bitcoins killer app - achieving mainstream adoption - sean walsh - download for speaker notes

Bitcoin’s Killer AppHow We’ll Achieve Mainstream Adoption

BTC Miami – January 2016

Sean M. Walsh - [email protected] - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

Sean M. WalshBackground:• Redwood City Ventures

• Bitcoin/Blockchain Investments (e.g. - BlockC.co)

• China/US Business & Investment Partnerships

• Previously Vice President at Bertram Capital ($1B Silicon Valley Private Equity firm)

Contact Information:• [email protected]

• Twitter: @SeanWalshBTC

• www.linkedin.com/in/SeanWalsh

http://www.blockc.co/

mailto:[email protected]

http://www.twitter.com/seanwalshbtc

http://www.linkedin.com/in/SeanWalsh

http://www.linkedin.com/in/SeanWalsh

Bitcoin – A Fascinating Intersection

Ecommerce

MonetaryFactors

SocialNetworking

1. Ecommerce/Online User Acquisition

2. Social Networking / Viral Marketing

3. Monetary/Economic Factors1. Monetary History2. Market speculation3. Foreign exchange 4. Global trade

[email protected] - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

Question…

What if Bitcoin’s “Killer App” is not an app at all?


My Objective1. Propose my thesis on how we can achieve mainstream

adoption for Bitcoin (in 17 minutes, or less).Note: I see this as a product Go To Market strategy challenge

2. Walk you through my thought process for narrowing down and identifying the most effective tactics to achieve our goal.

My process: 1. Ask Root Questions2. Find Key Evidence3. Draw Actionable Conclusions


Where To Start? First Principles1. What is the product? What is Bitcoin?

2. What is the current market situation?

3. What is our goal?

4. What is Product-Market fit?

5. What transactions can Bitcoin improve?

6. Who are the target users?

7. What resources do we [email protected] - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

1st Principle – The Current Situation?• About 400k people with 1+ BTC

To me, these are our “Users”

• $400 per BTC (and about 100k new BTC per month until Aug.)

• 180k+ transactions per day

• 2+ Million BTC traded per month on Top 10 exchanges

• Developer turmoil (let’s ignore that for now)

• What metrics should we measure for success?“That which is measured will improve”


https://www.cryptocoinsnews.com/1-bitcoin-community-controls-99-bitcoin-wealth/

1st Principle – What Is Our Goal?1. Reach 1 million people owning 1+ BTC

2. Add 100k new Users per month

• This requires giving people enough reason to go through the trouble of buying $400 in BTC.

• What are those reasons going to be? We need to elicit emotional motives that will inspire our desired actions.


1st Principle – What Is Product-Market Fit?

MP

A product that meets some burning needs of the target market(s)


1st Principle – What Is Bitcoin?• The best form of money ever invented

• But… what is money?1. Unit of Account2. Means of Exchange3. Store of Value

• How to compare different monies? SDDRFT1. Scarcity2. Durability3. Divisibility4. Reconizability

5. Fungability6. Transportability


1. Scarcity: limited, predictable supply

2. Durability: won’t decay

3. Divisibility: easy to subdivide

4. Recognizability: difficult to counterfeit

5. Fungibility: units is exchangeable

6. Transportability: easy to move

They all boil down to trustworthiness of the money.

1st Principle – “Moneyness”- The 6 Characteristics of Money


Scarcity

Durability

Divisibility

Recognizability

Fungibility

Transportability

0

1

2

3

4

1st Principle – “Moneyness”- The 6 Characteristics of Money

BitcoinSDDRFT Score = 22

(out of 24)


S

Dur.

Div.

R

F

T

Gold = 18S

Dur.

Div.

R

F

T

USD = 13S

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

S

Dur.

Div.

R

F

T

Cowry Shells = 11



Freque

nt Flie

r Mile

s

Starbuc

ks C

ards

Arg P

eso

Cowry

Shells

USDGold

Bitcoin

0

5

10

15

20

25

“Moneyness”

1st Principle – What Transactions Can Bitcoin Improve?

For now…

– forget about scalability concerns

– focus on Go-To-Market

– focus on financial services

What are the use cases?

