The document discusses the innovation of Bitcoin and blockchain technology. It begins by explaining how Bitcoin allows for secure digital transfers of property online without the need for trusted intermediaries. It then covers the basics of how the Bitcoin network and blockchain works at a high level, including how addresses, private keys, wallets, and mining process transactions and create new blocks in the ledger. It emphasizes that the decentralized nature of the blockchain makes it highly secure and not able to be controlled by any single entity. In closing, it suggests that blockchain technology may allow for innovative new applications and improvements to financial and legal systems.

5. Marc
Andreessen
• Co-founded Netscape Communications Corporation
• Founding member/partner of VC firm Andreessen-Horowitz
www.flickr.com/photos/joi/2757536235

6. Bitcoin gives us, for the first time, a way
for one Internet user to transfer a unique
piece of digital property to another Internet
user, such that the transfer is guaranteed to
be safe and secure, everyone knows that the
transfer has taken place, and nobody can
challenge the legitimacy of the transfer. The
consequences of this breakthrough are hard to
overstate.
http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/ www.flickr.com/photos/joi/2757536235

7. The consequences of this breakthrough are hard to overstate.

9. WHY USE BITCOIN?
•Ease of use
•Security
•Control

10. Understand the Payment System

11. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
This is a bitcoin address.

12. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
This is a bitcoin address.
Don’t freak out.

13. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
Think of it like an email address.
1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj

14. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
The difference is that the password is a “private key.”
1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
5Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KFPRIVATE KEY
These 2 strings are mathematically related.
(Example private key pulled from the Bitcoin wiki)

15. A “seed” is a master key for
multiple private keys:
underneath become heal dusty survive melody
position horse release clean focus glorious
This is a different application of cryptography called
“hierarchical determinism” that makes it easier
to protect your bitcoin wallet.
This seed is an example from the internet.

16. The seed can regenerate your bitcoin balance on
most bitcoin wallet software that supports
hierarchical determinism.
As long as you have your seed backed up, you
are protected against hard drive failure
or losing your phone.
The seed should be additionally protected with either a
password or a PIN.

17. Just like an email password, the login info needs to be kept
SECRET.
Unlike an email password, the login info:
CANNOT BE RESET.
IT CAN BE LOST.
IT CAN BE STOLEN.

18. IT’S DIGITAL CASH.
As long as you maintain the integrity of your
login info, nobody can control your bitcoin,
except YOU.

19. This is the power of Bitcoin.
YOU control your money.
No account freezes.
No fractional reserve banking.
No civil asset forfeiture.
No more helplessness.

20. Currently, bitcoin transactions
are not anonymous.
They are also irreversible.
(Multi-sig addresses irreversibility, but is
beyond the scope of this class.)

21. Bitcoin wallets on mobile devices
are for small spending amounts only.
Securing large amounts of bitcoin is
also beyond the scope of this class.

22. SENDING/RECEIVING WITH AIRBITZ

23. SENDING/RECEIVING WITH AIRBITZ

24. HIDE YOUR
SEED
SENDING/RECEIVING WITH AIRBITZ

25. SENDING/RECEIVING WITH AIRBITZ

26. SENDING/RECEIVING WITH AIRBITZ

27. Hold for confirmation

28. WHY THIS
IS SUCH
A BIG DEAL
www.flickr.com/photos/jurvetson/1055810551/in/set-5956

30. CURRENCY SIMILARITIES
XBT/USD = $374.87
USD/XBT = ฿0.0026
$5 = ฿0.01
or
10 mBTC
https://www.flickr.com/photos/zcopley/8753275612

31. • Finite amount
• 25 created every 10 min
• 21,000,000 maximum
• Over 14 million circulating
commons.wikimedia.org/wiki/FileGold_Bars
COMMODITY SIMILARITIES

32. commons.wikimedia.org/wiki/FileGold_Bars
COMMODITY SIMILARITIES
SCARCITY
COMMODITY SIMILARITIES

33. Bitcoin = internet protocol
bitcoin = unit of currency

34. THE POWER OF PROTOCOLS
HTTP: Hyperlinks (Firefox, Chrome, Safari)
TCP/IP: Networks
VoIP: Voice over IP (Skype, Vonage)

35. HYPER TEXT TRANSFER PROTOCOL
"Welcome to Netscape" by http://web.archive.org/web/20001017053754/www.acm.org/~hlb/col-edit/cybernautica/jan-feb96/
pcai96a1.gif at http://web.archive.org/web/20040616210227/http://www.acm.org/~hlb/col-edit/cybernautica/jan-feb96/pcai961.html.
Licensed under Fair use of copyrighted material in the context of Netscape (web browser) via Wikipedia - http://en.wikipedia.org/
wiki/File:Welcome_to_Netscape.gif#mediaviewer/File:Welcome_to_Netscape.gif
1990s HTTP/HTML
2010s HTTPS/HTML

