The digital money revolution

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The digital money revolution
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Digital currencies like Bitcoin give us the chance to democratize money and the services built on top of it. The talk will present the main advantages of digital currencies. We will also see what additional applications can be built on top of protocols like Bitcoin and how these functionalities can significantly reduce the power of financial intermediaries.
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usage that you have an what alleged the mother of emotion welcome from my side as well to the torque on the digital money revolution y yeah whether digital money or a standard fee money is good or bad is something that you all have to decide for yourself but I hope that my talk I will give you some insights so you can make better decisions for yourself so let's uh let's just jump right in what's actually so cool about money in general no matter what type of money may actually talk about money enables cooperation wise that's imagine you're a producer of shoes and you want to buy some groceries and there was no universal good as money you come to the grocery store and zoophilia basket with groceries and and come to the cash register and offered a new pair of shoes that you produce and when
they are not interested in choose because right now they don't need any you can buy the groceries you have to 1st trade your shoes for something else at the grocery store is interested in so there was no money transaction costs and traits are really really I and a lot of traits simply won't happen with all the universal good like money the really cool thing about money is that enables cooperation and economists usually define 3 functions that a certain good needs to fulfill in order to actually be regarded as money and these 3 functions
are it must be would store of value so it must have a certain kind of stability if take apples for instance apples get rotten after a while after a few weeks they don't preserve value really good so they could serve as money money needs to be a unit of account which means that needs to be divisible to some extent and you need to be able to calculate with it and then the next and the function is it needs to be a medium of exchange if you take all this for instance they preserve value very well you can count calculate with them but our house is not a medium that you can exchange and therefore calls would server well so something serve good as money and some things don't serve that well and if you look back in history what
has served as mining historically people started with very simple things they could find like Littlestone also shows that we use they fulfilled these 3 functions even though the people than really think about these functions explicitly they fulfilled these functions that were rare there were exchangeable really well and they uh
preserve value then at some point people were able to extract precious metals and they started to mint coins and this coin here that we can
see on the picture for instance that's the Greek graph now from around 700 BC and and the interesting thing about that you're right is that there were many different kinds of currencies almost every
city meant their own points which means that there was a competition of these clients if there were traders or merchants that in like particular coins because they thought that a certain cities printing our the main thing too many of these coins they could simply switch to another 1 in the
banking business that also started this way the 1st bankers were money changes because they were changing between different currencies and also 1 interesting aspect about that time is that exchange rates fluctuated pretty much so the volatility of the value of these currencies was pretty large so now we make a big jump or as money look like today if we look at today's money
and in today's currencies like the euro order you was a dollar a day they worked fairly well but they have a couple of problems and 1 of the main problems that I
personally and people like digital currencies see the problem of centralization and there a centralization and 2 different respects 1 respect is the issuance of currency if you have only 1 central issue of a currency like the euro which then
as the European Central Bank you have to trust this entity very strongly because they have the power to devalue its currency by printing more and more of it and there's actually currently happening inflation rate is still pretty low but there is some inflation inflation at least from my point of view is not a good thing because it's just an additional tax then there is a 2nd type of concentration and that's when you want to transact with the money so when you make money transfer for instance uh this is usually done electronically today and and work as a set and it works pretty well but you have to trust the parties there was always a couple of 3rd parties involved when you send money from your account to emerge as a conduit to your friends account
and these parties theoretically if they want to they can exploit you because they might say well we don't want to uh transacts uh this money transfer for you for whatever reason so they have a certain power and also technically there is
not much redundancy in the system so to sum it up today's money requires a lot of trust toward what's 3rd
parties so How could we improve the system we could improve it by making
