1State of Bitcoin and Blockchain
2016 State of Bitcoin and Blockchain 2016 28th January 2016

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in digital currency news, prices and information • The Bitcoin Price Index serves as an industry reference point • Offices in New York, Boston and London • Consensus 2016 conference will be held on 2–4 May in New York in collaboration with Digital Currency Group and Coin Center 2State of Bitcoin and Blockchain 2016

State of Bitcoin and Blockchain
Credits Creator and producer: Dr. Garrick Hileman London School of Economics and University of Cambridge Statistical assistance: Danqing Ying London School of Economics 3State of Bitcoin and Blockchain 2016 @GarrickHileman @DanqingYing

Contents 1. 2015 Year in
Review 2. Q4 2015 State of Bitcoin a. Price and Trading b. Media and Sentiment c. Investment and M&A d. Use Cases and Commerce e. Technology f. Regulation and Macro 3. Q4 2015 State of Blockchain a. Overview b. Private (Permissioned) Blockchains c. Public (Permissionless) Blockchains 4. 2016 Thought Leader Survey & Forecasts 4State of Bitcoin and Blockchain 2016

5State of Bitcoin and Blockchain
2016 1. 2015 Year in Review

2015 Industry Summary 6State of
Bitcoin and Blockchain 2016 “All about Blockchain”; major financial services firms invest and explore distributed ledger tech; bitcoin companies pivot VC investment slowed, growth rate dipped to 3% in Q4; too early to say whether this is industry specific or part of overall downturn in all VC funding Regulatory tempo slows in 2015; NY BitLicense finalised as some companies apply, others abandon NY market; Circle granted first license Issues like block size and concentration of mining pools draw heated debate among bitcoin community on scalability and security Payment processor and wallet sectors stagnate with little new VC investment; most consumers still lack compelling reason to use bitcoin Bitcoin price up 35% in 2015; China dominates bitcoin trading and mining, while Chinese financial instability drives bitcoin price gains

$150 $200 $250 $300 $350
$400 $450 $500 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 2015 Price Chart and Key Bitcoin & Blockchain Events 29th May Silk Road operator Ross Ulbricht sentenced to life in prison Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC New York releases final BitLicense 5th January Bitstamp claims it lost $5m in hot wallet hack 15th April MIT Media Lab launched Digital Currency Initiative 3rd June 11th May Nasdaq becomes first major Wall St firm to publicly announce trial of bitcoin network 20th January BBVA, USAA join Coinbase's $75m Series B 10th March Bitcoin startup 21 announces $116m all-star VC backing 11th March Former JP Morgan exec Blythe Masters joins blockchain startup State of Bitcoin and Blockchain 2016 7 15th August Bitcoin 'fork' proposed in controversial bid to resolve scalability question 9th September Visa, Capital One back blockchain startup Chain in $30m round 17th December R3’s distributed ledger initiative grows to 42 members 16th November Amazon starts shipping 21 bitcoin computers 23rd June Bitcoin network survives surprise stress test 5th November Final US government auction of over 44,000 Silk Road bitcoins

Key Bitcoin And Blockchain Adoption
Metrics: Price Up 82%, Trading Volume Increased 424% 8State of Bitcoin and Blockchain 2016 Quarterly Total or End-of-Quarter (EoQ) Year Ago Q4 2015 Q3 2015 Q4/Q3Δ Q3/Q2Δ Q4 2014 Δ Commerce Wallets (EoQ) 12,768,681 11,051,719 16% 18% 7,396,772 2x Transaction Volume (BTC) 384,835,478 350,286,741 10% 7% 291,817,718 1x Merchants’ annual revenue ($bn) (EoQ) $197 $190 4% 0% $180 1x ATMs (EoQ) 536 475 13% 12% 342 2x Price Price (EoQ) $430.05 $236.25 82% -10% $319.7 1x Exchange trading volume (BTC) 150,025,305 28,615,261 424% 17% 40,041,026 4x Bitcoin market capitalization ($bn) (EoQ) $6.5 $3.5 86% -8% $4.4 1x Industry All-time VC investment ($m) (EoQ) $949 $923 3% 10% $459 2x Number of VC-backed startups (EoQ) 127 120 6% 6% 90 1x Media Mainstream media mentions 521 411 27% 11% 508 1x Blockchain Number of blockchain companies (EoQ) 54 42 29% 40% 14 4x Technology Network hashrate (billion/second) (EoQ) 743,604,444 457,184,328 63% 30% 313,142,289 2x

2015 Bitcoin and Blockchain Metric
Highlights 9State of Bitcoin and Blockchain 2016 Data sources and notes: CoinDesk, Blockchain, BitcoinPulse, Github, Coin ATM Radar. Figures are cumulative from start of records, except transaction volume, exchange trading volume 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. • New wallets and ATMs both doubled from end of 2014 • Network hashrate doubled from end of 2014 • Total VC investment doubled from end of 2014 • Exchange trading volume in Q4 2015 is four times greater than Q4 2014 • Number of large firms interested in blockchain technology is four times greater than end of 2014 Up 2X Up 4X

Biggest VC Deals in 2015
10State of Bitcoin and Blockchain 2016 $75m $50m (Series C) April 2015(Series C) January 2015 *Note: Exact timing of when 21 Inc raised $116m has not been revealed and it’s likely that much of the funding was raised in 2014. Source: CoinDesk Investors: New York Stock Exchange, USAA, BBVA, Andreessen Horowitz Investors: Goldman Sachs, IDG Capital Partners, Breyer Capital $116m* (Series A) March 2015 Investors: Andreessen Horowitz, Data Collective, Khosla Ventures, RRE Ventures and Yuan Capital

Annual VC Investment in 2015
Increased 36% Over VC Investment in 2014 $362m $490m VC investment in 2014 VC investment in 2015* Data sources: CoinDesk, CrunchBase State of Bitcoin and Blockchain 2016 11 *Note: Exact timing of when 21 Inc raised $116m has not been revealed and it’s likely that much of the funding was raised in 2014.

While 2015 VC Investment Was
Greater Than 2014, the Growth Rate Slowed in 2015 State of Bitcoin and Blockchain 2016 12 Millions Data sources: CoinDesk, CrunchBase $362 $490 280% 36% 0% 50% 100% 150% 200% 250% 300% $0 $100 $200 $300 $400 $500 $600 2014 2015 Total VC Investment ($M) Annual Percentage Growth

By Comparison, Annual Internet VC
Investment Increased to 155% in 1996, Slowed to 41% in 1997 13State of Bitcoin and Blockchain 2016 Data source: PricewaterhouseCoopers Annual Internet VC Investment Billions $0.17 $0.45 $0.63 $1.08 $4.39 $9.08 155% 41% 71% 308% 107% $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 1995 1996 1997 1998 1999 2000 0% 50% 100% 150% 200% 250% 300% 350% Annual Investment ($b) Annual percentage increase

68% 54% 29% 41% 50%
22% 10% 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Quarterly Percentage Growth in All-Time VC Investment Growth Rate of Quarterly Bitcoin and Blockchain VC Investment Slowing, But… 14State of Bitcoin and Blockchain 2016 Data sources: CoinDesk, CrunchBase • Some of the slowdown in growth rate could be explained by the ‘law of large numbers’ for business, where achieving the same % growth rate on a larger base can steadily become more difficult

