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Crypto-Currency - Strategic Review v3

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Bryan Starbuck's Crypto-Currency Strategic Review v3

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Crypto-Currency - Strategic Review v3

  1. 1. WhiteHat Engineering, Inc.Bryan Starbuck Bryan@WhiteHatEngineering.com Strategic BlockChain Analysis
  2. 2. Understanding the Technology Blockchain (Aka Bitcoin & Crypto-Currencies)
  3. 3. Explaining Blockchain Blockchain = Read & Append Only Database New accounts = $0 Transaction = Transfer from Account A to B Database is ONLY list of TRANSFER transactions
  4. 4. Explaining Blockchain Details… Details… Details… Details… Details… #5 #3 #2 #4 #1 Transaction # Transaction Details
  5. 5. Crypto-Currency Wallet Your account control comes from your “Wallet”, which is a Private asymmetric encryption key. Your Public Key is your Crypto-Current Address. Transactions are “Signed” with your private key (aka wallet)
  6. 6. Local software challenge Using crypto-currency can require installing local software. The local software has access to your WALLET on your local computer. PRO: Harder to use. People hate installing software. CON: Ultra-secure (possibly)
  7. 7. Or use the cloud Or you can use a cloud provider (like) PROs: No local software. CONs: Security returns to equaling banks.
  8. 8. Local wallet keys Local WALLETs are: More secure: in the case of risk of cloud banking (Mt Gox or a bank) Less Secure: Local computer hacked or data loss.
  9. 9. Strategic analysis of the layers We will analyze these in the strategic stack User Interface (Owning Customer relationship) Currency Exchange Interop with the Offline World Backing Financial Transactions Smart Contracts Platform Strategy
  10. 10. Ethereum
  11. 11. Ethereum Transactions + Code + Custom database storage
  12. 12. Ethereum Ethereum “Smart Contract” can include codeftw SoftwareCODE Inthecontract
  13. 13. Ethereum Ethereum “Smart Contracts” include a mini-database to store values ftw Database Inthecontract
  14. 14. Why The high level
  15. 15. Top reasons this is important 1. Preservation of Capital – Converting the asset class into being secure 2. Race to own the USER EXPERIENCE 3. Lower fees 4. Infrastructure that is revolutionary 5. New Scenarios
  16. 16. Hear my story to illustrate This story illustrates all of the trends coming together
  17. 17. We want a car AirBnb for buying cars: We want to buy a car to share among our house-mates
  18. 18. The purchase The car costs $15,000. Everything will happen with crypto-currency But we only pay a little along the way. ftw SoftwareCODE Inthecontract
  19. 19. Strategic analysis of the layers We will analyze these in the strategic stack User Interface (Owning Customer relationship) Currency Exchange Interop with the Offline World Backing Financial Transactions Smart Contracts Platform Strategy
  20. 20. Monthly payments We make monthly payments. Buying all up-front is expensive. And we are poor college students.
  21. 21. I buy 50% of the car I’m buying 50% of the car, so I get more hours and priority on booking it. ftw SoftwareCODE Inthecontract
  22. 22. Assessing credit I’ll assess their credit rating. I have my assets at risk, based on the results. I make more than my peers with my quality score is higher. I earn less when it is lower. Backing Financial Transactions
  23. 23. Credit risk Then a credit risk score is issued. Backing Financial Transactions
  24. 24. Getting the loan We invest money buying this ”Consumer Credit”. We get 8.1% returns Backing Financial Transactions This is the crypto-currency version of LendingClub ($4 billion loaned)
  25. 25. Monthly payments They allow us to make monthly payments Backing Financial Transactions
  26. 26. It tracks my driving When I drive, it logs that JENNIFER and her driving hours
  27. 27. Priority reservations I rarely drive. I save my KARMA CREDITs for cross-state drives to family on holiday weekends.
  28. 28. Sold my share I only needed it senior year. I sold my share to someone else, when I graduated.
  29. 29. I bought more I started out owning 25%. I bought more to 75%, after I drove more with my new job.
  30. 30. Credit default swaps We buy 1% slices of people’s loans. We pick a wide range of loans at credit risk level 50% to 75% These get sold, over and over. Backing Financial Transactions
  31. 31. Who can do this? Who could do this ENTIRE CAR Scenario? MasterCard? Bank of Canada? PayPal? Equifax? Stripe? LendingClub? Crypto-currency = Powerful Legos Unlocks innovation
  32. 32. People act as a Store Creating a store can be as simple as printing out a sheet of paper. Buy my stuff: My bike: $30 Rent my car for Christmas break: $25
  33. 33. Let’s go deep
  34. 34. Strategic analysis of the layers We will analyze these in the strategic stack User Interface (Owning Customer relationship) Currency Exchange Interop with the Offline World Backing Financial Transactions Smart Contracts Platform Strategy
