cryptocurrencies - innovationleader.com · our 2012 fund was built during the mobile downturn. ......

3Q-2014 � ROCKET INSIGHTS � Cryptocurrencies

ROCKET I NSIGHTS � Q2-2014

CRYPTOCURRENCIES Johanna Lehmann � Nicole Roccaforte John Pryor � Ronan Roche � Patrick Liu


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Our 2004 fund was built during social. Our 2008 fund was built during social and the emergence of mobile. Our 2012 fund was built during the mobile downturn.

And our 2014 fund will be built during the blockchain cycle. I am looking forward to it.

Fred Wilson Union Square Ventures

I compare [Bitcoin] to the Internet. The Internet was a new way to transmit data. Bitcoin's a new way to transmit money.

Marc Andreessen Andreessen Horowitz

There's been discussion about whether Bitcoin is a currency, a commodity, or a technological protocol. There are good arguments for each categorization, but each is unsatisfying in some way. Now we know why this debate is so unsatisfying.

Bitcoin represents a novel form of organization — a blockchain-based entity — that's not quite like anything seen before it.

Rob Wile Business Insider


INTRODUCTION

Introduction to RocketX……………………………………………. 04

Report Methodology ………………………………….……………. 05

Foreword …………………………………………………….……………. 06

Introduction to Bitcoin ……………..……………………………… 07

Bitcoin Adoption ………………………………………………………. 10

MARKET ANALYSIS

Cryptocurrencies: A Timeline …………………………………… 12

Market Trends: Facts & Figures ………………………………. 13

Market Landscape ………………………..…………………………. 15

Cryptocurrency Market Taxonomy ………………………….. 17

FEATURED TECHNOLOGIES

Summary of Select Startups ……………………………………. 19

Startup Partnerability Index ……………………………………. 22

Startup Snapshots ……………………………………..……………. 23

CONCLUSION

Conclusion ………………………………………………….……………. 35

Endnotes & Additional References ……………….………… 36

Appendix …………………………………………………….……………. 39

RocketSpace Contact Information …………….……………. 40

3 This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. Cover Image Source: Anacoins via Compfight cc


“The only way to do great work is to love what you do.” – Steve Jobs

It is with great excitement that I join RocketSpace to lead our RocketX division devoted to Corporate Innovation. I love what we do as innovation professionals. Challenging and leading companies to think differently and explore new and exciting potential is the name of the game for us. I have been on this journey with many Fortune 500 companies across different sectors and industries, so I know the impact that our work can deliver. I look forward to working with you, along with our outstanding RocketX team, in my new role.

We believe the modern corporation must embrace Open Innovation to stay relevant.

At RocketX, our mission is to lead organizations on a journey of Open Innovation. This journey is most successful when there is an ecosystem that inspires, connects, engages, and co-creates with those inside and outside the organization.

Stretch your environment. Get outside your corporate walls and into a new ecosystem.

Our downtown San Francisco campus connects early-stage technology startups, incubators, innovative global brands, and international governments all in one place. Our startup members are disruptive, fast-growing technology companies who want to gain a competitive advantage in the marketplace.

At RocketX, we believe large global brands have a unique opportunity to plug into this ecosystem: creating new opportunities, inspiring disruptive thinking, and opening the door to effective partnerships.

We believe that connecting with startups will accelerate brand innovation.

Our campus gives us a unique perspective on “what’s next next” in technology trends – a critical need for global brands. Corporations have a unique opportunity to drive their Open Innovation activities right from our campus, leveraging the network that comes standard at RocketSpace. There is a world of startup discovery right here, and our expert team is ready to accelerate your path to partnership and innovation.

This RocketInsights report was compiled by our team to highlight Bitcoin and the major disruption that it presents to the world’s largest corporations. The world of payments will indeed see huge changes, but all industries will be impacted. We hope we can help your organization understand and prepare for this disruption to adapt your business in new and exciting ways.