…Bitcoin/Blockchain Industry Not Alone; Overall
VC Funding Environment Softened in 2015 15State of Bitcoin and Blockchain 2016 Data source: Bloomberg US Venture Capital Investment ($bn) • Total VC investment across all tech sectors decreased 9% from $31.1bn in 2014 to $28.2bn 2015; number of deals decreased 13% from 2014

Blockchain Startups Still Lag Behind
Bitcoin Startups in VC Investment 16State of Bitcoin and Blockchain 2016 Data source: CoinDesk Distribution of Investment Among Bitcoin, Blockchain and Hybrid Companies 64% 53% 53% 98% 36% 47% 47% 2% 0% 20% 40% 60% 80% 100% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Percentage of Bitcoin Company Investment Percentage of Blockchain and Hybrid Company Investment

17State of Bitcoin and Blockchain
2016 Bitcoin ‘Deadpool’ Grows to 26 Startups; Besides Funding, ‘Security’ Also Commonly Cited Cause of Death 0 5 10 15 20 25 30 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Bit121 Agora Data sources: CoinDesk, CrunchBase

Notable 2015 Bitcoin Announcements by
Major Financial Firms 18State of Bitcoin and Blockchain 2016 Source: CoinDesk • Visa Europe is working to leverage bitcoin blockchain for remittance services • MasterCard and American Express invested in Digital Currency Group (DCG) and Abra, respectively • PayPal adds Xapo CEO to Board of Directors

Notable 2015 Blockchain Announcements by
Major Financial Firms 19State of Bitcoin and Blockchain 2016 Source: CoinDesk • Nasdaq debuted its blockchain-based private markets product, Nasdaq Linq • CME and London Stock Exchange form blockchain settlement group • Australian Securities Exchange selects Digital Asset to develop distributed ledger solutions

Notable Regulatory Developments in 2015
20State of Bitcoin and Blockchain 2016 New Jersey: Digital Currency Jobs Creation Act introduced Hong Kong: No need for bitcoin regulation UK Treasury: AML rules for wallets and prudential regulations for exchanges European Court of Justice (ECJ): Bitcoin sales are not subject to VAT itBit Trust Company is chartered under New York Banking Law by the New York State Department of Financial Services (NYDFS) New York: The NY BitLicense became effective in August Securities and Exchange Commission (SEC): Some mining contracts are securities Bank Secrecy Act (BSA) audits: FinCEN is serious about anti-money laundering enforcement Commodity Futures Trade Commission (CFTC): Bitcoins are commodities Source: CoinDesk

Scaling Bitcoin Debate Draws Causalities
on Both Sides, “Stress Tests” Hamper Network 21State of Bitcoin and Blockchain 2016 Sources: MotherBoard, CoinDesk • Number of reachable nodes declined following the October stress test • The bitcoin network stress tests orchestrated by CoinWallet may have breached UK technology law June • Conducted by CoinWallet.eu • Spent 20 BTC (around $5,000) on transactions totaling about 200MB in data July • Conducted by an unknown party • Largest bitcoin transaction of all time was created to “clean up the mess” October • Stress test rumoured to be carried out by a hired Russian named “Alister Maclin” Three significant stress tests (or spam attacks) took place in the 2nd half of 2015

AntPool 25% F2Pool 24% BitFury
14% BTCC Pool 11% BW.COM 6% Slush 6% KnCMiner 5% 21 Inc. 2% Unknown Pools Dropped Significantly from 11% to 1%, Mining Pools Become More Concentrated 22State of Bitcoin and Blockchain 2016 Note: Labels for mining pools with 1% or less share are removed. Data source: Four-day average as of 2nd October 2014 and 6th January 2016 on Blockchain Discus Fish 31% GHash.IO 22% BTC Guild 5% Eligius 5% Unknown with 1BX5YoL Address 4% Polmine 4% Unknown with 1AcAj9p Address 4% Slush 4% KnCMiner 3% AntPool 2% Unknown 11% 2014 2015 • Antpool and F2Pool have grown significantly, from 2% to 50% in 2015; both now maintain a consistent 25% share of bitcoin’s hashing power

23State of Bitcoin and Blockchain
2016 2. Q4 2015 State of Bitcoin

Q4 2015 Summary 24State of
Bitcoin and Blockchain 2016 Bitcoin is exempt from VAT by the European Court of Justice - ‘A big milestone’ according to European exchanges VC investment growth rate dropped from 11% in Q3 to 3% in Q4; unclear if this is sector specific or driven by overall VC environment “It’s all about blockchain”; 42 major financial services firms partner with R3CEV to explore blockchain applications Media attention returns to sector with interest in blockchain technology, price rally and new speculation on Satoshi Nakamoto’s real identity Developing-world VC investment stagnates; debate emerges over cost advantages and overall value proposition of ‘rebittances’ Bitcoin price volatility reaches two- year high amid price rally and high exchange trading volume; bitcoin price up 82%

25State of Bitcoin and Blockchain
2016 2.a Price and Trading

CoinDesk Bitcoin Price Index –
Q4 & 2015 by the Numbers 26State of Bitcoin and Blockchain 2016 Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC

$200 $250 $300 $350 $400
$450 $500 1-Oct 8-Oct 15-Oct 22-Oct 29-Oct 5-Nov 12-Nov 19-Nov 26-Nov 3-Dec 10-Dec 17-Dec 24-Dec 31-Dec Bitcoin Price Rallied in Q4 19th November EU announces possible “crack down” on bitcoin after Paris attacks Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC Visa Europe demos bitcoin remittance app 5th November Final US government auction of over 44,000 Silk Road bitcoins 5th December 16th November Amazon starts shipping 21 bitcoin computers 11th December Bitcoin price climbs to one-year high on record volume 9th December Supposed Satoshi Nakamoto 'unmasking' might be driving bitcoin's price rally State of Bitcoin and Blockchain 2016 27 10th November Bitcoin price drops 13% to below $350 after hitting $450 for the first time in 2015 3rd November Bitcoin price breaks $400 amid 12% surge on China concerns 17th December R3’s distributed ledger initiative grows to 42 bank members

Bitcoin Rebounded From the Worst
Performing Currency in 2014 (-67%) to Best in 2015 (+35%) Data uses USD as a base currency. Source: the Money Project State of Bitcoin and Blockchain 2016 28 • Bitcoin was also the world’s top performing currency in 2013

Bitcoin vs. FinTech: Bitcoin’s 2015
Appreciation (+35%) Surpasses Publicly Traded FinTech Stocks (+12%) 29State of Bitcoin and Blockchain 2016 Notes: BPI is CoinDesk’s price index. The full list of FinTech portfolio stocks can be found at Bank Innovation. The FinTech stock index is an unweighted index. Both CoinDesk BPI and FinTech portfolio index are normalised to 100 on 1st January 2015. Data sources: BPI, OTCMarkets, eoddata 50 60 70 80 90 100 110 120 130 140 150 1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 FinTech Portforlio Index BPI FinTech Portfolio Index: +12% Bitcoin Price Index: +35%

• Bobby Lee, CEO of
BTCC, noted that bitcoin’s price was trading up to 10% higher in the Chinese market • “As China's government steps up capital controls to limit one widely used avoidance path, its citizens appear to be shifting resources to the next best option, cryptocurrencies.” - Robert Viglione, PHD, Darla Moore School of Business Main Drivers Behind the Price Rally Sources: Viglione (2015), CoinDesk, itBit State of Bitcoin and Blockchain 2016 30 • Positive media coverage and US Marshalls auction • European Court of Justice exempted bitcoin from VAT across EU

Some Measures Show a Decrease
in Bitcoin Volatility… 31State of Bitcoin and Blockchain 2016 Source: Coinbase blog, 31st Dec 2015 “Volatility has been on the decline since bitcoin’s inception. In 2015, bitcoin volatility fell by 21%. More specifically, BTC/USD exchange volatility (trailing 30-day average) fell from 3.98% to 3.15% this year.”

