1. S
DRIVING EDUCATION AND PROFESSIONAL USE OF
DIGITAL CURRENCY IN AUSTRALIA
www.thinkbitcoin.com.au
Produced by: Martin Davidson
Email: info@thinkbitcoin.com.au
2. What are Digital Currencies?
1) Digital currencies, also known as crypto
currencies, are math based computer generated
money.. But what is MONEY?
S Medium of exchange
S Store of value
S Unit of account
2) They are also their own payment networks
3. History of Bitcoin
https://bitcoin.org/bitcoin.pdf
2008: Bitcoin white paper is released
2009: Software becomes available
2010: First currency exchanges appear
2011: 1 Bitcoin = $1 USD
2012: Multi-signature
2013: Cyprus bank bail ins, 1BTC=$1k
2014: Mt Gox. Mainstream awareness
2015: Stock market listings..
4. Some Basic Terms
S bitcoin: Without capitalization, is used to describe bitcoins as a unit of
account
S Bitcoin: With capitalization, is used when describing the concept of
Bitcoin, or the entire network itself
S Address: A location that bitcoins have been sent to and reside at.
Alternatively, can be thought of as an account of sorts that has a balance
of bitcoins
S Blockchain: The complete transaction ledger of the Bitcoin network,
showing how bitcoins have been transferred from one address to another
over time. The blockchain is a public record of all bitcoin transactions in
chronological order
S Transaction: The movement of bitcoins from one address to another
address. In traditional terms, this can be thought of as a payment or
money movement
5. Digital Money
Bitcoin is the most well known example
of a new breed of digital currencies.
S Global digital currency
S Supply is capped at 21 million
S Can be divided to 8 decimal places
S Cannot be counterfeited
S Currently valued at around $350
AUD
S Network valued at $3.5bn
6. The Payment Network
S Decentralized, peer to peer network
S Transactions are fast and cheap
S Transactions are irreversible
S Transactions are verified in minutes
S Open to anyone with an internet
connection
S Can be used to transmit anything of
value. (2.0 projects)
7. What is Peer to Peer?
No centralised database or single point of failure
10. Bitcoin Mining
25 bitcoins mined into new blocks every 10 minutes
144 blocks mined per day = $1,080,000 AUD ($300 per BTC)
11. What is Mining?
Mining serves 2 purposes:
S Mining creates new bitcoins in each block. The amount
of bitcoin created is fixed and diminishes with time.
S Mining creates trust by ensuring that transactions are
only confirmed if enough power was devoted to the
block that contains them.
12. Mining contd.
S The creation of new blocks must
take an average of 10 minutes
S The regulation is done by
periodically adjusting the hash
target value for blocks.
S Every 2,016 blocks (which
spans 2 weeks if each block
takes 10 minutes), the nodes
calculate a new difficulty based
on the time it took to mine the
last 2,016 blocks.
13. Mining is a 3 step process
S Step 1: Miners create a file that contains (a) the hash of the last
block in the existing blockchain, (b) a block of the new proposed
transactions broadcast in the Bitcoin network and (c) a random
number that the miner guesses (a “nonce”). The combination of (a)
+ (b) + (c) is the data used as the input for Step 2
S Step 2: Miners apply a cryptographic function to the data. The
details of the function (SHA- 256 in the case of Bitcoin). What is
important to understand is that the function does some calculations
on the file/data from Step 1 and produces a random number known
as a “hash”
S Step 3: The hash is reviewed against a desired pattern (in the case
of Bitcoin, how many leading zeros it has, an outcome that is
effectively random). If the hash matches the pattern, the miner has
a correct block and will win an economic prize. If the hash does not
match the pattern, the miner returns to step 1, guessing a new
nonce and repeating the exercise
15. Mining pools
Bitcoin mining is a rapidly
expanding and highly specialised,
capital intensive industry.
S Mining pools use different
distribution schemes, they
share in the bitcoin rewards.
S Mining farms are located where
energy costs are lowest
16. Bitcoin issuance over time
May 2015: 14 million
bitcoins have been mined
2032: 99% of all bitcoins
will be mined
2140: 100% of all 21
million bitcoins will be
mined
19. What’s a Bitcoin Wallet?
The Public Key is used to produce a Bitcoin
address (like an account no.)
1AA6oACAt6iD7asKpCKoLnZQLoZCRj8CSV
The Private Key is used to digitally sign the
transaction like (like a pin no.)
5JxA624fMUnePFkgGYCUxWcDfzaomDM3QeXj9FxViJSsEz2X9Wh
21. Bitcoin units of account
S 1BTC = bitcoin ($300AUD)
S 0.001 = mBTC –millibitcoin (30cents)
S 0.000001 = uBTC – microbitcoin/ bits (.03 cents)
S 0.00000001 = Satoshi – smallest unit of a bitcoin (.0003 cents)
S 21 million BTC / 7 billion people = 0.003 BTC / 3mBTC per person (90c)
The default fee for most bitcoin wallet apps is 0.0001 BTC – 3
cents. This fee is paid to the miners verifying transactions on
the network.
You can choose to send a higher or a lower fee with some bitcoin wallet apps. eg-
Bitcoin QT/ Blockchain.info
NB: The market price of bitcoin will affect the transaction fees.
22. How to get, buy and sell bitcoins
• Online exchanges
• Bitcoin ATM’s/ vending machines
• OTC (over the counter)
• Peer to peer/ in person (Local Bitcoins)
• Offer a product or service via your
website/ shop
• Mine bitcoins / mining contracts
25. Digital Money for A Digital World
More people on the internet now, than the global population in 1960!
Question- How will people transact in the future?
26. Global Mobile Banking
Developing nations’ mobile and Internet infrastructure
is growing rapidly.
• M-Pesa now accounts for 31% of GDP in Kenya
• 70% of African population have mobile phones
27. Store of value for unstable
currencies?
March 2015:
“Inflation of as much as
40 percent is the biggest
economic challenge
Argentina faces”, says
presidential hopeful
Sergio Massa.
30. Charities and non profits
Bitcoin transactions offer the option of full transparency
31. Freedom of speech/ information
Like the internet, Bitcoin is a protocol which cannot be shut down.
• Transactions cannot be censored
32. Bitcoin has no borders
Over 100,000 businesses now accept bitcoin transactions
33. International trade
"Bitcoin helps us reduce the
inherent costs involved in
international trade. Tomcar
Australia already uses
Bitcoin to pay a growing
number of overseas
suppliers. Our manufacturing
partner, MTM is also actively
exploring using Bitcoin to do
this as well. If we use Bitcoin
ourselves, it makes sense to
accept it from customers too,”
Mr. Brim, Tomcar owner says.
34. In Store Payments
Up to 1% bitcoin to dollar transaction fee or $0 to hold digital currency