Luci ed ombre della criptofinanza

Negli ultimi anni si è visto emergere un fenomeno progressivamente sviluppatosi in modo indipendente da governi, banche centrali, istituzioni finanziarie e grandi imprese e che ha portato alla nascita di un sistema decentralizzato ed autonomo. Lo sviluppo della criptofinanza e delle criptomonete ha aperto e promette di aprire inediti scenari economici, giuridici e sociali. Parola chiave: Bitcoin, un nuovo mito che incuriosisce ed è oggetto di interesse dei principali attori del sistema finanziario globale (banche, regolatori pubblici e venture capitalists ecc.). Una vera e propria moneta che, secondo alcuni osservatori, è espressione della «sovranità» di Internet. Come sarà in grado di incidere e quali conseguenze potrà avere sulla competitività delle banche e sui pericoli di disintermediazione?

Transcript

1. 25 FEBBRAIO 2016 LUCI E OMBRE DELLA CRIPTOFINANZA IL FENOMENO BITCOIN, FRA RISCHI DI ILLEGALITA’ E NUOVI SCENARI DI UTILIZZO DELLA TECNOLOGIA con FERDINANDO MARIA AMETRANO
2. ABSTRACT Negli ultimi anni si è visto emergere un fenomeno progressivamente sviluppatosi in modo indipendente da governi, banche centrali, istituzioni finanziarie e grandi imprese e che ha portato alla nascita di un sistema decentralizzato ed autonomo. Lo sviluppo della criptofinanza e delle criptomonete ha aperto e promette di aprire inediti scenari economici, giuridici e sociali. Parola chiave: Bitcoin, un nuovo mito che incuriosisce ed è oggetto di interesse dei principali attori del sistema finanziario globale (banche, regolatori pubblici e venture capitalists ecc.). Una vera e propria moneta che, secondo alcuni osservatori, è espressione della «sovranità» di Internet. Come sarà in grado di incidere e quali conseguenze potrà avere sulla competitività delle banche e sui pericoli di disintermediazione?
3. LE 3 DOMANDE ALLE QUALI DAREMO RISPOSTA Perché le principali istituzioni finanziarie e banche internazionali stanno investendo nella tecnologia blockchain? Cosa è la moneta? Esiste l’oro digitale? Perché l’informazione associata al trasferimento di valore è l’unica informazione gravata da balzelli?
4. Outline 1. Introduction 2. Bitcoin Primer 3. About Money 4. Regulatory Framework 5. Payments, Settlement, Exchanges, and Banking 6. Blockchain beyond bitcoin
5. What is Bitcoin? https://www.youtube.com/watch?v=Gc2en3nHxA4&hl=it&fs=1
6. https://bitcoin.org/en/ Decentralized digital currency Not backed by any government or organization Instantaneous peer-to-peer transactions No need for trusted third party Cryptographic security Low-cost banking for everybody everywhere https://bitcoin.org/en/faq http://www.coindesk.com/information/
7. Opinions Ben Bernanke: [the virtual currency] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system. Alan Greenspan: It’s a bubble. It has to have intrinsic value: you have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can. I do not understand where the backing of Bitcoin is coming from http://qz.com/148399/ben-bernanke-bitcoin-may-hold-long-term-promise/ http://www.bloomberg.com/news/articles/2013-12-04/greenspan-says-bitcoin-a-bubble-without-intrinsic-currency-value
8. Marc Andreessen: Bitcoin today is like Internet in 1994, weird and scary  No transaction costs  No amount limits  No intermediaries  No frozen funds  24/7, 365 days  Social network enabled  Money for the Information Economy
9. Investments Landscape
10. A recent blockchain transaction https://blockchain.info/tx/8f1d3a8ef6b2d4a25d2f499279e01518b4770819ccbc39a765c4c326170c61b3 About $83M transacted with $0.04 fee
11. Bitcoin Economy http://bitcoincharts.com/charts/bitstampUSD#tgWzm1g10zm2g25zv  Total number of BTC is about 14M  BTC Market Cap: about $3-14B (USD M0 is about $1,200B)
12. December 2013: China crackdown  People’s Bank of China crackdown:  prohibits financial institutions from trading, underwriting, or offering insurance in bitcoins or any other digital currency  Bitcoin is not to be considered a currency  owning bitcoins is not outlawed or prohibited  As of December 2013 BTC China was world's largest Bitcoin exchange by volume  Alibaba, China's top Internet retailer, stopped using bitcoins as of January 19 2014.
