Bitcoin and the Blockchain 2016

Outline
v What is Bitcoin?
— How does it work?
— Remittance
— Bitcoin as an asset
v Blockchain
— Smart contracts
— Bank implementation
v Ethereum
— Expanding blockchain functionality
— Decentralized Autonomous Organization

Bitcoin
A Virtual Currency
v World’s first decentralized cryptocurrency
v Peer-to-peer transaction network launched in 2009
— Circumvents the need for a middleman
v Transactions verified by network nodes and recorded in a publicly distributed ledger
v As of Feb. 2015, accepted by over 100,000 merchants worldwide
v 66 active exchanges worldwide
v Current market price for one bitcoin = $671
— Demand driven due to predetermined supply

v Essentially virtual bank accounts
v Wallets vary depending on how and where you use Bitcoin
v Vary based on:
— Control over bitcoins
— Privacy
— Encrypted backups
— Security
v Private Key
— Only way to access wallet
Bitcoin
Wallets

https://blockchain.info/charts

Bitcoin
Addresses
v Created privately by each user
v The only information used to define where bitcoins are allocated and sent
v Once addresses are used they become tainted by the history of all transactions they are
involved with
v Addresses do not tend to remain anonymous
— Bank account details must be provided for transactions with exchanges
v Advisors recommend using a different address with every transaction

[QR code associated with the address]
[Value of transaction]
[Received]
[Paid]
[Transaction Label]

[Payer using balances from multiple addresses to execute transaction]
[QR code associated with the address]
[Value of transaction]
[Transaction Label]

Bitcoin
Miners
v Offer their computing power to process and record transactions into the public ledger
v Must solve complex, mathematically encrypted problems to access hashes
v Bundle transactions into blocks
— Blocks have a maximum of 1 MB of storage
— Takes about 10 minutes to fill a block
— Difficulty adjusted every 2016 blocks (about 2 weeks) to maintain steady production rate
v Miners compensated 12.5 new bitcoins per block created plus transaction fees

[Rate at which blocks are mined]
[Difficulty of mining a block]

Bitcoin
Halving
v Mining reward cut in half every 210,000 blocks (about 4 years)
— Miners will eventually only receive compensation through transaction fees
v Follows Bitcoin protocol
— Maximum of 21 million bitcoins to be produced
• Estimated to be reached by 2140
• Currently 15.75 million in circulation
v Decreasing-supply algorithm was chosen because it approximates the rate at which
commodities like gold are mined

[Second halving]
[First halving]

Bitcoin
Transaction Fees
v Voluntary on the part of person conducting transaction
v No miner necessarily needs to accept the transactions
— Transaction fees are incentive for user to make sure transaction will get included in
blockchain
v Default fee = 10 satoshi (.0000001 BTC)
v 20 satoshi will get you the fastest and cheapest transaction on the network
v Miners prefer transactions with greater fees

[Block size with a 1 GB maximum]
[Block creator]
[Time transaction added to blockchain]
[Aggregate transaction fees]
[Average transaction value based on certain price]
[Aggregate value of transactions]
[Transactions in block]
[1,000,000 bits per bitcoin]
[Arbitrary metric of difficulty]
[Time transaction was executed]
[Number of blocks preceding]
[Program used to identify miner’s software]]
[32-bit number used to create a hash]
[Miner’s bitcoin compensation]

Bitcoin
Nodes
v Full nodes download every block and transaction to check them against Bitcoin’s core
consensus rules:
— Blocks may only create a certain number of bitcoins
— Transactions must have correct signatures for bitcoins to be spent
— Transactions and blocks must be in the correct data format
— Within a single blockchain, a transaction output cannot be double-spent
v If a transaction violates the consensus rules, then it is absolutely rejected, even if every other
node on the network thinks that it is valid
v Lightweight nodes do whatever the majority of the mining power says
v Running a full node bolsters the network, adds security and speeds up verifications

