The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of...

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Χοντινυινγ Εδυχατιον Σεμιναρ Μαρχη 3, 2018 The Blockchain & Cryptocurrency Revolu6on Demys6fied

Transcript of The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of...

Page 1: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Χοντινυινγ Εδυχατιον Σεµιναρ Μαρχη 3, 2018

TheBlockchain&CryptocurrencyRevolu6onDemys6fied

Page 2: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Kirk Phillips, CMA, CPA, CFE, CBP Author, The Ultimate Bitcoin Business Guide

Page 3: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

YourCryptocurrencyJourneystartswithEduca6on

“Aninvestmentinknowledgepaysthebestinterest”

BenjaminFranklin

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YourCryptocurrencyJourneystartswithEduca6on

“Informa6onaboutmoneyhasbecomealmostmore

importantthanmoneyitself”WalterWriston,FormerCi6groupChairman&CEO

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YourCryptocurrencyJourneystartswithEduca6on

“Informa6onaboutcryptocurrenciesismore

importantthancryptoitself”KirkPhillips

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Itallstartedwithasimpleques6on.

Afriendasked,“ShouldIinvest$800inacomputertominebitcoin?”

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BITCOIN&BLOCKCHAIN

Overview

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1)  IDon’tknowanythingaboutit2)  Iknowsomethingaboutit3)  Iknowalotaboutit

BitcoinPercep6onPOLL

1)  Ihaveanega:vepercep:onofbitcoin2)  I’mneutral3)  Ihaveaposi:vepercep:onofbitcoin

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UptonSinclair

“It’sdifficulttogetamantounderstandsomethingwhenhissalarydepends

onhimnotunderstandingit.”

Howtolistentothispresenta6on

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ü  Understandbitcoin&cryptocurrencybasicsü  Theimpactonaccoun:ng,finance&audi:ngü  Theopportunityforyourbusiness&careerü Whatitmeansforyou

TheInten6onofthispresenta6on

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WhatisBitcoin?“IdothinkBitcoinisthefirst[encryptedmoney]thathasthepoten:altodosomethinglikechangetheworld."

PeterThiel,co-founderofPayPal

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WhatisBitcoin?"EconomistsandjournalistsoPengetcaughtupinthisques:on:WhydoesBitcoinhavevalue?Andtheanswerisveryeasy.Becauseitisusefulandscarce."

EricVoorhees,FounderofShapeShi[.io

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Whatiscryptocurrency?"Therearethreeerasofcurrency,

commodity-based,poli:cally-basedandnowmath-based."

ChrisDixon,technologyinvestor

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Whatisthistechnology?"Attheendoftheday,we'veneverseen

anythinglikethisbefore."

DavidWoo,HeadofGlobalRates&CurrencyResearch,BankofAmerica

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Whatwillhappen?“Everythingthatcanbedecentralized

willbedecentralized."

DavidJohnston,FounderofDecentralizedApplica6onsFundandBitAngels

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WhatisBitcoin?"Theaverageusershouldpickupbitcoin.To

experiencethefutureofmoney.Togainaglimpseintoanexci:ngtechnology.Tolearnabouthowmoneycouldbeinthefutureandalsobecome

awareofhowlimitedmoneyandbanksaretoday.”AndreasAntonopoulos,BitcoinevangelistandauthorofMasteringBitcoin

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WhatisBitcoin?“Everybodyhatesbanks,evenIhatebanks.[bitcoin]willforcetradi:onal

ins:tu:onstoadaptordie.”DavidAndolfa`o,VicePresidentoftheSt.LouisFederalReserveBank

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WhatisBitcoin?“Doingabankingtransac:onona

bankingholidaywithoutusingabank.”

KirkPhillips,AuthorofTheUl6mateBitcoinBusinessGuide

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WhatisBitcoin’sImpact?"It'simportanttorememberthatifthere

werenobitcoin,therewouldbenodistributedledgertechnology."

h`ps://www.coindesk.com/former-fdic-head-let-the-market-figure-out-bitcoins-value/3-1-18

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Whatdoallthetermsmean?v Coins/Tokensv Digitalcurrencyv Virtualcurrencyv Cryptocurrency

v Blockchainsv DLT~Distributed

LedgerTechnology

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ThreeFunc6onsofMoney

MediumofExchangeUnitofAccountStoreofValue

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A`ributesofMoney

PortableDurableFungibleDivisible

CompareGoldvs.bitcoin

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Whothinksbitcoinisanonymous?

