This talk explains Bitcoin and its innovations within the fields of politics, finance and technology.
I first explain a bit about what Bitcoin is as only about 20 of the 70 attendees knew what it was. None of them had any yet. It is still quite hard to buy Bitcoin. I offered them the chance to go grab some Bitcoin from my digital wallet, if they could figure out how to do so! It's still not that simple to get a wallet and figure it out.
First I spoke about why a digital or crypto currency has taken off now, mainly due to the recent financial crises and loss of trust int he banking system. And that it's a very secure system, designed to be a currency.
I spoke about the main innovations as I see them of Bitcoin:
Innovation 1
Peer to Peer: Bitcoin is simplifying the system. Way less players now get involved in a 'simple' payment transaction between 2 people. This brings down the transaction costs hugely.
Innovation 2
Bitcoin has a money supply that grows at a steady rate that is predicted, and is fixed at a certain date in the future. It is non-inflationary. Inflation has crippled our savings. this could really change the way we relate to money.
Innovation 3
We are putting our trust in Maths to verify the transactions, rather than in governments or banks. It is non -hierarchical - it is not developed by a company or a government. The founder set up the system and disappeared leaving it for us all to use. Hayek and the Libertarians love it because governments can't manipulate the money supply for political reasons or to win wars. We have moved from a commodity-based currency to a political-based currency to mathematical currency.
Innovation 4
It's not created by a country or a company- it's out there for everyone to use freely.
Story of Satoshi Nakamoto- its creator, who disappeared.
Innovation 5
It's Open Source- which means it's constantly being improved and tested. It's 'the people's job' to peer review the code and make sure it's secure, and that it doesn't favour any one party, or provide back-doors for a minority of vested interests.
Innovation 6
It is transparent- there's been a lot of hype about how black money can hide in Bitcoin. However all transactions are publicly available and so it's not anonymous, but rather pseudonymous. Swiss banks are much more anonymous.
Innovation 7
Bitcoin is for everyone to use, there is no one controlling the system making it exclusive. Now 1/3 of Kenyans have a Bitcoin Wallet for mobile transactions. The barriers to use Bitcoin are technical- both in knowledge and access to digital technology.
5. Bitcoins are âminedâ or released to
people who crack complex Maths
problems
They need very powerful computing power to do
so, like this specialisedBitcoin Avalon machine.
6. Fragile as a house of cards but
growing hugely in importance
Source: The Atlantic
7. How Big is Bitcoin?
On17 October 2013
⢠Economy Total 11m BTC in circulation
⢠Transactions last 24h 54,958
⢠Bitcoins sent last 24h 927,536.58 BTC
⢠Bitcoins sent avg. per hour 38,647.36 BTC
Recent survey of people who know about Bitcoin
⢠40% UK respondents trust Bitcoin as much as
Pound
⢠38% think itâs the currency of the future
* Survey: On Device Research, June 2013
8. A UK/US Credit Card Transaction
Bank
Bank
UK treaty
Forex trading
Short term
debt
instrument
US treaty
Clearing
11. Friedrich Hayek
Nobel Prize in Economics, 1974
âCentral banks cannot be reformed.
There can never be sound money so long as they are in charge.â
Download Hayek for
free: http://mises.org
13. Innovation 2:
A money supply that grows steadily
and then is fixed
⢠Every 10
minutes 25
Bitcoins are
released into the
system currently
⢠No more than
21m
BTC will exist
after 2040
Encourages saving!
15. Innovation 3:
Cryptography Ensures Trust
âWith e-currency based on
cryptographic proof,
without the need to trust a
third party middleman,
money can be secure and
transactions effortless.â
Satoshi Nakamoto
16. Bitcoin is not backed by anything!
⢠Not state-backed fiat currency
⢠Not backed by anything of value (e.g.
gold)
17. In Maths We Trust
âWe have elected to
put our money and
faith in
a mathematical
framework that is free
of politics and human
error.â
Tyler Winklevoss,
Entrepreneur
âThere are 3 eras of
currency: Commodity
based,
politically based, and
now, math based.â
21. Innovation 6: Transparent
â˘
â˘
â˘
Robust and resilient - data on every single transaction is logged
Anonymity - less personal data needed for transactions
Opposite of Swiss Banks!
22. Innovation 7 :
A global currency everyone can
use
⢠Low transaction
fees1/3 of Kenyans have a
Bitcoin Wallet
(Mpesa add-on)
⢠Sell directly to with
no middleman
- Coffee traders in
Bali
⢠Earn bitcoins for
online jobs Homeless people
in US (Wired)
24. Threat to Governments and
Banks?
