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The Smart Money is Tokens

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A high-level view of what tokens are and how they can be used to create Distributed Bearer Instruments (DBIs), a exploration of one obvious thing that DBIs can be used for (ie, money) and a model of digital currency to inform discussion.

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The Smart Money is Tokens

  1. 1. @dgwbirch Please copy and distribute (last updated 10 April 2018) 1 The image part with relationship ID rId3 was not found in the file. How can we fix the identity problem? From money we (think) we understand, to money that understands us David G.W. Birch (15Mb Ltd.) FS Club (London, April 2018) dave@15Mb.ltd www.15Mb.ltd v2 The Smart Money is Tokens
  2. 2. @dgwbirch Please copy and distribute (last updated 10 April 2018) 2 David G.W. Birch author, advisor and commentator Global top 15 favourite sources of business information (Wired Magazine); London FinTech Top 10 most influential commentators (City A.M.); Top 20 Fintech Influencer (JAX London); Top five Leader in IDentity (Rise); Top 10 Twitter account followed by innovators, alongside Bill Gates and Richard Branson (PR Daily); Top 10 most influential voices in banking (Financial Brand); Top 50 blockchain insider (Richtopia); Europe’s most influential commentator on emerging payments (Total Payments).
  3. 3. @dgwbirch Please copy and distribute (last updated 10 April 2018) 3 Agenda Should we have digital currency? OK, well, then… • Wait, tokens? What do tokens have to do with it? • Who might issue digital currency? • How will digital currency be different?
  4. 4. @dgwbirch Please copy and distribute (last updated 10 April 2018) 4 What are Tokens? A quick overview
  5. 5. @dgwbirch Please copy and distribute (last updated 10 April 2018) 5 Tokens? Between the governance and the applications, we can think of the ledger in four layers
  6. 6. @dgwbirch Please copy and distribute (last updated 10 April 2018) 6 Totally Tonto Tokens? Nearly $9 billion raised to date
  7. 7. @dgwbirch Please copy and distribute (last updated 10 April 2018) 7 Token Regulation Securities tokens ICOs SEC “walks like a duck” etc Utility tokens Access to services Money tokens Claim on future products or services Liquid alternative to “traditional” equity and debt 7
  8. 8. @dgwbirch Please copy and distribute (last updated 10 April 2018) 8 Digital Bearer Instruments Concept of “digital bearer instrument” (DBI) goes back to the 1980s Tokens are means to implement DBIs Different DBIs are made from different combinations of token types 8
  9. 9. @dgwbirch Please copy and distribute (last updated 10 April 2018) 9 Don’t Listen to Me…
  10. 10. @dgwbirch Please copy and distribute (last updated 10 April 2018) 10 What could we do with digital bearer instruments? Well, how about money…
  11. 11. @dgwbirch Please copy and distribute (last updated 10 April 2018) 11 The “5Cs” of Future Money Who could issue money in the future? Why would they want to do it? Commercial Banks, digital currency Private seigniorage Central Banks, digital fiat currency Control and economic growth Cryptography, cryptocurrency Dosh ex machina Companies, private currency To fund products and services Communities, decentralized currency Local money, bearing in mind that local doesn’t mean geographic any more
  12. 12. @dgwbirch Please copy and distribute (last updated 10 April 2018) 12 Commercial Bank Creation separate issue from use of shared ledger technologies to manage payments (cf “stablecoin” approaches). Commercial bank accounts as “skin” on central bank or separate as now? The People’s Bank of China “double tier” approach. Central bank control of creation. Commercial bank distribution. We tried this before with Mondex!
  13. 13. @dgwbirch Please copy and distribute (last updated 10 April 2018) 13 Central Bank There are obvious +ve GDP benefits to a digital currency. Reduced friction Increased innovation – cash has no API Central banks could maintain accounts for people and organisations. Retail chequing accounts would be a skin on central bank balances. A central bank digital currency would have an impact on commercial banks. 13 Source: Bank of England (July 2017).
  14. 14. @dgwbirch Please copy and distribute (last updated 10 April 2018) 14 Commercial Banks: Business Model Impact UK 4% notes and coins Seigniorage approximately £500m (used to purchase gilts, interest remitted to Treasury) UK 96% bank deposits Privilege of credit creation Private seigniorage of £23 billion of interest income on these deposits Eurozone bank deposits €17 trillion Private seigniorage approximately €300 billion (€1,000 per inhabitant) 14
  15. 15. @dgwbirch Please copy and distribute (last updated 10 April 2018) 15 Cryptography Digital currency outside of central banks, commercial banks or other institutions What are the requirements? Anonymity? Censorship resistance? Fungibility? Private keys as “digital gold” 15
  16. 16. @dgwbirch Please copy and distribute (last updated 10 April 2018) 16 Companies M-PESA currency board, Air miles… tokens? 16
  17. 17. @dgwbirch Please copy and distribute (last updated 10 April 2018) 17 Companies: Private Money 17 “pre-agreed algorithms would determine which financial assets were sold by the purchaser of the good or service depending on the value of the transaction…” “the same system could match demands and supplies of financial assets, determine prices and make settlements…” the key to any such a system would be “the ability of computers to communicate in real time to permit instantaneous verification of the creditworthiness of counterparties” I look forward to a time when the successors to Bill Gates will have put the successors to Alan Greenspan out of business. Edward de Bono (March 1994)
  18. 18. @dgwbirch Please copy and distribute (last updated 10 April 2018) 18 Communities Reduce internal transaction costs, increase external transactions costs 18
  19. 19. @dgwbirch Please copy and distribute (last updated 10 April 2018) 19 Communities: Cities and the Wealth of Nations Your identity, your credit rating and your parking place
  20. 20. @dgwbirch Please copy and distribute (last updated 10 April 2018) 20 Communities: Crazy?
  21. 21. @dgwbirch Please copy and distribute (last updated 10 April 2018) 21 A Digital Currency Model A high-level model linking shared ledgers, digital money and digital identity
  22. 22. @dgwbirch Please copy and distribute (last updated 10 April 2018) 22 Digital Currency: A Token Model A Layered Model for Discussion
  23. 23. @dgwbirch Please copy and distribute (last updated 10 April 2018) 23 From Dumb Money to Smart Money Dumb Money Smart Money Money as a value Money as a distributed application Standalone money Money with an API Money that substitutes for memory Money that has a memory Money that you can make decisions about Money that can make decisions about you Money that is a static creation of the nation state Money that is the dynamic property of communities
  24. 24. @dgwbirch Please copy and distribute (last updated 10 April 2018) 24 in the future, everyone will be famous for fifteen megabytes engage 15Mb Ltd. post 1 Armadale Road, Woking, Surrey GU21 3LB, UK call +44 1483 834631 contact dave@15Mb.ltd visit www.15Mb.ltd follow @dgwbirch comment blog.dgwbirch.com connect https://www.linkedin.com/in/dgwbirch/ order amazon.co.uk “Before Babylon, Beyond Bitcoin”

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