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Athena Capital Advisors LLC
55 Old Bedford Road
Suite 302
Lincoln, MA 01773
781.274.9300
athenacapital.com
Athena Capital Advisors
Blockchain & Cryptocurrency Review
January 2018
767 Third Avenue
Floor 21
New York, NY 10017
212.897.9640
One Ferry Building
Suite 255
San Francisco, CA 94111
415.851.7700
Blockchain
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
1
What is Blockchain?
Blockchain is a distributed ledger of peer to peer transactions that allows for secure record storage. Blockchain forms the technical
backbone for cryptocurrencies such as Bitcoin but also has broad applications as a ledger of various records and contracts.
Blockchain is unique because:
• Recording: Each block references the ones before it, creating a seamless record of ownership & transactions
• Disaggregated network: The distributed ledger is run by a disperse network of participants (akin to Wikipedia). There is no
central authority like a traditional financial intermediary. Each transaction is approved through consensus by multiple
independent network participants
• Transparency: It’s fully transparent and accessible at blockchain.info/blocks
• Anonymity: People making transactions are identified solely by coded addresses
• Security: Leverages novel applications of cryptography for security purposes
2 Source: Blockchain Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Recent Blocks
How Blockchain Works
3 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Blockgeeks
Security of the Blockchain
Blockchain fraud would consist of re-writing old transactions by changing the addressee to the criminal. However, this would alter
the block in which that transaction was stored as well as all subsequent blocks, creating an obvious red flag for the blockchain
network not to accept those transactions. Transactions typically need to have six subsequent blocks, representing a number of
independent validations by the user network, to be considered valid.
In order to prevent the red flag, the criminal would have to re-create all the blocks that occurred after the theft, which is deterred by
limitations on computing power and the time lag in adding new blocks in the Bitcoin protocol. As a result, the blockchain is secure
as long as criminal elements control the minority of the network’s computing power. The incentives are constructed such that the
reward to effort ratio for being an honest miner exceeds that of being a criminal.
4 Source: Medium Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Public and Private Blockchains
While Bitcoin runs off a transparent and public blockchain protocol, institutions such as banks and governments can use private
blockchains to store and manage information in a more efficient way. Public and private blockchains are both decentralized and
immutable, but private blockchains allow owners to control who has network access. Private blockchains also allow companies to
have oversight (ie can revert a transaction) and reduce energy usage because there are fewer nodes.
5 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: IBM
Blockchain Implications for Financial Services
Blockchain technology could be used by traditional financial institutions for trade clearing and settlement, trade finance, AML/KYC,
equity and debt issuance, and asset authentication. A WSJ article estimates that blockchain could reduce infrastructure costs for
UBS by as much as $20 billion by 2022. Blockchain could disrupt banks, stock exchanges, accounting, audit, and legal functions.
6 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Blockchain & Banking
According to a survey by IBM and the Economist Intelligence Unit, approximately 15% of banks are in the process of adopting
blockchain to reduce time, cost, and risk across business areas. Applications range from reducing settlement times to more
efficient compliance and financial reporting & audit.
7 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Broader Implications of Blockchain
Other uses:
• Home & Auto Ownership, Title Transfer, and Insurance: reduce paperwork and costs
• Healthcare: 30% of all data in the world is healthcare-related. Blockchain can maintain health & prescription history
• Logistics/Supply Chain Management: cut costs, certify origin of goods, comply with import/export laws and sanctions
• Fine Art and Luxury Goods Authentication: prevent counterfeiting, establish proof of ownership
8 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: IBM
Current Blockchain Applications
Cryptocurrencies
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
9
What is Cryptocurrency?
Cryptocurrencies began as an electronic payment system between two parties (akin to PayPal, Venmo, etc.). The original purpose of
cryptocurrencies was to confer the benefits of cash transactions (privacy, fraud protection, accessibility, no fees) to electronic
payments.
• Unlike traditional non-cash payments like credit cards, cryptocurrency:
• Solves the double spending problem via public ledger
• Uses cryptographic techniques to provide security
• Is decentralized, so users don’t pay fees to third parties like banks and credit card companies
• Has superior privacy because people use pseudonyms known as “public keys”
• Is available to all, including people not in the traditional banking system
• Transactions are irreversible, which means merchants don’t have to worry about charge-backs
10 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Applications of Cryptocurrency
Cryptocurrency may have limited day to day uses for those who are currently well-served by the traditional financial system, but
there are many potential implications for economically vulnerable populations and EM/Frontier countries. Additionally,
cryptocurrencies may be attractive for cash-light societies like Scandinavia and fiat currency skeptics.
