Bitcoin A Decentralized Cryptocurrency
Intro President Bitcoin Association Switzerland Master student Economics Uni ZH Seed-stage investor Co-founder of Wuala MSc Computer Science ETH 2
What is Bitcoin? 1. A currency without central control or identifiable issuer 2. A decentralized, secure payment system 3. An solution to the distributed consensus problem in computer science Ownership secured by technology, not rule of law. «Wir werden solange kein anständiges Geld bekommen, bis es anderen frei steht, uns ein besseres anzubieten als die jeweils herrschende Regierung.» Friedrich August von Hayek 3
Bitcoin transaction Live demo 363 Transactions (6.5 BTC) publicly visible, for example on: https://blockchain.info/address/1fkp2maqnjp24wjfy47sfmpgvgji7ybvpe 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 4
Easy to integrate, e.g. FlappyParty 5
Easy to integrate, e.g. Beer Bar 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 6
Silk Road 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 7
lieferservice.ch 5% of revenue in Bitcoin 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 8
Café Schoffel 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 9
Kommentar von «Wonko the Sane» The revolution already happened - it's called Bitcoin. I've spent the last year bank-free. I live in the US, but work for a Swiss software company and get paid the CHF equivalent of $160k/year. They pay me in Bitcoin. I have no bank account. Everything I need to buy I either pay for directly in Bitcoin, or in cash. When I need cash, I use LocalBitcoins to find somebody who wants to trade. The "massive bureaucracy with its bloated laws and indifferent employees" can fuck off. They can point their guns at secp256k1 all they want but it won't do them any good. I just have to laugh at people who still care about or participate in politics - it's a complete waste of time. Within a few years Bitcoin has accomplished the change which many decades of voting have failed to provide. - Wonko the Sane, Slashdot.org, 2014-10-26 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 10
Specialized Hardware ATMs Trezor Wallet Coins & Notes Mining Hardware 2014-10-29 Luzius Meisser Bitcoin Association Switzerland 11
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Mining Bitcoin network speed more than 1000 times faster than top 500 supercomputers combined 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 13
2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 14
Bitcoin in the media «Wenn die Bitcoin-Blase platzt» - 5.12.2013 «The rise of Bitcoin» - 4.7.2013 «Bitcoin Fever: The World's Largest Online Currency» - 21.3.2013 «Bitcoin Is A Disruptive Technology» - 9.4.2013 «Die Internetwährung wird salonfähig» - 12.4.2013 «Bitcoin wird Thema im Bundesrat» - 9.12.2013 «Is Bitcoin the future of currency?» - 11.6.2013 «Why Bitcoin Is Being Taken Seriously» - 27.3.2013 «Bitcoin Virtuelles Geld» - 29.11.2013 15
Bank attention Q1 2014 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 16
Legal: Federal Council Report Means of payment AML laws apply Only lower volatility missing to be considered money SRO under construction: dfca.ch 2014-06-06 - Luzius Meisser Bitcoin Association Switzerland 17
Swiss Regulation London & Isle of Man want to become centers for crypto-finance Switzerland laws neutral SRO «digital finance compliance association» Bitcoin an opportunity for Switzerland? 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 18
Swiss Franc vs Bitcoin Comparison Swiss Franc Bitcoin Must understand to use Money supply No. Who knows how EC- Cards work? Controlled by central bank Currently: 886 billion CHF Backed by Nothing (in the past: gold) Nothing Virtual 92%, stored as number in databases run by banks (only 8% of M3 are coins or notes and thus also legal tender) Exists since 1850 2009 No, but interesting. Pre-determined (more out of technical necessity than for ideological reasons). Limit: 21 million BTC 100%, stored as numbers in a database run by an anonymous collective everyone can join 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 19
Distributed Ledger Technology (DLT) Dezentral organisiertes Eigentumsregister Keine Kontrollinstanz Regeln nach Konvention Open Source Vollständige Transparenz: alle Regeln bekannt, Geldmenge bis in alle Zukunft vorbestimmt, alle Transaktionen öffentlich Macht Vermögenswerte weltweit ohne Finanzintermediär innert Sekunden direkt von Person zu Person übertragbar 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 20