âDoing Banking Better than
Bankers.
It's money 2.0, a huge huge
huge deal.â
- ChamathPalihapitiya
"Bitcoin will do to banks what
email did to the postal
industryâ
- Rick Falkvinge
[Bitcoin] is a techno tour de
force."
- Bill Gates
25. Show me what you can do!
Grab 0.15 BTC
Use the Pass Phrase I
mention.
Go to : Brainwallet.org
Get your digital wallet at:
www.Blockchain.info
26. Spawned a host of digital
currencies
â˘
â˘
â˘
â˘
â˘
Ripple
Lite Coin
Name Coin
Peer Coin
Prime Coin
27.
28. Bitcoin Ecosystem - innovation
â˘
â˘
â˘
â˘
Chip Manufacturers
Mining as a service
Compliant Exchanges
Secure Wallets
29. Bitcoin Ecosystem
Making Bitcoin easier to
use
⢠Dark Wallet
⢠Cash
converters/Bitcoin
ATM machines
⢠Building payment
protocol into web
browser
30. âYou can put a bank in your pocket.
Thatâs pretty bigâ
Gavin Andresen,
Bitcoin Foundation
Bitcoin has been designed to be used a currency.But people are calling it a Ponzi Scheme and others say it is taking back power of our money back to the people.So itâs controversial often misunderstood. Here we are to understand more and to particularly look at how itâs innovating.
http://www.youtube.com/watch?v=Um63OQz3bjo
However, if we consider that the Fed, led by its chairman, is the most powerful organization in the world â because by printing money, it can finance the government (fiscal deficits)and wars, manipulate the cost of money (interest rates), directly intervene in the economy by bailing out failing institutions (banks) or countries (Greece, etc.), intervene in the foreign exchange market and even influence elections â then the question arises whether it makes sense that so much power should be given to Fed members, who are âgroup thinkingâ academics and most of whom have never worked in the private sector. In my opinion, the enormous power of the âacademicâ Fed is a frightening thought.- Mark Faber- Daily Reckoning
When buying or selling bitcoins you can do it through an exchange or you can pay someone directly through your digital walletOr you can meet them in person and do it via your wallet.
Cleverly designed to be a currency Loss of trust in governments to control the money supply Mistrust of relationship between banks and governmentsDemand for low-cost global digital transactionsAfter Cyprus currency controls, etcLots since the 1980s- DigiCash by Chaum, etcThe Liberty Dollar was a private currency minted in Idaho and used by at most a quarter million people between 2007 and 2009, during which time its value doubled in relation to silver. It came to an ignominious end when the federal government arrested its creator, among others, and declared the operation a federal crime. E-gold, a digital currency backed by real gold, met a similar fate when the U.S. Department of Justice charged its creators with money-laundering
Hayek- an Economist from Austria-Hungary 1899- 1992Lived a long time and saw huge changes.His most famous book was The Road to Serfdom- anti-totalitarian book, cautious of the State, but saw the need for governments in roles such as institutions, labour hours, etcNobel Prize in Economics in 1974Hayek advocates a system of private currency in which financial institutions create currencies that compete for acceptance.Stability in value is presumed be the decisive factor for acceptance. Influenced Milton Friedman, Margaret Thatcher, Ronald ReaganRon Paul- End the FedCato InstituteNeo liberal or libertarianCentral banks cannot be reformed. There can never be sound money so long as they are in charge. He calls for their complete abolition, no compromises accepted. He wants the market in charge of money from top to bottom.
- Print money for political reasons Instability ď inflationThe currency loses valueWe lose out
Something we canât imagine- no printing of extra money to eat away at the value of our money!Can encourage people not to spend!
Prevents double spending- cryptography better solution, clients run validationAnonymity â pseudonyms- using public and private keys which are not linked to a person
Finite supply of bitcoins- 21mbut self-limited by the code
The Banksy of the InternetDisappearedNo hierarchy
As Forbes saidSilk Road doesnât really sell drugs. It sells insurance and financial products,â says Carnegie Mellon computer engineering professor Nicolas Christin. âIt doesnât really matter whether youâre selling T-shirts or cocaine. The business model is to commoditize security.â
Donât need an addressPoor people, small business those with mobile phones can use it
A protocol is sticky. We use smtp for email, http for web browsing.
For Bitcoin to work it needs a large ecosystem
SO Bitcoin might not be the final currency we end up using, But to me it has many defining characteristics will likely feature in the final currency we use