…While Other Measures Show Q4
Bitcoin Volatility is at a Two-Year High 32State of Bitcoin and Blockchain 2016 Source: CoinDesk Date Quarterly Price High Quarterly Price Low Peak-to-Trough Percentage Δ Q1 2014 $951.39 (6th January) $458.50 (31st March) 52% Q2 2014 $665.73 (3rd June) $360.84 (10th April) 84% Q3 2014 $647.34 (2nd July) $374.73 (29th September) 42% Q4 2014 $427.24 (12th November) $309.87 (30th December) 27% Q1 2015 $314.59 (2nd January) $177.28 (14th January) 44% Q2 2015 $262.48 (30th June) $218.27 (14th April) 20% Q3 2015 $309.98 (12th July) $209.13 (24th August) 33% Q4 2015 $237.4 (2nd October) $465.5 (15th December) 96%

High Volatility = More Trading:
Q4 Bitcoin Trading Volumes Hit One-Year High 33State of Bitcoin and Blockchain 2016 Data sources: CoinDesk, Bitcoinity Note: Bitcoinity has removed Mt Gox data, so trading volume chart may look different from those in previous State of Bitcoin reports. Monthly Bitcoin Trading Volume 0 5 10 15 20 25 30 35 40 0 10 20 30 40 50 60 70 80 90 USDBillion BTCMillion Monthly bitcoin trading volume (USD) Monthly bitcoin trading volume (BTC)

Trading Volume in Bitcoin Investment
Trust (GBTC) is Positively Correlated (0.53) With Exchange Trading 34State of Bitcoin and Blockchain 2016 Data sources: OTCMarket, Bitcoinity Weekly Indexed Bitcoin and GBTC Trading Volume 0 200 400 600 800 1000 1200 5/4/15 6/4/15 7/4/15 8/4/15 9/4/15 10/4/15 11/4/15 12/4/15 BTC Volume GBTC Volume

Percentage of Bitcoin Owned by
the Top 500 Richest Addresses Decreases From 33% to 30% 35State of Bitcoin and Blockchain 2016 Note: Block 335,000 is the block roughly one year ago and Block 390,000 is around the current block Data Source: Bitcoin Rich List Percent of Bitcoins Owned by Richest Addresses Over Time PercentofBitcoinsOwned

Total Number of Altcoins Decreased
by 3% in Q4; Altcoin Market Cap Share Decreased to 6% 36State of Bitcoin and Blockchain 2016 Data source: CoinMarketCap Note: Altcoin market cap share is calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by the combined market caps of all cryptocurrencies (including bitcoin). For example, a market cap share of 7% for altcoins indicates that bitcoin by itself represents 93% of the market cap of all cryptocurrencies combined. 64 216 347 483 590 594 648 693 675 9% 23% 7% 8% 9% 7% 9% 9% 6% 0% 5% 10% 15% 20% 25% 0 100 200 300 400 500 600 700 800 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Total Number of Altcoins Altcoin Market Cap Share (%)

Dropped from Top 10 Q4
Rank Q3 Rank BanxShares 588 7 Top Altcoins Prove Consistency, but… Data source: CoinMarketCap data as at end of quarter (7th January 2016 and 1st October 2015, respectively) Q4 Rank Name Market Cap Q3 Rank Δ 1 Bitcoin $6,757,260,784 Same 2 Ripple $203,373,383 Same 3 Litecoin $154,072,197 Same 4 Ethereum $72,555,828 Same 5 Dash $20,865,697 +1 6 Dogecoin $14,462,829 +2 7 Peercoin $9,946,601 +3 8 Stellar $8,321,801 +1 9 MaidSafeCoin $6,946,499 +2 10 Bitshare $6,632,485 -5 State of Bitcoin and Blockchain 2016 37

…There Are Now Over 400
‘Dead’ Altcoins Note: An altcoin is counted as dead when it does not have any reported market cap. Sources: bitcointalk, CoinMarketCap State of Bitcoin and Blockchain 2016 38 2chcoin AphroditeCoin Binarycoin Bountycoin Citizencoin 66coin Appcoin Birdcoin Boxxycoin ClockCoin 8coin AppleByte Bitcoin2 Boycoin Clockwisecoin 99cents Arkhash Bitcoin2.0 Brokebackmountaincoin CloudCoin Acros Armoredcoin Bitcoin3.0 BTCTalkCoin Cnote AeroCoin AstroCoin BiteCoin Bumbacoin Cococoin Aircoin AustraliaCoin Bitinium Burbucoin Coffeecoin Alcohoin Babycoin Bitland ButterflyCoin Coiledcoin Alicoin BaconBitsCoin Bitleu Californiacoin Coin Aliencoin Badcoin Bitpeso Cancercurecoin Coin2.0 AllAgesCoin Basecoin Bitpug Capitalcoin Coincoin Allahcoin BatCoin Bitraam CataloniaCoin CoinyeCoin AlphaCoin BeaoCoin Blazecoin Catedoge ColbertCoin AlphaOmegaCoin Beatlecoin BlobbyCoin Championcoin CollegeCoin Altrocoin BeeCoin Bluechip Charitycoin Cometcoin AmericanCoin BeerCoin Bones Chichicoin Compasscoin AmeriCoin BeliCoin BonusCoins Chicoin Cooperationcoin AminaCoin Bells Boomcoin Chococoin CopperBars AmKoin BestCoin Boringcoin ChoomCoin CopyCoin Apecoin Billaume Bosscoin ChuckCoin …

39State of Bitcoin and Blockchain
2016 2.b Media and Sentiment

Q4 Positive News 40State of
Bitcoin and Blockchain 2016 Amazon starts shipping 21 Bitcoin Computers Source: CoinDesk Bitcoin price rockets to one-year high on record volumes Visa Europe demos remittance app built using bitcoin blockchain

Q4 Negative News 41State of
Bitcoin and Blockchain 2016 Source: CoinDesk Increasing number of bitcoin companies enter dead pool SEC charged GAW Miners, ZenMiner and CEO Josh Garza with the fraudulent sale of unlicensed securities and the operation of a Ponzi scheme Digital currency exchange Cryptsy has suspended withdrawals and faces problems with allegations of fraud and mismanagement VC investment growth rate dropped from 11% in Q3 to 3% in Q4; companies focused on wallets and payment processors report no new funding

