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Χοντινυινγ Εδυχατιον Σεµιναρ Μαρχη 3, 2018
TheBlockchain&CryptocurrencyRevolu6onDemys6fied
Kirk Phillips, CMA, CPA, CFE, CBP Author, The Ultimate Bitcoin Business Guide
YourCryptocurrencyJourneystartswithEduca6on
“Aninvestmentinknowledgepaysthebestinterest”
BenjaminFranklin
YourCryptocurrencyJourneystartswithEduca6on
“Informa6onaboutmoneyhasbecomealmostmore
importantthanmoneyitself”WalterWriston,FormerCi6groupChairman&CEO
YourCryptocurrencyJourneystartswithEduca6on
“Informa6onaboutcryptocurrenciesismore
importantthancryptoitself”KirkPhillips
Itallstartedwithasimpleques6on.
Afriendasked,“ShouldIinvest$800inacomputertominebitcoin?”
BITCOIN&BLOCKCHAIN
Overview
1) IDon’tknowanythingaboutit2) Iknowsomethingaboutit3) Iknowalotaboutit
BitcoinPercep6onPOLL
1) Ihaveanega:vepercep:onofbitcoin2) I’mneutral3) Ihaveaposi:vepercep:onofbitcoin
UptonSinclair
“It’sdifficulttogetamantounderstandsomethingwhenhissalarydepends
onhimnotunderstandingit.”
Howtolistentothispresenta6on
ü Understandbitcoin&cryptocurrencybasicsü Theimpactonaccoun:ng,finance&audi:ngü Theopportunityforyourbusiness&careerü Whatitmeansforyou
TheInten6onofthispresenta6on
WhatisBitcoin?“IdothinkBitcoinisthefirst[encryptedmoney]thathasthepoten:altodosomethinglikechangetheworld."
PeterThiel,co-founderofPayPal
WhatisBitcoin?"EconomistsandjournalistsoPengetcaughtupinthisques:on:WhydoesBitcoinhavevalue?Andtheanswerisveryeasy.Becauseitisusefulandscarce."
EricVoorhees,FounderofShapeShi[.io
Whatiscryptocurrency?"Therearethreeerasofcurrency,
commodity-based,poli:cally-basedandnowmath-based."
ChrisDixon,technologyinvestor
Whatisthistechnology?"Attheendoftheday,we'veneverseen
anythinglikethisbefore."
DavidWoo,HeadofGlobalRates&CurrencyResearch,BankofAmerica
Whatwillhappen?“Everythingthatcanbedecentralized
willbedecentralized."
DavidJohnston,FounderofDecentralizedApplica6onsFundandBitAngels
WhatisBitcoin?"Theaverageusershouldpickupbitcoin.To
experiencethefutureofmoney.Togainaglimpseintoanexci:ngtechnology.Tolearnabouthowmoneycouldbeinthefutureandalsobecome
awareofhowlimitedmoneyandbanksaretoday.”AndreasAntonopoulos,BitcoinevangelistandauthorofMasteringBitcoin
WhatisBitcoin?“Everybodyhatesbanks,evenIhatebanks.[bitcoin]willforcetradi:onal
ins:tu:onstoadaptordie.”DavidAndolfa`o,VicePresidentoftheSt.LouisFederalReserveBank
WhatisBitcoin?“Doingabankingtransac:onona
bankingholidaywithoutusingabank.”
KirkPhillips,AuthorofTheUl6mateBitcoinBusinessGuide
WhatisBitcoin’sImpact?"It'simportanttorememberthatifthere
werenobitcoin,therewouldbenodistributedledgertechnology."
h`ps://www.coindesk.com/former-fdic-head-let-the-market-figure-out-bitcoins-value/3-1-18
Whatdoallthetermsmean?v Coins/Tokensv Digitalcurrencyv Virtualcurrencyv Cryptocurrency
v Blockchainsv DLT~Distributed
LedgerTechnology
ThreeFunc6onsofMoney
MediumofExchangeUnitofAccountStoreofValue
A`ributesofMoney
PortableDurableFungibleDivisible
CompareGoldvs.bitcoin
Whothinksbitcoinisanonymous?
Ø Pseudonymousatbest(iden6ty&transac6onsnotlinked)
Ø Transac6onscanbeanalyzedontheblockchainØ CrystalbyBihuryisablockchaininves6ga6ontoolØ BitcoinisNOTthecoinofchoiceforbadactorsØ WilltoolslikeCrystaldestroyfungability?
