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Df sba bitcoin and other cryptocurrencies 13_june2014_v3

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Df sba bitcoin and other cryptocurrencies 13_june2014_v3

  1. 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. 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. 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. 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. 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. 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. 7. © The Z/Yen Group 2014 Bitcoin Price (USD) [Source: blockchain.info]
  8. 8. © The Z/Yen Group 2014 Bitcoin price volatility
  9. 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. 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. 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. 12. © The Z/Yen Group 2014 Look beneath the coins
  13. 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. 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. 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!

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