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BitCoin and the Global Economy by Cristina Dolan Presented at MIT Center for International Studies

Cristina Dolan, MIT Media Lab Alumna and Internet Pioneer presented at the MIT Center for International Studies Starr Forum on April 7, 2016 along with Michael Casey, bestselling author and Senior Advisor, BlockChain opportunities at the MIT Media Lab.

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BitCoin and the Global Economy by Cristina Dolan Presented at MIT Center for International Studies

  2. 2. WHAT IS BITCOIN? Next Generation Information, Communication and Transaction Technology Global Peer to Peer Exchange of Value Trustless Deflationary © 2016 Cristina Dolan
  3. 3. HOW BITCOIN WORKS? © 2016 Cristina Dolan
  4. 4. TIMING IS EVERYTHING BitCoin Timing for Trust 11/2008 Satoshi Nakamoto White Paper 1/9/2009 Released Bitcoin Code 2011 Mt Gox & Silk Road Wave of Early Adopters 2013 Venture Capital Investment Products Launched and Partnerships Announced 2015 Wall Street Adoption of BlockChain TODAY Network Effect with Layers of Applications 2016 $1B+ in Venture Capital 2007 – 2008 Global Financial Crisis © 2016 Cristina Dolan
  5. 5. DISRUPTIVE TECHNOLOGIES Change in Business Models and Human Behavior WWW & Graphical Browser Wireless & Internet Broadband OpenSource Cell Phone & Smart Phone Blogs & Google Ads Cloud Computing Portable Cheap Memory Cheap Cameras & Video Digital & Streaming Music and Video VCRs & DVRs Time Delay Viewing © 2016 Cristina Dolan
  6. 6. BITCOIN COMPONENTS BitCoin Digital Currency & Stored Value Conduit Peer to Peer Efficient Transactions Technology, Business Process and Communications Blockchain Peer-to-Peer Distributed Ledger. Next generation technology that establishes trust, accountability and transparency while streamlining business processes. © 2016 Cristina Dolan
  7. 7. NEW SOLUTION FROM OLD TECHNOLOGIES Economic Incentive Layer Spread of distributed ledger and incentive for consensus computations Merkle Trees Patented in 1979 by Ralph Merkle SHA-256 A Secure Hash Algorithm family algorithm invented in 2000 by U.S. NSA Decentralized P2P Networks Popularized by Napster in 1999, KaZaA in 2001 and Skype and Gnutella Hashcash Proof-of-work proposed by Adam Back in 1997 Solution to Byzantine Generals’ Problem The proof-of-work chain solution © 2016 Cristina Dolan
  8. 8. ECONOMICS OF TRANSACTIONS •2 Billion Unbanked, Number improved by 20% in 2015 •59% Unbanked in developing countries & 11% in high-income areas •77% of adults earning less that $2 per day •75% of World’s poor unbanked due to poverty, costs, travel distance, paperwork Banking • $4 Trillion • $436B of $583B Cross Boarder remittances sent to developing countries in 2014 • 4% to 30% transaction fees, Cutting 5% points can save up to $16 Billion per year • Cross Boarder Payments benefit developing countries improves education and health Remittances •1-4% Payment Fees •Personally Identifiable Information in Central Database 3rd Party Payments •860M Global Mobile Bankers •Mobile Payments: Android, Apple and Samsung Pay •Stronger Customer relationships •M-Pesa in Kenya and M-KESHO Partnership for Banking Mobile Banking and Payments •New Business Models •New Compliance •New Customer Self Service Models Business Efficiencies © 2016 Cristina Dolan
  9. 9. WORLD BANK – UNBANKED 2B Unbanked People - 50% with Mobile Phones © 2016 Cristina Dolan
  10. 10. GLOBAL REMITTANCE OF MONEY • Cross Border $583 Billion 2014 • $436B send to Developing Countries, a 5% decrease in fees will save $16B • Migrants sending home 3X the World Total Aid Budget © 2016 Cristina Dolan
  11. 11. PAYMENT OPTIONS Payment Processing Value Chain Source of Funds Customer Account Provider Funds Transfer Funds Withdrawal Settlement Four Party Card Bank Issuer Card Network • Acquirer • PSP E-Wallet • Card • Stored Value • Bank Wallet Provider ACH Bank Bank ACH Network Bank Scheme Mobile Money Transfer • Carrier Bill • Mobile Money • Agent Mobile Network Operator • Mobile Wallet • Agent • Bank/ATMPartner Bank Bank Intermediary Network Carrier Billing Carrier Bill/Prepaid Balance Mobile Network Operator Mobile PSP Distributed Ledger Model Bank Virtual Currency Gateway Exchange Provider “Ledger” Server Network Gateway / Exchange / PSP BankedUnbanked © 2016 Cristina Dolan