Happy Innovating,

Michele McConomy Vice President, RocketX Corporate Innovation Programs RocketSpace

Michele McConomy VP, RocketX!



REPORT SNAPSHOT This report is intended to provide a macro snapshot of the cryptocurrency marketplace and to identify early stage companies and technologies that represent major market trends. The data for this report were gathered from 04/01/14 through 06/30/14 and are up to date at the time of publishing.

INTRODUCTION This section introduces the concept and technology behind Bitcoin as well as its potential impact across industries. It also includes a discussion of factors aiding and detracting from mass Bitcoin adoption.

MARKET TRENDS The Market Landscape and Market Trends summaries were developed through secondary research of sources including major technology press, technology research sites, Bitcoin exchanges, and industry reports, as well as an interview with cryptocurrency expert Edward Stadum.

CRYPTOCURRENCY TAXONOMY The Taxonomy for cryptocurrencies is based on what we believe to be the major market segments and trends in cryptocurrencies at this point in time.

FEATURED TECHNOLOGIES This section of our reports typically features select early stage technologies. However, for this report, we felt that it was also important to include major players since the market as a whole is still early in its lifecycle.

To select startups for this section we analyzed a combination of factors including: •  Company traction and user growth •  Market and product momentum •  Founding team execution capability and previous success •  Investors and investor pedigree •  Existing partnerships or ability to partner •  Other factors specific to the startup

CASE STUDIES We compiled company profiles and analyses using a combination of primary and secondary research, including reports from the technology press and publicly listed AngelList and CrunchBase information.

Where possible, case studies also include commentary from key stakeholders at the companies themselves.

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When we announced that our report this quarter would focus on cryptocurrencies, we got a resounding response from our corporate members: why do we care?

Our members span industries from education to consumer products, but most are not in financial services. So, they asked, how does this affect us?

We believe that cryptocurrencies will be one of the most profoundly impactful technologies of the decade, if not the century. It will touch companies across industries, in the same way that the internet has. Companies that harness the technology will stay ahead of the curve as consumer adoption accelerates.

We chose to call this report “Cryptocurrencies” rather than “Bitcoin” in order to emphasize that the broader cryptocurrency ecosystem will be equally if not more important than Bitcoin as a single example. However, we focus most of the report on Bitcoin itself, which was the first and is still the most popular of the many cryptocurrencies that have emerged since its inception in 2008.

This report will be a little more top heavy than our others in terms of exposition. Bitcoin is a complex technology and a relatively new market, so in addition to our usual market landscape and taxonomy we will also take you through how it works, why it is disruptive, as well as some of the bigger players in the market. Usually we would only focus on very early stage companies – but in Bitcoin, even the big guys are early stage. Hence, we will cover the market’s most important names in addition to the smaller ones.

Consider this your Bitcoin Bible. Although honestly, it will probably need a refresh in six months. We hope you enjoy!



[Jan-09] An anonymous developer launches Bitcoin under the pseudonym Satoshi Nakamoto

June 30

[Apr-11] Namecoin (a cryptocurrency that also acts as an alternative decentralized DNS) launches

[Oct-11] Litecoin launches, enabling faster transaction confirmations (2.5 minutes vs. 10 minutes for BTC)

[Aug-12] PPCoin launches, providing for annual inflation of about 1% (rather than a circulation max)

[Nov-13] Virgin Galactic announces it will accept BTC

[Jan-14] Overstock.com becomes the first online retailer to accept BTC

[Mar-14] BTC wallet Xapo raises $17M Series B, and BTC wallet and financial product company

Circle raises $20M Series A

[Feb-14] Leading BTC exchange Mt Gox suspends trading and closes its website

[May-13] BTC payment processor CoinBase raises $5M Series A – the biggest round of

funding for a BTC startup up to that date

[Dec-13] CoinBase raises $25M Series B

$638.40

[Jun-13] Adam Draper’s BoostVC incubator’s second class launches with a focus on BTC startups

