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BITCOIN
UNDERSTANDING
Financial Management
Ateneo Graduate School of Business
Leslie Bayona
29 May 2017
BITCOIN
UNDERSTANDING
What is bitcoin? How
does it work? Is it safe
and how can you make
money out of it?
The bitcoin basics for Filipinos
who want to understand and
invest in the new digital currency.
Source: www.bitcoin.org
Bitcoin is a cryptocurrency
and a digital payment system
introduced 8 years ago by an
unknown programmer.
This digital currency is
created and held electronically,
no one controls it.
Source: www.bitcoin.org
HOW DOES BITCOIN WORK?
As a new user, install Bitcoin
wallet on your computer or
mobile phone, it will generate
your first Bitcoin address.
You can disclose your Bitcoin
addresses to your friends so
that they can pay you or vice
versa.
Source: www.bitcoin.org
BALANCES – BLOCK CHAIN
The block chain is a shared
public ledger on which the entire
Bitcoin network relies.
Bitcoin wallets can calculate their
spendable balance and new
transactions can be verified.
The integrity and the chronological
order of the block chain are
enforced with cryptography.
Source: www.bitcoin.org
TRANSACTIONS – PRIVATE KEYS
A transaction is a transfer of value
between Bitcoin wallets that gets
included in the block chain.
Bitcoin wallets keep a secret piece
of data called a private key or seed,
which is used to sign transactions,
providing a mathematical proof
that they have come from the
owner of the wallet.
Source: www.bitcoin.org
TRANSACTIONS – PRIVATE KEYS
The signature also prevents the
transaction from being altered by
anybody once it has been issued.
All transactions are broadcast
between users and usually begin
to be confirmed by the network in
the following 10 minutes, through
a process called mining.
Source: www.bitcoin.org
PROCESSING - MINING
ü ENFORCES CHRONOLOGICAL ORDER
ü PROTECTS NEUTRALITY OF NETWORK
ü ALLOWS DIFFERENT COMPUTERS TO
AGREE ON THE STATE OF THE SYSTEM
Mining is a distributed consensus
system that is used to confirm
waiting transactions by including
them in the block chain.
Source: www.99bitcoins.com
HOW TO MAKE MONEY WITH
BITCOIN?
Setting up your own
BITCOIN WEBSITE
to generate a
passive income
MINI EARNINGS
A bit of your time,
a bit of cash
SELLING
products and services
BITCOIN MINING
Mine your own wealth
INVESTING
Tap into bitcoin’s
ever-growing value
GAMBLING
If you got some luck
you might make
some money
LENDING Loan some
bitcoins, earn some
interest
WRITING Turn your
literary skills into
cash
BB B B
BB B B
The Philippines Officially
Legitimize Bitcoin as
Payment Method
GUIDELINES FOR VIRTUAL CURRENCY
(VC) EXCHANGES
SOURCE: COINTELEGRAPH.COM
BSP CIRCULAR NO.944
FEBRUARY 2017
“The Bangko Sentral does not intend to
endorse any VC, such as Bitcoin, as a currency
since it is neither issued or guaranteed by a
central bank nor backed by any commodity.
Rather, the BSP aims to regulate VCs
when used for delivery of financial services,
particularly, for payments and remittances,
which have a material impact on anti-money
laundering (AML) and combating the
financing of terrorism (CFT), consumer
protection and financial stability.”
3 Major Bitcoin Platforms in PH,
Efficiency Comparison Test
Coins.ph
Users rank Coins.ph as one of the best and well-
rounded Bitcoin applications globally, due to its
connections with local banks, remittance
networks, corporations, and merchants.
Coins.ph allows users to settle utility bills, pay
tuition fees, credit card payments, purchase
mobile credits, and purchase and sell Bitcoin
through remittance branches, ATMs and banks.
SOURCE: COINTELEGRAPH.COM
3 Major Bitcoin Platforms in PH,
Efficiency Comparison Test
Buybitcoin.ph
For buyers, Buybitcoin.ph requires an over-the-
counter deposit to be submitted on the day of the
order. Once the payment is made, Buybitcoin.ph
sends the payment in a few hours.
For sellers, Buybitcoin.ph requires a bank account
number and the holder’s name for the payment.
Once the Bitcoin payment is received by
Buybitcoin.ph the payment is instantly sent to the
bank account.
SOURCE: COINTELEGRAPH.COM
3 Major Bitcoin Platforms in PH,
Efficiency Comparison Test
Rebit.ph
Rebit.ph is a remittance and billing platform
which consumers in the Philippines use to send
both local and international payments, and to
also settle utility bills.
SOURCE: COINTELEGRAPH.COM
BITCOIN RISKS
1. Digital currency is not a legal tender.
2. Platform and digital wallets can be hacked.
3. Bitcoin transactions can be subject to fraud and theft.
4. No safeguards for digital wallets.
5. Bitcoin payments are irreversible.
6. Illegal activity use (i.e. drug dealing, money laundering,
and other forms of illegal commerce)
SOURCE: FINRA.ORG
SOURCE: INVESTOPEDIA.COM
BITCOIN PREDICTIONS
FOR 2017
1. Increased focus on Bitcoin as
dominant digital currency vs
’altcoins’: LITECOIN, ETHEREUM,
AND ZEROCASH.
