1) The document discusses the limitations of fiat currencies like government control and lack of transparency, and introduces cryptocurrencies like Bitcoin as a potential solution. 2) Bitcoin was created in 2009 as a decentralized digital currency that operates via a public ledger called the blockchain. It has gained popularity as an alternative to fiat that is easier to transfer globally. 3) The document argues that Bitcoin could serve as a seamless global currency independent of governments as its adoption increases among merchants worldwide.

1. Classification: Birlasoft Public
WHITEPAPER ON
“EMERGING MARKETS OF CRYPTO CURRENCIES”
AUTHOR: KAPIL SANGHI
3-SEP-2015

2. Classification: Birlasoft Public
BACKGROUND
Romans introduced us to FIAT currency (coins) in 1st
century. Initially known by several names as
“Toilet paper money”, “Flying Money”; they have got us long from barter system. Ever since incep-
tion FIAT has been vulnerable to several devaluations and even collapse in few countries. Reason
mostly has been oversupply. Against common misperception that FIAT currencies are backed up
by gold reserve, they are generally not backed by a physical commodity; rather their value is de-
rived by the trend of supply and demand. Governments and banks usually mint “paper currency” at will and supply is
virtually limitless. This whitepapers talks about limitations of paper money and benefits of digital currencies.
CURRENT CONTEXT
During recent years, turmoil in global economy has caused lot of devaluation of FIAT currencies. Government spending is
on rise combined with a low or average GDP growth rate. This often
leaves governments with limited choices: Increase public debt and print
more money to commit towards future bond payments. Figure 1 shows
the steep increase in government debut vs GDP over a period of time.
As the government draws its income from much of the population, gov-
ernment debt is an indirect debt of the taxpayers.
FIAT currencies are primarily controlled by government and central
banks leaving no transparency of valuation and underlying operations to
general public. Currencies fluctuate with slightest change in sentiments
of the country causing worldwide ripple effect on stock markets.
Recent devaluation of YUAN in Aug ’15 is a classic example of ripple effects when once country chooses to devalue it’s
currency to remain competitive in global market. To stimulate exports, PBOC reduced valuation of YUAN against US dol-
lar. A weaker currency helps Chinese exporters sell their goods abroad at a cheaper rate. This caused chaos in global
markets and central banks of leading countries trading with china had to push their currencies lower to remain competi-
tive.
WHAT’S WRONG WITH ‘FIAT?
 US Dollar has lost over 92% of its value since initial issuance in 1913.
Ref Figure 2
 They are expensive to transfer across borders and come with several
regulatory overheads
 Fund tracking mechanism is decentralized and controlled by
authorities, government and banks of individual countries
 No transparency in valuation and management
 Controlled by governments and central banks of each country
 Every country speaks a different language (USD, GBP, EUR, INR etc.)
 To overcome issues with paper based currency, digital cards (credit/debit) are issued as a facilitating wrapper
but the underlying transaction and governance rules don’t change
 Security is low and stealing money is relatively easy!!
 Transactions are not persistent and reversal/manipulation (though limited) is still possible
Figure 1
Figure 2

3. Classification: Birlasoft Public
SOLUTION
Root of the problem lies in how entire global financial system operates and it’s strong dependency on several decentral-
ized currencies. Need is to have a currency which is independent of
geographical boundaries, is easier to trade or transact with and ultra-
secure against theft, volatility or manipulation. Answer is a global cryp-
to currency or digital currency. Amongst several options we will evalu-
ate 1. In 2009 Bitcoin was introduced by Satoshi Nakamoto; one of the
most popular digital currencies used in the world today. Since incep-
tion, Bitcoin’s popularity has taken the markets by storm worldwide.
Supported by a public ledger called Blockchain, it’s valuation has in-
creased from $0.05 per coin in 2009 to $250 in 2015 peaking at $1,000
during 2013-2014.
Bitcoin Facts:
- Currency Code BTC. Recognized by major search engines. Google “BTC to USD” to see current rates
- Bitcoins are earned by solving a software problem block using special software and hardware. Maximum 21 mil-
lion bitcoins will ever be mined
- Bitcoin is divisible to eighth decimal place 0.00000001. Smallest unit is called Satoshi
- Cost to transfer millions of bitcoins across countries is virtually negligible
- All transactions worldwide are available to public in Blockchain ledger
- Last bitcoin is expected to me mined in 2140.
- It had its share of up’s and down’s. Considerable fluctuations during Mt Gox exchange scam as visible in Figure 3.
- Used for some illegal transactions by website called Silk Road
- Bitcoins have their own ATM’s and several merchants who gladly accept them worldwide
- Bitcoin Boulevard located in Hague (Netherlands) - majority of shopkeepers located on streets alongside the
channel – accept Bitcoin. This is longest street of merchants in the world accepting bitcoins
- Can be stored in online or offline wallets
- The computing power of the Bitcoin network is 7468 times higher than the one of the cumulative 500 world su-
percomputers
Security:
Extremely secure to transact. Requires pair of public and private keys to access digital wallet. It’s estimated that
it would take half a billion US dollars to hack into bitcoin network for just 10 minutes.
Exchanges:
To Earn: Trade, Transact or Mine yourself
Known Exchanges: Bitstamp, Coinbase, BTCChina etc.
Wallets: LocalBitcoins, Coinbase etc.
Transact: Online or offline via mobiles, computers etc.
Legality of bitcoin worldwide: http://www.coindesk.com/bitcoin-legal-map/
CONCLUSION
With more and more (online and offline) merchants adopting Bitcoin worldwide it has gained significant attention in last
few years. Bitcoin has now been regulated in USA which indicates this is not a phenomenon anymore. With ever weak-
ening FIAT, it’s being strongly looked as alternative financial currency. Vision of having a seamless global currency
doesn’t look too distant now. Happy Mining!
BANKS HATE IT, PEOPLE LOVE IT
Figure 3