Cryptocurrency Trends, Challenges & Opportunities
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2017 has seen Bitcoin, Ethereum, and other cryptocurrencies become mainstream as an investment asset class. With the massive bull run taking place this year, cryptocurrencies have hit an all-time high in 2017 and investment professionals can no longer ignore this asset class. The coming of age of the Ethereum platform and the explosion of Initial Coin Offerings (ICO) this year has seen Venture Capital (VC) being disrupted. This talk will explore some of the trends happening in the blockchain space, challenges that stakeholders face, and the opportunities that participants can explore in this industry. For further information, visit our website at ma2017.mymagic.my. Facebook - Facebook.com/magic.cyberjaya Twitter - Twitter.com/MagicCyberjaya Instagram - Instagram.com/magic_cyberjaya/ LinkedIn - my.linkedin.com/in/magiccyberjaya YouTube - https://www.youtube.com/channel/UCIT_ihmWh5f3MCobvEwWMaA
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Cryptocurrency Trends, Challenges & Opportunities
- 1. New Money: Cryptocurrency Trends, Challenges & Opportunities Bobby Ong MaGIC Academy Symposium 2017 6th October 2017
- 2. About the Speaker Bobby Ong ● BSc. Economics, University College London (2012) ● Bought first bitcoin (Mid-2013) ● Co-founder, CoinGecko (Apr 2014) ● Co-author of Chapter 5: Handbook of Digital Currency, 1st Edition (Apr 2015) ● Co-author of Chapter 8 & 9: Handbook of Blockchain, Digital Finance, and Inclusion, 1st Edition (Sep 2017)
- 4. Who here owns bitcoin, ether or other cryptocurrencies?
- 6. Bitcoin ● First decentralized digital currency ● Invented by Satoshi Nakamoto in 2009 ● 21 million bitcoin supply limit ● Reward halved every 4 years 50 BTC → 25 BTC → 12.5 BTC → 6.25 BTC → ... → 0.00000001 BTC ● Current Circulation: 16.6 million BTC (79% of all BTC)
- 7. Blockchain as the ledger! Not a spreadsheet, not a regular database. Account Number Balance 1Ew6znJWou... 5.0 1AMPjUg2ku... 0.8 185HKCyjvh... 12.5 121FUdePko... 8.0 From To Amount 1EMRx910... 1Ew6znJWou... 5.0 1AMPjUg2ku... 185HKCyjvh... 2.5 121FUdePko... 185HKCyjvh... 10.0 121FUdePko... 1AMPjUg2ku... 3.0 ... Transactions Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Account Balance
- 8. From To Amount 1EMRx910... 1EwDAGu3... 15.0 1E893fjUg2ku... 185yOPE... 9.3 12NgdoPko... 1kiutrvh... 2.0 12NgdoPko... 1grUg2ku... 1.0 ... Pending/New Transactions Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction To add new transactions to the blockchain Must solve a Cryptographic Hash puzzle Find variable through the hash function that gives you the result of 000XX... f( ? + previous_block + tx ) = 000XX... f( 1 + previous_block + tx ) = 3ab12a... not 000XX, retry f( 2 + previous_block + tx ) = 932swp.. not 000XX, retry Keep trying until solution is found Mining
- 10. Bitcoin Price History Feb 2014 MtGox Closure Aug 2017 Bitcoin Cash (BCH) Split Jan 2015 Bitstamp Hacked Jun 2015 NY Releases BitLicense May 2017 New York Agreement SegWit2x Sep 2017 China Bans ICO Aug 2016 Bitfinex Hacked Jan 2016 Mike Hearn Quits Bitcoin Source: https://www.coingecko.com/en/price_charts/bitcoin/usd Additional Reading: https://99bitcoins.com/price-chart-history/ USD
- 11. Bitcoin Confirmed Transactions Per Day Source: https://blockchain.info/charts/n-transactions?timespan=all
- 12. Bitcoin Hashrate Distribution Source: https://blockchain.info/pools
- 14. Altcoins 101 Source: https://coinmarketcap.com/ ● Over 1,128 active cryptocurrencies in the market! ● $137 billion market capitalization ● $3 billion daily volume
- 15. Early Altcoins Ripple - Real Time Gross Settlement System & Remittance Network - Released in 2012 - Partnership with dozens of banks - Consensus protocol Namecoin - First altcoin - Launched 18 April 2011 - Decentralized censorship resistant Domain Name System (.bit domains) - Merged mined with Bitcoin Dash - Anonymous cryptocurrency - Previously Darkcoin / XCoin - PrivateSend based on CoinJoin - Mixing of coins using 0.01, 0.1, 1, 10 etc DASH - Launched 18 January 2014 Litecoin - Created by Charlie Lee - 84 million coins - Scrypt algorithm - 2.5 minutes block time - Block reward halves every 840,000 blocks - Launched 7 October 2011
- 16. Early Altcoin Trends ● Experiment with total supply of coins, distribution of coins ● Experiment with transaction time ● Experiment with hashing algorithm, Proof of Stake ● Experiment with different use cases ● Experiment with different codebases ● National cryptocurrencies ● Anonymous cryptocurrencies ● Fun Experiment - Dogecoin
- 17. Ethereum ● Bitcoin → peer to peer electronic cash system (payments) ● Ethereum → running code of decentralized application (smart contracts) ● Smart contracts → computer code that facilitate the exchange of money, content, property, shares, or anything of value.
