The document discusses Bitcoin and its potential as either a bubble or the greatest invention since the internet. It begins by outlining the long history of shell money used as a form of currency for over 12,000 years. The remainder of the document consists of slides from a presentation given by Sean Walsh on Bitcoin. The presentation covers principles for analyzing Bitcoin as an investment, including what Bitcoin is, how it works, what drives its value, and evidence that its price may continue to grow. It analyzes Bitcoin according to characteristics of effective money and compares it to other currencies and assets.
'Future Evolution of the Internet' delivered by Geoff Huston at Everything Op...
Breaking Down Bitcoin - Sean Walsh - Miami 2018
1. Breaking Down Bitcoin
Bubble Or Greatest Invention Since The Internet?
Miami – January 2018
Sean M. Walsh - sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
2. 12,000 Years Of Shell Money?!
10,000BC - Paleolithic era shell hoards found from Red Sea to Switzerland
5,000BC - Neolithic era shell money in South Pacific & Asia
1,600BC - Chinese Shang Dynasty, bronze cowrie shell money
1700s - used throughout India, Africa, Asia, Europe, South Pacific
1850 - used as legal tender in West Africa
1920 - Replaced by modern currency in remote parts of Africa
2017 - still used in Solomon Islands and Papua New Guinea
Sean M. Walsh - sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
3. Sean M. Walsh
• Newly appointed CEO, Hyperblock Technologies
• Redwood City Ventures (Bitcoin/Blockchain Focus)
• Advisor, Science Inc. Blockchain in Los Angeles
• Previously VP at Bertram Capital ($1+B Silicon
Valley Private Equity firm)
• Created several $100 Millions in new Enterprise
Value
• Online and Mobile Product Strategy + Customer
Acquisition
Contact Information:
• sean@RedwoodCityVentures.com
• Twitter: @SeanWalshBTC
• www.linkedin.com/in/SeanWalsh
• WeChat: BigWaveW
4. Notable Projects
• Advisor, Science Blockchain
• Blockchain Startup Incubator
• ICO Advisor
• Science Inc - $1.4B in exits
• Top Blockchain Security Datacenter in North
America (aka crypto mining)
• Bitcoin, Ethereum, Zcash, Litecoin, Etc.
• Server sales + leasing + repair + hosting,
new Blockchain proofs of concept
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
6. Objective
#1: Cover the most important investment-related
elements of Bitcoin for asset class evaluation.
#2: Provide an inside look at how we at RWCV analyze
and model crypto investment opportunities.
Reality: We have 50 more slides, and under 12 min.
Download this deck from my Twitter…
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
7. Important Disclaimer
1. I’m not a registered investment
advisor, or tax advisor, or attorney.
2. Do not rely on anything I say as
professional advice.
3. These are just my personal opinions.
(which are often wrong anyway)
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
8. The Basis Of Our Fascination
Ecommerce
Monetary
Factors
Social
Networking
1. Ecommerce/Online User
Acquisition
2. Social Networking / Viral
Marketing
3. Monetary/Economic Factors
1. Monetary History
2. Asset Design
3. Foreign exchange
4. Global trade
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
9. Our Investment Approach
We start by establishing the “First
Principles” of the investment we are
considering.
These are the most essential elements of
our thesis.
Note: If you don’t really know your investment, you
aren’t investing… you’re gambling.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
10. Step 1: First Principles
1. What is Bitcoin? What is money??
2. What is the current market situation?
3. How does Bitcoin work?
4. What transactions can Bitcoin improve? Who uses it?
5. What fundamentals drive the value of Bitcoin anyway?
6. Any evidence to suggest price will continue climbing?
7. What risks are commonly discussed?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
11. Principle #1 – What Is Bitcoin?
• The best form of money ever invented
• But, what is money?
1. Unit of Account
2. Means of Exchange
3. Store of Value
• How to compare different monies? SDDRFT
1. Scarcity
2. Durability
3. Divisibility
4. Reconizability
5. Fungability
6. Transportability
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
12. Important Note…
It’s looking incresingly likely that BTC and BCH will co-exist, however tense their
relationship may be on Twitter...
Note that we invest in both.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
Bitcoin
BTC
(Bitcoin Core)
BCH
(Bitcoin Cash)
+
13. 1. Scarcity: limited, predictable supply
2. Durability: won’t decay
3. Divisibility: easy to subdivide
4. Recognizability: difficult to counterfeit
5. Fungibility: units are exchangeable
6. Transportability: easy to move
They all boil down to trustworthiness of the money (faith).