13. February 2014: Mt Gox bankruptcy  As of January 2014 Mt Gox was world's largest Bitcoin exchange by volume  In February 2014 it filed for bankruptcy protection from creditors  It announced that around 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time  Fraud or theft?
14. Silk Road  Online market, operated as a Tor hidden service  Online users were able to buy illicit goodies using bitcoins, while browsing it anonymously and securely without potential traffic monitoring  Launched in February 2011  Shut down in October 2013  Ross William Ulbricht, alleged to be the owner of Silk Road arrested in San Francisco  Many other black markets have filled in as successors
15. Bitcoin resilience Is there anything else in financial world:  Just 7 years old  Without government or corporation backing  That can lose its main (China) market  With fraud/theft at its main reference exchange (Mt Gox)  With such a bad reputation (Silk Road)  That could be still alive and kicking?
16. Bitcoin used by terrorists Europol: Despite third party reporting suggesting the use of anonymous currencies like Bitcoin by terrorists to finance their activities, this has not been confirmed by law enforcement https://www.europol.europa.eu/sites/default/files/publications/changes_in_modus_operandi_of_is_in_terrorist_attacks. pdf
17. Bitcoin used for Money Laundering UK HM Treasury: The money laundering risk associated with digital currencies is low, though if the use of digital currencies was to become more prevalent in the UK this risk could rise https://www.gov.uk/government/news/government-publishes-anti-money-laundering-assessment-and-commits-to- action-plan
18. National risk assessment on money laudering
19. Cryptolockers  CryptoLocker is a ransomware propagated via infected email attachments and botnets; when activated, it encrypts files stored on local and mounted network drives  The malware then displays a message which offers to decrypt the data if a bitcoin payment is made
20. Private Monies  A widely accepted medium of exchange or payment  issued by a non-governmental body  without legal privileges  Private monies do not have to be generally acceptable; they merely have to be widely accepted  Public demand for private currencies :  hold them in the expectation that they will not diminish in purchasing power as state money has  conduct illegal activity  wish to be part of a movement against increasing state control of economic and personal behavior  just want better money
21. Liberty Dollar: 1998-2009  Private mint that issued gold and silver coins; also issued notes redeemable in precious metals  Periodically revalued against USD: the value of the latter fell over time against precious metals  Specifically designed to function in parallel with and in competition to USD  Never marketed or represented as official US currency  Highly successful: it became the second most popular currency in the US  Its use declared a federal crime by the US government  Its founders convicted for counterfeiting, fraud and conspiracy against the United States
22. E-gold: 1996-2007  Digital payment system with gold as unit of account  User accounts backed by gold reserves  By 2005, e-gold had grown to be second only to PayPal in the online payments industry: 1.2M accounts and $1.5B transactions  Indicted in April 2007 by US law enforcement services  Charges: unlicensed money-transmitting entity and a means of moving the proceeds of illegal activities  Never proven and even the judge expressed major doubts  ‘Offshore’ payment system rather than a money transmitter or bank as defined under then-existing regulations, not least because gold was not legally ‘money’
23. Digital Transfer of Value  To securely (cryptographically) transfer value digitally has been possible for decades  However it had always required the creation of a centralized trusted party to prevent double spending  Bitcoin  does not require a central trusted party  is designed to resist attacks of malicious agents, as long as they do not control network majority