• Unbanked or underbanked populations: about 9 million US households and 2 billion adults world-wide, particularly women, are
excluded from the financial system. An additional 24 million US households are underbanked. This prevents people from
saving and building up credit
• Remittance or cross-border payments: there is about $400 billion in annual global remittance payments, which can make up
over 25% of GDP in countries like Somalia and Haiti. Remittances are currently hampered by multi-day transaction times and
high fees averaging 7.5%
• Politically and economically unstable regimes: Venezuela is launching a national cryptocurrency, the Petro, backed by oil
reserves in hopes of offsetting the official bolivar’s 96% devaluation amid 4,000%+ inflation
• Sanctions and capital control evasion: Russia is seeking to develop a Cryptorouble, issued and controlled by the government, to
sidestep Western sanctions. China has banned cryptocurrencies for now as citizens may be tempted to use it to bypass capital
controls
• Countries that favor electronic payments: Sweden’s Riksbank is looking into creating an electronic version of the krona for the
nearly cashless economy (about 1% of payments are made in cash)
• Fiat currency skeptics: inflation hawks may prefer the inherent limit on the supply of cryptocurrencies in a global QE world
11 Source: World Bank Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Bitcoin
Satoshi Nakamoto published a white paper in October 2008 spelling out the basic tenets of Bitcoin. Unlike prior iterations of
electronic payment systems, Bitcoin functioned without oversight from a third party intermediary like a bank. The paper had two
innovations: using a self-governing network to police payments and a novel combination of existing cryptographic techniques for
security. Nakamoto is a pseudonym that is widely speculated to represent Nicholas Szabo, a legal scholar with a background in
computer science.
Nakamoto released the original Bitcoin code and mined the first coin in January 2009.
12 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Nicholas Szabo
Types of Cryptocurrencies
Cryptocurrency diversity is increasing as Bitcoin loses market share to Ethereum and other alternatives. Competition will likely
improve speed and user-friendliness while reducing overheated investor appetite in a single currency. While other cryptocurrencies
are highly correlated to Bitcoin, they may ultimately provide attractive alternatives as the underlying technology evolves. Newer
cryptocurrencies seek to differentiate themselves by focusing on issues including smart contracts, privacy, global payments, and
protocols building out blockchain.
13 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Coinmarketcap
Cryptocurrency Market Cap by Currency
Cryptocurrency Returns
2017 returns have been staggering at over 1,000%, but with significant volatility of up 7% a day. Public blockchain assets
dramatically outperformed traditional risk assets in 2017.
14 Source: Athena Capital Advisors
Annual Cryptocurrency Returns (%)
30 Day Trailing Average
Cryptocurrency As a Payment System
Transaction processing capacity will be crucial for cryptocurrencies to be practicable. Daily transactions have been increasing,
which bodes well for the development of cryptocurrencies into an institutional payment system. However, different cryptocurrencies
have different transaction bandwidths based on their underlying coding.
15 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Coindesk
Bitcoin vs Other Cryptocurrencies
Bitcoin is facing significant difficulty scaling. Compared to other cryptocurrencies, Bitcoin faces challenges with network capacity
due to its 10 minute average transaction processing time. As transaction volume increases, the pluralistic nature of the network
causes bottlenecks in processing time and drives up transaction fees. Unless this is rectified, it will be unlikely that Bitcoin becomes
the go-to cryptocurrency. Bitcoin has been losing market share in 2017 to competing cryptocurrencies such as Ethereum, which
can process approximately 3 times more transactions per day.
16 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Coinmetrics
Average Daily Transactions (#)
Bitcoin
Ethereum
Categorizing Bitcoin
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
17
How to Categorize Bitcoin?
“In a way, the emergence of cryptocurrencies is akin the dot-com
era, because there is no perfect comparison to illuminate the
“real” value of something like bitcoin.
