Does Bitcoin Matter?


Bitcoin is something that many people have heard of, but very few understand and even less master. First of all, what is Bitcoin anyway? To make it simple Bitcoin is the first decentralized digital currency. There have been other attempts before to create digital currencies, such as E-Gold in the ‘90s, but they all failed because of their centralized nature that made them fragile. The decentralized nature is the core and most important characteristic of Bitcoin because it doesn’t require a central organization to be trusted (trust is more expensive than what generally people think) and it is censorship resistant. Censorship resistant means that even if your business, the sources of your revenue or your opinions are not approved by the government of your country, your account can not be frozen, and you are still able to fully enjoy your financial freedom sending and receiving payments as you wish.

 However, the censorship-resistant is nothing new, we already have another instrument where its users can find the same quality: cash. Therefore Bitcoin can also be seen as digital cash, indeed it can be freely exchanged p2p just like we do every day with coins and notes, so is possible because Bitcoin for the first time ever introduced something that was missing from the digital world, the scarcity. Before Bitcoin every digital file with some kind of value was easily duplicable at close to zero costs (think about all the otherwise quite expensive movies you have downloaded for free), so it wasn’t possible to have a digital asset usable for trades. To make such innovation possible, Bitcoin uses a special kind of distributed shared ledger called blockchain, something that you may have read of on financial newspaper as an object of interest of big banks trying not to get disrupted.

The blockchain is an immutable public database whose identical copies are replicated in thousands of computers all over the world, making the loss or the manipulation of a single copy unharmful.  With a powerful accounting tool like the blockchain, it is possible for everyone to track every bitcoin transaction, always knowing exactly which bitcoin is owned by who, without relying on a centralized third party and making double spending impossible. Indeed, if you try to pay two different persons with the same bitcoin, the attempt of double spending would be detected and prevented by the network.

Another even very interesting and unique feature of Bitcoin is his supply model. The only way to produce new coins is through an expensive process called mining, that consist in dedicating a lot of computer power to resolve increasingly difficult maths puzzles, helping to keep the network secure and creating the blocks of data of the blockchain. The mining operations are on purpose very expensive, at the current rate the global yearly cost of mining can be estimated to be around 700 million USD.


Those who dedicate resources to mining are allowed to reward themselves with fresh new bitcoins (i.e. they can send themselves a transaction with 12.5 btc for each block they create), making the monetary base increase. Differently from other currencies, the bitcoin inflation is rigid and keeps decreasing over time, today the total number of outstanding bitcoins in the world is 16 million, with a daily production of 1800 coins per day, but the reward for mining activities will keep halving every 4 years, until the total number of bitcoins created reaches 21 million and no more coins are created. This constriction is obtained with protocol rules, if a miner tries to reward himself with more coins than expected, the other participants of the network will ignore his block and he will lose his reward transaction.


This means that in the long-term bitcoin is deflationary in terms of monetary supply, which is not ideal for some financial operation like loans, but it is the holy grail for store of value. There is no other good in the universe as scarce as bitcoin, not even precious metals like gold and platinum which are expensive to extract with today technology, but with future developments in deep see mining (and maybe even space mining) the supply in the coming decades may drastically change. Bitcoin instead not only is finite by design, but it also has a fixed programmed emission, meaning that an investor knows in advance with extreme precision how many new coins will be created each day.

Some people criticize Bitcoin for being anarchist and risky because it is able to avoid traditional regulation, which is partly true since the transactions cannot be controlled by financial authorities, but actually Bitcoin follows much stricter rules because it is regulated by mathematical constraints, and not by the will of some government agency that may casually change its vision every 4 or 5 years according to the political trends. So, it is true that with Bitcoin nobody can force a reverse transaction to refund and old lady that has been scammed, but at the same time any bitcoin holder is 100% sure to be protected from hyper-inflation.

A huge advantage of Bitcoin as store of value can be found in its extremely low storing costs. While storing and moving gold or other precious metals requires secure vaults and expensive transportation systems, bitcoins storage can be done on small hardware such as a simple USB key or even on a piece of paper and transactions can be sent anywhere in the world in few minutes at a very low cost (about 10 cents). Storing costs and transactions speed are not the only advantages, indeed Bitcoin allows also advance storing options, such as multi-signature accounts. With a multi-signature account it is possible to have funds that are controlled by more people, and a certain number of signatures is required to operate a transaction. For example, it is possible for a company to have an account where the funds are controlled by five members of the board of directors and to create a transaction it is needed at least the signature of the CEO and of other 2 directors, but if the CEO dies or lose access to his signature key, after 6 months three directors out of four remained can send a transaction without the CEO approval.

The success of Bitcoin is not only determined by the amazing features it has, those are easily achievable also in other cryptocurrencies. What gives Bitcoin a competitive advantage is the network effect, the security and the usability of a cryptocurrency is obtained by having a lot of participant in the network and a lot of economic interests running on it. This means that even if a technological more advanced alternative is found, a new user will always have an incentive to join the Bitcoin network instead of something else, making it even more secure and usable.