it to the central and also we could make it the central in many respects 1st of all we could have different types of currencies rights imagine you come to a grocery store and all you can get is 1 certain type of drink only 1 but usually you have different occasions where 1 different types of drinks when you go out for dinner you maybe want to have a glass of wine or a beer after sports I think he would prefer wine but you rather want a glass of water so that in money terms there is only 1 currency that we can choose from so there is a moral police and if there was at the central system where everybody could start their own currency there would be competition and maybe you would have currencies that work well for some applications and other currencies that well for other applications now another advantage of a decentralized money system is that if it really works peer-to-peer if I could send money directly from myself to 1 other
person I wouldn't have to rely on 3rd parties which would also be an advantage because either I would have to ask for permission for this transaction then another advantage over the central system as its redundancy if you don't have 1 central party that full 1st transactions you don't have 1 single point of failure and the central system where you rely on different nodes that do the transactions for you if 1 node disappears for whatever reason others can jump in and there is not 1 single point of failure but the system is more robust In order to do such a decentralized currency system you have to solve 1 very big problem it's called the
double spending problem imagine everybody could creates as much money as they wanted to probably people it's friend a lot of money right and so if they spend some of their money they would just pretend that they still have it and then spend yet so what would happen if there would be a huge inflation would be a lot of currency units and the money would become worthless and nobody would use it anymore so you have to solve this double-spending problem and in the electronic this is really difficult to imagine you're a musician you write your own song he recorded on an M P 3 file and then you send it to a friend or you sell it to somebody you have no control whatsoever if this M P 3 file gets distributed all around the internet I know there is some digital rights management system products but also with these products you have to rely on 3rd parties so in order to have a truly central money system you have to say solve this technical problem of double spending and the good news is there is a solution to it and the solution is you create a distributed public ledger and this public ledger actually really fits well to the name of this conference to Republic up because the word Republic actually means the public thing and the public ledger is 1 that can solve the double spending problem how does it do at the public ledger is a very simple list of balances and transactions so if we take this address for instance you can also think of an address as an account number or a location where a certain balance is thought this particular balance just stood as an example as the balance of 2 . 0 currency units and now comes the clue everybody who participates in this payment network knows that this particular addresses this particular balance so once the person was access to this address spends these 2 currency units everybody knows that because it's public and when the person was access to this address once spent a 3rd currents unit which they don't have nobody would accept this transaction because everybody can see that this addresses at true currents units they are a spent so that there is no way to creates out of the blue of the current unit and nobody accepts this transaction so this is the solution to the double spending problems the and so who did this 1st it was Bitcoin I assume that most of you who attend this have a of the con already and the really big uh the really big thing that Bitcoin achieved
was creating this public ledger and that point it's called the block chain so when I talk about the blockchain speaking of this public ledger where every transaction that is being conducted in this currency system is
recorded and since Bitcoins solved
the problem of double spending in the way it did Bitcoin can serve and 3 functions the 1st bit as Bitcoin can be a currency so you can uh chance as a with it as money the 2nd function is a bitcoin can be an asset and this is also quite known because every money is also an acid you can invest in it there there's a lot of FX trading on on in the world already and then there is the 3rd very interesting thing and that is a protocol and the protocol is actually just a set of rules of all computers X and exchange our in a certain network and the remainder of the talk will look at each of these 3 functions of a little more detail so let's look at the currency function wise Bitcoin such a
superior currency there are a lot of very good advantages I just want to highlight the most important ones with Bitcoin you can
conduct instant worldwide transactions at almost 0 cost and I can really just recommend you just try it out it's it's a free up that you can download on the phone or on a computer and you can send money to the person who sits right in front of you or to a person that sits in South America for instance and the money is there wouldn't seconds which is a huge advantage because it's fast and slow low-cost try to send money from your German or other European or American bank account to a country overseas it takes very long it's very expensive and then there is a 3rd really big advantage about Bitcoin and this is the bank independence so with that when you don't have to rely on 3rd parties
because bitcoin is a network of nodes where you don't have to ask for permission if you can prove where the block chain that you on 1 bitcoin refraction of a bitcoin you can go the transaction and you don't have to ask anybody for permission know since kind is such a good currency is also being used as a currency already there is around 200 thousand merchants worldwide that accept bitcoin and everywhere where you see the