Ø Pseudonymousatbest(iden6ty&transac6onsnotlinked)

Ø Transac6onscanbeanalyzedontheblockchainØ CrystalbyBihuryisablockchaininves6ga6ontoolØ BitcoinisNOTthecoinofchoiceforbadactorsØ WilltoolslikeCrystaldestroyfungability?

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BitcoinCharacteris6cs

Ø bitcoinsymbolisBTCØ Eachcoinhas100,000,000unitsor8decimalplacesØ Exampleofabitcoinamountis1.89543145BTCØ TotalBTCsupply21,000,000Ø Cryptographic,predictable,fixedmonetarysupplyØ NooneownsBitcoin~Anyonecanownbitcoins

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BitcoinAddress&PrivateKeys

Bitaddress.org

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BitcoinCharacteris6csØ PUSHvs.PULL

Ø Peertopeer

Ø Nointermediaries(2008)

Ø NoFraud

Ø NoPCI

Ø Nomoregianta`acksilos

Ø Publicledgertransparency

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CreditCardChaos

AshokMisra

Page 28: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

MoneyTransferMadness

SimonNahnybida

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BitcoinSimplified

BTC.org

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TheBitcoinBlockchain

Ø  Ablockisabatchoftransac6ons

Ø  Linkedtogetherwithcryptographichashes

Ø  TheBlockchainisachainofblockslinkedbyhashes

Ø  Infeasibletobreakthechainandrewritehistory

Ø  Bitcoinminersprovide“ProofofWork”

Ø  Bitcoinminerscompetefornewbitcoins

Abitcoiner

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BitcoinHas4Elements

Ø OpenØ BorderlessØ NeutralØ CensorshipResistance

AndreasAntonopoulos,LTB#329

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BitcoinElementsSaidAnotherWay

Ø NetworkØ ProtocolØ Incen6vemechanismØ (ie.Na6vecurrency)

AndreasAntonopoulos,LTB#329

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OneVersionoftheTruth

“Ina6meofdeceit,tellingthetruthisarevolu6onaryact.”

unknown

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NOTALLBlockchainsarethesame!

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BitcoinBreakthrough

Forthefirst6meinhistorywenowhave

“oneversionofthetruth”

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Coinmarketcap.com

TheUl6mateBitcoinBusinessGuide™HashedintoTheBlockchain

ProofofExistence

Page 37: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

BitcoinBreakthrough

Forthefirst6meinhistorywecanturnmoneyintodataandprogramit

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ABitcoinTransac6on&BlockExplorer

Blockchain.info

Page 39: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

DesktopWallet&MobileWallet

ReddcoinCore Airbitz.co

Page 40: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Mul6-Sig:AnInternalControlBreakthrough

BitGo

Page 41: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Mul6-Sig:ComplexCorporateExample

Armory

Page 42: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

TheFuture

TheAccountantwillbecometheBanker,FinancialAdvisor,SecurityExpertandmorefortheircompany

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TheFuture

Cryptocurrencyisinthe1998eraoftheInternet.Youarefindingoutaboutitnow!

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CRYPTOASSETSANewAssetClass

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CryptoAssets(termsrefined)

CryptocurrenciesCryptocommodi:es

CryptotokensCryptocollec:bles

ChrisBurniske&JackTatar,CryptoAssets2017

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Coinmarketcap.com

MarketCapScreenshot1-16-15

1-16-15

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Coinmarketcap.com

5-23-17

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Coinmarketcap.com

2-27-18

Page 49: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

BuyOrderonaCryptocurrencyExchange

Cryptsy(nowdefunct)

Page 50: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

CryptocurrencyCrowdsales~TheICO

Ø Anewprotocolprojectcreatesit’sowncoin

Ø BitcoinistheINTERFACEtoallothercoinsØ AlmostanyonecaninvestintheIni6alCoinOfferingØ It’sNOTsharesinacompany(willbe)Ø It’slikeowningpartoftheprotocol,alicensetouse

Page 51: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

CryptocurrencyCrowdsales~TheICOIni6alCoinOffering

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TheICO~Ini6alCoinOffering

h`ps://elementus.io/token-sales-history

Page 53: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

RemembertheThreeFunc6onsofMoney?ConsidertheintrinsicvalueofCryptoAssets

h`ps://www.coindesk.com/former-fdic-head-let-the-market-figure-out-bitcoins-value/

SheilaBair,FormerFDICChief,suggestedthatwhile…cryptoslackan‘intrinsicvalue,’neitherdocurrenciessuchastheU.S.dollar….“thegreenbillsinyourpocketdon'thaveanintrinsicvalue,either,”shewasquotedassaying.3-1-18

Page 54: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

YapeseRaiStones(StoneMoney)8,800lbs.

