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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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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)

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