MONEY...MONEY...MONEY!!
Alex Arnold introduced our speaker....our own Dennis Kurimai! Dennis' topic is A Deeper Look at Money and Bitcoin. Dennis has a B.S. in Economics from UCLA. Dennis has worked for Mitsui Operations Foreign Currency Exchange Options Desk in Tokyo; Research and Software quantitative analyst for FX Options Trading; Guest lectured at Harvard and Haas School of Business on Option Trading and Currency Hedging using MEstimate statistical methods. Dennis is a currency enthusiast and works full time at Oracle where he specializes in Enterprise software. | Looking good...
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Dennis started with a song...and then introduced bitcoins by providing some background. Bitcoins (btc) were introduced in 2009 by Satoshi Nakamoto (probably a pseudonym) and are a digital currency. Btc uses cryptography for security and the blockchain is the overarching tracker of bitcoins and who owns them. During a trade, validation can take up to 10 minutes. Bitcoins can be bought and sold on exchanges - MtGox & BTC in China are the two largest. Counterfeiting is supposedly "impossible" as there are no physical bitcoins. Bitcoin 'miners' can mine them as individuals but can't game the system. Bitcoin warnings: - secure your wallet
- prices are volatile
- transactions are irreversible
- transactions are not anonymous
- instant transactions are less secure
- still experimental
- don't forget government taxes (even though some may be attracted to avoid taxes)
Recently China cracked down...Chinese nationals were sending funds out of China via bitcoin purchases. BTC was all but shut down (65% of users were Chinese nationals) and stopped Yuan deposits. The US Congress started an investigation in November so we will have to wait to see how US regulations play out but Digital Currency will probably be big... It has been used for illegal purposes as in the case of Silk Road's Ross Ulbricht who accepted bitcoin payments for illegal products/services. He is currently suing the US Gov't to get his bitcoins back. Volatility and Illiquidity...big price swings based on last trade. In 2140, the numberof bitcoins will be capped - at just under 21 million worldwide. As of December 2013, there are 12 million in circulation and, according to lore, Satoshi has about a million of those. You can buy bitcoins or you can accept them as a form of payment for goods or services: - new technologies like SlySoft.com that may have questionable business models
- Virgin Atlantic
Why use bitcoins? One answer is freedom - no foreign exchange risk
- low transaction fees
- security and control (no gov't intervention like Cyprus situation where they closed the banks and confiscated funds)
- private and secure commerce
- value is transparent
Wrong reasons to use btc - to launder money
- to engage in criminal activity
- to try to transfer restricted assets
- to avoid taxes
Bigger question....what is "money"?? "Money is any form of payment that is accepted by both the payer and the payee." The Exchanges will post the last trade value but to get rid of a bitcoin you need to get someone to buy it or exchange good/services for it. A "good" currency must be portable; readily recognizable; be fungible so transactions of all sizes can be executed; can't be manufactured for a cost less than its free market value. Anthropology and the history of money... - started with barter
- then Grains and Foodstuffs were currency
- coinage usually backed by precious metals
- paper money - bank notes were given as a receipt for precious metals on deposit and those were traded
- digital money - is already here, what % of US dollars is actually in a note or coin??
Currency by Fiat - money has value by decree of the government. Every major currency in circulation today is a fiat currency...including the U.S. Dollar but bitcoin is not. Why do we even use money? The barter "thing" was working so well. Governments want to control fiat currency so it is easier to tax it. Digital Currency is here to stay... - it is portable
- authenticity can be validated
- can serve as a store of value
- fungible and divisible
But - btc can be created for less than its value
- btc operates "outside" of fiat currency systems
Does btc pass the 4 way test?? Does the US dollar?? Currency creation is no longer in the sole domain of governments as mankind continues to seek solutions. Dennis ended with a quote from Rothschild: "Give me control of a nation's money and I care not who makes the laws" |