2. Overview
Quest for the Cashless Society
History of Digital Cash
The Story of Bitcoin
Consumer Wallets
Merchant Benefits
Statistics
Future Prospects
Questions and Answers
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3. Quest for the Cashless Society
Goals of the Cashless Society
No messy paper cash and bulky coins
No cash production and handling costs
No anonymous transactions above a certain limit
No untraceable transactions
No informal or ‘grey’ economy
No missing tax revenue
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4. Quest for the Cashless Society
Scary Aspects of the Cashless Society
Identity becomes the new money
Full traceability of all personal transactions
Full unit of account control to the monetary sovereign
Payment blockades and confiscation become easier
Total elimination of the informal shadow economy
Near absolute efficiency in tax collection
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5. Quest for the Cashless Society
Does the Cashless Society have to mean that we lose all of
the privacy attributes of physical cash?
Anonymous
Untraceable
Bearer Nature
We have arrived at the historic crossroads!
User-defined privacy – or –
Identity-based money
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6. History of Digital Cash (Pre-Bitcoin)
What public key cryptography enables
E-Money is not regular payments going online
Nomenclature of digital cash (digitalcash.org)
Concept of digital bearer instruments
If you can click “forgot password” and have balances restored,
then it’s not a digital bearer instrument
Centralised issuing mint schemes
DigiCash (1990-1998)
eCache (1999-2008)
Voucher-Safe (2010-present)
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7. History of Digital Cash (Precursors to Bitcoin)
Hashcash (1997) Adam Back
Proof-of-work system to limit email spam
SHA-1 hash of the header
B-money (1998) Wei Dai
Public keys identify pseudonyms
Broadcast solution to computational problem
Arbitrator and fine schedule
Broadcasted subset account servers with bail
BitGold (2001-2005) Nick Szabo
Public challenge string of bits
Client puzzle functions
Securely timestamped
Distributed property title registry
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8. The Story of Bitcoin
Launched in January 2009 by Satoshi Nakamoto
Open source built on cryptographic primitives
Elliptic Curve DSA and keypairs
RPOW (reusable proof of work)
SHA-256 Hash (incorporating distributed block chain)
Solved the double spend problem without centralisation
Dual role of payment system and unit of account
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9. The Story of Bitcoin
Bitcoin is a decentralised electronic cash system using
peer-to-peer networking, digital signatures and
cryptographic proof to enable irreversible payments
between parties without relying on trust.
Bitcoin is a reaction to 3 separate developments
Centralised monetary authority
Diminishing financial privacy
Dominant legacy infrastructure
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10. Bitcoin Consumer Wallets
Full Client
Installs locally
Downloads entire block chain
User maintains private keys
Lightweight Client
Involves some level of trust in the server
Downloads block headers only using Simple Payment
Verification
User maintains private keys
Browser-based Client
Access via the browser
Service provider downloads block chain
Hosting server may or may not maintain private keys
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11. Bitcoin Merchant Benefits
Extend acceptance to countries not reached by Visa,
MasterCard, and PayPal (60+)
Provide payment method for the unbanked
No disallowed merchant categories codes (MCCs)
Not subject to payments embargo
Eliminate chargeback and fraud risk
Processing fees approaching zero
Near immediacy of settlement
Flexible wallet solutions
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13. Bitcoin Statistics
Exchange Rate ~ 47.00 USD
Size of Economy $520.0 million
Total Bitcoin Mined 10,899,150
Maximum Potential Bitcoin 21,000,000
Total Block Count 225,965
Average Blocks per Hour 6.0
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14. Bitcoin Statistics: Numbers Tell The Real Story
Bitcoin Network ‘Horsepower’
● December 2009: 0.008 Ghash/sec
● December 2010: 103 Ghash/sec
● December 2011: 8,303 Ghash/sec
● September 2012: 19,284 Ghash/sec
● March 2013: 42,000 Ghash/sec
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15. Bitcoin Statistics: Numbers Tell The Real Story
Bitcoin Value in USD By Year
July 2010: $ 0.04 (first Mt. Gox quote)
January 2011: $ 0.30
June 2011: $32.00
January 2012: $ 5.26
November 2012: $12.00
March 2013: $47.00
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19. Future Prospects
Bitcoin has the ideal virtual currency attributes
Two-way convertibility
Independent floating exchange rate
Nonpolitical unit of account
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20. Future Prospects
Regulatory Issues
Decentralised nature inhibits third party shutdown
Exchanges will be a focal point of government scrutiny
Pressure on larger merchants
No direct legislation (similar to air guitars)
Only four jurisdictions have any official comment
USA
Australia
Norway
France
ECB
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21. Future Prospects
“Digital cash is to legal tender
as BitTorrents are to copyrights”
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22. Thank You – Questions?
Twitter: jonmatonis
Email: matonis@hushmail.com
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