Bryan Starbuck's Crypto-Currency Strategic Review v3

1. WhiteHat Engineering, Inc.Bryan Starbuck Bryan@WhiteHatEngineering.com
Strategic BlockChain Analysis

2. Understanding the Technology
Blockchain
(Aka Bitcoin & Crypto-Currencies)

3. Explaining Blockchain
Blockchain = Read & Append Only Database
New accounts = $0
Transaction = Transfer from Account A to B
Database is ONLY list of TRANSFER transactions

4. Explaining Blockchain
Details…
Details…
Details…
Details…
Details…
#5
#3
#2
#4
#1
Transaction # Transaction Details

5. Crypto-Currency Wallet
Your account control comes from your “Wallet”, which
is a Private asymmetric encryption key.
Your Public Key is your Crypto-Current Address.
Transactions are “Signed”
with your private key (aka wallet)

6. Local software challenge
Using crypto-currency can require installing local
software.
The local software has access to your WALLET on
your local computer.
PRO: Harder to use. People hate installing software.
CON: Ultra-secure (possibly)

7. Or use the cloud
Or you can use a cloud provider (like)
PROs: No local software.
CONs: Security returns to equaling banks.

8. Local wallet keys
Local WALLETs are:
More secure: in the case of risk of cloud banking
(Mt Gox or a bank)
Less Secure: Local computer hacked or data loss.

9. Strategic analysis of the layers
We will analyze these in the strategic stack
User Interface
(Owning Customer relationship)
Currency Exchange
Interop with the Offline World
Backing Financial Transactions
Smart Contracts
Platform Strategy

10. Ethereum

11. Ethereum
Transactions +
Code +
Custom database storage

12. Ethereum
Ethereum “Smart Contract”
can include codeftw
SoftwareCODE
Inthecontract

13. Ethereum
Ethereum “Smart Contracts”
include a mini-database to
store values
ftw
Database
Inthecontract

14. Why
The high level

15. Top reasons this is important
1. Preservation of Capital – Converting the asset class
into being secure
2. Race to own the USER EXPERIENCE
3. Lower fees
4. Infrastructure that is revolutionary
5. New Scenarios

16. Hear my story to illustrate
This story illustrates all of the trends coming together

17. We want a car
AirBnb for buying cars:
We want to buy a car to
share among our house-mates

18. The purchase
The car costs $15,000.
Everything will happen with crypto-currency
But we only pay a little along the way.
ftw
SoftwareCODE
Inthecontract

19. Strategic analysis of the layers
We will analyze these in the strategic stack
User Interface
(Owning Customer relationship)
Currency Exchange
Interop with the Offline World
Backing Financial Transactions
Smart Contracts
Platform Strategy

20. Monthly payments
We make monthly payments.
Buying all up-front is expensive.
And we are poor college students.

21. I buy 50% of the car
I’m buying 50% of the car,
so I get more hours and
priority on booking it.
ftw
SoftwareCODE
Inthecontract

22. Assessing credit
I’ll assess their credit rating.
I have my assets at risk, based on the
results.
I make more than my peers with my quality
score is higher. I earn less when it is lower.
Backing Financial Transactions

23. Credit risk
Then a credit risk
score is issued.
Backing Financial Transactions

24. Getting the loan
We invest money buying
this ”Consumer Credit”.
We get 8.1% returns
Backing Financial Transactions
This is the crypto-currency version of
LendingClub ($4 billion loaned)

25. Monthly payments
They allow us to make
monthly payments
Backing Financial Transactions

26. It tracks my driving
When I drive,
it logs that JENNIFER and
her driving hours

27. Priority reservations
I rarely drive.
I save my KARMA CREDITs
for cross-state drives to
family on holiday weekends.

28. Sold my share
I only needed it senior year.
I sold my share to someone
else, when I graduated.

29. I bought more
I started out owning 25%.
I bought more to 75%, after I
drove more with my new job.

30. Credit default swaps
We buy 1% slices of people’s loans.
We pick a wide range of loans at
credit risk level 50% to 75%
These get sold, over and over.
Backing Financial Transactions

31. Who can do this?
Who could do this ENTIRE CAR Scenario?
MasterCard?
Bank of Canada?
PayPal?
Equifax?
Stripe?
LendingClub?
Crypto-currency
=
Powerful Legos
Unlocks innovation

32. People act as a Store
Creating a store can be as simple
as printing out a sheet of paper.
Buy my stuff:
My bike: $30
Rent my car for
Christmas break: $25

33. Let’s go deep

34. Strategic analysis of the layers
We will analyze these in the strategic stack
User Interface
(Owning Customer relationship)
Currency Exchange
Interop with the Offline World
Backing Financial Transactions
Smart Contracts
Platform Strategy

35. Startup Weekend
You have 3 days at a startup weekend.
Add value in the world.

36. Startup Weekend
You can only have:
3 days
2 devs
500 lines of code
(Or less)

37. Startup Weekend
What you deliver:
Unlock Value X
&
Charge Y

38. Startup Weekend
This is a real Ethereum
Contract:
Simple, Simple, Simple
What could you write in an hour?
It is 9 lines long (ignoring comments)

39. Prediction Markets
Prediction markets are great.
Consumer credit risk. Asset Pool risk levels.
Presidential elections.
Backing Financial Transactions

40. VISA Fees
The race to cut the VISA fees.
Their value-add is to interact with
the offline world.
Interop with the Offline World

41. Offline world and VISA
Interop with the Offline World
INTERNET = Connection
iPad = P.O.S. system
Where is VISA needed?