2. Demand growth in China, India.
3. Market cap closing $18B.
4. Price could double to $2,100 by
Q4 2017.
BITCOIN TRENDS
BITCOIN
UNDERSTANDING

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Understanding Bitcoin

  • 1. BITCOIN UNDERSTANDING Financial Management Ateneo Graduate School of Business Leslie Bayona 29 May 2017
  • 2. BITCOIN UNDERSTANDING What is bitcoin? How does it work? Is it safe and how can you make money out of it? The bitcoin basics for Filipinos who want to understand and invest in the new digital currency.
  • 3. Source: www.bitcoin.org Bitcoin is a cryptocurrency and a digital payment system introduced 8 years ago by an unknown programmer. This digital currency is created and held electronically, no one controls it.
  • 4. Source: www.bitcoin.org HOW DOES BITCOIN WORK? As a new user, install Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address. You can disclose your Bitcoin addresses to your friends so that they can pay you or vice versa.
  • 5. Source: www.bitcoin.org BALANCES – BLOCK CHAIN The block chain is a shared public ledger on which the entire Bitcoin network relies. Bitcoin wallets can calculate their spendable balance and new transactions can be verified. The integrity and the chronological order of the block chain are enforced with cryptography.
  • 6. Source: www.bitcoin.org TRANSACTIONS – PRIVATE KEYS A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet.
  • 7. Source: www.bitcoin.org TRANSACTIONS – PRIVATE KEYS The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.
  • 8. Source: www.bitcoin.org PROCESSING - MINING ü ENFORCES CHRONOLOGICAL ORDER ü PROTECTS NEUTRALITY OF NETWORK ü ALLOWS DIFFERENT COMPUTERS TO AGREE ON THE STATE OF THE SYSTEM Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain.
  • 9. Source: www.99bitcoins.com HOW TO MAKE MONEY WITH BITCOIN? Setting up your own BITCOIN WEBSITE to generate a passive income MINI EARNINGS A bit of your time, a bit of cash SELLING products and services BITCOIN MINING Mine your own wealth INVESTING Tap into bitcoin’s ever-growing value GAMBLING If you got some luck you might make some money LENDING Loan some bitcoins, earn some interest WRITING Turn your literary skills into cash BB B B BB B B
  • 10. The Philippines Officially Legitimize Bitcoin as Payment Method GUIDELINES FOR VIRTUAL CURRENCY (VC) EXCHANGES SOURCE: COINTELEGRAPH.COM BSP CIRCULAR NO.944 FEBRUARY 2017 “The Bangko Sentral does not intend to endorse any VC, such as Bitcoin, as a currency since it is neither issued or guaranteed by a central bank nor backed by any commodity. Rather, the BSP aims to regulate VCs when used for delivery of financial services, particularly, for payments and remittances, which have a material impact on anti-money laundering (AML) and combating the financing of terrorism (CFT), consumer protection and financial stability.”
  • 11. 3 Major Bitcoin Platforms in PH, Efficiency Comparison Test Coins.ph Users rank Coins.ph as one of the best and well- rounded Bitcoin applications globally, due to its connections with local banks, remittance networks, corporations, and merchants. Coins.ph allows users to settle utility bills, pay tuition fees, credit card payments, purchase mobile credits, and purchase and sell Bitcoin through remittance branches, ATMs and banks. SOURCE: COINTELEGRAPH.COM
  • 12. 3 Major Bitcoin Platforms in PH, Efficiency Comparison Test Buybitcoin.ph For buyers, Buybitcoin.ph requires an over-the- counter deposit to be submitted on the day of the order. Once the payment is made, Buybitcoin.ph sends the payment in a few hours. For sellers, Buybitcoin.ph requires a bank account number and the holder’s name for the payment. Once the Bitcoin payment is received by Buybitcoin.ph the payment is instantly sent to the bank account. SOURCE: COINTELEGRAPH.COM
  • 13. 3 Major Bitcoin Platforms in PH, Efficiency Comparison Test Rebit.ph Rebit.ph is a remittance and billing platform which consumers in the Philippines use to send both local and international payments, and to also settle utility bills. SOURCE: COINTELEGRAPH.COM
  • 14. BITCOIN RISKS 1. Digital currency is not a legal tender. 2. Platform and digital wallets can be hacked. 3. Bitcoin transactions can be subject to fraud and theft. 4. No safeguards for digital wallets. 5. Bitcoin payments are irreversible. 6. Illegal activity use (i.e. drug dealing, money laundering, and other forms of illegal commerce) SOURCE: FINRA.ORG
  • 15. SOURCE: INVESTOPEDIA.COM BITCOIN PREDICTIONS FOR 2017 1. Increased focus on Bitcoin as dominant digital currency vs ’altcoins’: LITECOIN, ETHEREUM, AND ZEROCASH. 2. Demand growth in China, India. 3. Market cap closing $18B. 4. Price could double to $2,100 by Q4 2017. BITCOIN TRENDS