The document discusses digital currencies like Bitcoin and their potential future impact. It provides background on cryptocurrencies and how they work using blockchain technology. While cryptocurrencies provide benefits like improved security and lower transaction costs, there are also drawbacks around volatility, electricity use, and potential illicit use. The document considers whether cryptocurrencies could reach a tipping point and become more widely adopted, and what scenarios might emerge in the future as these new digital currencies continue to develop and evolve.

1. The Future of Digital Currencies
----
Opportunity or threat?
October 2014

2. Today’s presentation
 Brief history
 A vocabulary list of currencies
 Cryptocurrencies, e.g., Bitcoin
 Benefits and drawbacks
 Recent events
 Moving forward

3. Do we even need money?
 Incan Empire
− Across today’s Peru,
Colombia, Chile, Bolivia,
Ecuador, Argentina
− 20 mln people
 No traders
 No shops/marketplaces
 No need for money
− Reciprocity/shared labor
− Self-sufficiency

4. What is money?
 Not just a medium of exchange
− Rational view
− But why is holding a piece of paper or metal rational?
 A social construction
− System of social relations based on power relations and
social norms
− Inter-temporal promise
 Store of abstract value linking past, present, and future
− Trust that our claim on future goods will be met

5. A vocabulary list of currencies
 Fiat currency
− National currency
 Alternative/complementary 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

6. 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, Euro
•Record virtual good:
USD 625,000

7. We are “stuck” in our old mindset …
Money=Fiat Currency
Fiat Currency
 Derives value from
government
 Fiat money as
country’s main
currency

8. Today > 6000 complementary currencies
 Many community-based
currencies
 In cooperation with national
currencies
 Benefits
− Counterbalance banks
− Create means of exchange
− Promote resilience of local
community
http://www.lietaer.com/writings/books/rethinking-money-by-bernard-lietaer-and-jacqui-dunne/

9. WIR in Switzerland - Complementary
 Founded 1934 by cooperative of
businessmen
 IOU system based on personal
trust
 Secondary mortgages enable
additional credit
 >60,000 member firms
 >CHF 4 bln assets (SEK 29 bln)
 Countercyclical impact
Top down fiat
currency
Bottom up
mutual credit
http://p2pfoundation.net/WIR_Economic_Circle_Cooperative

10. From Africa to Eastern Europe to ?

11. The future?
Facebook + banking license?

12. Bitcoin = The power of community +
open source + internet + CPU
• Developed by self-organizing community of thousands of
“strangers” across globe
• Not one but many motivations (intrinsic, extrinsic)
• Approx USD 5.2 bln in circulation (October 2014) and 70,000
daily transactions
• 91 bln SEK in circulation vs SEK 38 bln of Bitcoin in five years
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707

13. What is a cryptocurrency?
 Digital
 Decentralized, peer-to-peer (P2P), i.e., no central,
third party
 Uses cryptography to validate transactions
 Also uses cryptography to generate currency itself

14. How does Bitcoin work?
Block chain
• Shared public ledger
• All transactions ever
made included
• Chronology and
integrity enforced by
cryptography
Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”

15. Mycelium Bitcoin Wallet

16. http://techcrunch.com/2014/09/04/kncminer-raises-14-million-to-take-bitcoin-mining-to-the-moon/

17. Benefits of Bitcoin
 Improved transaction security
 Trust in cryptography rather than institution(s)
 Transparency
 Lower transaction costs
 Cross-border, faster transactions
 No outside intervention
 No inflation (although market volatility)

18. Bitcoin – one of many cryptocurrencies
Currency Code
Year
Est.
Founder(s) Active Website PoW PoS
Bitcoin BTC or XBT 2009
Satoshi
Nakamoto
(pseudonym)
Yes N/A Yes No
Ripple XRP 2013
Chris Larsen
& Jed
McCaleb
Yes ripple.com No No
Litecoin LTC 2011 Charles Lee Yes litecoin.org Yes No
Peercoin PPC 2012
Sunny King
(pseudonym)
Yes peercoin.net Yes Yes
Dogecoin DOGE 2013
Jackson
Palmer
& Billy
Markus
Yes
dogecoin.co
m
Yes No
Namecoin NMC 2011 N/A Yes dot-bit.org Yes No
Mastercoin MSC 2013 J. R. Willett Yes
mastercoin.or
g
No No
Primecoin XPM 2013
Sunny King
(pseudonym)
Yes
primecoin.or
g
Yes No

19. Drawbacks of Bitcoin
 Taxation concerns
 Security issues
 Consumer uncertainty
 Market volatility (commodity or currency?)
 Potential for illicit use
 High electricity consumption to “mine”
 …

21. Can we put our “trust” in a network?
 Social networks follow basic principles
− Self-organizing
− Self-policing
− But the “rich get richer”
− “Birds of a feather flock together”
− Likelihood of groupthink

22. Will there be a tipping point?
http://coinmap.org/
Depends on….
- Switching costs
- Network effects
Bitcoin accepted here
http://mercatus.org/site
s/default/files/Luther_Cr
yptocurrenciesNetworkE
ffects_v1.pdf

23. Future scenarios?

24. Issuing equity in cryptocurrency
http://techcrunch.com/2014/09/30/reddit-scoops-up-50m-series-b-from-sam-altman-a16z-sequoia-at-
500m-valuation

25. Bitcoin – so much more than a “coin”
 From dumb to smart money
 Underlying Bitcoin protocol holds real
transformative power
 Transfer property rights (e.g., shares,
certificates, digital money) fast,
transparent and very securely.
http://thenextweb.com/insider/2014/02/15/bitcoin-platform-currency/

26. ”Bitcoin has made me interested in
issues like finance and money – things
that I never thought about before. Now
I am really curious and questioning
why things are the way they are in the
finance world….and wondering what
can I do to change them.”
- Bitcoin 2014 Conference Attendee

27. Institutions
E.g., Complementary
~ Emergent community developing
own bottom up complementary
financial instruments
Emergent Collective
vs
E.g., Central Bank
~ Long-standing financial
institutions and regulations
Teigland, Yetis, Larsson 2013

28. Thomas Jefferson (1816)
“Laws and institutions must go hand in hand
with the progress of the human mind.”
The problem is that the human mind itself
can’t keep pace with the advances that
computers are enabling.
http://wadhwa.com/2014/04/15/mit-technology-review-laws-and-ethics-cant-keep-pace-with-technology/

29. The genie is
out of the bottle….

30. If you love knowledge,
set it free…
Robin Teigland
robin.teigland@hhs.se
www.knowledgenetworking.org
www.slideshare.net/eteigland
www.nordicworlds.net
@RobinTeigland
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