SlideShare a Scribd company logo
1 of 35
Download to read offline
How Bitcoin 2.0 Will Shape the
Future of Business
Chris Clark
Bitcoin 1.0 - electronic payments
● Is Bitcoin better than a credit card?
○ Takes 1 hour to confirm a payment (for now…)
○ You lose all your money if you lose your digital wallet
○ No built-in theft insurance
● The benefits may seem minor in comparison
○ Much lower transaction fees
○ Not inflationary
○ Better privacy (if you are careful)
○ You control how much gets sent to merchant
Why Bitcoin is such a big deal
1. Bitcoin is the first electronic method of
settling payments that doesn’t have a choke
point for regulation
2. Bitcoin is the first system that enables smart
contracts
It’s hard to regulate Bitcoin
● Regulate exchanges
○ No effect on transactions in the Bitcoin system
● Regulate miners
○ No effect unless all countries in the world shut them
down or internet censorship is used (like China’s
Great Firewall)
● Regulate businesses accepting Bitcoin
○ Gives unfair advantage to foreign businesses
○ Most feasible option, but still very difficult to enforce
Bitcoin
Colored Coins
Voting
Smart Contracts
Decentralized Organizations
The Internet
People
Colored Coins
● An organization arbitrarily chooses some
bitcoins and declares that ownership of
those coins implies ownership of some real-
world asset (probaby coins they own)
○ Could represent stock in a company
○ Could represent land ownership or car ownership
● Ownership is tracked as they are transacted
○ Issuer makes special rules for mixed-color inputs
Secure Voting
● A colored coin owner can prove that they
own the colored coins by publishing their
public key and a message signed with that
public key
○ A hash of the public key is stored in the Bitcoin
blockchain as the address that owns the coin
● Secure voting
○ Sign a message that contains the vote to cast
Crypto-equity
● A company sells colored coins instead of
doing a traditional IPO
● The company promises to pay dividends in
Bitcoin to each address that owns its colored
coins
● Colored coin owners may also have votes
● Must trust the company to fulfill promises
○ Unless the company is a smart contract...
Smart Contracts
● Contracts that are enforced automatically
using algorithmic transactions (a program)
○ Eliminates counterparty risk and associated costs
● Vending machine is a simple example (Nick
Szabo)
● Bitcoin supports some types of smart
contracts natively with it’s built-in scripting
language
Multi-signature Transactions
● Payment is only made if 2 out of 3 (or m out
of n) people sign
○ Useful for escrow and dispute mediation
○ Don’t have to trust the mediator because they never
possess the money, it’s locked algorithmically
○ Just have to trust that the mediator won’t collude
with counterparty
● To reduce risk of collusion with counterparty,
use 15 mediators and require 8 signatures
Multi-signature Transaction Example
● Escrow for automobile purchase
○ The buyer creates public key K1 collects public keys
from seller and mediator, K2 and K3 respectively
○ The buyer locks funds with scriptPubKey:
■ 2 <K1> <K2> <K3> 3 CHECKMUTLISIGVERIFY
○ The buyer shows this transaction to the seller
○ The seller verifies that K3 belongs to mediator by
requesting that mediator sign a random nonce
○ The seller verifies that funds are locked in
blockchain and hands over the keys
Multi-Signature Transaction Example
● Automobile escrow resolution
○ If all goes well, the mediator does nothing, buyer and
seller both sign a transaction sending funds from
escrow to seller
○ If there is a dispute, mediator reviews documents
and DMV records, then creates and signs a
transaction that sends money to either the buyer or
seller, and whoever is receiving the money provides
the second signature
Oracles
● Third party in multi-signature transaction can
also be an oracle that automatically signs
the transaction contingent upon information
available on the internet
○ Can create financial derivatives by observing
exchange rates
○ Can be used for betting by observing the news
Smart Contract Architectures
● Ethereum
○ All code runs on every node in the network
○ Contracts have “gas” that pays for their execution
○ If the gas runs out, the contract is terminated
○ Contracts have memory and can send messages
like function calls
○ Contracts cannot reach out to the internet, but
computers on the internet can send messages into
the Ethereum network
Smart Contract Architectures (cont)
● Codius
○ Generic platform for deploying smart contracts
■ Like Amazon Web Services or OpenStack
○ Contract creator can choose how many hosts to use
■ Much more scalable than Ethereum
○ Minimize trust in hosts by using m of n consensus
○ Each Codius host can have its own billing policy
○ Contracts can be written in any language
○ Contracts can directly reach out to the internet
Decentralized Organizations
● A smart contract tied to a crypto-equity
(colored coin) containing corporate by-laws
and accounting logic, with real employees!
● All corporate revenues enter the smart
contract through bitcoin payments and get
disbursed according to budgeting rules and
dividend policy
○ No more counterparty risk in crypto-equities
Decentralized Organizations (cont)
● DO smart contract contains bitcoin
addresses and payment amounts for C-suite
salaries and departmental budgets
○ Crypto-equity owners can vote to change these
addresses, effectively firing the CEO or defunding a
department
● Owners may also vote to change the
dividend ratio
Decentralized Organization Example
● Online news site
○ All advertisers are asked to send payments to
addresses in a deterministic wallet that is controlled
by the smart contract (no human has access to it)
○ Smart contract sends a percentage of revenues to
owners as dividends (less game-able than profits)
○ Remainder of revenues gets added to a pool of
