Intro to Bitcoin and Paymium.

1. Bitcoin
An decentralized open source cryptographic currency.

2. Stephan Florquin
David Francois
paymium.com

3. Intro
• Bitcoin is a decentralized, open source,
digital currency
• No central authority
• First released anonymously in 2009 by
“Satoshi Nakamoto”

4. • It received a lot of media attention during
summer 2011, the exchange rate surged
• Some websites got hacked, Bitcoin got a
bad reputation
• The exchange rate crashed to near zero
and Bitcoin was dead according to most
media

5. • A community still believed in Bitcoin and
the exchange rate steadily went up during
2012
• Major websites started accepting Bitcoin
(Wordpress, Reddit)
• Despite all criticism, Bitcoin is now
stronger than ever

6. Bitcoin price over time

7. “I am very intrigued by Bitcoin. It has all the signs.
Paradigm shift, hackers love it, yet it's derided as a toy.
Just like microcomputers.”
Paul Graham
“Bitcoin is still very much a fringe thing [...]
But I like to pay attention to the jokes, the laughing stocks,
because occasionally they get the last laugh.”
Fred Wilson

8. How does Bitcoin
work?

9. • 2 essential concepts, not new to Bitcoin
• Pier to pier (P2P) technology
• Digital signatures

10. P2P network

11. • Each client is connected to nearby peers
• A client can broadcast a message to its
peers
• The peers will forward the message to
their own nearby peers until it reaches the
entire network

12. • Anyone can download a Bitcoin client and
add a node to the network
• There are already tens of thousands of
nodes

13. Digital signatures

14. Digital signatures

15. Digital signatures

16. • In the Bitcoin network, we sign transactions
• Ownership of Bicoins go from a Bitcoin
address to another
• A Bitcoin address is just a hash of the
public key

17. • To create a transaction, I broadcast a signed
message that says “transfer ownership of X
Bitcoins from my Bitcoin address to this
Bitcoin address”
• I also send my public key

18. • Since my Bitcoin address is a hash of my
public key, peers can verify that the public
key corresponds to my Bitcoin address
• Using the digital signature, peers can now
verify that I indeed intend to send Bitcoins
to the destination Bitcoin address

19. • By combining a P2P network and digital
signatures, we have a secure, reliable way of
broadcasting Bitcoin transactions
• But have to we keep track of how many
Bitcoins belong to an address?

20. • Every Bitcoin client has an up-to-date copy
of the history of all Bitcoin transactions
• All transactions are public and irreversible
• This is what we call the “Blockchain”

21. The blockchain

22. • The blockchain is a list of blocks
• Every block contains a list of transactions
• Roughly every 10 minutes, a block
containing recent transactions is appended
to the blockchain

23. The blockchain

24. The blockchain

25. • “Miners” compete to find the next block
• It involves solving a cryptographic
challenge, known as “Proof of work”
• If blocks are mined too quickly, the difficulty
is increased (and vice versa)

26. • What if multiple blockchains emerge?
• This can happen naturally or if someone
attempts to attack the network
• The longest chain is considered valid

27. Blockchain fork

28. Blockchain fork

29. Blockchain fork

30. • To consider a transaction valid, we wait
until several blocks have been appended
afterwards
• This is to ensure forked chains have been
resolved
• Two to six blocks are enough to consider a
transaction valid (20 - 60 minutes)

31. • But how are Bitcoins created in the first
place?
• When a miner finds the next block, he is
rewarded Bitcoins
• Every 210,000 blocks, the reward is divided
by two (every four years)

32. • The bounty for mining one of the first
210,000 blocks was 50 Bitcoins
• Since the end of 2012, it is 25 Bitcoins
• Currently, there are around 11,000,000
Bitcoins
• By 2140, around 21,000,000 Bitcoins will
have been discovered, which is the limit

33. Number of Bitcoins

34. • In addition, you can add a fee to a
transaction
• The miner who find the block that includes
your transaction is awarded the fee
• The higher the fee, the most likely the
transaction will be included in the next
block

35. What we do at
Paymium

36. • We believe Bitcoin has enormous potential
• We work to promote Bitcoin
• We build services on top of the Bitcoin
network

37. • Unlike traditional currencies, the Bitcoin
network is totally open
• Any developer can hack a project
• Bitcoin is both a currency and a transaction
network

38. • As a currency, it is immune to inflation
(fixed number of coins) and not centrally
regulated
• As a transaction network, it allows fast,
secured, cheap irreversible transactions
• Credit cards, on the other hand, have high
fees (3% or more) and charge backs (up to
6 months, why?? Fraud!)

39. • With traditional payment systems, you have
to hand over your credit card info to third
parties (and trust them!)
• With Bitcoins, you give them nothing!
• How would you pay an online merchant
with Bitcoins?

40. • The merchant generate a new, unique
Bitcoin address for your purchase
• You send Bitcoins to the address
• After the transaction is confirmed by the
Bitcoin network, the merchant can safely
deliver your purchase
• That’s it!

41. • This is the kind of stuff Paymium has been
doing since 2011
• To help Bitcoin go mainstream, we work
with both Euros and Bitcoins
• For instance, you can pay a Bitcoin address
using Euros and vice-versa!

42. • We can do this because we have our own
Bitcoin exchange and we can trade Euros
automatically
• In addition we provide easy-to-use wallets
and an API for developers
• Much more coming later this year, so much
we can do!

43. • We made headlines last year because we
became the first Bitcoin startup to have a
Payment Service Provider!
• This means we can open a bank account
for each of our customers instead of mixing
their funds with ours
• In addition we are going to be able to print
debit cards and create IBAN numbers for
our customers

44. Security

45. • At Paymium, we hold a large number of
Bitcoins for our customers
• We keeps our servers as secure as
possible, but we have to imagine worst case
scenarios
• What if someone gains access to our web
servers?
• By the way this never happened :)

46. • Remember, all you need to prove
ownership of Bitcoins is a private key
• A private key is just a string of character
• It can easily be encrypted, then printed or
stored on a USB key

47. • Because of this, you can store your private
keys in secure locations such as a bank
vault
• Afterwards, you can erase all other traces
of the private key
• This is called “cold storage”

48. • You can still keep the Bitcoin address and
receive payments
• On the other hand, you have to get access
to the physical location of the private key
and know the encryption key to send
Bitcoins

49. • On our servers, we keep the minimum
amount of Bitcoins possible (< 7%)
• We can do this because we can predict
how many Bitcoins are needed during a
normal day
• In we need more coins, we have to go to
our cold storage facilities

50. • In short, the damage that can be done is
limited and we can survive an attack

51. • I hope you enjoyed this talk and that I made
you want to try Bitcoins!
• If you are interested in Bitcoins and are
skilled in security, programming, finance,
marketing, let’s get in touch!
• Questions?

52. Stephan Florquin
David Francois
paymium.com
@paymium
contact@paymium.com