[Jul-10] Mt. Gox, one of the best known BTC exchanges, is established in Tokyo

[Apr-11] Time publishes an article on Bitcoin

[Feb-12] TradeHill, the 2nd largest BTC exchange in the world, shuts down

citing regulatory problems

[Oct-13] FBI shuts down Silk Road, seizing $3.6M in BTC

[Jan-14] DogeCoin community sends Jamaican Bobsled team to the Winter Olympics

31-Dec: $757.50

31-Dec: $0.30

18-Jul: $0.09

31-Dec: $13.51

31-Dec: $4.72


Exchanges Online Bitcoin Exchange •  Web-based platforms for buying and selling Bitcoins

Open Source Exchange •  Platforms using open source software for creating and trading cryptocurrencies

Brick & Mortar •  Kiosks, ATMs, and physical locations where cryptocurrencies can be exchanged

Financial Institutions •  Platforms enabling financial institutions to issue or store cryptocurrencies

Custom Exchanges •  Platforms enabling any business to create their own Bitcoin exchange

Bitcoin Wallets Web Wallet •  Online platform for storing, sending and receiving Bitcoins

Cold Storage •  Services that store Bitcoin and cryptocurrencies offline

Fiat Storage •  Wallet that lets the user hold Bitcoin in fiat currencies

P2P Payments •  Allows users to send and receive Bitcoin through P2P services

Colored Coin Wallet •  Web wallet made to store, issue, send and receive colored coins

Developer Ecosystem Blockchain App Platform •  Optimized platforms for scaling app development on blockchain technology

Security Technology •  Software developed for securing transactions and the Bitcoin ecosystem

User Authentication •  Technology and platforms created to simplify identity verification

Payment Integration •  Products that facilitate the use of Bitcoin across different payment networks

Payment Gateways Payment Walls •  Cryptocurrency payment processors for merchants

Micropayment Walls •  Payment processors that focus on enabling very small transactions

Social Payments •  Platforms that allow users to pay with or transfer bitcoins over social networks


Vertical Applications Travel Booking •  Bitcoin payments for travel booking

Direct Music Purchasing •  Decentralized music distribution using Bitcoin

P2P Betting •  Betting networks that use Bitcoin instead of fiat currencies

Metacoin Platforms (Altcoins) Company Equity •  Platforms that allow users to purchase shares of decentralized companies

Domain Names •  Cryptocurrencies that act as decentralized domain names

Non-Blockchain •  Non-mined cryptocurrencies (Ripple is currently the only example)

Cloud Storage •  Decentralized storage in the cloud

Contract & Asset Exchange •  Decentralized financial instruments for trading assets

BTC Ecosystem Market Insights •  Market studies and analysis on the cryptocurrency landscape

Mining Hardware •  Hardware and infrastructure for mining Bitcoin

Mining-as-a-Service •  Services allowing users to mine Bitcoin without buying any equipment

Bitcoin Incubator or Fund •  Investments focused on innovative Bitcoin or cryptocurrency entrepreneurs

Transactional Data •  Data around cryptocurrency transactions, price movements and mining activity

Decentralized Apps Blogging •  Decentralized platform for blogging or micro-blogging

Casino •  Software platform for decentralized gambling

Encrypted Messages •  Decentralized communication platforms for sending encrypted messages

Wireless Connectivity •  Platforms that decentralize wireless networks


HOW TO USE THIS GRAPH

This graph reflects RocketX research of cryptocurrency startups and is intended to position some of the most interesting companies in terms of product innovation and to user adoption.

The term “partnerability” covers various concepts. There are many ways that startups and corporates can partner; from incubation or investment to acquisition or joint market entry. The type of partnership that works best depends on the needs of the startup and corporation in question.

In assessing partnerability, one of the factors we consider is the ability to handle scale. So far, relatively few crypto startups have demonstrated the ability to handle scale; therefore, extra weighting has been given to startups that have already demonstrated this ability.

Some of the startups in our index are focused on particular verticals. This does not mean that they are not partnerable, but rather that they are best suited to corporations operating in these specific verticals.