66 Active Bitcoin Exchanges
https://data.bitcoinity.org/markets/volume/5y/USD?c=e&r=week&t=a

Bitcoin
ATMs
v 681 Bitcoin ATM’s worldwide
v Easiest way to get bitcoins
v Operate solely in cash
v Buying bitcoins
— Provide Bitcoin address for deposit using private key
— Put cash into ATM
— Bitcoins transfer to corresponding address
v Selling bitcoins
— Provide Bitcoin address using private key
— Bitcoins sent to corresponding address
— Receive cash

Circle
Social Payments
v Founded October 2013
v Operates as an exchange, wallet and social payment app
— Currently can exchange bitcoins for USD and GBP
• Exchange rates are more conservative than large exchanges in order to take
commissions
— Merging of messaging, media and payments
• Can personalize messages accompanying money transfers with pictures, emojis and
GIFs
— Two-factor authentication
— No fees to move money and no limits on how much you can send and receive each week
v Hopes a user-friendly app will prompt consumers to pay for extra features
— Possibilities of issuing credit and loans

Circle
Total Funding = $136 million
Date Amount/Round Lead Investor Investors
Jun., 2016 $60M/Series D IDG Capital 9
Apr., 2015 $50M/Series C Goldman Sachs 6
Jul., 2014 $17M/Series B Breyer Capital 8
Oct.,
2013
$9M/Series A - 2
Investor Round
Accel Series C
Baidu Series D
Breyer Capital Series B, Series D
China Everbright Investment Management Series D
China International Capital Corporation Alpha Series D
Credit Ease Series D
Digital Currency Group Series B
Fenway Summer Ventures Series B, Series C
General Catalyst Partners Series A, Series B, Series C, Series D
Glenn Hutchins Series D
Goldman Sachs Series C
IDG Capital Partners Series D
Jim Breyer Series A
Leonard Schrank Series B
Michele Burns Series B
Oak Investment Partners Series B, Series C
Pantera Capital Series B, Series C
Sam Palmisano Series D
https://www.crunchbase.com/organization/circle-2/investors

Bitcoin
Remittance
v Average transaction fee for money transfer = 9.6%
— Western Union’s fees = 5.5-10%
v Western Union’s market share = 12.5%
— Proven quite progressive in adopting to digital evolution
500000
520000
540000
560000
580000
600000
2011 2012 2013 2014 2015
Global Remittance ($m)
http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data

Bitcoin
Remittance
0 5 10 15 20 25 30
USA-Guatemala
USA-Vietnam
Saudi Arabia-Egypt
USA-Philippines
Saudi Arabia-India
USA-India
UAE-India
Hong Kong-China
USA-China
USA-Mex
2015 Remittance ($b)
https://openknowledge.worldbank.org/bitstream/handle/10986/23743/9781464803192.pdf?sequence=3&isAllowed=y

ABRA
A Better Remittance App
v “Uber for Money”
— Goal: turn every smartphone in the world into an ATM to process transfers between digital
and fiat currencies
— Making cash mobile in a frictionless marketplace
v Raised $14 million in venture financing since 2015 inception
—
Launched June 30, 2016 in the United
States
v Assumptions:
— By 2020, an estimated 80% of adults will own a smartphone
— 250 million immigrants around the world
— ~66.7% of adults (15-65) with access to financial services (bank accounts, credit, etc.)