Q4 Most-Viewed CoinDesk Articles: 60%
Are Price- Related 42State of Bitcoin and Blockchain 2016 Source: CoinDesk top 10 Q3 stories based on pageviews CoinDesk’s Top 10 Most Viewed Stories in Q4 Rank Title Date 1 Bitcoin's Price Rise Explained by Industry Insiders 31st October 2 Poll: What Will Bitcoin's Price Be at the End of 2015? 2nd November 3 US Government to Sell Over 44,000 Bitcoins Today 5th November 4 Vote for 2015's Most Influential People in Bitcoin and Blockchain 24th November 5 Bitcoin Price Rockets to One-Year High on Record Volumes 11th December 6 Satoshi Nakamoto ‘Unmasking’ Might Be Driving Bitcoin's Price Rally 9th December 7 Bitcoin Price Breaks $400 Amid 12% Surge 3rd November 8 Jamie Dimon: Bitcoin Will Not Survive 5th November 9 Ben Bernanke: Bitcoin Has ‘Serious Problems' 19th November 10 Bitcoin Price Drops 13% to Fall Below $350 10th November

Mainstream Media Coverage of Bitcoin
on China’s Sina Increased 42% QoQ, Largely Flat in Western Media 43State of Bitcoin and Blockchain 2016 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 287 81 76 77 202 87 76 46 0 50 100 150 200 250 300 350 Sina WSJ NYT FT Q3 2015 Q4 2015

China Bitcoin Exchange Market Share
Almost 90%; CNY/BTC Captures 95% of Total Volume 44State of Bitcoin and Blockchain 2016 Note: Labels for currencies and exchanges with less than 1% market share are omitted. Data source: Bitcoinity huobi, 42.85% okcoin, 41.21% btcchina, 4.10% others, 3.13% bitfinex, 2.45% lakebtc, 2.10% bitstamp, 1.63% Exchange Market Share CNY, 95.05% USD, 3.91% Currency Share by Exchange Volume (BTC)

Google Searches: ‘Gemini Bitcoin’ and
‘mmm Bitcoin’ (Notorious Ponzi Scheme) Have Been Rising Fast in Past Three Months 45State of Bitcoin and Blockchain 2016 Q4 2015 Related Searches: Top Related Searches: Rising 2015 Source: Google Trends search bitcoin

Bitcoin Academic Research Increased by
8% in 2015, Economics Discipline Leads with 25% of Publications Note: Run rate calculated for 2015 total research. Sources: Brett Scott , Peer-to-Peer Review: The State of Academic Bitcoin Research 2014, JSTOR, Science Direct, Ingenta, Microsoft academic search, SpringerLink, SSRN, Taylor and Francis, Wiley, ArXiv, Oxford Journals , deepdyve, researchgate, seekdl, dblp, Cryptology ePrint Archive, Freesearch and Cambridge Journals. Number of New Bitcoin Academic Research Publications Each Year Discipline Distribution of Publications State of Bitcoin and Blockchain 2016 46 1 0 1 8 23 71 248 267 0 50 100 150 200 250 300 2008 2009 2010 2011 2012 2013 2014 2015 Economics 25% Finance 10% Accounting 0% Computer Science & Engineering 23% Cryptography and Security 17% Environment 1% Law 15% Politics 1% Sociology 8%

47State of Bitcoin and Blockchain
2016 2.c Investment and M&A

Biggest VC Deals in Q4
48State of Bitcoin and Blockchain 2016 Source: CoinDesk $13m $5m (Series B) October 2015(Series A) November 2015

$25 $20 $30 $20 $31
$75 $50 $30 $13 $0 $10 $20 $30 $40 $50 $60 $70 $80 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 VC Deal Sizes Continue Declining *Note: 21 Inc. is excluded because the precise timing of when it raised the $116m, which occurred in various individual stages, has not been revealed. Source: CoinDesk Millions * State of Bitcoin and Blockchain 2016 49 Largest Quarterly VC Deals

No New Countries Added a
VC-backed Bitcoin Startup in Q4 Keeping Total at 23 Countries Sources: CoinDesk, CrunchBase Switzerland Sweden Philippines South Korea Kenya Singapore Panama Japan Canada The Netherlands India Barbados Mexico France Australia Luxembourg United States Israel Denmark Argentina Germany United Kingdom China State of Bitcoin and Blockchain 2016 50

Both Total VC Investment and
Average VC Deal Size Dropped QoQ Data sources: CoinDesk, CrunchBase Millions Millions State of Bitcoin and Blockchain 2016 51 $74 $133 $228 $145 $85 $26 $3 $4 $10 $10 $6 $3 $0 $2 $4 $6 $8 $10 $12 $0 $50 $100 $150 $200 $250 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Quarterly VC Investment ($m) Quarterly Total VC Investment ($m) Quarterly Average VC Investment Deal Size ($m)

Bitcoin VC Investment Now Falling
Behind Early- Stage Internet Investment 52State of Bitcoin and Blockchain 2016 Note: Internet figures include only first-sequence venture deals. Year-end projection extrapolated from YTD run rate. 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 Bitcoin vs Early Internet VC Investment ($m) Millions 2014 Bitcoin 2015 Bitcoin 1995 Internet 1996 Internet $362 $490 $250 $639 $0 $100 $200 $300 $400 $500 $600 $700

Asia Saw Largest Q4 %
Increase; New Investment in Middle East, Latin America and Africa Has Evaporated 53State of Bitcoin and Blockchain 2016 $ Invested as of Q3 • No VC investment in Middle East, Latin America and Africa for three consecutive quarters • US continues to dominate bitcoin VC investment Note: $ invested represents all-time total bitcoin VC investment at the end of each quarter. Data sources: CoinDesk, CrunchBase $ Invested as of Q4 Regions Q4 ($m) Q3 ($m) Q/Q Δ ($m) Q/Q Δ US & Canada 710.7 694.3 16.5 2.4% Europe 156.4 155.8 0.57 0.4% Asia 59.5 50.2 9.3 18.5% Middle East 14.0 14.0 0.0 0.0% Latin America 7.5 7.5 0.0 0.0% Africa 1.1 1.1 0.0 0.0% Total 949.2 922.9 26.3 2.9% Europe 17% Africa 0% Asia 5% Middle East 2% Latin America 1% US & Canada 75% Europe 16% Africa 0% Asia 6% Middle East 1% Latin America 1% US & Canada 75%

US VC Investment is 2.6x
the Rest of World Combined 54State of Bitcoin and Blockchain 2016 Millions Note: US is excluded from above chart. Data sources: CoinDesk, CrunchBase $0 $10 $20 $30 $40 $50 $60 $70 Total Funding by Country ($m)

Share of VC Investment in
Silicon Valley Remained Relatively Constant Over Past Quarters 55State of Bitcoin and Blockchain 2016 • Total number of VC-backed bitcoin companies increased steadily over the past quarters $ Invested No. of Companies Data sources: CoinDesk, CrunchBase Location Value ($m) No. of companies Silicon Valley 507.8 38 Rest of World 449.5 90 Total 957.3 128 Silicon Valley 30% Rest of World 70% Silicon Valley 53% Rest of World 47%

