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Bitcoin: What The Hell Is It...And Why Should We Care?

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An introduction to Bitcoin given by Dug Campbell to the Codebase technology startup incubator in Edinburgh, United Kingdom on May 29th 2014.

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Bitcoin: What The Hell Is It...And Why Should We Care?

  1. 1. @dugcampbell | Digital Thinking BITCOIN WHAT THE HELL IS IT... …AND WHY SHOULD WE CARE? Codebase Talk | 29th May 2014
  2. 2. @dugcampbell | Digital Thinking the world’s first, completely decentralised peer-to-peer digital currency
  3. 3. @dugcampbell | Digital Thinking but how is this different to today?
  4. 4. @dugcampbell | Digital Thinking it all comes down to the ledger and trust
  5. 5. @dugcampbell | Digital Thinking third parties bring their own problems Bitcoin provides an answer
  6. 6. @dugcampbell | Digital Thinking WHY IS IT DIFFERENT? DIGITISED MONEY (BANKS) 1 JUST DIGITS/NUMBERS 2 CENTRAL AUTHORITY/BANK 3 BANKS HOLD ELECTRONIC $/£ 4 ‘NUMBERS’ CANNOT BE STOLEN 5 PAPER MONEY USED AS CASH 6 PHYSICAL PAPER MONEY 7 COUNTERFEIT NOTES & COINS 8 QUANTITATIVE EASING / INFLATE 9 ALL TRANSACTIONS RECORDED 10 NOTE PRINTING - INFLATIONARY 11 GOVERNMENT CONTROLS CURRENCY & LEGAL TENDER 12 PRIVATE DATA COMPROMISED? 13 TRANSACTION FEES / FOREX DIGITAL MONEY (BITCOIN) 1 CRYPTOGRAPHIC PROTOCOL 2 P2P NETWORK ISSUES BITCOINS 3 CONSUMERS HOLD BTC IN THEIR OWN WALLETS 4 BITCOINS CAN BE REMOVED / STOLEN 5 BITCOINS ARE (ELECTRONIC) CASH 6 NO PHYSICAL BITCOINS 7 BITCOINS CANNOT BE COUNTERFEITED 8 BITCOIN - FIXED SUPPLY - DEFLATIONARY 9 ANONYMOUS RECORDING IN BLOCKCHAIN 10 NO NOTE PRINTING - DEFLATIONARY 11 NO ONE CONTROLS BTC. TOTAL CAPPED AT 21 MILLION 12 NO PRIVATE DATA GIVEN TO MERCHANTS 13 NONE OR 0.00005 MINER’S FEE Courtesy of Michael Parsons
  7. 7. @dugcampbell | Digital Thinking Limit of 21 million, issued every ~10 mins
  8. 8. @dugcampbell | Digital Thinking With Bitcoin, you own your own money - 100%
  9. 9. @dugcampbell | Digital Thinking Accounts can’t get frozen or seized
  10. 10. @dugcampbell | Digital Thinking Irreversible, guaranteed payment
  11. 11. @dugcampbell | Digital Thinking International transfers - safe, secure, simple
  12. 12. @dugcampbell | Digital Thinking Pseudonymous - not anonymous
  13. 13. @dugcampbell | Digital Thinking Immediate transfers...and cheaper
  14. 14. @dugcampbell | Digital Thinking BTC is the first practical way to do business over the internet with no prior relationship, no central administrator, and no trust required.
  15. 15. @dugcampbell | Digital Thinking information wants to be free
  16. 16. @dugcampbell | Digital Thinking time for the $64,000 dollar* question… how does it work? * approx. 110.2 BTC
  17. 17. @dugcampbell | Digital Thinking How to get bitcoins Mining ATM Exchange goods/services Swap fiat on an exchange
  18. 18. @dugcampbell | Digital Thinking a wallet generates a bitcoin address each address creates a cryptographic key pair a public key and a private key
  19. 19. @dugcampbell | Digital Thinking Private key: c4bcbb1fbec99d65bf59d85c8cb62ee2db963f0fe107f483d9afa73bd4e39a8a Public key: 0478d430274f8c5ec1321338151e9f27f4c532a008bdf8638d07c0b6be9ab35c7 1a1518063243acd4dfe93b66e3f2ec8013c8e072cd09b3834a19f81f659cc3455 Address: 1JwSSuhprg6iPtRjtyqhUYYH7bZg3Lfy1T
  20. 20. @dugcampbell | Digital Thinking to transfer BTC’s, you sign a transaction with the private key provides mathematical proof to the network that you own the BTC’s