24. Precursors  Ecash, David Chaum, 1982 (blind signature)  Hashcash, Adam Back, 1997 (Proof-of-Work)  B-money, Wei Dau, 1988 (distributed database)  Bit gold, Nick Szabo, 1998 (distributed database, sequential money creation)  Anonymous Electronic Cash, Tomas Sander and Amnon Ta-Shma, 1999 (anonymity)  Reusable P-o-W, Hal Finney, 2004
25. The announcement From: Satoshi Nakamoto <satoshi <at> vistomail.com> Subject: Bitcoin P2P e-cash paper Newsgroups: gmane.comp.encryption.general Date: 2008-10-31 18:10:00 GMT I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party. The paper is available at: http://www.bitcoin.org/bitcoin.pdf The main properties: Double-spending is prevented with a peer-to-peer network. No mint or other trusted parties. Participants can be anonymous. New coins are made from Hashcash style proof-of-work. The proof-of-work for new coin generation also powers the network to prevent double-spending. Bitcoin: A Peer-to-Peer Electronic Cash System Abstract. A purely peer-to-peer version of electronic cash […] Satoshi Nakamoto --------------------------------------- The Cryptography Mailing List
26. Satoshi Nakamoto http://mag.newsweek.com/2014/03/14/bitcoin-satoshi-nakamoto.html  Unknown identity: pseudonymous person or group?  Worked on Bitcoin since probably 2007  Published the paper in 2008  Released the code in January 2009  Stopped involvement mid-2010  Entrusted the project and a copy of the alert key to Gavin Andresen, effectively his successor  He owns about 1M bitcoins, never spent
27. Nakamoto's political motivations  "Yes, [we will not find a solution to political problems in cryptography,] but we can win a major battle in the arms race and gain a new territory of freedom for several years. Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own."  "[Bitcoin is] very attractive to the libertarian viewpoint if we can explain it properly. I'm better with code than with words though."  In the Bitcoin's transaction database, the first entry has a note by Nakamoto: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
28. Source Code License Bitcoin was released under the MIT license, so it is:  open source; cryptographic software’s source code must be available to allows public inspection (absence of backdoor and security vulnerabilities)  free software; the user the right to use, copy, modify, and redistribute the software Instead, proprietary software is often close source and it only grants the right to use
29. Outline 1. Introduction 2. Bitcoin Primer 3. About Money 4. Regulatory Framework 5. Payments, Settlement, Exchanges, and Banking 6. Blockchain beyond bitcoin
30. Bitcoin: a currency and a protocol  Bitcoin: protocol, software, and community  Bitcoins: units of the currency bitcoins are sent using Bitcoin  Bitcoins are the first powerful protocol application: a digital property created inside the Bitcoin protocol
31. Bitcoin the protocol Distributed public ledger of transactions:  shared with peer-to-peer technology  allows to transfer a unique digital token  the token can be exchanged, but not duplicated  keeps records of each and every transaction forever It can replace any processing central authority with decentralized peer-to-peer cryptographically secure equivalent
32. The bitcoin currency  Not to be found anywhere, they only exist as public ledger documented transactions  A bitcoin wallet is a public address 1FEz167JCVgBvhJBahpzmrsTNewhiwgWVG  the bitcoin public ledger (aka blockchain) certifies for everybody how many bitcoins are associated to the wallet http://blockexplorer.com/address/1FEz167JCVgBvhJBahpzmrsTNewhiwgWVG It is mine; you are REALLY encouraged to tip
33. Bitcoin as Scriptural Asset  Bitcoins are scriptural assets, they only exist as validated transactions  Bitcoins are not liabilities  Bearer instruments