36. At one time, the Internet was predicted to be
a complete and total failure.
Who would ever bother to use email?

37. Bitcoin is a PLATFORM on which the
financial system can be re-invented.

38. The evolution of money.
https://www.flickr.com/photos/torbenh/6105409913

39. A BRIEF HISTORY OF CURRENCY

40. http://en.wikipedia.org/wiki/Shell_money#/media/File:Chinese_shell_money_16th_8th_century_BCE.jpg

41. 貝

42. http://en.wikipedia.org/wiki/Ancient_Greek_coinage#/media/File:Alexandria_222-235_Drachm.jpg

43. http://commons.wikimedia.org/wiki/File:Exchange_Money_Conversion_to_Foreign_Currency.jpg
epsos.de/Simple-Safe-FOREX-Trading-Strategy-Advise

44. http://commons.wikimedia.org/wiki/File%3AUlpiano_Checa_La_invasi%C3%B3n_de_los_b%C3%A1rbaros.jpg

45. http://commons.wikimedia.org/wiki/File%3AUlpiano_Checa_La_invasi%C3%B3n_de_los_b%C3%A1rbaros.jpg
www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/01/20120103_JPM_reserve.png

46. http://commons.wikimedia.org/wiki/File:Place_de_la_R%C3%A9volution_ex%C3%A9cution_capitale.jpg
CAUSES OF THE FRENCH REVOLUTION

47. http://commons.wikimedia.org/wiki/File:Place_de_la_R%C3%A9volution_ex%C3%A9cution_capitale.jpg
CAUSES OF THE FRENCH REVOLUTION
• Overwhelming debt due to military overspending
(including assisting Americans in our own revolution)
• Overtaxation of the working class
• Expensive food
• Ineffectiveness of Louis XVI’s 1% aristocracy

48. http://en.wikipedia.org/wiki/File:Napoleon_Wagram.jpg
NAPOLEON
• Conquered Europe
• Attempted to conquer Russia
• Sold Americans the Louisiana Purchase
• Finally lost to the British at Waterloo

49. http://en.wikipedia.org/wiki/Louisiana_Purchase#mediaviewer/File:LouisianaPurchase.png

50. http://en.wikipedia.org/wiki/File:The_British_Empire.png
THE BRITISH EMPIRE

51. LESSONS FROM HISTORY
• A new reserve currency is the result of profound social change
• Overwhelming debt leads to destabilization
• Major revolutions often originate from national financial crisis
• All of this has happened before, and will happen again

52. Understanding cryptocurrency is important because it will be a
major driver of history-making events in the 21st century.

53. Bitcoin is not controlled by a government.

54. The consequences of this breakthrough are hard to overstate.

56. IN MATH WE TRUST
https://www.flickr.com/photos/chijs/10890817443

57. ARISTOTLE’S THEORY OF SOUND MONEY
• Durable
• Portable
• Divisible
• Fungible
• Intrinsic value
http://commons.wikimedia.org/wiki/File:Busto_di_Aristotele_conservato_a_Palazzo_Altaemps,_Roma._Foto_di_Giovanni_Dall%27Orto.jpg

58. • Durable: distributed database
• Portable: network-transmitted
• Divisible: fractional amounts
• Fungible: all units equal and alike
• Intrinsic value: proof-of-work/debatable

59. INTRINSIC VALUE OF BLOCKCHAIN CURRENCIES
•Scarcity of blockchain tokens
•Incentivized security
•Strength of the mining algorithm
•Funds spent by the network to secure itself
•Ability to trust a trust-less network
•Network effect

60. The existence of bitcoin as a currency secures the
blockchain by incentivizing miner participation.

61. Bitcoin’s blockchain is one of the greatest
innovations in history.
http://commons.wikimedia.org/wiki/Apollo_11#mediaviewer/File:Buzz_Aldrin_and_the_U.S._flag_on_the_Moon_-_GPN-2001-000012.jpg

62. The Bitcoin blockchain is a permanent, distributed,
publicly-viewable transaction ledger.
http://commons.wikimedia.org/wiki/Moon#mediaviewer/File:Moon_merged_small.jpg

63. http://commons.wikimedia.org/wiki/Moon#mediaviewer/File:Moon_merged_small.jpg
• Shutting down the network is impossible.
• Counterfeiting or attacking is too expensive to be profitable.
• The network is global and decentralized (no central point of control).
• The open-source software is publicly available for inspection.
The Bitcoin blockchain is a permanent, distributed,
publicly-viewable transaction ledger.