Principle #1 – “Moneyness”- 6 Characteristics of Money
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
14. S
Dur.
Div.
R
F
T
Gold = 18
S
Dur.
Div.
R
F
T
USD = 13
S
Dur.
Div.
R
F
T
Arg Peso = 10
S
Dur.
Div.
R
F
T
Frequent Flier Miles = 5
S
Dur.
Div.
R
F
T
Starbucks Cards = 6
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
S
Dur.
Div.
R
F
T
Cowrie Shells = 15
17. How To Know When Money Earns Faith…
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
What is Bitcoin Money backed by?
It’s users’ faith in it’s future…
(AKA, neck tattoos)
Shout out to
Mike Novagratz
18. But… It Ain’t Just Bitcoin…
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
I’m convinced that
Paleolithic ballers
were covered in
Cowrie Shell tattoos…
Roman Imperatorial Coinage from 1st Triumvirate circa 59BC
19. The Importance of Moneyness
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
John Exter
(NY Fed President)
20. A Note On Recognizability…
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
26. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
30.9%(avg. monthly growth rate)
Interesting Trend – Since Sept 2017
1+ BTC Wallets BTC Price
Interesting Note: Over the past few weeks, it seems 1+ BTC Wallet growth has
stalled, which was expected. We plan to measure fiat balance wallets now…
3.2%(avg. monthly growth rate)
27. Bitcoin Exchange Volume by Currency
https://www.cryptocompare.com/coins/btc/analysis/USD?type=Currencies
34. Principle #3 – How Does Bitcoin Work?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
1. The Blockchain (the database)
2. Bitcoin Network Nodes:
1. Transaction Propagation
2. Propagation + Blockchain Construction
3. Blockchain Security Servers (Bitcoin Miners)
-They get the votes to control network
4. Bitcoin Wallets: many kinds…
1. Hardware
2. Software (local PC)
3. Online/Mobile Service
4. Paper
5. Virtual Unit of Money, a “Bitcoin”
6. Bitcoin Exchanges
Six
Primary
Elements >>
35. Principle #3 – Benefit of Peer-to-Peer Network
Sean M. Walsh - sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
36. Principle #4 – What Transactions Can Bitcoin
Improve?
Note: there are thousands of use-case archetypes across these Categories.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
Consumer
to
Business
Consumer
to
Consumer
Business
to
Business
"Financial
Transcations"
37. Principle #4 – Transaction Volume
Note: Legacy network is hitting limit of 3 tps.
Bitcoin Cash upgrade increased throughput by 8x
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
Source: www.bitinfocharts.com
BTC Network Headroom: Very little to 0.4 Million tx/day
BCH Network Headroom: 60x growth to 2.5 Million tx/day
BTC, 400k tx/day cap here
38. Principle #5 – What Fundamentals Drive Bitcoin Value?
1. Transaction Volume / Means of Exchange Use
2. Metcalfe’s Law
3. Bitcoin Customer Base Growth
4. Increasing faith in the “moneyness” of Bitcoin
5. P/E Ratio vs. Metcalfe’s Law vs. Price Elasticity
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
39. Principle #5 – Robert Metcalfe’s Law (Network Effect)
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
41. Principle #5 – Customer Base Growth
Note: 1+ BTC Wallets now 697k, from 605k in Sept 2017 (23k monthly growth,
vs. 10k historically)
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
42. Principle #6 – Evidence of Continued Value Growth?
1. Metcalfe’s Law
2. Bitcoin Customer Base Growth
3. Price Elasticity of Supply
4. Bitcoin Dilution Trend
5. Institutional Money Flow
6. 99.9% Of Capital Is Sitting On Sidelines
7. TAM Of Over 3Billion internet-connected
adults, but just 695k people own 1+ Bitcoins.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
44. Price Elasticity Of Supply - Bitcoin
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
New Minted Coins
(100k per month)
+
Coins Sold
by Holders
Bitcoin
Supply
=
As price increases, supply
declines, leading to
acceleration.
