Privacy + Security Forum East and West: Blockchain and Compliance Strategies October 15, 2019
What is the Internet ? 2
Part 1: Demographics of Economic Growth – the Millennials
Dad – What is this? 4
Generational Gap – Views of Bitcoin Jamie Dimon, CEO of JPMorgan “ Bitcoin is a “fraud” which is “worse than tulip bulbs, it won't end well” and that any JPMorgan “trader trading bitcoin” will be “ “fired for being stupid.” “ My daughter bought bitcoin, it went up and “ she thinks she’s a genius. Source: CNBC (Sep 2017), “JP Morgan CEO Jamie Dimon says bitcoin is a ‘fraud’ that will eventually blow up,” https://www.cnbc.com/2017/09/12/jpmorgan-ceo-jamie-dimon-raises-flag-on-trading-revenue-sees-20-percent-fall-for- 5 the-third-quarter.html
Millennials – 43% of World Adults Born between 1981-2000 and larger than Baby Boomer generation • With a 10X increase in bitcoin wallets, 20% could own crypto assets • Will have largest economic impact in our global economy through investment of digital assets • Total World Population divided by age groups 20% 2.5 billion Own Global Crypto Millennials Assets Gold Equities Hedge Funds Digital Assets Source: Fundstrat, United Nations. Bloomberg 6
Facebook Study – Millennials View of Financial Institutions • Only 8 % of Millennials Trust Financial Institutions • Shaped by 2008 Financial Crisis In 2016, Facebook IQ, a team of researchers, scientists and analysts funded and supported by Facebook Inc., published a white paper entitled “ Millennials + Money: The Unfiltered Journey ” to evaluate the beliefs and thoughts of today’s youth on traditional banking and financial systems. Source: Facebook (Jan 2016), Millennials and Money: The Unfiltered Journey , https://www.facebook.com/business/ 7 news/insights/millennials-money-the-unfiltered-journey#Infographic:-Millennials-and-money
Digital Generation – Today’s Innovation Each generation sees innovations… its mostly digital today Each generation is also characterized by innovations that differentiate that generation from prior • generations As shown below, what differentiates the millennial experience (in their 20s) is the growth of social media • and digital businesses. Notably, blockchain is the newest innovation. Innovations seen when each generation was in their 20s General sources. Wired Magazine. Baby Boomers in their 20s GenX in their 20s Millennials in their 20s 1970s~1980s 1990s~2000s 2000s~now Disruptive and misunderstood by prior generation Source: Fundstrat. Wired (Feb 2015), “How Millennials are Changing Product Development for Good,” 8 https://www.wired.com/insights/2015/02/millennials-changing-product-development/.
Part 2: Does Blockchain Matter?
What is the Blockchain? 10
McKinsey Study – Most Disruptive Tech Since Internet 11
U.S. Federal Reserve St. Louis – Important Asset Class 12
Blockchain and Cryptocurrency – Why this Matters Blockchain + Cryptocurrency 1 2 3 Intermediary Potential Major services (e.g., applications of technological financial) less blockchain – shift expensive limitless B Disruptors today will become the “new normal” 13
Bitcoin Transaction Facts Bitcoin Onchain: US$1.3 trillion year More than 2X Paypal 7X of Discover May surpass Visa/Master Card • BitMex: US$1.2 billion of net income (3rd most profitable exchange in the world) Nasdaq: US$700 million of net income CBOE: US$500 million of net income BitMex is making more than those 2 combined Source: Fundstrat. Live Coin Watch (Aug 2018), “Bitcoin Network Processes $1.3T Annually, Surpasses Paypal’s 14 Transaction Value,” https://news.livecoinwatch.com/bitcoin-network-paypal-transactional-value/.
