Invested as of Q1
Europe 18%
Africa 0%
Asia 6%
Middle East 2%
Latin America
1%
US & Canada
73%
Europe 22%
Africa 0%
Asia 9%
Middle East 3%
Latin America
1%
US & Canada
65%
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Startups in 4 New Countries Received VC Investments; 22 Countries in Total Have a VC-Backed Bitcoin Startup
32 State of Bitcoin Q1 2015
Data source: CoinDesk (www.coindesk.com/bitcoin-venture-capital/)
Barbados
Switzerland
France
Kenya
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US-Based Bitcoin Venture Capital Investment Nearly 2x Greater Than Rest of the World Combined
33 State of Bitcoin Q1 2015
Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
$0
$100
$200
$300
$400
$500
Luxe
mbo
urg
Indi
a G
erm
any
Den
mar
k A
ustra
lia
Sw
itzer
land
P
anam
a K
enya
M
exic
o B
arba
dos
Japa
n S
inga
pore
Fr
ance
A
rgen
tina
Can
ada
Sou
th K
orea
Is
rael
C
hina
S
wed
en
The
Net
herla
nds
Uni
ted
Kin
gdom
U
nite
d S
tate
s
Mill
ions
Total Funding by Country (USD Millions)
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Silicon Valley Pulling Away: Share of All-Time Bitcoin VC Investment Jumped from 45% in Q4 to 59% in Q1
34 State of Bitcoin Q1 2015
Location Value ($m) No. of companies
Silicon Valley $400.0 30
Rest of World $276.1 73
Total $676.1 103
• 87% of the total Q1 bitcoin VC funding went to Silicon Valley-based startups
• Total number of VC-backed bitcoin companies increased from 89 in Q4 2014 to 103 in Q1, a 16% increase
$ Invested No. of Companies
Note: Prior State of Bitcoin data may differ due to new funding information obtained. Date sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
Silicon Valley 59%
Rest of World 41%
Silicon Valley 29%
Rest of World 71%
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Q1 Deal Summary: Acquisitions and Reverse Merger Activity Accelerates
35 State of Bitcoin Q1 2015
Source: CoinDesk
Jan 2015
Jan 2015
Acquisitions
Reverse Mergers
Jan 2015
Feb 2015
Loma Vista Capital
MGT Capital Investment
Apr 2015
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Keeping Bitcoin’s Size in Perspective - FinTech Investments Dwarfed Bitcoin in 2014
36 State of Bitcoin Q1 2015
Bitcoin FinTech
Data sources: CoinDesk, Medium (https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677) *Note: All data are 2014 only.
FinTech
$3bn invested in 2014
$0.3bn invested in
2014
100 Deals
Biggest Deal
$31m*
216 Deals
Biggest Deal
$150m
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The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company Categories
37 State of Bitcoin Q1 2015
Payment Processing
Wallets
Mining
Financial Services
Exchanges
Infrastructure
Universal
Source: CoinDesk
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A New Ecosystem Category Takes Shape: Infrastructure
38 State of Bitcoin Q1 2015
Sources: CoinDesk
• Bitcoin infrastructure companies build security tools, develop protocol enhancements and provide APIs for other bitcoin businesses to build on
• The eight companies in the infrastructure category have raised a combined $56m to date
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Ecosystem Sector Trends: Universals Raised Most Funding in Q1, Followed by Mining and Infrastructure
39 State of Bitcoin Q1 2015