BitcoinCharacteris6cs
Ø bitcoinsymbolisBTCØ Eachcoinhas100,000,000unitsor8decimalplacesØ Exampleofabitcoinamountis1.89543145BTCØ TotalBTCsupply21,000,000Ø Cryptographic,predictable,fixedmonetarysupplyØ NooneownsBitcoin~Anyonecanownbitcoins
BitcoinAddress&PrivateKeys
Bitaddress.org
BitcoinCharacteris6csØ PUSHvs.PULL
Ø Peertopeer
Ø Nointermediaries(2008)
Ø NoFraud
Ø NoPCI
Ø Nomoregianta`acksilos
Ø Publicledgertransparency
CreditCardChaos
AshokMisra
MoneyTransferMadness
SimonNahnybida
BitcoinSimplified
BTC.org
TheBitcoinBlockchain
Ø Ablockisabatchoftransac6ons
Ø Linkedtogetherwithcryptographichashes
Ø TheBlockchainisachainofblockslinkedbyhashes
Ø Infeasibletobreakthechainandrewritehistory
Ø Bitcoinminersprovide“ProofofWork”
Ø Bitcoinminerscompetefornewbitcoins
Abitcoiner
BitcoinHas4Elements
Ø OpenØ BorderlessØ NeutralØ CensorshipResistance
AndreasAntonopoulos,LTB#329
BitcoinElementsSaidAnotherWay
Ø NetworkØ ProtocolØ Incen6vemechanismØ (ie.Na6vecurrency)
AndreasAntonopoulos,LTB#329
OneVersionoftheTruth
“Ina6meofdeceit,tellingthetruthisarevolu6onaryact.”
unknown
NOTALLBlockchainsarethesame!
BitcoinBreakthrough
Forthefirst6meinhistorywenowhave
“oneversionofthetruth”
Coinmarketcap.com
TheUl6mateBitcoinBusinessGuide™HashedintoTheBlockchain
ProofofExistence
BitcoinBreakthrough
Forthefirst6meinhistorywecanturnmoneyintodataandprogramit
ABitcoinTransac6on&BlockExplorer
Blockchain.info
DesktopWallet&MobileWallet
ReddcoinCore Airbitz.co
Mul6-Sig:AnInternalControlBreakthrough
BitGo
Mul6-Sig:ComplexCorporateExample
Armory
TheFuture
TheAccountantwillbecometheBanker,FinancialAdvisor,SecurityExpertandmorefortheircompany
TheFuture
Cryptocurrencyisinthe1998eraoftheInternet.Youarefindingoutaboutitnow!
CRYPTOASSETSANewAssetClass
CryptoAssets(termsrefined)
CryptocurrenciesCryptocommodi:es
CryptotokensCryptocollec:bles
ChrisBurniske&JackTatar,CryptoAssets2017
Coinmarketcap.com
MarketCapScreenshot1-16-15
1-16-15
Coinmarketcap.com
5-23-17
Coinmarketcap.com
2-27-18
BuyOrderonaCryptocurrencyExchange
Cryptsy(nowdefunct)
CryptocurrencyCrowdsales~TheICO
Ø Anewprotocolprojectcreatesit’sowncoin
Ø BitcoinistheINTERFACEtoallothercoinsØ AlmostanyonecaninvestintheIni6alCoinOfferingØ It’sNOTsharesinacompany(willbe)Ø It’slikeowningpartoftheprotocol,alicensetouse
CryptocurrencyCrowdsales~TheICOIni6alCoinOffering
TheICO~Ini6alCoinOffering
h`ps://elementus.io/token-sales-history
RemembertheThreeFunc6onsofMoney?ConsidertheintrinsicvalueofCryptoAssets
h`ps://www.coindesk.com/former-fdic-head-let-the-market-figure-out-bitcoins-value/
SheilaBair,FormerFDICChief,suggestedthatwhile…cryptoslackan‘intrinsicvalue,’neitherdocurrenciessuchastheU.S.dollar….“thegreenbillsinyourpocketdon'thaveanintrinsicvalue,either,”shewasquotedassaying.3-1-18
YapeseRaiStones(StoneMoney)8,800lbs.
