Introduction to bitcoin

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  • Great presentation
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  • Sàn bitcoint lớn nhất thế giới bất ngờ biến mất
    http://securitydaily.net/san-giao-dich-bitcoin-hang-dau-the-gioi-bat-ngo-bien-mat/
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  • Hi Robert,

    you got it nice summed up.

    Would you mind if i use your presentation (at least the first slides) in our internal Brown Bag session?
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  • Excellent presentation, but slide 61 is where Mr. McNally got it wrong.

    The Bitcoin Address is NOT the Public Key. It's not even the same length as the Public Key. For a high-level audience, this is a reasonable simplification, but it's just non-factual.

    There are three numeric pieces to Bitcoin. The Private Key, the Public Key, and the Bitcoin Address. The Bitcoin Address can be derived from the Public Key (but not vice versa). And the Public Key can be derived from the Private Key (but not vice versa).

    The Public Key is revealed when you spend money. That is one of the reasons not to re-use Bitcoin Addresses that you have spent from, and to return your change back to a fresh address. (Another reason is to help with anonymity.)

    Just take 'Public Key' off this slide, and you're all set.
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Transcript

  • 1. Introduction to Bitcoin Robert McNally
  • 2. What Is Money?
  • 3. Money Is:A Medium of Exchange
  • 4. Money Is:A Medium of Exchange• Stands in for an arbitrarily long chain of barter.
  • 5. Money Is:A Medium of Exchange• Stands in for an arbitrarily long chain of barter.• Widely accepted.
  • 6. Money Is:A Unit of Account
  • 7. Money Is: A Unit of Account• Recognizable
  • 8. Money Is: A Unit of Account• Recognizable• Fungible
  • 9. Money Is: A Unit of Account• Recognizable• Fungible• Divisible
  • 10. Money Is: A Unit of Account• Recognizable• Fungible• Divisible• Transportable
  • 11. Money Is: A Unit of Account• Recognizable• Fungible• Divisible• Transportable• Transferable
  • 12. Money Is: A Unit of Account• Recognizable• Fungible• Divisible• Transportable• Transferable• Hard to counterfeit
  • 13. Money Is:A Store of Value
  • 14. Money Is: A Store of Value• Stable supply
  • 15. Money Is: A Store of Value• Stable supply• Durable
  • 16. Money Is: A Store of Value• Stable supply• Durable• Securable
  • 17. Money Is: A Store of Value• Stable supply• Durable• Securable• Stable value
  • 18. What Is Cryptocurrency?
  • 19. Cryptocurrency Is: A Bearer Instrument
  • 20. Cryptocurrency Is: A Bearer Instrument• Holder has ownership
  • 21. Cryptocurrency Is: A Bearer Instrument• Holder has ownership• No other records kept as to identity of owner
  • 22. Cryptocurrency Is: A Bearer Instrument• Holder has ownership• No other records kept as to identity of owner• Easy to keep anonymous
  • 23. Cryptocurrency Is: A Bearer Instrument• Holder has ownership• No other records kept as to identity of owner• Easy to keep anonymous• Hard or impossible to replace if lost or stolen
  • 24. Cryptocurrency Is: A Bearer Instrument......based on digital cryptography
  • 25. Cryptocurrency Is: A Bearer Instrument... ...based on digital cryptography• Derives trust from mathematical properties
  • 26. Cryptocurrency Is: A Bearer Instrument... ...based on digital cryptography• Derives trust from mathematical properties• Based on established, trusted cryptographic primitives
  • 27. Cryptocurrency Is: A Bearer Instrument... ...based on digital cryptography• Derives trust from mathematical properties• Based on established, trusted cryptographic primitives• NOT from chemical/physical properties
  • 28. Cryptocurrency Is: A Bearer Instrument... ...based on digital cryptography• Derives trust from mathematical properties• Based on established, trusted cryptographic primitives• NOT from chemical/physical properties• NOT from coercive Legal Tender statutes
  • 29. Cryptocurrency Is: A Bearer Instrument......based on digital cryptography: “Downloadable Money”
  • 30. What Makes Bitcoin Different?
  • 31. Bitcoin Is:Decentralized, Distributed,Voluntary
  • 32. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.”
  • 33. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org)
  • 34. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin
  • 35. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin• Relative to other bearer instruments