Q1 VC Investment by Ecosystem Category (USD Millions)
Data sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
$1.1 $2.0 $3.8 $5.0 $6.1
$20.0
$191.0
$0
$40
$80
$120
$160
$200
Mill
ions
Payment Processor Wallet Exchange Financial Services Infrastructure Mining Universal
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Universals Are Pulling Away From Other Sectors in Total VC Investment
40 State of Bitcoin Q1 2015
2013 to 2015 VC Investment by Ecosystem Category (USD Millions)
Data source: CoinDesk
$0
$50
$100
$150
$200
$250
$300
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Mill
ions
Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure
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Universals Now Command Nearly 40% of VC Investment; Mining and Wallets at 14% Each
41 State of Bitcoin Q1 2015
• 83% of Q1 investment was made in Universals
• The number of Universals also continues to climb, now up to 10
$ Invested as of Q4 2014 $ Invested as of Q1
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter. Data Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase
Payment Processor
12%
Infrastructure 11%
Exchange 14%
Financial Services
10%
Mining 17%
Universal 16%
Wallet 20%
Sector Q1 Q4 Q/Q Δ ($m) Q/Q Δ ($m) ($m)
Payment Processor 55.4 54.3 1.1 2%
Infrastructure 55.7 49.6 6.1 12%
Exchange 65.8 62.0 3.8 6% Financial Services 48.5 43.5 5.0 12%
Mining 96.5 76.5 20.0 26% Universal 262.6 71.6 191.0 267%
Wallet 91.6 89.6 2.0 2% Total 676.1 447.3 229.0 51%
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Q1 2015 Investment Rounds in Bitcoin Startups
42 State of Bitcoin Q1 2015
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Close Date Company Size ($m) Round Select Investors Headquartered Mar-15 PeerNova 5.00 First OverStock San Jose
Mar-15 Bitt 1.50 Seed Avatar Capital Christ Church
Mar-15 TabTrader 0.07 Seed Rockstart Amsterdam
Mar-15 Coinigy 0.10 Seed Undisclosed Milwaukee
Mar-15 21 Inc 116.00 First Andreessen Horowitz, Data Collective, Khosla Ventures San Francisco
Mar-15 ShapeShift 0.53 Seed Barry Silbert and Roger Ver Zug
Feb-15 Ledger 1.50 Seed XAnge Private Equity, Hi-Pay (Hi-Media group), Fred Potter Paris
Feb-15 BitPesa 1.10 Second Pantera Capital, Bitcoin Opportunity Corp, Crypto Currency Partners Nairobi
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Q1 2015 Investment Rounds in Bitcoin Startups (contd.)
43 State of Bitcoin Q1 2015
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Close Date Company Size ($m) Round Select Investors Headquartered
Feb-15 HashRabbit 0.50 Seed Draper Associates, VegasTechFund San Francisco
Feb-15 KnCMiner 15.00 Second Accel Partners, GP Bullhound, Creandum, Martin Wattin Stockholm
Feb-15 NeuCoin 1.25 Seed Patrik Stymne, Emil Michael, Henrik Kjellberg Paris
Feb-15 Ziftr 0.85 Seed 10x Venture Partners Milford
Feb-15 Bonafide (Bonifide.io) 0.85 Seed Quest Venture Partners, Crypto
Currency Partners New York
Jan-15 BitFlyer 1.10 Seed Bitcoin Opportunity Corp, RSP Fund No. 5, GMO Venture Partners Tokyo
Jan-15 Colu 2.50 Seed Aleph, Spark Capital, Bitcoin Opportunity Corp, Box Group Tel Aviv
Jan-15 Anycoin Direct 0.56 Seed Undisclosed Veghel
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Q1 2015 Investment Rounds in Bitcoin Startups (contd.)