34. Asymmetric Cryptography: Public/Private Key Pair mathematically linked, perform opposite digital signature functions:  private (secret) key used to generate the signature  public key used by anyone to verify the signature  The bitcoin wallet address is the public key  The private key allows spending from the wallet Try at https://www.bitaddress.org
35. A bitcoin transaction: from public key to public key  Transaction: amount + receiver’s public key  The sender’s private key signs the transaction  With sender’s public key anyone can verify that:  The private key has been used, non-forged signature  Transaction has not been tampered or modified  The amount is at sender’s public key disposal  The transaction is published to the public ledger  Everybody knows that the receiver’s public key has received the transacted amount
36. Bitcoin wallet security  Bitcoins are effectively owned by whoever can spend them  Securing a wallet: private key safe storage  PC client: Bitcoin Core, Armory, Electrum  Web client: greenaddress.it, blockchain.info  Cold storage: never exposed to Internet, stored away
37. Pseudonymity, Anonymity Bitcoin is really pseudonymous, not anonymous:  The public key does not provide direct information about the private key owner  All transactions are transparent to everybody’s inspection.  Perfect persistent public account history: the public ledger is forever https://blockchain.info/ http://blockexplorer.com/
38. Bitcoin’s public ledger: the block chain  Transactions are bundled in blocks, sequentially chained, about one block every 10 minutes  The block chain is a history of transactions resilient to network attackers  The cryptographic link between blocks requires large amount of computing power, so the block chain cannot be altered without huge resources  Computing power is measured in hash/s, hash being the basic operation needed for validation
39. Network hash rate https://blockchain.info/charts/hash-rate?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= Specialized non-generic hardware, with hashing capacity 13,000 times that of the combined 500 largest supercomputers
40. Mining  Miners are the nodes of the network providing the computing power for:  processing and validating transactions (avoiding double spending)  securing the network  synchronizing the nodes  Miners compete to process a new block of transactions. The winner provides a proof-of-work and is rewarded with the issue of new bitcoins.  Seigniorage revenues subsidize the network, making transaction almost free
41. The Byzantine Generals' Problem  Communicate using messengers  There are traitors amongst them  Decide unanimously whether to attack  Success (i.e. fault tolerance) is achieved if the loyal generals can agree on their strategy, whatever it might be
42. Hash Function  Any algorithm that maps data of arbitrary length to data of a fixed length (called the hash value) in a non-invertible way  Bitcoin uses the (Secure Hash Algorithm) SHA-256 algorithm that generates a fixed size 256-bit (32-byte) output
43. SHA-256(“Hello, world!”)  SHA-256(“Hello, world!”) = 315f5bdb76d078c43b8ac0064e4a0164612b1fce77c869345bfc94c75894edd3  SHA-256(“Hello, world!0”) = 1312af178c253f84028d480a6adc1e25e81caa44c749ec81976192e2ec934c64  SHA-256(“Hello, world!1”) = e9afc424b79e4f6ab42d99c81156d3a17228d6e1eef4139be78e948a9332a7d8  ……  SHA-256(“Hello, world!4249”) = c004190b822f1669cac8dc37e761cb73652e7832fb814565702245cf26ebb9e6  SHA-256(“Hello, world!4250”) = 0000c3af42fc31103f1fdc0151fa747ff87349a4714df7cc52ea464e12dcd4e9
44. Proof-of-Work  A new block is added with a mathematical proof-of-work based on SHA-256 hashing. Find a nonce for a given block such that: SHA-256(previous block hash, transactions, nonce) <= target  The longer chain (actually the one with higher difficulty) is the consensus
45. Validation Process Block Generation The proof-of-work difficulty is adapted to the overall available computing power to ensure an average of one block every ten minutes.
