Crypto-Currency - Strategic Review v3
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Transcript of Crypto-Currency - Strategic Review v3
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Understanding the Technology
Blockchain(Aka Bitcoin & Crypto-Currencies)
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Explaining Blockchain
Blockchain = Read & Append Only Database
New accounts = $0
Transaction = Transfer from Account A to B
Database is ONLY list of TRANSFER transactions
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Explaining Blockchain
Details…
Details… Details…
Details…
Details…
#5
#3#2
#4
#1
Transaction #
Transaction Details
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Crypto-Currency Wallet
Your account control comes from your “Wallet”, which is a Private asymmetric encryption key.
Your Public Key is your Crypto-Current Address.
Transactions are “Signed” with your private key (aka wallet)
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Local software challenge
Using crypto-currency can require installing local software.
The local software has access to your WALLET on your local computer.
PRO: Harder to use. People hate installing software.CON: Ultra-secure (possibly)
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Or use the cloud
Or you can use a cloud provider (like)
PROs: No local software.CONs: Security returns to equaling banks.
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Local wallet keys
Local WALLETs are:
More secure: in the case of risk of cloud banking
(Mt Gox or a bank)
Less Secure: Local computer hacked or data loss.
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Strategic analysis of the layers
We will analyze these in the strategic stackUser Interface
(Owning Customer relationship)Currency Exchange
Interop with the Offline WorldBacking Financial Transactions
Smart Contracts
Platform Strategy
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Ethereum
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Ethereum
Transactions +
Code +
Custom database storage
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Ethereum
Ethereum “Smart Contract” can include codeftw
Softw
are CO
DEIn
the
cont
ract
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Ethereum
Ethereum “Smart Contracts” include a mini-database to store values
ftw
Data
base
In th
e co
ntra
ct
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Why
The high level
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Top reasons this is important
1. Preservation of Capital – Converting the asset class into being secure
2. Race to own the USER EXPERIENCE3. Lower fees4. Infrastructure that is revolutionary5. New Scenarios
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Hear my story to illustrate
This story illustrates all of the trends coming together
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We want a car
AirBnb for buying cars:
We want to buy a car to share among our house-mates
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The purchase
The car costs $15,000.
Everything will happen with crypto-currency
But we only pay a little along the way.
ftw
Softw
are CO
DEIn
the
cont
ract
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Strategic analysis of the layers
We will analyze these in the strategic stackUser Interface
(Owning Customer relationship)Currency Exchange
Interop with the Offline WorldBacking Financial Transactions
Smart Contracts
Platform Strategy
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Monthly payments
We make monthly payments.
Buying all up-front is expensive.And we are poor college students.
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I buy 50% of the car
I’m buying 50% of the car,
so I get more hours and priority on booking it.
ftw
Softw
are CO
DEIn
the
cont
ract
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Assessing credit
I’ll assess their credit rating.
I have my assets at risk, based on the results.
I make more than my peers with my quality score is higher. I earn less
when it is lower.Backing Financial Transactions
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Credit risk
Then a credit risk score is issued.
Backing Financial Transactions
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Getting the loan
We invest money buying this
”Consumer Credit”.
We get 8.1% returnsBacking Financial Transactions
This is the crypto-currency version of LendingClub ($4 billion loaned)
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Monthly payments
They allow us to make monthly
payments
Backing Financial Transactions
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It tracks my driving
When I drive,
it logs that JENNIFER and her driving hours
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Priority reservations
I rarely drive.
I save my KARMA CREDITs for cross-state drives to
family on holiday weekends.
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Sold my share
I only needed it senior year.
I sold my share to someone else, when I
graduated.
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I bought more
I started out owning 25%.
I bought more to 75%, after I drove more with
my new job.
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Credit default swaps
We buy 1% slices of people’s loans.
We pick a wide range of loans at credit risk level 50% to 75%
These get sold, over and over.
Backing Financial Transactions
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Who can do this?
Who could do this ENTIRE CAR Scenario?
MasterCard?Bank of Canada?
PayPal?Equifax?Stripe?
LendingClub?
Crypto-currency=
Powerful Legos
Unlocks innovation
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People act as a Store
Creating a store can be as simple as printing out a sheet of paper.
Buy my stuff:
My bike: $30
Rent my car for Christmas break:
$25
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Let’s go deep
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Strategic analysis of the layers
We will analyze these in the strategic stackUser Interface
(Owning Customer relationship)Currency Exchange
Interop with the Offline WorldBacking Financial Transactions
Smart Contracts
Platform Strategy
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Startup Weekend
You have 3 days at a startup weekend.
Add value in the world.