42. HARDWARE Locks
Interop with the Offline World
Hardware locks
that unlock upon crypto-
currency payments

43. HARDWARE Locks
Interop with the Offline World
Seattle had paid toilets
Insert joke here

44. HARDWARE Locks
Interop with the Offline World
Uber for
Bike Rentals

45. HARDWARE Locks
Unlock it in a few
lines of code
Interop with the Offline World

46. Platform strategy
A platform strategy
unlocks the masses
Platform Strategy
We can write
500 lines of code.

47. Own the customer relationship = strategic lock
This is the true
strategic lock
This would require
giving another talk…User Interface
(Owning Customer relationship)

48. Fees
Crypto-Currency fees
race to $ZERO

49. Why #1
Making CURRENCIES
a secure asset class

50. Living on the edge of leverage
During the 2007/2008 crisis:
Bernanke said,
~They are all digital accounts. If
everyone withdrawals, the just isn’t
enough cash to back it up.

51. Person A is wealthy. My wealth is
backed up by assets.
I live safely here.
1) Real estate asset class
2) Precious metals
3) Stocks (Equities)
The point is that they are secure

52. I’m in the bottom 60%. I live 100% in the
CASH asset class.
I’m forced to live on numbers in a computer.
In the next 2007 crash, I can’t feed my family.
I’m denied the ASSET BACKING that the wealthy get.

53. Fiat Currencies
Fiat Currencies do crash
Rome in 213 ad
Germany 1923
Argentina in 1932
France in 1795
Mexico 1994
Many more
Thai “baht” 1997
China – 11th century

54. Rome
Gov Needs Money  Dilute  Collapse
Around the time of Rome’s
collapse, the denarius
contained only 0.02% silver
and virtually nobody accepted
it as a medium of exchange or
a store of value

55. France
French revolution
Default on Debt ~1785 
People Starve 
1795 currency inflates by
13,000%

56. Failing currency
Could this happen in 2016?
Greece is a recent example

60. 60
The LEFT:
“Crony capitalism is alive and well and flourishes under big, powerful
government. Because the bigger government gets, the more powerful
and complicated it becomes, the more true it also is that only the big,
the powerful, the wealthy and the well-connected can handle it and the
small and the powerless get crushed.”
The RIGHT:
Carly Fiorina
2015 Presidential Republican Candidate

61. I’m forced to live on numbers in a computer.
In the next 2007 crash, I can’t feed my family.
I’m denied the ASSETs that the wealthy get.
My family
matters.

62. The End

63. An engineering team that builds
entire startup companies
from the ground up
WhiteHat Engineering
STARTUPS & ENGINEERING
Early Stage Crypto-Currency & more

64. TalentSpring Founder & CEO - Acquired in 2010
B2B Enterprise SaaS company with Artificial Intelligence / Machine Learning
SPARKON Founder & CEO - 2011 to 2013
B2C Online learning & Passion Discovery
Owner at WhiteHat Engineering: (Current)
Our engineering team builds startup companies & products
Bryan Starbuck
STARTUPS & ENGINEERING Bryan@TheStarbucks.com

65. NXT Coin

66. How NXT Coin HELPS
1. “Assets”
2. Example: Buy a boat. Pay NXT
coins. Then issue a new asset of
SHARES in boat XYZ.
NXT
Coin

67. BitShares

68. How BitShares Helps
1. “Crypto-Finance”
2. BitUSD vs BitGold vs BitEU
3. Currency Derivatives
BitShare
s

69. Ethereum

70. How Ethereum Helps
1. “Crypto-Law”
2. Smart Contracts
3. “Ether” vs “Gas”
4. Smart Contract = Coins + code
Ethereum

71. Other Areas

72. Regulations – Money Laundering
• USD Dollars   Bitcoin = Exchange
• Bitcoin: Owner A  B
• California = Bank $1,000,000 annual fee for
regulators
• “Bit License”: NY Dept of Financials Services

73. Other Important Areas
• Protect the wallet
• Hosted coin providers (CoinBase.com)
• Regulations
• Proof of Work –vs- Proof of Stake
• Byzantine General’s Problem
• Liberty Reserve: Costa Rica. Founders in Jail

74. THE END
See the backup slides

75. An engineering team that builds
entire startup companies
from the ground up
WhiteHat Engineering
STARTUPS & ENGINEERING
Early Stage Crypto-Currency & more