ByEricGuinther-EnglishWikipedia,CCBY-SA3.0,h`ps://commons.wikimedia.org/w/index.php?curid=161923
o CarvedfromlimestoneinMicronesiao TransportedfromPalautoYapbycanoe
o NoLimestoneonYap=PerceivedValue
o RaiaretransferredbyanORALHISTORY
o TOOBigtoMOVEo MiltonFriedman,“It’sagoldstandard”
IfMiltonFriedmansays,“StonescanbeGOLD”whycan’tGOLDinthegroundbea
cryptocurrency?“NowwecandigitallymineGOLDwithoutactually
physicallyminingit.KirkPhillipsWhatdoyouthink?
ByEricGuinther-EnglishWikipedia,CCBY-SA3.0,h`ps://commons.wikimedia.org/w/index.php?curid=161923
Tradle~KYC-as-a-Service
v KYCisafounda6onallayernecessarytobridgeblockchainwithtradi6onalfinance
v Thenmuchmorebecomespossiblev AnAssuranceMarketplace…..v CapitalwillFLOWlikeELECTRICITY!
Tradle~KYC-as-a-ServiceIden%ty.Contractualandperformanceriskmi6ga6onstartswiththeKYCduediligence.KYCisnecessaryforregulatorycompliancereasons,butweputittouseforassessingthelegalstatusofthecompany,itscorebusinessac6vi6es,professionalismofdirectorsandcharacteroftheowners.Assurance.Further,theintegra6onwithaccoun6ngpackagesandanindependentaccoun6ngaudit,allowstoachievecreditriskmi6ga6on.Creditra%ng.Insuranceoffersaresidualriskcover,thuseleva6ngSME’dcreditra6ng.Thisfinalstepmakesitpossibletobundleupandsecuri6zeloans.Audit,paidbyaninsurancecompany,notbytheSME,allowstoavoidaperpetualconflictofinterestthatplaguestheassuranceindustry.
Tradle~KYC-as-a-Service
CryptocurrencyNon-financialUseCasesØ DecentralizedInternet(Maidsafe)Ø Decentralizedfilestorage(Storj,Sia)Ø Documentimmutability(Factom)Ø Privacycoins(Monero,Dash,Zcash)Ø Governance(Boardroom)Ø Predic6onMarkets(Augur,Gnosis)Ø Smartcontracts(Ethereum)
CRYPTOCURRENCYTAXATION
Conver6bleVirtualCurrency• IRSNo:ce2014-21~3-25-14:Statesvirtualcurrencyis
treatedlikeproperty(thepropertyrulesapply)• NOGUIDENCESINCETHISTIME• MakeaUSDtransla:onatthe:meofatransac:on• CapitalgainsandlossescomputedonALLtransac:ons• TherecanONLYbeoneLEGALTENDER
ANewRealmofTaxableEvents&Considera6onso Forks&ChainSplitso Like-KindExchangeso Airdrops&Giveawayso TokenSwapso Tippingo AcceptableValua:ono CostBasisMethod
o “DoubleCapitalGainParadox”BitcoinasaConduit
o ADeMinimisElec:ono Dealers&Traderso Dominion&Controlo PriceDiscovery
SECURITY,RISK&STRESS
ANewRealmofRisko KeyManagementRisko Cogni:veRisko Blockchain
InteroperabilityRisko BlockchainCon:nuity
Risko Encryp:onRisk
o Forks&ChainSplitRisko ConsensusRisko GovernanceRisko SocialEngineeringRisko CodeManagementRisko WalletRisko LegacyRisk
Howdoyousecurepasswords&privatekeys?
****TheGoldenemailRule****Themostvaluablesecuritytakeaway!
ü UseONEemailforcommunica6onandaDIFFERENTemailforUSERNAMES
ü [email protected]#Hp9!n*[email protected]ü OtherwisehackersALREADYhaveyourusernameü BruteforcingbecomesEASY
ExamplesofBitcoinHardwareWallets
Trezor
Ledger
ExamplesofBitcoinPaperWallets
Trezor
Ledger
ACASESTUDY:Ethereum,TheDAO&Governance
Ø TheDAOraised$150MM+inSpring2016crowdsale
Ø EthereumSmartContractsPlahormØ Marke6ngbe`erthantheexecu6onØ THENahackerdrains$60MMØ EthereumETHFORKS&EthereumClassicETCisbornØ OneCHAINbecomesTwoCHAINS
ACASESTUDY:Ethereum,TheDAO&Governance
Ø NOONEpredictedtheChainSplitØ 10%ofminerscon6nuedtominetheoriginalchainØ EthereumcommunityhasbeenatoddseversinceØ Visith`ps://ethereumclassic.github.io/Ø BREAKOUT#3:STUDYtheTimelineØ Whatdoyouthink?