- 20. Cryptocurrency Market Cap Increased Is this a bubble waiting to pop?
- 21. Cryptocurrency Market Cap Increased
- 22. Bitcoin Dominance Reduced in 2017
- 24. Initial Coin Offering (ICO) ● Unregulated method of financing very similar to Initial Public Offerings (IPO) ● Cryptocurrency projects create new tokens and sell a percentage of newly created tokens in exchange for ETH / BTC etc. Tokens are then listed on cryptocurrency exchanges and freely tradable ● Most ICOs create tokens on top of Ethereum platform using the ERC20 standard ● Blockchain token sales > crypto VC deals
- 25. Initial Coin Offering (ICO) Source: https://www.coingecko.com/ico
- 26. Initial Coin Offering (ICO) Source: https://www.coindesk.com/ico-tracker/
- 27. ● YTD Sept 2017 ICOs have raised US$1,484 million ● Some notable ICO: Tezos (2017) - US$232 million Bancor (2017) - US$153 million The DAO (2016) - US$152 million Status (2017) - US$95 million TenX (2017) - US$83 million Ethereum (2014) - US$18 million ● Many ICOs are illegal-fundraising of securities disguised as tokens. ● SEC (US) use Howey Test to determine if an ICO is a security ● There are many ICO scams. Be careful! Source: https://www.coingecko.com/ico https://www.coindesk.com/ico-tracker/ https://bitcoinmagazine.com/guides/what-ico/ Initial Coin Offering (ICO)
- 28. ICO Unicorns ● ICO tokens are starting to have market capitalization / valuation of above $1 billion ● OmiseGo - Thailand based payment company. Raised $25m in ICO. Tokens from $0.27 to $11 ● QTUM - Ethereum of China. Raised $15.6m in ICO. Tokens from $0.30 to $17 Source: https://techcrunch.com/2017/08/31/the-first-ico-unicorns-are-here/
- 30. Bitcoin Scalability Issue 1 MB hard cap reached
- 31. Scalability Issue ● Bitcoin has a scalability issue - 7 transactions/second ● Hard cap in block size of 1 MB → Limit is reached ● How do we scale? Segregated Witness? Lightning Network? Increase in blocksize? ● [23 May 2017] New York Agreement Digital Currency Group brokered an agreement to implement SegWit and increase block size to 2MB known as “SegWit2x” ● [21 July 2017] Bitcoin miners agree to upgrade software to support Segregated Witness ● [1 August 2017] Bitcoin Cash born - no SegWit and block size increase to 8MB ● [November 2017] 2MB increase to Bitcoin as per NYA. Another Bitcoin Split...
- 32. Chain Splits
- 33. At this split, Any amount of Bitcoin you own will be duplicated into Bitcoin Cash Bitcoin Cash inherits all history of Bitcoin up until this point Chain Split! New consensus rules New software Group of miners mine a new blockchain Blockchain Split
- 34. Blockchain Split Why a Split? No consensus on how to scale Bitcoin for almost 2 years Difficult to make changes without support Only solution is to part ways Bigger Blocks as a way to scale more transactions to be written into the blockchain ledger Rearrange how data is stored within the Block. Pack more transactions.
- 35. (A) May 2016 DAO Token was launched on top of Ethereum Crowdfunding successfully raised $168 million Largest crowdfunding ever 14% of all Ethereum (B) June 2016 Vulnerability of the DAO Token contract was exploited Perpetrator transferred funds from the contracts into his account worth $60 million (at that time) Balance recided in the Ethereum ledger
- 36. Due to the systemic risk to the platform & lost of confidence Ethereum core developers decided to change the rules of the blockchain By issuing a fix to the contract, permitting refunds to the victims As though the hack did not happen
- 37. At this split, Any amount of Ethereum you own will be duplicated into Ethereum Classic Ethereum Classic inherits all history of Ethereum including the DAO Token hack Blockchain Split Chain Split! Ethereum Classic stays true to the original ledger where the hacking incident occurred with the original rules
- 38. Regulations
- 39. Regulations
- 40. Opportunities
- 42. Opportunities ● Get involved in the blockchain space ● Learn, Learn & Learn ● Trade the many cryptocurrencies ● Build apps for the blockchain space - Join us to build block explorers anyone? ● Research and write articles/journals ● Contribute to the community by weeding out scams