Bitcoin Presentation
Transcript: Cryptocurrency: Bitcoin A presentation delivered by Abrar, Dieter, Sam and Jay REFERENCES Anatomy of Financial Crises Introduction to CryptoCurrency Introduction to CryptoCurrency Who created Cryptocurrency? When was it created? Why was it created? David Chaum is a cryptographer who originally created Cryptocurrency Bitcoin was the first established cryptocurrency, there were many attempts to create cryptocurrency between 1998-2009; Bit Gold, and B Money A "Peer-t0-peer Electronic Cash System" would allow online payments to be sent directly from one party to another without a financial institution Bitcoin Overview Chart taken from BloomBerg Markets; Lam, Benhamou, Leung Introduction to Bitcoin Who created Bitcon? When it was created Why it was created The creator of Bitcoin is still a mystery to the world population a name regularly associated with the creation of Bitcoin is 'Satoshi Nakamoto'. It is unknown whether this is an individual or a group but what we do know is they hold 1 million Bitcoins worth $19 billion Bitcoin was created in 2009, originating from China Bitcoin was originally used for transactions on the black market such Silk Road. it allowed for the transactions origin and destination not to be traced Question? What was the first known Bitcoin transaction? a. Purchase a weapon b. Purchase two pizza's c. Purchase a house Is Bitcoin Money? Is Bitcoin Money? Bitcoin is not money Bitcoin is not money For a digital currency - or any currecny - to be considered money, it needs to fulfil the following functions, that is: medium of exchange, unit of account and store of value (see Dwyer 2014; Ali et al., 2014). Medium of exchange: Lo and Wang (2014): for Bitcoin to be used, it must be accepted. Unit of Account: Bitcoin's monthly volatility, from 2012 to 2014, was 265%; daily volatility was 200% whereas emerging market currencies displayed only 9%-20% volatility, over the same period (Lo and Wang, 2014). Cheung et al. (2015) argues this (volatility) diminishes any unit of account funtion of Bitcoin. Store of Value: Bitcoin hinges entirely on expectations. Thus, it is conducive to speculative. Hence, it is subject to bubbles. Bitcoin charts Bitcoin Charts (source: coinmarketcap (2018)) Bitcoin Charts (source: coinmarketcap (2018)) Bitcoin has demonstrated that it does meet the below criteria Bitcoin has demonstrated that it does meet the below criteria Medium of exchange: Bitcoin is accepted as a medium of exchange at a number of Multinational Companies including: Dell, Microsoft and the University of Cumbria. Unit of Account: The volatility of Bitcoin has always been associated with political/financial factors for example when China's central bank banned Bitcoin in 2013. According to the financial Times (2013) its value fell 11% as a result of this announcement. Store of Value: Bitcoin does not hinge on expectation, it is in fact backed by electricity Malone (2014) in the same way money is backed by gold. Venture Capitalist Gurley (2014) also states it is a even more beneficial store of value for underdeveloped nations. Geographical Bitcoin Stance Source: UK Business Insider Anonymity and Bitcoin Anonymity and Bitcoin Many merchants still don’t accept Bitcoin, a notable exception is Silk Road. Silk Road is an online market-place for a variety of goods but with a primary focus on drugs and other illegal substances (Barratt, 2012). The site ran from 2011 to 2013 Given the nature of the transaction, anonymity is a core issue – and Bitcoin is the solution (Meiklejohn et al., 2013). Christin (2012) found approximately 4.5% to 9% of Bitcoin exchanges constituted as a result of Silk Road related trades. To implement bitcoin as an active currency, its fundamental values will have to be amended, for example anonymity. How is Bitcoin money? How is Bitcoin money? All currencies have changing value on a daily basis and have been used to fund illegal activities. -Gold standard - there are a number of features in the composition of Bitcoin which makes it resemble the idea of money inherent in commodity theory. -Fiat money - the core aim of Bitcoin is to create a form of money that does not rely on trust in any central authority and so, Bitcoin is radically different from fiat money issued by a state. -Credit Money - credit money is nothing but the recording of the relation between creditor and debtor in a bookkeeping system. Similarily, the core of Bitcoin is the block chain, which functions as a public ledger registering the credits of the money users in the system. Is there a bubble? Is there a bubble? Bitcoin is a bubble Bitcoin is a bubble What are "bubbles": "Bubbles are not characterised by an exponential increase of price but rather by a faster-than-exponential growth of price" (Sornette et al., 2013); In 2017 alone, the price of Bitcoin increase by $1,000 9 time (see Kelly and Chavez-Dreyfuss, 2017). Overview: Cheah and Fry (2015) state Bitcoin has no fundamental nor intrinsic value; value is derived from
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