46. ASIC Mining  Application-Specific Integrated Circuit  Designed and manufactured for a specific purpose.  Introduced in 2013 for Bitcoin mining  Less power consumption, higher hashing power. Outpaced CPU and GPU mining  $8M a Month Miner: Dave Carlson http://www.coindesk.com/inside-north-americas-8m-bitcoin-mining-operation
47. Open issues  the clustering of mining resources  10 minute for first confirmation  computer power wasted by mining
48. Seigniorage Revenues Dissipation in Network Security Costs About $600M per year (miner remuneration)
49. Bitcoin Monetary Rule  2009: 50BTC every 10 minutes  halving every 4Y  This is the only way new bitcoins are released  It is called mining because of its similarity with the progressive scarcity of gold extraction  digital cash supply free of discretionary intervention
50. Inelastic Money Supply: Deterministic Decreasing Rate 2029: issued 96.88% of all BTC 2141: issued last 0.00000001 BTC
51. Outline 1. Introduction 2. Bitcoin Primer 3. About Money 4. Regulatory Framework 5. Payments, Settlement, Exchanges, and Banking 6. Blockchain beyond bitcoin
52. Money as social relation instrument  Human beings are born into a gift economy  Enlarged relationship circle requires exchange economy  Barter economy, coincidence of wants  Trade economy, money as medium of exchange  Bitcoin is money for the information economy
53. Friedrich August von Hayek - Denationalisation of Money  history of coinage is an almost uninterrupted story of debasements; history is largely a history of inflation engineered by governments for their gain  why government monopoly of the provision of money is regarded as indispensable? It deprived public of the opportunity to discover and use a better reliable money Blessed will be the day when it will no longer be from the benevolence of the government that we expect good money but from the regard of the banks for their own interest A Free-Market Monetary System, Gold and Monetary Conference, New Orleans, Nov. 1977, https://mises.org/daily/3204 Hayek, F. A., Denationalisation of Money, The Institute of Economic Affairs,http://www.mises.org/books/denationalisation.pdf
54. IMF’s SDR, F. Saccomanni  Special Drawing Rights are international reserve assets, created in 1969 to supplement existing official reserves of member countries  SDRs address the lack of a non-national currency to be used as reserve asset  F. Saccomanni: cryptocurrencies could be an effective monetary policy instruments [...] we should pay more attention to the geniuses working on them, try to understand what of interest they could teach us https://it.finance.yahoo.com/notizie/saccomanni-non-bisogna-demonizzare-cripto-valute-172912255.html http://www.ufficiostampa.rai.it/pdf/2014/2014-10-09/2014100928490498.pdf
55. From gold standard to fiat money  Gold: the commodity money standard  resistance to corrosion and oxidation  high malleability  relative easiness of purity assessment  pleasant color  Gold purity certification  Representative money  Fractional receipt money  Fiat money and legal tender  War on cash and negatives interest rates
56. Money Comparison Medium of Exchange Store of Value Unit of Account Live cattle Diamonds Gold Fiat coins and notes Cryptocurrency  swappable  fungible  portable  divisible  recognizable  resistant to counterfeiting  reliably saved, stored, and retrieved  retain usefulness over time  non-perishable  low preservation cost  relative worth unit of measure  stable value for stable price comparison  supply must be limited in some way
57. Unit of Account Money as value yardstick  Money is the unit of account against which the value of every other good is measured  The price system measures the value of goods relative to the value of money Good money should provide stable prices to best perform its role as unit of account
58. The Monetary Bitcoin Problem  Money is a good in itself: its value is governed by supply and demand  The Bitcoin protocol has got rid of any central monetary authority  The bitcoin currency is lacking elastic supply http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q101.pdf http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q3digitalcurrenciesbitcoin1.pdf http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q3digitalcurrenciesbitcoin2.pdf
59. Hayek Money The cryptocurrency monetary standard of elastic non-discretionary supply regulated to achieve stable prices with respect to a (commodity) price index Ametrano, Ferdinando M. (2014) Hayek Money: the Cryptocurrency Price Stability Solution http://ssrn.com/abstract=2425270
