Presentation made in March 2015 for CIOs in Sweden on Bitcoin, Blockchain, and IoT

1. March2015
www.hhs.se
Bitcoin, Blockchain, and IoT

2. Who am I? (LinkedIn Inmaps)
SSE
Exec Ed
Swedish
Industry
Research
Wharton
Stanford
McKinsey
funnovation.se

3. Halloween in Nashville, 1974

4. In just a few years in Sweden alone…
Company Founded Business
Klarna 2005 E-commerce payment services
MyLoan 2006 Loan broker
Trustly 2008 Online payments
TrustBuddy 2009 P2P lending
iZettle 2010 Mobile payments
FundedByMe 2011 Crowdfunding, crowd equity
Kivra 2011 Digital mailbox
Tink 2012 Personal finance
Safello 2013 Cryptocurrency exchange
KnCMiner 2013 Cryptocurrency mining equipment
Toborrow 2013 P2P lending for companies

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

6. If the rate of change on the
outside (of an organization)
exceeds the rate of change on
the inside, the end is near....
-Jack Welch

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. 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

9. 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

10. 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/

11. Banking is
essential
but banks are not.
Bill Gates

12. Within 6 years:
Challenging the
fiat money
system?
Bitcoin – An emergent phenomenon
• Open source project on SourceForge in Jan 2009
• Original source code by “Satoshi Nakamoto” – pseudonym?
• Developed by self-organizing community of thousands of
strangers across globe
• Approx USD 3.6 bln in circulation (Feb 2015) and 80,000
daily transactions
• SEK 30 bln of Bitcoin vs Swedish Crown: 91 bln SEK
Teigland, Yetis, Larsson 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707

13. Bitcoin Online Forums

14. Bitcoin Foundations across the globe

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

16. 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
 Non-technical explanation of Bitcoin
− https://www.youtube.com/watch?v=t5JGQXCTe3c

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

18. Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
Transactions between Bitcoin wallets secured
through digital signatures

19. Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
Verifying a transaction

20. “Mining” confirms waiting transactions through
distributed consensus system
Generates new
Bitcoins
(at decreasing rate)
Does coding and
de-coding that
verifies and stores
transactions
(increasingly complex)

21. Screenclips from: How Bitcoin Works under the hood, by “Curious Inventor”
Preventing double spending fraud

22. Mycelium Bitcoin Wallet

23. 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

24. Bitcoin – one of 100s of cryptocurrencies

25. More than USD 475m has been invested in the Bitcoin Ecosystem
Selection of companies getting funding in 2014
Blockstream:
14M USD
Spondoolies:
6M USD
Bitnet:
14.5M USD
Blockchain:
30M USD
KnCM:
30M USD
Chain:
9.5M USD
Bitfury:
20M USD
Bitpay:
30M USD
Vaurum:
4M USD
Circle:
26M USD
Kraken:
5M USD
Coinbase:
100M USD
BTC China:
5M USD
Ripple:
3.5M USD
Ethereum:
6M USD
OKcoin:
10M USD
Xapo:
20M (60m) USD
Blockstream
21M USD
Source: KnC Miner, Jan 2015

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

28. Benefits and drawbacks of Bitcoin
 Benefits
− 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)
 Drawbacks
− Tax concerns
− Only as safe as wallet holding coins or exchange’s servers
− Consumer uncertainty
− Market volatility (commodity or currency?)
− Potential for illicit use
− High electricity consumption to “mine”

29. What is Bitcoin?
Is it ….
 A currency?
 An investment?
But it is definitely ….
 A ledger
 A transaction network

30. Bitcoin – so much more than a “coin”
 From dumb to smart money
 Underlying blockchain technology 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/

33. People
• “Net generation”
• 24x7 “mobile” workforce
• Knowledge via MOOCs
• Sharing not consuming
• Sustainability
Technology
• Broadband access
• The Cloud
• Mobile phones
• Internet of Things
• Big Data
• 3D printing
• Robotics/AI
• VR/AR
Open Source
• Software
• Hardware
• Physibles
Convergence of…..
Finance
• Microlending/microfinance
• Crowdfunding/equity/P2P
• Non-fiat cryptocurrencies
• Mobile money/payments

34. What’s around the corner?
24x7 Global Internet Collaboration + Open Source + 3D Printing
http://mashable.com/2013/02/13/robohand/
$60,000
$150
Available for free
download on
Where is
the firm?

35. Want to learn more?
Join our funnovation workshops
funnovation.se (site launched April 1, 2015)

36. Robin Teigland
robin.teigland@hhs.se
www.knowledgenetworking.org
www.slideshare.net/eteigland
www.funnovation.se
@RobinTeigland
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Thank you!!!!!

37. Recommended viewing:
How Bitcoin Works under the hood, by “Curious
Inventor” http://youtu.be/Lx9zgZCMqXE