3. Currency (n.):
Representative currency: deriving its worth from a
link to some physical store of value like gold, silver
or gemstones.
Fiat currency: Derives its value from the fact that a
government or central authority guaranteed it.
4. How to build a digital currency?
Requirements:
- Decentralized (Peer to peer)
- As anonymous as possible
- Fraud proof: No double spending, no theft
- Gradual availability of more currency, effort required
5. What is a hashing algorithm?
Hashing d7a8fbb307d7809469ca9abcb0082e4f8d5651e46d3cdb762d02d0bf37c9e592
File length: 12,322 bytes
7. How to build a digital currency?
The block chain: the innovative part of Bitcoin
The
genesis
block Dead
branch
8. Bitcoin – How the blocks in the blockchain are created
All transactions are logged in the blockchain (ledger)
All nodes (miners, clients in P2) have the full blockchain
New blocks are mined by the miners, who get a reward (first transaction)
New blocks are verified by all and refused if not valid
If you are miner, you must also process transactions – most earn a small
fee
9. Bitcoin – The network
Miners create blocks and process transactions
All the miners are connected to each other peer-to-peer
A Bitcoin client connects to the peer-to-peer network
Transactions are written into the blockchain
Confirmations are sent to the client
10. Bitcoin – Ways to do transactions
Currency exchanges like Mt Gox (EUR to BTC, BTC to EUR)
Local exchange (with other individuals)
Using your mobile phone
Unlimited – after all, you only need to exchange some data to do a
transaction
11. Bitcoin - Mining
How it works
Falling reward level
Technology rat race: cpu, gpu, asic
Profitability depends on BTC exchange rate, cost of electricity, cost of
hardware investment
12. Bitcoin (n.):
Not a representative currency, because it is not
linked to anything physical.
Not a fiat currency, as its supply is actually
finite and it lacks any central backing authority.
13. Bitcoin (n.):
Something new, only possible because of the Internet
and high-speed processing power of modern
hardware
Unforgeable, verifiable, secure, (almost) no
transaction fees, quasi-anonymous
Distributed, borderless
No trusted third party needed for transactions (bank)
14. Part two: Bitcoin and society
- Impact on government
- Context from privacy perspective
- Impact from real life events in Bitcoin (Cyprus,
Argentine)
16. Bitcoin - History
Created by “Satoshi Nakamoto”, an alias for the creator(s). Must be
mathematician(s) and programmer(s). Released a paper describing the
entire protocol in 2008.
2009-2010: First implementations of the miners. First transactions
achieved.
2011-2012: Wikileaks, EFF, Silk Road, 1000+ merchants accept BTC.
2013: Accidental fork of the blockchain, government starts regulating,
Coinbase and MtGox run out of trading capacity, exchange rate spikes to
$266
17.
18. Part three: Bitcoin and money
Making money with Bitcoin – how are people
doing it today?
Mining, rate speculation, currency exchanges,
casino’s, crime, payment processing, securities
exchanges.
19. Bitcoin – Has its own securities exchanges
MPEx, BitFunder, btct are Bitcoin denominated stock exchanges
Recent acquisition of a casino for 126315 BTC ($12.4 million
USD)
Companies on the exchange are mining companies, exchanges,
casino’s, etc. All Bitcoin related ventures.
The securities are priced, naturally in Bitcoin.
20. The first exit in Bitcoin
SatoshiDice acquired for 126,315 BTC (€8.69 million) on
July 18th.
Was trading publicly on MPEx, a Romanian Bitcoin
securities exchange.
21. Bitcoin – Startup investors are here and ready
Angel network BitAngels put together $7m from 120 angels
Boost VC in San Mateo has a incubator program for Bitcoin
startups
VC’s: Liberty City Ventures has $15m Bitcoin fund, Union Square
Ventures, Andreessen Horowitz have invested in Bitcoin startups.
French VC’s : on the beach
22. Bitcoin – follow up currencies are “altcoins”
Primecoin: the mining work results in discovery of new prime
numbers
PPCoin: Includes “Proof of stake”
Freicoin: Includes exploration of demurrage