Presentation at Technology & Privacy Forum, February 2015

1. Bitcoins and Altcoins
Privacy in a
decentralised world
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2. “Bitcoins”
2
Block chain
Altcoins
“Bitcoin 2.0”

3. Today’s Agenda
• Bitcoins and Altcoins as currencies
• Q&A
• Bitcoin 2.0 and decentralisation
• Q&A
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4. A Bit of History
• Precursor: crypto, many ecash technologies
especially David Chaum and Stefan Brands
• November 2008: paper “Bitcoin: A Peer-to-Peer
Electronic Cash System” by “Satoshi Nakamoto”
• January 2009: network came into existence
• August 2010: only major security flaw
• April 2011: 1st Altcoin launched (Namecoin)
followed by Litecoin
• February 2014: Mt Gox collapse (70% of market)
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5. Price Volatility, Immaturity
Full price history
Last 3 months
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6. Supply Side
• Mimics gold mining
• Fixed supply of BTCs
– 21 million cap
– supply reduces
geometrically
– currently 25 BTCs per
block (10 minutes)
which is about US$
1M per day
• Inherently deflationary
13.9M, 66%
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7. Chinese Exchanges Dominate
Source: http://bitcoincharts.com/charts/volumepie/
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8. Regulatory Focus on Exchanges
• Increasingly full AML (Anti-Money Laundering)
processes required including KYC (Know Your
Customer) and Suspicious Transaction
Reporting
• Consumer protection laws- lots of scams, full
custodial control of money
• Taxation laws
• Privacy concerns
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9. All the Technical Details
Free version: http://chimera.labs.oreilly.com/books/1234000001802/index.html
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10. 3 Things You
Need to Know
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11. 1. Beautiful Design
• Completely decentralised
• No trust in anyone required
• Alignment of incentives for all roles
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12. 2. Wallets Still Weak Point
• More key ring than cash store
• Bitcoin addresses (where BTCs received) can
be public, unlike credit cards
• Lots of security innovation but wallets are still
the weak point
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13. 3. Not Anonymous
• Bitcoin addresses are pseudonymous
• Block chain has an immutable, public record of
every transaction
• Mixing and laundry services are of dubious
legality. More common: new address for every
transaction
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14. Altcoins
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15. Altcoins
• Alternatives to Bitcoin, modifying it in one or
more ways
• Around 900 but growing all the time
• Not yet significant- just 9 have market cap
over $10M compared to Bitcoin’s $3.3B
• Many scams including pump and dump
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16. Ripple (XRP)
• Largest Altcoin (?), market cap $440M
• Re-developed in 2011 by the controversial Jed
McCaleb, now with “Bitcoin killer” Stellar STRs
• Completely separate from Bitcoin but bridge
exists between the two
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17. Litecoin
• 2nd largest Altcoin, market cap $66M
• Forked from Bitcoin in October 2011
• Compared to Bitcoin, Litecoin has:
– faster confirmation time (2.5 minutes)
– 4 times as many currency units
– different mining algorithm called scrypt
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18. Darkcoin
• 5th largest Altcoin, market cap $14M
• Focus on privacy by obscuring transactions and
IP (Internet Protocol) addresses
• Compared to Bitcoin and Litecoin, Darkcoin
has different mining algorithm called X11
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19. Zerocash
• Under development. Goal: anonymous “origin,
destination, and amount of the payment”
• Extends Bitcoin’s protocol and software
• Utilises a special crypto technique called zk-
SNARK (zero knowledge Succinct Non-
interactive ARguments of Knowledge). Proof
that something is true without disclosing it
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20. Dogecoin
• 4th largest Altcoin, market cap $14M
• Started as a joke currency in 2013
• Gained traction quickly as an Internet tipping
currency
• Completely breached in December 2013.
Community then donated to cover all losses in
a month
• Community funded Jamaican Bobsled Team
for the 2014 Winter Olympics
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21. Summary
• Bitcoin shows decentralised currencies without
trusted intermediaries may work
• Still immature. No mainstream adoption yet but
niches clear, e.g. international remittances
• Bitcoin network itself strong and secure but
ecosystem has weaknesses
• Regulation increasing
• Bitcoin is not anonymous. Some Altcoins
addressing this
• Future? Niches at low cost + digital applications
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22. Questions / comments
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23. Bitcoin 2.0
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24. The Block Chain
• Probably Bitcoin’s major innovation
• Foundation for new decentralised and
distributed systems
The block chain is a technology step-change
to build a secure, scalable and open
coordination platform globally.
Not limited to currency or financial systems.
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25. The Block Chain is
• A ledger: an ordered record
of transactions
– verified
– immutable
– public
– anyone can replicate and
verify it independently
– records consensus of the
“truth”
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26. 1. Timestamping
• Cryptographic fingerprint of a file put in a
block chain (content not revealed)
• Proof that file
– existed at particular point of time
– hasn’t been altered
• Widespread application
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27. 2. Sidechains
• Bitcoin network innovation bogged down by
vested interests and stability concerns
• Interconnect with other block chains, including
altcoins, as a trust anchor
• Best of both worlds: innovation + stability
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28. 3. Internet of Things
• Block chain acts as a database, determining
state with smart objects, and adding security
• IBM and Samsung working on ADEPT
(Autonomous Decentralized Peer-to-Peer
Telemetry)
• [Full Disclosure: commercial interest]
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29. 4. User-centric Identity
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30. 5. New Wave of Decentralisation
• The Internet provides communication and
cryptocurrencies (Bitcoins, Altcoins) digital
money
• A new wave of decentralisation is coming
– Autonomous Agents
– Decentralised Applications
– Decentralised Organisations
– Decentralised Autonomous Organisations
(DAOs) or Corporations (DACs)
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31. An Evil DAO
Evil DAO
Runs an evil marketplace
Buys human services from
Amazon’s Mechanical Turk
Pays for hosting
and other services
Launders Bitcoins or
converts to Darkcoins
Bad guys get profit
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32. Summary
• The block chain is a technology step-change
with applications far beyond currencies and
financial systems
• A new wave of innovative decentralised and
distributed services and systems coming
• Some of them may require adaptation of
current policy instruments but it’s still only a
theoretical risk
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33. Questions / comments
Vikram Kumar © 2015
Co-founder, Swerl IO Ltd.
Email: vikram@swerl.io
Twitter: @vikram_nz
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Images Attribution
• Cover: Martin Sutovec, Cagle Cartoons, Slovakia http://www.truthdig.com/cartoon/item/bitcoin_not_accepted_20131129
• Altcoins: Fredo&Pid’Jin http://www.pidjin.net/2013/12/09/bitcoined/