Bitcoin and other distributed virtual currencies are revolutionizing how monetary value is stored and exchanged on the Internet. Key opportunities and risks will be described. The two main objectives of this talk will be to explain the underlying blockchain and cryptology technologies that make them work, and to demonstrate PHP recipes for using the web services that enable payment processing, identity validation, and smart contract execution.

1. David Kelleher
davidk.net
CRYPTOCURRENCIES
JOIND.IN/TALK/VIEW/13246

2.  BASICS - What is cryptocurrency
 TECHNOLOGY - and terminology
 OPPORTUNITIES - and RISKS
 IMPLEMENTATION - PHP and beyond
 COOKBOOK - recipes for use cases
CRYPTOCURRENCIES

3. BASICS

4.  Peer to Peer technology
 No "central bank" controlling monetary
policy
DECENTRALIZED

5.  The software is open source
 The transaction ledger is public
OPEN

6.  Like Cash
IRREVERSIBLE

7.  Supply and Demand
 (Scarcity and Community)
VALUE

8. TECHNOLOGY

9.  One Way Functions
CRYPTOGRAPHY

10. Clear Text Password
Hash Function
Stored Password Hash
PASSWORD VERIFICATION EXAMPLE

11.  Private Key:
Randomly generated "password”
 Public Key:
Generated from the Private Key
using a one way function
CRYPTOCURRENCY KEYS

12. Private Key
One Way Elliptic Curve Function
Public Key
Hash Function
Hashed Public Key
CRYPTOCURRENCY KEYS

13.  Generated from the public key
 This is the string you give out to receive
a payment
ADDRESS

14. Hashed Public Key + Checksum
BASE58 Encoding
Public Address
ADDRESS

15.  Privacy Risks
 Easier for a theoretical quantum
computer to hack
DON’T REUSE ADDRESSES

16.  Addresses are targeted in transactions
 They do not "store" a running balance
AN ADDRESS IS NOT AN ACCOUNT

17.  Software that stores your private keys
 Reads through the entire transaction
history to calculate your balance
 Sends coins by automatically choosing
unspent transactions to spend
 Signs transactions with your private keys
WALLET

18.  Mobile/Desktop
 Lightweight Wallet
 Web Wallet
 Hardware Wallet
 Cold Storage/Paper Wallet
KINDS OF WALLETS

19.  Don't backup your wallet and lose all
your private keys
WAYS TO LOSE YOUR COINS #1

20.  Use a web wallet service that gets
hacked or disappears
WAYS TO LOSE YOUR COINS #2

21.  Distributed database of all transactions
Feb 2015: Size is 29 GB, doubled in size
last year
BLOCKCHAIN

22.  Groups of transactions
 Miners solve math problems
 The first solution wins!
 The miner wins an award (coins + fees)
 Txns put in a new block and chained to
end of the blockchain
BLOCKS

23.  Everyone was supposed to mine with the
software
 ASICS (optimized hardware) took over
 Risks centralization
MINING

24. OPPORTUNITIES

25.  Microtransactions with low fees
 Make direct payments without third
party privacy risks
 Sellers avoid chargebacks
 No central point of failure
 Developing world
OPPORTUNITIES

26. RISKS

27.  Few consumer protections or regulations
 High learning curve
 Confirmation delays
 Not anonymous
 Scammers and hackers
 Fluctuating values
RISKS

28.  Herd mentality: buy high, sell low
speculating
 Complex tax reporting, compliance
 Government crackdowns and regulations
 Experimental
 Possible exploits discovered in future
 Competing virtual currencies
RISKS

29.  bitcoin-qt: bitcoin peer and GUI wallet
 bitcoind: bitcoin peer and JSON-RPC
 bitcoin-cli: command line RPC
IMPLEMENTATION

30.  https://github.com/bitcoin/bitcoin/blob/master/doc
/build-unix.md
 Security:
https://bitcoinsecurityproject.org/
 Keep most coins in cold storage when running an online
wallet
 Use fixed-point decimal numbers
BITCOIND SERVER NODE

31. -testnet argument (public test blockchain)
-regtest argument (new private blockchain)
TESTING

32.  https://en.bitcoin.it/wiki/PHP_developer_intro
 PHP JSON-RPC library
http://jsonrpcphp.org/
require_once 'jsonRPCClient.php';
$myCoin = new
jsonRPCClient('http://user:password@host:port/');
 (RPC username, password, host, port)
BITCOIND + PHP

33.  Generate a new address
$newAddress = $myCoin->getnewaddress();
 Send coins to the address
$newAddress = $myCoin->sendtoaddress($newAddress,
$amount);
BITCOIND + PHP

34. https://github.com/Bit-Wasp/bitcoin-lib-php
Implements more advanced features of Bitcoin
(in development)
PHP WRAPPERS

35.  https://en.bitcoin.it/wiki/API_reference_(JSON-RPC)
Python, Ruby, Java, Perl, C#, Node.JS, cURL, C++
OTHER LANGUAGES

36. MORE EXAMPLES

37. PAYMENT PROTOCOL BIPS

38.  https://bitpay.com/
 REST API
CURL, PHP, Node.js, Python, Ruby, Java, C#, Perl,
Android
Integration with popular shopping carts
 https://www.coinbase.com
 Gocoin + Shopify
COMMERCIAL APIS

39. 1. User scans a QR code containing a callback page
and user session id:
bitid://www.site.com/callback?x=NONCE
2. Wallet asks user if they want to proceed with
identification
3. Wallet signs the BitID URI with the user's private key
4. Server validates the signature
BITID AUTHENTICATION

40.  m of n signatures
 Escrow
people.xiph.org/~greg/escrowexample.txt
MULTISIGNATURE

41.  Meta Coins
https://en.bitcoin.it/wiki/Colored_Coins
Create a new alt-coin on top of existing
blockchain. New coins represent assets
that can be traded.
ASSET MANAGEMENT

42.  https://en.bitcoin.it/wiki/Contracts
 Deferred payment: coins paid when a
date has passed
 Crowdfunding: coins paid when funding
levels reached
SMART CONTRACTS

43. David Kelleher
davidk.net
CRYPTOCURRENCIES
JOIND.IN/TALK/VIEW/13246