  • 36. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin• Relative to other bearer instruments • Easier to transport anywhere in the world
  • 37. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin• Relative to other bearer instruments • Easier to transport anywhere in the world • Easier to secure
  • 38. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin• Relative to other bearer instruments • Easier to transport anywhere in the world • Easier to secure• Relative to other electronic currencies
  • 39. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin• Relative to other bearer instruments • Easier to transport anywhere in the world • Easier to secure• Relative to other electronic currencies • Immune to sovereign censorship, shutdown, or confiscation
  • 40. Bitcoin Is: Decentralized, Distributed,Voluntary• No central issuing or verification authority, no “Bitcoin Corp.” • Bitcoin Foundation (bitcoinfoundation.org) • Growing numbers of of entrepreneurs accepting or basing new business concepts on Bitcoin• Relative to other bearer instruments • Easier to transport anywhere in the world • Easier to secure• Relative to other electronic currencies • Immune to sovereign censorship, shutdown, or confiscation • Immune to inflation and bank defaults
  • 41. How Does Bitcoin Work?
  • 42. Bitcoin Tech
  • 43. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."
  • 44. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."• Based on the block chain: a growing general public ledger of cryptographically-signed transactions.
  • 45. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."• Based on the block chain: a growing general public ledger of cryptographically-signed transactions.• All transactions are public, but are not by default tied to anyones real identity.
  • 46. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."• Based on the block chain: a growing general public ledger of cryptographically-signed transactions.• All transactions are public, but are not by default tied to anyones real identity.• Anonymity and traceability are “user defined”, i.e. the counter parties can be as anonymous as they take steps to be— even to each other.
  • 47. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."• Based on the block chain: a growing general public ledger of cryptographically-signed transactions.• All transactions are public, but are not by default tied to anyones real identity.• Anonymity and traceability are “user defined”, i.e. the counter parties can be as anonymous as they take steps to be— even to each other.• Transfer of bitcoins consists not of physically moving an object from A to B, but simply of adding a new, publicly accepted transaction to the block chain.
  • 48. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."• Based on the block chain: a growing general public ledger of cryptographically-signed transactions.• All transactions are public, but are not by default tied to anyones real identity.• Anonymity and traceability are “user defined”, i.e. the counter parties can be as anonymous as they take steps to be— even to each other.• Transfer of bitcoins consists not of physically moving an object from A to B, but simply of adding a new, publicly accepted transaction to the block chain.• Secured by collective compute power of miners. It is very difficult to create a new valid block, but very easy for every client, miner or not, to check the validity of a new block.
  • 49. Bitcoin Tech• Bitcoin is a protocol. The unit of account is "bitcoins."• Based on the block chain: a growing general public ledger of cryptographically-signed transactions.• All transactions are public, but are not by default tied to anyones real identity.• Anonymity and traceability are “user defined”, i.e. the counter parties can be as anonymous as they take steps to be— even to each other.• Transfer of bitcoins consists not of physically moving an object from A to B, but simply of adding a new, publicly accepted transaction to the block chain.• Secured by collective compute power of miners. It is very difficult to create a new valid block, but very easy for every client, miner or not, to check the validity of a new block.• Miners are awarded newly-minted bitcoins or transaction fees for successfully finding blocks. The distributed algorithm ensures that bounty of new bitcoins will asymptotically approach 21M, and the reward for mining will then become transaction fees only.
  • 50. Bitcoin Tech
