the future of digital currencies
DESCRIPTION
My presentation on digital currencies and cryptocurrencies for DI Fintech Day in October 2014. Feel free to download and use.TRANSCRIPT
The Future of Digital Currencies----
Opportunity or threat?
Dr. Robin Teigland Stockholm School of Economicswww.knowledgenetworking.orgwww.slideshare.net/eteigland
@RobinTeiglandwww.hhs.se October 2014
Today’s presentation
Brief history A vocabulary list of currenciesCryptocurrencies, e.g., BitcoinBenefits and drawbacksRecent eventsMoving forward
Do we even need money?
Incan Empire−Across today’s Peru,
Colombia, Chile, Bolivia, Ecuador, Argentina
−20 mln people
No tradersNo
shops/marketplaces
No need for money−Reciprocity/shared
labor−Self-sufficiency
What is money?
Not just a medium of exchange−Rational view−But why is holding a piece of paper or metal
rational?
A social construction−System of social relations based on power
relations and social norms −Inter-temporal promise
Store of abstract value linking past, present, and future
−Trust that our claim on future goods will be met
A vocabulary list of currencies
Fiat currency−National currency
Alternative/complementary currency−Bonus points/vouchers, e.g., frequent flyer
miles−Digital currency
In-game currencies, e.g., Stardollars, Farmville cash Virtual world currencies, e.g., Linden dollars, PEDs Mobile currency, e.g., M-pesa Cryptocurrency, e.g., Bitcoin
Real cash economy in Entropia Universe
http://blogs.forbes.com/oliverchiang/2010/11/13/meet-the-man-who-just-made-a-cool-half-million-from-the-sale-of-virtual-property/
• GDP >USD 440 mln• PEDs <--> USD, Euro
• Record virtual good: USD 625,000
We are “stuck” in our old mindset …Money=Fiat Currency
Fiat CurrencyDerives value from
government
Fiat money as country’s main currency
Today > 6000 complementary currencies
Many community-based currencies
In cooperation with national currencies
Benefits−Counterbalance banks−Create means of
exchange−Promote resilience of local
community
http://www.lietaer.com/writings/books/rethinking-money-by-bernard-lietaer-and-jacqui-dunne/
WIR in Switzerland - Complementary
Founded 1934 by cooperative of businessmen
IOU system based on personal trust
Secondary mortgages enable additional credit
>60,000 member firms >CHF 4 bln assets (SEK 29
bln)
Countercyclical impact
Top down fiat currency
Bottom up mutual credit
http://p2pfoundation.net/WIR_Economic_Circle_Cooperative
From Africa to Eastern Europe to ?
The future?
Facebook + banking license?
Bitcoin = The power of community + open source + internet + CPU
• Developed by self-organizing community of thousands of “strangers” across globe
• Not one but many motivations (intrinsic, extrinsic)• Approx USD 5.2 bln in circulation (October 2014) and
70,000 daily transactions• 91 bln SEK in circulation vs SEK 38 bln of Bitcoin in
five years
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
What is a cryptocurrency?
DigitalDecentralized, peer-to-peer (P2P), i.e., no
central, third party
Uses cryptography to validate transactionsAlso uses cryptography to generate
currency itself
How does Bitcoin work?
Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
Block chain • Shared public
ledger • All transactions
ever made included
• Chronology and integrity enforced by cryptography
Mycelium Bitcoin Wallet
http://techcrunch.com/2014/09/04/kncminer-raises-14-million-to-take-bitcoin-mining-to-the-moon/
Benefits of Bitcoin
Improved transaction securityTrust in cryptography rather than
institution(s)Transparency Lower transaction costsCross-border, faster transactionsNo outside intervention No inflation (although market volatility)
Bitcoin – one of many cryptocurrencies
Currency CodeYearEst.
Founder(s)
Active Website PoW PoS
Bitcoin BTC or XBT 2009
Satoshi Nakamoto (pseudonym)
Yes N/A Yes No
Ripple XRP 2013
Chris Larsen & Jed McCaleb
Yes ripple.com No No
Litecoin LTC 2011 Charles Lee Yes litecoin.org Yes No
Peercoin PPC 2012Sunny King (pseudonym)
Yespeercoin.net
Yes Yes
Dogecoin DOGE 2013
Jackson Palmer& Billy Markus
Yesdogecoin.com
Yes No
Namecoin NMC 2011 N/A Yes dot-bit.org Yes No
Mastercoin MSC 2013 J. R. Willett Yesmastercoin.org
No No
Primecoin XPM 2013Sunny King (pseudonym)
Yesprimecoin.org
Yes No
Drawbacks of Bitcoin
Taxation concernsSecurity issuesConsumer uncertaintyMarket volatility (commodity or
currency?)Potential for illicit useHigh electricity consumption to “mine”…
Can we put our “trust” in a network?
Social networks follow basic principles −Self-organizing−Self-policing
−But the “rich get richer”−“Birds of a feather flock together”−Likelihood of groupthink
Will there be a tipping point?
http://coinmap.org/
Depends on….- Switching costs- Network effects
Bitcoin accepted here
http://mercatus.org/sites/default/files/Luther_CryptocurrenciesNetworkEffects_v1.pdf
Future scenarios?
Issuing equity in cryptocurrency
http://techcrunch.com/2014/09/30/reddit-scoops-up-50m-series-b-from-sam-altman-a16z-sequoia-at-500m-valuation
Bitcoin – so much more than a “coin”
From dumb to smart moneyUnderlying Bitcoin protocol holds
real transformative powerTransfer property rights (e.g.,
shares, certificates, digital money) fast, transparent and very securely.
http://thenextweb.com/insider/2014/02/15/bitcoin-platform-currency/
”Bitcoin has made me interested in issues like finance and money – things that I never thought about before. Now I am really curious and questioning why things are the way they are in the finance
world….and wondering what can I do to change them.”
- Bitcoin 2014 Conference Attendee
Institutions
Emergent Collective vs
E.g., Complementary~ Emergent community developing own bottom up complementary financial instruments
Teigland, Yetis, Larsson 2013
E.g., Central Bank~ Long-standing financial
institutions and regulations
Thomas Jefferson (1816)“Laws and institutions must go hand in hand with the progress of the human
mind.”
The problem is that the human mind itself can’t keep pace with the advances
that computers are enabling.
http://wadhwa.com/2014/04/15/mit-technology-review-laws-and-ethics-cant-keep-pace-with-technology/
The genie is out of the bottle….
Robin [email protected]
www.knowledgenetworking.org
www.slideshare.net/eteigland
www.nordicworlds.net @RobinTeigland
If you love knowledge, set it
free…
If you like this presentation and would like to contribute to our research, we accept bitcoins: 14hs4JbnQLXE87GGzu84uXGaspmxmnLpwC.Thank you!!!!!