Bottom
Line:
49. Max $10 Billion of Fiat Into Exchanges
99.9% Of Capital Is Still On The Sidelines
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
$70 Trillion – 7,000x $80.9 Trillion –8,090x
Bitcoin
50. Principle #7 - Risks Moving Forward
1. Regulatory Crackdown
2. Dramatic price drop leading to 2014-type cycle
3. Renewed attempts at regulatory circumvention (illegal
activities)
1. It’s terrible publicity to our target Users
2. It intensifies regulatory scrutiny and crackdown risk
4. Developer infighting / transaction bottlenecks
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
55. Conclusion
1. Bitcoin is wildly attractive to 500+ Million people.
2. Yet… only 700,000 people own one.
3. TAM penetration is downright tiny.
4. Bitcoin production is almost inconceivably small.
5. Non correlated asset (portfolio diversification, target 1%-4%)
6. Most asymmetric return profile in history?
7. Mainstream adoption due to SDDRFT – best money ever (but
not a replacement for fiat currency).
8. Evidence appears to support strong long-term growth of Bitcoin
and many crypto-asset networks.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
56. Sean M. Walsh
• Newly appointed CEO, Hyperblock Technologies
• Redwood City Ventures (Bitcoin/Blockchain Focus)
• Advisor, Science Inc. Blockchain in Los Angeles
• Previously VP at Bertram Capital ($1+B Silicon
Valley Private Equity firm)
• Created several $100 Millions in new Enterprise
Value
• Online and Mobile Product Strategy + Customer
Acquisition
Contact Information:
• sean@RedwoodCityVentures.com
• Twitter: @SeanWalshBTC
• www.linkedin.com/in/SeanWalsh
• WeChat: BigWaveW
Note: you can make a white version of this deck for printing by clicking “Theme” in the top ribbon, and then selecting the basic white theme in your PowerPoint, like this… http://d.pr/i/10fsb
I’m Sean Walsh. Who’s wearing a watch today? Raise your hand.
Oh, that’s a nice one. Let me buy it from you. I’ll give you a whole bag of money for it. It’s the most well-established form of money in human history.
No? Ok ok… you’re very clever… I can see you drive a hard bargain… I’ll give you two bags of money for it.
Still no deal?? Pity that. OK, sell me your phone then…
What is the lesson here?
Money evolves
Money is society’s most fundamentally important inventions. It’s the basis of how we interact with each other.
Designing good money is very hard, as we’ll discuss momentarily.
Our cultural attachment or inertia is enormous when we establish a new money habit, our mainstream moves together in a big pack.
OK, back to work…
Cowrie Shell Money:
10,000BC – Paleolithic Age, in wide area from Red Sea to Switzerland, extensive discovery of shell hoards suggesting use as money
5,000BC – Neolithic age, substantial evidence of shell money in South Pacific and China (some believe shells may have been used as many as 100,000 years ago)
1600BC – Shang Dyansty, China , brozne cowrie shells for money
.
. Shells, Gold, Coins in steady use as money
.
1800 – used in India, Africa, Asia, Europe, South Pacific
1850 – still used as legal tender in West Africa
1920 – finally replaced by modern currency in remoter parts of Africa
2017 – still used in Solomon Islands and Papua New Guinea
. Found on every continent except Antartica
. Largest sources was Maldive Islands in Indian Ocean
. In classical Chinese, cowrie and money are the same character
Shang Dynasty, 1600BC - http://factsanddetails.com/china/cat2/sub1/entry-5392.html
Monetaria Moneta - https://en.wikipedia.org/wiki/Monetaria_moneta
History of Shell Money - https://en.wikipedia.org/wiki/Shell_money
Money History - https://books.google.com/books?id=CVNQu_9NehIC&pg=PA90&lpg=PA90&dq=shell+money+5000+bc&source=bl&ots=pZ1yzwbULh&sig=RgVCj7Yde9IfoGc6hqt7egFbPek&hl=en&sa=X&ved=0ahUKEwjSp5aEvqXWAhVJzlQKHUrkDuoQ6AEIWzAM#v=onepage&q=shell%20money%205000%20bc&f=false
Chinese Archaeology - https://books.google.com/books?id=ystMAgAAQBAJ&pg=PA141&lpg=PA141&dq=shell+money+5000+bc&source=bl&ots=OtWOUpON00&sig=ctfEZ-Gu5dsN5Gt3I7KyHBzY6zE&hl=en&sa=X&ved=0ahUKEwjSp5aEvqXWAhVJzlQKHUrkDuoQ6AEIXjAN#v=onepage&q=shell%20money%205000%20bc&f=false
Paleolithic Shell Money - https://books.google.com/books?id=aASnQujNgzoC&pg=PA19&lpg=PA19&dq=5000bc+shell+money&source=bl&ots=dNWT7ApTwx&sig=DeLuZVScws-ni6KPH5d28axAO0Q&hl=en&sa=X&ved=0ahUKEwiA_PaQwKXWAhWjrlQKHf8-DgkQ6AEIXDAL#v=onepage&q=5000bc%20shell%20money&f=false
Ai. Add Hyperblock reference
As the emcee mentioned in my introduction, here’s a little about me.