funds from which expenses are paid
■ Pool -> Managers -> Reporters & Designers etc.
Smart Contract
Advertisers
Anonymous
Stockholders
Website
Hosting
Provider
Managers
Worldwide Staff
Bitcoin
Colored Coins
Voting
Smart Contracts
Decentralized Organizations
The Internet
People
Decentralized Organizations (cont)
● Why do people make corporations?
○ They allow a group of people to enter a business
together, ensuring that the intended ownership of the
business and dividend payments are enforced
○ They limit the liability of the owners
○ They allow ownership to be transferred at will or
after death of an owner
● All of this can be handled by smart contracts
○ Liability limitation through anonymity
Decentralized Organizations (cont)
● A decentralized organization lives in the
blockchain, distributed around the world
● Imagine such a company with employees in
dozens of countries, doing business
internationally through the internet…. which
country would try to claim it’s income taxes?
○ Ex: an online news site
○ Ex: a software development company
Income Taxes
● There is no feasible way to divide up
corporate income between countries
● DOs (like foreign employers) have no
incentive to withhold income taxes from their
employees
● Employees can easily hide their bitcoin
income (this is already happening)
Will companies transition to DOs?
● Most companies don’t want to change
unless they have to
● Employees will accept lower wages in bitcoin
if they know they can get away with tax
evasion
● Traditional corporations will have to compete
against DOs with 20-30% cheaper workforce
○ And they will eventually go out of business
Physical Presence
● Many companies require a physical
presence (such as hosting providers)
● This can be used as a point of taxation
● But tracking income is still infeasible
● Move to resource-based government funding
○ Property taxes
○ Power consumption fees
○ Pollution fines (gas taxes)
Other Government Funding Options
● Contract signing service
○ Submit your smart contracts to a government server
that charges a fee to digitally sign the contract
○ If the contract is signed, the government will help
you enforce it in the real world using the court
system and police, otherwise you have to pay for
private arbitration (idea from Ayn Rand)
○ Fee is based on a percentage of the value bound by
the contract
Definition of Tax
1. “a compulsory contribution to state revenue, levied by the government on
workers' income and business profits or added to the cost of some goods,
services, and transactions.” - Google
2. “A tax is a financial charge or other levy imposed upon a taxpayer (an
individual or legal entity) by a state or the functional equivalent of a state
such that failure to pay, or evasion of or resistance to collection, is
punishable by law.” - Wikipedia
● Contract enforcement fees are not taxes because the
government will never compel you to pay them; they are
completely voluntary
● Like postage fees, they are a payment for services
Property “Taxes”
● Technically speaking, nobody owns land in
the US because there is no allodial title
● Make a small change: you are not evicted
from your property for not paying property
taxes, you are evicted for trespassing after
you stop and someone else starts paying
● Now property “taxes” are no longer taxes
because they are voluntary
Is this what we want?
● Nobel prize winning economist Milton
Friedman said land value tax is the least bad
tax (most economically efficient)
● Ethically preferable to avoid violent
compulsion
● Still generates a massive amount of revenue
○ Don’t have to eliminate social safety nets
The Invisible Hand
It is economically possible to:
1. Eliminate ALL taxes
2. While still funding the government/military
3. And providing a basic income to all citizens,
making employment optional
a. Just in time to address technological unemployment
● Tech is guiding policy like an invisible hand,
just as capitalism guides economic activity
DAOs
● Decentralized Autonomous Organizations
○ A decentralized organization that runs itself
○ May hire programmers to improve its own code
● May be impossible to shut down
○ Each host has a different cryptographic key pair
■ Generated locally as part of deployment protocol
○ Decisions are made by consensus of 70/100 hosts
○ If you disable a host, it automatically buys another
Sidechains
● It’s possible that a better coin will be created
○ Faster settlement, more anonymous, less power
consumption from mining
● But it’s hard to beat the network effect
○ Ex: Craigslist is still most popular classifieds site
despite it’s primitive and inefficient user interface
● Sidechains create a two-way currency peg
○ Allow new currencies to be backed by bitcoins just
like how US dollars used to be backed by gold
Instant Payment Confirmation
● BIP 65 suggests a new script op-code:
OP_CHECKLOCKTIMEVERIFY
○ Compares parameter to lock time of the transaction
that is trying to spend the transaction the script is in
● Can lock funds so it requires 2 signatures
until some point in future, then only one
○ IF (<notary pubkey> CHECKSIG) {} // empty if block
ELSE {<expiry time> CHECKLOCKTIMEVERIFY DROP}
<user pubkey> CHECKSIGVERIFY
Instant Payment Confirmation (cont)
● Merchant sees that you can only spend with
cooperation of notary (at least today)
● Merchant trusts notary not to collude with
you to double-spend
● Merchant accepts a transaction signed by
you and the notary with zero confirmations
● If notary is malicious or shuts down, you still
get all your money back at expiration
Difficulty of Value Capture
● Usually monumental change provides
massive opportunities for profit
● Decentralization is so impactful precisely
because it eliminates the drain caused by
middlemen
● Blockstream (company driving sidechain
development) doesn’t seem to have a
business model