  12. 12. CUSTOMER RELATIONSHIPS Telcos have deepest customer relationships for paid services • 7.413 Billion - Total World Population (including children) • 7.526 Billion - Active Mobile Subscriptions • 3.4 Billion - Smartphone Subscriptions Globally • 1B Mobile - Phones in Africa – doubled in the past 5 years Mobile Infrastructure Order Process Management Payment Process Management Account Access & Management Marketing CRM Services Telcos √ √ √ √ Bank/Payment Networks √ √ √ Merchants √ √ Tech Providers √ √ New Intermediaries √ √ √ √ √ © 2016 Cristina Dolan
  13. 13. MERCHANTS, ATMS, M-BANKING GROWTH 42% YoY Growth BTC Merchants 150K by YE 2016 Forecasted 13% Growth New BitCoin Deployment 860M Mobile Banking Users 100% growth by 2021 to 1.6 Billion © 2016 Cristina Dolan
  14. 14. REGULATORY DECISIONS • Virtual Currencies are ‘Property’ for US Federal Tax • European Court exempt bitcoin from VAT, categorized as a ‘Currency’ Map by Latham Watkins © 2016 Cristina Dolan
  15. 15. PUBLIC RECORDS Public Registry Land Titles Business License Business Incorporation Business Ownership Business Dissolution Regulatory Records Criminal Records Birth Certificates Marriage Licenses Passports Death Certificates Name Changes Voter IDs Voting Records Voter Registration Restaurant Licenses/Ratings Health Inspections Safety Inspections Building permits Court records Building Construction Permits Gun Permits Forensic Evidence Court Records Non-Profit Records Government Financials DMV Driver’s License DMV Parking Violations DMV Vehicle Registration Judgments Property Liens Patents FINANCIAL Currency Public Equities Private Equities Bonds Commodities Derivatives (Swaps, Futures, Options, and other contracts) Interest Insurance Contracts Mortgage Loan Records Crowd-Funding Micro-Finance Micro-Charity Servicing Records Trading Records Voting Rights Proxy Fights Brokerage Exchanges Merchants Wallets Trading Platforms Capital Markets Banks ATMS Money Services Investment Services Payroll Insurance Compliance Financial Data SEMI-PUBLIC RECORDS Educational Degrees Certifications Grades Testing/Scores Company HR Records Medical Records Accounting Records Business Transaction Records Business Tax Forms Personal Tax Forms Genome data Institutional GPS Trails Delivery Records Arbitration Physical Asset Keys Vacation Home/Timeshare Keys Hotel Room Keys Car Keys Rental Car Keys Leased Car Keys Nodes – Internet of Things Sale of Registered Property Art Registry Precious Stones and Jewelry Registry PRIVATE RECORDS Contracts Auto-Contract Smart Contracts Signatures Notarizations Wills Escrows Trusts Diamonds & Gems Adoptions Health Records DNA/Genome Personal GPS Trails Corporate Emails Corporate Research and patent notes TYPES OF APPLICATIONS © 2016 Cristina Dolan
  16. 16. EVOLUTION OF MARKET ECONOMICS Traditional Markets Supply and Demand – Discovery and Negotiation – Intermediaries Centralized Control Internet Marketplaces Shift in Control – Disintermediation – Easier Access – Supply Chain Shared Economies Swapping – Sharing – Bartering – Lending – Trading – Renting Evolving roles, changing behaviors, different challenges, easier access, less expensive alternatives to incumbent provides Peer to Peer Transactions and Contracts - Frictionless – Efficient – New Business Processes - Incumbents will resist change - New entrants will disrupt and innovate © 2016 Cristina Dolan
  17. 17. BLOCKCHAIN VS BITCOIN INVESTMENTS • BitCoin Applications – 66% • Non Currency Applications – 20% • Opportunities for Tools and Services Businesses • Commercial implementation of OpenSource © 2016 Cristina Dolan
  18. 18. BLOCKCHAIN NUMBERS Value Description $1.109 Billion Cumulative VC investment in Bitcoin & Blockchain Companies to Oct 2015. ($649.99M in 2015, $361.53M in 2014 and $95.05M in 2013.) $121 Million Largest cumulative funding total – raised by Bitcoin computer developer 21inc. 805 Number of early stage Bitcoin & Blockchain companies identified by Venture Scanner 43+ Banks & Financial Institutions know to be testing, analyzing or investing in Blockchain technologies. (R3 Consortium is made up of 43 banks) 11 Million Number of registered Bitcoin wallets in Sept 2015 – up from 6.6m in 2014 106,000 Number of merchants who accept Bitcoin $6.455 Billion Bitcoin market capitalization April 4, 2016. Bitcoin accounts for around 90% of the capital value of cryptocurrencies $2.7 Billion Value of Bitcoin trading in Sept 2015 475 Bitcoin ATMs installed worldwide 25 Bitcoins The Mining fee will decrease to 12.5 BTC per block in mid July 2016. 15.39M Total Bitcoins (limited to 21 Million) with 405.7K Total Blocks © 2016 Cristina Dolan
  19. 19. SCALABILITY • Visa • 2,000 transactions per second (tps) • 4,000 peak • .5 kilobyte average size • Paypal • 115 tps • 10 Million transactions per day • Bitcoin • 7 tps (due to bitcoin protocol restricted block size of 1MB) © 2016 Cristina Dolan