Venture Investment Falls Into Seven
Distinct Bitcoin Industry Sectors 56State of Bitcoin and Blockchain 2016 Payment Processing Wallets Mining Financial Services Exchanges Infrastructure Universal Source: CoinDesk

Sector Trends: 69% of This
Quarter’s Total Investment Is Raised by Financial Services Companies 57State of Bitcoin and Blockchain 2016 VC Investment by Ecosystem Category ($m) Data sources: CoinDesk, CrunchBase Millions $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure Q1 Q2 Q3 Q4

Wallets, Payment Processors Have Raised
No New Investment for Several Quarters 58State of Bitcoin and Blockchain 2016 2013 to 2015 VC Investment by Ecosystem Category ($m) Data source: CoinDesk Millions $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 Q3 2015 Q4 2015 Payment Processor Exchange Universal Mining Financial Services Wallet Infrastructure

Payment Processor and Wallet Investment
Nearly Flat Over Last Four Quarters 59State of Bitcoin and Blockchain 2016 • Financial Services received highest growth in VC investment at 16% • Five new VC-backed financial services startups added this quarter $ Invested as of Q3$ Invested as of Q4 Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter. Data sources: CoinDesk, CrunchBase Payment Processor 8% Infrastructure 10% Exchange 12% Financial Services 12% Mining 13% Universal 35% Wallet 10%Sector Q4 Q3 Q/Q Δ ($m) Q/Q Δ ($m) ($m) Payment Processor 78.9 77.6 1.4 2% Infrastructure 94.8 94.4 0.4 0% Exchange 105.7 105.7 0 0% Financial Services 133.6 115.4 18.1 16% Mining 120.8 119.3 1.4 1% Universal 321.7 316.7 5.0 2% Wallet 93.8 93.8 0 0% Total 949.2 922.9 26.3 3% Payment Processor 8% Infrastructure 10% Exchange 11% Financial Services 14% Mining 13% Universal 34% Wallet 10%

Q4 2015 Investment Rounds 60State
of Bitcoin and Blockchain 2016 Source: CoinDesk Close Date Company Size ($m) Round Select Investors Headquartered Dec-2015 Streami 2.00 Seed Shinhan Bank, Shinhan Data Systems, ICB, Bluepoint Partners South Korea Dec-2015 BTCS 1.45 N/A Cavalry Fund I LP Virginia Dec-2015 Purse.io 1.00 Seed Digital Currency Group San Francisco Nov-2015 Bitwage 0.76 Seed Orange Telecom, Draper Associates, Cloud Money Ventures, Saeed Amidi San Francisco Nov-2015 Align Commerce 12.50 First Kleiner Perkins Caufield & Byers, Digital Currency Group, FS Venture Capital, Pantera Capital San Francisco

Q4 2015 Investment Rounds (cont.)
61State of Bitcoin and Blockchain 2016 Close Date Company Size ($m) Round Select Investors Headquartered Nov-2015 Zapchain 0.35 Seed Adam Draper, Tim Draper, Boost Bitcoin Fund San Francisco Oct-2015 ScoreChain 0.57 Seed Undisclosed Luxembourg Oct-2015 Orb 2.30 Seed Adways Inc, Ceres, Monex Ventures, SBI Investment Tokyo Oct-2015 Coinplug 5.00 Second KB Investment, SBI Investment, Atinum Investment Co. Ltd. Seoul Source: CoinDesk

62State of Bitcoin and Blockchain
2016 2.d Use Cases and Commerce

While Average Daily Bitcoin Transactions
Increased 81% in 2015… 63State of Bitcoin and Blockchain 2016 Note: 100 most popular addresses. Source: Blockchain Number of Transactions Per Day 0 50 100 150 200 250 300 Thousand Total no. of daily transactions No. of daily transactions excluding popular addresses 2014 daily average: 69,200 2015 daily average: 125,100

…Once Long-chains* Are Removed, Growth
Since 2014 Has Been Only 50% Per Year 64State of Bitcoin and Blockchain 2016 *Long-chain transactions comprised of spam, wallet shuffling, coin mixing, mining payouts, faucets, etc. Sources: Coinbase, A Proxy for Users, Neighbourhood Pool Watch

Coinbase Off-chain* Transaction Volume Is
Roughly Same Across All of 2015 65State of Bitcoin and Blockchain 2016 *An off-chain transaction is one on an internal database rather than movement of value on the blockchain. Sources: A Proxy for Users, Coinbase

16 Million Bitcoin Wallets Forecasted
by 2016 (+25% YoY), YE 2015 Forecast Exceeded by 0.8m 66State of Bitcoin and Blockchain 2016 Data sources and notes: total wallets based on data from Blockchain, MultiBit, Coinbase, Andreas Schildbach (Android bitcoin wallet developer). Historical Coinbase data provided by BitcoinPulse. 2015 Q2 MultiBit figures note made available, held constant as end of March 2015 onwards. Total bitcoin wallets Forecasted bitcoin wallets R² = 0.9864 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000

Blockchain’s New Wallet Growth Rate
Has Climbed Last Two Quarters 67State of Bitcoin and Blockchain 2016 Data source: Blockchain 118,286 514,583 481,258 343,121 480,715 451,294 454,435 488,303 706,209 1,066,962 35% 114% 50% 24% 27% 20% 17% 15% 19% 24% 0% 20% 40% 60% 80% 100% 120% 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Number of New Wallets Added Each Quarter Quarterly Increase in Wallets Quarterly Percentage Growth

Zero Q4 Growth Reported in
New Bitcoin-Accepting Merchants by Coinbase or BitPay Note: Data reflects number of new merchants, as self-reported by BitPay and Coinbase. The startups either declined to provide data to the report or reported no change. Sources: Coinbase, BitPay State of Bitcoin and Blockchain 2016 68 10,360 6,000 6,000 12,000 6,000 0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

150k Merchants Accepting Bitcoin Forecasted
by 2016 (+42% YoY), YE 2015 Forecast Fell Short by 34k 69State of Bitcoin and Blockchain 2016 Data sources and notes: Total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided by BitcoinPulse. Daily merchant increase is calculated using linear interpolation. Total merchants accepting bitcoin Forecasted total merchants R² = 0.9709 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16

International Coinbase Users Grew from
44% to 51% of Total User Base in 2015 Source: Coinbase State of Bitcoin and Blockchain 2016 70 • The majority of Coinbase users now reside outside the US • Countries like Brazil, the Philippines and Indonesia saw big growth

New Bitcoin ATM Deployments Growth
Rate at 13%; One ATM Producer Ends Bitcoin Business 71State of Bitcoin and Blockchain 2016 Data source: CoinATMRadar, CoinDesk 43 79 112 104 32 52 48 62 0 20 40 60 80 100 120 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Increase in ATMs in Each Quarter • Robocoin announced a shutdown of its bitcoin business and a move towards traditional payments. Robocoin ATMs represents 4% of total bitcoin ATMs

