Digital (Bitcoi Currencies ENT 470 Social Innovation in Finance n) HULT Internatj onal Business School - Summer One 2016 Alessandro alessandro.lanteri@faculty.hult.edu Lanteri
Schedul More or e less… Mark Lamb CEO & Co-Founder CoinFloor Blockchain Break Money + Bitcoin Guest Lecturer Wrap up 15 min 11:30 pm 12:30 pm 10:30 pm 9 am ca. 60 min. ca. 60 min. ca. 60 min.
Digital Currencies vs. Money
Private ENT 470 the daring and fascinating alternatives to government-backed currencies Money watch Bitcoin. Sweat. hom at Tide. Meet the e future of branded currency. Paul Kemp Robertson Contagious Communications http://www.ted.com/talks/paul_kemp_robertson_bitcoin_sweat_tide_meet_the_future_of_b randed_currency
A history of ENT 470 (very, very, very brief) Money commodities commodity-backed fjat money items representing legal tender issued by a goods with intrinsic underlying commodities central (trusted) authority value with intrinsic value ECB (2012); Ali et al. (2014) USD, GBP… cows, potuery, shells, gold certjfjcates… grains… trust is very important (e.g., dollarizatjon)
The functions of ENT 470 Classical theory of money Money Store of value Medium of exchange Unit of account money can be saved money is used as an money acts as a standard and retrieved in the intermediary in trade to avoid numerical unit for the future. the inconveniences of a barter measurement of value and system, i.e. the need for a costs of goods, services, coincidence of wants between assets and liabilities. the two parties involved in the transaction. example: trading cards, example: cigarettes… hours… example: houses… Ali et al. (2014) NOTE: money with such functions is not necessarily legal tender (ex. gold, diamonds…)
The functions of ENT 470 Hierarchy of functions Money Unit of money is a social account convention as such, it evolves over time not all the functions must be present at all times and for all constituencies Medium of exchange Ali et al. (2014) Store of value
Types of ENT 470 formats and legal currencies status ECB (2012)
Types of virtual ENT 470 with respect to their relationship with legal tender and real goods currencies Closed virtual currencies Unidirectional fl ow Bidirectional fl ow Almost no link to the real economy The virtual currency can be Users can buy and sell virtual and sometimes called “in-game purchased directly using real money according to the only” schemes. Users usually pay a currency at a specific exchange exchange rates with their subscription fee and then earn rate, but it cannot be currency. virtual money based on their exchanged back to the original online performance. currency. The virtual currency is similar to any other convertible currency with The virtual currency can only be The currency is used to purchase regard to its interoperability with spent by purchasing virtual goods virtual goods and services, but the real world. These schemes and services offered within the some may also allow their allow for the purchase of both virtual community and, at least in currencies to be used to virtual and real goods and theory, it cannot be traded outside purchase real goods and services. the virtual community. services.. ECB (2012) example: WoW Gold… example: F acebook example: Linden Credit, air Dollars, miles…
Types of virtual ENT 470 with respect to their relationship with legal tender and real goods currencies ECB (2012)
Electronic vs Virtual ENT 470 Types of money schemes Money electroni virtua c l money format digital digital unit of account traditional currency invented currency acceptance ‘universal’ within a community issuer legal money inst. non-fin. company supply fixed determined by issuer ECB (2012) redeemability guaranteed not guaranteed
Virtual ENT 470 A definition Currencies // A virtual currency is a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community. // privat issuer communi unregulated digital e determin ty issue ed based r ECB (2012)
Bitcoi ENT 470 the first virtual currency n watch hom at e Disrupt Andreas Antonopoulos Bitcoin Foundation https:// www.youtube.com/watch?v=c2CsJ2HMA
Time for a BREAK Please be back in 15 minutes
Bitcoin basics
How to store ENT 470 an intro bitcoin Wallets are where bitcoins are virtually stored and are used to make transactions. HOT wallets COLD wallets are online are o ffl ine allow for instantaneous more secure transfer of funds payment greater ease of use process is slower but more vulnerable and more to hacking cumbersome
How to obtain ENT 470 an intro bitcoin EARN Like any currency, Bitcoin can be obtained in exchange for goods and services rendered. A TM’s ATM users first verify their bitcoin wallet by scanning a QR code on their smartphone. They then insert cash into the ATM and submit to complete the transaction. The appropriate amount of bitcoins are credited to their wallet (at current exchange rate). DIGIT AL EX CHANGE Digital currency exchanges allow buying and selling Bitcoin at the current market rates. MINING Miners are the backbone of the Bitcoin ecosystem, providing services that help secure the network and keep it running. Miners are rewarded for their services with Bitcoin payments.
How to spend ENT 470 an intro bitcoin PURCHASES A growing number of merchants are accepting bitcoin as a form of payment. P2P P A YMENTS Bitcoins’ fast transfer times, lower fees and absence of transaction limits make them an attractive option for micro-payments. INVESTING Bitcoins are frequently traded on digital currency exchanges. CHARITY ff Bitcoins o er a faster and safer way to give to charities in the developing countries marred by social and political unrest.
Intro to Bitcoin
Bitcoin ENT 470 (in a nutshell) transactions
The ENT 350 Miners worldwide blockchain www.blockchain.info (2015) US EUROP A E
Inside a Bitcoin ENT 470 the physical making of digital currencies Mine Life inside a secret Chinese Bitcoin mine https: //www.youtube.com/watch?v=K8kua5B5
Some features of ENT 470 Mainly, its strengths bitcoin Only a finite amount of bitcoin is available. Thus, no entity can The decentralized nature of Bitcoins manipulate bitcoin value through an eliminates the prospect of increase or decrease in currency Decentralise Stabl government control or ownership. production. This leaves bitcoin value d e largely to the laws of natural supply and demand economics. The blockchain is a permanent public record of all confirmed Although all Bitcoin transaction transactions that occur in the BU details are stored publicly, the system and an integral part of the identities of the users involved Transpar Privat Bitcoin ecosystem. The blockchain remain relatively T ent e helps promote order and anonymous . transparency while prevent counterfeiting. Digital payments to individuals and merchants can occur at These benefits extend to payments ranging from basic P2P anytime and are processed faster with lower fees. This is transfers to remittances. due in large part to removing banks from the transaction Remittances are instantaneous and inexpensive, < 1% fee. Ali et al. (2014) F ast, processing equation. FX fees are eliminated. Cheap
The ENT 470 The true social innovation in bitcoins blockchain // A blockchain is a public ledger of all Bitcoin transactions that have ever been executed. It is constantly growing as 'completed' blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. // chronological permanent complete public
The ENT 470 The true social innovation in bitcoins blockchain // A blockchain is a public ledger of all Bitcoin transactions that have ever been executed. It is constantly growing as 'completed' blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. // the systems allow the blockchain the blockchain the elimination of miners confirm the publicly records the ensures each BTC is intermediaries (e.g., validity of transactions between uniquely coded and banks), creating new transactions and add sender and recipient therefore can only possibilities beyond them to the and allows be spent once the currency blockchain verification
The ENT 470 The true social innovation in bitcoins blockchain Blockchain technology is arguably the greatest innovation of the Bitcoin system. The blockchain is a constantly updated public ledger of all transactions that have occurred. It provides transparency across the Bitcoin system, allowing transactions to be processed in a decentralized, trustless manner. Nakamoto (2008)
The ENT 470 The true social innovation in bitcoins blockchain traditio trusted identitie nal transaction co unterpa rt public third privacy s s y party model new transaction priva identities public cy s Nakamoto. (2008) mod el
Recommend
More recommend