1. Non-correlated asset class for storing value

2. Digital money for retail discounts

3. Global P2P Money Transmission


1st Principle – What Transactions Can Bitcoin Improve?

Note: there are thousands of use-case archetypes across these [email protected] - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

Consumerto

Business

Consumerto

Consumer

Businessto

Business

"Financial Transcations"

1st Principle – Who Are The Target Users?

1. Investors / Savers

2. International Workers (from ~10 Countries)

3. Coupon Clippers


Target #1 – Investors / SaversWhy Bitcoin?

1. Store of Value

2. Non correlated asset class

3. Incredibly asymmetric return profile

4. SDDRFT, best form of money ever

5. Portfolio diversification: 1% - 5% target

6. Almost inconceivably scarce

7. Value is up over 5,000% in 3 years

Note: There are also over

250 Million people around the

world who own Gold as a

Store of Value.


Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-201550.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

130.00

Asset Prices #1, Last 12 Months

Arg PesoUSD DXY10YrUSTrGoldCase-ShillerWTI OilBTC Price

Pric

e In

dex


Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-201550.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

130.00

140.00

150.00

Asset Prices #2, Last 12 Months

S&P 500NASDAQSSES&P 500 CorpMSCI EMBTC Price

Pric

e In

dex


BTC Price

Gold

S&P 500 Corp

NASDAQ

Shanghai Stock Exchange

10YrUSTr

MSCI EM

Case-Shiller

WTI Oil

USD DXY

Arg Peso

-1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800 1.000

-0.144

0.063

0.319

0.877

0.588

0.066

0.487

-0.190

0.289

0.200

0.099

Asset Class Correlation – S&P 500 vs Others, 12-Month



S&P 500

Gold

S&P 500 Corp

NASDAQ

Shanghai Stock Exchange

10YrUSTr

MSCI EM

Case-Shiller

WTI Oil

USD DXY

Arg Peso

-1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800 1.000

-0.144

-0.411

-0.330

0.001

-0.316

0.054

-0.357

0.154

-0.691

0.496

-0.651

Asset Class Correlation – Bitcoin vs Others, 12-Month

Target #1 – The Investing Public


Target #2 – International Workers

From: USA, UK, China, Philippines, Mexico, Colombia, India, Brazil, Argentina

Elevator Pitch:1. Use Bitcoin to get money home quickly

2. Easily divide up your remittances among family members

3. Bitcoin is an interesting Store of Value, and is probably clobbering your home currency

4. Easy to sell Bitcoin and deposit into your home bank


3.9M

3.4M2.9M

1M

.6M

1.2M

1.2M

11.2M

3.5M

http://www.oecd.org/els/mig/World-Migration-in-Figures.pdf

International Workers by Origin

Total = 28.9 Million People

Target #2 – International Workers

Graphics courtesy of http://www.visualcapitalist.com/its-official-bitcoin-was-the-top-performing-currency-of-2015/

Target #3 – USA Coupon Clippers

http://www.slideshare.net/InmarInc/2015-inmar-coupontrends-presentation-2014-yearendreport

1st Principle – What Resources Do We Have?

1. $400 million in annual miner revenue

2. A team of evangelists (maybe 10,000 of us?)

3. 400k people with at least 1 BTC



Total TTM Miner Expense + OpEx $409,000,000

Total TTM Revenue, $ $360,000,000

% of the Industry Participants that Contribute 50%

15% of disposable expenditures $30,000,000

Target number of new users 600,000

Available User Acqusition Expense $51

Resultant Upward Price Movement 50%

Incremental Mining Industry Revenue $190,000,000

Incremental Revenue to Participants $95,000,000

Breakeven BTC Price Increase 17%

Profit to Participants $75,000,000

17% 20% 30% 50% 75% 100%

$100M

$200M

$300M

$400M

ROI – User Acquisition Campaign

Incr Mining RevenueParticipant Profit

Bitcoin Price [email protected] - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

Strategies For Growth?

1. Refine the message / accelerate Word of

Mouth- Think “Ashton Kutcher tweet”

2. People love games and contests (gamification)

3. Direct Referrals (Selling) is very scalable

4. Starting in a small geography is proven(Boiling the ocean is difficult / quicker solution to empty-room problem)


Strategies For Growth?