Analogy We determine: Everyon in the room gets 100 SIPUG-Coins Freely transferrably by loud announcement Everyone keeps track of everyone else s balance In case you miss a transaction, ask a few neighbors Every 10 minutes we agree on a bundle of transactions by majority vote 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 21
Moving Online Identification by digital signature Voting weights proportional to computing power (one of the few things that cannot be faked online) Incentive for correct archival of transactions (mining) 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 22
Richest Addresses Source: http://btc.ondn.net/ 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 23
Currency: Exchange rate Yearly Performance 2010 285% 2011 1474% 2012 186% 2013 5870% 2014 YTD -50% Peak Price: 1203 USD Current price: ~650 USD Trading volume: ~37 mln USD/day 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 24
Currency: Exchange rate 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 25
Currency: Exchange rate Google Trends 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 26
Price Drivers Supply: 3600 Bitcoins per day until summer 2016 (About 2 million per day) 1800 Bitcoins per day afterwards Demand: Speculation Wealth preservation («digital gold») Actual payments 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 27
Attracts adventurous traders «Wild west» E.g. margin trading on Bitfinex.com Pays 0.23% on your USD holdings per day! (Via swaps to margin traders.) 2014-06-06 - Luzius Meisser Bitcoin Association Switzerland 28
Attracts Venture Capital Startup Funding in million USD BitPay: 32.5 Circle: 17 Ripple: 9 Satoshi-Dice: 11.5 Coinbase: 31.7 CH startups: Monetas, Ethereum Many more 2014-06-06 - Luzius Meisser Bitcoin Association Switzerland 29
Soon also attracts banks? Oliver Bussmann (CIO UBS) in WSJ.D on 2014-10- 17: «I believe that blockchain technology will not only change the way we do payments but it will change the whole trading and settlement topic. «When somebody with a strong brand and security level establishes it as a reliable service, then the whole industry will follow. Source: http://blogs.wsj.com/digits/2014/10/27/ubs-cio-blockchain-technology-can-massivelysimplify-banking/ 2014-07-03 - Luzius Meisser Bitcoin Association Switzerland 30
Colored Coins «Bearer» tokens for any kind of asset: Currencies (e.g. CHF from ZKB) Bonds (incl. interest payments) Shares incl. dividends and voting Ownership of a car (authenticate to start) Digitales «Property» of books, movies, etc. 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 31
Future Smart, self-executing contracts Distributed autonomous organizations Decentralized autonomous companies (Based in Zug, 18 MM USD funding) 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 32
Smart contract: Bet Alice and Bob bet 100 Ether that Brazil wins against Germany in the world cup They program a contract, release it to the Ethereum network and load it with 100 Ether each As soon as the result appears on fifa.com, the contrat is executed and 200 Ether sent to the winner Btw: no judge in the world can stop the execution of the contract. It happens «in the cloud». 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 33
Distributed Autonomous Organizations What if a program outlives its creator and continues to act economically? The program might buy and sell goods and pay for the resources it needs to run Example 1: autonomous exchange for cryptoassets Example 2: autonomous trader on such exchange In cryptofinance, you don t know whether your counterparty is human or machine 2014-10-29 - Luzius Meisser Bitcoin Association Switzerland 34
Scenario 2100 Tainter: complexity of societies tend to increase of the course of time Bureaucracies eventually collapse under own weight (e.g. Roman empire) Bitcoin not backed by laws, backed by technology. Provides reliable payment system even in times of chaos. 2014-05-16 - Luzius Meisser Bitcoin Association Switzerland 35
Questions? To do: 1. Open a wallet and buy your first Bitcoin (blockchain.info, Android wallet) 2. Join the next meetup (monthly in ZH, see meetup.com/bitcoin-meetup-switzerland) 3. Relax and watch a revolution unfold Contact: mail@luziusmeisser.com 2014-04-02 Luzius Meisser Bitcoin Association Switzerland 36