df sba bitcoin and other cryptocurrencies 13_june2014_v3

© The Z/Yen Group 2014

Z/Yen Group LimitedGeneva/Switzerland BranchRue De-Beaumont 81206 GenevaSwitzerlandtel: +41 (22) 347-2768www.zyen.com

“Zest for Enlightenment”

Bitcoin & other cryptocurrencies: monetary and economic aspects

Geneva, 13 June 2014


♦ Background ♦ Bitcoin overview♦ Bitcoin as a medium of exchange, store of

value and unit of account♦ Other applications for blockchain technology

and cryptocurrencies

Outline


London Accord

Financial Centre Futures

Meta-Commerce

Eternal Coin

About‘When would we know our

financial system is working?’

Objectives: Expand Frontiers Change Systems Deliver Services Build Communities


Self-referential system upon which all our analysis is based:

♦ What does GDP mean?♦ Are competing

currencies good or bad?♦ Should money be a long

term store of value?

The Eternal Coin

[Source: http://illusionsetc.blogspot.com/2005/08/moving-mobius-strip.html]


♦ Nearly 13 million Bitcoins (BTC) in circulation ♦ Limited supply - 21 million BTC by 2140♦ Bitcoin ‘issued’ as a reward for payment

processing work (mining)25 BTC per block c. every 10’ until mid 2016Then, 12.5 BTC per block mid 2016 to 2020Then, halving continues until 2110-2140

♦ Market capitalisation - circa 8 billions USD, albeit fluctuating

Bitcoins - an overview


♦ Up to 10 Jan 2014, based on John Ratcliff’s work279,535 blocks30,720,691 transactions25,397,303 unique public key addresses (UPKA)

22,982,911 UPKA with a 0 BTC balanceLeaves 2,414,392 UPKA with a >0 BTC balance, of which

– 157,632 UKPA w. BTC balance between 1 to 10

– 88,328 UKPA w. BTC balance between 10 to 100

– 11,576 UKPA w. BTC balance between 100 to 1,000

– 1,344 UKPA w. BTC balance between 1,000 and 10,000

– 97 UKPA w. BTC balance >10,000 but <100,000

– 2 UKPA w. BTC balance >100,000 BTCs

How many people own Bitcoins?

[Source: http://codesuppository.blogspot.co.uk/2014/01/a-command-line-interface-for-blockchain.html]


Bitcoin Price (USD)

[Source: blockchain.info]


Bitcoin price volatility


♦ AttractiveLower transaction costs

No third party to financial transactionsLower transaction fees to users incl. businesses

Alternative to cashPublic ledger of transactions (history)Secure and transparentNo chance of counterfeiting

Fixed BTC supply should limit inflation Potential for e-commerce and money transfer

♦ But high price volatility hinders acceptance♦ And… lack of consumer/user protection

Bitcoin as a medium of exchange


♦ In theory feasible BTC modeled after gold - no interest, limited supplyBTC’s negative correlation with risk sensitive assets

♦ But Reputation? Uncertainty around long-term value

High price volatilitySpeculative marketPoor liquidityUnstable returns

Bitcoin as a store of value


How does Bitcoin compare


Look beneath the coins


♦ Registries – ships, aircraft, artworks, tax, …

♦ Trade reporting

♦ Consolidated tapes

♦ Personal insurance blockchains and smart insurance contracts

♦ Corporate voting

♦ Identity blockchains for anti-fraud protection or anti-money laundering

♦ Accounting registries

♦ Multi-entity contracting and virtual contract companies

Other blockchain technology applications in Finance ?


♦ BTC has most potential as a medium of exchange

♦ BTC value depends on people’s perception of its worth

♦ Governments may want to control BTCRegulating use and tax classification ‘Seigniorage’ issue if BTC grows big and competes

with fiat currencies

♦ Blockchain technology is innovative and could be applied to other sectors

Conclusion


♦ More information on Long Finance - www.longfinance.net

♦ Further reading on cryptocurrencies “Building Bit: What’s A Poor Government To Do

About AltCoins?”, Banking Technology, April 2014

♦ Any questions? [email protected]

Thank you!

df sba bitcoin and other cryptocurrencies 13_june2014_v3

Economy & Finance