Here is an overview presentation given by Sean Walsh of Redwood City Ventures to Silicon Valley Insight in November 2015. Several hundred Chinese technologists, entrepreneurs, and investors were in attendance...
Bitcoin & Blockchain Overview - What You Need To Know - Sean Walsh
1. Silicon Valley Insight
Bitcoin & Blockchain Overview
November 2015
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
2. Sean M. Walsh
Background:
• Bitcoin/Blockchain Investments (e.g. - BlockC.co)
• China/US Business & Investment Partnerships
• Past Vice President at Bertram Capital ($1B PE firm
in Silicon Valley)
• www.linkedin.com/in/SeanWalsh
Contact Information:
• sean@RedwoodCityVentures.com
• Twitter: @SeanWalshBTC
• WeChat: BigWaveW
3. What Is Money?
Store of Value vs. Medium of Exchange vs. Unit of Account:
The Six Characteristics of Money:
1. Scarcity: limited, and predictable supply
2. Durability: won’t decay
3. Divisibility: easy to subdivide
4. Recognizability: difficult to counterfeit
5. Fungibility: every unit is exchangeable
6. Transportability: easy to move
They all boil down to trustworthiness of the money.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
4. What is wrong with fiat money and system?
1. Fiat money loses value quickly.
2. Fiancial Intermediation is effectively a tax on the productive economy.
3. Banking has grown more centralized over the past 50-years, and
Financial Services profits have grown commensurately.
4. To wit, that tax has reached 7.2% of US GDP, from 3% in 1950 (over $1.2
Trillion per year), and over ⅓ of US corporate profits.
5. However, the WWW has granted much greater power to consumers.
6. Metcalf’s Law is relevant to, and beneficial for the lender/borrower
network through more desirable matches (think Craigslist and
Newspapers).
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
5. Transaction Cost of Traditional Finance
One US example: Credit Card purchases…
1. Merchant pays 3% to accept credit card.
2. Merchant pays 100% of credit card chargebacks (which currently averages
5+% of revenue for online businesses).
3. Additional fraud expenses: card theft, identity theft, etc.
4. Annual US credit card purchases = over $1 Trillion
5. Total Cost of fraud to the system is almost 10%, per Lexis Nexis = over
$100 Billion/yr
Who ultimately pays this? Is there a more efficient way?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
6. Over 1 Billion People - Internet but No Bank
1. Today there are 6 Billion Cellphones in use (5 Billion are prepaid).
2. 2.6 Billion smartphone subscriptions
3. About 3.5 Billion people use the Internet.
4. Mobile industry predicts over 6 Billion smartphones by 2020.
5. There are about 2.3 Billion people with bank accounts.
6. Bank accounts are not expected to grow as fast as Internet connectivity
and smartphone penetration.
CONCLUSION - Over 1 Billion people can join the developed world, by
becoming their own bank (via new money systems like Bitcoin)
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
10. What is Bitcoin?
1. Money without a traditional bank.
2. A new system for all 3 roles of money:
1. Unit of Account
2. Medium of Exchange
3. Store of Value
3. A global, peer-to-peer transaction network.
4. A shared, public, permissionless, immutable database.
5. A complete, public, global transaction ledger.
6. A programmable system for complex transactions.
7. The best form of “money” the world has ever seen.
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
The Blockchain
11. The Best Form Of Money In History:
Scarcity: 14.5 million exist, 100,000 created monthly, rate cut in half every
4 years.
Durability: Stored and protected by 10s of thousands of Bitcoin servers
around the world.