60. Leverage Bitcoin As Reserve Asset  Bitcoin is the first and most successful instance of an intrinsically scarce digital asset: it is digital gold  When used as reserve asset, its qualities are magnified!  Its limits are lessened. No more need to:  scale to huge (cash + bank accounts + credit cards) number of transactions  support economically inefficient micropayments  lower confirmation time  The Reserve Bank DAO  The Reserve Bank IPO: raise bitcoins, issue seigniorage share
61. Bitcoin as (Digital) Gold in the History of (Crypto)Money GOLD  For centuries gold has been the most successful form of money  Its adoption was not centrally planned  It has been surpassed by other kind of money without becoming obsolete BITCOIN  Bitcoin is the most successful form of cryptocurrency  Its adoption has not been centrally planned  It might be surpassed by more advanced type of cryptocurrencies without becoming obsolete
62. Outline 1. Introduction 2. Bitcoin Primer 3. About Money 4. Regulatory Framework 5. Payments, Settlement, Exchanges, and Banking 6. Blockchain beyond bitcoin
63. Hard to regulate  Janet Yellen (Feb 2014 US Senate Banking Committee):  Bitcoin is a payment innovation that's taking place outside the banking industry  It's not so easy to regulate Bitcoin because there's no central issuer or network operator. This is a decentralized, global [entity]  ECB (October 2012 report):  governments and central banks would face serious difficulties if they tried to control or ban any virtual currency scheme  there is no server that could be shut down if the authorities deemed it necessary http://blogs.wsj.com/moneybeat/2014/02/27/yellen-on-bitcoin-fed-doesnt-have-authority-to-regulate-it-in-any-way/ http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf
64. EU Landscape: July 4, 2014 EBA opinion  Endorses the creation of governing authorities accountable for protocol and transaction ledger integrity  Until a comprehensive regulatory regime is developed:  recommends that national supervisory authorities(*) discourage [financial] institutions from buying, holding, or selling virtual currencies  allows financial institutions to maintain current account relationship with businesses active in the field of virtual currencies http://www.eba.europa.eu/documents/10180/657547/EBA-Op-2014-08+Opinion+on+Virtual+Currencies.pdf (*) http://www.bancaditalia.it/pubblicazioni/bollettino-vigilanza/2015-01/20150130_II15.pdf http://uif.bancaditalia.it/normativa/norm-indicatori-anomalia/Comunicazione_UIF_su_VV.pdf
65. US Landscape  July 1, 2014: first US Marshall BTC auction  30000BTC for north of USD19M  New York Department of Financial Services BitLicense Regulatory Framework, widely regarded as possible framework for other jurisdictions  August 2013: analysis begins  July 2014: first draft, 120 days comment period  February 2015: second draft, 30 days comment period http://www.dfs.ny.gov/legal/regulations/revised_vc_regulation.pdf
66. Benjamin M. Lawsky - NY DFS superintendent The challenge we face is to come up with appropriate guardrails that  safeguard customer assets;  protect consumers from fraud and abuse;  root out money laundering and other illicit activities;  defend against hackers by emphasizing robust cyber security not stifling beneficial innovation in a fledgling industry In an age of heightened consumer expectations for real-time, digital payments, if banks fail to innovate, they could face a real challenge Enough is enough: four decades of slow-to-non-existent progress in the bank payments system seems like fair warning Bipartisan Policy Center in Washington, DC. December 18th, 2014 http://www.dfs.ny.gov/about/speeches_testimony/sp1412181.htm
67. SEC and unregulated IPOs  ColoredCoins, Conterparty, Coinprism: technologies for creating and exchanging digital assets http://coloredcoins.org/ http://counterparty.io/ https://www.coinprism.com/  The Security and Exchange Commission is conducting an inquiry to determine if violation of federal securities laws have occurred http://www.scribd.com/doc/244670525/Letter-LA-Office https://www.cryptocoinsnews.com/sec-sends-inquiry-letters-hundreds-bitcoin-companies-unregistered-securities/
