Bitcoin is an open-source cryptocurrency created by the pseudonymous Satoshi Nakamoto. It is a decentralized digital currency that uses peer-to-peer technology to operate without a central authority. Transactions are verified through a proof-of-work system and recorded in a public distributed ledger called a blockchain. While bitcoin offers advantages like instant transactions and anonymity, it also faces challenges like volatility, scalability issues, and the risk of losing coins if private keys are lost. Overall, bitcoin remains a controversial new currency that some see as the future while others see risks in its use and acceptance.

1. Bitcoin
http://www.flickr.com/photos/31119160@N06/8007585111/
Vesa Linja-aho — T-76.5753 Law in Network Society

2. About me
 Vesa Linja-aho, M. Sc. in electrical and electronics
engineering.
 Professional background:
 7 years at Aalto university (research and teaching)
 1 year in Computerworld Finland magazine (editor)
 3 years at Metropolia, senior lecturer
 Electronics and electric safety
 Accounting and economics
 Open educational resources
 Everything new 
 http://www.google.com/#q=vesa+linja-aho
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3. Bitcoin = open source cryptocurrency
 Bitcoin = distributed accounting system
 No central authority -> does not depend on
trust to single or couple of institutions.
 Like cash, but for the internet
 1 bitcoin = 50 euros (20th of Mar 2013).
 Created by pseudonym Satoshi Nakamoto
 Based on a peer-to-peer network of
computers running the bitcoin software.
 The transactions are verified by proof-of-
work system of computers running a mining
software.
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4. Pros
 No unpredictable inflation by ”printing more
money” by political decision.
 Transactions travel instantly
 Send money in seconds to anyone with internet
access – with zero transaction costs.
 Highly anonymous, in certain conditions
 Every transaction is public, though!
 If you memorize your private key, the only way
to steal your bitcoins (even for the authorities)
is to torture you (or spy or hack your computer).
 Easy to use
 You can choose the tool (usability / security)
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5. Cons
 Bitcoin is rather new and its still in marginal
use -> high volatility.
 BTC money supply: 500,000,000 €
 EUR money supply: 5,000,000,000,000 €
 It’s currency for the internet – take down the
internet, and you cannot use bitcoins.
 Perhaps not suitable for any country’s official
currency.
 Lose your private key -> lose your bitcoins.
 No means to cancel the transaction!
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6. Someone’s pro is someone’s con!
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7. Stupid arguments against bitcoin
 People buy guns and drugs with it!
 But it proves it works!
 And people use plain cash for the same.
 Early adopters benefit too much
 Is it really a problem?
 Bitcoin has actually no value
 Same applies to euros and dollars.
 They only have value because people believe
they have value.
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8. Good or at least considerable arguments
against bitcoin
 The value is unstable.
 There might be a bubble!
 Bitcoin can be replaced with a similar product.
 The government can shut it down.
 Or at least try to, by making it illegal to use
bitcoins.
 The slowness of transaction verification (about
10 minutes per block).
 The scalability: the current version can not
handle the transactions if everyone in the world
used bitcoins.
 MtGox handles most of the trade -> raid it -> ?
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9. Is there a bubble?
 Media attention will inspire people to buy
bitcoins
 Media attention will inspire companies to
accept bitcoins (and vice versa)
 The price of bitcoins rise -> media attention
 The circle is ready.
 As long as the price rises together with the use
of bitcoin, there is (probably) no bubble.
 I emphasize the word probably. The
circulation speed of bitcoin is low if
compared to regular money.
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10. How it works
 Every ”account” consists of the public key (=
bitcoin address) and the private key.
 Anyone who knows your public key, can send
you bitcoins.
 To spend bitcoins, you have to know the
private key.
 The transaction is broadcasted to the bitcoin
network.
 The miners confirm the transactions
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11. The addresses
 An example of a bitcoin address:
 14nRKoXJAUpKYYbzw6Yrqh9gW2p26zerpW
 2 160 (about 10 48)possible addresses
 The corresponding private key:
 5HuEupX3DNFJ7UypjFtXDTm4BVuAwZtAgY
f94sMALPyakgafVnU
 256 bits
 About 10 77 possible private keys
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12. Confirmations
 In the process called mining, all transactions
are collected in a block. A new block is mined
in about every 10 minutes.
 For small payments or with payments with
trusted peer, 0 confirmations is usually ok.
 For large amounts, 6 confirmations is
considered safe.
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13. Double spend elimination
 Because bitcoin has no central authority, one
of the main security problems is eliminating a
double spend fraud (wherein the same money
is spent twice).
 The main innovation in bitcoin is the
blockchain. Each full node (= computer
running the bitcoin program) in the network
has a copy of all mined blocks.
 Disrupting the system would need enormous
computing power.
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14. Anonymity
 Understand how bitcoin works
 Every transaction from address to address is
public.
 How much and when = public, who owns the
address = not public (can be
analyzed, though).
 Create a new address for every transaction
 Use mixing services
 The larger the transactions, the easier it is to
carry out traffic analysis
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15. Who accepts bitcoins?
 Namecheap
 Wordpress
 Many nonprofits accept bitcoin donations
 Archive.org
 Bitpay (= simple interface for merchants)
 Bitspend.net (order anything with bitcoins)
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17. Legal stuff
 In Finland, the Board of Accounting recognizes
bitcoin:
 treated like stocks
 or if selling and buying bitcoins is the core
business of the company, they are put in the
current assets.
 Its completely legal to use bitcoins as money
(as it is legal to use potatoes or gold as
money)
 Anti-terrorism and money laundering law:
selling bitcoins for > 15 000 € -> ask for ID.
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18. Bitcoin and taxes
 I asked the tax authorities about bitcoin: 'we
have a group of experts working on it’.
 Currently, VAT 24% is imposed on selling
bitcoins.
 Exchanging bitcoins for a customer is VAT 0%
 That is, the dealer buys the bitcoins for the
customer.
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19. Bitcoin and taxes?
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20. Worth reading
 http://www.reddit.com/r/Bitcoin
 http://bitcoin.it/
 https://blockchain.info/tx/8b555a4399797c78
4033863dda38abef7b8adcaf6748e9519dcb1
75fb1d04ee0
 http://krugman.blogs.nytimes.com/2011/09/07
/golden-cyberfetters/
 https://twitter.com/carsonj/status/314382483
468713984
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21. Tools for beginners (and everyone)
 http://easywallet.org
 http://blockchain.info/
 https://www.bitaddress.org/
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