ACASESTUDY:Ethereum,TheDAO&Governance
Transac:onFinalityofETC“Webelievethecorevalueproposi6onofanyblockchainisimmutability;validtransac6onscanneverbeerasedorforgo`en.Individualsinterac6ngonEthereumClassicaregovernedbythisreality;CodeisLaw.”“Transac6onsarefinal;applica6onsareunstoppable.”
ACASESTUDY:Ethereum,TheDAO&GovernanceTransac:onFinalityofETC“Thisdoesnotnecessarilymeanthatcodereplacesexis6nglaws,orthatonlycodeislaw...ByenteringintocontractsonEthereumClassic,youcanbecertain…theoutcomeoftransac6onswillbedictatedbycodeyouvoluntarilyinteractwith.Unlessexplicitlydefinedbythecontractcode,therearenoreversals,noundos,noopt-outs.”
ACASESTUDY:Ethereum,TheDAO&GovernanceDecentralizedGovernance“Therearemanyproblemsthatfesterduetocentraliza6onandopaqueness;corrup6on,unaccountability,nepo6sm,inefficiencyandstagna6on.Ul6mately,centraliza6onleadstofragility;onlydecentralizedsystemscanstandthetestof6me…webelievethatonlytrulydecentralizedprojectscansurviveinthelongrun.”
ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’smoretothestory…...7-19-17
Ø ParitywalletHACKresultsin$30MMgone
Ø Asimplebuginthewalletcode(mul6-sig)
Ø ThreeICO’s:Edgeless,SwarmCity&Aeternityimpacted
Ø Lot’sofRISKabounds
ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’sEVENmoretothestory…...11-9-17
Ø ParitywalletFREEZEresultsin$152MMfrozenfundsØ Polkadot$145MMICOraise~$98MM“FROZEN”Ø TheonlywaytosolveisANOTHERhardforkØ 600walletslockedbytheissueØ Lot’sofRISKabounds
ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’sEVENmoretothestory…...2-8-18
Ø FourmonthslaterNOsolu6onsandtensionsmountØ Astatechangeproposalputforthbythosewithfrozen
fundswasvehementlyREJECTEDØ “Returninglostfundsshouldberareandincreasingly
excep6onal.”AlexVandeSande(ETHdeveloper)
ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’sEVENmoretothestory…...2-8-18"Theauthorsares:lllookingforacertainclassofpeoplewhocanmakejudgments.Theyarelookingforauthori:es...singlepointsoffailureandtheneedoftrust[is]whatethereumtriestoavoid.”YoichiHirai(ETHdeveloper)
ACASESTUDY:Ethereum,TheDAO&GovernanceItkeepsoncoming…...2-28-18
v JamesLevywaspaid40,000ETHon11-24-15($35,000)v 3WeekslaterALLETHishackedv Nowhewantsahardfork~EIP867Proposal(standard
forfundrecovery)v Causeofthehack:WEAKPASSPHRASEv 40,000ETHisnowworth$35,000,000
COGNITIVECRYPTOSTRESS“It’sanewrealmofstressandriskwherehumannaturehastoadapt”KirkPhillips
“Yourmindhastobefreeandclearoryouwillmakemistakes.Thestakesincryptoarehigherandyouhavetostepupyouroverallgameinlife.”KirkPhillipsAsT.HarvEckersays,“Howyoudoanythingishowyoudoeverything.”
COGNITIVECRYPTOSTRESS“I’msayingthistoinspireyounottoscareyouawayfromcrypto.”KirkPhillips
“Themarrowandessenceofcryptoishaving100%responsibilityandcontrol.”KirkPhillipsAsStephenCoveysays,“Putfirstthingsfirst.”
IndustryProfessionalOrganiza6ons
YourCryptocurrencyJourneystartswithEduca6on
“Aninvestmentinknowledgepaysthebestinterest”
BenjaminFranklin,Phila17XX