I founded Redwood City Ventures. I’m an Advisor to Science Blockchain in Los Angeles. I spent 5 years at a San Francisco PE firm. Etcetera.
My contact info, too. Please reach out. We’re always looking for new investment and partnership opportunities.
A little about my active projects…
Some of you may already know about Science Blockchain, and it’s parent company Science Inc. They’re a VC firm / startup incubator in Los Angeles with about $1.4B in exits to date.
As for Redwood City Ventures, our portfolio includes the largest Blockchain Security Datacenter, aka mining farm, in North America
Again, please reach out if you’re interested in discussing either of these projects.
https://s3-us-west-2.amazonaws.com/scienceblockchainlogo/Scienceblockchain_Form_Digital.pdf
Here’s a summary of what inspired me to get involved in Bitcoin in the first place.
I realized that Bitcoin, and crytpo-assets in general, bring together three very powerful forces on the world today, which I happen to have previous experience with.
To be sure there are many other forces as well (cryptography, peer-peer and open source software, politics, etc), but these are the three most important for this presentation.
Main Points:
Part of Bitcoin’s novelty, and power, is that it incorporates so many different Industries and Fields Of Study. Here are 10: Monetary History, Financial/Banking Systems, Economic Theory, Market Speculation, Cryptography, Open Source Software, Peer to Peer Networking, Ecommerce, Social Networking, and Politics.
Without detracting from any of these fascinating dimensions, these are the 3 that resonate most strongly with us, and convinced us to focus our investment activities here.
I think the complementary interaction between these 3 dimensions is what makes Bitcoin such a valuable new technology.
Also, I think these three dimension are likely to contribute dramatically to mainstream adoption.
If you don’t really know your investment, you aren’t investing… you’re gambling.
OK. Humor me for a minute on this one. Remember, we must go back to the basics to find the essence of what we’ve built and what we’re selling to the mainstream.
Of course we all know what Bitcoin is. But, let’s take a deeper look.
We think there are some characteristics that don’t receive enough emphasis, but that are particularly influential in our mainstream adoption thesis.
We expect every form of money to serve three essential functions…
Unit Of Account simply means a tool for measuring the relative worth of every product and service that gets traded… is exponentially easier than trying to calculate bi-directional exchange rates for everything.
A dozen eggs, my airfare to London, a gallon of gas, one hour of accounting services, a restaurant meal, a car tire, a haircut, a house, a movie ticket… a unit of account allows us to easily measure each on the same scale.
Means of Exchange means a token we trade amongst ourselves that we agree has value for transactions. Closely tied to Unit of Account, but the subtle difference is important.
Store of Value is somewhat self explanatory. It means a physical or virtual object that we can purchase to retain any excess wealth we may accumulate in our regular business. We can hold onto that object over time, and it should maintain it’s relative value. Then we can exchange it later for goods and services that we need or want.
What’s interesting, is that economists have devised 6 characteristics of money that we can use to compare moneys.
Their acronym is SDDRFT. Let’s take a look at what they are…
OK. SDDRFT. How to quantify and compare forms of money.
[Run through all six, with examples]
Essentially, they all boil down to the trustworthiness of the money. People need to develop faith in their money.
This is probably why cowrie shells worked so well for so long. People trusted them, and held onto their money habits for a LONG time.
We decided to try this comparison method out for a few common forms of money.
Here are six forms of money. We scored each from 0-4 on SDDRFT and made these radial or polar plots of the results.
From top left, in chronological order of development… cowrie shells, gold, US Dollars, Argentinian Pesos, airline frequent flier miles, and Starbucks cards.
The larger the colored area for each form of money, the higher it’s quality or “moneyness”.
