1. Blockchain, Cryptocurrencies & ICO’s
September 20th, 2018
Rusty Yerkes, Ph.D.

2. This talk is not intended to be investment advice.
Disclaimer
This talk is not intended to be investment advice.

3. BTC = $6,445 as of Monday 9/17/2018
Bubble?
Source: Coinmarketcap.com

4. Overview Blockchain and Distributed Ledger Technology (DLT)
Cryptocurrencies and Cryptocurrency Market
Initial Coin Offerings (ICO’s)
Q&A

5. BLOCKCHAIN & DLT

6. Blockchain
Blockchain is a Platform. Like the internet which can host many “applications” like cryptocurrencies.
Potential. To be Revolutionary, like the internet.
Block. Block of data.
SHA-256 Hash.
“Secure Hash Algorithm” cryptographic hash algorithm developed by the NSA.
Unique digital fingerprint, uses a one-way compression function (cannot be decrypted)
Blockchain. Chain of signed blocks, where each block is linked to a previous block by its hash.
Distributed. Decentralized, multiple copies make data tamper resistant.
Transactions. Transactions (such as token trades) can operate on the Blockchain platform.
Coinbase. Seeding an account, like a deposit.
Source: Nakamoto, Satoshi Bitcoin: A Peer-to-Peer Electronic Cash System. White paper.

7. Block from SHA-256 Hash
Source: Anders Brownworth,

8. Blockchain Protocol or Platform
Source: Anders Brownworth,

9. Distributed Ledger Technology (DLT)
Source: Anders Brownworth,

10. “Digital Coin” Application on Blockchain
Source: Anders Brownworth,

11. Key Question? What Problem(s) Does Blockchain Solve?
Data Duplication (Record Keeping)
Data Verification
Key Industries:

12. Digital/Crypto/Virtual Currency

13. Digital or Crypto Currencies
Digital Coin (Token).
Public key. Receive funds (like a bank account and routing number).
Private key. Send funds (like a PIN). Can be stolen but virtually impossible to brute force hack (guess)
Timestamp. Chronologically record transactions to prevent double spend.
Peer-to-peer. No third party institution needed.
Supply. May be limited.
Irrevocable. Transactions are computationally impossible to reverse.
Proof-of-Work. Miners provide computing power to verify transactions in exchange for fees and coins.
Digital/virtual coins are not legal tender by decree of and thus not backed the government nor are they backed by anything of value such as gold.
Digital currencies have features associated with currencies:
Medium of exchange
Store of value
Source: Nakamoto, Satoshi Bitcoin: A Peer-to-Peer Electronic Cash System. White paper.

14. Satoshi Nakamoto’s 2009 White Paper
Source:

15. Bitcoin is neither private nor anonymous
Source:

16. Wallet Address

17. Public Ledger
Source:

18. Public “Account”
Source:

19. Bitcoin Ecosystem
Source: BitcoinFoundation.org

20. “Alt Coins” i.e. Bitcoin Alternatives
Hard Fork = essentially new cryptocurrency; Soft fork = enhancement
Source: Investopedia.com

21. Bitcoin 55% Market Share
Source: Coinmarketcap.com

22. Cryptocurrency Market
Source: Coinmarketcap.com

23. 2017: The Year of Cryptocurrencies
Source: Coinmarketcap.com

24. Why is Bitcoin so volatile? Headlines.

25. Digital Currency Theft

26. Bitcoin Headlines

27. Initial Coin Offerings (ICO’s)

28. Initial Coin Offerings (ICO’s)
Type of Crowdfunding
NONE are registered with the SEC
SOME use various registration exemptions (See Reg A, D, CF)
The remaining………
Question: Are “coins” securities & subject to securities regulation?
Answer: If the SEC says they are securities…..they are securities. (Howey test)
Three Basic Types of Tokens
Payment coins (means of payment)
Utility coins (give holder access to application or a service)
Asset coins (represent a claim on earning streams; most like equity)

29. Token Economies
“Token economies introduce a strange new set of elements that do not fit the traditional models: instead of creating value by owning something, as in the shareholder equity model, people create value by improving the underlying protocol, either by helping to maintain the ledger (as in Bitcoin mining), or by writing apps atop it, or simply by using the service.
The lines between founders, investors and customers are far blurrier than in traditional corporate models; all the incentives are explicitly designed to steer away from winner-take-all outcomes.
And yet at the same time, the whole system depends on an initial speculative phase in which outsiders are betting on the token to rise in value.”
Source:

30. Initial Coin Offerings (ICO’s)
Source: Coindesk, as of Jan. 1, 2018.

31. Initial Coin Offerings (ICO’s)
Source: Coindesk, as of Jul 31, 2018.

32. Initial Coin Offerings (ICO’s)
Source: Coindesk, as of Jul 31, 2018.

33. Initial Coin Offerings (ICO’s)
Source: Coindesk, as of Jul 31, 2018.

34. Initial Coin Offerings (ICO’s)
Source: Coindesk, as of Jul 31, 2018.

35. Source: Coindesk, as of Jul 31, 2018.

36. Source: Coindesk, as of Jul 31, 2018.

37. Closing thoughts Blockchain and Distributed Ledger Technology
Blockchain will be revolutionary
Healthcare, financial services, transportation/logistics, real estate and more
Cryptocurrencies
Saturated Market
Regulators closely monitoring
Not backed by any commodity
Value driven by fundamental and speculative demand
These attributes = volatility
Volatility and verification delay make everyday use impractical
China cracking down (people use cryptocurrency to get money out of the country)
Initial Coin Offerings (ICO’s)
Regulators highly scrutinizing
Significant source of funding for blockchain applications

38. Q&A
Rusty Yerkes
(205)