More Related Content

What's hot

Introduction to Bitcoin and ECDSA
Introduction to Bitcoin and ECDSAIntroduction to Bitcoin and ECDSA
Introduction to Bitcoin and ECDSANikesh Mistry
 
Blockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.me
Blockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.meBlockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.me
Blockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.meJuan Ignacio Pérez Sacristán
 
Smart contractjp smartcontract_about
Smart contractjp smartcontract_aboutSmart contractjp smartcontract_about
Smart contractjp smartcontract_aboutTomoaki Sato
 
Ethereum Blockchain with Smart contract and ERC20
Ethereum Blockchain with Smart contract and ERC20Ethereum Blockchain with Smart contract and ERC20
Ethereum Blockchain with Smart contract and ERC20Truong Nguyen
 
The best smart contract platforms in 2021
The best smart contract platforms in 2021The best smart contract platforms in 2021
The best smart contract platforms in 2021OliviaJune1
 
Primer to smart contracts, smart property, trustless asset management
Primer to smart contracts, smart property, trustless asset managementPrimer to smart contracts, smart property, trustless asset management
Primer to smart contracts, smart property, trustless asset managementTim Swanson
 
Anatomy of a blockchain
Anatomy of a blockchainAnatomy of a blockchain
Anatomy of a blockchainAvtar Sehra
 
Blockchain, Ethereum and Business Applications
Blockchain, Ethereum and Business ApplicationsBlockchain, Ethereum and Business Applications
Blockchain, Ethereum and Business ApplicationsMatthias Zimmermann
 
Introducing blockchain
Introducing blockchainIntroducing blockchain
Introducing blockchainLon Barfield
 
Tutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ssTutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ssHoward Anglin
 
Blockchain - Introduction and Authoring Smart Contracts
Blockchain - Introduction and Authoring Smart ContractsBlockchain - Introduction and Authoring Smart Contracts
Blockchain - Introduction and Authoring Smart ContractsVikas Grover
 
Blockchain and Bitcoin
Blockchain and BitcoinBlockchain and Bitcoin
Blockchain and BitcoinHugo Rodrigues
 
Introduction to blockchain and smart contracts
Introduction to blockchain and smart contractsIntroduction to blockchain and smart contracts
Introduction to blockchain and smart contractsValidity Labs
 
How does a blockchain work?
How does a blockchain work?How does a blockchain work?
How does a blockchain work?Deloitte UK
 
Blockchain Deconstructed - by nexxworks
Blockchain Deconstructed - by nexxworks Blockchain Deconstructed - by nexxworks
Blockchain Deconstructed - by nexxworks nexxworks
 
Session 3 introduction blockchain by franco 22 januari
Session 3   introduction blockchain by franco 22 januariSession 3   introduction blockchain by franco 22 januari
Session 3 introduction blockchain by franco 22 januariArthur Janse
 
Blockchain, cryptography, and consensus
Blockchain, cryptography, and consensusBlockchain, cryptography, and consensus
Blockchain, cryptography, and consensusITU
 
Introduction to Bitcoin & Blockchain
Introduction to Bitcoin & BlockchainIntroduction to Bitcoin & Blockchain
Introduction to Bitcoin & BlockchainLon Barfield
 

What's hot (20)

Introduction to Bitcoin and ECDSA
Introduction to Bitcoin and ECDSAIntroduction to Bitcoin and ECDSA
Introduction to Bitcoin and ECDSA
 
Blockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.me
Blockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.meBlockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.me
Blockchain analysis: 2016-11-23 MeetUp FinTech Marketpay.io - LemonPay.me
 
Smart contractjp smartcontract_about
Smart contractjp smartcontract_aboutSmart contractjp smartcontract_about
Smart contractjp smartcontract_about
 
Ethereum Blockchain with Smart contract and ERC20
Ethereum Blockchain with Smart contract and ERC20Ethereum Blockchain with Smart contract and ERC20
Ethereum Blockchain with Smart contract and ERC20
 
The basics of ethereum
The basics of ethereumThe basics of ethereum
The basics of ethereum
 
The best smart contract platforms in 2021
The best smart contract platforms in 2021The best smart contract platforms in 2021
The best smart contract platforms in 2021
 
Primer to smart contracts, smart property, trustless asset management
Primer to smart contracts, smart property, trustless asset managementPrimer to smart contracts, smart property, trustless asset management
Primer to smart contracts, smart property, trustless asset management
 
Anatomy of a blockchain
Anatomy of a blockchainAnatomy of a blockchain
Anatomy of a blockchain
 
Blockchain, Ethereum and Business Applications
Blockchain, Ethereum and Business ApplicationsBlockchain, Ethereum and Business Applications
Blockchain, Ethereum and Business Applications
 
Introducing blockchain
Introducing blockchainIntroducing blockchain
Introducing blockchain
 
Blockchain Introduction
Blockchain IntroductionBlockchain Introduction
Blockchain Introduction
 
Tutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ssTutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ss
 
Blockchain - Introduction and Authoring Smart Contracts
Blockchain - Introduction and Authoring Smart ContractsBlockchain - Introduction and Authoring Smart Contracts
Blockchain - Introduction and Authoring Smart Contracts
 
Blockchain and Bitcoin
Blockchain and BitcoinBlockchain and Bitcoin
Blockchain and Bitcoin
 
Introduction to blockchain and smart contracts
Introduction to blockchain and smart contractsIntroduction to blockchain and smart contracts
Introduction to blockchain and smart contracts
 
How does a blockchain work?
How does a blockchain work?How does a blockchain work?
How does a blockchain work?
 