New Market Opportunities • Average person 3.5 weeks a year the privilege of using the financial system (credit card processing, insurance, loans – knows your credit scores and financial records generally) Makes US$860-1,000 per year for each user • Facebook (knows more about you than any company in the world) Makes US$7 per year for each user • Technology companies are targeting the banking industry 5 banks control half assets of the US market 3 banks typically control 70% of the market This is the market opportunity 15 Source: Fundstrat
What’s in the Future – Let’s Look at the Past “This ‘telephone’ has too many shortcomings to be seriously considered as a means of 1876 communication.” Telephone • William Orton, President of Western Union. “The horse is here to stay but the automobile is only a novelty — a fad.” 1903 • President of the Michigan Savings Bank advising Henry Ford’s lawyer, Horace Rackham, Car not to invest in the Ford Motor Company. “The wireless music box has no imaginable commercial value. Who would pay for a message sent to no one in particular?” 1921 • Associates of David Sarnoff (pioneer of radio) responding to the latter’s call for investment Radio in the radio. “Television won’t be able to hold on to any market it captures after the first six months. 1946 People will soon get tired of staring at a plywood box every night.” Television • Darryl Zanuck, film producer, co-founder of 20th Century Fox. “The idea of a personal communicator in every pocket is a “pipe dream driven by greed.” 1992 • Andy Grove, then CEO of Intel. Smart Phone 2019 B WHAT WILL WE SAY? Bitcoin/ Blockchain 16 Source: Medium blog post (Jan 2017), “The absolute worst technology predictions of the past 150 years,” https://medium.freecodecamp.org/worst-tech-predictions-of-the-past-100-years-c18654211375
Part 3: Privacy and Blockchain
Global Privacy Law Map H EAVY R EGULATION R OBUST & E NFORCEMENT L IMITED M ODERATE Source: DLA Piper website 18
Key Definitions: Personal Data Personal data Information pertaining to a living individual (e.g., name, address • and images) that can be used to identify that individual either Korea on its own or when easily combined with other information Is part of a cell phone number personal information? (Daejeon District Court Nonsan Branch Decision No. 2013Godan17 rendered on August 9, 2013) “… There are cases where the last 4 digits of a cell phone number are sufficient to identify the user… Even if the last 4 digits cannot identify the user, such 4 digits, easily combined with other information (aforementioned date of birth, date of anniversary, home phone number, family phone number, phone call records, etc.) that are related to the last 4 digits, can identify the user… Therefore, the information in the present case, which the defendant provided to XX Yoon… constitutes personal information under Article 2, Item 1 of PIPA” 19
Key Definitions: Data Controller/Data Processor Processor Data controller (Personal information controller) Public institution, legal person, organization, individual, etc. that • processes personal information directly or indirectly to operate the personal information files for its own business purposes Korea Data processor Person or entity who is delegated to process personal • information on behalf of the personal information controller Who is the data controller and data processor in Korea? Many multinational hotel chains (e.g., Marriott, Hyatt, Hilton, etc.) franchise their brand to Korean entities that • own the building Multinational hotel chains collect personal data (i.e., guest information) from globally, including Korea, and • centrally process overseas Who is the data controller and data processor under Korean law? • In most cases, the data controller is the Korean entity and the data processor is the multinational hotel • chain operate the personal information files for its own business purpose (e.g., processing guests) 20
Blockchains Basic Definitions B Public Key Private Key Comparable to email address Comparable to a password • • Every transaction published and Known only to user • • linked to a psuedonoymized Provides access to the bitcoins • hash Likely qualify as “personal data” • Encrypted and represents a • particular user Private Key: 18e14a7b6a307f426a94f8114701e7c8e774e7f9a47 e2c2035db29a206321725 Can be re-used Public Key: 0250863ad64a87ae8a2fe83c1af1a8403cb53f53e486 • d8511dad8a04887e5b2352 Likely qualify as “personal data” • 21
Blockchain Principles B Transparency : Information transitioning though 1 blockchain is visible to every node Immutability : Information cannot be removed in a 2 blockchain 22
Blockchain Data Protection Issues Right to erasure Erasure is technically impossible due to system design • Rectify personal data Changes or undoing of transactions are impossible unless • counterparty cooperates B Counterparty identity can be unknown • Accessibility - Everyone has it Anyone can see the transactions and amount held by each • user’s public key through the internet Consent? Who do we give it to? • How do we withdrawal? • 23
Who is the Data Controller? Blockchain transactions are written by the • data subjects themselves B May involve multiple data controller • around the world Operated by all its users in a peer-to-peer • network environment Applicable law may have to analyzed on a • transaction basis Foundation? Validating nodes or participating nodes? Possible candidates Network users? 24
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