The proprieties and use cases described above are just some of the most immediate and market ready applications of the blockchain, but another very important point is that for the first time ever Bitcoin allows computer programs to trigger financial transaction without need of human permission. While some people may still find Bitcoin non-intuitive and its application not very user friendly, for machines it’s just perfect since they can actually manage money autonomously. If the IoT industry really becomes a thing, different devices will have to pay each other for goods and services, in such scenario an old fashion financial system could cause friction. Thanks to Bitcoin we could have a future where an autonomous vehicle earns its own money with a Uber-like service and can autonomously pay for fuel, maintenance, insurance and even a dividend to the owner.

Bitcoin is bringing us many innovations, but knowing just few of them is already enough to understand how valuable it is a know-how in this technology.


Federico Tenga, Co-Founder at Chainside


Spain Overview: Economic Analysis and M&A Market Trends

Free Trade: New Challenges Ahead

From ESCP Finance Society,
A comprehensive analysis of the challenges globalization and free trade are facing in the wake of Brexit referendum and American elections

ESCP Finance Society

On the 23rd of June 2016, the British people decided to leave the EU, the only geographical area that almost completely fits the textbook definition of free trade, i.e. “the economic policy of not discriminating against imports from and exports to foreign jurisdictions.”. They made this decision official on the 27th of March, and lots of interrogations remain about the new agreements between the EU and Great Britain. In fact, a NatCen study shows that 88% of Britons back free trade, but 69% of them also support customs check and a harder immigration policy. This, associated with a lot of privileges like passporting no longer being available to British based companies, would push talents away, and ultimately entail less growth and innovation in Great Britain. But this is only one of the many possible scenarios. As said before, the EU is the only really integrated area. In the rest of…

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A ghost in the Street?

From ESCP Europe Finance Society, A new ghost in the street?, by Tancredi Viale

ESCP Finance Society

Today, is Tech day. Snapchat’s parent company will be trading today in the New York Stock Exchange with a price tag of $17.0 per share for a total valuation of $24 billion. It is the most awaited and the largest IPO since Alibaba started trading in 2014 with a valuation of $168bn. American capital markets have not seen many tech companies going public despite the growing number of unicorns in the tech sector. Investor will look at this IPO also to evaluate  the health of the Tech IPO market. Many start-ups prefer to stay private where they can benefit astronomic valuation as emerged in the latest financing rounds of Uber or Airbnb. Investors are thirsty of new tech stocks and Snapchat valuation seems to support the view. Some concerns remain, such as the profitability profile of the company and growth prospects or the scalability of Snapchat customer base.

Snapchat is the…

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Johnson & Johnson to Acquire Actelion for $30 Billion With Spin-Out of New R&D Company

From Escp Europe Finance Society, The biggest European drugs takeover in 13 years: Johnson & Johnson has unveiled its intention to acquire the Swiss drug-maker Actelion Ltd (SIX:ATLN) with a move that will cost $30bn to the US company. Find out in this article more about the two companies, the deal structure and discover an overview of the healthcare M&A sector.

ESCP Finance Society

Johnson & Johnson (NYSE:JNJ), the world’s largest healthcare holding company, with total registered worldwide sales of $71.89bn in 2016, has unveiled its intention to acquire the Swiss drug-maker Actelion Ltd (SIX:ATLN) with a move that will cost $30bn to the US company.

Johnson & Johnson

Johnson & Johnson is an American multinational medical devices, pharmaceutical and consumer packaged goods manufacturer founded in 1886. It has more than 250 companies located in 60 countries around the world while their products are sold in over 175 countries. Their companies are broken down into several business segments: consumer healthcare, medical devices and pharmaceuticals. Johnson & Johnson’s consumer healthcare segment produces a variety of consumer care products in the areas of baby care, skin and hair care, wound care, oral health, OTC medicines and nutritionals.
Johnson & Johnson’s brands include numerous household names of medications and first aid supplies.
Among its well-known consumer products are the Band-Aid Brand line…

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Bond activity after the American election

From ESCP Finance Society, a comprehensive analysys of the Bond activity after Trumps’ election, by Ghali Bensouda and Giulia Maccelli

ESCP Finance Society

Trump’s victory in November led up to sudden changes in financial markets. Firstly, the fiscal spending he promised has led to higher commodities price as the US government will ask for more commodities to build more facilities. The future tax reduction under Trump’s administration results in repatriation of dollars that strengthens the US currency. The trade tariffs that Trump wants to implement with US commercial partners will have a negative impact on exports of some emerging countries including China and Mexico. Above all, this fiscal stimulus will create inflation that the FED is trying to control by hiking its targeted interest rate from 0.5% to 0.75% knowing that higher interest rates causes lower bond prices. Since the US election in November roughly $3trn have moved from bond markets to stock markets[1].