It’s a currency (like the dollar), whose owners consider it a long-
term store of value (like silver), which is appreciating as if it were
a faddish collectible (like a Beanie Baby), and is running on a
blockchain platform, which some insist could change the future
of everything from legal titles to daily payments (like Internet).
How can one be so sure bitcoin is a bubble if we don’t even know
what the proper comparison is—dollars, silver, Beanie Babies, or
the Internet?”
- The Atlantic
18 Source: The Atlantic Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Is Bitcoin a Currency?
Bitcoin is not yet a currency as traditionally defined in economic terms.
1) A unit of account – very few retailers denominate their prices in Bitcoin even when they accept it and prices vary widely across
trading platforms
2) A store of value – Bitcoin’s exceptional volatility is unlike any traditional currencies or assets
3) A medium of exchange – only ~300k transactions a day, not accepted by many merchants, long delays in transactions (10
minutes+), surveys indicate that about 93% of users are male
19 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business, Coinmetrics
https://ww
w.ncbi.nlm.
nih.gov/pm
c/articles/P
MC451913
9/
Trailing 30 Day Bitcoin Volatility vs S&P 500 (%)
Bitcoin
S&P 500
Is Bitcoin the New Gold?
While Nakamoto envisioned Bitcoin functioning akin to gold, it hasn’t yet displayed such characteristics. Bitcoin has had a negative
correlation to gold thus far and its own users think it’s more like a digital currency than digital gold. Athena thinks that defining an
asset as a store of value is extremely subjective. For example, what is the intrinsic value of fiat currency, gold, or diamonds? Assets
become stores of value if they are deemed as such, and Bitcoin is unlikely to gain such social status in the near-term given its
novelty and the public’s skeptical reaction.
20 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
“There is nobody to act as central bank or federal reserve to adjust the money supply as the population of
users grows…In this sense, it's more typical of a precious metal. Instead of the supply changing to keep
the value the same, the supply is predetermined and the value changes.”
- Nakamoto
Is Bitcoin a Speculative Investment?
Athena believes Bitcoin is a speculative investment. According to a 2014 research paper by Christopher Fink and Thomas
Johann of the University of Mannheim, the ratio of trades to commercial transactions in Bitcoin is approximately 12:1. Research
by Florian Glaser of Goethe University also found no connection between the volume of users trading cryptocurrencies on
exchanges and those using them to make payments. This leads us to infer that the vast majority of Bitcoin trading volume is for
speculative investment.
21 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Goethe University
“There is no subsequent migration
between exchange and network
volumes, at least within the last
three years. That is, both
increases in Wikipedia searches or
exchange volumes do not affect
network volumes. We Bitcoin -
Asset or
Currency? Twenty Second
European Conference on
Information Systems, Tel Aviv 2014
11 therefore conclude that
uninformed users most likely stay
with exchange trading after their first
contact, holding Bitcoin as
alternative
investment asset and eventually will
neither contribute to nor participate
in the Bitcoin currency
network.” – Florian
Glaser
Is Bitcoin a Speculative Investment?
According to Fink and Johann, the history of Bitcoin winners and losers is akin to a slightly right-skewed distribution with a mean
around zero, which supports the idea that it is a risk asset.
22 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Is Bitcoin a Speculative Bubble?
Lessons about speculative bubbles:
• A bubble is hard to define, and even harder to spot
• Bubbles can be “rational” if you expect the supply of buyers to remain nonzero with some probability (greater fool theory)
• They end very quickly
• Bubbles are typically fueled by retail investors, but about 1,000 people own 40% of all outstanding Bitcoin. These core
owners may provide a ballast against smaller and newer market participants
• As of 2Q17, 58% of people surveyed on a cryptocurrency website said that digital asset valuations are in a bubble
• Bitcoin’s 2013 price decline (a stress case scenario) is more akin to the tech bust of the late 1990s than the oft-referenced
tulip bulb bubble. Bitcoin seems to resemble a risky, entrepreneurial investment more than a tulip bubble
23 Source: College of William & Mary, Athena Capital Advisors
Approximately 1,000 people own 40
percent of all bitcoin in circulation,
according to Bloomberg. Just 100 accounts
control 17 percent of the market.
https://www.theatlantic.com/business/archi
ve/2017/12/bitcoin-bubble/547952/
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Portfolio Implications
A small allocation to Bitcoin may improve risk-adjusted portfolio performance based on modern portfolio theory because Bitcoin
thus far has not been correlated to any traditional assets. Of course, correlations are unstable and subject to change.