ByEricGuinther-EnglishWikipedia,CCBY-SA3.0,h`ps://commons.wikimedia.org/w/index.php?curid=161923

o CarvedfromlimestoneinMicronesiao TransportedfromPalautoYapbycanoe

o NoLimestoneonYap=PerceivedValue

o RaiaretransferredbyanORALHISTORY

o TOOBigtoMOVEo MiltonFriedman,“It’sagoldstandard”

Page 55: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

IfMiltonFriedmansays,“StonescanbeGOLD”whycan’tGOLDinthegroundbea

cryptocurrency?“NowwecandigitallymineGOLDwithoutactually

physicallyminingit.KirkPhillipsWhatdoyouthink?

ByEricGuinther-EnglishWikipedia,CCBY-SA3.0,h`ps://commons.wikimedia.org/w/index.php?curid=161923

Page 56: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Tradle~KYC-as-a-Service

v KYCisafounda6onallayernecessarytobridgeblockchainwithtradi6onalfinance

v Thenmuchmorebecomespossiblev AnAssuranceMarketplace…..v CapitalwillFLOWlikeELECTRICITY!

Page 57: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Tradle~KYC-as-a-ServiceIden%ty.Contractualandperformanceriskmi6ga6onstartswiththeKYCduediligence.KYCisnecessaryforregulatorycompliancereasons,butweputittouseforassessingthelegalstatusofthecompany,itscorebusinessac6vi6es,professionalismofdirectorsandcharacteroftheowners.Assurance.Further,theintegra6onwithaccoun6ngpackagesandanindependentaccoun6ngaudit,allowstoachievecreditriskmi6ga6on.Creditra%ng.Insuranceoffersaresidualriskcover,thuseleva6ngSME’dcreditra6ng.Thisfinalstepmakesitpossibletobundleupandsecuri6zeloans.Audit,paidbyaninsurancecompany,notbytheSME,allowstoavoidaperpetualconflictofinterestthatplaguestheassuranceindustry.

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Tradle~KYC-as-a-Service

Page 59: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

CryptocurrencyNon-financialUseCasesØ DecentralizedInternet(Maidsafe)Ø Decentralizedfilestorage(Storj,Sia)Ø Documentimmutability(Factom)Ø Privacycoins(Monero,Dash,Zcash)Ø Governance(Boardroom)Ø Predic6onMarkets(Augur,Gnosis)Ø Smartcontracts(Ethereum)

Page 60: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

CRYPTOCURRENCYTAXATION

Page 61: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Conver6bleVirtualCurrency•  IRSNo:ce2014-21~3-25-14:Statesvirtualcurrencyis

treatedlikeproperty(thepropertyrulesapply)•  NOGUIDENCESINCETHISTIME•  MakeaUSDtransla:onatthe:meofatransac:on•  CapitalgainsandlossescomputedonALLtransac:ons•  TherecanONLYbeoneLEGALTENDER

Page 62: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

ANewRealmofTaxableEvents&Considera6onso  Forks&ChainSplitso  Like-KindExchangeso  Airdrops&Giveawayso  TokenSwapso  Tippingo  AcceptableValua:ono  CostBasisMethod

o  “DoubleCapitalGainParadox”BitcoinasaConduit

o  ADeMinimisElec:ono  Dealers&Traderso  Dominion&Controlo  PriceDiscovery

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SECURITY,RISK&STRESS

Page 64: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

ANewRealmofRisko  KeyManagementRisko  Cogni:veRisko  Blockchain

InteroperabilityRisko  BlockchainCon:nuity

Risko  Encryp:onRisk

o  Forks&ChainSplitRisko  ConsensusRisko  GovernanceRisko  SocialEngineeringRisko  CodeManagementRisko  WalletRisko  LegacyRisk

Page 65: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

Howdoyousecurepasswords&privatekeys?

Page 66: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

****TheGoldenemailRule****Themostvaluablesecuritytakeaway!

ü  UseONEemailforcommunica6onandaDIFFERENTemailforUSERNAMES

ü  [email protected]#Hp9!n*[email protected]ü  OtherwisehackersALREADYhaveyourusernameü  BruteforcingbecomesEASY

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ExamplesofBitcoinHardwareWallets

Trezor

Ledger

Page 68: The Blockchain - ceworkshops.com · Examples of Bitcoin Hardware Wallets Trezor Ledger Examples of Bitcoin Paper Wallets Trezor Ledger A CASE STUDY: Ethereum, The DAO & Governance

ExamplesofBitcoinPaperWallets

Trezor

Ledger

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ACASESTUDY:Ethereum,TheDAO&Governance

Ø TheDAOraised$150MM+inSpring2016crowdsale

Ø EthereumSmartContractsPlahormØ Marke6ngbe`erthantheexecu6onØ THENahackerdrains$60MMØ EthereumETHFORKS&EthereumClassicETCisbornØ OneCHAINbecomesTwoCHAINS

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ACASESTUDY:Ethereum,TheDAO&Governance

Ø NOONEpredictedtheChainSplitØ 10%ofminerscon6nuedtominetheoriginalchainØ EthereumcommunityhasbeenatoddseversinceØ Visith`ps://ethereumclassic.github.io/Ø BREAKOUT#3:STUDYtheTimelineØ Whatdoyouthink?

