Virtual currency


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Discussion of current money system and some virtual currency and digital currency alternatives for the future...

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  • Today in Canada and most other nations worldwide, we exchange labor, ideas, products or other intangible intellectual property (call this 'goods and services') for a fiat currency called 'Canadian dollars'. Private Corporations and Public Organizations act as Employers when they pay people for their goods and services, those people in turn spend that same currency or a portion thereof on products and services they personally need such as food, shelter, transportation, electricity to power home appliances, entertainment, etc... It hasn't always been this way though. By taking a look back to how money has evolved over time, we can better predict what the future forms of money might look like, and possibly start to understand the economies and markets that form around a currency.
  • Any currency, whether digital or otherwise, used for representing the value of an exchange which takes place in a 'Virtual Economy', such as within a game, or, for participation in an online community.
  • Still not secure enough to replace existing money
  • Mt.Gox the biggest exchange only used MD5 to protect buyer/seller accounts, and was hacked in June, 2011 in a selloff that brought BitCoins down to $0.01/BTC.
  • Virtual currency

    1. 1. Virtual Currencies “ Analyzing BitCoin and Market Crashes to Understand the Future of Money” By: Bryan Copeland
    2. 2. What is Money? <ul><li>Payment Providers, Credit Cards </li></ul><ul><li>Currency is a geopolitical symbol/code & index </li></ul><ul><li>Other things that have been used for $: </li></ul><ul><ul><li>Feathers </li></ul></ul><ul><ul><li>Jewels & Unique stones </li></ul></ul><ul><ul><li>Items for barter </li></ul></ul><ul><ul><li>Salt (hence “salary”) </li></ul></ul>“ Measurement of an exchange of value”
    3. 3. Digital Currency <ul><li>Money differs from scrip only by laws </li></ul><ul><li>Used in B2B, E-Commerce activities, gifting </li></ul><ul><li>Easily converted to real-world currency, ex: </li></ul><ul><ul><li>OpenCoin (eCash) </li></ul></ul><ul><ul><li>Flattr </li></ul></ul><ul><ul><li>BitCoin </li></ul></ul>“ Value of an exchange stored, transacted or fulfilled wholly by electronic means”
    4. 4. Virtual Currency <ul><li>Used in B2C, Games, In-app purchases, App stores </li></ul><ul><li>Examples: </li></ul><ul><ul><li>Facebook Credits </li></ul></ul><ul><ul><li>Linden Dollars </li></ul></ul><ul><ul><li>WoW currencies </li></ul></ul><ul><ul><li>... </li></ul></ul>Currency representing the value of an exchange which takes place in a “ Virtual Economy ”
    5. 5. Virtual Economy <ul><li>MMORPG s </li></ul><ul><ul><li>SecondLife , WoW , etc... </li></ul></ul><ul><ul><li>FB apps: Farmville , MafiaWars , etc... </li></ul></ul><ul><li>Online Communities </li></ul><ul><ul><li>Wikipedia , StackOverflow (privileges) </li></ul></ul><ul><ul><li>Dribble , DeviantArt , Forums (rep points) </li></ul></ul><ul><li>Virtual Goods </li></ul><ul><ul><li>Real estate, Game objects (items, powers, equipment, weapons, etc) </li></ul></ul>
    6. 6. Why Do Users Buy Virtual Goods? <ul><li>Status </li></ul><ul><ul><li>Pay to obtain skills/tools more quickly </li></ul></ul><ul><ul><li>Quickly gain reputation or unlock levels </li></ul></ul><ul><li>Relationships </li></ul><ul><ul><li>Gifts to friends/family (Birthday, holiday, etc) </li></ul></ul><ul><ul><li>Spouse/gf/bf/crush (Valentine, Anniversary) </li></ul></ul><ul><li>Business </li></ul><ul><ul><li>Donations, Contests, PR campaigns </li></ul></ul><ul><ul><li>Branded items, templates, sprites, audio </li></ul></ul>
    7. 7. BitCoin (BC) <ul><li>P2P, decentralized digital crypto-currency and client, started by the mysterious Satoshi Nakamoto </li></ul><ul><li>Legally a form of “scrip” </li></ul><ul><ul><li>To use legally today, daily trades must be < $1000 USD </li></ul></ul><ul><li>Can't be used at many locations (except online ) </li></ul><ul><li>More traction than other digital currencies </li></ul>
    8. 8. BC: Algorithm <ul><li>Encryption: SHA256(SHA256(Block_Header)) </li></ul><ul><li>Signature: Elliptic Curve DSA </li></ul><ul><li>Potential weaknesses found </li></ul><ul><ul><li>Exchange account attack (Mt.Gox) </li></ul></ul><ul><ul><li>51% attack & Concerted sell-off, buy-back attacks </li></ul></ul><ul><ul><li>Sybill attack , Mining pools, Covert mining attack </li></ul></ul><ul><ul><li>Value-overflow & Unencrypted wallets (fixed) </li></ul></ul><ul><ul><li>P2P, yet not “really” decentralized </li></ul></ul>
    9. 9. BC: Market Crashes <ul><li>Flash crash in June 2011 (from $33/BTC down to $0.01/BTC) </li></ul><ul><li>Major, sustained crash and sell-off Nov 2011 (from $20/BTC down to $2.84/BTC) </li></ul><ul><li>Not immune to Booms/Busts </li></ul><ul><li>Disproportionate early-adopter advantage </li></ul>
    10. 10. Real-World Market Crashes <ul><li>Perpetual debt only good for debtors </li></ul><ul><li>Stock Market crashes despite corporate profit gains </li></ul><ul><li>Joblessness at an all-time high </li></ul><ul><li>Enter “ Occupy Wall Street ” and related movements </li></ul>
    11. 11. Key Measures of Wealth
    12. 12. Purchasing Power
    13. 13. Why does it happen? <ul><li>By Design (flaws inherent in the system) </li></ul>
    14. 14. Future of Money? <ul><li>Not BitCoin... but similar ( SolidCoin , OT , PaySwarm , etc) </li></ul><ul><li>Digital Gold and Self-issued Credit projects could merge BitCoin anonymity & decentralization </li></ul><ul><li>P2P, Community reserves </li></ul><ul><li>Interest-free, no 2-lenders problem, more like a Neighborhood Watch or Credit Union than Bank </li></ul>Image courtesy: DigitalMoneyWorld
    15. 15. Thanks! -> Movie guide to Occupy Wall Street (by Reuters) -> Money as Debt , Zeitgeist series , Clarke & Dawe (clips used) -> The Creature from Jekyll Island (by G. Edward Griffin) -> The Money Masters , Capitalism and Freedom (by Milton Friedman) -> Who Got Bailed Out? , Which Banks Got Loans? (economic analysis) -> Loan Repayment Calculator , Retirement Calculator (useful tools) -> Complimentary Currency , CommunityExchange (alternative currency projects)