ABA/ABA Money Laundering Enforcement Conference

tackynonchalantSoftware and s/w Development

Dec 3, 2013 (3 years and 8 months ago)

120 views

11/21/2013

1

11/21/2013

1

ABA/ABA Money Laundering

Enforcement Conference



Pre
-
Paid Access, Mobile Payments,
Virtual Currency, and More: The Good,
the Bad and Potentially Ugly




November 18, 2013

Washington, D.C.


Decentralized Currency

11/21/2013

2

What Is a Decentralized Currency?



An independent online monetary system that
combines features of cash and and existing
online payment methods



A software
-
based, distributed unit of value that
does not depend on centralized issuing bodies
to operate



Value is created by the user community and
the operation is distributed using an open
source system that can be installed on any
computer

Popular Virtual Currencies

11/21/2013

2

Crytpocurrencies in Greater Detail

11/21/2013

3


A consensus network and open
-
source software platform that enables a new payment system and completely digital money


The first decentralized peer
-
to
-
peer payment network that is powered by its users with no central authority middlemen. Users
leverage BTC as Internet cash


A peer
-
to
-
peer Internet currency based on BTC
protol

that enables instant payments to anyone in the world.


More efficiently mined than BTC with consumer
-
grade hardware. Provides faster transaction confirmations (2.5 minutes on
average) and uses a memory
-
hard,
scrypt
-
based mining proof
-
of
-
work algorithm to target the commonly used computers


An alternative
cryptocurrency

that is the first known implementation of a combined Proof of Stake/Proof of Work system


Coins are generated based on proof
-
of
-
stake blocks. Proof
-
of
-
stake block generation is based on coins held by individuals


A peer
-
to
-
peer decentralized currency based on
Bitcoin


The collective network manages transactions and issues money


Hybrid
scrypt

Proof
-
of
-
Work + Proof
-
of
-
Stake based
cryptocurrency

operating with no central authority via peer
-
to
-
peer open
source network


A peer
-
to
-
peer, alternative distributed Domain Name System based on
Bitcoin

software


Expands the software to add features such as transactions for registering, updating, and transferring domains


Leverages
Bitcoin's

open source software but offers different solution through
Scrypt

based hashing algorithm (SHA
-
256)


Scrypt

is the only viable solution for GPU (graphics processing unit) miners as
Bitcoin

mining is now dominated by
professional ASIC (application
-
specific Integrated circuit) mining hardware


A
cryptocurrency

(XRP), universal payment network, and distribution exchange


Frictionless, transparent method for transferring value in any currency


Supported on Kindle Fire devices (except Kindle Fire 1st Generation), and on the Amazon
Appstore

on
Amazon.com


Currently only supporting US customers on Kindle Fire

Bitcoin

(BTC)

Litecoin

(LTC)?

PPcoin

(PPC)

PPcoin

(PPC)

Novacoin

(NVC)?

Namecoin

(NMC)?

Feathercoin

(FTC)

Ripple

(XRP)

Amazon
Coins

Virtual Currency Ecosystem

11/21/2013

4

Service Type

Popular Providers

Description

Wallets


Blockchain.info


Coinbase


Paxum


Ripple


Webmoney


Bitcoin Faucet


Easycoin


Strongcoin


Flexcoin


System and method for delivering upon request credits having monetary value to a
mobile device using a communications network (ex. Mobile phone)


An account of available credit for the user of the mobile device is maintained and
authorized to issue credit is generated when a request for credit for the mobile
device is received and there is available credit in the account associated with the
mobile device equal to or greater than the requested credit


Credit may be offset, or sponsored, by one or more value providers and issued to the
user to initiate transaction

Exchanges


Mt Gox


Bitcoin Central


Bitfloor


Bitstamp


BTC China


BTC Quick


Tradehill


An automated system for currency trades, that makes cross
-
currency payments
possible. Hub for enabling a market of virtual currencies via bank cash depots in
dollars, SEPA transfer, physical deposits and withdraws (including ATMs)


Precious commodities and precious metals are available for trade in the spot market


Real
-
time exchanges also perform banking and wallet functions. However, some are
intended for one
-
time transactions

Payment
Processor


ZipZap


BitPay


OKPAY


VirtaPay


Third party handling virtual transactions between merchants and financial
institutions


Operations include: peer
-
to
-
peer facilitation, social media, and point of sale and
deliveries

Vendors


Gyft


CoinLab


BTC Buy


WalletBit


Virtual currency service providers. Often perform as marketplaces and merchants


Multiple transaction endpoints and a gap in payment procedures are common


Transfer BTC to gift cards

11/21/2013

3

Structure and Operations

11/21/2013

5

Activity

Description

Mining/Hashing


Mining (or generating new) Bitcoins or virtual currency. The result of complex mathematical
computation that is easy to reproduce, difficult to reverse, and hard to predict


Transactions are facilitated in

Block Transactions

. Block Transactions are bundled into data chunks and
linked together in chronological order to ensure transactions are valid

Mining Services


Hosting and renting mining capabilities has become popular enabling quicker transactions and more
transactions to be facilitated. New capabilities enable mining to be broken into more manageable pieces

Ledger


A shared, constantly updated database of accounts and transactions. The

Block Chain


is a network
timestamps of transactions where hashing occurs in an ongoing chain of proof
-
of
-
work forming a record
that cannot be changed without redoing the historical records


The Block Chain mitigates double spending by using a peer
-
to
-
peer distributed system where
participants agree on a single history of the order in which transactions are received


Payee receives proof that at the time of the transaction the funds or value was available

Lifecycle Overview

11/21/2013

6

Establish a
Virtual Wallet

1

Purchase
Good or
Service

Transaction
Verification

3
b

Acquire
Virtual
Currency

Hashing

Final

Delivery

Historical
Records

4

1

Virtual Wallet:

Files that provide access to virtual
currency addresses. Open source
software available for desktop and
mobile across Mac, Windows,
Unix, iPhone, and Android?

2

2

Virtual Currency:

Exchanges handle deposits and
withdraws in which buy orders are
matched with sell orders. Transfer
funds into, out of, and between
exchanges

3
a

3

Transaction:

Buyer identifies goods or services
and the Virtual Wallet

s private key
initiates the transaction request
with the private key of the seller

s
virtual wallet.


Miners


bundle transactions into

blocks


to confirm payment and
receive 50 Bitcoins for services

4

Historical Records

In order to modify future
transactions, historical records
would have to be addressed first
due to randomized cryptographic
numerical values added to
transaction results.

Transaction

11/21/2013

4

Exchange and Transaction

11/21/2013

7

Acquire
Virtual
Currency

2

Purchase
Goods or
Service

3
a

Historical
Records

4

Transaction
Verification

3
b

Hashing

Transaction


Create an account with a
Bitcoin

exchange (ex.
Bitstamp
)


Make deposit via wire transfer, PayPal,
credit card, or physical cash exchange


Bitstamp

provides an 11 digit
reference code and account
information to purchase
Bitcoins


Transfer
Bitcoins

to an exchange and
receive unique alphanumeric deposit ID


Either goods or services will be delivered to
a predetermined address,
etc
. or currency
can be received from select ATMs

Contact Information

8

Brian Stoeckert, JD, CAMS, CFE

Chief Strategy Officer


Email:
bstoeckert@coincomply.com

Tel: 917.554.9903

Web:
www.coincomply.com

Twitter:
@coincomply

11/18/13