BITCOIN HISTORY 2013

Collapse of Trust
Eric Holder U.S. Attorney General I am concerned that the size of some of these institutions becomes so large that it does become difcult for us to prosecute them when we are hit with indications that if we do prosecute if we do bring a criminal charge it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.

2.25% per day

LIBOR CASE

CYPRUS

4.50% per day

6.75% per day

Bitcoin market cap rose from $55 million on the rst of January 2013 to $143 million by the rst of February 2013. By March the market cap surpassed $403 million and by mid March bitcoins surpassed $500 million. A few days later Laiki Bank announced it would freeze the deposits of all account holders in Cyprus as a way to secure assets to maintain liquidity for the bank. Within hours every Parliament and Congress of every major economic power in the world said that nothing stood in the way of other banks doing this throughout the world, though most reassured their people this would not be needed for them. Banks followed suit saying they were not like Cyprus yet reiterated that they did have the right to seize deposits under certain circumstances. No legal consultation was made of the world ! s legal establishment

throughout all this. JP Morgan had a glitch that day as well zeroing out the balances of all its depositors. The glitch was xed by mid afternoon and that became the focus of most news reports in New York and Washington. By the 20th of March the market cap for bitcoin surpassed $1 billion. During the rst week of April 2013 New York!s Federal District Court ruled that banks could not be prosecuted under relevant laws for LIBOR rate rigging and other wrong-doing. Top cop, Attorney General Eric Holder re-iterated that due to the systemically important nature of modern banks it is impossible to prosecute them for signicant breaches of the law, including bid rigging, money laundering or outright theft, since doing so would have severe societal costs. Today, on April 10, 2013 the value of all bitcoins surpasses $2.8 billion.

As the rule of law crumbles, many people are seeking ways to preserve their property by removing it from the care of trusted third parties. Modern electronic commerce relies upon trusted third parties to take place. Thus a need exists for a transaction system that operates independently of trusted third parties. The bitcoin system of exchange relies on cryptology to remove the need for trusted third parties to conduct business electronically. Thus, bitcoin is an ideal alternative to traditional legacy systems of nance, despite the difculties faced in making bitcoin easy to use and adapting its unique features to meet the needs of the electronic marketplace.

copyright (c) 2013 William H. Mook!

BITCOIN VALUE
In cryptography we trust
Just as precious metals give coins an intrinsic values so too do precious numbers give bitcoins intrinsic value. Just as precious metals are mined from a sea of rock and dirt, so too are precious numbers mined from a sea of lesser numbers. Using double SHA 256 encryption we know that there are 2.1 quadrillion numbers that are possible to use as the base of a blockchain that is used to build an innite series of transaction sequences. Today through the effort of hundreds of thousands of miners, we know 1.1 quadrillion of these numbers. Over time we will know 2.1 quadrillion of these numbers. The numbers possessing a unit of value called the Satoshi is the smallest unit of a bitcoin. It takes 100 million Satoshis to make a group that forms a bitcoin. This allows nearly innite divisibility. These numbers are traded among users securely without any possibility of counterfeit. With these numbers we create transactions that share all the features we associate with gold and silver in the real world. We have in essence the digital equivalent of gold. We have precious numbers.

WHY VCs LOVE BTC Surpassing $1B per month!

Bitcoin values are growing rapidly and that growth is accelerating. It is important to realize that despite this rapid and accelerating growth, most people (around 72%) are buying bitcoins to store value, not realize trading prots. This value is likely to rise since the number of bitcoins is limited whilst the number of dollars in circulation is constantly increasing. Bitcoin numbers are limited today to 11.08 million and are limited for all time to less than 21.00 million not by convention, but by the nature of numbers themselves. Bitcoins are freely traded on a 87 exchanges at present which determines their value day to day minute by minute. Bitcoins offer secure, reliable, fast and private transfer of value between parties using a peer to peer communication of encrypted digital money. They offer intrinsic digital value. How can digital bitcoins have intrinsic value? copyright (c) 2013 William H. Mook!

VC interest is never ideological, its always mercenary. Bitcoin has the opportunity to disrupt multi-trillion dollar markets and in doing so create truly astronomical markets. There are four key steps in realizing these opportunities.

BITCOIN WALLET A place to put your stuff

EXCHANGE Show me the money!

PAYMENTS The Buck Stops Here!

Just as you need a web browser to surf the internet, you need an electronic wallet to trade bitcoins. Wallets are free, but the technology is difcult to use and harder to understand. Comparing the situation with bitcoin wallets to the development of web browsers, if Satoshi Nakamoto is bitcoin!s Tim Berners Lee (creator of the hyper text transfer protocol (http:)), we have yet to see the emergence of Mark Andreesen. Once we do, we have the basis of a multi-trillion dollar business. Two factors are of paramount importance, (1) Ease of Use and (2) Security. Instawallet was a failed effort at a client wallet that lost clients money and has yet to recover it at the time of this writing. Stand alone software downloaded from MIT, compiled and synchronized, not only takes 18 hours or more, but also is extremely complex. The only real solution? Hardware!

Bitcoin has a lot to recommend it as the perfect digital currency. However, it is not legal tender in any country. As a result, there is a demand for exchanging between Bitcoin and at currency. Consumer level exchanges charge between 50 and 100 basis points for each trade. Large trades pay 10 basis points. Assuming 35 basis points as an average and $5 billion in trades this year current revenues are $17.5 million per year. Volumes are expected to rise 100 fold this year increasing the value of this revenue stream to $2 billion per year. If this seems surprisingly large consider that volumes have increased 50 fold already this year.

The key driver of both Bitcoin price appreciation and exchange volume has to be payments volume. People using bitcoins to pay merchants for transactions provides a real economic driver for both price and exchange volume to rise simultaneously. How do we get there? There are two additional drivers prior to reaching critical mass; (1) bitcoins perceived as a store of value and (2) bitcoin pricing driven by speculation. These have provided the dramatic rises of recent months and will drive us to the point of merchant acceptance.

copyright (c) 2013 William H. Mook!

PROVEN EXPERIENCE Working with world class talent!

WHERE THE MONEY IS

Offering security and privacy

Computer based payment systems were invented by William Mook in the 1980s and the rst patent for a point of sale computer was issued to William in 1990. William!s leadership continues to this day and he is a sought after speaker on the subject of payment automation.

Increasingly intrusive regulatory environment, the result of regulatory capture by "too big to fail! institutions have created a situation where faith and trust in these institutions and even the law have begun to falter across the Eurozone, North America and parts of Asia. At risk is over $150 trillion of deposits held by individuals who have between $100,000 and $5,000,000 in deposits. These individuals can benet greatly

by transferring a portion of their wealth into bitcoins. An innovative transfer program has been developed in the wake of Cyprus that transfers funds even when threatened by adverse bank action.

copyright (c) 2013 William H. Mook!