We’ll review the total scores in a minute, but let’s first look at Bitcoin in the same manner…
Here’s how we scored Bitcoin.
Score Meaning…
0 = Non existent
1 = Low
2 = Medium
3 = High
4 = Near-Perfect
These scores are obviously subjective, and we assigned them ourselves, but we think they’re defensible, and adequately coarse.
Maximum score is 24 points.
As you can see, Bitcoin does quite well. Let’s compare all 7 forms of money we analyzed...
Here’s all 7 forms of money.
They’re in chronological order of development from left to right.
Now, we doubt many people in the mainstream public sit around contemplating moneyness much right now, but we believe that’s changing quickly especially in places like Venezuela, Argentina, Russia, the Ukraine, etc.
Geopolitical events could accelerate this any day, with the way things seem to be going.
Note: the USD, and most fiat currencies, are perfectly good at Unit of Account and Means of Exchange. It just seems to us that people have a tendency, right or wrong, to also rely on money also as a Store of Value, and that causes problems for them.
I’m not calling for a replacement of fiat currency, or criticizing any government. Fiat currency is excellent for Unit of Account, and Means of Exchange. It just has problems with Store of Value, yet diligent money savers continue to use it.
https://99bitcoins.com/the-best-7-bitcoin-tattoos/#prettyPhoto
People aren’t going to get a neck tattoo of a form of money unless they REALLY have faith it’s going to be around in the future!
I imagine it’s very likely that people have always tattooed themselves with money they trust… dollar signs… gold coins/bars… all the way back to cowrie shell tattoos
I imagine it’s very likely that people have always tattooed themselves with money they trust… dollar signs… gold coins/bars… Roman imperatorial coins from the first triumvarate in 59BC… all the way back to cowrie shell tattoos
In case there was any doubt, moneyness is important. We’re not alone in our appreciation of it.
Here’s a guy. His name was John Exter. He was president of the New York Federal Reserve Bank in the mid-1900’s
He was very focused on “Moneyness”, as you can see in his quote and his pyramid.
He produced this inverted pyramid to compare different forms of money and assets, sort of like the SDDRFT I previously mentioned.
His position was that the scarcer forms of money were the most valuable/powerful.
REMINDER: I’m not calling for a replacement of fiat currency, or criticizing any government. Fiat currency is excellent for Unit of Account, and Means of Exchange. It just has problems with Store of Value, yet diligent money savers continue to use it.
Example of Counterfeit Currencies
http://www.businessinsider.com/r-china-finds-15-billion-of-loans-tied-to-falsified-gold-deals-2014-26
https://twitter.com/cnledger/status/833856207882379264
This is asset class correlation with the S&P 500 as the basis. We looked at currencies, oil, real estate, stocks, bonds, gold, etc
It’s several months old, but still applicable.
You can see high positive correlations essentially across the board.
Here’s a similar analysis with Bitcoin as the basis of comparison.
You can see a couple of high negative correlations, that have dissipated in the months since we ran this analysis.
It proves the point that Bitcoin does not have a high positive or negative correlation with other asset classes.
This is very desirable from an portfolio allocation/diversification perspective.
TAM: 3 Billion internet-connected adults, 1.5B with no banking
Customer Base: Under 900k people with 1+ Bitcoin
BTC Network: about 400k tx/day, completely full, $20 per tx
BCH Network: about 50k tx/day and growing fast, capacity for 2.5M tx/day, $0.02 per tx
New Bitcoins/Month: about 100k
Global Regulations: mixed bag
Inflation and Geopolitical Risks: growing
Ai. Incorporate BCH stats
Main Points:
Here are some data points that we think matter. They capture some of the key aspects of our opportunity (to achieve mainstream adoption)
From a Product Marketing perspective, these stats are great! They’re a sign of MVP validity and much more.
The geographic density of our User base is uncomfortably low, but we’ll get to that later.
Which metrics should we measure? I think these are 4 great ones. By the way, if you’re a blockchain analytics company, I want to talk to you about a project.
Note: see Appendix for further detail
Source: https://www.cryptocoinsnews.com/1-bitcoin-community-controls-99-bitcoin-wealth/
Note: there are another 400k wallets with 0.1 > 1 BTC, but most of these balances are probably not an indication of full adoption
Over 70 million per month traded in China, but fees are zero and numbers are unreliable
What metrics should we measure for success?
“That which is measured will improve”
Let me show you an interesting trend that we’ve found in the Bitcoin market.
