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The BarCamper’s
Guide to Bitcoin

                                                                        Ash Moran
                                                                  @wisemonkeyash
Creative Commons Attribution-ShareAlike 3.0 Unported License   ash@ashleymoran.net
Disclaimers


I am not a Bitcoin expert
I am not a financial adviser
This is not financial advice!
This is beer
Who likes beer?
This is money
Who likes money?
The problem
(one of them)
Who has noticed the price
of beer has gone from this…
…to this…
…and one day maybe to
this?
The cause
Inflating the money supply
makes it worth less
which makes prices rise
UK money supply
Source: Wikipedia
The bankers
are stealing
your beer
This is not good
Economic Bullshit Bingo 101
This one is worth 10 points
What is money?
Here are two more examples
This is also money
It is a different kind of money (bank debt)
Who likes bank debt?
This is money too
It has been for 6000 years
No modern currency is still backed by gold
Good money
We need to decide what qualities we want in our
money
Bitcoin
What and how
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
Bitcoin client
The “official” Bitcoin client
Transaction list
Bitcoin client
Payment screen
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
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)
Transaction chain
Private keys give the owner the ability to sign
Bitcoins over to another address
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
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
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
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
What is a Bitcoin?
Bitcoins are address balances
Individual Bitcoins are not identifiable entities
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?
Proving a transaction history


 Two parts to the problem:
   Proving the sequence of transactions
   Making it hard to create a false (fraudulent) sequence
Genesis block




Block chain
We need to make this hard to generate
Timestamp server
The sequence of hashes proves the timeline
Proof of work
Valid hashes must be less than a certain value
Sample Bitcoin block
Notice 0s in the hash indicating bytes of 0-bits
http://blockexplorer.com/
Longest block chain
The network accepts the black chain as the “true
history” because it was the hardest to form
Bitcoin creation
Block generation is called “mining”, because the
winner awards himself Bitcoins
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
Compare GBP vs BTC
Which monetary policy do you prefer?
What can you do with
Bitcoin?
A brief tour of the economy
Bitcoin markets
MtGox still largest despite the high-profile hack
http://bitcoincharts.com/markets/
Britcoin exchange
Currently seeing ~1kBTC/day trading volume
http://britcoin.co.uk/
Bitcoin wiki traders list
(Look at the size of the scrollbar)
https://en.bitcoin.it/wiki/Trade
MJB Monetary Metals
Small UK-based precious metal dealer
http://mjbmonetarymetals.co.uk/
In the end though…
It’s all about gold, bitchez! Θ
Like the presentation?
Send me a tip :-)
http://payb.tc/ashmoran
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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The BarCamper's Guide to Bitcoin

  • 1. presented at The BarCamper’s Guide to Bitcoin Ash Moran @wisemonkeyash Creative Commons Attribution-ShareAlike 3.0 Unported License ash@ashleymoran.net
  • 2. Disclaimers I am not a Bitcoin expert I am not a financial adviser This is not financial advice!
  • 3. This is beer Who likes beer?
  • 4. This is money Who likes money?
  • 6. Who has noticed the price of beer has gone from this…
  • 8. …and one day maybe to this?
  • 9. The cause Inflating the money supply makes it worth less which makes prices rise
  • 11. The bankers are stealing your beer This is not good
  • 12. Economic Bullshit Bingo 101 This one is worth 10 points
  • 13. What is money? Here are two more examples
  • 14. This is also money It is a different kind of money (bank debt) Who likes bank debt?
  • 15. This is money too It has been for 6000 years No modern currency is still backed by gold
  • 16. Good money We need to decide what qualities we want in our money
  • 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. Bitcoin client The “official” Bitcoin client Transaction list
  • 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. 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. Transaction chain Private keys give the owner the ability to sign Bitcoins over to another address
  • 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. 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. 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. 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. What is a Bitcoin? Bitcoins are address balances Individual Bitcoins are not identifiable entities
  • 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. Proving a transaction history Two parts to the problem: Proving the sequence of transactions Making it hard to create a false (fraudulent) sequence
  • 31. Genesis block Block chain We need to make this hard to generate
  • 32. Timestamp server The sequence of hashes proves the timeline
  • 33. Proof of work Valid hashes must be less than a certain value
  • 34. Sample Bitcoin block Notice 0s in the hash indicating bytes of 0-bits http://blockexplorer.com/
  • 35. Longest block chain The network accepts the black chain as the “true history” because it was the hardest to form
  • 36. Bitcoin creation Block generation is called “mining”, because the winner awards himself Bitcoins
  • 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. Compare GBP vs BTC Which monetary policy do you prefer?
  • 39. What can you do with Bitcoin? A brief tour of the economy
  • 40. Bitcoin markets MtGox still largest despite the high-profile hack http://bitcoincharts.com/markets/
  • 41. Britcoin exchange Currently seeing ~1kBTC/day trading volume http://britcoin.co.uk/
  • 42. Bitcoin wiki traders list (Look at the size of the scrollbar) https://en.bitcoin.it/wiki/Trade
  • 43. MJB Monetary Metals Small UK-based precious metal dealer http://mjbmonetarymetals.co.uk/
  • 44. In the end though… It’s all about gold, bitchez! Θ
  • 45. Like the presentation? Send me a tip :-) http://payb.tc/ashmoran
  • 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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