68. UK Landscape  BoE: The emergence of Bitcoin has shown that it is possible to transfer value securely without a trusted third party. The distributed ledger technology may have considerable promise.  BoE: Digital currencies, combined with mobile technology, may reshape the mechanisms for secure payments  Government: is committed to increasing banking competition encouraging the creation of a world-leading environment for innovative payments and financial technology  Government: is launching a research initiative for digital currency technology funded with £10m  BBA: banks must accept they are part of the broader ecosystems customers are constructing around themselves. However, their place in these ecosystems is far from secure
69. Outline 1. Introduction 2. Bitcoin Primer 3. About Money 4. Regulatory Framework 5. Payments, Settlement, Exchanges, and Banking 6. Blockchain beyond bitcoin
70. Merchants & Payment Processors  Sridhar Ramaswamy, head of Google Wallet We are working in the payments team to figure out how to incorporate bitcoin into our plans https://www.cryptocoinsnews.com/google-may-introduce-bitcoin-new-payment-system/  Amazon: granted patent for the use of digital currencies as payment on cloud platforms (Amazon Web Services)
71. Companies Representing $180B in Annual Revenue Now Accept Bitcoin
72. Massively Simplify Banking I believe that blockchain technology will not only change the way we do payments but it will change the whole trading and settlement topic. It has potential to trigger “massive” simplification of banking processes and cost structure. When somebody with a strong brand and security level establishes it as a reliable service, then the whole industry will follow. Oliver Bussmann, CIO of Swiss bank UBS http://blogs.wsj.com/digits/2014/10/27/ubs-cio-blockchain-technology-can-massively-simplify-banking/ Major banks like JPMorgan Chase, Citibank and Bank of America have established teams of experts focusing exclusively on digital currency Edmund Moy, former director of the United States Mint http://www.coindesk.com/former-us-mint-director-save-bitcoin-regulators
73.  Bitcoin-like real-time settlement infrastructure  Free and instant exchange of any form of money or value, even EUR or USD, not just crypto-assets  Banks can offer their customers instant international money transfers, and offer international settlement services to other banks https://ripple.com/
74.  With Ripple, we can deliver a superior banking experience at a fraction of the time and cost Matthias Kröner, CEO  With Kraken (a California-based exchange) Fidor is launching a banking platform for crypto-currencies https://ripple.com/blog/fidor-bank-ag-the-first-bank-to-use-the-ripple-protocol/ https://www.cryptocurrency-bank.com/
75.  San Francisco based USD/BTC exchange, wallets provider, and merchant payment processor  $75m record-setting funding round in January 2015: to date it has raised $106m  A host of notable investors:  BBVA  New York Stock Exchange  former Citigroup CEO Vikram Pandit  former Thomson Reuters CEO Tom Glocer  USAA http://www.coindesk.com/coinbases-75-million-series-c/
76.  April 2015: $50m funding round:  Goldman Sachs  China-based IDG Capital Partners  Breyer Capital, General Catalyst, Accel  invest in companies that have the promise to transform global markets through technical innovation Tom Jessop, MD Goldman Sachs’ Principal Strategic Investments Group  hybrid fiat-digital currency model  benefits of digital currency even for USD http://www.wsj.com/articles/goldman-a-lead-investor-in-funding-round-for-bitcoin-startup-circle-1430363042
77.  The New York bitcoin exchange has closed $25m in Series A fundraising  It has received a trust company charter from the New York State Department of Financial Services (NYDFS)  Customer funds denominated in US dollars will be held in FDIC- insured accounts
78.  Utilizing the blockchain is a natural digital evolution for managing physical securities, [this technology holds the potential to] benefit not only our clients, but the broader global capital markets NASDAQ Chief Executive Robert Greifeld  Pilot project: NASDAQ Private Market (pre-IPO trading among private companies)  Bitcoin technology replaces the informal systems used for sales and transfers of shares
79. Nasdaq / Overstock  Nasdaq has debuted Linq, the first platform for asset trading managed digitally through the use of blockchain technology  SEC has approved Overstock.com S-3 Filing to Issue Shares Using Bitcoin Blockchain
80. R3CEV and PTDLWG  R3CEV has launched the Distributed Ledger Working Group, pooling together over 30 global banks to create financial standards for blockchain technology  The Post Trade Digital Ledger Working Group includes exchanges, banks, and regulators working on clearing and settlement application of blockchain technology