On the left, you can see a little over 2-years of growth in 1+ BTC wallets, which we use as a rough proxy for customers in our whole analysis. The average growth has been a little shy of 2% since July 2015. We see this as organic customer adoption.
On the right, Bitcoin price… a corresponding growth of almost 10% monthly.
We believe this is much more than correlation. We believe significant causality exists where customer growth is driving price appreciation, given limited BTC supply and other factors.
Remember this… 2% monthly organic customer growth seems to have driven 10% monthly price appreciation. What if we can augment this organic customer growth? We think we can.
Create a second table that shows the wallet and price growth since Sept 2017
Let me show you an interesting trend that we’ve found in the Bitcoin market.
On the left, you can see a little over 2-years of growth in 1+ BTC wallets, which we use as a rough proxy for customers in our whole analysis. The average growth has been a little shy of 2% since July 2015. We see this as organic customer adoption.
On the right, Bitcoin price… a corresponding growth of almost 10% monthly.
We believe this is much more than correlation. We believe significant causality exists where customer growth is driving price appreciation, given limited BTC supply and other factors.
Remember this… 2% monthly organic customer growth seems to have driven 10% monthly price appreciation. What if we can augment this organic customer growth? We think we can.
It’s funny to look back on these headlines over the years, but we believe there’s a profound underlying truth.
Bitcoin started from zero in 2009. It’s network success and current customer base are the real achievement.
Here’s what we think… In future decades, historians will write about the incredible achievements Bitcoin made in growing from nothing to 100k, 200k, 500k customers in it’s first few years of life, as opposed to it’s mainstream growth and development in the subsequent 20-30 years.
Going from Zero to One is the truly rare achievement.
Main Points:
The Bitcoin network is a monumental achievement by many measures.
We believe the most impressive is it’s very existence, network growth, and resilience.
We believe it’s much rarer to take a network/marketplace from ”Zero” to “One” than from One to Ten, or even One to One Hundred. Starting a movement is VERY difficult. This is easy to see in the litany of failed/failing alt-coins.
In 20 years, historians will likely talk more about the first 6-years of Bitcoin (when it went from Zero to One) than the subsequent 20 years.
The Bitcoin network is like the honey badger, it’s death has now been proclaimed over 100-times across major global media outlets. Regardless, Bitcoin and the Bitcoin ecosystem continue steady growth.
https://99bitcoins.com/bitcoinobituaries/
2011.11.23 Wired $2.37 https://www.wired.com/2011/11/mf_bitcoin/
2012.12.24 Wired $13.30 https://www.wired.com/2012/12/wired-tired-expired/
2013.08.08 Bloomberg View $93.57 http://www.bloombergview.com/articles/2013-08-08/did-the-sec-just-validate-bitcoin-no-
2013.11.06 Business Insider $433.57 http://www.businessinsider.com/bitcoin-is-a-currency-for-clowns-2013-11
2014.12.16 Washington Post $325.10 https://www.washingtonpost.com/blogs/monkey-cage/wp/2014/12/16/bitcoins-financial-network-is-doomed/
2015.02.15 International Business Times $217.87 http://www.ibtimes.co.uk/bitcoin-dying-will-be-remembered-like-pogs-1487228
2016.01.14 Mike Hearn $429.73 https://blog.plan99.net/the-resolution-of-the-bitcoin-experiment-dabb30201f7#.wul2upuxx
2016.10.12 Newsweek $635.43 http://europe.newsweek.com/quantum-computers-kill-bitcoin-cryptocurrency-509053?rm=eu
2016.12.08 LinkedIn $771.23 https://archive.fo/Btd0y
2017.02.24 Gizmodo $1,184.47 https://gizmodo.com/bitcoin-all-time-high-1792712406
https://99bitcoins.com/bitcoinobituaries/
2011.11.23 Wired $2.37 https://www.wired.com/2011/11/mf_bitcoin/
2012.12.24 Wired $13.30 https://www.wired.com/2012/12/wired-tired-expired/
2013.08.08 Bloomberg View $93.57 http://www.bloombergview.com/articles/2013-08-08/did-the-sec-just-validate-bitcoin-no-
2013.11.06 Business Insider $433.57 http://www.businessinsider.com/bitcoin-is-a-currency-for-clowns-2013-11
2015.02.15 International Business Times $217.87 http://www.ibtimes.co.uk/bitcoin-dying-will-be-remembered-like-pogs-1487228
2016.01.14 Mike Hearn $429.73 https://blog.plan99.net/the-resolution-of-the-bitcoin-experiment-dabb30201f7#.wul2upuxx
2016.10.12 Newsweek $635.43 http://europe.newsweek.com/quantum-computers-kill-bitcoin-cryptocurrency-509053?rm=eu
2016.12.08 LinkedIn $771.23 https://archive.fo/Btd0y
2017.02.24 Gizmodo $1,184.47 https://gizmodo.com/bitcoin-all-time-high-1792712406
It’s funny to look back on these headlines over the years, but we believe there’s a profound underlying truth.
