blockchains: bitcoin was always so much more

Blockchains and distributed ledgers

----- Bitcoin was always so much

more…..

Professor Robin Teigland Stockholm School of Economics

www.slideshare.net/eteiglandwww.funnovation.se

Robin.teigland@hhs.se @RobinTeigland

April 2016www.hhs.se

Halloween in Nashville, 1974

Valuecreation

People• “Net generation”• 24x7 “mobile”

workforce• Knowledge via MOOCs• Sharing not owning• Sustainability

Technology • Broadband access• Mobile phones• The cloud• Internet of Things • Big Data• 3D printing• Robotics/AI• VR/AR• Holography• Blockchains

Open Source IP

• Software • Hardware• Physibles

Convergence of…..

Finance•

Microlending/microfinance

• Crowdfunding/equity/P2P

• Non-fiat cryptocurrencies

• Mobile money/payments

• M2M payments

Banking is essential,

but banks are not.

Bill Gates

The emergence of FinTech

Stockholm hits 100 Fintech companies in 2015

Acquired companies included in these totals

Strong investment in Stockholm Fintechs

* 2015 estimate based on 2014 growth rates.

m USD

658.5m USDInvested over the past 5 years

>14bn SEK Estimated 2015 Revenue for Stockholm

Fintechs*

>5800Estimated 2015 Employment for Stockholm

Fintechs

2015 2014 2013 2012 2011

137.7

266.2

17.6

55.4

181.6

Investments in Stockholm Fintech Companies

Stockholm Fintechs moving in on traditional bank territory

Inspiration from CB Insights, SEB base webpage slightly modified to make more room

+

USD 137.7 mln in funding to Stockholm Fintech Companies in 2015

66.6m USD Intel, Zouk

Capital, Creandum, Dawn Capital,

Index Ventures, MCI Capital, Northzone

15.0m USDAccel, Creandum,

GP Bullhound, Martin Wattin

10.0m USDNorthzone, White Star

Capital

1.9m USDUndisclosed

1.4m USDNorthzone, Undisclosed

Angels

0.6m USDPeter

Gyllenhammar

0.6m USDNFT Ventures

0.5m USDAndreas Bonnier

0.7m USDCrowdfunding,

Techstars

Undisclosed UndisclosedAggregate Media

UndisclosedNFT Ventures

UndisclosedNFT Ventures

38.0m USDKinnevik, LeapFrog

0.7m USDNFT Ventures

0.5m USD Karl Johan

Persson

1.2m USDStaffan Persson,

Thord Wilkne

UndisclosedNFT Ventures

Corporates investing in bitcoin and blockchains

https://www.cbinsights.com/blog/largest-blockchain-deals-strategic/

No one knows everything, everyone knows something,

all knowledge resides in humanity.

networks.

Adapted from Lévy 1997Image: Krebs

Bitcoin – An emergent phenomenon• Open source project on SourceForge in Jan 2009 • Original source code by “Satoshi Nakamoto” –

pseudonym?• Developed by self-organizing, online community of

thousands of strangers across globe• Approx USD 6.6 bln market cap and 200,000

transactions equal to USD 150 mln in daily transaction volume

• 1 BTC = USD 425 (April 13, 2016)

Teigland, Yetis, Larsson 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707

Within 6 years: Challenging

the fiat money system?

InstitutionsEmergent Collective v

s

E.g., Central Bank~ Long-standing financial

institutions and regulations

E.g., Bitcoin Community ~ Emergent collective of users across globe connected through internet

Teigland, Yetis, Larsson 2013

Why do banks exist?

How does Bitcoin work?

https://99bitcoins.com/get-your-first-bitcoin/

• Digital• Decentralized, P2P• No third party

• Shared public ledger

• All transactions ever made logged

• Chronology and integrity enforced by cryptography

The blockchain underlies bitcoin transactions

Financial Times

Centralized vs distributed ledgers

Financial Times

A global network of Bitcoin nodes

https://bitnodes.21.co/

https://www.youtube.com/watch?v=K8kua5B5K3I

AltCoins and the Blockchain

http://www.longfinance.net/images/events/Blockchain_and_Insurance_Webinar_10.14v2.0.pdf

Where can I spend my bitcoins?

MicrosoftDell

WordpressNewegg

OverstockGiftcards

Bitcoin – one of 100s of AltCoins

http://coinmarketcap.com/

Sluggish growth in bitcoin usage? Users satisfied with current payment systems

that continuously improving Practical difficulty of purchasing bitcoins Volatility of bitcoin’s value relative to

government issued currencies Perception that bitcoin is insecure Questions over bitcoin’s legal status Irreversible and unforgiving nature of bitcoin

transactions Lack of support for bitcoin in mainstream

financial sector

http://www.multichain.com/download/MultiChain-White-Paper.pdf

The blockchain: bitcoin only one application

Decentralized - robust, no central control or authority required to coordinate behavior or interaction

Shared public history of all transactions Displaces roles of trusted third parties

• Can’t do same transaction twice • No double spending• No transaction repudiation

‘Trustful – initial entry requires high degrees of trust but then system operates on trustless basis

http://www.longfinance.net/images/events/Blockchain_and_Insurance_Webinar_10.14v2.0.pdf

The (Ethereum) blockchain

Betting on the blockchain - together

>40 banks and counting…Goldman Sachs, JPMorgan,

Credit Suisse, Barclays, Commonwealth Bank of

Australia, State Street, RBS, BBVA,

UBS, Nordea, SEB, + ……

+ +

Benefits of blockchain for financial services

Lower costs through shared infrastructureFaster settlement that leads to lower

capital and liquidity needs Increased transparency, especially with

cross border paymentsGreater security through cryptography,

transparency

Citi Research, Jan 2016

Blockchain insurance applications

Enabling smart contracts

Weather dataalgorithm

Insuranceclaim payout

From “trusted”, centralized human authorities

to trustless, decentralized networks

IBM Institute for Business Value (PDF)

• World’s first decentralized computer• Commoditizes trust

https://www.youtube.com/watch?v=U_LK0t_qaPo

robots

Enablers of a “true” Collaborative Economy?

Blockchains

Sharing/ Collaborative Economy

IoT/sensors

P2P/M2M micropayments

Big data

Time will tell…..

The Blockchain is the glue that is going to drive a productivity revolution across the globe on par with what Henry Ford did with the automobile.

— Paul Brody, Americas Strategy Leader, Technology Sector, Ernst & Young

1950s vision of home PC in 2004

If the rate of change on the outside (of an organization) exceeds the rate of change

on the inside, the end is near....

-Jack Welch

Robin Teiglandrobin.teigland@hhs.se

www.slideshare.net/eteiglandwww.funnovation.se

@robin.teigland

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