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The BarCamper's Guide to Bitcoin

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The BarCamper's Guide to Bitcoin

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An introduction to Bitcoin I gave at BarCamp Nottingham on 23-July-2011. Blog post here: http://aviewfromafar.net/the-barcampers-guide-to-bitcoin

Note: I've updated this! The new version is just called "Introduction to Bitcoin", and is here: http://www.slideshare.net/ashmoran/introduction-to-bitcoin-30852714

An introduction to Bitcoin I gave at BarCamp Nottingham on 23-July-2011. Blog post here: http://aviewfromafar.net/the-barcampers-guide-to-bitcoin

Note: I've updated this! The new version is just called "Introduction to Bitcoin", and is here: http://www.slideshare.net/ashmoran/introduction-to-bitcoin-30852714

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The BarCamper's Guide to Bitcoin

  1. 1. presented at The BarCamper’s Guide to Bitcoin Ash Moran @wisemonkeyash Creative Commons Attribution-ShareAlike 3.0 Unported License ash@ashleymoran.net
  2. 2. Disclaimers I am not a Bitcoin expert I am not a financial adviser This is not financial advice!
  3. 3. This is beer Who likes beer?
  4. 4. This is money Who likes money?
  5. 5. The problem (one of them)
  6. 6. Who has noticed the price of beer has gone from this…
  7. 7. …to this…
  8. 8. …and one day maybe to this?
  9. 9. The cause Inflating the money supply makes it worth less which makes prices rise
  10. 10. UK money supply Source: Wikipedia
  11. 11. The bankers are stealing your beer This is not good
  12. 12. Economic Bullshit Bingo 101 This one is worth 10 points
  13. 13. What is money? Here are two more examples
  14. 14. This is also money It is a different kind of money (bank debt) Who likes bank debt?
  15. 15. This is money too It has been for 6000 years No modern currency is still backed by gold
  16. 16. Good money We need to decide what qualities we want in our money
  17. 17. Bitcoin What and how
  18. 18. Example: Alice pays Bob Alice wants to send Bob 2BTC Bob gives Alice his Bitcoin address eg 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W Alice gives her Bitcoin client the instruction to send 2BTC from her wallet to address Alice’s Bitcoin client broadcasts the transaction to the peer-to-peer network
  19. 19. Bitcoin client The “official” Bitcoin client Transaction list
  20. 20. Bitcoin client Payment screen
  21. 21. Alice (Node) TX TX message Node 1 TX Amount: 2 Node 4 To: 175tWpb8… TX Node 3 TX Node 2 TX Bob (Node) TX Node 5 TX Node 6 Payment is broadcast Messages are broadcast on a best-effort basis
  22. 22. Inputs Outputs From: 16fMXaUy… Amount: 1.5 To: 134nwkgU… Amount: 200 From: 1K1hoWtp… Amount: 230 To: 1CkjeUts… Amount: 31.5015 From: 1Ltvsdrh… Amount: 0.0015 Bitcoin transaction (Simplified)
  23. 23. Transaction chain Private keys give the owner the ability to sign Bitcoins over to another address
  24. 24. Bitcoin Node T8 T9 Block 1 Block 2 Block 3 TX T2 T3 T5 T6 T7 Block chain Transactions are grouped into blocks Clients can download the full block chain
  25. 25. Alice (Node) TX Node 1 TX Node 4 B1 B2 B3 B1 B2 B3 TX B1 B2 B3 Node 2 TX Node 3 (miner) B1 B2 B3 B4 B1 B2 B3 TX TX Node 5 Node 6 (miner) TX Bob (Node) B1 B2 B3 B1 B2 B3 B4 TX B1 B2 B3 Mining Mining nodes will try to create Block 4 that contains the new transaction
  26. 26. Alice (Node) B4 Node 1 Node 4 B1 B2 B3 B1 B2 B3 B1 B2 B3 B4 B4 B4 Node 2 Node 3 (miner) B4 TX B1 B2 B3 B4 B1 B2 B3 B4 B4 B4 B4 Node 5 Node 6 (miner) Bob (Node) B1 B2 B3 B1 B2 B3 B1 B2 B3 Broadcasting new blocks Clients that accept the new block will consider the new transaction valid
  27. 27. Alice (Node) Node 1 Node 4 B1 B2 B3 B4 B1 B2 B3 B4 B1 B2 B3 B4 Node 2 Node 3 (miner) B1 B2 B3 B4 B1 B2 B3 B4 Node 5 Node 6 (miner) B1 B2 B3 B4 Bob (Node) B1 B2 B3 B4 B1 B2 B3 B4 Network acceptance Bob sees the network has accepted the payment
  28. 28. What is a Bitcoin? Bitcoins are address balances Individual Bitcoins are not identifiable entities
  29. 29. Alice turns evil Bitcoins are digital, like MP3s and movies What stops Alice sending the same money to Charlie? “Double-spending” How does the network agree on the “true” history of transactions?
  30. 30. Proving a transaction history Two parts to the problem: Proving the sequence of transactions Making it hard to create a false (fraudulent) sequence
  31. 31. Genesis block Block chain We need to make this hard to generate
  32. 32. Timestamp server The sequence of hashes proves the timeline
  33. 33. Proof of work Valid hashes must be less than a certain value
  34. 34. Sample Bitcoin block Notice 0s in the hash indicating bytes of 0-bits http://blockexplorer.com/
  35. 35. Longest block chain The network accepts the black chain as the “true history” because it was the hardest to form
  36. 36. Bitcoin creation Block generation is called “mining”, because the winner awards himself Bitcoins
  37. 37. 2033 - 21MBTC Creation halves every 4 years / 210k generations 2011 - 6MBTC Bitcoin generation rate Difficulty is adjusted by the network every 2 weeks to keep on target
  38. 38. Compare GBP vs BTC Which monetary policy do you prefer?
  39. 39. What can you do with Bitcoin? A brief tour of the economy
  40. 40. Bitcoin markets MtGox still largest despite the high-profile hack http://bitcoincharts.com/markets/
  41. 41. Britcoin exchange Currently seeing ~1kBTC/day trading volume http://britcoin.co.uk/
  42. 42. Bitcoin wiki traders list (Look at the size of the scrollbar) https://en.bitcoin.it/wiki/Trade
  43. 43. MJB Monetary Metals Small UK-based precious metal dealer http://mjbmonetarymetals.co.uk/
  44. 44. In the end though… It’s all about gold, bitchez! Θ
  45. 45. Like the presentation? Send me a tip :-) http://payb.tc/ashmoran
  46. 46. Further Reading Bitcoin: A Peer-to-Peer Electronic Cash System Original paper - very accessible http://www.bitcoin.org/bitcoin.pdf Bitcoin wiki: https://en.bitcoin.it/wiki/ Money as Debt (video by Paul Grignon) Explains the history of our monetary system Highly recommended http://bit.ly/moneyasdebt-full

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