Bitcoin accepted the sticker you can pay with Bitcoin most of them are online but durable and there's also a lot of stores a a lot of physical stores that accept bitcoin as a currency just get there with you for 1 you can buy a beer or something else and play with Bitcoin the yeah 1 of the great thing about Bitcoin is that it's open source and open source is good for 1 thing everybody can read the code so if you don't really trust this and you think the code is not good you can simply take a look at it is available online and the other good thing is that you can take this code and build your own blockchain and therefore the John currency on top of it and as of today there is already 260 altcoins as they're called alternative cryptocurrencies and these few symbols that I put on
here are just examples you know there are 1 of the larger altcoins so the first one is like going there's ripple Namecoin dortch quantum Prime corn and many many more
what's the what's there what's that traction order adoption all bitcoin is still by far the largest bitcoin has a market cap of 5 . 5 billion dollars so if you take all bitcoins together and sum them up there were 5 . 5 billion and if you take all other cryptocurrencies and sum them up the total values . 6 billion dollars so they are still very small but the good thing is that there was a competition and everybody wants to use digital currencies as a choice they don't use bitcoin they can use any of the other ones as well so open source is another big feature of Bitcoin the let's take a quick look at Bitcoin as an asset and
bitcoin has a market price and it's traded on exchanges so when it started it was basically what nothing because nobody knew about Bitcoin when it came out in early 2009 and then some people started to transact with it and then the 1st exchange in July 2010 started to make Bitcoin available for trading and since then it's it's value rose quite significantly so if you invested early intimate coined the return that you could have made this squad big step non space but is and that's what happens with essence right so
sometimes they go up sometimes they were gone OK
now since bitcoin already works very well as a currency and as an acid there is a whole ecosystem being built around it and and this is
these are just a couple of startups that's a provide Bitcoin related services there is many more but I had to make a
selection so you've got wallet provide us when you want to use Bitcoin you need a bit wallet either on your phone or on your computer so we've got many providers that do this most of them are for free by the way that you've got payment service providers if you want to accept Bitcoin as a currency your much and you don't need any additional infrastructure but if you want to get paid in euros or dollars or any other local currency you can uh you can cooperate with the payment service provider and it is still much cheaper and much more secure than accepting credit card payments for instance then you've got the con brokers they simply sell confocal mission and you got exchanges where people buy and sell bitcoin and directly over the exchange and you've got financial services providers which either are on the that's either on equity side of I run for instance bit bond which is a peer-to-peer lending platform for a bit points yeah all right so
so far we've looked at bitcoin as a currency and bitcoin as an asset
and then there is the 1st that function that Bitcoin as bit con is also a protocol a defined so that has been exchanged and and this specific case how um data as being exchanged or the blockchain and that kind actually allows you to own a digital
assets the Bitcoin and this is quite revolutionary as we've seen with the example of 1 of the M P 3 file another good thing as that's the blockchain and can also be used for other applications and will look at them in a minute and and some people believe that the power of the block chain and the applications that you can run on top of it is even more
and bigger that Bitcoin as a currency itself Fred Wilson for instance is a very famous venture capitalists from New York believes that the potential that we will see in the future years that come out of the block chain out of the public ledger is even bigger than the con itself if you currently have certain doubts about this is I would like to make 1 remark before we jump into the applications Bitcoin and especially the Bitcoin blockchain applications today are maybe like e-mail in 1985 so it's really just at the beginning some of them work some of them are still being built and so on there was
still a lot to do but as we can see you know became a very widespread tool for communication and I and many other people do with Bitcoin believe that Bitcoin will take a similar trajectory to e-mail and the good thing is you won't have to understand the protocol if you don't
like to of course you can never but not everybody can look at it but probably everybody of us serves the Internet every day and only very few people actually understand the underlying protocol which is http at least I don't understand http and his details
but I can browse the internet with my browser so I expect the same development of evolution for Bitcoin as well alright enough talking about the protocol let's look at some applications
that could be done and 1 thing that I find particularly interesting are distributed markets today if you own a stock of a company for instance you on 1 share of BMW stock if you want to sell at you need to go to a centralized exchange you probably will go to Botshabelo because all too nice wherever BMW is listed and now these exchanges work well but the point is they are quite expensive to have a legacy huge infrastructure and all the larger corporations have access to the to the stock market with Bitcoin you could do the stock transactions over the block chain and you would have to be real peer-to-peer transaction Soros's work imagine you have a fraction of a bitcoin it is possible to attach and other assets to this fraction of a bitcoin and then that kind of not serve as a currency anymore but it serves as a token it simply allows you to sell something that is attached to it from 1 person to another over the block chain and everybody can see in the block chain that I sold this share of BMW stock and that exchanged hands and now it has a new owner so we could have a real peer-to-peer exchange and this is something that's already in the making 1 other interesting application is called smart property imagine you have a