72State of Bitcoin and Blockchain
2016 2.e Technology

In Response to Bitcoin’s Q4
Price Spike, Network Difficulty Growth Rate Increased 67% QoQ 73State of Bitcoin and Blockchain 2016 Notes: Difficulty represents the number of necessary hash calculations to mine a new block. Data source: CoinDesk Hashrate 6.0 6.1 2.7 9.9 39.8 17% 15% 6% 20% 67% 0% 10% 20% 30% 40% 50% 60% 70% 80% 0 5 10 15 20 25 30 35 40 45 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 TenBillion Quarterly Increase in Bitcoin Mining Difficulty Quarterly Increase in Mining Difficulty Percentage Increase in Mining Difficulty

Bitcoin Payment Software Developer Ecosystem
Grew 40% in 2015 74State of Bitcoin and Blockchain 2016 Source: GitHub Number of GitHub repositories that mention payment methods

While Battle Continues Over the
First Major 'Post- Satoshi' Protocol Decision… 75State of Bitcoin and Blockchain 2016 Source: Medium FAST SECURE CHEAPUNLIMITED DECENTRALISED Scalability is a trade-off between decentralisation and low fees

… A New Solution Proposed
at Scaling Bitcoin Conference Has Support of Bitcoin Core 76State of Bitcoin and Blockchain 2016 Sources: CoinDesk, Pieter Wuille (2015) Segregated witness and deploying it for Bitcoin Presentation • Segregated witness alters how signature data is handled by the network to increase transaction capacity without raising block size limit • This will make transactions appear smaller to current nodes on the network, so more can be included in a bitcoin block Pieter Wuille Core Dev and Tech Engineer, Blockstream

Number of Bitcoin Nodes Decreased,
Down 6% from 6,030 at End of Q3 77State of Bitcoin and Blockchain 2016 Data source: Bitnodes

78State of Bitcoin and Blockchain
2016 2.f Regulation and Macro

Bank of England Examines Macroeconomic
Consequences of New ‘Central Bank Digital Currency’ Source: Kumhof and Barrdear (2016) State of Bitcoin and Blockchain 2016 79 • Bank of England researchers “explore the macroeconomic consequences of central banks themselves issuing digital currency in sizeable amounts, in direct competition with privately-issued bank deposits.” • Preliminary findings: • “A sizeable increase in the steady- state level of GDP.” • “Stabilise the business cycle by granting policymakers an additional policy instrument that controls either the price or the quantity of government-provided liquidity.” Michael Kumhof John Barrdear

Difficulties Reported by Cryptocurreny Startups
in Gaining Approvals From Swiss Authorities 80State of Bitcoin and Blockchain 2016 • While Switzerland is advertising itself as a haven for cryptocurrency firms, a number of companies are reporting problems with getting approval from the Swiss financial market authority, as well as with getting banking accounts • Opportunities are opening up in London, Luxembourg, and other friendlier jurisdictions

Bitcoin is Exempt from European
VAT, ‘A Big Milestone’ According to Exchanges Source: CoinDesk State of Bitcoin and Blockchain 2016 81 The European Court of Justice decided to exempt bitcoin transactions from Value Added Tax (VAT). In so doing, the court effectively recognized bitcoin as a legitimate means of payment in Europe, putting it in the same group as other currencies for tax purposes. ”An impetus for the development of crypto payments in the EU.” Filip Godecki, COO of Bitcurex “Brings additional clarity and legal certainty.” Nejc Kodric, CEO of Bitstamp “A big milestone for bitcoin in general.” Nikolaus Kangas, Founder of LocalBitcoins “Reduction of risks and uncertainties surrounding the adoption of an innovation.” Pierre Noizat, Co-founder of Paymium “Regulation is proving to be more efficient than the technology to organise the rights and the correct functioning of the market.” Alberto Gomez Toribio, CEO of Coinffeine ”Absolutely reasonable and quite expected.” Victoria Polyakova, Chief Legal Officer of CEX.io

Select Country Regulatory Updates 82State
of Bitcoin and Blockchain 2016 Source: CoinDesk • Poland’s Ministry of Finance: Regulating bitcoin should form "part of initiatives at the EU level, due to the trans-border character of cryptocurrency transactions" • Japan’s Financial Services Agency: Financial regulators moving closer to creating a system for registering and overseeing domestic digital currency exchanges Poland Japan

Viewpoint: Why China Should Consider
Promoting Bitcoin As a New Reserve Asset Sources: CoinDesk, World Gold Council • The emergence of a new reserve asset could weaken US dollar/US’s grip on global monetary system • Central banks are openly weighing pros/cons of acquiring bitcoin • In an effort to boost China’s global economic standing, for years the PBOC has acquired gold • However, China’s gold holdings still trail the US, Germany, IMF, etc • Gold is expensive (global market cap ~$7tn) compared to bitcoin ($6 bn) • With over half of all bitcoin mining inside ‘The Great Firewall of China’, China can exert influence over bitcoin State of Bitcoin and Blockchain 2016 83

84State of Bitcoin and Blockchain
2016 3. Q4 2015 State of Blockchain

85State of Bitcoin and Blockchain
2016 3.a Overview

Distributed Ledger Technology (DLT) 101:
‘Blockchain Tech’ vs ‘The Bitcoin Blockchain’ 86State of Bitcoin and Blockchain 2016 “Blockchain technology” “The Bitcoin Blockchain” private (intra-) public (inter-) Intranets & IT The Internet

Startups Pivoting from Bitcoin (Currency)
Focus to Blockchain (Non-currency) and Hybrid Business Models Hybrid State of Bitcoin and Blockchain 2016 87 Bitcoin Blockchain

Blockchain vs Bitcoin: Blockchain and
Hybrid (Currency + Non-Currency) Startups Raised 35% of All VC Funds Note: Three new deals in January (including the $50m raised by Digital Asset Holdings) are included in these two charts. Data sources: CoinDesk, CrunchBase State of Bitcoin and Blockchain 2016 88 Bitcoin 79% Blockchain 20% Hybrid 1% No. of Companies Bitcoin 66% Blockchain 20% Hybrid 14% Total VC Raised ($m)

Q4 2015 Blockchain Investment Rounds
89State of Bitcoin and Blockchain 2016 Close Date Company Size ($m) Round Select Investors Headquartered Oct-2015 Factom 0.40 Seed Kuala Innovations Texas Source: CoinDesk

Consolidation of Blockchain Companies Slows
From Three Q3 Acquisitions to One in Q4 90State of Bitcoin and Blockchain 2016 Source: CoinDesk Q4 Merger & Acquisitions Acquirer Acquiree Oct 2015

Google Search of Blockchain Shows
An Increasing Trend Over the Past One Year, Up 272% Source: Google Trend search for “blockchain” from January 2015 to December 2015 State of Bitcoin and Blockchain 2016 91 100 0

Google Searches Show ‘Blockchain’ Joins
the Top Bitcoin-Related Searches 92State of Bitcoin and Blockchain 2016 Q4 2015 Related Searches: Top Related Searches: Rising Past 12 Months Source: Google Trends search for blockchain