Divisibility: Can be split down to 1-billionth, a Satoshi
Recognizability: Sha256/Proof of Work/Merkle Tree system has proven
uncrackable since 2009
Fungibility: All BTC are stored together (some concern about
provenance)
Transportability: instant transfer to any point on the Internet
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
12. Elements of the Bitcoin System:
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
1. The Blockchain
2. Bitcoin Nodes:
1. Transaction Propagation
2. Propagation + Blockchain Construction
3. Blockchain Construction/Security Servers (Bitcoin Miners)
4. Bitcoin Wallets: many kinds…
1. Hardware
2. Software (local PC)
3. Online Service
4. Paper (it’s just private key storage)
5. Virtual Unit of Account, a “Bitcoin”
13. How Popular Is Bitcoin, 1/2?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
1. BTC Outstanding - 14,800,000
2. Dead Coins - 4,000,000
3. Wallet Addresses - 70,000,000+
4. Wallets > 1BTC - 360,000
5. Transaction Volume - 150,000 per day, est
6. BTC Sent - 2,000,000 per day, est
14. How Popular Is Bitcoin, 2/2?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
6. Notable Exchanges - 12
7. Exchange Volume - 750,000 per day, est
8. BTC on Deposit At Exchanges - 500,000 est
9. BTC Mining Revenue - 1.3M BTC / $375,000,000
10. Global Network Size - 450 Petahashes/Sec
15. Bitcoin Node Distribution
78% of active BTC nodes are in North America and Western Europe
Source: getaddr.bitnodes.io
16. Geographic Distribution
88% of 2014 VC investment in BTC-related companies is flowing into North
America and Europe
2014 VC Funding ($M) % of Total
North America $129.0 68%
Europe $37.9 20%
Asia $18.6 10%
Latin America $2.0 1%
Middle East $1.5 1%
Total $188.9 100%
Source: CoinDesk
17. Bitcoin Mining Distribution
60%10%
15%15%
75% of the Bitcoin network processing power is in China, Russia, and
Eastern Europe…
Sources: blockchain.info, CoinDesk, BlockC.co estimates
18. The Most Popular Bitcoin Use Cases
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
1. Store of Value / Price Speculation
2. Peer-to-Peer Payments / International Remittance
3. Purchases:
1. Ecommerce
2. Offline
3. Micropayments (ChangeTip, Streamium)
4. Multi-party Transactions
5. Purse.io (15% off everything on Amazon.com)
6. FoldApp (20% off at Starbucks)
20. Bitcoin As A Store Of Value, 2/3?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
21. Bitcoin As A Store Of Value, 3/3?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
Argentinian
Peso
25. Notable Moments in Bitcoin
1983-1998: David Chaum, Cryptographic “blinding formula”, DigiCash
1999-2005: Flooz, Beenz, e-Gold, regulatory crack-down and dot-com bust
1999: X.com becomes PayPal and abandons virtual currency aspirations .
2006: Anshe Chung becomes first millionaire from virtual property on Second Life.
2009: Mysterious figure “Satoshi Nakamoto” launches Bitcoin network, first transaction to Hal Finney.
2010: May 22 – Bitcoin Pizza Day, 10k paid for 2 Pizzas in Florida
2013: December - 5th Bitcoin price peak ($0.08, $1, $32, $266, $1,100)
2013: October – FBI seizes Silk Road
2014: February - Mt. Gox goes out of business
2015: Wall Street embraces Bitcoin/Blockchain
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
26. Wall Street A-Team Embraces Bitcoin
Lawrence Summers - former US Secretary of the Treasury, Xapo Advisor, 21 Inc. board member
Blythe Masters - former Managing Director at JP Morgan, invented CDSs, ran $4B physical
commodity business, now CEO of Digital Asset Holdings
Dee Hock - founder of Visa, Xapo Advisor
John Reed - former Chairman of NYSE, former CEO of Citigroup, Xapo Advisor
Vikram Pandit - former CEO of Citigroup, investor in Coinbase
James Robinson III - former CEO of American Express, Chain.com Board Member
Duncan Niederauer - former CEO of NYSE, President of ICE, Tera Exchange Advisory Director
Jeffrey Sprecher - Founder, Chairman, and CEO of ICE, Chairman of NYSE, Coinbase.com investor
