April 2016
www.hhs.se

Time will tell…..
The Blockchain is the glue that is going to
drive a productivity revolution across the
globe on par with what Henry Ford did
with the automobile.
— Paul Brody, Americas Strategy Leader,
Technology Sector, Ernst & Young

>USD 1 bln invested in Bitcoin/Blockchain
https://www.cbinsights.com/blog/largest-blockchain-deals-strategic/

Challenging our mindset
Money = Fiat currency
 Country’s primary
currency
 Derives value from
government backing

A vocabulary list of currencies
 Fiat currency
− National currency
 Alternative currency
− Bonus points/vouchers, e.g., frequent flyer miles
− Digital currency
 In-game currencies, e.g., Stardollars, Farmville cash
 Virtual world currencies, e.g., Linden dollars, PEDs
 Mobile currency, e.g., M-pesa
 Cryptocurrency, e.g., Bitcoin
>6000
alternative
currencies

Real cash economy in Entropia Universe
http://blogs.forbes.com/oliverchiang/2010/11/13/meet-the-man-who-
just-made-a-cool-half-million-from-the-sale-of-virtual-property/
•GDP >USD 440 mln
•PEDs <--> USD, EUR
•Record virtual good:
USD 625,000

https://bitcoin.org/bitcoin.pdf
“…an electronic payment system based on cryptographic proof
instead of trust, allowing any two willing parties to transact
directly with each other without the need for a trusted third party.”
The beginnings of Bitcoin on the
internet in 2008-2009

Banking is essential,
but banks are not.
Bill Gates

Self-organizing, global community of strangers
• Libertarian
• Efficiency
• Profit
• Challenge
• Community

Institutions
EmergentCollective
VS
E.g., Central Bank
~ Long-standing financial
institutions and regulations
E.g., Bitcoin Community
~ Emergent collective of users across
globe connected through internet
Teigland, Yetis, Larsson 2013

Continued growth
On April 27, 2016
• 1 BTC = USD 463
• 15.5 mln bitcoins in
circulation
• Market capitalization of
≈USD 7.1 bln
• ≈245,000 transactions
https://blockchain.info/charts

How does Bitcoin work?
https://99bitcoins.com/get-your-first-bitcoin/

Where can I buy bitcoins?
32 länder i Europa

Yesterday I
bought 1000
SEK of bitcoins

The blockchain underlies bitcoin transactions
Financial Times

A global network of Bitcoin nodes
https://bitnodes.21.co/

https://www.youtube.com/watch?v=K8kua5B5K3I
Miners verify the transactions

Mycelium wallet on my phone

Where can I spend my bitcoins?
Dell
Microsoft
Wordpress
Overstock
Giftcards
Expedia

Where can I spend bitcoin in Prague?

my bitcoin purchase
http://www.coindesk.com/information/how-do-bitcoin-transactions-work/

What is so novel about Bitcoin?
• Distributed timestamped
public ledger
• Decentralized, P2P network
• Proof-of-work algorithm
• All transactions ever made
logged
• Chronology and integrity
enforced by cryptography
• No third party overseeing
Trust in
the network

Bitcoin – one of 100s of cryptocurrencies
http://coinmarketcap.com/

Sluggish growth in bitcoin usage?
 Users satisfied with current payment systems that
continuously improving
 Practical difficulty of purchasing bitcoins
 Volatility of bitcoin’s value relative to governmentissued
currencies
 Perception that bitcoin is insecure
 Perception that only used for money laundering, drugs, etc.
 Questions over bitcoin’s legal status
 Irreversible and unforgiving nature of bitcoin transactions
 Lack of support for bitcoin in mainstream financial sector
http://www.multichain.com/download/MultiChain-White-Paper.pdf

- Andreas Antonopolous
Saying that Bitcoin is a currency
is like saying that the internet is email.
Currency is just the first app!
http://startusingbitcoin.com/blog/1-what-is-bitcoin/

The blockchain
 Decentralized and distributed
• Robust, no central control or authority required to
coordinate behavior or interaction
• Shared public history of all transactions
 Displaces roles of trusted third parties
• Can’t do same transaction twice
• No transaction repudiation
• Initial entry requires trust but then system operates on
trustless basis
http://www.longfinance.net/images/events/Blockchain_and_Insurance_Webinar_10.14v2.0.pdf

Centralized vs distributed ledgers
Financial Times

Benefits of blockchain for financial services
 Lower costs through shared infrastructure
 Faster settlement that leads to lower capital
and liquidity needs
 Increased transparency, especially with cross
border payments
 Greater security through cryptography,
transparency
Citi Research, Jan 2016

Betting on the blockchain - together
>40 banks and counting…
Goldman Sachs, JPMorgan,
Credit Suisse, Barclays,
Commonwealth Bank of Australia,
State Street, RBS, BBVA, UBS,
Nordea, SEB, + ……
+ +

What can be decentralized using blockchains?
• Trading, stocks, bonds,
• Contracts, notary services
• Insurance
• Law, dispute resolution,
• Matchmaking services
• Crowdfunding, peer-to-peer lending
• Etc.
http://startusingbitcoin.com/blog/1-what-is-bitcoin/

Blockchain insurance applications

Enabling smart contracts?
Weather data
algorithm
Insurance
claim payout

IBM Institute for Business Value (PDF)

• World’s first decentralized computer?
• Commoditizes trust
https://www.youtube.com/watch?v=U_LK0t_qaPo

robots
nanok.com

All our knowledge is about the past, but all our
strategic decisions are about the future.
What we don’t know
we don’t know
Most of what we need to know
to make good decisions today
is outside our comprehension:
We don’t even know it’s there.
What we
know
What we know
we don’t know

1950s vision of
home PC in 2004

Robin Teigland
robin.teigland@hhs.se
www.slideshare.net/eteigland
www.funnovation.se
@robin.teigland
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