1. © The Z/Yen
Group 2014
Z/Yen Group Limited
Geneva/Switzerland Branch
Rue De-Beaumont 8
1206 Geneva
Switzerland
tel: +41 (22) 347-2768
www.zyen.com
“Zest for Enlightenment”
Bitcoin & other cryptocurrencies:
monetary and economic aspects
Geneva, 13 June 2014

2. © The Z/Yen
Group 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

3. © The Z/Yen
Group 2014
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

4. © The Z/Yen
Group 2014
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]

5. © The Z/Yen
Group 2014
♦ 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 2016
Then, 12.5 BTC per block mid 2016 to 2020
Then, halving continues until 2110-2140
♦ Market capitalisation - circa 8 billions USD,
albeit fluctuating
Bitcoins - an overview

6. © The Z/Yen
Group 2014
♦ Up to 10 Jan 2014, based on John Ratcliff’s
work
279,535 blocks
30,720,691 transactions
25,397,303 unique public key addresses (UPKA)
22,982,911 UPKA with a 0 BTC balance
Leaves 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]

7. © The Z/Yen
Group 2014
Bitcoin Price (USD)
[Source: blockchain.info]

8. © The Z/Yen
Group 2014
Bitcoin price volatility

9. © The Z/Yen
Group 2014
♦ Attractive
Lower transaction costs
No third party to financial transactions
Lower transaction fees to users incl. businesses
Alternative to cash
Public ledger of transactions (history)
Secure and transparent
No 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

10. © The Z/Yen
Group 2014
♦ In theory feasible
BTC modeled after gold - no interest, limited supply
BTC’s negative correlation with risk sensitive assets
♦ But
Reputation?
Uncertainty around long-term value
High price volatility
Speculative market
Poor liquidity
Unstable returns
Bitcoin as a store of value

11. © The Z/Yen
Group 2014
How does Bitcoin compare
Currency Unit of
account
Medium of
exchange
Store of value
Gold (+) (+) +
Fiat
currency
+/! + +/!
USD + + !
Bitcoin ! +/- !

12. © The Z/Yen
Group 2014
Look beneath the coins

13. © The Z/Yen
Group 2014
♦ 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 ?

14. © The Z/Yen
Group 2014
♦ BTC has most potential as a medium of
exchange
♦ BTC value depends on people’s perception of
its worth
♦ Governments may want to control BTC
Regulating 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

15. © The Z/Yen
Group 2014
♦ 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? chiara_vongunten@zyen.com
Thank you!