Tom Jessop - Managing Director at Goldman Sachs, Circle.com investor
Arthur Levitt - former Chairman of the SEC, Bitpay.com Advisor
Sheila Bair - former Chairwoman of the FDIC, itBit Board Member
Bill Bradley - former New Jersey Senator, itBit Board Member
Robert Herz - former Chairman of FASB, itBit Board Member
27. Non-Bitcoin Use Cases For Blockchains
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
1. Namecoin: decentralized DNS
2. Property/Birth Records: recording transfers and births on Blockchain
3. Ethereum: scripting language atop Blockchain
4. BitUSD/Tether: cryptocurrency pegged to USD
5. Ripple: bank network money transfers
6. NXT: distributed asset market (equities, etc.)
7. MaidSafe/Storj: Decentralized HDD storage
8. BitCrystals: Spells of Genesis game currency
9. Financial Transaction Settlement: DAH, R3 CEV
10. Alt-Coins: numerous others, many with unique features, such as privacy
32. What Is Bitcoin’s “Killer App”?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
1. Allowing unbanked to participate in digital economy?
2. Ecommerce, or IOT Micropayments?
3. International Remittances?
4. Gambling?
5. Wealth preservation?
6. Price Speculation?
7. Protection against inflation / currency crisis?
8. Circumventing regulatory obligations?
34. Notable Regulation - China
1. In early 2014, Chinese government forbade Bitcoin exchanges from
transacting directly with banks.
2. This was effectively solved through the use of 3rd party money agents.
3. Chinese exchanges now claim that the banking restrictions have been
lifted.
4. Open Question: what effect does/will the GFW (Great Firewall) have?
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
35. Notable Regulation - USA
1. US JOBS Act
a. Title 4 threw open the doors to equity crowdfunding for non-accredited
investors in Q2 2015.
2. New York BitLicense (late 2014)
a. Seen by many as redundant, misguided, and an egotistical PR stunt
by the NY Superintendent of Financial Services.
b. Has caused many Bitcoin companies to cease NY operations.
c. First license issued 9/21/2015 to Circle.com.
3. California BitLicense
a. Was also widely criticized as a destructive burden and political grab
for fame.
b. Was shelved by CA Senator Mitchell on 9/9/2015
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
36. Sean M. Walsh
Background:
• Bitcoin/Blockchain Investments (e.g. - BlockC.co)
• China/US Business & Investment Partnerships
• Past Vice President at Bertram Capital ($1B PE firm
in Silicon Valley)
• www.linkedin.com/in/SeanWalsh
Contact Information:
• sean@RedwoodCityVentures.com
• Twitter: @SeanWalshBTC
• WeChat: BigWaveW
Notas del editor
It’s important to begin with “first principles” (what we know is true) and build from there.
http://jamesclear.com/first-principles
There are really 2 primary reasons for the massive disruption we’re witnessing…
The $1.2 T annual Financial Services tax entrepreneurs have to play with.
The ease of matching lenders/borrowers using the Web.
There are about 7.5B people in the world.
There were only 1B land lines installed because they required credit check.
People with bank accounts did grow by 700M between 2011 and 2014 (and 62% of adults have a bank account).
World’s adult population is about 5B (⅔ of total).
These slides were provided Professor David Lee, of Singapore Management University, currently a Visiting Fullbright Scholar at Stanford
It should come as no surprise that many of the 1+ Billion previously mentioned people are outside of the US.
The point is twofold:
mobile phones are ubiquitous in China, and much of the EM.
All of these mobile phones are likely to be replaced with internet-enabled smart phones in the next few years.
By comparison, the US dollar (the “best” money in the world) has lost over ½ of it’s value in the past 30 years, and over 98% of it’s value since inception in 1913!
https://www.cryptocoinsnews.com/1-bitcoin-community-controls-99-bitcoin-wealth/
Wallet addresses are high, because you can (and many recommend) change your wallet address after every transaction.
