An introduction to Bitcoin I gave at BarCamp Nottingham on 23-July-2011. Blog post here: http://aviewfromafar.net/the-barcampers-guide-to-bitcoin Note: I've updated this! The new version is just called "Introduction to Bitcoin", and is here: http://www.slideshare.net/ashmoran/introduction-to-bitcoin-30852714

1. presented at
The BarCamper’s
Guide to Bitcoin
Ash Moran
@wisemonkeyash
Creative Commons Attribution-ShareAlike 3.0 Unported License ash@ashleymoran.net

2. Disclaimers
I am not a Bitcoin expert
I am not a financial adviser
This is not financial advice!

3. This is beer
Who likes beer?

4. This is money
Who likes money?

5. The problem
(one of them)

6. Who has noticed the price
of beer has gone from this…

7. …to this…

8. …and one day maybe to
this?

9. The cause
Inflating the money supply
makes it worth less
which makes prices rise

10. UK money supply
Source: Wikipedia

11. The bankers
are stealing
your beer
This is not good

12. Economic Bullshit Bingo 101
This one is worth 10 points

13. What is money?
Here are two more examples

14. This is also money
It is a different kind of money (bank debt)
Who likes bank debt?

15. This is money too
It has been for 6000 years
No modern currency is still backed by gold

16. Good money
We need to decide what qualities we want in our
money

17. Bitcoin
What and how

18. Example: Alice pays Bob
Alice wants to send Bob 2BTC
Bob gives Alice his Bitcoin address
eg 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W
Alice gives her Bitcoin client the instruction to send
2BTC from her wallet to address
Alice’s Bitcoin client broadcasts the transaction to the
peer-to-peer network

19. Bitcoin client
The “official” Bitcoin client
Transaction list

20. Bitcoin client
Payment screen

21. Alice (Node)
TX
TX message Node 1
TX
Amount: 2 Node 4
To: 175tWpb8…
TX
Node 3
TX
Node 2
TX
Bob (Node)
TX
Node 5
TX
Node 6
Payment is broadcast
Messages are broadcast on a best-effort basis

22. Inputs Outputs
From: 16fMXaUy…
Amount: 1.5
To: 134nwkgU…
Amount: 200
From: 1K1hoWtp…
Amount: 230
To: 1CkjeUts…
Amount: 31.5015
From: 1Ltvsdrh…
Amount: 0.0015
Bitcoin transaction
(Simplified)

23. Transaction chain
Private keys give the owner the ability to sign
Bitcoins over to another address

24. Bitcoin Node
T8
T9
Block 1 Block 2 Block 3
TX T2 T3 T5 T6 T7
Block chain
Transactions are grouped into blocks
Clients can download the full block chain

25. Alice (Node) TX
Node 1 TX Node 4
B1 B2 B3
B1 B2 B3
TX B1 B2 B3
Node 2 TX Node 3 (miner)
B1 B2 B3 B4
B1 B2 B3 TX
TX
Node 5 Node 6 (miner) TX
Bob (Node)
B1 B2 B3 B1 B2 B3 B4
TX
B1 B2 B3
Mining
Mining nodes will try to create Block 4 that
contains the new transaction

26. Alice (Node)
B4 Node 1 Node 4
B1 B2 B3
B1 B2 B3
B1 B2 B3
B4
B4
B4
Node 2 Node 3 (miner) B4
TX
B1 B2 B3 B4
B1 B2 B3
B4
B4 B4 B4
Node 5 Node 6 (miner)
Bob (Node)
B1 B2 B3 B1 B2 B3
B1 B2 B3
Broadcasting new blocks
Clients that accept the new block will consider
the new transaction valid

27. Alice (Node)
Node 1 Node 4
B1 B2 B3 B4
B1 B2 B3 B4
B1 B2 B3 B4
Node 2 Node 3 (miner)
B1 B2 B3 B4
B1 B2 B3 B4
Node 5
Node 6 (miner)
B1 B2 B3 B4 Bob (Node)
B1 B2 B3 B4
B1 B2 B3 B4
Network acceptance
Bob sees the network has accepted the payment

28. What is a Bitcoin?
Bitcoins are address balances
Individual Bitcoins are not identifiable entities

29. Alice turns evil
Bitcoins are digital, like MP3s and movies
What stops Alice sending the same money to Charlie?
“Double-spending”
How does the network agree on the “true” history of
transactions?

30. Proving a transaction history
Two parts to the problem:
Proving the sequence of transactions
Making it hard to create a false (fraudulent) sequence

31. Genesis block
Block chain
We need to make this hard to generate

32. Timestamp server
The sequence of hashes proves the timeline

33. Proof of work
Valid hashes must be less than a certain value

34. Sample Bitcoin block
Notice 0s in the hash indicating bytes of 0-bits
http://blockexplorer.com/

35. Longest block chain
The network accepts the black chain as the “true
history” because it was the hardest to form

36. Bitcoin creation
Block generation is called “mining”, because the
winner awards himself Bitcoins

37. 2033 - 21MBTC
Creation halves every
4 years / 210k generations
2011 - 6MBTC
Bitcoin generation rate
Difficulty is adjusted by the network every
2 weeks to keep on target

38. Compare GBP vs BTC
Which monetary policy do you prefer?

39. What can you do with
Bitcoin?
A brief tour of the economy

40. Bitcoin markets
MtGox still largest despite the high-profile hack
http://bitcoincharts.com/markets/

41. Britcoin exchange
Currently seeing ~1kBTC/day trading volume
http://britcoin.co.uk/

42. Bitcoin wiki traders list
(Look at the size of the scrollbar)
https://en.bitcoin.it/wiki/Trade

43. MJB Monetary Metals
Small UK-based precious metal dealer
http://mjbmonetarymetals.co.uk/

44. In the end though…
It’s all about gold, bitchez! Θ

45. Like the presentation?
Send me a tip :-)
http://payb.tc/ashmoran

46. Further Reading
Bitcoin: A Peer-to-Peer Electronic Cash System
Original paper - very accessible
http://www.bitcoin.org/bitcoin.pdf
Bitcoin wiki: https://en.bitcoin.it/wiki/
Money as Debt (video by Paul Grignon)
Explains the history of our monetary system
Highly recommended
http://bit.ly/moneyasdebt-full