BitCoin and the Global Economy by Cristina Dolan Presented at MIT Center for International Studies
-
Upload
cristina-dolan -
Category
Technology
-
view
1.594 -
download
0
Transcript of BitCoin and the Global Economy by Cristina Dolan Presented at MIT Center for International Studies
BITCOIN AND
THE GLOBAL
ECONOMY
CRISTINA DOLAN
APRIL 7, 2016
MIT CENTER FOR INTERNATIONAL STUDIES – STARR FORUM
WHAT IS BITCOIN?
Next Generation
Information,
Communication and
Transaction Technology
Global Peer to Peer Exchange of Value
TrustlessDeflationary
© 2016 Cristina Dolan
HOW BITCOIN
WORKS?
© 2016 Cristina Dolan
TIMING IS
EVERYTHING
BitCoin Timing for Trust
11/2008
Satoshi NakamotoWhite 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
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
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
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
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
WORLD BANK –
UNBANKED
2B Unbanked People - 50% with Mobile Phones
© 2016 Cristina Dolan
http://datatopics.worldbank.org/financialinclusion/
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
PAYMENT
OPTIONS
Payment Processing Value Chain
Source of Funds
Customer Account Provider
Funds Transfer
Funds Withdrawal Settlement
Four Party CardBank Issuer Card Network
• Acquirer
• PSP
E-Wallet • Card
• Stored Value
• Bank
Wallet Provider
ACHBank
Bank
ACH Network BankScheme
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
Banked
Unbanked
© 2016 Cristina Dolan
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
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
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
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
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
BLOCKCHAIN VS
BITCOIN INVESTMENTS
• BitCoin Applications – 66%
• Non Currency Applications – 20%
• Opportunities for Tools and Services Businesses
• Commercial implementation of OpenSource
© 2016 Cristina Dolan
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
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