ABRA
v A peer-to-peer network of independent “human ATMs”
v Basic process:
— App participant stores and purchases money in wallet via bank account or cash
— Depositing cash done through Abra Teller who transfers equivalent amount to wallet for
small transaction fee
— Participant sends balance to family member’s wallet without a fee
— Family member then transfers balance to Abra Teller who gives cash in return for a small
fee

ABRA
v Wallet balances displayed in local currency, however balance contents are bitcoins
— Transactions settled on the blockchain
v Abra users don’t need to know about Bitcoin or how it works
v Wallet balances remain stable even as the price of bitcoin fluctuates
— Abra partnered with an unnamed derivatives company that enters into future contracts in
order to hedge bitcoin price fluctuations
v User’s asset portfolio is a mix of bitcoins and hedges, which are tucked under the hood of the
smartphone and user never needs to know what’s exactly in their portfolio

ABRA
v Abra never touches customers’ money
— Avoids dealing with complex regulatory requirements for remittance firms in countries
where they operate
v Only charge Abra tellers .5% while assuming all FX risk
— Tellers include individuals and corporations which hold substantial amounts of cash
v Risks
— Mobile data connectivity is usually non-existent in areas in need of remittance
— Currently no voluntary tellers
— Safety
• Criminals can quickly identify tellers holding substantial amounts of cash

ABRA
Total Funding = $14 million
Sep.,
2015
$12M/ Series A Arbor Ventures 12
Mar.,
2015
$2M/Seed - 6
Jul., 2014 Undisclosed/See
d
Digital Currency
Group
1
Investor Round
American Express
Ventures
Series A
Arbor Ventures Series A
Blockchain Capital Series A
Carthona Capital Series A
Digital Currency Group Series A, Seed,
Seed
First Round Series A, Seed
Future Perfect Ventures Series A, Seed
Jungle Ventures Series A
Lerer Hippeau Ventures Series A, Seed
Pantera Capital Series A
Ratan Tata Series A
RRE Ventures Series A, Seed
Silicon Badia Seed
https://www.crunchbase.com/organization/abra#/entity

Bitcoin
An Asset
v Deemed a commodity by the Commodity Futures Trading Commission
v Widely used for speculative trading
— Some exchanges have allowed leverage up to 50:1
v As of late has been used to protect from currency devaluations, high inflation, and volatile
economic environments
v Risk-off selling in wider capital markets triggers Bitcoin’s gold-like qualities
— Relatively low correlation to traditional asset classes
v Bitcoin up 57% in 2016
v Bitcoin up 170% in the last twelve months

Mar. 2013 – Cyprus banking crisis
Feb. 20, 2014 - Mt. Gox goes offline following
large security breaches
Aug. 11, 2015 -
People’s Bank of
China devalues
Yuan 1.9%
June 23, 2016 –
Brexit Referendum
Dec. 5, 2013 – People’s Bank of
China bans financial institutions
from Bitcoin transactions
Aug. 18, 2014 – BTC-E, flash crash
Oct. 2, 2013 – FBI shuts down Silk Road
Nov. 18, 2013 – Beyond Silk Road Senate Hearing
Dec. 2, 2013 - 96,000 bitcoins stolen from Sheep Marketplace
Apr. 20, 2013 – Bitcoin Central hacked
May 2, 2013 - $75 million lawsuit against Mt. Gox
June 30, 2015 –
Greece defaults
on $1.7 billion
IMF Payment
Apr. 10, 2014 – Deposit freeze at Chinese
exchanges
Oct. 2013 - BTC China becomes largest exchange

https://data.bitcoinity.org/markets/volume/5y/USD?c=e&r=week&t=a

Bitcoin Statistics
Weekly Percentage Change in Bitcoin Price
Jan. 2013 –
Present
MSCI
AW
MSCI
EM
S&P
500
Shanghai
Composite
Stoxx
600
Gold Crude
Oil
VIX US 10
Yr.
Bond
CNY/
USD
GBP/
USD
EUR/
USD
JPY/
USD
Correlation 0.007 -0.057 0.041 -0.020 -0.048 -0.062 -0.137 0.003 -0.004 -0.038 0.036 0.012 0.09
2
Beta 0.058 -0.478 0.352 -0.082 -0.319 -0.398 -0.470* 0.002 -0.011 -1.507 0.453 0.149 0.96
7
R2 0.001 0.003 0.002 0.001 0.002 0.004 0.019 0.001 0.001 0.001 0.001 0.001 0.00
8
* Value is statistically significant at a 10% significance level
May 2014 –
Present
MSCI
AW
MSCI
EM
S&P
500
Shanghai
Composite
Stoxx
600
Gold Crude
Oil
VIX US 10
Yr.
Bond
CNY/
USD
GBP/
USD
EUR/
USD
JPY/
USD
Correlation 0.014 -0.038 0.053 -0.032 -0.062 -0.134 -0.141 -0.054 0.025 0.105 -0.045 0.006 -0.109
Beta 0.060 -0.162 0.232 -0.065 -0.209 -0.524 -0.229 -0.021 0.040 2.038 -0.305 0.038 -0.670
R2 0.001 0.001 0.003 0.001 0.004 0.018 0.020 0.003 0.001 0.011 0.002 0.001 0.012