Blockchain Deconstructed - by nexxworks
Blockchain Deconstructed - by nexxworks Blockchain Deconstructed - by nexxworks
Blockchain Deconstructed - by nexxworks
 
Session 3 introduction blockchain by franco 22 januari
Session 3   introduction blockchain by franco 22 januariSession 3   introduction blockchain by franco 22 januari
Session 3 introduction blockchain by franco 22 januari
 
Blockchain, cryptography, and consensus
Blockchain, cryptography, and consensusBlockchain, cryptography, and consensus
Blockchain, cryptography, and consensus
 
Introduction to Bitcoin & Blockchain
Introduction to Bitcoin & BlockchainIntroduction to Bitcoin & Blockchain
Introduction to Bitcoin & Blockchain
 

Viewers also liked

Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...
Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...
Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...WithTheBest
 
Bitcoin India Pitch Deck
Bitcoin India Pitch DeckBitcoin India Pitch Deck
Bitcoin India Pitch DeckBiddingeasy4u
 
An analysis of bitcoin exchange rates by Jake Smith (University of Houston)
An analysis of bitcoin exchange rates by Jake Smith (University of Houston)An analysis of bitcoin exchange rates by Jake Smith (University of Houston)
An analysis of bitcoin exchange rates by Jake Smith (University of Houston)Hashers United
 
Bitcoin volatility
Bitcoin volatilityBitcoin volatility
Bitcoin volatilityLydia Njeri
 
Bitcash business plan
Bitcash business planBitcash business plan
Bitcash business plansybitc
 
Click_Pay_Business_Plan
Click_Pay_Business_PlanClick_Pay_Business_Plan
Click_Pay_Business_PlanAmir Almas
 
Riccardo Vittoria
Riccardo VittoriaRiccardo Vittoria
Riccardo VittoriaWithTheBest
 
MyBitSavings Business Plan - Earn Bitcoin
MyBitSavings Business Plan - Earn BitcoinMyBitSavings Business Plan - Earn Bitcoin
MyBitSavings Business Plan - Earn BitcoinMike Janssens
 

Viewers also liked (9)

Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...
Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...
Building the Bitcoin & Blockchain Ecosystem: A Closer Look at the work of Ind...
 
Bitcoin India Pitch Deck
Bitcoin India Pitch DeckBitcoin India Pitch Deck
Bitcoin India Pitch Deck
 
An analysis of bitcoin exchange rates by Jake Smith (University of Houston)
An analysis of bitcoin exchange rates by Jake Smith (University of Houston)An analysis of bitcoin exchange rates by Jake Smith (University of Houston)
An analysis of bitcoin exchange rates by Jake Smith (University of Houston)
 
Bitcoin volatility
Bitcoin volatilityBitcoin volatility
Bitcoin volatility
 
37 Coins
37 Coins37 Coins
37 Coins
 
Bitcash business plan
Bitcash business planBitcash business plan
Bitcash business plan
 
Click_Pay_Business_Plan
Click_Pay_Business_PlanClick_Pay_Business_Plan
Click_Pay_Business_Plan
 
Riccardo Vittoria
Riccardo VittoriaRiccardo Vittoria
Riccardo Vittoria
 
MyBitSavings Business Plan - Earn Bitcoin
MyBitSavings Business Plan - Earn BitcoinMyBitSavings Business Plan - Earn Bitcoin
MyBitSavings Business Plan - Earn Bitcoin
 

Similar to How Bitcoin 2.0 Will Shape the Future of Business

Demystifying Smart Contracts
Demystifying Smart ContractsDemystifying Smart Contracts
Demystifying Smart ContractsBernard Peh
 
Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014
Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014
Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014Ldger, Inc
 
Blockchain and cryptocurrency
Blockchain and cryptocurrencyBlockchain and cryptocurrency
Blockchain and cryptocurrencyAbhishek Kori
 
A Gentle introduction to Blockchain with Ethereum
A Gentle introduction to Blockchain with EthereumA Gentle introduction to Blockchain with Ethereum
A Gentle introduction to Blockchain with EthereumJohann Romefort
 
Blockchain Basics
Blockchain BasicsBlockchain Basics
Blockchain BasicsAli Ayyash
 
Bitcoin and New Economy - Manuel Lains
Bitcoin and New Economy - Manuel LainsBitcoin and New Economy - Manuel Lains
Bitcoin and New Economy - Manuel LainsChristian Lains
 
BizDay: Truck Wallet, Daimler, KI Decentralized
BizDay: Truck Wallet, Daimler, KI DecentralizedBizDay: Truck Wallet, Daimler, KI Decentralized
BizDay: Truck Wallet, Daimler, KI DecentralizedR3
 
Blockchain @ Insurance Analytics Summit Canada
Blockchain @ Insurance Analytics Summit CanadaBlockchain @ Insurance Analytics Summit Canada
Blockchain @ Insurance Analytics Summit CanadaCristina Ignatenco
 
The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...
The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...
The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...Ory Band
 
Blockchain: Breaking it down and putting it into action
Blockchain: Breaking it down and putting it into actionBlockchain: Breaking it down and putting it into action
Blockchain: Breaking it down and putting it into actionshiftdsm
 
Cryptocurrency secrets
Cryptocurrency secretsCryptocurrency secrets
Cryptocurrency secretsMohammed NAZIH
 
Bitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdf
Bitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdfBitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdf
Bitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdfgatesow363
 
Can smart Contracts Exist without The Blockchain
Can smart Contracts Exist without The Blockchain Can smart Contracts Exist without The Blockchain
Can smart Contracts Exist without The Blockchain Blockchain Council
 
Cryptocurrency Secrets.pdf
Cryptocurrency Secrets.pdfCryptocurrency Secrets.pdf
Cryptocurrency Secrets.pdfSimoCharif2
 

Similar to How Bitcoin 2.0 Will Shape the Future of Business (20)

Demystifying Smart Contracts
Demystifying Smart ContractsDemystifying Smart Contracts
Demystifying Smart Contracts
 
Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014
Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014
Columbia Law School - Decentralized Ledgers Presentation on 4/7/2014
 
Blockchain and cryptocurrency
Blockchain and cryptocurrencyBlockchain and cryptocurrency
Blockchain and cryptocurrency
 
Blockchain External.pdf
Blockchain External.pdfBlockchain External.pdf
Blockchain External.pdf
 
A Gentle introduction to Blockchain with Ethereum
A Gentle introduction to Blockchain with EthereumA Gentle introduction to Blockchain with Ethereum
A Gentle introduction to Blockchain with Ethereum
 
Blockchain Basics
Blockchain BasicsBlockchain Basics
Blockchain Basics
 
Smart contracts an innovative tool
Smart contracts an innovative toolSmart contracts an innovative tool
Smart contracts an innovative tool
 
Blockchain in a Nutshell
Blockchain in a NutshellBlockchain in a Nutshell
Blockchain in a Nutshell
 
Bitcoin and New Economy - Manuel Lains
Bitcoin and New Economy - Manuel LainsBitcoin and New Economy - Manuel Lains
Bitcoin and New Economy - Manuel Lains
 
BizDay: Truck Wallet, Daimler, KI Decentralized
BizDay: Truck Wallet, Daimler, KI DecentralizedBizDay: Truck Wallet, Daimler, KI Decentralized
BizDay: Truck Wallet, Daimler, KI Decentralized
 
Fintech & Blockchain
Fintech & BlockchainFintech & Blockchain
Fintech & Blockchain
 
Blockchain @ Insurance Analytics Summit Canada
Blockchain @ Insurance Analytics Summit CanadaBlockchain @ Insurance Analytics Summit Canada
Blockchain @ Insurance Analytics Summit Canada
 
The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...
The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...
The Stellar Blockchain and The Story of the Federated Consensus — Blockchain ...
 
Blockchain: Breaking it down and putting it into action
Blockchain: Breaking it down and putting it into actionBlockchain: Breaking it down and putting it into action
Blockchain: Breaking it down and putting it into action
 
Cryptocurrency secrets
Cryptocurrency secretsCryptocurrency secrets
Cryptocurrency secrets
 
Bitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdf
Bitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdfBitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdf
Bitcoin Etherium and other coin in india Taxation-Cryptocurrency.pdf
 
Blockchain
BlockchainBlockchain
Blockchain
 
Cryptocurrency
CryptocurrencyCryptocurrency
Cryptocurrency
 
Can smart Contracts Exist without The Blockchain
Can smart Contracts Exist without The Blockchain Can smart Contracts Exist without The Blockchain
Can smart Contracts Exist without The Blockchain
 
Cryptocurrency Secrets.pdf
Cryptocurrency Secrets.pdfCryptocurrency Secrets.pdf
Cryptocurrency Secrets.pdf
 

Recently uploaded

Driving Business Impact for PMs with Jon Harmer
Driving Business Impact for PMs with Jon HarmerDriving Business Impact for PMs with Jon Harmer
Driving Business Impact for PMs with Jon HarmerAggregage
 
Entrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider contextEntrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider contextP&CO
 
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdfSherl Simon
 
Healthcare Feb. & Mar. Healthcare Newsletter
Healthcare Feb. & Mar. Healthcare NewsletterHealthcare Feb. & Mar. Healthcare Newsletter
Healthcare Feb. & Mar. Healthcare NewsletterJamesConcepcion7
 
Neha Jhalani Hiranandani: A Guide to Her Life and Career
Neha Jhalani Hiranandani: A Guide to Her Life and CareerNeha Jhalani Hiranandani: A Guide to Her Life and Career
Neha Jhalani Hiranandani: A Guide to Her Life and Careerr98588472
 
How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...
How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...
How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...Hector Del Castillo, CPM, CPMM
 
How the Insurance Industry is Scaling with AI
How the Insurance Industry is  Scaling with AIHow the Insurance Industry is  Scaling with AI
How the Insurance Industry is Scaling with AIPeter Ward
 
Unveiling the Soundscape Music for Psychedelic Experiences
Unveiling the Soundscape Music for Psychedelic ExperiencesUnveiling the Soundscape Music for Psychedelic Experiences
Unveiling the Soundscape Music for Psychedelic ExperiencesDoe Paoro
 
ISO 37002:2021 (Whistleblowing Management Systems) Awareness Training
ISO 37002:2021 (Whistleblowing Management Systems) Awareness TrainingISO 37002:2021 (Whistleblowing Management Systems) Awareness Training
ISO 37002:2021 (Whistleblowing Management Systems) Awareness TrainingOperational Excellence Consulting
 