  • 51. Number of Bitcoins Over Time Minted as of 2012 November: 10.35M
  • 52. Bitcoin Mining RigModMiner Quad by BTCFPGA.COM 839Mh/s @ 63W = ~BTC0.2/day
  • 53. Bitcoin Mining RigModMiner Quad by BTCFPGA.COM 839Mh/s @ 63W = ~BTC0.2/day
  • 54. Bitcoin Tech
  • 55. Bitcoin Tech• The distributed algorithm dynamically adjusts how much computing power it takes to find a valid block, limiting block creation to around 1 block every 10 minutes.
  • 56. Bitcoin Tech• The distributed algorithm dynamically adjusts how much computing power it takes to find a valid block, limiting block creation to around 1 block every 10 minutes.• The bounties or transaction fees miners earn are compensation for securing the block chain.
  • 57. Network Compute PowerAs of 2012 November: 24.34Th/s (309.18PFLOPS)
  • 58. What Do Bitcoins “Look” Like?
  • 59. What Do Bitcoins “Look” Like?
  • 60. What Do Bitcoins “Look” Like? 1454A2geTxaJwF8eqry7oLECdomgDSj6Zx Public Key (“Address”) 34 characters starting with 1 or 3 Represents a possible destination for payment
  • 61. What Do Bitcoins “Look” Like? 1454A2geTxaJwF8eqry7oLECdomgDSj6Zx Public Key (“Address”) 34 characters starting with 1 or 3 Represents a possible destination for payment 5JHkYd4mYkTsCsF5axnFj573PG6tqpeJ39Rz2M33vwBka4S1hu6 Private Key 51 characters starting with 5 Required to transfer value from the address
  • 62. What Do Bitcoins “Look” Like?
  • 63. What Do Bitcoins “Look” Like? Hard Disk
  • 64. What Do Bitcoins “Look” Like? Hard Disk Digital Diversion Safe
  • 65. What Do Bitcoins “Look” Like? Hard Disk Digital Diversion Safe SD Card
  • 66. What Do Bitcoins “Look” Like? Hard Disk Digital Diversion Safe SD Card Paper Bills
  • 67. What Do Bitcoins “Look” Like? Hard Disk Digital Diversion Safe SD Card Paper Bills Casascius Physical Bitcoins
  • 68. What Do Bitcoins “Look” Like? Hard Disk Digital Diversion Safe SD Card Paper Bills Memorized Passphrase Hashable to Private Key Casascius Physical Bitcoins “Brainwallet”
  • 69. USD Exchange RateAs of 2012 November: BTC1.00 = $10.83
  • 70. USD Exchange RateAs of 2012 November: BTC1.00 = $10.83
  • 71. What is the LegalStatus of Bitcoin?
  • 72. What is the LegalStatus of Bitcoin?
  • 73. What is the Legal Status of Bitcoin?• Exchanging bitcoins for anything is basically barter, which is legal.
  • 74. What is the Legal Status of Bitcoin?• Exchanging bitcoins for anything is basically barter, which is legal.• The enhanced anonymity of Bitcoin potentially affords the same benefits as cash or gold to people operating outside the law, but additionally, is relatively frictionless to transfer to anyone in the world.
  • 75. What is the Legal Status of Bitcoin?• Exchanging bitcoins for anything is basically barter, which is legal.• The enhanced anonymity of Bitcoin potentially affords the same benefits as cash or gold to people operating outside the law, but additionally, is relatively frictionless to transfer to anyone in the world.• As with barter, exchanging in Bitcoin does not remove the requirement to pay taxes on income or sales.
  • 76. What is the Legal Status of Bitcoin?• Exchanging bitcoins for anything is basically barter, which is legal.• The enhanced anonymity of Bitcoin potentially affords the same benefits as cash or gold to people operating outside the law, but additionally, is relatively frictionless to transfer to anyone in the world.• As with barter, exchanging in Bitcoin does not remove the requirement to pay taxes on income or sales.• Value entirely inside the bitcoin economy can be extremely difficult or impossible to trace.
  • 77. What is the Legal Status of Bitcoin?• Exchanging bitcoins for anything is basically barter, which is legal.• The enhanced anonymity of Bitcoin potentially affords the same benefits as cash or gold to people operating outside the law, but additionally, is relatively frictionless to transfer to anyone in the world.• As with barter, exchanging in Bitcoin does not remove the requirement to pay taxes on income or sales.• Value entirely inside the bitcoin economy can be extremely difficult or impossible to trace.• Authorities are most likely to attempt to regulate the Bitcoin economys end-points: the exchanges.
  • 78. What Can You Buy With Bitcoin? Before 2011
  • 79. What Can You Buy With Bitcoin? Late 2011
  • 80. What Can You Buy With Bitcoin? Late 2012
  • 81. Bitcoin-Denominated Poker Chips by Robert McNally
  • 82. Bitcoin-Denominated Poker Chips by Robert McNally
  • 83. Robert McNallyironwolf@dangerousgames.com