-0,3
-0,2
-0,1
0
0,1
0,2
0,3
0,4
2014/01/10
2014/03/10
2014/05/10
2014/07/10
2014/09/10
2014/11/10
2015/01/10
2015/03/10
2015/05/10
2015/07/10
2015/09/10
2015/11/10
2016/01/10
2016/03/10
2016/05/10
One Year Moving Correlation with Bitcoin Price
Equities
MSCI AW
MSCI EM
S&P 500
Shanghai Composite
Stoxx 600

-2
-1
0
1
2
3
4
2014/01/10
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2015/08/10
2015/09/10
2015/10/10
2015/11/10
2015/12/10
2016/01/10
2016/02/10
2016/03/10
2016/04/10
2016/05/10
2016/06/10
Bitcoin One Year Moving Beta
Equities
MSCI AW
MSCI EM
S&P 500
Shanghai Composite
Stoxx 600

-0,6
-0,5
-0,4
-0,3
-0,2
-0,1
0
0,1
0,2
0,3
2014/01/10
2014/02/10
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2015/10/10
2015/11/10
2015/12/10
2016/01/10
2016/02/10
2016/03/10
2016/04/10
2016/05/10
2016/06/10
Alternatives
Gold
Crude Oil
VIX
US 10 Year Bond

-3,5
-3
-2,5
-2
-1,5
-1
-0,5
0
0,5
1
1,5
2014/01/10
2014/02/10
2014/03/10
2014/04/10
2014/05/10
2014/06/10
2014/07/10
2014/08/10
2014/09/10
2014/10/10
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2015/01/10
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2015/10/10
2015/11/10
2015/12/10
2016/01/10
2016/02/10
2016/03/10
2016/04/10
2016/05/10
2016/06/10
Alternatives
Gold
Crude Oil
VIX
US 10 Year Bond

-0,4
-0,3
-0,2
-0,1
0
0,1
0,2
0,3
0,4
2014/01/10
2014/02/10
2014/03/10
2014/04/10
2014/05/10
2014/06/10
2014/07/10
2014/08/10
2014/09/10
2014/10/10
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2015/01/10
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2015/11/10
2015/12/10
2016/01/10
2016/02/10
2016/03/10
2016/04/10
2016/05/10
2016/06/10
Currencies
CNY/USD
GBP/USD
EUR/USD
JPY/USD

-50
-40
-30
-20
-10
0
10
20
2014/01/10
2014/02/10
2014/03/10
2014/04/10
2014/05/10
2014/06/10
2014/07/10
2014/08/10
2014/09/10
2014/10/10
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2014/12/10
2015/01/10
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2016/01/10
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2016/03/10
2016/04/10
2016/05/10
2016/06/10
Currencies
CNY/USD
GBP/USD
EUR/USD
JPY/USD

Bitcoin
Risks
v Price volatility
— Young economy and novel nature
v Scalability
— Can only operate 7 transactions per second
v Regulations
— Banned in Iceland, Bolivia, Ecuador, Kyrgyzstan and Vietnam
— Countries starting to impose know-your-customer regulations on exchanges for taxing
purposes
— 2014 IRS deems Bitcoin as a capital asset subject to capital gains taxes
• Trading through an exchange is a taxable event
v Criminal Activity
— Theft
— Black markets due to Bitcoin’s anonymity
http://www.coindesk.com/information/is-bitcoin-legal/

