Quarterly Mark December 2023 - 47

EXHIBIT 1
As Traditional Finance Recovered, Interest in Decentralized Assets Has Persisted. Tier 1 Capital Ratios,
2005 through 2022
15
12
Imagining Bitcoin
Satoshi Nakamoto,
the founder(s) of
Bitcoin, publish a
paper describing
the virtual currency
I
S
t
COVID-19
Bitcoin Is Born
Days after the second
bank bailout
9
Financial Collapse
The traditional financial system
suffers its worst collapse since the
Great Depression, triggering fears
for the financial system's safety
6
2005
2009
2013
2017
SOURCES: Macrobond, US Federal Deposit Insurance Corporation, latest available data as of January 1, 2023.
2021
The world's worst
pandemic since the
Spanish Flu triggers
rampant government
relief spending, leading
to renewed fears of
inflation
The Sovereign Debt Crisis
Many European countries reveal
significant financial problems
When functioning correctly, these central authorities perform an important role
by verifying transactions, keeping a trusted record of them (the database), and
protecting these records from being tampered with. If we want to do away with
these third-party authorities, how can we perform transactions and pass along
sensitive personal information in a way we can trust? How can we prove who owns
what, and whose information is whose?
Blockchain attempts to solve this problem. A blockchain is a decentralized
database. Instead of relying on one or a few institutions to maintain our databases,
blockchain relies on a large network of peers, individuals like us connected by
computers.
Every new transaction or change in the database is provided to this network, in
a packet of data called a " block. " Rather than one controlling authority vouching for
the block, the network of peers agrees on the current state of data and any changes
to it. This method of agreement (called a " consensus mechanism " ) is accomplished
by an energy-intensive, computerized verification process that uses a series of
cryptographic rules and puzzles. Newly verified blocks are broadcast to the network
and appended to the blockchain (see Exhibit 3).
To create an incentive for members to participate in the blockchain network,
new Bitcoins are minted automatically and rewarded to the participants who
successfully complete the cryptographic puzzle first. This process, called " mining, "
continually creates new blocks in the blockchain with new transaction data, forming
Quarterly Mark | 47
Tier 1 Capital Ratio

Quarterly Mark December 2023

Table of Contents for the Digital Edition of Quarterly Mark December 2023

Quarterly Mark December 2023 - Cover
Quarterly Mark December 2023 - Inside Front Cover
Quarterly Mark December 2023 - 1
Quarterly Mark December 2023 - 2
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Quarterly Mark December 2023 - Back Cover
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