Legal Seminar, Denver, CO

071018 Discussion Draft

A. Overview – Major Cryptocurrencies

Cryptocurrency

# Issued

Value (US $)/Unit Market Cap (US $)

% of M2

Bitcoin

17,102,053 100,297,924

$ $ $ $ $ $

6,316.91

$ $ $ $ $ $

108,032,153,271 46,784,012,663 19,071,273,952 13,150,815,123 4,795,164,370 2,091,749,373

0.770% 0.334% 0.136% 0.094% 0.034% 0.015%

Etherium

466.45

Ripple

39,245,304,677

0.49

Bitcoin Cash

17,189,816 57,139,058 16,165,751

765.04

Litecoin Monero

83.92

129.39

M2 Money Supply (US $, May 2018)

14,024,200,000,000 $

Source of Data: https://bitinfocharts.com/ (as of 6/25/18); https://www.federalreserve.gov/releases/h6/current/default.htm (May 2018)

B. Missing Link. The typical history behind cryptocurrencies begins with Satoshi Nakamoto’s white paper, Bitcoin: A Peer –to-Peer Electronic Cash System (2008). (My own recent article for the Computer Law and Security Review takes this approach.) But those interested in the history of ideas will be interested in a recent essay that tracks the conceptual underpinnings of distributed ledger technology to scientists worried about the prospects of maintaining an accurate record of history in an age of digital documents. Rather than trusting a centralized source, why not distribute copies of the digital record across a broad, diffused network, validating the record through cryptographic means? A 1991 paper in the Journal of Cryptography provides the solution, leading to a startup and a patent that lapsed in 2004 due to nonpayment of fees. See Amy Whitacre, The Eureka Moment that Made Bitcoin Possible, Wall Street Journal, May 25, 2018, https://www.wsj.com/articles/the-eureka-moment-that- made-bitcoin-possible-1527268025 C. Advantages/Disadvantages of Cryptocurrencies. Cryptocurrencies present certain advantages over traditional electronic payment methods. Unfortunately, these advantages are particularly attractive to criminal enterprises. 1. Pseudo-anonymity. A payment can be made in bitcoin without fully disclosing the actual identities of the payor/payee. However, since the blockchain is publicly accessible, the public key is disclosed with the amount and time. Clever use of data analytics could be used to unlock the identity of a payor. See Jillian Friedman, Cryptocurrency 126-27 in E LECTRONIC P AYMENT S YSTEMS (2018). For this reason, new types of cryptocurrencies, such as Monero, are being developed to further shield user privacy. See, e.g., Olga Kharif, The Criminal Underworld is Dropping Bitcoin for Another Currency (Jan. 2, 2018), https://www.bloomberg.com/news/articles/2018-01-02/criminal-underworld-is-dropping- bitcoin-for-another-currency 2. Peer-to-Peer. Unlike other electronic payments with “peer-to-peer” features, cryptocurrencies allow direct transfers of value between parties without using an intermediary. This can be

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