Bitcoin
Chinese Demand
v Stock and real estate bubbles of late 2013 as well as high savings rate led to a corresponding
Bitcoin price surge
v Chinese government was alarmed at how fast the market had grown and tried to rein it in by
banning financial institutions from facilitating Bitcoin transactions on December 5, 2013
v China’s growing middle class attracted to Bitcoin due to a lack of other alternatives
— A lot of speculative trading as well
v Accommodative monetary policy that allows Bitcoin market to thrive, through legal protection
over non-physical property
v Yuan trades have accounted for up to 95% of daily exchange volume following August 2015
devaluation

Bitcoin Investment Trust
GBTC
v First publicly quoted investment vehicle deriving value from Bitcoin price
— Investors gain exposure to price movements of Bitcoin without the challenges of buying,
storing and safekeeping bitcoins
— Legitimate avenue for buying on margin and shorting bitcoins
v Publicly listed starting May 4, 2015 on OTCQX, following approval from FINRA
v Market Price = $103.5
— Market Cap = $176.97 million
— NAV = $63.46
v Accredited investors (SecondMarket) purchase shares at daily NAV in baskets of 100 shares
— Shares restricted and subject to significant limitations on resale and transferability
v Each market share represents ownership of approximately 0.1 bitcoin
— However, trades at a premium due to higher demand than availability

0
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2015/05/01
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2016/05/27
2016/06/10
2016/06/24
2016/07/08
GBTC vs Underlying Bitcoin
GBTC
BTC/10

Bitcoin Investment Trust
Cease-and-desist
v July 11, 2016 SEC issued a cease-and-desist order against Bitcoin Investment Trust and its
authorized participant SecondMarket
— SecondMarket is the only entity that may place orders to create and redeem Bitcoin
Investment Trust shares
— Cease-and-desist order relates to a share redemption program in 2014
• SecondMarket repurchased 85,721 shares between April and September as shares were
being created
— SecondMarket settled with SEC for the $51,650.11 they earned through the redemption
program plus interest of $2,100

Bitcoin
Exchange-traded funds
v Winklevoss Bitcoin Trust
— July 1, 2013 filed with the SEC to launch an ETF on NASDAQ under COIN
• Would offer exposure to Bitcoin, without the hassles of buying and storing the
underlying asset
— Still awaiting regulatory approval, now seeking to list the product on BATS Global
Exchange
— Have increased the size of offering from $20 million to $65 million
v SolidX Bitcoin Trust
— July 12, 2016 filed with the SEC to launch an ETF that would offer exposure to Bitcoin
— Raised $3 million since 2014 with the goal of offering ‘total return swaps’ to large
institutional Bitcoin investors
— Unlike Winklevoss, has secured insurance that would cover the loss or theft of bitcoins in
the trust
— Will be listed on NYSE under XBTC
— Will not be actively managed

Blockchain
A Decentralized Ledger
v The distributed ledger behind Bitcoin
v Way of using modern encryption to enable entities to share a common infrastructure for
database retention
v Provides proof of who owns what at any given juncture
v Unalterable and immutable data stored without requiring any central authority
v Cryptography so powerful that it’s typically dismissed as “impossible to alter”
— If anyone tries to corrupt a transaction, nodes will not arrive at a consensus and transaction
not included in the blockchain
v Trust established through mass collaboration and clever code

Blockchain
Smart Contracts
v Computer protocols that facilitate, verify or enforce the negotiation or performance of a
contract
v Emulate the logic of contractual clauses
v State how asset is to be used and executes automatically
v Enforce compliancy upfront
v Minimize counterparty risk, reduce settlement times and increase transparency

