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1 $110100$010 Crypto Currencies Good or Evil? $ $

2 What are Crypto-Currencies Crypto-currencies, such as Bitcoin, are digital currencies that rely on cryptographic algorithms and distributed, open access to a common ledger to provide non-repudiation, anti-tampering and full auditing of all currency related transactions. Usually no central authority Based on peer-to-peer networking. Convertible to traditional currencies: USD, Euro, Yen, Renminbi via crypto-currency exchanges

3 Bitcoin History Developed by Satoshi Nakamoto a pseudonym of a person (or persons) whose true identity has not been publicly disclosed. Proposed Oct 2008 on a forum. Source Code released Jan 2009.

4 Bitcoin Facts Largest crypto currency $14.8 Billion market cap. (Jan 2017 $275M daily transactions. ~1,800 Bitcoin are minted every day. ~95% market share coindesk.com January, 2017

5 The Ledger TX ID Sender Receiver Amount Other Info 09fe8faa5ea535e0c845bf1bfda0f 32TJnMo2hsbwgh5VTHKGbg 1K46VqcTFDHTSv6Dpaepao BTC IP Address Relay Timestamp

6 The Blockchain Like a bank s Master Ledger that has every account number and every transaction associated with that account number Every transaction since the inception of Bitcoin is stored on the blockchain. Bitcoin is based on this widely distributed ledger Everybody involved with Bitcoin keeps a copy

7 The Bitcoin Wallet Collection of cryptographic keys that allow the wallet holder to post transactions to the Blockchain. Bitcoins aren t actually stored in the wallet, just the cryptographic keys that grant access to them on the blockchain.

8 The Bitcoin Wallet The wallet is like an ATM card Allows the user to send and receive money, which is recorded on the block chain Sender Receiver Paying in Bitcoin Posting a transaction on the blockchain that transfers Bitcoin from the sender s balance on the blockchain to the receiver s balance.

9 Auditing the Blockchain Critical that participants are confident in its integrity Continuous auditing by willing participants = Mining Mining results in Cryptographic confirmation of the transactions Rewards for successful mining of a set of transactions currently 12.5 btc, but dropping over time

10 Auditing the Blockchain Bitcoin network updates the audited status every 10 minutes Computational difficulty is artificially adjusted - keeps auditing period around 10 minutes. numbers of miners computational power predictable pace of mining rewards

11 Auditing the Blockchain Successful audit closes the books for the audited period This audited segment is called a block. Hence the name blockchain Blocks validated 12 times are generally considered fully audited Every block audited from the beginning each time Ensures cryptographic integrity from day one

12 Is Bitcoin Anonymous? Not completely. Less like cash, more like a numbered bank account. A detailed audit of the blockchain will show the flows of Bitcoin throughout time, account to account. address = account number A BTC address is not tied to a person on the blockchain To pay someone with Bitcoin, you must know their address. Bitcoin, therefore, offers pseudo anonymity.

13 While criminal use is well documented, does Bitcoin have any legitimate uses? Absolutely Here are three

14 1 The Unbanked 2.5 billion people worldwide have no bank account World Bank, Gallup, Gates Foundation poll, 2012 Exclusion from banking restricts: capital formation extended geographic reach digital economy participation

15 1 The Unbanked While they may lack access to traditional banking There is near universal access to cell phone service with SMS and often Internet. Low cost of transactions ~ Bitcoin (6 cents, USD) Global payments and receipts w/sms

16 2 Micro Transactions Current traditional banking fee structures have minimum transaction sizes below which there is no efficiency.

17 2 Micro Transactions Pay-as-you-go requires bulk deposit up front. Many services are shoe-horned into inefficient flat-fee arrangements or end-of-cycle billing introducing credit risk.

18 3 Digital Economy Credit cards are based on pre- Internet commerce. Compliance and Risk costs are very high. $ Requires complex risk and loss management algorithms. Gateway $ Merchant E-Commerce by Credit Card is essentially a mashup of bolton arrangements to make a dated payment system work.

19 3 Digital Economy Crypto currencies integrate natively with digital commerce. Payment becomes virtually seamless. Payments can be direct or via escrow low-cost non-repudiated transactions triggered and structured payment terms

20 Banks, Exchanges and Blockchain European interbank trade platform based on blockchain: HSBC, Rabobank, Société Générale, Natixis, UniCredit and KBC Stock Exchange of Hong Kong looking at the block chain for ledger and settlements

21 Blockchain Technology for Distributed Assurance The blockchain has no single point of failure No need for ultimate trusted entity only trust of the algorithm. Improves security against tampering of a trusted source

22 The Blockchain outside financial sector Tech: Distributed authentication database (Directory) Routing resilience (Youtube, BGP) Domain Name Services (DNS - name coin) Contracts and Agreements

23 Escrow and Contract The blockchain is extended to support escrow and 2 out of 3 signatures. Conditions and triggers are built natively in to the payment flow. Banks, shipping companies or freight forwarders can be the third signature.

24 Ethereum Background Ethereum is a platform and API (application programming interface) that allows organizations to develop blockchainpowered applications. Features include: Easy to Use API (business language rules and work flow) Custom block-chain. Custom currency called ether for establishing cost of transactions and rewarding auditing (mining)

25 Ethereum Use Cases Smart Contracts Corporate Formation Multi-jurisdictional agreements Buy / Sell Agreements Civil unions and contracts Insurance contracts

26 Ethereum Example 1 0 $ $

27 Contact