The Monetization of Centralized Bitcoin Services

The Bitcoin industry continues to pick up steam as startups gather round after round of Venture Capital funding. To date over $317 million has been raised by startup companies in the space. The lions share of funds have gone to the biggest players that focus on universal bitcoin services (Coinbase, Circle), wallet services (Blockchain, Xapo), exchanges (Kraken, Bitstamp), mining (KNC Miner), API developers (Chain, Gem); the list goes on… Despite the tremendous amount of investment most companies are currently offering their services at little to no cost whatsoever… this has left many asking themselves; “how will these organizations eventually monetize their business?”

This conundrum is further instigated by Jeremy Allaire, CEO of Circle, who was quoted earlier this month by Xconomy.com stating:

“If you go on social media sites like Reddit, there are a lot of users speculating. But right now, possible business models are not things that we’re going to talk about, or have really given that much thought to.” – Jeremy Allaire

When the first unpaid mobile applications (non-bitcoin) were released for smartphones in the late 2000’s many consumers were equally as dumbfounded. How will these developers pay for their costs let alone make a profit? In the era of multi-billion dollar mobile acquisitions (WhatsApp: $19 billion, Instagram: $1 billion) it has become clear that the value of any application is access to the user-base and their information. In many ways the era of bitcoin related services is not much different.

When considering centralized startups in the bitcoin industry one thing is clear – it is a race for the user-base where quarterly earnings are not of any concern for the time-being. As exposure and adoption grows it is not hard to imagine an increasingly competitive landscape where free may not be cheap enough. To help understand the “state of monetization” for these organizations I’ve provided a table below (click to enlarge) to summarize the current and speculative methods of monetization. It should be recognized that many of these service providers are in direct competition that could lead to a battle of attrition or a windfall of mergers and acquisitions. Additionally, I would encourage viewers to please leave comments and help build this table as you view.

A summary of major bitcoin startups. For each the existing revenue streams have been defined as well as speculations on potential future methods of monetization.

A summary of major bitcoin startups. For each the existing revenue streams have been defined as well as speculations on potential future methods of monetization.