Blockchain
Advantages
v Independent nodes converge on a consensus even with poor interconnectivity and potentially
dishonest operators
v Any well-connected node able to determine with certainty whether a transaction exists and is
valid
v Prohibitively high cost to attempt to rewrite or alter transaction history
v Conflicting transactions never become part of the confirmed dataset

Blockchain
Largest Demands
v Instantaneous transferring and exchanging digital representations of assets
v Storing raw, unprocessed data and turning it into an immutable distributed database
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 (Through April)
Blockchain VC Funding ($m)
http://www.coindesk.com/state-of-blockchain-q1-2016/

Blockchain
Bank Implementation
v Develop distributed, encrypted, straight-through processing tools that allow them
essentially to share common database infrastructure
v Able to cut a significant amount of cost out of the post trade financial manufacturing
— Post-trade processing hasn’t been revolutionized in any meaningful sense in decades
v Blockchain would provide:
— Instant settlement
— Fewer fees per trade
— Lower cost
— More robust and transparent trading environment
— Less clearing and settling

Chain
Blockchain infrastructure for banks
v Building suite of blockchain based tools for banks, stock exchanges, credit card companies,
etc.
— Will enable them to move, store, trade and manage financial assets quickly, securely and
with less risk to the system
v May 2, 2016 released new open-source, permissioned protocol built in collaboration with 10
financial and telecom firms
— Applications including clearing and payment processing
— Achieves finality in seconds, even for high-volume transaction
v NASDAQ using platform for private market securities testing, proxy voting and clearing
efforts

Chain
Total Funding = $43.7 million
Sep., 2015 $30M/Series C RRE Ventures 11
Aug., 2014 $9.5M/Series B Khosla
Ventures
11
Jan., 2014 $4.2M/Seed - 5
Investor Round
500 Startups Series B
Betaworks Seed
Blockchain Capital Series B, Series C
Capital One Growth
Ventues
Series C
Citi Ventures Series C
Digital Currency Group Series B
Draft Ventures Series C
Fiserv Series C
Homebrew Series B
Kevin Ryan Series B
Khosla Ventures Series B
NASDAQ Series C
Orange Series C
Orange Digital Adventures Series C
Pantera Capital Series B, Series C
RRE Ventures Seed, Series B, Series
C
Scott Banister Series B
Semil Shah Seed
SV Angel Seed, Series B
Thrive Capital Seed, Series B
Visa Series C
https://www.crunchbase.com/organization/chain-2#/entity
http://www.coindesk.com/10-vc-firms-bullish-on-bitcoins-potential/

R3 CEV
Blockchain adaptation for banks
v Leading a consortium of 45 financial firms in research and development of blockchain usage
— Collaborate with partner institutions on research, experimentation, design and engineering
v March 3, 2016 concluded an R3-led, 40 bank trial of five different blockchain solutions
— Each bank given a separate node in which to issue, trade, transfer and redeem digitized
assets in a peer-to-peer transaction network
— Participants modeled commercial paper and a short-term bond
v R3 Corda
— Developing a distributed ledger tailor-made for financial institutions
• Starting point is individual agreements between firms
• Reject the notion that all data should be copied to all participants, even if it’s encrypted

Hyperledger Project
Blockchain adaptation for business
v Open-source project to advance blockchain technology under oversight of Linux Foundation
v Exploration of the characteristics of blockchains
v Engineering an underlying, universal blockchain platform for business
v 30 partner firms see a value in sharing ideas and bringing a mature technology to market
— Partners have voiced their confidence in private blockchain networks, criticizing public
versions as ill-equipped to handle the requirements of business

Private blockchains
Blockchain or Database?
v Proponents argue “blockchain” applies to any data structure which batches data into blocks
which are time-stamped and serve as a distributed multi-version concurrency control
— Many proposed private systems would allocate full nodes to a number of trusted entities to
facilitate and compile transactions and ledger
• Firms would be able to leverage blockchain’s instant settling and smart contract
capabilities while having control over the network
v Opponents say permissioned systems look like traditional corporate databases
— Not supporting decentralized verification of the data
— Not hardened against tampering and revision by their operators
— “A private blockchain is nothing more than a new type of shared database”

