Alternatively:

Why don’t I

invest more

than a percent

of my savings

in Bitcoin?

BITCOIN – THE TWO

GREAT UNKNOWNS

A SHORT TALK BY

MEHER ROY

Background

Bitcoin is probably the greatest intellectual breakthrough of

the last decade.

- “The HTTP of Finance” - Cl iché

- “We believe that embedded mining wil l ult imately establish bitcoin as a

fundamental system resource on par with CPU, bandwidth, hard drive

space, and RAM .” : Balaj i Srinivasan, CEO 21co.

- “Personal computers in 1975, the Internet in 1993, and – I bel ieve –

Bitcoin in 2014.” : Marc Andreessen, Andreessen Horowitz

A great invention does not necessarily a great market make!

A Balancing Act

Incent ive for miners for secur ing the network . Larger i t is , more secure the network . ~$1 mi l l ion per day

cur rent ly

Miner revenue in form of t ransact ion

fees . Current ly ~5000 USD per day,

~4 cents per t ransact ion .

Miner revenue in form of newly

generated b i tco ins . Current ly ~1

mi l l ion per day.

Hardcoded Network Parameters And ideal world behavior

Excerpt from paper by Kerem Kaskaloglu at http://sdiwc.net/digital-library/near-zero-bitcoin-transaction-fees-cannot-last-forever.html

But! Miner earnings from transaction fees Measured in USD per day

And! Bitcoin network deficit Measured in USD per day

A proclivity towards being Digital Gold Anecdotes - I

http://www.coindesk.com/xapo-switzerland-privacy-concerns/

http://www.coindesk.com/is-bitcoins-merchant-appeal-fading/

A proclivity towards being Digital Gold Anecdotes - I I

http://uk.businessinsider.com/30-million-bitcoin-startup-bitpays-backup-plan-sell-tech-to-the-banks-2015-6?IR=T

A proclivity towards being Digital Gold Data - I

Source: John Ratcliff

A proclivity towards being Digital Gold Data - I I

- BitPay processed about 1000-1500 “retail” payments per day, averaging less than 1 BTC each.

- The number of retail transactions processed by BitPay has grown 3x since mid-2013, and has been

flat through most of 2014.

Source: Jorge Stolfi, http://www.reddit.com/r/Buttcoin/comments/2pp6r5/always_one_to_pump_a_scam_the_ever_honest_roger/cmz1v0r

Can transaction volume on the blockchain scale 200x in order

that BTC miners develop a viable business model?

How does the possibility of off -chain payments like Lightning

networks, federated sidechains etc. impact revenues of

miners?

Without a viable long term business model for miners, is the

cap of 21 million BTC viable? Or will a future hard fork raise

the limit?

The question

It is a commonly held belief that “Bitcoin is backed by

mathematics”. This is a bogus assertion.

Bitcoin is essentially lots of dif ferent entities agreeing to

treat entries on one database, the blockchain, as “value”.

But what happens when half these entities want the database

to operate by one ruleset, and the other half by another

ruleset?

This situation is called an “unresolved hard fork”, and the first

of them could occur in 2016.

Backed by people’s beliefs not

mathematics!

When a person is confronted by 2

choices..

Bitcoin confronted by 2 choices could..

Both Bluecoin and Redcoin c la im to be the “Real B i tcoin”

Der ide the other as the “Fake Bi tcoin”

Number of transactions per day

Estimated USD transaction volume per day