Is Bitcoin a disruptive innovation? A talk at Portsmouth Business School, UK

Bitcoin& Innovation

17 Oct 2013 - Portsmouth Business School (updated 22 Nov 2013)Creativity that pays - innovation in finance session

Niki Gomez

@nikigomez

“Bitcoin is the most important invention in the history of the world since the Internet.” Roger Ver

Give me control of a nation’s money supply, and I care not who makes its law - Amschel Rothchild

What is bitcoin?

http://www.weusecoins.com

Bitcoins are ‘mined’ or released to people who crack

complex Maths problems

They need very powerful computing power to do so, like this specialised Bitcoin Avalon machine.

Source: The Atlantic

Fragile as a house of cards but growing hugely in importance

• Economy Total 11m BTC in circulation

• Transactions last 24h 54,958• Bitcoins sent last 24h 927,536.58 BTC• Bitcoins sent avg. per hour 38,647.36 BTC

Recent survey of people who know about Bitcoin • 40% UK respondents trust Bitcoin as much as

Pound • 38% think it’s the currency of the future

* Survey: On Device Research, June 2013

How Big is Bitcoin?On17 October 2013

A UK/US Credit Card Transaction

Bank

US treatyForex trading

UK treaty

Clearing

Bank

Short term debt

instrument

Innovation 1:Bitcoin is Peer to Peer

Alice

Internet(Bitcoin Miners)

Bob

Why First Digital Currency to Go Mass?-

Friedrich HayekNobel Prize in Economics, 1974

“Central banks cannot be reformed. There can never be sound money so long as they are in charge.”

Download Hayek for free:

http://mises.org

When Governments control money

Innovation 2:A money supply that grows steadily and then is fixed

• Every 10 minutes 25 Bitcoins are released into the system currently

• No more than 21m

BTC will exist after 2040 (11m BTC so

far)

Encourages saving!

A currency is based on trust.Innovation in trust

Innovation 3: Cryptography Ensures Trust

“With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.”

Satoshi Nakamoto

Bitcoin is not backed by anything!

• Not state-backed fiat currency • Not backed by anything of value

(e.g. gold)

In Maths We Trust

“We have elected to put our money and faith in a mathematical framework that is free of politics and human error.”

Tyler Winklevoss, Entrepreneur

“There are 3 eras of currency: Commodity based, politically based, and now, math based.”Chris Dixon, Technology Investor

Innovation 4 : Currency Not via a Country or Company!

Satoshi Nakamoto, disappeared 2009

Innovation 5 :

• Democratic• Always being improved• Secure: all transactions are monitored collectively by the Bitcoin network.

Governance?• Bitcoin Foundation- Gavin Andresen, lead developer• Hackers/ coders verifying each transaction and mining for new coins

Innovation 6: Transparent

• Robust and resilient - data on every single transaction is logged• Anonymity - less personal data needed for transactions• Opposite of Swiss Banks!

Innovation 7 :A global currency everyone can use

• Low transaction fees-

1/3 of Kenyans have a Bitcoin Wallet

(Mpesa add-on)

• Sell directly to with no middleman

- Coffee traders in Bali

• Earn bitcoins for online jobs - Homeless people in US (Wired)

Disruptive Innovation?

A protocol for money

Threat to Governments and Banks?

“Doing Banking Better than Bankers.

It's money 2.0, a huge huge huge deal.”

- Chamath Palihapitiya

"Bitcoin will do to banks what email did to the postal industry”

- Rick Falkvinge

[Bitcoin] is a techno tour de force."

- Bill Gates

Show me what you can do!Grab 0.15 BTC

Use the Pass Phrase I mention.

Go to : Brainwallet.org

Get your digital wallet at: www.Blockchain.info

Spawned a host of digital currencies

• Ripple• Lite Coin• Name Coin• Peer Coin• Prime Coin

Bitcoin Ecosystem - innovation

• Chip Manufacturers • Mining as a service• Compliant Exchanges• Secure Wallets

Bitcoin Ecosystem

Making Bitcoin easier to use

• Dark Wallet• Cash

converters/Bitcoin ATM machines

• Building payment protocol into web browser

“You can put a bank in your pocket. That’s pretty big”

Gavin Andresen, Bitcoin Foundation

Parallel Bitcoin Economy

We can buy and sell between us in Bitcoin

Source: On Device Research Survey quoted on Techcrunch

Who is richer now?

niki@cybersalon.orgwww.cybersalon.org@cybrsalon

Links

Bitcoin News Aggregators:• CoinDesk.com• On Bitcoin • Bits of Coin (Android App)

• Blockchain.info• Brain Wallet• cybersalon.org/

cypherpunk