Bitcoins Killer App - Achieving Mainstream Adoption - Sean Walsh - DOWNLOAD FOR SPEAKER NOTES

Bitcoin’s Killer App
How We’ll Achieve Mainstream Adoption
BTC Miami – January 2016
Sean M. Walsh - sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

Sean M. Walsh
Background:
• 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:
• sean@RedwoodCityVentures.com
• Twitter: @SeanWalshBTC
• www.linkedin.com/in/SeanWalsh

Bitcoin – A Fascinating Intersection
Ecommerce
Monetary
Factors
Social
Networking
1. Ecommerce/Online User
Acquisition
2. Social Networking / Viral
Marketing
3. Monetary/Economic Factors
1. Monetary History
2. Market speculation
3. Foreign exchange
4. Global trade
sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh

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

My Objective
1. 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 Questions
2. Find Key Evidence
3. Draw Actionable Conclusions

Where To Start? First Principles
1. 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 have?

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”

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 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

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

0
1
2
3
4
Scarcity
Durability
Divisibility
Recognizability
Fungibility
Transportability
1st Principle – “Moneyness”- The 6 Characteristics of Money
Bitcoin
SDDRFT Score = 22
(out of 24)

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
S
Dur.
Div.
R
F
T
Cowry Shells = 11

0
5
10
15
20
25
Frequent
Flier Miles
Starbucks
Cards
Arg Peso Cowry
Shells
USD Gold Bitcoin
“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 Categories.
Consumer
to
Business
Consumer
to
Consumer
Business
to
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 / Savers
Why 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.

50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015
PriceIndex
Asset Prices #1, Last 12 Months
Arg Peso
USD DXY
10YrUSTr
Gold
Case-Shiller
WTI Oil
BTC Price

50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015
PriceIndex
Asset Prices #2, Last 12 Months
S&P 500
NASDAQ
SSE
S&P 500 Corp
MSCI EM
BTC Price

-0.144
0.063
0.319
0.877
0.588
0.066
0.487
-0.190
0.289
0.200
0.099
-1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800 1.000
BTC Price
Gold
S&P 500 Corp
NASDAQ
Shanghai Stock Exchange
10YrUSTr
MSCI EM
Case-Shiller
WTI Oil
USD DXY
Arg Peso
Asset Class Correlation – S&P 500 vs Others, 12-Month

-0.144
-0.411
-0.330
0.001
-0.316
0.054
-0.357
0.154
-0.691
0.496
-0.651
-1.000 -0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600 0.800 1.000
S&P 500
Gold
S&P 500 Corp
NASDAQ
Shanghai Stock Exchange
10YrUSTr
MSCI EM
Case-Shiller
WTI Oil
USD DXY
Arg Peso
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
3.4M
2.9M
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

$50M
$100M
$150M
$200M
$250M
$300M
$350M
$400M
17% 20% 30% 50% 75% 100%
Bitcoin Price Growth
ROI – User Acquisition Campaign
Incr Mining Revenue
Participant Profit

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 word
2. Trigger Moments
Budweiser “wazzap?” campaign
3. Emotional Stimulation Level
Emotion’s polarity is secondary
4. Public Displays
Apple’s white headphones
5. Practical Value
How-to Youtube videos
6. Stories
Fundamental to humanity

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

User Acquisition Campaign Details
1. 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 Ahead
1. Regulatory Crackdown
1. Renewed attempts at regulatory circumvention (illegal activities)
1. It’s terrible publicity to our target Users
2. It intensifies regulatory scrutiny and crackdown risk
2. Developer infighting and stalemate?
I think this is a bit of a false risk

Private Blockchains Are Not A Risk
1. 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

Conclusion
1. 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
Mining
Expenditure
Breakdown

Notes
BTC Price 1/1/2013 $ 13.41
BTC Price 1/1/2016 $ 433.59
Bitcoins Outstanding 1/1/2013 6,000,000excluding 4M "dead coins"
Bitcoins Outstanding 1/1/2016 11,000,000excluding 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

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