car and this guy a digital key so it doesn't have a physical key like we are used to from today's vote but it has a digital key note the power that you can have as you can you can grant and refuse access to the SCOP
by this key over the blockchain without actually being physically present at the car work at this beautiful uh and let alone for instance if somebody takes alone in the longest collateralized with that car and your only and allowed to use this car as long as you make your loan payments on time than somebody else could control the access to this car buyer the blockchain and refuse access once certain conditions don't apply like paying the long payments on on time so therefore you don't would have to be
physically present and you could transfer the ownership of the car which basically the key is to somebody else by the blockchain without actually having to be physically there 1 other thing that already works is named quite Namecoin provides decentralized web addresses Namecoin corners exactly built on top of the bitcoin protocol or it is actually a copy of it with additional features you can register don't bit domains by uh the the the uh wire the Namecoin blockchain and then nobody can shut you down if you're living in a repressive country and you have a website and the regime doesn't like which is saying on this website they can shut down this address because it's on some centralized server but if you run
adult bits domain they would have to shut down Namecoin entirely which is very difficult because the Namecoin blockchain has many copies many thousands of copies around the world student to shut all these computers that run the Namecoin protocol therefore this is a very powerful tool for free speech also 1 other interesting application which is under development is related to identity think of how many different accounts you have online with many different provide us I think I myself of around 200 accounts and all these websites are left a lot of data I put up my name often I put that my address at least I put up my e-mail address is sometimes date of birth and all this data and even if I want to shut 1 of these accounts down the provider says my data I have no way to make sure that the provider he raises my data if you shut down for your Facebook account for instance you don't have access to it anymore but Facebook so keep that up and there is a certain development which tries to make or cooperative daytime the block chain so you can actually control and grant access somebody to the data but you can also refuse access and this would be an extremely powerful tool because then the
user would be the 1 where she controls what happens with the data and not the provider whom you have granted access to this data the so to sum this up
that kind is a very big start Bitcoin invented the blockchain a public ledger of every transaction is start but many applications can be run on top of it and we've just discussed some and I can only recommend you very interested in this topic to research
yourself which applications you find interesting if talked about Namecoin a little bit and then there is the theory and we haven't talked about that yet maybe just a few remarks ET reemr was not built as a currency in the 1st place like Bitcoin was but the
Syrian was mainly this to be a protocol where other people can invent new applications that run on top
of it and it's optimized so that these blockchain applications run very well and very efficiently so that there might be many more applications than what I've just shown to you that might change many things and empower the user especially when it comes to access and when it comes to data control thank you very much so this was my talk and now we have quizzes on who is going to show you 1 application
which is based on a cryptocurrency called dortch point that I also mentioned and talk the the it the alright so
on you have to be adult going before and just deliberate what those point is an school is like the little mean brother of Bitcoin so when the coin was gaining traction our people a little bit inspired from the forward chain and besides they there was thinking command we want to make also are cryptocurrency and put this cute little story on there and a little
bit in contrast to to Bitcoin weights of all of its whereas a lot of work out what a surprise how much profit to 1 major economic and bulge going is more like having the idea of trying and want to playing with that giving it forward tipping other users and for example on the red it on the the communities online on rented a lot of this operator approach on separate them
