BITCOIN
the future of finance
Eric Martindale · EntreDot · June 8th, 2015
HELLO!
I’m Eric Martindale.
I’m an early adopter, software engineer, and entrepreneur.
I’m on Twitter at @martindale,
or email at eric@ericmartindale.com.
WHAT IS THIS BITCOIN THING?
It’s a lot easier than you think.
“
Bitcoin offers a sweeping vista of opportunity
to reimagine how the financial system can
and should work in the Internet era, and a
catalyst to reshape that system in ways that
are more powerful for individuals and
businesses alike.
– Marc Andreessen
LEGACY BANKING
Our course from physical money
(gold) to paper money, into fiat
currency and now “cryptocurrency”.
FIRST, WHAT IS MONEY?
○
○
○
○
○
Medium of exchange
Store of value
Fungible
Easily transported
Not consumable
Money today is most of these things, but not
quite perfect. It works, for now.
MODERN MONEY TYPES
Physical
Virtual
Gold, paper money, etc.
Very “worldly”, can be
used without any
technology at all.
Much easier to move, no
requirement for physical
storage or worries about
theft through violence.
Can be heavy, possibly
counterfeited.
Most US Dollars are
actually virtual.
$10,500,000,000,000
US Dollars in existence: 10.5 trillion, not including
derivatives
(I had to change my font size to get that number to fit)
$1,200,000,000,000
Physical coins and notes in circulation
(USD)
1.2 trillion
91.25%
...of US dollars are virtual issuances!
HOW THE DOLLAR WORKS
Federal Reserve
Banks
Studies the economy and
makes decisions about
when to “create” money.
Private corporation.
Issue currency based on
their deposits and the
loans issued to them by
the Federal Reserve.
Loans money to the
banks, at interest.
Banks pay interest on
every dollar in existence.
THE EVOLUTION OF MONEY
asset
backed
trust
backed
math
backed
A COMPARISON OF TRUST
Fiat
Bitcoin
...has value because a
government wrote a law
requiring it to have value
(or, requiring businesses
to accept it)
...has value because it is
explicitly scarce, and
cannot be copied or
duplicated in any way.
Value: trust, in a
government, or bank.
Value: trust, in the
mathematics backing it.
PAYMENT MECHANISMS
Basic commerce has a dirty, dangerous
secret.
CREDIT CARD BREACHES
A
B
C
Neiman Marcus
January
2014
1,100,000
Michaels
January
2014
3,000,000
June
2014
200,000
Home Depot
September
2014
56,000,000
Staples
December
2014
1,160,000
PF Changs
70,000,000
credit cards compromised in 2014 alone
PAYMENT MECHANISMS
Credit Cards
Bitcoin
...grant anyone with your
account number access
to your funds.
...never reveals your
access code, only a
digital “signature”.
You send this number
over the Internet any time
you make any kind of
purchase.
Signatures are 100%
positive proofs of identity,
but share no further
information.
PAYMENT MECHANISMS
Credit Cards
Bitcoin
...require payment
processors, who take
fees in exchange for their
services.
...can be sent directly
from the customer to you,
from anywhere in the
world. No fees.
THE UNBANKED
We’re pretty lucky, but we can do better.
7,320,000,000
people alive today
2,500,000,000
have little or no access to banking services
10,000,000
in the United States!
LEGACY SYSTEM PROBLEMS
○ Security model not designed for Internet
○ Chargebacks & Fraud
○ Requires middle-men, who take fees
□
This includes banks & payment processors
○ Limited to one geographic region
○ Infinite money supply
□
We went off the gold standard in 1971!
○ Your business usually held liable!
HOW CAN WE FIX IT?
A foundation for a renaissance.
THE UNIVERSE & BIG NUMBERS
We’ve got the entire universe on our side here.
“
One must acknowledge that with
cryptography, no amount of
violence will ever solve a math
problem.
– Jacob Applebaum
THE BLOCKCHAIN
The ultimate solution to fraud and
counterfeit; a way to perfectly track
where things came from.
DOUBLE ENTRY LEDGERS
Credits
Debits
...keep track of outgoing
transfers, or the
decrease of an asset.
...keep track of incoming
transfers, or the increase
of an asset.
We reconcile the differences
between these two columns,
making sure they match 100%.
TRIPLE ENTRY LEDGERS
You
You’ve got your
version of the
recordbook, and you
trust it completely.
You wrote it, after all.
Me
Like you, I’ve got my
own copy of the
recordbook, which I
trust, but I might not
trust yours.
Everyone
The entire ledger, or
the blockchain, is kept
by everyone. If we
ever disagree or find a
discrepancy, we just
ask for a consensus.
THE BLOCKCHAIN
The World Wide Ledger.
PAGES IN A LEDGER
Blocks
Miners
...are just pages in the
ledger. It’s really hard to
create one – it takes a lot
of work, but is
immediately verifiable if
correct.
...try to create blocks as
fast as they can. Blocks
are only valid if they
follow the rules, and the
reward is newly created
Bitcoin.
~10 minutes worth of
transactions per block.
Self-adjusting algorithm,
rules keep it on target.
THE FIRST BLOCKCHAIN “APP”
To rebuild the system, we need a unit of value.
bitcoin
THE FIRST BLOCKCHAIN “APP”
To rebuild the system, we need a unit of value.
DIGITAL CASH
No middlemen taking
a cut.
BORDERLESS CURRENCY
SO, WHERE ARE WE?
Pretty far, actually. Yet, only the beginning...
THE BITCOIN ECOSYSTEM
Peers
Miners
Merchants
Anyone who runs the Bitcoin
program joins the peer-to-peer
network, and relays transactions.
Miners receive the transactions
and sign them into pages in the
world-wide ledger, the Blockchain.
Businesses that accept Bitcoin can
directly monitor the public network
for related transactions.
Exchanges
Wallets
Smart Contracts
Many online markets exist to trade
fiat currencies for crypto
currencies, making Bitcoin easy to
acquire.
Since Bitcoin is an open protocol,
there are many choices of wallets
to store your Bitcoin in.
The holy grail of contract law,
Bitcoin is a programmable system
enabling automatic enforcement of
contracts without a third party.
PAYING WITH BITCOIN
Far easier than Apple Pay.
Either tap to pay with NFC,
or scan a code and simply
press “send”.
Place your screenshot here
USING BITCOIN TODAY
Hundreds of thousands of businesses already accept
Bitcoin, today. Some even offer exclusive discounts!
BITCOIN MERCHANTS
Microsoft
Gyft
Overstock.com
Buy anything in Microsoft’s digital
goods store (including XBox
points, for those of you with kids!)
with Bitcoin.
Gift cards at hundreds of stores, in
a simple digital interface. Whole
Foods, Papa John’s, Target, and
many more.
Furniture, electronics, jewelry…
global marketplace that sells pretty
much everything. Great payment
experience.
NewEgg
Reeds Jewelers
Expedia
Electronics – computers,
televisions, sound systems. One
of the earliest adopters and
biggest supporters!
A local company! Full adoption of
Bitcoin payments at all locations
nationwide.
Travel in style with Bitcoin
including flights, hotels, and car
rentals. The final piece of the
puzzle!
“
Bitcoin is truly radical, Cryptocurrency, more broadly,
is a truly radical, truly revolutionary, fundamental
breakthrough in computer science, completely
different way to do transaction processing, potentially
a replacement for a very large amount of the status
quo.
– Marc Andreessen
THANKS!
Any questions?
You can find me pretty much anywhere...
@martindale
eric@ericmartindale.com
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