Presentation from Swedish Bitcoin Conference 2014, April 2014, Stockholm, Sweden

1. What is Money?
----
Some thoughts on money and Bitcoin
April 2014

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

3. Some events in the history of money
Time Event
c 9000 - 6000 BC Cattle and grain as money
640 – 630 BC Crude coins in Lydia
600 – 300 BC Round coins in China
200 to 400 AD Roman Empire established through institutions &
gold coins
806 AD First paper money in China (first fiat money)
1600s Several European National banks founded
- 1656: Bank of Stockholm established
- 1661: Sweden has first chartered bank in Europe
to issue fiat money
- 1683 – Bank of Amsterdam introduced fiat
money
1794 US Mint formed
http://projects.exeter.ac.uk/RDavies/arian/amser/chrono1.html

4. Money is more than medium of exchange
The Beer Parable

5. 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

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 >US$ 440 mln
•PEDs <--> USD
•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. Bangla-Pesa in Kenya (Voucher)
• 140 businesses in
Mombasa County
• Typical: 35 year old
mother with 2-3 children
• 7% daily trades in
Bangla-Pesa
• Founder arrested and
charged due to fear of
replacing Kenyan shilling
• Charges dropped in
November 2013
http://koru.or.ke/bangla-pesa-survey-feb-2014

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

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)
• 91 bln SEK in circulation vs SEK 36 bln of Bitcoin in five years
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707

13. 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)

14. 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

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

17. 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

18. 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

19. Future scenarios?

20. Increasing pressure due to variety of
new financial instruments
Forces for change
• Cryptocurrencies
• Community
currencies
• Crowdfunding
• Microfinance
• P2P lending
• Sharing
The
status
quo
Forces for stability
• Governments
• Central banks
• Multinational
financial actors
• Legal system
• Mindset

21. People
• “Net generation”
• 24x7 “mobile” workforce
• Social entrepreneurship
Technology
• Broadband access
• 3D printing
• Robotics
Open Source
• Software
• Hardware
• Physibles
Convergence -> Third Industrial Revolution?
Finance
• Microlending/microfinance
• Crowdfunding/equity
• Digital, non-fiat currencies

22. 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?

23. Karinda Rhode
aka Robin Teigland
robin.teigland@hhs.se
www.knowledgenetworking.org
www.slideshare.net/eteigland
www.nordicworlds.net
RobinTeigland
Photo: Lindholm, Metro
Photo:
Nordenskiöld
Photo:
Lindqvist
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