24 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Global Regulation
The sampling of recent headlines shown below highlights that global governments are keen to regulate cryptocurrency, but the
response so far has been a patchwork ranging from excitement to crackdown. China and South Korea are seeking to curb
cryptocurrency trading while Japan and Scandinavian countries are more sanguine. Cryptocurrencies could evade regulations
absent a coordinated global regulatory response.
25 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation. Source: Strategic Coin, Bitcoin, Hacked, CCN, Coindesk
US Regulation
Below is a summary of the views of various US regulatory agencies on cryptocurrencies.
26 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: MarketWatch
Athena’s Conclusion: Blockchain and Cryptocurrency
Opportunities:
• In our opinion, blockchain is a game-changing technology with broad applications across business and government functions
• By eliminating the middleman, blockchain can lower costs and challenge the function of many institutions
• Cryptocurrencies based on blockchain technology can have useful applications, especially in EM and Frontier countries,
though the systems aren’t robust enough to compete with traditional currency at this time (for example, the volatility is too
high). Some cryptocurrencies are more viable than others as a payment system. The next generation of cryptocurrency is
creating decentralized applications such as smart contracts, which have broader uses than payments
• Cryptocurrency is most likely a speculative asset that has been uncorrelated to traditional assets thus far, though it has
extremely high volatility and is not widely understood
Risks:
• It is difficult to determine the intrinsic value of cryptocurrencies due to their novelty. While prices have skyrocketed, they may
be justified if cryptocurrency is a competitor for Visa, MasterCard, Amex, Western Union, etc. On the other hand,
cryptocurrencies could turn out to be a repeat of the internet bubble
• The lack of a central authority can have drawbacks; there is no recourse from errors and no one to mediate conflicts
• Cryptocurrencies are not yet a viable medium of exchange; they are not broadly accepted by merchants, are very volatile, and
the owner base is relatively homogeneous
• Bitcoin mining is extremely energy intensive
• Regulatory action may prohibit cryptocurrencies or significantly change the landscape, though several governments are testing
their own cryptocurrencies
• Cryptocurrency is considered property by the IRS and is subject to capital gains tax rates
27 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
How to Invest in Cryptocurrency (caveat emptor)
28 Source: CoinDesk, Coincentral, Athena Capital Advisors
Option 2) Buy Through an Investment Fund
Public Funds: Bitcoin Investment Trust (GBTC), Winklevoss Bitcoin Trust (unregistered)
Private Funds: BlockTower, Cryptocurrency Fund, Protos, etc.
Estimated total over 120 hedge funds with over $2 billion AUM
Option 1) Buy Cryptocurrency Directly through an Exchange
There are over 40 exchanges globally. Coinbase, Gemini and Kraken are the primary exchanges based in the US. Coinbase is the
most popular exchange, but it charges high fees. Gemini seeks to serve a more institutional clientele by focusing on security and
regulation. Kraken supports more cryptocurrencies, but it isn’t registered with US regulators and isn’t as robust as its competitors.
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
How to Store Cryptocurrency
29
Cryptocurrency is typically stored in a wallet, which is a service that allows users to hold, send, and receive digital currency. There
are two primary kinds of cryptocurrency wallets:
• Hot wallet: computer or smartphone-enabled software that stores a user’s account information. Accounts within exchanges like
Coinbase are also considered hot wallets. These accounts are seen as less secure because they are on devices or cloud
networks that are connected to the internet and can be hacked.
• Cold wallet: hardware or paper-based storage that is not connected to the internet and therefore not susceptible to hacking.
Hardware wallets are physical devices that resemble USB flash drives. Some wallet companies will store most client funds in
cold wallets. A paper wallet is simply a written down or printed version of the user’s login information (public and private keys).
It is impossible to retrieve account access if users lose their hardware or paper wallets.