81. Blythe Masters, Digital Asset Holdings  Blythe Masters, the former JPMorgan Chase executive credited with creating the modern credit default swap, is the CEO of Digital Asset Holdings  DAH provides settlement and ledger services for financial assets  Masters has just declined the offer to lead the investment banking division of Barclays
82. Transaction, settlement, and clearing  The cash transaction is the only financial transaction that is automatically settled and cleared  Financial transactions can be real time, but their settlement and clearing is a convoluted legacy t+2 or t+3 process  Blockchain transactions are settled and cleared as soon as the transaction is validated
83. Outline 1. Introduction 2. Bitcoin Primer 3. About Money 4. Regulatory Framework 5. Payments, Settlement, Exchanges, and Banking 6. Blockchain beyond bitcoin
84. Smart Properties and Contracts  Smart properties: digital token programmatically exchanged using smart contracts  Smart contracts: math-based contracts with automated software settlement, with no legal systems or human actions required  Autonomous agents: software programs created for specific tasks, able to make and receive payments using Bitcoin  Decentralized Autonomous Organizations (DAO)
85. Proof of Existence  Block chain as time stamp authority  Put a hash value in the «comment» section of a (monetarily negligible) transaction  Hash being a fixed length string that uniquely identify an arbitrary length digital object (e.g. a txt or pdf file)  Existence of that digital object at the transaction time is proved on the block chain www.proofofexistence.com
86. IBM - Internet of Things  Samsung, IBM has been working on the Autonomous Decentralised Peer-to-Peer Telemetry (ADEPT) platform for a decentralised approach to the internet of things  Blockchain (transaction processing engine)  Telehash (JSON private message protocol)  Bittorrent (network connection) http://www.computerweekly.com/news/2240238627/IBM-uses-Bitcoin-technology-to-build-internet-of-things-platform https://gigaom.com/2014/09/09/check-out-ibms-proposal-for-an-internet-of-things-architecture-using-bitcoins-block- chain-tech/
87. No central authorities: examples digital tokens for:  Car ownership (car sharing)  Stakeholder shares, IPOs  Voting rights (liquid democracy) Distributed Autonomous Organizations:  Gambling online (no fees, no taxes)  Health insurance (without company costs)
88. The problem with bitcoin  Uncensorable  Pseudonymous, can be obfuscated to anonymity  Unknown miners  Only 3 transaction per second (VISA is able to reach 60000 tps)  In order to be uncensorable the blockchain is a very low performance database
90. Blockchain without bitcoin  No bitcoin (no assets available to reward miners)  No miners, only permissioned validators  More transactions per second  Permissioned distributed ledger!!
91. Permissioned Distributed Ledger  Without the bitcoin asset the ledger only tracks liabilities and IOUs  With permissioned validators instead of permissionless miners there is not decentralization, only replication  Just use a replicated concurrent commit database!
92. The Online Walled Garden  In the 90s corporate wanted to go online, but not in the wild unregulated internet  Microsoft and AOL offered a walled garden experience  Permissioned ledger are the walled garden blockchain: bizarre non- sense proposal
93. Sidechain
94. Sidechain: the Future is Bright  Custom tailored Bitcoin codebase  Permissioned validators or merge mining  Bitcoin blockchain interoperability  Bitcoin asset + issued liabilities and IOUs
95. Scalability  If bitcoin is digital gold does not need to scale to huge number of transactions  The blockchain is a real time gross settlement system  Increasing block size is ineffective, it should be increased 20,000+ to scale up at VISA levels
96. Off-chain Scalability  Keep low value high volume transaction off-chain  Lighting Network leverage micropayment channels and payment hubs  Compatible with bitcoin blockchain… and so also with sidechains: interoperability
97. Privacy vs Transparency  In a digital age whatever is transparent to regulators and investigators is transparent for criminal too  Apple has refused to open a iPhone backdoor for FBI for this reason  Cryptography backdoors are useless and nonsensical
98. Bitcoin is a disruptive invention  Technology: endless possibility in replacing central authorities, even beyond money  History of Money: the eve of possibly the best money ever devised in human history  Financial industry: payment systems and exchanges will never be the same Blockchain beyond bitcoin Blockchain without bitcoin