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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

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The BarCamper's Guide to Bitcoin

  1. 1. presented atThe BarCamper’sGuide to Bitcoin Ash Moran @wisemonkeyashCreative Commons Attribution-ShareAlike 3.0 Unported License ash@ashleymoran.net
  2. 2. DisclaimersI am not a Bitcoin expertI am not a financial adviserThis is not financial advice!
  3. 3. This is beerWho likes beer?
  4. 4. This is moneyWho likes money?
  5. 5. The problem(one of them)
  6. 6. Who has noticed the priceof beer has gone from this…
  7. 7. …to this…
  8. 8. …and one day maybe tothis?
  9. 9. The causeInflating the money supplymakes it worth lesswhich makes prices rise
  10. 10. UK money supplySource: Wikipedia
  11. 11. The bankersare stealingyour beerThis is not good
  12. 12. Economic Bullshit Bingo 101This one is worth 10 points
  13. 13. What is money?Here are two more examples
  14. 14. This is also moneyIt is a different kind of money (bank debt)Who likes bank debt?
  15. 15. This is money tooIt has been for 6000 yearsNo modern currency is still backed by gold
  16. 16. Good moneyWe need to decide what qualities we want in ourmoney
  17. 17. BitcoinWhat and how
  18. 18. Example: Alice pays BobAlice wants to send Bob 2BTCBob gives Alice his Bitcoin address eg 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245WAlice gives her Bitcoin client the instruction to send2BTC from her wallet to addressAlice’s Bitcoin client broadcasts the transaction to thepeer-to-peer network
  19. 19. Bitcoin clientThe “official” Bitcoin clientTransaction list
  20. 20. Bitcoin clientPayment 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 6Payment is broadcastMessages 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: 0.0015Bitcoin transaction(Simplified)
  23. 23. Transaction chainPrivate keys give the owner the ability to signBitcoins over to another address
  24. 24. Bitcoin Node T8 T9 Block 1 Block 2 Block 3 TX T2 T3 T5 T6 T7Block chainTransactions are grouped into blocksClients 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 B3MiningMining nodes will try to create Block 4 thatcontains 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 B3Broadcasting new blocksClients that accept the new block will considerthe 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 B4Network acceptanceBob sees the network has accepted the payment
  28. 28. What is a Bitcoin?Bitcoins are address balancesIndividual 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 blockBlock chainWe need to make this hard to generate
  32. 32. Timestamp serverThe sequence of hashes proves the timeline
  33. 33. Proof of workValid hashes must be less than a certain value
  34. 34. Sample Bitcoin blockNotice 0s in the hash indicating bytes of 0-bitshttp://blockexplorer.com/
  35. 35. Longest block chainThe network accepts the black chain as the “truehistory” because it was the hardest to form
  36. 36. Bitcoin creationBlock generation is called “mining”, because thewinner awards himself Bitcoins
  37. 37. 2033 - 21MBTC Creation halves every 4 years / 210k generations 2011 - 6MBTCBitcoin generation rateDifficulty is adjusted by the network every2 weeks to keep on target
  38. 38. Compare GBP vs BTCWhich monetary policy do you prefer?
  39. 39. What can you do withBitcoin?A brief tour of the economy
  40. 40. Bitcoin marketsMtGox still largest despite the high-profile hackhttp://bitcoincharts.com/markets/
  41. 41. Britcoin exchangeCurrently seeing ~1kBTC/day trading volumehttp://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 MetalsSmall UK-based precious metal dealerhttp://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 ReadingBitcoin: A Peer-to-Peer Electronic Cash System Original paper - very accessible http://www.bitcoin.org/bitcoin.pdfBitcoin 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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