44 State of Bitcoin Q1 2015
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)
Close Date Company Size ($m) Round Select Investors Headquartered
Jan-15 Coinbase 75.00 Third New York Stock Exchange (NYSE), USAA, BBVA, DoCoMo San Francisco
Jan-15 TrustAtom 0.10 Seed Brian Cartmell, Vinny Lingham Vancouver
Jan-15 Ciphrex 0.50 First Undisclosed San Diego
Jan-15 BlockCypher 3.10 Seed Tim Draper, AME Cloud Ventures, Boost VC, 500 Startups San Mateo
Jan-15 Airbitz 0.03 Seed Plug and Play Tech Center San Diego
Jan-15 LibertyX 0.40 Seed Project 11 Boston
Jan-15 GetGems 0.40 Seed Magma VC Unknown
Jan-15 CoinOutlet 0.10 Seed BitcoinShop New York
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Everyday Items Rank Above Consumer Tech on Overstock’s List of ‘Most Often Bought with Bitcoin’
46 State of Bitcoin Q1 2015
Sources: CoinDesk, Overstock
1. Sheets 2. Donations to non-profits
3. Headphones
6. Cables and tools
5. Area rugs 4. Cases and holders
7. Mattresses 8. Coffee tables 10. Fashion sunglasses
9. A/V cables
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Growth of New Bitcoin-Accepting Merchants Plummeted in Q1, Continuing Downward Trend
47 State of Bitcoin Q1 2015
Sources: CoinDesk, CoinBase, BitPay, International Business Times
Number of New Bitcoin-Accepting Businesses Added Each Quarter
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
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More than 88,000 Merchants Now Accept Bitcoin, up from 82,000 in Q4 (+7%)
48 State of Bitcoin Q1 2015
50K 38K Data sources: Coinbase, BitPay
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Total merchants Forecasted merchants
Bitcoin-Accepting Merchant Forecast Slashed to Approximately 120,000 by End of 2015
49 State of Bitcoin Q1 2015
Data sources and notes: Total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided by BitcoinPulse. BitPay historical data between new merchant press release announcements of 10,000 (16th Sep 2013), 20,000 (13th Jan
2014) and 30,000 (28th May 2014), respectively, calculated using linear interpolation.
R² = 0.95861
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
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Bitcoin’s Lack of Use in Commerce is Not Just a ‘Chicken and Egg’ Problem
50 State of Bitcoin Q1 2015
Sources: Pantera Capital, ZepChain, CoinDesk (http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/)
"I believe merchants have been widely disappointed by the number of transactions they see in bitcoin. Most merchants have taken a passive approach to integrating bitcoin as a payment method, instead of strategically testing and optimizing checkout flows to encourage consumer adoption." Steve Beauregard,
CEO of GoCoin
• Merchants generally welcome bitcoin adoption • Lack of consumer adoption is the fundamental problem • Consumers need compelling reasons to use the volatile
and still relatively hard to acquire bitcoin over alternatives
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CoinCenter’s Public Sentiment Survey Indicates Low Bitcoin Awareness in US
51 State of Bitcoin Q1 2015
Source: CoinCenter
64.3% of the general American population are not familiar at all with bitcoin
6.2% of the general American population
say they have used bitcoin
Distrust in bitcoin
decreases from 50% to 37% as familiarity
with bitcoin
increases
People who are familiar
with bitcoin
are more likely to think it is
useful
But the distrust in bitcoin is similar (47%) among those who frequently use bitcoin and those who never use
53.1% of those who are very familiar with
bitcoin have never used it
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Blockchain’s Quarterly New Wallet Growth Rate Has Been Remarkably Consistent
52 State of Bitcoin Q1 2015
Data Source: Blockchain.info
120
515 481
343
481 451 454
0
100
200
300
400
500
600
Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015
Thou
sand
s
No. of New Wallets Added Each Quarter
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Total Wallets Forecasted Wallets
Forecast for Total Bitcoin Wallets by End of 2015 Maintained at 12 million
53 State of Bitcoin Q1 2015
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.
R² = 0.98069
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 Jan-16
Mill
ions
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The Five Types of Bitcoin User
54 State of Bitcoin Q1 2015
1. People who want a cheap, fast, global online payment experience
2. People who want access to a new suite of consumer payment applications
3. People who want to connect to the global economy for the first time
4. People who believe bitcoin is an attractive investment
5. People who value financial privacy
Sources: CoinDesk, Coinbase Blog
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Bitcoin Transactions Have Been Rising; Average of 10,000 Daily Transactions by Popular Addresses*
55 State of Bitcoin Q1 2015
40,000
60,000
80,000
100,000
120,000
Apr-14 Jul-14 Oct-14 Jan-15
Total no. of daily transactions No. of daily transactions excluding popular addresses
Source and note: Blockchain.info, *100 most popular addresses.
