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What is Bitcoin? And what's going on?

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What is Bitcoin? And how is it being used? Drawing on Swedish examples, this presentation discusses the growing Bitcoin ecosystem in Sweden and across the globe.

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What is Bitcoin? And what's going on?

  1. 1. What is Bitcoin? (And what’s going on?) Claire Ingram Stockholm School of Economics I’ve used Swedish companies as examples, where possible, although can’t claim to have represented all possible companies.
  2. 2.  Bitcoin Protocol released in 2008 by “Satoshi Nakamoto” in a paper on The Cryptography Mailing list 2014-11-06 │ 2  Underlying technology called “the Blockchain”  Released the first version of the bitcoin software client in 2009  Disappeared in 2010
  3. 3. 2014-11-06 │ 3 Buying Bitcoins
  4. 4. 2014-11-06 │ 4 The Blockchain Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
  5. 5. 2014-11-06 │ 5 Currency? • Derives value from government • Fiat money as country’s main currency
  6. 6. 2014-11-06 │ 6 Commodity?  Tobacco Virginia Colony, USA, 1600s  Cowry Shells China, from 2000 BC Africa, up to ca. 1850
  7. 7. 2014-11-06 │ 7 Centralisation  Interest-bearing loans  Laws and authorities  Various Taxes  Fiat currency http://students.brown.edu/ai/aboutus.htm
  8. 8. 2014-11-06 │ 8 Libertarian or commercial?  Definite underlying libertarian tendencies  Price spikes when money seized in Cyprus in 2013 (said to be demand spikes)  Emphasis on decentralisation as a trust mechanism  Extra-legal  Many entrepreneurs are more commercially pragmatic though  Emphasis on decentralisation for efficiency  Compliance with regulations (as far as possible)
  9. 9. 2014-11-06 │ 9 What’s it being used for?  Initially, people on ”the dark ’net”, including on Silk Road  Increasingly for mainstream transactions □ ”Bitcoin Boulevard” in The Hague □ Kreuzberg in Berlin  As well as investment/speculation  And for fun, of course “Cash on the internet”
  10. 10. 2014-11-06 │ 10 Who’s using it?
  11. 11. 2014-11-06 │ 11
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  13. 13. 2014-11-06 │ 13 Speculation and Volatility  Price volatility  Insert graph here
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  17. 17. 2014-11-06 │ 17 Regulations US: Bitlicence in NY State (closed for comments in Oct 2014) IRS treats it as ”property” (so Capital Gains Tax) Some states consider Bitcoin a good (so VAT/Moms) Europe: Sweden referred question of VAT (Moms) to European Court of Justice in Summer 2014 Banned for Transactions: China, Russia, Vietnam….
  18. 18. 2014-11-06 │ 18 Security & Professionalism  Security Systems □ Professionalism □ Industry Standards? □ “Cryptographic Audit”  Jumio and “BISON”  More use of identification by exchanges □ Eg BankID here in Sweden □ BISON for broader reach
  19. 19. 2014-11-06 │ 19
  20. 20. 2014-11-06 │ 20 Involvement of Banks  Mostly limited (sometimes even sceptical)  Fidor bank in Germany working together with at least two exchanges  Handles fiat currencies while exchanges hold Bitcoins
  21. 21. 2014-11-06 │ 21 Possible problems  “Liability of newness”  Security of Bitcoins  Price Volatility  Consumer protection  Transaction transparency requirements  Cross-border transactions  Jurisdictional issues in event of dispute  Dispute resolution possibilities  Securitisation  Trust in general
  22. 22. 2014-11-06 │ 22 Currency Protocol  Wave of other currencies based on similar principles □ Dogecoin □ Litecoin □ Stellar □ Ripple  Use of protocol for a number of other purposes □ Storj.io □ Coloured Coins □ Ethereum
  23. 23. 2014-11-06 │ 23 From “How Bitcoin Works, Under the Hood” by CuriousInventor https://www.youtube.com/watch?v=Lx9zgZCMqXE
  24. 24. 2014-11-06 │ 24
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  27. 27. 2014-11-06 │ 27
  28. 28. Claire Ingram Stockholm School of Economics claire.ingram@hhs.se @Claire_EBI BTC Address: 1M57W5dRniL3D9xJ7vj THg8QVMZGGeNXyM 2014-11-06 │ 28

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