Criticism of Blockchain Hype Raised
Sources: Motherboard, Bloomberg, Tony Arcieri’s blog State of Bitcoin and Blockchain 2016 93 “Private blockchain is not ultimately wildly conceptually different. It's just some brokers getting together and agreeing on who owns what and who sold what to whom.” “Nasdaq's Linq blockchain can replace Microsoft Excel as a way to keep corporate cap tables. But why would you want it to?” “Uses approximately the same amount of electricity as could power an average American household for a day per transaction” “Certificate Transparency is more efficient in solving the decentralized audit log problem.” Matt Levine Bloomberg View columnist Tony Arcieri Platform security specialist at Square

Regulators Show Interest in Using
Blockchain to Monitor Systemic Risk Sources: Pantera BitFlash, Bloomberg State of Bitcoin and Blockchain 2016 94 • “While I am not advocating for the adoption or effectiveness of blockchain technology, it appears to offer potential” • “One can imagine a world in which securities lending, repo, and margin financing are all traceable through blockchain's transparent and open approach to tracking transactions” • This “could revolutionize regulators’ approach to monitoring systemic risk in these areas, including the oversight of collateral reuse, to name just one potential use” Kara Stein Commissioner of the US Securities and Exchange Commission

Bonds Are Ideal For Smart
Contracts… State of Bitcoin and Blockchain 2016 95 • UBS announced smart bonds platform built on Ethereum • Bonds are well suited for smart contracts – fungible, relatively simple to code regularly scheduled principal/interest payments • Can also be fully collateralized on the blockchain if the bond issuer fails Source: International Business Times

Smart Contracts May Have a
Negative Impact on Insurance Industry Profits Source: BankInnovation State of Bitcoin and Blockchain 2016 96 • There were 558,000 passengers who did not files insurance claims for delayed or cancelled flights in and out of the UK in a 12-month period • A smart flight cancellation insurance contract - policy conditions held on a blockchain • A delayed flight is a matter of fact and public record • If event occurs, a smart contract is triggered and payout is automatic

97State of Bitcoin and Blockchain
2016 3.b Private Blockchains

Q4 Blockchain Top News 98State
of Bitcoin and Blockchain 2016 R3’s distributed ledger initiative grows to 42 bank members Nasdaq formally debuts its blockchain product, Nasdaq Linq Source: CoinDesk

R3 CEV’s Consortium: 42 Banks
with Combined $600bn+ Market Cap; 60% Are Global SIFIs Source: CoinDesk State of Bitcoin and Blockchain 2016 99

Critical Mass: R3’s Wall St
Founders Have the Formula For Attracting Top Blockchain Talent 100State of Bitcoin and Blockchain 2016 Sources: R3 CEV, Diginomics 2016 Bitcoin Investor’s Report Jesse Edwards Co-founder David Rutter CEO Todd McDonald Co-founder Richard Brown CTO Mike Hearn Chief Platform Officer

Not Everyone is Thrilled About
R3 and Megabank Blockchain Initiatives 101State of Bitcoin and Blockchain 2016 Sources: Diginomics 2016 Bitcoin Investor’s Report , 2016 Bitcoin Investor's Report “The problem is not the regulators. I think the regulators want this to happen. They don’t want to be under the thumb of Wall Street. They understand Wall Street has monopolistic power.” “What’s happening is Wall Street is trying to slow us down while they come up with their own version, and that’s, I think, R3. That’s a consortium that’s really going to be there — so Wall Street comes up with their own version, and then they’re going to outlaw [the competition].” Patrick Bryne CEO of Overstock

Wall St Mainly Interested in
‘Private’ or ‘Permissioned’ Blockchains Sources: CoinDesk, BitFury Group in collaboration with Jeff Garzik (2015) Public versus Private Blockchains Part 2: Permissionless Blockchains White Paper State of Bitcoin and Blockchain 2016 102 • Many permissioned blockchain applications can be layered on top of permissionless blockchains (eg Ethereum, Bitcoin) using existing technology • For example, ‘colored coins’, which aim to ease the transfer of assets on blockchains, could make public ledgers useful for financial institutions

Blockchain Companies and Financial Institutions
Apply for Cryptocurrency Patents 103State of Bitcoin and Blockchain 2016 Source: CoinDesk • “Real-time conversion system” • “Cryptocurrency transaction payment system” • “Cryptocurrency suspicious user alert system” • "Cryptographic Currency For Securities Settlement" that allows peer-to-peer participants to exchange cryptographic tokens representing securities with instant settlement • “Mining circuitry” which described herein may be used for any digital medium of exchange such as digital currencies, rewards or points

Will Other Large Database Companies
Remain Conspicuously Quiet in 2016 About Blockchain Tech? Sources: ServerWatch, Microsoft State of Bitcoin and Blockchain 2016 104 $29.09bn $38.60bn $10.64bn $16.13bn $0.30bn $2.73bn 2014 Total Revenue • Only two large database firms have made significant blockchain tech announcements: IBM and Microsoft • In Nov 2015 Microsoft announced “Blockchain as a Service”, incorporating Ethereum and bitcoin into Azure • IBM recently announced support for the Open Ledger Project

105State of Bitcoin and Blockchain
2016 3.c Public Blockchains

Too Many Blockchains? Image via
Tony Arcieri’s blog State of Bitcoin and Blockchain 2016 106

Interledger Could Be Solution to
the “Too Many Blockchains” Interoperability Dilemma 107State of Bitcoin and Blockchain 2016 Sources: A Protocol for Interledger Payments, CoinDesk, Wired • A protocol for payments across payment systems • Secure transfers between ledgers and allows anyone with accounts on two ledgers to create a connection between them • No global coordinating system or blockchain required • “Rather than trying to create a global ledger that everyone can agree on,” Ripple chief technology officer Stefan Thomas explains, “we’re trying to tie together all the ledgers that are already out there.”

Viewpoint: To Reap the Main
Benefits of Distributed Ledgers, Banks Must Use ‘Permissionless’ Blockchains State of Bitcoin and Blockchain 2016 108 • “Banks naturally hate the loss of power; it's extremely difficult for them to implement seamless global systems” • "So they keep trying to re-inject points of control, and thus points of vulnerability, into blockchains, eg through 'permissioning’ • However, “this nullifies the main benefits (of blockchains), which come from removing points of vulnerability” Nick Szabo Smart contract and cryptocurrency pioneer Source: International Business Times

Can the Linux Model Address
Governance Issues That Have Stalled Blockchain Development? 109State of Bitcoin and Blockchain 2016 Sources: Fortune, Wired, Bloomberg, CoinDesk • The Open Ledger Project is a development library that will allow businesses to build custom distributed ledger solutions, without having to rely on open, public blockchains like bitcoin and Ethereum • Will use the Linux Foundation approach to provide governance • But how will this approach work without a ‘benevolent dictator’ to settle contentious disputes?