Bitcoin started from zero in 2009. It’s network success and current customer base are the real achievement.
Here’s what we think… In future decades, historians will write about the incredible achievements Bitcoin made in growing from nothing to 100k, 200k, 500k customers in it’s first few years of life, as opposed to it’s mainstream growth and development in the subsequent 20-30 years.
Going from Zero to One is the truly rare achievement.
https://99bitcoins.com/bitcoinobituaries/
2017.06.06 $2,741.29 https://www.cnbc.com/2017/06/06/mark-cuban-calls-bitcoin-a-bubble-price-falls.html
2017.07.12 $2,410.55 https://finance.yahoo.com/news/morgan-stanley-bitcoin-acceptance-virtually-163151472.html
2017.08.17 $4,179.97 https://www.tradingview.com/chart/BTCUSD/SNpaQPLN-The-Death-of-Bitcoin/
2017.09.11 $4,450.15 https://www.forbes.com/sites/panosmourdoukoutas/2017/09/09/why-china-crushed-bitcoin/#21ab3ee529ef
2017.09.12 $4,376.12 https://www.cnbc.com/2017/09/12/jpmorgan-ceo-jamie-dimon-raises-flag-on-trading-revenue-sees-20-percent-fall-for-the-third-quarter.html
Why did this happen?
Essentially, I think Jamie Dimon forgot to search Google images for “Bitcoin Tattoos”…
Here’s a look at the full spectrum of all the thousands of financial services use cases, divided into four buckets. We see about half of these use cases in Consumer to Business and Consumer to Consumer.
That’s where we’ve focused of our campaign.
Main Points:
1. Here’s a pie chart representing the spectrum of financial services use cases. I’ve divided them into four broad categories…
Consumer to Business = 30% Consumer to Consumer = 20%
Business to Business = 30% “Financial Transactions” = 20%
2. In my view, we should focus on Bitcoin’s application to B2C and P2P.
3. As a side note, this is also where Bitcoin’s public blockchain makes the most sense, just like the public WWW made more sense than the countless walled-gardens and Intranets back in the early days of the internet. In both cases, the value of the, and low barriers to entry for network participants, are absolutely critical for success.
4. That said, I see plenty of space for public and private blockchains to co-exist. They naturally apply to different use cases, and frankly I think that each will help the other as they progress through stages of growth and popularity.
Even R3 (Todd McDaniel?) recently articulated this very point, that public and private blockchains are not “enemies” or even “frenemies”, they are allies addressing complimentary financial services use cases
There are many use cases for both types of blockchain systems, but I predict a single dominant public blockchain just like the WWW.
Ai. Update this slide, and include a second chart for BCH
The idea of this slide is to simply describe the basic concept for typical products (oil, wheat, fidget spinners, coconut water, flatscreen tvs, eggs, etc)
I want to show you a virtuous cycle we believe we can trigger with our Bitcoin customer acquisition campaign.
This is the well-established theory of Price Elasticity of Supply
It basically states that, as the price for a good increases, suppliers will increase their supply commensurately to attenuate price appreciation. That behavior would lead to an upward slope in the blue line.
And we see this in well over 99% of all good and services sold in our society. Oil, food, computers, cars, houses… they all typify this behavior.
However, we believe Bitcoin is a rare exception to this rule. We believe Bitcoin’s PES has a negative slope, meaning that as Price increases along the x-axis, Supply paradoxically declines.
If true, this effectively means price appreciation would accelerate the higher BTC price moves.
Each month there are about 4,300 12.5BTC block rewards produced by the network.
There are 3 Billion internet-connected adults on the planet that could purchase those Bitcoins.