Welding Electrode Making Machine By Deccan Dynamics
Welding Electrode Making Machine By Deccan DynamicsWelding Electrode Making Machine By Deccan Dynamics
Welding Electrode Making Machine By Deccan DynamicsIndiaMART InterMESH Limited
 
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdfGUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdfDanny Diep To
 
Implementing Exponential Accelerators.pptx
Implementing Exponential Accelerators.pptxImplementing Exponential Accelerators.pptx
Implementing Exponential Accelerators.pptxRich Reba
 
5 Digital Onboarding Trends To Watch In 2024.pdf
5 Digital Onboarding Trends To Watch In 2024.pdf5 Digital Onboarding Trends To Watch In 2024.pdf
5 Digital Onboarding Trends To Watch In 2024.pdfVeri5digital
 
How to Conduct a Service Gap Analysis for Your Business
How to Conduct a Service Gap Analysis for Your BusinessHow to Conduct a Service Gap Analysis for Your Business
How to Conduct a Service Gap Analysis for Your BusinessHelp Desk Migration
 
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...Aggregage
 
Darshan Hiranandani (Son of Niranjan Hiranandani).pdf
Darshan Hiranandani (Son of Niranjan Hiranandani).pdfDarshan Hiranandani (Son of Niranjan Hiranandani).pdf
Darshan Hiranandani (Son of Niranjan Hiranandani).pdfShashank Mehta
 
WSMM Technology February.March Newsletter_vF.pdf
WSMM Technology February.March Newsletter_vF.pdfWSMM Technology February.March Newsletter_vF.pdf
WSMM Technology February.March Newsletter_vF.pdfJamesConcepcion7
 
digital marketing , introduction of digital marketing
digital marketing , introduction of digital marketingdigital marketing , introduction of digital marketing
digital marketing , introduction of digital marketingrajputmeenakshi733
 
Technical Leaders - Working with the Management Team
Technical Leaders - Working with the Management TeamTechnical Leaders - Working with the Management Team
Technical Leaders - Working with the Management TeamArik Fletcher
 
Customizable Contents Restoration Training
Customizable Contents Restoration TrainingCustomizable Contents Restoration Training
Customizable Contents Restoration TrainingCalvinarnold843
 

Recently uploaded (20)

Driving Business Impact for PMs with Jon Harmer
Driving Business Impact for PMs with Jon HarmerDriving Business Impact for PMs with Jon Harmer
Driving Business Impact for PMs with Jon Harmer
 
Entrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider contextEntrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider context
 
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
 
Healthcare Feb. & Mar. Healthcare Newsletter
Healthcare Feb. & Mar. Healthcare NewsletterHealthcare Feb. & Mar. Healthcare Newsletter
Healthcare Feb. & Mar. Healthcare Newsletter
 
Neha Jhalani Hiranandani: A Guide to Her Life and Career
Neha Jhalani Hiranandani: A Guide to Her Life and CareerNeha Jhalani Hiranandani: A Guide to Her Life and Career
Neha Jhalani Hiranandani: A Guide to Her Life and Career
 
How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...
How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...
How Generative AI Is Transforming Your Business | Byond Growth Insights | Apr...
 
How the Insurance Industry is Scaling with AI
How the Insurance Industry is  Scaling with AIHow the Insurance Industry is  Scaling with AI
How the Insurance Industry is Scaling with AI
 
Unveiling the Soundscape Music for Psychedelic Experiences
Unveiling the Soundscape Music for Psychedelic ExperiencesUnveiling the Soundscape Music for Psychedelic Experiences
Unveiling the Soundscape Music for Psychedelic Experiences
 
ISO 37002:2021 (Whistleblowing Management Systems) Awareness Training
ISO 37002:2021 (Whistleblowing Management Systems) Awareness TrainingISO 37002:2021 (Whistleblowing Management Systems) Awareness Training
ISO 37002:2021 (Whistleblowing Management Systems) Awareness Training
 
Welding Electrode Making Machine By Deccan Dynamics
Welding Electrode Making Machine By Deccan DynamicsWelding Electrode Making Machine By Deccan Dynamics
Welding Electrode Making Machine By Deccan Dynamics
 
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdfGUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
 
Implementing Exponential Accelerators.pptx
Implementing Exponential Accelerators.pptxImplementing Exponential Accelerators.pptx
Implementing Exponential Accelerators.pptx
 
5 Digital Onboarding Trends To Watch In 2024.pdf
5 Digital Onboarding Trends To Watch In 2024.pdf5 Digital Onboarding Trends To Watch In 2024.pdf
5 Digital Onboarding Trends To Watch In 2024.pdf
 
How to Conduct a Service Gap Analysis for Your Business
How to Conduct a Service Gap Analysis for Your BusinessHow to Conduct a Service Gap Analysis for Your Business
How to Conduct a Service Gap Analysis for Your Business
 
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
 
Darshan Hiranandani (Son of Niranjan Hiranandani).pdf
Darshan Hiranandani (Son of Niranjan Hiranandani).pdfDarshan Hiranandani (Son of Niranjan Hiranandani).pdf
Darshan Hiranandani (Son of Niranjan Hiranandani).pdf
 
