Takeaways:

1. BENEFITS AND RISKS of Bitcoin
   • The challenge for regulators is to encourage beneficial uses and future innovations while minimizing the risks posed and to do so without preventing such innovations from spawning. - 1.5.7 Legal regulatory attitude
2. IMPACT OF THE DIGITAL CURRENCY REVOLUTION
   • The digital currency revolution will have a lot of impact on the digital and physical world. A lot of devices will be connected to each other via near-field communication (NFC). Devices that are carried by our side or are worn on our body will contain information about our preferences, possibly our current state of health and most likely all our personal records including how much money we have. We may not need to carry physical wallets and identity cards anymore. - 1.6 IMPACT OF THE DIGITAL CURRENCY REVOLUTION
   • These devices will monitor us and improve our experience in every aspect of our life including medical care, education, and financial services. Blockchain technology can play a major role in lowering the cost of financial services via cost-sharing through mining, and therefore, financial institutions can reach out to the unbanked and underbanked, as well as those that require lending and fundraising. All these can be done via the peer-to-peer network of cryptocurrency, either decentralized or distributed. Financial services especially banking will likely be disrupted and margin will be affected as what eCash was set out to do in the early 1990s. - 1.6 IMPACT OF THE DIGITAL CURRENCY REVOLUTION
3. Smart contract for a sharing economy
4. As soon as the full supply of 21 million bitcoins is issued by the year 2040, which is still very distant, the risk of miners dropping out may increase. If the only reward is transaction fees and if fees become too high, the merchants are likely to drop out.
5. There are technical solutions to all these and some cryptocurrencies have come up with the idea of proof of stake reducing the probability that any single person can use a quantum computer to overwrite the whole system. There are also attempts to lower the cost of mining so as to reduce the so-called 51% attack or gold finger problem. However, there is still no foolproof solution to the gold finger issue that if anyone with enough financial strength wishes to mess up the record, he or she can theoretically do it.
6. There are also cryptocurrencies that are looking into proof of identity to reduce the possibility of using the currency for money laundering or terrorism activities. If that problem can be resolved, cryptocurrency has a very real potential to be very popular. If a particular cryptocurrency is able to accept that the government is part of the ecosystem and its community engages with the government meaningfully in creating the ecosystem, that cryptocurrency is likely to become more widely accepted. Given that most of the welfare improvement comes from the bottom of the wealth pyramid, emerging markets have the upper hand in harnessing the low-hanging fruits of cryptocurrency via a decentralized but not necessary distributed system. A cryptocurrency that addresses those issues mentioned will have a bright future.
7. Bitcoin faces a long-term structural economic problem related to the absolute limit of 21 million units that can ever be issued, with no expansion possible of the bitcoin supply after the year 2140. If bitcoin becomes wildly successful and displaces sovereign fiat currencies, it would exert a deflationary force on the economy since the money supply would not increase in concert with economic growth.

Quotes

• Bitcoin is something that is very different from the existing financial system for which country regulators have experience regulating.
• Cryptocurrency may not replace fiat currency, but its blockchain technology will certainly have an impact on the welfare of the people and perhaps even out the inequality.