Bitcoin offers an incredibly asymmetric return profile, which makes it very compelling for many.
P2P Payment use case is a bit strange for Chinese audience, because they already have WePay, and other options. BTC may never take hold for this use case.
Bitcoin offers an incredibly asymmetric return profile, which makes it very compelling for many.
I think it’s important to recognize a few facts…
BTC was diluted by over 10% in 2014
BTC will be diluted by almost 10% in 2015 (14% ex-Dead BTC)
BTC dilution will drop below 3% by 2020, and quickly approach 0% thereafter
Virtual currencies are in their infancy relative to fiat currencies
BTC averaged under $15 until 2013. As of Nov 2015, return since early 2013 is over 2,000%.
I think it’s important to recognize a few facts…
BTC was diluted by over 10% in 2014
BTC will be diluted by about 8% in 2015
BTC dilution will drop below 3% by 2020, and quickly approach 0% thereafter
Virtual currencies are in their infancy relative to fiat currencies
BTC averaged under $15 until 2013. Current 2 year return is about 15x.
Also, in Nov 2015, it now costs $133 for McDonald’s french fries in Venezuela… http://www.independent.co.uk/news/world/americas/mcdonalds-french-fries-cost-133-in-venezuela-a6724466.html
US M2 is growing about 8% annually now: https://research.stlouisfed.org/fred2/series/M2
But BTC, an exploding global network phenomenon, will be ¼ of that by 2020 (at below 2%)
US M2 is growing about 8% annually now: https://research.stlouisfed.org/fred2/series/M2
But BTC, an exploding global network phenomenon, will be ¼ of that by 2020 (at below 2%)
US M2 is growing about 8% annually now: https://research.stlouisfed.org/fred2/series/M2
But BTC, an exploding global network phenomenon, will be ¼ of that by 2020 (at below 2%)
It is fair to say that the last 20 years have been littered with attempts to create virtual currencies of one sort or another.
What caused the failures? Many fell prey to banking regulation. In the words of Marc Andreesen, it is “cosmically difficult to work with US banking regulators”.
http://www.coindesk.com/3-pre-bitcoin-virtual-currencies-bit-dust/
https://bitcoinmagazine.com/articles/quick-history-cryptocurrencies-bbtc-bitcoin-1397682630
http://www.newyorker.com/magazine/2011/11/28/no-death-no-taxes
http://www.futuristspeaker.com/2012/07/peter-thiels-quest-for-creating-a-viable-global-currency/
http://www.businessweek.com/the_thread/techbeat/archives/2006/11/second_lifes_fi.html
https://en.wikipedia.org/wiki/Bitcoin%23History
http://www.coindesk.com/bitcoin-pizza-day-celebrating-pizza-bought-10000-btc/
https://en.wikipedia.org/wiki/Mt._Gox
https://en.wikipedia.org/wiki/Silk_Road_(marketplace)
Also Augur network – betting on binary outcome events, and voting network
Following Charts cover the Bitcoin/Blockchain Landscape
http://insights.venturescanner.com/category/bitcoin/
Published Sept 2015, Funding was $881M.
$1B mark was passed in early November: http://money.cnn.com/2015/11/02/technology/bitcoin-1-billion-invested/
Following Charts cover the Bitcoin/Blockchain Landscape
http://insights.venturescanner.com/category/bitcoin/
Published Sept 2015, Funding was $881M.
$1B mark was passed in early November: http://money.cnn.com/2015/11/02/technology/bitcoin-1-billion-invested/
Following Charts cover the Bitcoin/Blockchain Landscape
http://insights.venturescanner.com/category/bitcoin/
Published Sept 2015, Funding was $881M.
$1B mark was passed in early November: http://money.cnn.com/2015/11/02/technology/bitcoin-1-billion-invested/
“Killer App” is defined as the one app that will cause mass market adoption of Bitcoin.
For example, email was a killer app for the World Wide Web (as was Netscape, and Google)