bitcoin: why it matters, and where it's going -...
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Vardiz Commerce Sdn Bhd (2018)
Bitcoin:Why it matters, and where it’s going
Last updated:
September 2018
Helplessness is alearned trait
Sometimes optimism needs to be preached
Source: Failure to escape traumatic shock; Seligman et. al 1967
Alternatives are possible when we startbelieving again
Innovation in bankingis an oxymoron
Too many shackles to make fundamental improvements
Source: Ikiru, Akira Kurosawa 1952
We are getting short changed
“The one thing that’s missing but that will soon be developed is a reliable e-cash;
a method whereby on the internet you can transfer funds from A to B,
without A knowing B or B knowing A”
Milton Friedman1999
The solution wasto replace authority with a network
Source: Bitcoin.org
It took 10 years before Milton’s reliable e-cash got developed
The problem wasyou cannot “cut and paste” over the internet without an authority
Source: Bitcoin.org
1. Download a wallet
2. Generate addresses:
3. Addresses hold Bitcoin
4. Receive and spend Bitcoins
5. Addresses controlled by unique private keys
6. Anyone with the private keys to an address can spend it’s Bitcoin
3MHJX539UGViWKJ22qXiBgGh2mNU8ejDkC
Appwallets
Hardwarewallets
Enthusiastwallets
BRD Samourai Copay Zap
KeepKey Trezor Ledger
Full Node Hardware Security Module
…
…
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Many kinds of wallets available.
Must be open-sourced, must be backed-up.
The onus of security is on the user.
Source: Bitcoin.org
Mining is how addresses are updated on the Blockchain
Miners are rewarded new Bitcoins for their service
Blockchain is the public ledger where Bitcoin of all addresses are tracked
Technology once invented, can never be uninvented
Markets develop around how technologies are used, not what they are intended for
Adoption often haveunintended consequences
Bitcoin started out as ane-cash, and has worked as advertised for ~9 years now
Turns out right now, storing value is what many people want to use Bitcoin for
It’s proven resilience has driven its adoption as a store of value
Global stores of value Size (USD) %
Real estate 228tn 82%
Collectibles 22tn 8%
Government bonds 20tn 7%
Gold 9tn 3%
280tn
Bitcoin 0.2tn 0.01%
Bitcoin’s main advantages:-
1. Absolute ownership
2. Absolute scarcity
3. Cross-border fungibility
4. Merchant acceptance
Source Fundstrat, Aljazeera
Source: https://www.coindesk.com/crypto-gaza-west-bank-bitcoin-palestine/
>170m people worldwide affected by conflict– many also shut-off from international finance.
Banks simply disinterested–too much risk for little return.
Bitcoin may be the onlysustainable long-term solution.
Governments with exchange controls sometimes responded negatively to Bitcoin
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Weekly peer-to-peer trading volume
Crackdowns move the market underground
The more Bitcoin survives persecution, the more credible it becomes
Absolute control over finance magnifies the cost of misguidance.
Financial policies are often implemented with a lot less rigour and a lot more hubris than people believe.
Source: When India’s cash disappeared; https://www.npr.org/sections/money/2017/05/10/527803742/episode-770-when-indias-cash-disappeared-part-one
However, buying Bitcoins just for storage is boring
Ultimately working with stakeholders produces better results
Producing a vibrant local ecosystem is more difficult, but the outcome will be more profound.
Regulatory clarity
Mature service
providersMaturemarkets
Mature technology
No market manipulationFull reserve exchangesCross-border liquidityDerivatives
Accounting / Audit / TaxERP / POS systems
Price indexCorporate wallets
Legal method of paymentTrading income / capital gainsAML/CFT & Exchange controlsMoney transmitters
DecentralizationScalability
PrivacyUser experience
Once the pieces are assembled, adoption spreads on its own
The spread of Bitcoin comes from its legion of fans, not reliant on government mandates
Japan is the best example
With growth comes scalability issues: network can only handle ~7 transactions per second
Bitcoin evolves. An open-source, global team of developers keeps it ahead of its competitors
Spike in confirmation times & fees in 2017 degraded user experience
While Bitcoin remained robust, its service providers are less so.
Fiat exchanges are natural honeypots for hackers
Need for regular 3rd party audits, technology sharing and imposition of best practices
MtGox
• Formerly largest fiat exchange based in Japan
• 850,000 BTC stolen
• Bankruptcy proceedings ongoing
2014
Bitstamp
• Fiat exchange based in Slovenia
• 19,000 BTC stolen
• Losses absorbed, continued operating
2015
Bitfinex
• Fiat exchange based in Hong Kong
• 120,000 BTC stolen
• Losses “socialized”, continued operating
2016
Frenzy stopped once artificial enablers were taken away
Important not to conflate organic growth with exuberance
BTC / USD
Bitcoin needs organic propagation to succeed, it will take years
Source: Why Bitcoin Matters – Marc Andreesen New York Times 2014
“Eventually mainstream products, companies and industries emerge to commercialize it;
its effects become profound; and later,
many people wonder why its powerful promise wasn’t more obvious from the start.”
Fancy applications only makes sense after a large user base is established
Onboarding as many people as possible is our top priority
Market infrastructure for Bitcoin are being built across ASEAN
It takes 25% adoption1 of a new trend before it reaches tipping point and becomes the next social norm.
Source: Bloomberg, https://www.asc.upenn.edu/news-events/news/research-finds-tipping-point-large-scale-social-change
Bursa Malaysia has 2.5m retail investors. 25% of that is 625,000 people.
About usVardiz Commerce Sdn Bhd
Our goalTo produce compliant market infrastructure for the Malaysian Bitcoin ecosystem
Our plan1. Educate the public2. Lobby stakeholders3. Operate a brokerage4. Develop an exchange5. Spread merchant tools
Get in [email protected]