• The milestone of 100,000 daily transactions by ‘addresses excluding popular ones’ was reached in February, which is two months later than total transactions
Number of Transactions per Day
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Now Over 374 Bitcoin ATMs Around the World, but Growth in New ATMs is Slowing
56 State of Bitcoin Q1 2015
Data source: CoinATMRadar
43
79
112
104
32
0
20
40
60
80
100
120
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Increase in Number of Bitcoin ATMs
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Break Even for Bitcoin ATM Owners is 11 Months; Average ATM Generates $5,520 profit per year
57 State of Bitcoin Q1 2015
Sources: CoinDesk, BitAccess, Reddit, CoinATMRadar
Notes: Annual profits vary significantly depending on transaction volume. BitAccess machines are doing about $30,000 in transactions per month (Montreal installed machine). Skyhook Bitcoin ATM in Philippines has on average 40-50 transactions per month. However, the average bitcoin purchase size is not revealed.
Operation Metrics Number of transactions/month 100 Average transaction size ($) 200 Transaction fee revenue (%) 5 Revenue per year ($) 12,000 Cost Metrics Bitcoin ATM acquisition cost ($) 5,000 Place rent/month ($) 200 Exchange fee (%) 0.2 Cash logistics/month ($) 300 Costs per year ($) 6,480 Profits per Year ($) 5,520
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High Transaction Fees May be Discouraging People from Using Bitcoin ATMs
58 State of Bitcoin Q1 2015
Sources: CoinDesk, Reddit, CoinATMRadar
Social media comments on bitcoin ATM fees
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North America
50%
Europe 32%
Asia 11%
Oceania 6%
Latin America
1%
Africa 0%
Bitcoin ATMs by Continent
Half of Bitcoin ATMs are Located in North America, Nearly One-Third are in Europe
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Data source: CoinATMRadar
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Profiles of Four Alternative Uses of Blockchain Technology
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1. Property title
2. Smart contracts
3. Voting
4. Notary services
Sources: CoinDesk, Coinbase Blog
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Property Title: Blockchain Technology Could Empower the Poor, Reduce Global Inequality
62 State of Bitcoin Q1 2015
• With protected property title, people could better engage in economic activities such as investment and infrastructure construction.
Sources: Hernando de Soto (2002) Law and Property Outside the West, Housing Finance International June 1994, de Soto, Hernando. 2000. The Mystery of Capital. UK: Black Swan.
“An elite minority enjoys the economic benefits of the law and globalization, while the majority of entrepreneurs are stuck in poverty, where their assets – adding up to more than $10tn worldwide – languish as dead capital in the shadows of the law.”
- Hernando de Soto, economist Lima, Peru
“Blockchain technology could 'parachute' property title services into many poverty stricken countries.” - Balaji S. Srinivasan, 21 Inc
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Financial Automation: Smart Contracts are Being Deployed by a Number of Companies
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Sample smart contract: A dog with a GPS chip in his collar is walked by a dog walker. On completing the walk the collar sends a network signal, and the contract automatically executes a cryptocurrency payment to the walker.
Sources: CoinDesk, Ripple Labs, BitHalo, Reality Keys, Fast Co.labs, Morton Fraser
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Voting: Blockchain-Based Tech is Already Being Used in Elections
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• In a traditional voting system, you have no idea about whether your vote is counted. However, blockchain voting allows you to have the ability to audit whether your vote is counted by viewing your vote using a public ledger.
• At the same time, anonymity is also protected. Source: CoinDesk
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Notary: Blockchain Technology Could Reshape Notarization Services and Reduce Inefficiency
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Sources: The Economist, Proof of Existence, CoinDesk
• A study carried out for the European Commission in 2007 found that house buyers in countries with highly regulated notarial systems paid much higher legal fees than house buyers elsewhere (see chart).
• Blockchains can store and certify the existence of documents without relying on a central authority. Companies like CoinSpark and Proof of Existence are providing the service.
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Views on the Application of Bitcoin Technology to the Internet of Things
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Sources: CoinDesk, LinkedIn
“Applying the blockchain concept to the world of the Internet of Things offers fascinating possibilities. Right from the time a product completes final assembly, it can be registered by the manufacturer into a universal blockchain representing its beginning of life. Once sold, a dealer or end customer can register it to a regional blockchain (a community, city or state).” “We demonstrate how a humble washer can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.”
