IPA Slovenia organise presentation on Cryptocurrencies

30 May 2019

Slovenia is one of the most active centres of the European crypto world. For some, it is a business revolution, as they believe that the future of money lies in cryptocurrencies, others might see it as a financial balloon that will pop sooner or later, while for the rest it represents the most important technological potential. Although it is not certain for how long the crypto world will last, it is suitable that we learn more about it. Around 160 listeners from all around Slovenia gathered to find out about cryptocurrencies at a professional consultation that was organised by IPA Club Štajerska in association with the Police Directorate Maribor.

As Danijel Lorbek, the director of the Police Directorate Maribor, stated at the beginning of the consultation, the police Directorate of Maribor together with the District court in Maribor paves the way in the field of cryptocurrencies. ‘That was one of the reasons for organising this consultation in cooperation with IPA Club Štajerska and present listeners with the priceless experience that we have acquired.’ Judiciary Councillor Mitja Kozar and Counsellor of Law, Petra Bezjak, from the District court in Maribor presented a case in which Bitcoins were seized and sold further. The case is currently in criminal proceedings and is the first such case for Slovenian courts. The Bitcoins were seized as an alleged property benefit that was obtained from a criminal act of an online sale of synthetic drugs. The court issued an agreement to sell them.44 crypto3

The Maribor police, including Borut Štok, Head of the Department for Computer Forensics Investigations at the Police Directorate Maribor, who introduced the basics of cryptocurrencies with the focus on how Bitcoin cryptosystems operate, cooperated. As he explained, the beginnings of Bitcoin supposedly go back to the year 2008, when they were first introduced to the general public by their founder, known by the pseudonym Satoši Nakamoto. Among the more than 1,500 different cryptocurrencies that currently exist, Bitcoin is the most well-known. It is a cryptographic currency that enables rapid and efficient online transactions. Its value is based on people’s belief that it has a certain value. Unlike real money currency, cryptocurrencies are not based on the trust of authorities, i.e. the government and banks, but are founded on mathematics. ‘New Bitcoins are produced in a process called mining. Bitcoin has an inbuilt mathematical algorithmic enigma that can be solved only by guessing the correct series of signs. Why would individuals waste processor power and electricity for solving a mathematical enigma? Because the one who manages to solve it first, gets an award of 12.5 bitcoins’, he added.

The number of Bitcoins is fixed, and amounts to 21 million, with slightly over 16 million in circulation. Bitcoin is both the leading and the oldest cryptocurrency, with its value equalling 3,228.00€ in February 2019.

Cryptocurrencies can also be used as a legal business, i.e. as smart contracts.  Legal expert and entrepreneur Dr. Peter Merc believes that they are the highest added value to BC technology. ‘The Swedes have already transmitted their land register to BC. Next year they will not be transmitted in a traditional way, as is the practice here, where one needs to visit a notary and risks being deceived by the seller, as can happen that while waiting for the registration in the land register, someone else is registered instead. In Sweden, the ownership will soon be transmitted with smart or self-executable contracts. In some parts they are already in use. In the USA they sometimes put a blocking mechanism in the starter of a car when it is stated in the contract that it would be automatically activated if the renter does not settle the bill,’ explained Dr. Merc.

So-called ICO-campaigns, (Initial Coin Offering), is a market which is experiencing a real blossoming. It is a type of massive investment, where interested investors purchase crypto coins that were designed by a company or a project. However, as Dr. Merc warned, misuses and risks can occur in this field: ‘We must be cautious when crypto coins are sold in the street, when certain events are organised with the purpose of selling them or when new Bitcoins appear that are not yet on a stock market but will be in two years’ time. There are a few other indicators that it might be a scam: real cryptocurrencies can always be sold (however, there was a case when it was only possible to sell them to someone else, which is an example of a pyramid scheme). An ICO is about funding a start-up company where entrepreneurs collect money that will be used to finance the development for a few years. The most obvious sign is if the founder specifies how the coins will be handled – e.g. they might determine that they will keep about 60 to 70 % of coins, distributing the other 10 or 20 % to consultants and other people involved. If the team does not believe in a project, there is no way they will lock coins for a few years, but will want to have them at their disposal as soon as possible. At this point, BC and smart contracts come forward – a smart contract is a contract that is written in a programme code, which is self-executable in BC. At the same time, it is transparent, so that everyone can look at it. A team decides that they will receive 10 % of the coins as a reward; those will be locked in a smart contract, after two years the clause will self-execute, and they will receive the coins. I do not believe in projects where people are able to freely have coins at their disposal, as there is no motivation to work and develop a project. With earnest projects, the owners are limited when it comes to using the coins, or those are even locked. When the project is serious, different experts are involved, e.g. people from the business world, industry, consultants for marketing, law, etc. Projects, where there are no limitations about the collected money are suspicious. ICO-projects in which we can trust, need to be intended to fund an actual product, and when the limit for the collective fund is reached, if the team collects too much or too little, the money is returned. It is extremely suspicious when projects with triple earnings in a few months are promised.’

Text: Anita Kovačič Čelofiga, IPA Slovenia, photos: Igor Šebart, UIKS