  35. 35. Startup Weekend You have 3 days at a startup weekend. Add value in the world.
  36. 36. Startup Weekend You can only have: 3 days 2 devs 500 lines of code (Or less)
  37. 37. Startup Weekend What you deliver: Unlock Value X & Charge Y
  38. 38. Startup Weekend This is a real Ethereum Contract: Simple, Simple, Simple What could you write in an hour? It is 9 lines long (ignoring comments)
  39. 39. Prediction Markets Prediction markets are great. Consumer credit risk. Asset Pool risk levels. Presidential elections. Backing Financial Transactions
  40. 40. VISA Fees The race to cut the VISA fees. Their value-add is to interact with the offline world. Interop with the Offline World
  41. 41. Offline world and VISA Interop with the Offline World INTERNET = Connection iPad = P.O.S. system Where is VISA needed?
  42. 42. HARDWARE Locks Interop with the Offline World Hardware locks that unlock upon crypto- currency payments
  43. 43. HARDWARE Locks Interop with the Offline World Seattle had paid toilets Insert joke here
  44. 44. HARDWARE Locks Interop with the Offline World Uber for Bike Rentals
  45. 45. HARDWARE Locks Unlock it in a few lines of code Interop with the Offline World
  46. 46. Platform strategy A platform strategy unlocks the masses Platform Strategy We can write 500 lines of code.
  47. 47. Own the customer relationship = strategic lock This is the true strategic lock This would require giving another talk…User Interface (Owning Customer relationship)
  48. 48. Fees Crypto-Currency fees race to $ZERO
  49. 49. Why #1 Making CURRENCIES a secure asset class
  50. 50. Living on the edge of leverage During the 2007/2008 crisis: Bernanke said, ~They are all digital accounts. If everyone withdrawals, the just isn’t enough cash to back it up.
  51. 51. Person A is wealthy. My wealth is backed up by assets. I live safely here. 1) Real estate asset class 2) Precious metals 3) Stocks (Equities) The point is that they are secure
  52. 52. I’m in the bottom 60%. I live 100% in the CASH asset class. I’m forced to live on numbers in a computer. In the next 2007 crash, I can’t feed my family. I’m denied the ASSET BACKING that the wealthy get.
  53. 53. Fiat Currencies Fiat Currencies do crash Rome in 213 ad Germany 1923 Argentina in 1932 France in 1795 Mexico 1994 Many more Thai “baht” 1997 China – 11th century
  54. 54. Rome Gov Needs Money  Dilute  Collapse Around the time of Rome’s collapse, the denarius contained only 0.02% silver and virtually nobody accepted it as a medium of exchange or a store of value
  55. 55. France French revolution Default on Debt ~1785  People Starve  1795 currency inflates by 13,000%
  56. 56. Failing currency Could this happen in 2016? Greece is a recent example
  57. 57. 60 The LEFT: “Crony capitalism is alive and well and flourishes under big, powerful government. Because the bigger government gets, the more powerful and complicated it becomes, the more true it also is that only the big, the powerful, the wealthy and the well-connected can handle it and the small and the powerless get crushed.” The RIGHT: Carly Fiorina 2015 Presidential Republican Candidate
  58. 58. I’m forced to live on numbers in a computer. In the next 2007 crash, I can’t feed my family. I’m denied the ASSETs that the wealthy get. My family matters.
  59. 59. The End
  60. 60. An engineering team that builds entire startup companies from the ground up WhiteHat Engineering STARTUPS & ENGINEERING Early Stage Crypto-Currency & more
  61. 61. TalentSpring Founder & CEO - Acquired in 2010 B2B Enterprise SaaS company with Artificial Intelligence / Machine Learning SPARKON Founder & CEO - 2011 to 2013 B2C Online learning & Passion Discovery Owner at WhiteHat Engineering: (Current) Our engineering team builds startup companies & products Bryan Starbuck STARTUPS & ENGINEERING Bryan@TheStarbucks.com
  62. 62. NXT Coin
  63. 63. How NXT Coin HELPS 1. “Assets” 2. Example: Buy a boat. Pay NXT coins. Then issue a new asset of SHARES in boat XYZ. NXT Coin
  64. 64. BitShares
  65. 65. How BitShares Helps 1. “Crypto-Finance” 2. BitUSD vs BitGold vs BitEU 3. Currency Derivatives BitShare s
  66. 66. Ethereum
  67. 67. How Ethereum Helps 1. “Crypto-Law” 2. Smart Contracts 3. “Ether” vs “Gas” 4. Smart Contract = Coins + code Ethereum
  68. 68. Other Areas
  69. 69. Regulations – Money Laundering • USD Dollars   Bitcoin = Exchange • Bitcoin: Owner A  B • California = Bank $1,000,000 annual fee for regulators • “Bit License”: NY Dept of Financials Services
  70. 70. Other Important Areas • Protect the wallet • Hosted coin providers (CoinBase.com) • Regulations • Proof of Work –vs- Proof of Stake • Byzantine General’s Problem • Liberty Reserve: Costa Rica. Founders in Jail
  71. 71. THE END See the backup slides
  72. 72. An engineering team that builds entire startup companies from the ground up WhiteHat Engineering STARTUPS & ENGINEERING Early Stage Crypto-Currency & more

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