Paul Brody, Technology Strategy Consulting, IBM
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Functional Bitcoin Applications Can Be Grouped into 10 Categories
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Source: CoinBase Blog
Email – Email applications that eliminate spam by requiring BTC for email delivery Video – Video applications that require one-click micropayments to view video content News – News sites that eliminate advertising for users by requiring BTC for time spent viewing content Crowdfunding – Global crowdfunding applications that allow project creators to raise funds from around the world Payouts – Applications that allow creators or service providers anywhere in the world to get paid by a global audience
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Bitcoin Functional Applications (contd.)
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Source: CoinBase Blog
Remittances – Global remittance applications that enable worldwide cross-border payments Ecommerce – Bitcoin-focused merchant directories that offer a beautiful UI for consumers Communication Networks – Applications that incentivize nodes to provide resources to communications networks by rewarding BTC for participation Identity – Distributed identity applications that give people control of their own identity, built on top of a distributed identity protocol Attribution – Attribution applications that allow users to prove ownership of data, built on top of an attribution protocol
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Bitcoin Mining Arms Race Slows: Bitcoin’s Network Difficulty QoQ Growth Rate Flattens
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Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk
Quarterly Increase in Bitcoin Mining Difficulty
11.8
17.8
6.0 6.1
236%
106%
17% 15%
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
Has
hes
Bill
ions
Quarterly Increase in Mining Difficulty Qtr.-over-Qtr. Percentage Increase in Mining Difficulty
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AntPool
F2Pool
BW.com
BTCChina Pool
KnCMiner
Slush Ghash.io
BTC Guild Eligius
EclipseMC Bitcoin Affiliate Network
MegaBigPower
P2Pool
BitMinter
Unknown with 1BwZeHJ Address
Unknown
Mining Pools: No News is Good News; Still No Permanent Fix for 51% Attack Risk
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Data source: Four-day average as of 1st Apr 2015 blockchain.info/pools
Ghash.io continues to shrink, down to less than 10% share from 50% in July 2014
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Software Developer Interest in Bitcoin Continues Steady Growth
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Number of Created Repositories in Github with Bitcoin in the Name or Description
Data source: BitcoinPulse
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Nodes: Levelling Off in Node Numbers Eases Bitcoin Network Centralization Concerns
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Data sources: Bitnodes
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Quiet, Successful Update to the Bitcoin Core Protocol in Q1
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Consensus library:
• The consensus library makes it easier to build competing full node implementations by reusing the most sensitive and difficult part of the Core source code
Transaction fees:
• Core wallet users are provided with an estimate of the fees to pay in order to get quicker confirmations
Headers-first syncing:
• A node first downloads parts of a block before proceeding to download the entire blockchain, which speeds up communications between nodes. This makes running a full node a more attractive prospect even as there are fears over a declining number of nodes in operation
Source: CoinDesk
New features added to Bitcoin Core software version 0.10 include:
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Bitcoin Startups Targeting the World’s 2.5 Billion ‘Unbanked’
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Sources: CoinDesk, Mckinsey, Bitcoin for the Unbanked
Percentage of total adult population that does not use formal or semiformal financial services
0-25% 26-50% 51-75% 76-100%
Estimates used to calculate regional averages
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Wall Street Interest in Bitcoin is Growing
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Three blockchain startups selected for Barclays Accelerator, with one aiming to provide blockchain solutions for the insurance industry
Sources: CoinDesk, Bank Innovation
Citi wants “to [accelerate] emerging technologies that have the potential to transform financial services experiences for Citi’s customers”
UBS is set to open a London-based research lab to explore the application of blockchain technology in the financial services industry
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Migration of Wall Street Executives to Bitcoin Companies Continues
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Sources: WSJ, CoinDesk, LinkedIn
Blythe Masters, JP Morgan Chase. Now at Digital Assets Holdings LLC
Gene Sperling, National Economic Council. Now advisor at Ripple Labs
Duncan Niederauer, NYSE. Now advisor at TeraExchange
Paul Camp, JP Morgan Chase. Now at Circle
Arthur Levitt, SEC. Now advisor at BitPay and Vaurum
Arthur Hayes, Citi. Now at BitMEX
Jason Weinstein, US Department of Justice. Now advisor at BitFury
Timo Schlaefer, Goldman Sachs. Now at Crypto Facilities
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Nine Banks in Total Have Established Banking Relationships with Bitcoin Startups to Date
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Source: CoinDesk
• Securing banking partnerships has hindered the operations of bitcoin companies, often forcing them to halt part of their offerings
• However, partnership between banks and bitcoin companies could improve security and efficiency
24th Mar 2015
27th Mar 2015
Newly Announced Banking Relationships
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Views on How Bitcoin Technology Can Transform Financial Services
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Sources: CoinDesk, LinkedIn
“Digital Assets has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology.” “The possibilities for reducing cost and risk in settlement are enormous.”