WSMM Technology February.March Newsletter_vF.pdf
WSMM Technology February.March Newsletter_vF.pdfWSMM Technology February.March Newsletter_vF.pdf
WSMM Technology February.March Newsletter_vF.pdf
 
digital marketing , introduction of digital marketing
digital marketing , introduction of digital marketingdigital marketing , introduction of digital marketing
digital marketing , introduction of digital marketing
 
Technical Leaders - Working with the Management Team
Technical Leaders - Working with the Management TeamTechnical Leaders - Working with the Management Team
Technical Leaders - Working with the Management Team
 
Customizable Contents Restoration Training
Customizable Contents Restoration TrainingCustomizable Contents Restoration Training
Customizable Contents Restoration Training
 

How Bitcoin 2.0 Will Shape the Future of Business

  • 1. How Bitcoin 2.0 Will Shape the Future of Business Chris Clark
  • 2. Bitcoin 1.0 - electronic payments ● Is Bitcoin better than a credit card? ○ Takes 1 hour to confirm a payment (for now…) ○ You lose all your money if you lose your digital wallet ○ No built-in theft insurance ● The benefits may seem minor in comparison ○ Much lower transaction fees ○ Not inflationary ○ Better privacy (if you are careful) ○ You control how much gets sent to merchant
  • 3. Why Bitcoin is such a big deal 1. Bitcoin is the first electronic method of settling payments that doesn’t have a choke point for regulation 2. Bitcoin is the first system that enables smart contracts
  • 4. It’s hard to regulate Bitcoin ● Regulate exchanges ○ No effect on transactions in the Bitcoin system ● Regulate miners ○ No effect unless all countries in the world shut them down or internet censorship is used (like China’s Great Firewall) ● Regulate businesses accepting Bitcoin ○ Gives unfair advantage to foreign businesses ○ Most feasible option, but still very difficult to enforce
  • 6. Colored Coins ● An organization arbitrarily chooses some bitcoins and declares that ownership of those coins implies ownership of some real- world asset (probaby coins they own) ○ Could represent stock in a company ○ Could represent land ownership or car ownership ● Ownership is tracked as they are transacted ○ Issuer makes special rules for mixed-color inputs
  • 7. Secure Voting ● A colored coin owner can prove that they own the colored coins by publishing their public key and a message signed with that public key ○ A hash of the public key is stored in the Bitcoin blockchain as the address that owns the coin ● Secure voting ○ Sign a message that contains the vote to cast
  • 8. Crypto-equity ● A company sells colored coins instead of doing a traditional IPO ● The company promises to pay dividends in Bitcoin to each address that owns its colored coins ● Colored coin owners may also have votes ● Must trust the company to fulfill promises ○ Unless the company is a smart contract...
  • 9. Smart Contracts ● Contracts that are enforced automatically using algorithmic transactions (a program) ○ Eliminates counterparty risk and associated costs ● Vending machine is a simple example (Nick Szabo) ● Bitcoin supports some types of smart contracts natively with it’s built-in scripting language
  • 10. Multi-signature Transactions ● Payment is only made if 2 out of 3 (or m out of n) people sign ○ Useful for escrow and dispute mediation ○ Don’t have to trust the mediator because they never possess the money, it’s locked algorithmically ○ Just have to trust that the mediator won’t collude with counterparty ● To reduce risk of collusion with counterparty, use 15 mediators and require 8 signatures
  • 11. Multi-signature Transaction Example ● Escrow for automobile purchase ○ The buyer creates public key K1 collects public keys from seller and mediator, K2 and K3 respectively ○ The buyer locks funds with scriptPubKey: ■ 2 <K1> <K2> <K3> 3 CHECKMUTLISIGVERIFY ○ The buyer shows this transaction to the seller ○ The seller verifies that K3 belongs to mediator by requesting that mediator sign a random nonce ○ The seller verifies that funds are locked in blockchain and hands over the keys
  • 12. Multi-Signature Transaction Example ● Automobile escrow resolution ○ If all goes well, the mediator does nothing, buyer and seller both sign a transaction sending funds from escrow to seller ○ If there is a dispute, mediator reviews documents and DMV records, then creates and signs a transaction that sends money to either the buyer or seller, and whoever is receiving the money provides the second signature
  • 13. Oracles ● Third party in multi-signature transaction can also be an oracle that automatically signs the transaction contingent upon information available on the internet ○ Can create financial derivatives by observing exchange rates ○ Can be used for betting by observing the news
  • 14. Smart Contract Architectures ● Ethereum ○ All code runs on every node in the network ○ Contracts have “gas” that pays for their execution ○ If the gas runs out, the contract is terminated ○ Contracts have memory and can send messages like function calls ○ Contracts cannot reach out to the internet, but computers on the internet can send messages into the Ethereum network
  • 15. Smart Contract Architectures (cont) ● Codius ○ Generic platform for deploying smart contracts ■ Like Amazon Web Services or OpenStack ○ Contract creator can choose how many hosts to use ■ Much more scalable than Ethereum ○ Minimize trust in hosts by using m of n consensus ○ Each Codius host can have its own billing policy ○ Contracts can be written in any language ○ Contracts can directly reach out to the internet
  • 16. Decentralized Organizations ● A smart contract tied to a crypto-equity (colored coin) containing corporate by-laws and accounting logic, with real employees! ● All corporate revenues enter the smart contract through bitcoin payments and get disbursed according to budgeting rules and dividend policy ○ No more counterparty risk in crypto-equities