QUADRANT METHODOLOGY

The graph was built using a set of evaluation criteria over two axes:

•  Technology Innovation, a term that we use to assess the uniqueness of the technology (are there other, similar technologies), its maturity, its ability to handle scale, and the technical strength of the team.

•  User Adoption, which measures existing users, intent to partner with corporates, existing partnerships, investment raised, investors, and the business strength of the team.

Technology Innovation

Use

r A

dop

tion

ROCKETX STARTUP PARTNERABILITY INDEX

low high

low

hi

gh


CASE STUDY

Cryptiv CEO Mat Cybula

WHAT IS CRYPTIV?

Cryptiv is a digital wallet and microtransaction platform that enables users to send digital currencies to social media accounts. The platform works by connecting a user’s social media account to their digital wallet via a browser plugin, and is compatible with both Bitcoin and Dogecoin.

The company sees a major opportunity in the popular “social tipping” behavior, where users tip each other tiny amounts of money (down to 1¢) for creating content or adding value to an online community. Its platform enables that behavior across social networking sites and with no technical knowledge required. Cryptiv also allows users to search their friends on the platform in order to send and receive payments instantly.

The technology is a great example of microtransactions, one of the prime use cases for cryptocurrencies. The Dogecoin community, in particular, has already established a strong social pull that encourages members to tip one another and contribute to causes. Cryptiv enables non-technical consumers to adopt social tipping without having to understand how cryptocurrencies work.

The team hopes to be at the forefront of making digital currencies social and secure. CEO Mat Cybula notes that “there’s a lot you can do with these new currencies that you could never do before with Visa.”

WHY DOES IT MATTER TO CONSUMERS?

Cryptiv allows users to tip anyone online, from freelance journalists on reddit, to their favorite tweets on Twitter. Online users stand to gain from microtransactions as consumer choice will increase via incentivisation. Rather than ‘liking’ a blog post, consumers can ‘tip’ with BTC, for example by transferring the USD equivalent of 1-2¢ at a time.

Users can use microtransactions to engage with each other, reward content creators, and buy and sell digital services over new platforms. Cryptiv also allows users to search their friends on the platform to send and receive BTC instantaneously.

WHY DOES IT MATTER TO CORPORATES?

Cryptiv will give brands, particularly content creators, new monetization models. It allows users to tip for content instead of liking or sharing, adding a whole new level of engagement as well as a way for brands to offer content without using ads as the primary revenue driver.

Toronto, CAN Founded 2014 bootstrapped cryptiv.com



RocketSpace has created an open innovation ecosystem that facilitates trend scouting, technology discovery, and pilot execution. RocketX, RocketSpace’s signature corporate innovation program, is designed to facilitate emerging technology pilots and strategic partnerships or investment deals for our corporate partners. Program packages include:

RETAINED DISCOVERY Our team of research analysts continuously surveys the startup landscape and highlights top companies in emerging verticals for our Retained Discovery clients’ specific open innovation objectives. Using a project-based approach, we have developed a streamlined discovery process that takes our partner all the way from detailed startup analysis to custom demo day, project proposals, and pilot execution.

CAMPUS ENGAGEMENT Physical elements of the program include event space, desks, conference rooms, and brand representation to help innovation teams establish a physical presence in the heart of the San Francisco / Silicon Valley startup ecosystem. By providing access and maintaining community visibility, corporate innovation teams can accelerate platform adoption, technology integration, and partnership formation. Come join other top innovation executives at our quarterly roundtables, where participants share insights and best practices around driving change.

ROCKETINSIGHTS: QUARTERLY INNOVATION REPORTS A quarterly snapshot of emerging trends from a startup perspective on a revolving set of themes and industries. A subscription is included in the Retained Discovery and Campus Engagement packages but can also be acquired separately.

For more information about RocketX, visit www.rocket-space.com/corporate-innovation-teams.

cryptocurrencies - innovationleader.com · our 2012 fund was built during the mobile downturn. ......

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