STEPPS:1. Social Currency

Koreatown bar’s nightly code word2. Trigger Moments

Budweiser “wazzap?” campaign3. Emotional Stimulation Level

Emotion’s polarity is secondary4. Public Displays

Apple’s white headphones5. Practical Value

How-to Youtube videos6. Stories

Fundamental to humanity


Strategies For Growth

We need to think like so-called “Growth Hackers”We need K > 1.0


User Acquisition Campaign Details1. Can be seen as a typical user acquisition play, except that the benefits to the

industry are wildly amplified by the effect on BTC prices.

2. Funding Sources:

1. 5%-10% of mining equipment sales / mining revenue (over $30 million)

2. 2%-4% of BTC holdings of ~1,700 largest holders (over $70 million)

3. User Acquisition Channels:

1. Direct Sales

2. Online advertising

3. Sweepstakes

4. Games of Skill

4. The poetic beauty is that much of the compensation could be automated via Blockchain applications themselves to ensure fairness and execution.


Review: What Are The “Killer Apps”?1. A Federated User Acquisition Campaign

2. The ongoing regional monetary weakness that is likely to intensify and spread over the next 12-months

3. Discounts for using BTC (e.g. – Fold, Purse.io)

4. A Direct Sales Execution

5. [Electronic money for 1 billion unbanked people in South America, Asia, and Africa]


Our Biggest Risks Ahead1. Regulatory Crackdown

2. Renewed attempts at regulatory circumvention (illegal activities)

1. It’s terrible publicity to our target Users

2. It intensifies regulatory scrutiny and crackdown risk

3. Developer infighting and stalemate?

I think this is a bit of a false risk


Private Blockchains Are Not A Risk1. There are plenty of use cases to go around

2. Refer to the early days of the World Wide Web.

3. Refer to the early days of telephone networks


Conclusion1. Bitcoin already has a number of killer apps in the bag.

2. Let’s act like a single company seeking mainstream adoption for our product.

– 1 million Users ( people owning 1+ BTC)

3. Let’s think more creatively about how to use our resources (like mining revenue) to hit 1 million Users.


Recent Breakdown of Wallet Balances

https://www.cryptocoinsnews.com/1-bitcoin-community-controls-99-bitcoin-wealth/

Annual Mining Industry Expenditures

Input Variables

Global Network, January, 2016 (PH) 811

Global Network, January 2015 (PH) 314

TTM Miners Retired/Failed, PH 250

Net Miners Produced, PH 747

Miner Design/Production Cost, per PH $200,000

PSU Cost, per PH $50,000

Subtotal $186,750,000

Datacenter Expansion, MW 200

Datacenter Expansion Cost, per MW $150,000

Subtotal $30,000,000

Power Cost, per MW per Year $525,600

Operating Cost, per MW per Year $262,800

TTM Average Miner Efficiency, MW/PH 0.5

TTM Average Miner Power Draw, MW 281.25

TTM Total Opex Expense, Global Network $221,737,500

Total TTM Miner + Opex Expense $408,487,500

Total TTM BTC Generated 1,200,000

TTM Average $ per BTC $300

Total TTM Revenue, $ $360,000,000

% of the industry participants that contribute 50%

15% of disposable expenditures $30,636,563

Target number of new users 600,000

Available User Acqusition Expense $51.06

Resultant upward price movement 100.00%

Incremental Mining Industry Revenue $360,000,000

Incremental Revenue to Participants $180,000,000

Breakeven BTC Price Increase 17.02%

Profit to Participants $149,363,438

MiningExpenditureBreakdown

NotesBTC Price 1/1/2013 $ 13.41 BTC Price 1/1/2016 $ 433.59

Bitcoins Outstanding 1/1/2013 6,000,000 excluding 4M "dead coins"Bitcoins Outstanding 1/1/2016 11,000,000 excluding 4M "dead coins"

Total BTC Market Capitalization $ 80,460,000 Total BTC Market Capitalization $ 4,769,490,000

% Change 5828%

Bitcoin Market Capitalization – 3 Year

bitcoins killer app - achieving mainstream adoption - sean walsh - download for speaker notes

Economy & Finance