  • 17. Decentralized Organizations (cont) ● DO smart contract contains bitcoin addresses and payment amounts for C-suite salaries and departmental budgets ○ Crypto-equity owners can vote to change these addresses, effectively firing the CEO or defunding a department ● Owners may also vote to change the dividend ratio
  • 18. Decentralized Organization Example ● Online news site ○ All advertisers are asked to send payments to addresses in a deterministic wallet that is controlled by the smart contract (no human has access to it) ○ Smart contract sends a percentage of revenues to owners as dividends (less game-able than profits) ○ Remainder of revenues gets added to a pool of funds from which expenses are paid ■ Pool -> Managers -> Reporters & Designers etc.
  • 21. Decentralized Organizations (cont) ● Why do people make corporations? ○ They allow a group of people to enter a business together, ensuring that the intended ownership of the business and dividend payments are enforced ○ They limit the liability of the owners ○ They allow ownership to be transferred at will or after death of an owner ● All of this can be handled by smart contracts ○ Liability limitation through anonymity
  • 22. Decentralized Organizations (cont) ● A decentralized organization lives in the blockchain, distributed around the world ● Imagine such a company with employees in dozens of countries, doing business internationally through the internet…. which country would try to claim it’s income taxes? ○ Ex: an online news site ○ Ex: a software development company
  • 23. Income Taxes ● There is no feasible way to divide up corporate income between countries ● DOs (like foreign employers) have no incentive to withhold income taxes from their employees ● Employees can easily hide their bitcoin income (this is already happening)
  • 24. Will companies transition to DOs? ● Most companies don’t want to change unless they have to ● Employees will accept lower wages in bitcoin if they know they can get away with tax evasion ● Traditional corporations will have to compete against DOs with 20-30% cheaper workforce ○ And they will eventually go out of business
  • 25. Physical Presence ● Many companies require a physical presence (such as hosting providers) ● This can be used as a point of taxation ● But tracking income is still infeasible ● Move to resource-based government funding ○ Property taxes ○ Power consumption fees ○ Pollution fines (gas taxes)
  • 26. Other Government Funding Options ● Contract signing service ○ Submit your smart contracts to a government server that charges a fee to digitally sign the contract ○ If the contract is signed, the government will help you enforce it in the real world using the court system and police, otherwise you have to pay for private arbitration (idea from Ayn Rand) ○ Fee is based on a percentage of the value bound by the contract
  • 27. Definition of Tax 1. “a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions.” - Google 2. “A tax is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay, or evasion of or resistance to collection, is punishable by law.” - Wikipedia ● Contract enforcement fees are not taxes because the government will never compel you to pay them; they are completely voluntary ● Like postage fees, they are a payment for services
  • 28. Property “Taxes” ● Technically speaking, nobody owns land in the US because there is no allodial title ● Make a small change: you are not evicted from your property for not paying property taxes, you are evicted for trespassing after you stop and someone else starts paying ● Now property “taxes” are no longer taxes because they are voluntary
  • 29. Is this what we want? ● Nobel prize winning economist Milton Friedman said land value tax is the least bad tax (most economically efficient) ● Ethically preferable to avoid violent compulsion ● Still generates a massive amount of revenue ○ Don’t have to eliminate social safety nets
  • 30. The Invisible Hand It is economically possible to: 1. Eliminate ALL taxes 2. While still funding the government/military 3. And providing a basic income to all citizens, making employment optional a. Just in time to address technological unemployment ● Tech is guiding policy like an invisible hand, just as capitalism guides economic activity
  • 31. DAOs ● Decentralized Autonomous Organizations ○ A decentralized organization that runs itself ○ May hire programmers to improve its own code ● May be impossible to shut down ○ Each host has a different cryptographic key pair ■ Generated locally as part of deployment protocol ○ Decisions are made by consensus of 70/100 hosts ○ If you disable a host, it automatically buys another
  • 32. Sidechains ● It’s possible that a better coin will be created ○ Faster settlement, more anonymous, less power consumption from mining ● But it’s hard to beat the network effect ○ Ex: Craigslist is still most popular classifieds site despite it’s primitive and inefficient user interface ● Sidechains create a two-way currency peg ○ Allow new currencies to be backed by bitcoins just like how US dollars used to be backed by gold
  • 33. Instant Payment Confirmation ● BIP 65 suggests a new script op-code: OP_CHECKLOCKTIMEVERIFY ○ Compares parameter to lock time of the transaction that is trying to spend the transaction the script is in ● Can lock funds so it requires 2 signatures until some point in future, then only one ○ IF (<notary pubkey> CHECKSIG) {} // empty if block ELSE {<expiry time> CHECKLOCKTIMEVERIFY DROP} <user pubkey> CHECKSIGVERIFY
  • 34. Instant Payment Confirmation (cont) ● Merchant sees that you can only spend with cooperation of notary (at least today) ● Merchant trusts notary not to collude with you to double-spend ● Merchant accepts a transaction signed by you and the notary with zero confirmations ● If notary is malicious or shuts down, you still get all your money back at expiration
  • 35. Difficulty of Value Capture ● Usually monumental change provides massive opportunities for profit ● Decentralization is so impactful precisely because it eliminates the drain caused by middlemen ● Blockstream (company driving sidechain development) doesn’t seem to have a business model