Investors can have both hot and cold wallets. Hot wallets are typically used for trading while cold wallets are considered more
secure and are better for storing cryptocurrency holdings. Below are some of the providers of various wallets:
Hardware Cold Wallets:
• Ledger Nano S
• Trezor.io
• KeepKey
Hot Wallets:
• Coinbase
• Blockchain.info
• Electrum
• Jaxx
Paper Wallets:
• Blockchain.info
• MyEtherWallet (MEW)
• Walletgenerator.net
• Bitaddress.org
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Comparing Cryptocurrency Wallets
30 Source: Blockgeeks Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Appendix – Blockchain Examples
31 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Blockchain
“Accountants work frequently in the ‘verification’ business – audit and attest and so
on -- and blockchain is all about verification...Clearly audit is going to change
dramatically -- it already is changing… Ultimately, CPAs will be attesting to
companies’ compliance with cyber-security standards”
Appendix – Cryptocurrency Demographics
User community largely:
• Male
• Age 26-35
• Most first bought cryptocurrency this year
• Generally own over $1k in cryptocurrency
32 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: Coindesk
Appendix - How Does Mining Work?
Miners use graphics processing units (GPUs) to do proof of work exercises all day. There are five large mining pools where
miners pool resources and share the rewards. Serious miners can build large mining farms, often near cheap sources of
energy like Icelandic geothermal. The winning miner earns 12.5 Bitcoin (~$200k).
Mining can be extremely energy-intensive. Energy consumption is the primary real-world cost of Bitcoin. Global mining
costs about $1.6 billion a year in electricity and is akin to the annual energy consumption of Denmark. Each Bitcoin
transaction uses approximately the same energy as 4,000 Visa card transactions. Other cryptocurrencies have less
intense energy usage.
33 Source: NYU Stern School of Business, Greentechmedia Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Appendix - Cryptography Basis of Blockchain Security
Hash functions:
• Text input algorithm output
• Example: Athena 412b726dc9dc6f02318798948a421e124f1ca5946be39b87cca764e063d6ebca
• Athena Capital 658352c6a378a521129416ba3dcdb21e4ce1149c4c3565b50c3a8cb473ed4cf1
• Algorithm turns any text into a 64 digit alphanumeric code
• Output will always be the same for a given input
• Can’t work backwards from output to find original input
• Initially developed by AT&T Bell Labs in 1950s as way to encrypt data
Difficulty
• Difficulty denotes the number of consecutive leading zeroes that must be in a hash (ie
0000000000000000000098948a421e124f1ca5946be39b87cca764e063d6ebca)
• The more leading zeroes, the harder it is to randomly generate such a hash
• Difficulty calibrated so on average will take about 10 minutes for Bitcoin. As a result, higher computing power does
not make mining easier
Proof of Work (Bitcoin)
• Miners use trial and error to try to find a nonce that produces a hash with enough leading zeroes (can take billions to
trillions of iterations)
• Cannot be gamed and no algorithmic shortcuts. Uses time and electric resources
• Any given transaction will be verified by multiple independent sources
34 Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Source: NYU Stern School of Business
Appendix - Transaction Example
35 Source: Blockchain, Athena Capital Advisors
Block 1 Block 2 Block 3 Block 4 Block 5
16pMLZJCumkuB7a6uSrN
Wfmxp85ADQrLMo
(Alice’s Address)
1DMxMmZ1VycmM3rLB9P
e9HCXPNR48KiRfn (Bob’s
Address)
Alice sends Bob 0.02 Bitcoin at 1:30 pm on 12/19/2017 310bcc79a04076373d37309c653
910317376fd44ec0038f819b773c
c7b0371e0 (unique hash of all
transaction info)
Transaction 1
1LE7j5WNzLMatb7AYLaE
KqGYsGPGgRqoCa
(Mike’s Address)
15TARz56yraLD8PmKv5xS
LuY4xuCRyYzQ4 (Dan’s
Address)
Mike sends Dan 0.7 Bitcoin at 1:40 pm on 12/19/2017 61d0988ef92a779fa875b07abd34
5e3bbd5958d2a06916620ebd451
57db9f052 (unique hash of all
transaction info)
Transaction 2
Hash
Previous
Hash
3J6F
3J6F
A83H
A83H
R9S5
R9S5
Z293
Z293
4B7A
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Why is Blockchain Secure?
