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July 21, 2015- In This Issue:

  
10 VC Firms Betting Big on Bitcoin and the Blockchain

With more than $800m so far invested in bitcoin and blockchain technology startups since 2012, it's safe to say that venture capitalists are certainly captivated.

 

Investments in the industry have already exceeded the cumulative total for 2014, with more than $380m pledged to startups in publicly announced funding rounds this year.

 

While an impressive figure on its own, what that number doesn't successfully convey is how many seed to late-stage firms are making bets on the new wave of innovators aiming to take bitcoin and blockchain technology forward.

 

CoinDesk's Bitcoin Venture Capital data indicates nearly 200 VC firms have invested in bitcoin companies, a total that excludes the various private deals kept out of the public eye for as-yet-unannounced stealth projects.

 

Out of these many investment firms, however, clear leaders have emerged whose investment deals and ideals have influenced the wider ecosystem.

 

With this in mind, we've compiled a list of 10 of the most influential and visible investment firms in the industry.


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Bitcoin Trends In The First Half Of 2015

It's already past the halfway mark in 2015 and we thought it would be a good time to provide an overview of the trends that we're seeing in Bitcoin this year.

 

While the price of bitcoin is down 9% year-to-date, if you look below the surface it is clear that Bitcoin had a strong first half and is making great strides as digital money for people around the world and a payment network for innovation.

 

Price

 

While the price is down 9% YTD (as of July 13), it's up over 213% over a two year time frame. It appears the price has now stabilized in the wake of bitcoin's third bubble, after the price increased 50x in 2013.

 

Volatility

 

At the same time, several major exchanges (including Coinbase Exchange) launched in the U.S and the infrastructure required to buy, sell and store bitcoin has improved significantly. This has attracted more institutional investors to the market and volatility has decreased as a result.

 

Number of wallets

 

People around the world are increasingly adopting bitcoin as digital money. There are now somewhere between 5 and 10 million bitcoin wallet holders around the world, with 2.4M users and 3.1M wallets on Coinbase.

 

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Financial Disruption: Part III

Finance is continuing down the path of technological disruption with marked acceleration.

 

Helping to lead the charge is the Massachusetts Institute of Technology in Cambridge, Massachusetts, known for an environment that incubates innovative intellectual ideas with pragmatic applications. (Disclosure: my son is currently an undergraduate student at MIT.)

 

At the forefront of this revolutionary change is the concept of the virtual currency, such as bitcoin.

 

As the pioneers at MIT describe it, this "currency" is much more than a currency: it represents a platform and protocol for ownership and transfer of virtually any good or service in return for any another - whether it is a carrot, a car, condominium, a contract, or a convertible bond.

 

The principle reason for this highly perfected barter arrangement is the infinitely divisible property of digital assets. In this model, a portion of your kitchen table can be sold and used to purchase a two-year internet connectivity contract. The title of ownership will be more secure and less susceptible to manipulation by individuals, corporations or governments, since the information is decentralized and available for the world to see. Moreover, this system removes many financial intermediary layers, thereby affording quicker and cheaper transactions.

 

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Bank of England: Central Banks Looking at 'Hybrid Systems' using Bitcoin's Blockchain Technology

The Bank of England has said central banks are looking at ways to implement "hybrid systems" involving distributed ledger technology of the type currently used to record bitcoin transactions.

 

It is interesting to get an insight into the thought processes of the governors of international banking in this regard. Would a combination of a distributed ledger with some sort of trusted third party overseeing remain a decentralised system?

 

Naturally, the preferred option for central banks would be to stay in charge of the nuts and bolts of the flow of money of all stripes through the financial system.

 

Central banks are the governors in terms of regulation and have a mission to ensure financial stability throughout the system. They are alive to potential scale of disruption visited upon them by money over IP and are even looking at use cases whereby they might issue cryptocurrencies.

 

The Bank of England said: "There is more than one way in which a distributed ledger system can work, and remuneration would have to be designed in such a way as to incentivise honest participation in the system without leading to socially inefficient over-investment in transaction verification.

 

"Further research would also be required to devise a system which could utilise distributed ledger technology without compromising a central bank's ability to control its currency and secure the system against systemic attack."


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On Bitcoin: Voices from the Cutting Edge 

MCC's contributing firms weigh in on the bitcoin phenomena - how it works, legal and privacy implications, and the broader impact of this disruptive technology as non-monetary currency gains acceptance and popularity.

 

Bitcoin: An Important Disruptive Technology?

 

Bitcoin has been identified as a new and disruptive technology platform with application well beyond its intended purpose, "bitcoin as money." Well-known technology investor Marc Andreesen in 2014 compared the development of bitcoin to the arrival of personal computers in 1975 or the Internet in 1993. Are those statements "hype" by a venture capitalist with a vested interest, or is bitcoin that important a technology? Steve Gold of McGuireWoods LLP addresses this question and comments on some of the non-monetary uses of bitcoin technology that will have an impact on the legal system and the legal landscape for businesses. 

 

According to many observers, the blockchain technology that underlies bitcoin represents both an important advance in computer science and a disruptive innovation that has a wide variety of applications well beyond its application to bitcoin itself as a currency. The blockchain is the online, decentralized and programmable shared ledger of bitcoin transactions. The cryptography and the clever incentive structure of bitcoin mining that underlies the blockchain are what make it possible for there to be an agreed ledger that everyone participating in bitcoin can trust as providing the definitive description of everyone's accounts and balances, without a single party, such as a government or a bank, managing the whole bitcoin system.


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United States Military Seeks Bitcoin Tipping Bounties

CoinTelegraph recently learned that the United States military is considering using Bitcoin tipping as a platform for providing bounties in combat and terrorist hot zones. The relative anonymity that the blockchain provides and the cost-cutting nature of crowdsourcing are the driving forces behind the scheme.

 

Earlier this year, in February, the Combating Terrorism Technical Support Office (CTTSO) released the Advance Planning Briefing for Industry (APBI), which forecasted its funding requirements for Fiscal Year 2016 and advertised solicitations, or government "bids," using a Broad Agency Announcement (BAA).

 

Bid R3962 contained a solicitation for the Irregular Warfare and Evolving Threats (IW/ET) group. The bid was entitled "Micropayment-Enabled Gamified Civil Reporting In Conflict Zones" and states that the CTTSO is looking for someone to:

 

"Develop an operational concept and application that enables civilians in conflict zones or at-risk areas to be rewarded in near real-time with 'tip-sized' amounts of virtual currencies, or other stores of value."

 

While the announcement makes no mention of Bitcoin, it does mention the blockchain, which is the worldwide immutable public ledger that Bitcoin utilizes. The announcement says:

 

"The current approach [of paying sources for information] is costly and labor intensive to manage. It fails to realize the potential to dramatically increase the volume and precision of reporting possible through crowdsourcing applications, particularly when they are combined with 'rewards' owing to the breakthrough in payment processing afforded by blockchain technology."

 

CTTSO is taking a cue from Amazon's Mechanical Turk human marketplace, which posts bounties for Human Intelligence Tasks or HITs. As NPR recently explained:

 

"People around the world race to perform those tasks, sometimes for pennies, [...] 'street-level' community information [...] - for cents rather than thousands of dollars."

 

For instance, right now there are approximately US$362 million dollars worth of bounties listed at the Department of State's Rewards for Justice program. According to reporting by Kathy Gilsinan for the Atlantic, bounty values are determined by the Secretary of State based on the "perceived threat a given terrorist poses to U.S. people or property."


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