" It is well enough that people of the nation do
not understand our banking and money system,
for if they did, I believe there would be a
revolution before tomorrow morning."
~ Henry Ford
current financial system
How does it work?
Current state around the world
to fundamentals: What is money?
"If the American people ever allow private
banks to control the issue of their currency,
first by inflation, then by deflation, the banks
and corporations that will grow up around
them will deprive the people of all property
until their children wake up homeless on the
continent their Fathers conquered...I believe
that banking institutions are more dangerous
to our liberties than standing armies... The
issuing power should be taken from the banks
and restored to the people, to whom it
current financial system
How does it work?
Search for: Mike Maloney ―Hidden Secrets Of
urges 'de-Americanized' new financial
End of the Petrodollar?
Uncharted territory with unsustainable debt
levels – EU, UK, Japan, USA etc..
Bail-In strategies like Cyprus
Rather than fixing the financial system, maybe
it is time to rebuild a new financial system
from the ground up.
It must be durable, which is why we don’t use wheat or corn or rice.
It must be divisible, which is why we don’t use art work.
It must be convenient, which is why we don’t use lead or copper.
It must be consistent, which is why we don’t use real estate.
It must possess value in itself, which is why we don’t use paper.
It must be limited in the quantity that is available, which is why we
don’t use aluminium or iron.
It should have a long history of acceptance, which is why we don’t use
molybdenum or rhodium.
Gold & Silver possesses these qualities
"At any rate, the spook spoke the truth: cryptology
represents the future of privacy, and more. By
implication cryptology also represents the future of
money, and the future of banking and finance. (By
"money" I mean the medium of exchange, the
institutional mechanisms for making transactions,
whether by cash, check, debit card or other
electronic transfer.) Given the choice between
intersecting with a monetary system that leaves a
detailed electronic trail of all one's financial
activities, and a parallel system that ensures
anonymity and privacy, people will opt for the
latter. Moreover, they will demand the latter,
because the current monetary system is being
turned into the principal instrument of surveillance
and control by tyrannical elements in Western
governments." - J. Orlin Grabbe (1947-2008)
Open Source cryptocurrency
Distributed cryptographically protected
No central authority -> does not depend on trust
to single or couple of institutions.
Like cash, but for the internet
1 Bitcoin = 3,520 ZAR (as on 8th Nov 2013).
Created by pseudonym Satoshi Nakamoto in 2009
Based on a peer-to-peer network of computers
running the Bitcoin software.
The transactions are verified by proof-of-work
system of computers running mining software.
No unpredictable inflation by ‖printing more
money‖ by political decision
Transactions travel instantly
Send money in seconds to anyone with internet
access – with practically zero transaction costs.
Highly anonymous, in certain conditions
Every transaction in the public ledger
If you memorize your private key, the only way
to steal your Bitcoins (even for the authorities) is
to torture you (or spy or hack your computer)
Easy to use
You can choose how to store your Bitcoins
(online / offline)
‖account‖ consists of the public key (=
bitcoin address) and the private key.
Anyone who knows your public key, can send
To spend bitcoins, you have to know the
The transaction is broadcasted to the Bitcoin
The miners confirm the transactions
But it proves it works!
And people use plain cash for the same.
adopters benefit too much
Is it really a problem?
buy guns and drugs with it!
has actually no value
Same applies to euros and dollars.
They only have value because people believe
they have value.
example of a bitcoin address:
2160 (about 1048)possible addresses
corresponding private key:
256 bits (SHA256 encryption)
About 1077 possible private keys
the process called mining, all transactions
are collected in a block. A new block is
mined in about every 10 minutes.
For small payments or with payments with
trusted peer, 0 confirmations is usually ok.
For large amounts, 6 confirmations is
Bitcoin has no central authority, one
of the main security problems is eliminating
a double spend fraud (wherein the same
money is spent twice)
The main innovation in Bitcoin is the
blockchain. Each full node (a computer
running the Bitcoin program) in the network
has a copy of all mined blocks
Disrupting the system would need enormous
how bitcoin works
Every transaction from address to address is
How much and when = public, who owns the
address = not public (can be analyzed, though).
a new address for every transaction
Use mixing services
The larger the transactions, the easier it is to
carry out traffic analysis
ledger containing every Bitcoin
transaction ever made
Processing power securing the ledger using
How are Bitcoins released:
It is scarce (there will never be more than 21 million)
It is secure: it can’t be counterfeited or multiplied at will,
and it allows for as much privacy as the user desires
It is extremely transportable: you send it virtually
instantaneous, essentially for free, to anywhere in the
Flexible: every single Bitcoin can be subdivided into
millions of smaller parts, and all Bitcoins are
Extremely durable: the Bitcoins in your wallet will
disappear only after every single copy of the Blockchain on
the planet has been erased—and remember, the QT client
alone has been downloaded already over 3 million times
And finally, unlike that of fiat currencies, the supply of
Bitcoin is steady and predictable
do I get a Bitcoin?
Step 1 – Create a Wallet
Step 2 – Buy Bitcoin on an Exchange
Step 3 – Use it on your own terms!
System D (Informal Economy)
The unbanked (Africa)
Remittances (PayPal, Western Union)
Protocol extension with APIs
Decentralised Securities Exchanges
BitShares, Coloured Coins, Mastercoin
End of Wall Street?
Contracts, Wills, Charity..
Man is free at the moment he wishes to be. ~Voltaire
Economics & the current Financial system