•Competition among miners creates the indelibility of data on a blockchain
•Fraud = rewriting old transactions
•Prohibitively difficult to recreate a block; nonces must be found for all subsequent blocks before honest miners code the
next block
•Implication: transactions are indelible, but also irreversible
•According to Nakamoto: “as long as a majority of CPU power is controlled by nodes that are not cooperating to attack the
network, they’ll generate the longest chain and outpace attackers”
36 Source: NYU Stern School of Business Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
Disclosures and Disclaimers
Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.
Please see important disclosures and disclaimers at the end of this presentation.
37
Athena Capital Advisors LLC (“Athena”) prepared this document solely for the person to whom it has been given for informational and discussion purposes only. This document and the
information contained herein are strictly confidential and may not be reproduced, distributed or communicated to any third party without the express written approval of Athena. Athena
reserves the right at any time to amend or change the contents of this document without notice. The information and opinions herein reflect the views and opinions of Athena as of the
date hereof and not as of any future date. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions.
This document and the information contained shall not constitute an offer, solicitation or recommendation to sell or an offer to purchase any securities, investment products or investment
advisory services. The material contained herein has not been based on a consideration of any individual client circumstances and is not investment advice, or should it be construed in
any way as tax, accounting, legal or regulatory advice. An investment with Athena involves substantial risks and there can be no assurance that the investment objectives described
herein will be achieved. Athena believes that the research used in this presentation is based on accurate sources (including but not limited to economic and market data from various
government and private sources and reputable external databases), but we have not independently verified those sources, and we therefore do not guarantee their accuracy. The
opinions, projections and estimates contained herein reflect the views of Athena only and should not be construed as absolute statements and are subject to change without notice.
In considering the performance information contained herein, recipients should bear in mind that past and present performance is not necessarily indicative of future results, nor does it
ensure that investors will not incur a loss with respect to their investment. Current performance may be higher or lower than the performance data quoted. Certain performance numbers
in this presentation may be unaudited, preliminary and based on estimates. Final reported and audited performance numbers may vary considerably from these estimates due to many
factors. Estimated gross and net performance numbers could change materially as final performance figures and underlying investment costs and fees are determined and
allocated. Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of terms such as “may”, “will”, “should”, “seek”, “expect”,
“anticipate”, “project”, “estimate”, “intend”, “continue”, “target” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. Due to various risks and
uncertainties, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should
not rely on such forward-looking statements in making their investment decisions. No representation or warranty is made as to future performance or such forward-looking statements.
Benchmarks are shown for illustrative purposes only and are provided for the purpose of making general market data available as a point of reference only. Such benchmarks may not be
available for direct investment, may be unmanaged, assume reinvestment of income, do not reflect the impact of any trading commissions and costs, management or performance fees
and have limitations when used for comparison or other purposes because they, among other reasons, may have different trading strategy, volatility, credit, or other material
characteristics (such as limitations on the number and types of securities or instruments). No representation is made that any benchmark or index is an appropriate measure for
comparison.
Historical index performance results for all historical benchmark indices do not reflect the deduction of transaction and custodial charges, or the deduction of an investment manager fee,
the incurrence of which would have the effect of decreasing indicated historical performance results. The historical performance results for all indices are provided exclusively for
comparison purposes only, so as to provide general comparative information to assist in determining whether Athena’s performance meets, or continues to meet, your investment
objective(s). Comparative indices may be more or less volatile than Athena portfolios. Athena performance results reflect the reinvestment of dividends and other account earnings, and
are net of applicable account transaction charges. It should not be assumed that Athena account holdings will correspond directly to any such comparative benchmark index.
Any description of tax consequences set forth herein is not intended as a substitute for careful tax planning. Recipients of this material are advised to consult tax counsel for advice
specifically related to any and all tax consequences of an investment made with or through Athena. The information provided herein is not intended to, nor does it specifically advise on,
tax matters pertaining to federal, state, estate, local, foreign or other tax consequences of an investment. The recipient is solely responsible for all tax consequences with respect to any
investment made with or through Athena.
Massachusetts
55 Old Bedford Road, Suite 302
Lincoln, MA 01773
781.274.9300
California
One Ferry Building, Suite 255
San Francisco, CA 94111
415.851.7700
New York
767 Third Avenue, 21st Floor
New York, NY 10017
212.897.9640
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