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Startup Weekend
You can only have:
3 days
2 devs
500 lines of code(Or less)
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Startup Weekend
What you deliver:
Unlock Value X&
Charge Y
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Startup Weekend
This is a real Ethereum Contract:
Simple, Simple, Simple
What could you write in an hour?
It is 9 lines long (ignoring comments)
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Prediction Markets
Prediction markets are great.
Consumer credit risk. Asset Pool risk levels.
Presidential elections.
Backing Financial Transactions
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VISA Fees
The race to cut the VISA fees.
Their value-add is to interact with the offline world.
Interop with the Offline World
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Offline world and VISA
Interop with the Offline World
INTERNET = Connection
iPad = P.O.S. system
Where is VISA needed?
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HARDWARE Locks
Interop with the Offline World
Hardware locks
that unlock upon crypto-currency
payments
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HARDWARE Locks
Interop with the Offline World
Seattle had paid toilets
Insert joke here
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HARDWARE Locks
Interop with the Offline World
Uber for Bike Rentals
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HARDWARE Locks
Unlock it in a few lines of code
Interop with the Offline World
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Platform strategy
A platform strategy unlocks
the masses
Platform StrategyWe can write
500 lines of code.
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Own the customer relationship = strategic lock
This is the true strategic lock
This would require giving another
talk…User Interface
(Owning Customer relationship)
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Fees
Crypto-Currency fees race to $ZERO
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Why #1
Making CURRENCIES a secure asset class
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Living on the edge of leverage
During the 2007/2008 crisis:
Bernanke said,
~They are all digital accounts. If everyone withdrawals, the just isn’t enough cash to back it up.
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Person A is wealthy. My wealth is backed up by assets.
I live safely here.
1) Real estate asset class2) Precious metals3) Stocks (Equities)
The point is that they are secure
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I’m in the bottom 60%. I live 100% in the CASH asset class.
I’m forced to live on numbers in a computer.
In the next 2007 crash, I can’t feed my family.
I’m denied the ASSET BACKING that the wealthy get.
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Fiat Currencies
Fiat Currencies do crashRome in 213 adGermany 1923
Argentina in 1932
France in 1795
Mexico 1994
Many moreThai “baht”
1997China – 11th century
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Rome
Gov Needs Money Dilute Collapse
Around the time of Rome’s collapse, the denarius contained only 0.02%
silver and virtually nobody accepted it as a medium of
exchange or a store of value
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France
French revolutionDefault on Debt ~1785
People Starve
1795 currency inflates by 13,000%
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Failing currency
Could this happen in 2016?
Greece is a recent example
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60The LEFT:
“Crony capitalism is alive and well and flourishes under big, powerful government. Because the bigger government gets, the more powerful and complicated it becomes, the more true it also is that only the big, the powerful, the wealthy and the well-connected can handle it and the small and the powerless get crushed.”
The RIGHT:
Carly Fiorina2015 Presidential Republican Candidate
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I’m forced to live on numbers in a computer.
In the next 2007 crash, I can’t feed my family.
I’m denied the ASSETs that the wealthy get.
My family matters.
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The End
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An engineering team that builds entire startup companies
from the ground up
WhiteHat EngineeringSTARTUPS & ENGINEERING
Early Stage Crypto-Currency & more
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TalentSpring Founder & CEO - Acquired in 2010B2B Enterprise SaaS company with Artificial Intelligence / Machine Learning
SPARKON Founder & CEO - 2011 to 2013B2C Online learning & Passion Discovery
Owner at WhiteHat Engineering: (Current)Our engineering team builds startup companies & products
Bryan StarbuckSTARTUPS & ENGINEERING [email protected]
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NXT Coin
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How NXT Coin HELPS
1. “Assets”2. Example: Buy a boat. Pay NXT
coins. Then issue a new asset of SHARES in boat XYZ.
NXTCoin
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BitShares
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How BitShares Helps
1. “Crypto-Finance”2. BitUSD vs BitGold vs BitEU3. Currency Derivatives
BitShares
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Ethereum
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How Ethereum Helps
1. “Crypto-Law”2. Smart Contracts3. “Ether” vs “Gas”4. Smart Contract = Coins + code
Ethereum
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Other Areas
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Regulations – Money Laundering
• USD Dollars Bitcoin = Exchange
• Bitcoin: Owner A B
• California = Bank $1,000,000 annual fee for regulators
• “Bit License”: NY Dept of Financials Services
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Other Important Areas
• Protect the wallet• Hosted coin providers (CoinBase.com)• Regulations• Proof of Work –vs- Proof of Stake
• Byzantine General’s Problem• Liberty Reserve: Costa Rica. Founders in Jail
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THE END
See the backup slides
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An engineering team that builds entire startup companies
from the ground up
WhiteHat EngineeringSTARTUPS & ENGINEERING
Early Stage Crypto-Currency & more