1. IT FOR FINANCIAL SERVICES IS356

2. Agenda What is Bitcoin? A digital currency that is created and exchanged independently of any government or bank. Bitcoin is computer generated and can be converted into cash after being deposited in a virtual wallet. Digital currencies in general Why now? How does Bitcoin work? Peer-to-peer network Mining Signs of a Bubble 2

3. Why now? Payment methods like cash are problematic… Cash wears out, needs to be replaced Not always easily traceable Potential for counterfeit / forgery Theft – cannot be easily deactivated Expensive to transport, heavy, bulky Inflation – just print more Costly to produce 5.7 cents for a dollar bill 10 cents for a dollar coin 12.5 cents for the new $100 bill Once retired, cash must be destroyed 3

4. In Cash We Trust Why does cash work so well? TRUST Cash is just paper… exchangeable paper As long as I know that I can exchange it… Liquidity… as good as gold Convertible into gold Nixon Severs the Dollar from Gold: 8-15-71 4 1971

5. Digital Currency The USD is kind of digital already You don’t have to run the printing presses just to expand the money supply Buy back bonds, pay with digital deposit But Bitcoin isn’t like that… Removes the central function of a federal reserve (government) With the full force and backing of… nobody! How do you get Bitcoin? Exchange rate applies… (weird) Figure out a way to move Bitcoin currency… easy How can you increase the money supply… mine more 5

6. 6 Source: https://bitcoin.org/bitcoin.pdf Bitcoin Origins, October 2008

7. Exchange Rate 7 January 2009 – Bitcoin v0.1 announced Flat line – no activity extending all the way back to January 2009 Source: https://blockchain.info/charts/market-price?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

8. Real Time Pricing 8

9. Bitcoin Exchanges 9

10. Arbitrage Opportunities 10

11. Demise of Mt. Gox 11 MIT Technology Review

12. Bitcoin Wallet 12

13. Bitcoin – Managing Supply 13 There will never be more than 21 million bitcoins in circulation.

14. Bitcoin – Circulation to date… 14

15. Bitcoin Mining… 15

16. Bitcoin – Signs of a Bubble 16