64. http://commons.wikimedia.org/wiki/File:Ledger_of_the_fur_trader_Dedo_from_Leipzig,_1876-1885_015.jpg

65. http://commons.wikimedia.org/wiki/File:Ledger_of_the_fur_trader_Dedo_from_Leipzig,_1876-1885_015.jpg
Every new “page” on this ledger is called a block.

66. http://commons.wikimedia.org/wiki/File:Ledger_of_the_fur_trader_Dedo_from_Leipzig,_1876-1885_015.jpg
Every new “page” on this ledger is called a block.
Everyone on the network is distributed a copy of the same ledger.

67. A decentralized and distributed network is impossible to shut down
because the network only requires 2 nodes to operate.

68. SYSTEMS ARE ONLY SECURE WHEN NO ONE HAS TOTAL CONTROL
Decentralized: No one entity is in control of the network
Distributed: Transaction processing is done in different places

69. Mining is the mathematical transaction-clearing process that
protects the blockchain against attack.
http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg

70. Mining is the mathematical transaction-clearing process that
protects the blockchain against attack.
http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg
It is also how new bitcoin are minted.

71. Mining is the mathematical transaction-clearing process that
protects the blockchain against attack.
http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg
It is also how new bitcoin are minted.
Mining farms with supercomputer levels of power
are located all over the world.

72. http://commons.wikimedia.org/wiki/File:Ledger_of_the_fur_trader_Dedo_from_Leipzig,_1876-1885_015.jpg
Mining also adds new blocks to the blockchain.

73. http://commons.wikimedia.org/wiki/File:Ledger_of_the_fur_trader_Dedo_from_Leipzig,_1876-1885_015.jpg
Mining also adds new blocks to the blockchain.
Every new block verifies the integrity of the previous block
through a process called cryptographic proof of work.

74. Cryptographic proof of work is a mathematical game that forces
miners to compete with each other.

75. The game is necessary to protect the network
against malicious actors.

76. http://commons.wikimedia.org/wiki/File:Small_Box_Monopoly.JPG
The Bitcoin protocol regards many of the actions banks engage in
today to be malicious.
• Blacklisting accounts
• Spending non-existent funds
• Falsification of records
• Endless fees

77. http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg
The first miner to win the math game receives a prize.
Currently the block reward is 25 bitcoin.

78. http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg
The first miner to win the math game receives a prize.
Currently the block reward is 25 bitcoin.
The block reward, and transaction fees, are what incentivize
miners to add their computing power to the network.

79. http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg
The first miner to win the math game receives a prize.
Currently the block reward is 25 bitcoin.
The block reward, and transaction fees, are what incentivize
miners to add their computing power to the network.
Since the entire blockchain is being constantly updated
and re-verified by miners, we have a system ruled by
distributed consensus.

80. The mechanism of distributed consensus amongst miners is
what makes the blockchain a revolutionary innovation.

81. http://commons.wikimedia.org/wiki/Moon#mediaviewer/File:Moon_merged_small.jpg
Distributed consensus decentralizes TRUST.
DISTRIBUTED
CONSENSUS

82. Decentralizing trust means that we are able to
remove some of human nature’s failings
from the financial system.

83. Cryptocurrency may allow us to opt out of a
corrupt and failing financial system.
http://www.thetimes.co.uk/tto/business/industries/banking/article2160028.ece
http://blogs.reuters.com/financial-regulatory-forum/2014/12/18/reversal-of-dodd-frank-swaps-rule-ignores-lessons-from-financial-crisis-london-whale/

84. • Coinbase/Circle, easiest option for US citizens
• BTC China, Huobi
• localbitcoins.com
• bitcoin ATMs
WHERE TO BUY BITCOIN?

85. ADVANCED WALLET SECURITY
CASE
TREZOR

86. • Only exchanges and wallets get hacked. Bitcoin itself is secure.
• Volatility in a brand-new asset class is to be expected.
• All value is subjective.
ON HACKING AND PRICE VOLATILITY

87. • Algorithmic regulation
• The Internet of Things
• Smart contracts
• Distributed autonomous corporations
THE FUTURE OF BLOCKCHAIN-BASED TECHNOLOGY
http://observer.com/2014/05/v-c-firm-names-robot-to-board-of-directors/

88. http://commons.wikimedia.org/wiki/Moon#mediaviewer/File:Moon_merged_small.jpg
“NOTHING IS MORE POWERFUL THAN
AN IDEA WHOSE TIME HAS COME”
- Victor Hugo

89. http://commons.wikimedia.org/wiki/Moon#mediaviewer/File:Moon_merged_small.jpg
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