  21. 21. @dugcampbell | Digital Thinking cryptography proves digital ownership but still needs to prevent ‘double-spend’ network agrees every 10 minutes on what transactions have taken place
  22. 22. @dugcampbell | Digital Thinking a miner a peer in the network who works to collect transactions and organise them into blocks racing to win the right to update the ledger
  23. 23. @dugcampbell | Digital Thinking Mining (competitive bookkeeping) Race to solve a mathematical puzzle Miners bundle new transactions into a ‘block’ Hash information & hope for correct answer Difficulty adjusts, solved every 10 minutes
  24. 24. @dugcampbell | Digital Thinking Easy for network to check answer (Proof of Work) is correct - without redoing the work Network agrees and new block added to chain Winner receives 25 BTC’s (+ transaction fees)
  25. 25. @dugcampbell | Digital Thinking Want to cheat the network? You still need to carry out that intensive work Every ten minutes And control 51% of network to control agreement
  26. 26. @dugcampbell | Digital Thinking Current cost of carrying out a 51% attack: $1,112,153,015 (source: http://www.coinometrics.com/bitcoin/rix)
  27. 27. @dugcampbell | Digital Thinking so now you can see if this invention can work for money, it can work for other digital assets also the block chain isn’t just about money...
  28. 28. @dugcampbell | Digital Thinking “This is the distributed trust network that the Internet always needed and never had” Marc Andreessen
  29. 29. @dugcampbell | Digital Thinking the block chain
  30. 30. @dugcampbell | Digital Thinking Physical property whose ownership transfers with a bitcoin transaction anything that can be associated with a digital entity can be stored in bitcoin’s digital asset register (stocks, shares, cars, houses, legal documents) Smart Property
  31. 31. @dugcampbell | Digital Thinking Programmable Money Endless possibilities Money only available in certain GPS coordinates Release money by calendar dates Or according to specific events
  32. 32. @dugcampbell | Digital Thinking Multi-signature Transactions Require a certain number of signatures in an organisation Mathematically guaranteed that money cannot be spent without those signatures
  33. 33. @dugcampbell | Digital Thinking Transparency Audit governments, companies, charities Inspect their accounts Ensure that money is being spent properly
  34. 34. @dugcampbell | Digital Thinking Crowdfunding Ways to fund creation of a public good
  35. 35. @dugcampbell | Digital Thinking Micro-transactions Website adverts Internet radio Newspaper website pageviews Public Wi-Fi
  36. 36. @dugcampbell | Digital Thinking Machine to Machine Payments An economic identity for the Internet of Things Economy that does not yet exist
  37. 37. @dugcampbell | Digital Thinking Security The concept of irrecoverable data
  38. 38. @dugcampbell | Digital Thinking Regulation: the elephant in the room?
  39. 39. @dugcampbell | Digital Thinking The Future like layers of an onion decentralise currency then you need to decentralise markets then you need to decentralise identity….
  40. 40. @dugcampbell | Digital Thinking We’re just at the start of the journey...
  41. 41. @dugcampbell | Digital Thinking More consumers pay with Bitcoin More merchants accept Bitcoin More miners validate transactions & secure the network More entrepreneurs build products to meet the demand the network is starting to strengthen
  42. 42. @dugcampbell | Digital Thinking Any questions?

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