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ACASESTUDY:Ethereum,TheDAO&Governance

Transac:onFinalityofETC“Webelievethecorevalueproposi6onofanyblockchainisimmutability;validtransac6onscanneverbeerasedorforgo`en.Individualsinterac6ngonEthereumClassicaregovernedbythisreality;CodeisLaw.”“Transac6onsarefinal;applica6onsareunstoppable.”

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ACASESTUDY:Ethereum,TheDAO&GovernanceTransac:onFinalityofETC“Thisdoesnotnecessarilymeanthatcodereplacesexis6nglaws,orthatonlycodeislaw...ByenteringintocontractsonEthereumClassic,youcanbecertain…theoutcomeoftransac6onswillbedictatedbycodeyouvoluntarilyinteractwith.Unlessexplicitlydefinedbythecontractcode,therearenoreversals,noundos,noopt-outs.”

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ACASESTUDY:Ethereum,TheDAO&GovernanceDecentralizedGovernance“Therearemanyproblemsthatfesterduetocentraliza6onandopaqueness;corrup6on,unaccountability,nepo6sm,inefficiencyandstagna6on.Ul6mately,centraliza6onleadstofragility;onlydecentralizedsystemscanstandthetestof6me…webelievethatonlytrulydecentralizedprojectscansurviveinthelongrun.”

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ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’smoretothestory…...7-19-17

Ø  ParitywalletHACKresultsin$30MMgone

Ø  Asimplebuginthewalletcode(mul6-sig)

Ø  ThreeICO’s:Edgeless,SwarmCity&Aeternityimpacted

Ø  Lot’sofRISKabounds

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ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’sEVENmoretothestory…...11-9-17

Ø  ParitywalletFREEZEresultsin$152MMfrozenfundsØ  Polkadot$145MMICOraise~$98MM“FROZEN”Ø  TheonlywaytosolveisANOTHERhardforkØ  600walletslockedbytheissueØ  Lot’sofRISKabounds

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ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’sEVENmoretothestory…...2-8-18

Ø  FourmonthslaterNOsolu6onsandtensionsmountØ  Astatechangeproposalputforthbythosewithfrozen

fundswasvehementlyREJECTEDØ  “Returninglostfundsshouldberareandincreasingly

excep6onal.”AlexVandeSande(ETHdeveloper)

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ACASESTUDY:Ethereum,TheDAO&GovernanceButwait,there’sEVENmoretothestory…...2-8-18"Theauthorsares:lllookingforacertainclassofpeoplewhocanmakejudgments.Theyarelookingforauthori:es...singlepointsoffailureandtheneedoftrust[is]whatethereumtriestoavoid.”YoichiHirai(ETHdeveloper)

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ACASESTUDY:Ethereum,TheDAO&GovernanceItkeepsoncoming…...2-28-18

v  JamesLevywaspaid40,000ETHon11-24-15($35,000)v  3WeekslaterALLETHishackedv  Nowhewantsahardfork~EIP867Proposal(standard

forfundrecovery)v  Causeofthehack:WEAKPASSPHRASEv  40,000ETHisnowworth$35,000,000

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COGNITIVECRYPTOSTRESS“It’sanewrealmofstressandriskwherehumannaturehastoadapt”KirkPhillips

“Yourmindhastobefreeandclearoryouwillmakemistakes.Thestakesincryptoarehigherandyouhavetostepupyouroverallgameinlife.”KirkPhillipsAsT.HarvEckersays,“Howyoudoanythingishowyoudoeverything.”

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COGNITIVECRYPTOSTRESS“I’msayingthistoinspireyounottoscareyouawayfromcrypto.”KirkPhillips

“Themarrowandessenceofcryptoishaving100%responsibilityandcontrol.”KirkPhillipsAsStephenCoveysays,“Putfirstthingsfirst.”

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IndustryProfessionalOrganiza6ons

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YourCryptocurrencyJourneystartswithEduca6on

“Aninvestmentinknowledgepaysthebestinterest”

BenjaminFranklin,Phila17XX