Bitcoin 101 provides an overview of bitcoin basics including that it is a peer-to-peer digital currency that allows for pseudo-anonymous value transfer through irreversible transactions recorded on a distributed blockchain ledger. It describes how bitcoin addresses and private keys work to send and receive bitcoin as well as exploring the bitcoin community, transactions, and units of bitcoin. It also summarizes different types of bitcoin wallets including desktop, mobile, online, hardware and paper wallets as well as key management, backups and importing/exporting between wallets.

1. Bitcoin 101
Crash Course - Session 2
Lisa Cheng
Founder of Vanbex Group
Co Founder of Etherparty
Formerly Communications at Ethereum
Advisor to Factom
email: L@vanbex.com
twitter: @lisacheng

2. Bitcoin Basics
• peer to peer
• digital value transfer
• pseudo anonymous
• not accessible by www
• no counterfeit possible
• irreversible transactions
• no intermediary

3. Bitcoin Community
• Bitcointalk
• IRC Freenode
• Meetups
• StackExchange
• Reddit
• Slack

4. Bitcoin Addresses & Keys
• Private Key — (mathematical magic)—> Address
• A secret key: The secret number that unlocks
bitcoins sent to the corresponding address.
• Looks like:
5J76sF8L5jTtzE96r66Sf8cka9y44wdpJjMwCxR3t
zLh3ibVPxh.
• A bitcoin address consists of a string of letters and
numbers starting with a "1" (number one).
• Looks like:
1DSrfJdB2AnWaFNgSbv3MZC2m74996JafV.

5. Bitcoin Transactions
• The average time for a new block is 10 minutes
• This is also the time it takes for 1 Confirmation
• Bitcoin companies/exchanges/services will often
require 3 - 4 confirmations before the funds are
recognized in the account
• Attaching a fee to the Bitcoin transaction gives it
priority, the higher the fee the greater the priority

6. Exploring Bitcoin
Transactions

7. Bitcoin Blockchain Ledger
• Performs traditional functions of a Central Bank/Issuing Authority
by providing serial numbers, keeping track of who has money,
and verifying that transactions are legitimate
• This process of a transaction being added to a block, as other
blocks are added afterwards that is referred to as a Confirmation
• Only those transactions that are added to a block appear
publicly on the Blockchain
• The only information publicly viewable/recorded on the
Blockchain: Bitcoin addresses and transaction values.
• Essentially a distributed ledger of historical transactions

8. Old School Ledger

9. Blockchain Ledger

10. bitcoin the unit
• refers to Bitcoin the currency
• breaks down into 8 decimal places
• the smallest unit is called a ‘satoshi’
• Can be denominated in
• satoshi: 0.00000001 (0.000009446 CAD)
• finney: 0.0000001 (0.00009445 CAD)
• bit: 0.000001 (0.0009456 CAD)
• millibit: 0.001 (0.9457 CAD)

11. Bitcoin the network
• A peer-to-peer network that propagates transactions
and blocks to every bitcoin node on the network.
• Users send bitcoins, the units of currency, by
broadcasting digitally signed messages to the
network using bitcoin wallet software
• Transactions are recorded into a distributed,
replicated public database known as the
blockchain, with consensus achieved by a proof-of-
work system called “mining".

12. Map of Bitcoin Nodes

13. BIPs
• 3 types of BIPs:
• Standards Track BIPs - Changes to the network
protocol, block or transaction validation, or anything
affecting interoperability.
• Informational BIPs - Design issues, general guidelines.
This type of BIP is NOT for proposing new features and
do not represent community consensus
• Process BIPs - Describes or proposes a change in
process. Similar to Standards BIPs but apply outside
the Bitcoin protocol.

14. Buying and Selling Bitcoin
• 3 methods:
1. Direct trades
2. Exchange trades
3. Peer to peer trading marketplaces

15. Blockchain Explorers
• a blockchain explorer is a web application that
operates as a bitcoin blockchain search engine.
• it allows you to search for addresses, transactions,
and blocks and see the relationship and flows
between them.
• blockchain.info
• blocktrail.com

17. UTXOs
• An Unspent Transaction Output
(UTXO) that can be spent as an
input in a new transaction.
• Every time you receive bitcoin
you get a UTXO for that
amount. Later on when you
spend bitcoin you join a few
UTXOs together and send
change back to yourself as
another UTXO.

18. Wallets, Clients, and Key
Management
• A Bitcoin Client is a program that you can download and
use on your computer in order to store, receive and send
Bitcoins. Other names include Bitcoin Wallet, Bitcoin QT
also see Paper Wallet, Cold Storage, Online Wallet.
• Wallet: Software that holds all your bitcoin addresses and
secret keys. Use it to send, receive, and store your
bitcoin.
• Key Management: A secure method to manage user
private keys.

19. Bitcoin Clients
• The three main forms of bitcoin clients are:
• Full client or "full node”: a client that stores the entire history of
bitcoin transactions (every transaction by every user, ever),
manages the users' wallets, and can initiate transactions directly
on the bitcoin network.
• Lightweight client: stores the user’s wallet but relies on third-
party–owned servers for access to the bitcoin transactions and
network. The light client does not store a full copy of all
transactions and therefore must trust the third-party servers for
transaction validation.
• Web client: are accessed through a web browser and store the
user’s wallet on a server owned by a third party.

20. Bitcoin Client Example

21. Wallet Types
1. Cold wallets vs Hot wallets
2. Desktop wallets
3. Mobile wallets
4. Online web wallets
5. Physical wallets
6. Bitcoin clients
7. Hardware wallets

22. Online Web Wallet
• blockchain.info
• GreenAddress.it
• Coinbase.com
• BitGo.com
• blocktrail.com

23. Hot vs Cold
• Any wallet somehow connected to the internet =
hot wallet
• Any wallet with an air gap between it and the
internet = cold wallet

24. Desktop Wallet
• Software application that manages your keys,
addresses, and provides a balance of your bitcoin
holdings
• Electrum
• MultiBit

25. Mobile Wallet
• Airbitz
• CoPay
• blockchain.info
• Mycelium
• Circle

26. Cold Storage/ Paper Wallets

27. Hardware
wallets

28. Deterministic Wallets
(BIP32)
• Allows the creation of un/limited bitcoin addresses/
child keys from a seed/parent key
• Example mnemonic: “select scout crash enforce
riot rival spring whale hollow radar rule sentence”
• Easy to manage multiple bitcoin addresses from
one main wallet

29. Passphrase Encrypted
Wallets (BIP38)
• Intended for use on
paper wallets or
physical bitcoins
• To encrypt a bitcoin
private key to store
somewhere
• Can access the wallet
with the passphrase,
decrypt to .WIF

30. Backup
• Very important to restore your wallet
• If using the Bitcoin Client - wallet.dat
• Backing up your wallet makes a copy of your
private keys, but it's important to back up your
whole wallet.

31. Importing and Exporting
• Import and Exporting your private key is essentially
importing/exporting your Bitcoin wallet
• You can easily do this with the Import/Export
function on any web or desktop wallet
• This allows users to switch wallet service providers
and also recover wallet functionality if a wallet
becomes inoperable (lost device, company goes
out of business, etc.).

32. Learn more
• Our research and reports: http://report.vanbex.com
• My linkedin: http://ca.linkedin.com/chenglisa
• Twitter: http://twitter.com/lisacheng
• Email: L@vanbex.com
• Personal Website and Essays: http://lisacheng.info
• Company Website: http://vanbex.com