The Bitcoin Big Bang: How Alternative Currencies Are About to Change the World

236 Pages·2015·2.39 MB·English

by  Brian Kelly

THE BITCOIN BIG BANG
How Alternative Currencies Are About to
Change the World
Brian Kelly
Cover image: © iStock.com/pixelparticle
Cover design: Wiley
Copyright © 2015 by Brian Kelly. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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ISBN 9781118963661 (Hardcover)
ISBN 9781118963647 (ePDF)
ISBN 9781118963654 (ePub)
For my wife, Dawn, this book is a testament to your unwavering
faith in my stupid ideas.
CONTENTS
Preface
Acknowledgments
About the Author
Chapter 1: Bitcoin Is a Bubble
The Quest to Buy Bitcoin
Bitcoin Enlightenment
Currencies Are a Matter of Trust
What Is Bitcoin?
Is It a Currency?
It's Revolutionary
Chapter 2: Understanding the Digital Gold Rush
The Language of Bitcoin
How Do I Buy Bitcoin?
Who “Gets” It?
The Gold Rush Is Just Starting
Chapter 3: Bitcoin Is More than Digital Gold
Searching for Satoshi
The Search
Why Is Satoshi a Genius?
Bigger than Satoshi
Chapter 4: Byzantine Generals' Problem
How Does Bitcoin Solve the BGP?
51 Percent Attack
An Elegant Solution
Chapter 5: A Decentralized Financial System
Grand De-Central Station
What's at Stake?
Central Banks
Bitcoin Is the Catalyst
Chapter 6: What Do You Call a Bitcoin Miner? A Banker
How Does a Bitcoin Transaction Work?
What Is Cryptography?
Still Want to Be a Miner?
Do We Need Another Bitcoin?
Chapter 7: Nautiluscoin—0 to $1 Million in 60 Days
Creating the Coin
Did It Work?
Chapter 8: Building the Nautiluscoin Economy
Dynamic Proof-of-Stake
Other Policy Tools
Alternative to Gold
Money, Made Better
Financial Market Integration
Special Drawing Rights
Why NAUT?
Chapter 9: Investing and Trading in Alternative Currencies
A New Investment Class
Valuation
Exchanges
Investment Vehicles
Asset Class Growth
Chapter 10: Regulation
Regulatory Agencies
Challenges to Regulation
Pushing on a String
Chapter 11: Smart Money: Set It and Forget It
Rules of the Road
Smart Contracts and Property
Ethereum
Cryptoequities: A New Type of Investment
Decentralized Autonomous Organizations
Professor Money
Chapter 12: Everything You Know about Business Is Wrong
Cryptonomics
Growth Share Matrix
Learning Curve Effects
Porter's Three Generic Strategies
Human Resource Management
Fueling the Sharing Economy
The Future Just Might Work
Appendix 1: Department of the Treasury Financial Crimes Enforcement
Network Guidance: FIN-20 13-G00 1
Issued: March 18, 2013
Subject: Application of FinCEN's Regulations to
Persons Administering, Exchanging, or Using Virtual Currencies
Currency vs. Virtual Currency
Background
Definitions of User, Exchanger, and Administrator
Users of Virtual Currency
Administrators and Exchangers of Virtual Currency
Providers and Sellers of Prepaid Access
Dealers in Foreign Exchange
Notes
Appendix 2: New York State Department of Financial Services Proposed
New York Codes, Rules and Regulations:
Title 23. Department of Financial Services
Chapter I. Regulations of the Superintendent of Financial Services
Part 200. Virtual Currencies
Section 200.1 Introduction
Section 200.2 Definitions
Section 200.3 License
Section 200.4 Application
Section 200.5 Application Fees
Section 200.6 Action by Superintendent
Section 200.7 Compliance
Section 200.8 Capital Requirements
Section 200.9 Custody and Protection of Customer Assets
Section 200.10 Material Change to Business
Section 200.11 Change of Control; Mergers and Acquisitions
Section 200.12 Books and Records
Section 200.13 Examinations
Section 200.14 Reports and Financial Disclosures
Section 200.15 Anti–money Laundering Program
Section 200.16 Cyber Security Program
Section 200.17 Business Continuity and Disaster Recovery
Section 200.18 Advertising and Marketing
Section 200.19 Consumer Protection
Section 200.20 Complaints
Section 200.21 Transitional Period
Index
End User License Agreement
List of Tables
Chapter 6
Table 6.1
Table 6.2
Chapter 8
Table 8.1
Chapter 9
Table 9.1
Table 9.2
Table 9.3
List of Illustrations
Chapter 5
Figure 5.1 A Simple Transaction in a Centralized Financial System
Figure 5.2 Types of Systems
Figure 5.3 A Transaction Using the Decentralized Bitcoin Network
Figure 5.4 Bitcoin Aims to Disrupt a $459bn+ Industry
Chapter 6
Figure 6.1 Bitcoin Price versus Network Difficulty and Hash Rate
Figure 6.2 Homemade FPGA Mining Rig
Figure 6.3 Dave Carlson in His $8 Million per Month Bitcoin Mine
Figure 6.4 Bitcoin Mining Pool Market Share
Chapter 8
Figure 8.1 Chain of Causality for Monetary Policy
Figure 8.2 Dynamic Algorithmic Monetary Policy Creates Smooth
Economic Growth Pattern over the Long Run
Figure 8.3 Nautiluscoin Policy Tools
Chapter 9
Figure 9.1 A $100,000 Portfolio That Is Invested $60,000 in SPY and
$40,000 in TLT
Figure 9.2 Rolling 6-Month Correlation between S&P 500 and 10-Year
Yield
Figure 9.3 HGY00—High-Grade Copper—Daily Line Chart
Figure 9.4 Price of Bitcoin Rises
Chapter 12
Figure 12.1 The Growth Share Matrix
Figure 12.2 Ford Model T Price Experience Curve: 1909–1916
Figure 12.3 Three Generic Strategies