PEORIA MAGAZINE October 2022

In general, blockchain and crypto currencies create value by providing digital scarcity, which is dependent on the security of the network. This means you cannot spend the same dig ital currency twice because the rules and regulations of the blockchain will not allow it. There also may be a limit in supply on the number of available currencies in the network … There are many blockchains and each blockchain has many cryptocurrencies that all derive value differently. Third-par ty f inancial ser v ice providers have cryptocurrency based credit cards that can allow for purchases of goods within the current financial system for practically any item. PM: Many Americans may be wary of the whole cryptocurrency phenomenon, given its opaque origins. For example, Bitcoin was founded by a Satoshi Nakamoto, evidently a pseudonym for some Oz-like character whose real identity remains unknown. Given that, can cryptocurrency be trusted? JK: The ethos in the cryptocurrency community is “code is law,” where code means computer code. While Satoshi Nakamoto created Bitcoin in 2008, by 2010 he stepped away … and handed control of the source code repository to Gavin Andreasen, who in turn created the nonprofit Bitcoin Foundation in 2012 to helpmaintain the codebase. Due to the technical ability required to audit the Bitcoin codebase, many of the initial adopters have been software developers who see the promise of the technology. Many blockchain enthusiasts trust the distributed nature of the network and the process of open-source code creation more than currencies backed by central governments. Different blockchains are secured in different ways. Some consensus mechanisms, rules and regulations MANY AMERICANS MAY BE WARY … CAN CRYPTOCURRENCY BE TRUSTED?

… can be manipulated if 51% of the computers on the network are control led by a single malicious actor … There are enough computers participating in the Bitcoin network that it would be difficult for a single nation to control more than 51% … Other blockchains can be defeated if 33% of the assets that secure the blockchain are controlled by a single malicious actor. The Ethereum network is moving to this type of mechanism where a user would have to control over $10 billion worth of the network assets. Most other blockchains are controlled by only a few hundred computers or nodes and require some level of trust from the network participants. The success of cryptocurrencies largely depends on consumer demand. Benefits of cryptocurrency technology include: • F aster cross-border asset transfers (from half a day to seconds); • Lower transaction fees than credit cards (can be fractions of a cent); • A ccess to money at any time (the internet never sleeps); • No limits on withdraws or purchases; • Accounts cannot be frozen by the government. However,many central governments see cryptocurrencies as a threat to national security … Therefore, countries are starting to consider their own digital currencies, known as Central Bank Digital Currencies (CBDCs) … The main difference from a centralized government to a distributed system is that the centralized government would most likely retain the ability to freeze assets and track all forms of digital spending. While these differences would limit the liberties of good actors, they would also allow for additional consumer protections … PM: Wall Street is experiencing a bear market, somanypeople's investments are taking a pounding, but cryptocurrency prices have been in freefall after soaring

earlier. On the risk scale, just how much of a chance are investors taking by putting their money down on, say, Bitcoin or other cryptocurrencies? JK: Bitcoin and other cryptocurrencies are still considered risk assets. Bitcoin and Eth are the closest to “bluechips” that exist in crypto due to the size of the networks backing the currencies. Any other cryptocurrency is known as an “altcoin” or alternative coin. These altcoins carrymuchmore risk but could also provide for greater returns. Recently, cryptocurrencies as an asset class have been in freefall because the industry was overleveraged. Some projects in the blockchain space were promising returns of 20% or more by leveraging assets to buy more assets in a process called “yield farming.” When markets started to turn, these projects could not keep paying out top returns, and malicious actors participated in market manipulation. These projects began to become insolvent and eventually failed … Investors are demanding more trans parency and reserves of traditional cur rencies to underwrite riskier projects. PM: How many cryptocurrencies are out there, and what are the differences? JK : There a re t housands of cryptocurrencies. You have come this far with me, so let’s dive further down the crypto rabbit hole … I break down cryptocurrencies into three functional buckets: (1) digital gold; (2) network coins; (3) application coins.

$5 IN BITCOIN IN 2011 WERE WORTH $325,000 IN 2021

Digital Gold : The godfather of cryptocurrencies and the poster child for digital gold is Bitcoin … Only 21 million Bitcoins will ever be added to circulation based on Bitcoin’s source code. This helps to create digital scarcity and drives the price of Bitcoin higher …

OCTOBER 2022 PEORIA MAGAZINE 91