While Still Two Years Away
From Providing a Robust Platform, Expect to Hear More About Ethereum in 2016 110State of Bitcoin and Blockchain 2016 Sources: Slock.it, Augur, FreeMyVunk, Bank Innovation, Medium, CoinDesk Slock.it • Rent, sell or share anything - without middlemen • Use cases: washing machines and bikes Augur • Get precise forecasts on any topic • Augur enables the long tail of prediction markets Vunk • Trade your “virtual junk” that you accumulate while playing video games • Decentralized value exchange • Ethereum development now focused on decentralized apps • General view remains that if you need to deploy something on a blockchain right now, use bitcoin, private DLT, etc; if your time horizon is two years, consider Ethereum

Two Big Challenges for Public
Blockchain Tech: Scalability and Privacy 111State of Bitcoin and Blockchain 2016 Sources: Ethereum, Bitcoin Wiki Scalability • Currently, the network process 3-20 transactions per second • Several orders of magnitude away from mainstream payment systems such as VISA, which handles around 2,000 transactions per second • Several solutions are available like Segregated Witness Privacy • Companies or individuals are unwilling to publish all of their information onto a public database which is accessible by government, competitors and family members. • Difficult to provide solutions with privacy and full capability of blockchain

112State of Bitcoin and Blockchain
2016 4. Thought Leader Survey and 2016 Forecasts

Survey Highlights State of Bitcoin
and Blockchain 2016 113 Source: Bitcoin and Blockchain Thought Leaders Annual Survey What were the highlights for bitcoin and blockchain in 2015? • 43% mentioned blockchain initiatives by major established companies like Nasdaq • 21% mentioned the CoinDesk Consensus Conference • 14% mentioned transaction growth What was the biggest challenge or setback for bitcoin and blockchain in 2015? • 23% mentioned the block size debate • 23% mentioned the slow adoption of bitcoin as an alternative payment method

Survey Highlights (cont.) State of
Bitcoin and Blockchain 2016 114 Source: Bitcoin and Blockchain Thought Leaders Annual Survey What do you think is the main driver behind the price surge in October 2015? • 29% mentioned “China” and “Chinese economic worries” • 14% mentioned growing demand • Factors like “Fed interest rates”, “increased visibility” were also mentioned What do you think about the slowdown in bitcoin and blockchain venture capital investment? • 29% mentioned lack of realization of the promises they made when they got funding initially • 21% believed it is cyclical and temporary

Survey Highlights (cont.) State of
Bitcoin and Blockchain 2016 115 Source: Bitcoin and Blockchain Thought Leaders Annual Survey Which areas do you think blockchain technology will have the greatest impact in? 15% 15% 23% 23% 38% 54% 77% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% other Privacy Decentralised coordination (e.g.: Prediction, Voting) Communication (e.g.: machine to machine) Property title Identity Finance (e.g.: Transaction settlement)

Survey Highlights (cont.) State of
Bitcoin and Blockchain 2016 116 What are your views on industry regulation, both what's happened and what's to come? • 36% expressed negative attitudes towards current regulations, saying they are “stifling innovation”, “poorly-crafted” and “not friendly” • 29% expressed positive views, suggesting they believe the laws increase “transparency” and “awareness” Source: Bitcoin and Blockchain Thought Leaders Annual Survey

Views on 2015 Events and
What Lies Ahead in 2016 Source: Bitcoin and Blockchain Thought Leaders Annual Survey State of Bitcoin and Blockchain 2016 117 Gil Luria Managing Director, Wedbush Securities “(Bitcoin and blockchain VC investment) will reaccelerate once some of the early ventures become successful.” “(Block size debate) will only be resolved when participants recognize that this or any subsequent increases in block size are a continuing transaction fee subsidy provided by the network and financed ultimately by the bitcoin investors.” Jon Matonis Former Executive Director, Bitcoin Foundation

Source: Bitcoin and Blockchain Thought
Leaders Annual Survey State of Bitcoin and Blockchain 2016 118 “The established players are mostly acting out of fear and still do not trust the technology. Most of the initiatives to date exhibit an unwillingness to embrace the distributed ledger technology completely.” David Yermack Professor of Finance, New York University “In general, regulatory certainty is good, but the industry must work together to educate regulators so they don't act out of fear, anxiety or misinformation. I would look for more regulatory activity in Europe and for more enforcement activity in the US in 2016.” Jason Weinstein Partner, Steptoe & Johnson LLP Views on 2015 Events and What Lies Ahead in 2016

Source: Bitcoin and Blockchain Thought
Leaders Annual Survey State of Bitcoin and Blockchain 2016 119 Bill Barhydt CEO & Founder, Abra “Most of the regulation is not helping consumers and it's helping the industry even less. Smart regulators will watch what happens first, figure out if and where regulatory pain manifests itself and then respond in kind.” “I think services like Purse.io and Fold will drive many more people to start using bitcoin simply because it is useful to them. We will also see bitcoin wallets become even easier for people to use.” Roger Ver CEO, Bitcoin.com Views on 2015 Events and What Lies Ahead in 2016

Source: Bitcoin and Blockchain Thought
Leaders Annual Survey State of Bitcoin and Blockchain 2016 120 Scott Robinson Founder & Director, Plug and Play FinTech “I am supporting the growth of innovation in using bitcoin and blockchain, whether by bank or not. I believe the industry to be growing and that the legacy domains will need to change to account for the extremely fast-moving ecosystem.” “(Slowdown in VC investment) is a telling sign that there’s not enough real use-cases and business cases yet. But, at the same time, new sectors are coming online who see potential in bitcoin and the blockchain all the time, for example, insurance, fine art, trade finance and supply chain.” Wong Joon Ian Tech Correspondent, Quartz Views on 2015 Events and What Lies Ahead in 2016

Source: Bitcoin and Blockchain Thought
Leaders Annual Survey State of Bitcoin and Blockchain 2016 121 “The UK will continue to be a leader in innovation-friendly policy for digital currency. In 2015, the UK released a policy that is much more amenable to innovation, and this will be put into place in 2016. 2016 will likely see more regulatory activity outside of just the money transmission realm, be it around securities or futures, or law enforcement efforts. We will also see more states in the US cement their digital currency-specific policy, but they will be competing to be the anti-New York.” Elizabeth Stark Co-founder, Lightning Views on 2015 Events and What Lies Ahead in 2016

2016 Forecasts From Survey Participants
122State of Bitcoin and Blockchain 2016 Sources: Bank Innovation, CoinDesk, Bitcoin and Blockchain Thought Leaders Annual Survey • More blockchain hype • Bitcoin community will (at least temporarily) solve scalability challenges • Private and public blockchains will co-exist • There will be more blockchain proofs-of- concept and minimal viable product/experimentation from Fortune 500 • Regulators will come to understand (and love) blockchain technology

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Disclaimer • CoinDesk makes every
effort to ensure the information used these slides 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. • CoinDesk is owned by Digital Currency Group, one of the most active investors in the bitcoin and blockchain technology industry. Many DCG investments are referenced in this report, and a full list can be reviewed at www.dcg.co. CoinDesk is run as an independent entity, and its editorial team does not give preferential treatment to DCG investments when they are referenced in research reports or news posts. DCG portfolio companies referenced in this report include Abra, Align Commerce, BitGo, Bitnet, BitPay, BitX, BTCC, Chain, Circle, Coinbase, Colu, itBit, Kraken, and Xapo. 124State of Bitcoin and Blockchain 2016