on them and they took a lot of other people if you look a great content in their desert blocked and people really like to stroll the adult points around and uh let the that people be part of it and make him and what I have to say you learn we what cryptocurrencies our and how they feel when you use them and I want to invite you today so if you have an Android phone sorry iPhone users of apple is not allowing Bitcoin acts on their stores so this is just and right but I'll ap here you see down there on the web page filch lame duck I all don't lame-duck by all you have to be linked to the place or at and why you are installing on OK I hear somebody already has or a perfect so did the ideas may be very simple you you have your phone you have to adults cones on their on the on on the phone it's an online wallet and then you start to see why on the phone and you begin to make make adults coin rain to you build up a out and when you're ready you get it drops and other people having the at open at this time can collect those points and that's a little bit to them without them and the selection goes you do the more you nearby by the volume a collect so anybody has the have already installed on our 1 2 OK all the time and the other 1 anybody needs a minute OK let's let's do we have a minute so we go chemical ballot and then I started to just what is minute I will tell at a little bit more about the notion community very young it's about December I think they got funded or they started their getting funded they just decided to do it at all source and during that time because there's already they you as we value behind toge going you can trade 4 dollars if you want and they they were doing a lot of charity and then that they there was sending I'm on some of the best match for the team to the Olympics due to make in ISM ones and they were with clean water for Africa they always uh last week in them and putting them out to harmonize NASA rated as Moscow arrays so it's a fun community if you haven't if you have half an hour checkups separated so separate don't coinages yes community and their their way to mean you if you have any questions so who has the of open alright I think this is like so I will now make a really big brain of about 10 thousand those points and the idea you don't you because I knew that and I I I I I I this is ozone getting bigger 3 2 hours and was thousand 5 thousand well yes OK I hope interconnection works OK I dropped tilts and there some lucky winners at the beginning so I just want to encourage you so sometimes if you now have some doubts going on there just open that up sometimes rolled around and if you've any questions about that point at which point we need to come to grant you questions for the I think very much you know of other any questions you have time for 1 and a
half questions please come over here ladies 1st the I had I had a professor in college and environmental studies he said that we would be in future ideally you see the sign how much energy household individuals parties so as 184 a staff since I had hoped for a fixed point the line officers maybe I could find the energy of the house to department here which would maybe make this point more valuable on heart in OK so the question is how
to incorporate is a bit con digital currencies in producing your own energy and then uh getting a reward of I got it
right and yes I've obviously you could do that and maybe 1 1 thing that would be possible that I haven't heard somebody doing yet but that would definitely be possible 1 good thing about the the is that it enables microtransactions so if if you want to send money that's just work maybe . 5 euros like 50 cents it over the internet usually these transactions don't make sense because the payment cause to do the transaction is a higher than the actual amount that you want to send and I could imagine that in the example that you have just given way you maybe get rewarded for contributing energy to the network on a on a small level because you just have a small home and would make sense with the regular payment network where the Bitcoin if you try to corporate that you could accept microtransactions and the transactions also worth doing because the costs are still lower than the actual
transactions so that might be a an application it I can imagine hello and I have 1 question regarding privacy in 1
question regarding the security market so he said that all the transactions they are public so does that mean that everyone can see who trades with whom so that's true OK no well the point is that I
don't know if you remember this address this I've put up you would need to know which
person which identity owns this address and typically you won't know this so if you look at it from from the 1st uh the perspective it's actually really are anonymous but then there is a 2nd thing if you do really really large transactions at some point you become visible on the block chain as I would say it's so that is called pseudonymous because at some point it might be possible to to actually find out which identity belongs to a certain addresses so it depends on how you behave on the blockchain I would
say but then the other question is like if for example it's it's it's a call are the ownership of a car is attached to Bitcoin then then
let's say someone but breaks into my computer is he able to just cell that hard to someone else for a very cheap money and so a
this this question is very good when it does just applied to the car example but to become a general so the addresses that I've shown there called public keys and there was a local private key to each address and this private key you need to store safely and say privately on your computer and the RAF somebody gets access to this private key they can actually spend your Bitcoin and it doesn't matter whether you have attached to a car ownership over the blockchain tutors Bitcoin or it's just the Bitcoin if somebody has access is private key they can steal bitcoins and then they're gone just like cash when somebody yes cash from you you can get it back hours you find the person so yes so you would have to security but the good news is there are a lot of very good solutions by now to secure your private keys and to not lose them even if your hard disk crashes for instance thank you recall for this
insight into this overview of goes from it was quite good to get those others is the net beginning to understand because I'm not become specialists so thank you for all of this and here I don't know who changed to US is 1st come according to the clinical account already what was moving but it takes a view of other questions I'll be around then thanks a lot in the few who do