In other words, each block reward could have 700k people fighting over it.
There simply aren’t enough to go around.
That leaves marginal supply to pre-existing holders, but human nature typically causes one to hoard more agressively as price increases.
Where would you repurchase your sold BTC? Only the increasing market into which you just sold.
This is what drives the very unusual reverse slope of the Bitcoin Price Elasticity Curve.
Importantly, we believe we can stimulate this behavior by absorbing say 20% of newly produced Bitcoins with our customer acquisition campaign.
http://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_supply.html (take a quick look at the video, but don’t worry about understanding all of it)
http://economics.fundamentalfinance.com/micro_price-elasticity.php
US M2 is growing about 8% annually now: https://research.stlouisfed.org/fred2/series/M2
But BTC, an exploding global network phenomenon still in it’s infancy (relative to network size and tx volume), will be ¼ of that by 2020 (at below 2%)
Some of the media has suggested Bitcoin is used to circumvent capital controls.
This visual should put that to rest.
With max $10B of fiat into BTC exchanges, and $150T sitting in global money and stock markets, you might as well fill a swimming pool with a teaspoon… or an eye dropper. I don’t know, whichever would be slower and less practical!
Bitcoin just can’t move that needle.
OK. Let’s take a quick look at some risks to our success, and then try to wrap everything back together.
I place developer infighting as the #3 risk because of the substantial tangible action we’ve seen this year in response to scaling debate (NYA/SegWit2x, BCH launch/success).
It does seem that the quiet majority has finally awakened, and they’re quite powerful.
Here’s a good example of regulatory crackdown in Jan 2017.
BTC price was soaring, media accolades were pouring in.
And, then…
The PBOC froze all Chinese exchanges for about 3 months.
Price plummeted. Though it did recover with a speed that surprised many.
No Margin Trading
No “Fake” Trades
No Advertising
Increased KYC AML
Fast forward to Sept 2017, and we’ve all got deja-vu.
Two interesting differences though…
Exchanges are apparently getting shut permanently.
Price correction has been much less drastic.
It’s important to note that Chinese exchange volume is now only 10% of the global total.
We see this as evidence that Bitcoin’s resilience continues to grow.
A China shutdown is obviously not “good”, but it’s apparently no disaster. Plus, Google, Youtube, Gmail, Facebook, Twitter all seem to be doing fine despite bans in China.
It seems even the biggest risk to our success is fading into the background.
http://www.trustnodes.com/2017/09/20/chinese-bitcoin-trading-volumes-fall-3-60
https://news.bitcoin.com/china-bitcoin-volume-2017/
https://www.coindesk.com/document-lists-closure-steps-for-chinas-bitcoin-exchanges/
https://www.coindesk.com/correction-not-crash-bitcoin-price-eyes-3000-traders-take-profits/
AI:
We need a price chart here, showing that current BTC prices around $3,000 are still about 4x higher than they were in January of 2017. – held off on doing so with prices dropping to $2400 in China today
Replace China ICO headline with one discussing shutdown of BTC exchanges.
Try to add a note that China represents 10% of global exchange volume.
Key Point: Bitcoin is growing more resilient.
OK. Speed conclusion…
Bitcoin is already wildly attractive to an accessible market of over 300 Million people
There are proven Go to market techniques to reach them, and we have the resources for this.
We’ve developed a practical and economical Customer Acquisition Campaign to attract another 600k customers to Bitcoin.
The ROI for our campaign will be enormous, and we’re 60% funded.
We feel this is the single best thing we can do for the Bitcoin ecosystem today.
And finally, please contact us if your interested in joining our campaign in any capacity.
A footnote... We see this core strategy as very appropriate for every ICO and alt-coin looking to achieve customer acquisition success.
Ai. Add Hyperblock reference
As the emcee mentioned in my introduction, here’s a little about me.
I founded Redwood City Ventures. I’m an Advisor to Science Blockchain in Los Angeles. I spent 5 years at a San Francisco PE firm. Etcetera.
My contact info, too. Please reach out. We’re always looking for new investment and partnership opportunities.
I’ll just leave you with this reminder of the varying transportability and scarcity of money. I think it’s Somalia…
REMINDER: I’m not calling for a replacement of fiat currency, or criticizing any government. Fiat currency is excellent for Unit of Account, and Means of Exchange. It just has problems with Store of Value, yet diligent money savers continue to use it.