Ethereum
A Bitcoin Competitor
v Contains a peer-to-peer money system comparable to Bitcoin
v Uses cryptocurrency Ether
— Current ether price = $11.20
v Miners rewarded 5 ether per block plus transaction fees
v Difficulty adjusts so one block produced every 12 seconds
v Can process 25 transactions per second
v No current cap on Ether production
— 82 million ether currently in circulation
— No halving

Ether Historical Ether Price (USD)ices
http://coinmarketcap.com/currencies/ethereum/

Ethereum
Expanding Blockchain
v “A next generation cryptocurrency and a decentralized application platform” – Vitalik
Buterin, founder
v Basic aim: to make it possible to program binding agreements into the blockchain
v Bitcoin’s blockchain used as the base for Ethereum’s, but the ability to execute code allows
developers to innovate with far less effort and far more speed
— Security of the computation is guaranteed by the same kinds of cryptography and
economic incentives as Bitcoin
v At the forefront of smart contract development
— Digitization of real world assets, derivatives, smart bonds, secure internet infrastructure,
etc.
v Attracting interest from JP Morgan, Microsoft, IBM, etc.

Consensus Systems
Ethereum Development
v Venture production studio building decentralized applications and various developer tools for
blockchain ecosystems
v Spawns, coordinates, incubates and accelerates ventures through development, resource
sharing, acquisitions, investments and formation of joint ventures
v 68 employees in nine countries developing applications to be organized, governed, funded
and executed on Ethereum blockchain
v UJO Music
— Website for buying music online
— Software that facilitates direct trade between musicians and customers
— Traded with ether
— Smart music contracts

Decentralized Autonomous Organization
An Ethereum Application
v Investor-directed venture capital funds
v Instantiated on Ethereum blockchain without management structure
v Crowd-funded via token sale in May 2016
— Set record for largest crowd-funding campaign in history ($150 million of Ether in 21 days)
v June 2016, hacker siphoned $55 million of DAO’s ether, revealing flaws with regards to
recursive calls

DAO
Ethereum-Based Venture Capital
v Candidates for investment provide investors:
— business plan
— smart contracts defining relationship between them and DAO
v Curators (group of volunteers) check identity and legality of projects before whitelisting them
v In exchange for Ether, investors receive voting rights by means of digital share tokens
— Purest form of shareholder governance
v Once proposal is approved, funds flow automatically under rules specified by smart contracts

DAO.Link
Bridging Ethereum and Reality
v Bridge between DAOs and real world where companies need to pay taxes and adhere to
regulatory requirements
v Businesses wishing to send corporate invoices, purchase orders and pay taxes won’t be able
to attribute those funds to the Ethereum blockchain
v Provides a physical address through which outside companies can interact with DAOs
— Incorporated in Switzerland
• Swiss law makes it possible to “take money from an unknown source as long as you
know where it is going”

Conclusion
v Bitcoin
— World’s first decentralized cryptocurrency
• Circumvents the need for middlemen in transactions
— All transactions are recorded in an immutable, publicly distributed ledger, the blockchain
— Historically volatile prices are demand driven due to predetermined supply
— Relatively uncorrelated to most asset classes
v Blockchain
— Uses modern encryption to share a common infrastructure for database retention
— Trust is established through mass collaboration and clever code
— Smart Contracts
• Protocols emulating contractual clauses and executing automatically
• Enforce compliancy upfront
v Ethereum
— Operates using its own cryptocurrency, ether
— Expanding off of Bitcoin’s blockchain, the ability to execute code allows developers to innovate
with far less effort and far more speed
— At the forefront of smart contract development

Bitcoin and the Blockchain 2016

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