Two of the most important factors hurting bond prices right now are then the fact that inflation…

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The Power of Sight: Essilor Luxottica Merger

From ESCP Finance Society, a deep look into one of the most important merger occurred in Italy, by Guglielmo De Martino, Imad El Ahdi and Filippo Zanini

ESCP Finance Society

Companies Overview


Global leading Italian Company in design, production and distribution of high-technical quality fashion, luxury, sport and performance eyewear with a brand-names portfolio consisting of Ray-Ban, Oakley, Vogue Eyewear, Persol, Oliver Peoples e Alain Mikli. It also includes prestigious licenses as well as brand like Giorgio Armani, Burberry, Bulgari, Chanel, Dolce&Gabbana, Michael Kors, Prada, Ralph Lauren, Tiffany & Co., Versace and Valentino. The firm was founded in 1961 by the current Chairman Leonardo Del Vecchio in Agordo (VE), Italy. It nowadays employs more than 75.000 people and is headquartered in Milano. Currently Delfin S.a.r.l., controlled by Del Vecchio family, acts as a holding company with a 61.9% stake, having no common managing interest with the subsidiary from an operational perspective.

The business model adopted covers every step of the value-chain production: design, development, production, logistics and distribution. This allowed Luxottica to operate as manufacturer and retailer in more…

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Credibility of Central Banks – A comprehensive analysis of ECB and FED effectiveness

From ESCP Europe Finance Society, a comprehensive analysis of ECB and FED effectiveness, by Conor Marriman, Niccolò Ricci and Alessandro Sicilia

ESCP Finance Society

On the 1st of January 1999, the ECB assumed responsibility for monetary policy in the euro area, with the primary objective of maintaining price stability, keeping the euro area’s target inflation rate (calculated using the Harmonized Index of Consumer Price, HICP) below, but close to 2% over the medium term. This objective has even been reinforced with the ratification of the Lisbon Treaty in 2007. Seventeen years later in 2008 the global financial crisis erupted causing the greatest economic recession since 1928. Since then the ECB has been put under additional pressure to advise on regulation and enforce banking supervision while fostering economic growth. Extremely unconventional monetary measures have been taken to achieve this objective and a recover of the economy and productivity.

On the 12th of November 2008, the first measure was implemented by cutting the interest rates for deposits, overnight loans and the Main Refinancing Operations. The two…

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Elections Aftermath: Expert Talks

A view over Trump’s victory and his future economic policies from an expert in behavioral economics and philosophy of mind, who kindly accepted to write for about this topic.

People who feel to be losing tend to be riskier (Prospect Theory of Kahneman and Tversky), and even if ambiguity and uncertainty support a more prudent behavior the risk propensity in a losing condition is stronger. This behavioral propensity may explain why many Americans from the declining middle class in states traditionally democratic such as Pennsylvania, Michigan, Wisconsin and Ohio voted for Trump on Election Day. It is better the uncertainty of a Trump presidency than the progressive loss of purchasing power experienced during the last years. Trump’s electoral success in these states is the major determinant of its election as President.

What may this middle class expect from Trump’s economic policy? In the short term,  some good news are coming from his commitment towards a Keynesian multiplier of a strong public demand for new physical infrastructures as bridges, buildings, trains, airports, harbors and so on. Undoubtedly, other good news arise from the likely decrease of taxes and fiscal burdens. These changes will fuel an increase in the private demand and consequently a stronger economic growth.

Perhaps also some protectionist measures towards goods and human capital will increase in the short term their purchasing power.

However, what about the middle class and the long term? The consequences of this policy will be a dangerous increase in public debt. The spike in public debt will make federal expenses soaring. Federal Reserve, consequently, would hike official discount rates in order to prevent inflation, strengthening the US dollar. More inflation and higher cost of imported goods will be the result of these expansionary spending policies of the White House. Trump would be then forced to increase tax imposition and to stop public demand. The deterioration of economic climate would be worst if Trump, along with the Republican Congress, tried to change the independent status of the Federal Reserve. The situation would be higher instability and volatility for the loss of transparency of the monetary policies of the Federal Reserve in a moment when cost of debt would be higher and the deficit increased.

After some years, the middle class worker of Michigan or the white collar of Pennsylvania would find themselves in a worst condition than the one experienced during Obama administration. Probably they would have been better off by listening to their System II of thinking  (Kahneman, “Thinking, Fast and Slow”, 2011) for a more prudent choice of an experienced politician such as Hillary Clinton, instead of shooting in the dark with a Trump presidency.


By Riccardo Viale


Professor of Behavioral Economics, University of Milano-Bicocca


Breakfast with: Maxime Sbaihi, Eurozone Economist at Bloomberg

Luca Cartechini
Global Head of Markets & AM @ ESCP Finance Society

ESCP Finance Society

Breakfast with: Maxime Sbaihi, Eurozone Economist at Bloomberg

Maxime is an economist with a strong educational background (ESCP, MiM 2010). He has many years of working experience in the finance industry, both in Paris and London and across different institutions such as S&P, BNP, CA and Oddo & Cie. He also worked as an adviser for the French Minister for Higher Education and Research.


Q: Before anything else, I would like to thank you for joining the ESCP Europe Finance Society ‘Coffee Break’. Would you like to start by sharing an overview of your professional and academic background?

Maxime: I have been working for nearly 3 years as an economist at Bloomberg in London, covering the euro area. Just before, I was a junior economist at Oddo Securities in Paris. That was my first job after finishing a Masters in international economics from the Paris Dauphine University…

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