Blythe Masters, CEO of Digital Assets Holdings LLC
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Select Country Regulatory Updates
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Source: CoinDesk
The government does not see a need to regulate or ban bitcoin activities. Bitcoin does not pose a substantial threat to Hong Kong's financial system.
Spanish political party, Unión Progreso y Democracia (UPyD), has submitted a proposal to the country's Congress outlining why bitcoin regulation is needed.
Digital currency businesses will have to comply with the Isle of Man's anti-money laundering (AML) laws from 1st April.
Hong Kong
Isle of Man
Spain
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In Q1 There Were Positive Developments With the NY BitLicense Proposal, but …
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• Businesses that “store”, “hold”, “issue”, “administer”, “exchange” or “control” digital currency on behalf of their customers require a license to operate
• An exemption added for companies engaging in mere software “development and dissemination”
• Eliminates the prohibition on digital currency investments, so long as they are held in an acceptable ratio
• Demands that the licensee must submit non-customer identities “to the extent practicable”
• NY regulators accepted new comments, further revisions are a possibility
Sources: CoinDesk. Manhattan photo courtesy of Symmetry50
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… Problems Remain with BitLicense’s ‘Duplicative and Redundant’ Requirements
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1. Anti-money laundering (AML) requirements: Virtual currency exchangers and administrators are already required to comply with federal AML regulations
2. State money transmission regulations are already in place and are applicable to all virtual currency businesses
“We should be mindful of this 'tax on innovation' that regulations place on the startup sector and high growth companies in general.”
Fred Wilson, Union Square Ventures
Source: CoinDesk (http://www.coindesk.com/fred-wilson-on-the-proposed-bitlicense-regulations/)
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Generally Favorable Response to UK’s Initial Cryptocurrency Regulatory Framework
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Sources: HM Treasury, CoinDesk
Core elements of the HM Treasury proposal: • Curb criminal activity via AML regulation • Allow cryptocurrency companies to opt-in to
standardized consumer protections • Proposed injecting £10m into digital currencies
research
• “A light touch approach” (Marc
Warne, Bittylicious) • “Help score banking
relationships” (Hugh Halford-Thompson, QuickBitcoin)
• “[Should] limit this to fiat-to-crypto exchanges” (Marc Warne, Bittylicious)
• “Will force the UK's bitcoin companies to move abroad” (Akin Fernandez, Azteco)
Positive Reactions Negative Reactions
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Views on Bitcoin Regulation and its Potential Positive Impact on Economic Growth
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George Osborne Chancellor of the Exchequer, Second Lord of the Treasury
Source: CoinDesk
“Among other things, [the programme] will look at whether regulation of the sector is required, so that virtual currency businesses can continue to be set up in the UK, and people and businesses can use [cryptocurrencies] safely.” “It's only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we'll ensure Britain's financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future.”
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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 [email protected] • We also welcome any feedback you have on the report
85 State of Bitcoin Q1 2015
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Disclaimer
• CoinDesk makes every effort to ensure that 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 that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
86 State of Bitcoin Q1 2015