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Intro to Bitcoin
- 5. Marc Andreessen • Co-founded NetscapeCommunications 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 ofthis breakthrough are hard to overstate.
- 9. WHY USE BITCOIN? •Easeof use •Security •Control
- 10. Understand the PaymentSystem
- 11. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj This is abitcoin address.
- 12. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj This is abitcoin address. Don’t freak out.
- 13. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj Think of itlike an email address. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
- 14. 1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj The difference isthat 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” isa 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 canregenerate 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 anemail 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. Aslong as you maintain the integrity of your login info, nobody can control your bitcoin, except YOU.
- 19. This is thepower of Bitcoin. YOU control your money. No account freezes. No fractional reserve banking. No civil asset forfeiture. No more helplessness.
- 20. Currently, bitcoin transactions arenot anonymous. They are also irreversible. (Multi-sig addresses irreversibility, but is beyond the scope of this class.)
- 21. Bitcoin wallets onmobile devices are for small spending amounts only. Securing large amounts of bitcoin is also beyond the scope of this class.
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- 28. WHY THIS IS SUCH ABIG 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
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- 33. Bitcoin = internetprotocol bitcoin = unit of currency
- 34. THE POWER OFPROTOCOLS HTTP: Hyperlinks (Firefox, Chrome, Safari) TCP/IP: Networks VoIP: Voice over IP (Skype, Vonage)
- 35. HYPER TEXT TRANSFERPROTOCOL "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 aPLATFORM on which the financial system can be re-invented.
- 38. The evolution ofmoney. https://www.flickr.com/photos/torbenh/6105409913
- 39. A BRIEF HISTORYOF CURRENCY
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- 47. http://commons.wikimedia.org/wiki/File:Place_de_la_R%C3%A9volution_ex%C3%A9cution_capitale.jpg CAUSES OF THEFRENCH 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
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- 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 isimportant because it will be a major driver of history-making events in the 21st century.
- 53. Bitcoin is notcontrolled by a government.
- 54. The consequences ofthis breakthrough are hard to overstate.
- 56. IN MATH WETRUST https://www.flickr.com/photos/chijs/10890817443
- 57. ARISTOTLE’S THEORY OFSOUND 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: distributeddatabase • Portable: network-transmitted • Divisible: fractional amounts • Fungible: all units equal and alike • Intrinsic value: proof-of-work/debatable
- 59. INTRINSIC VALUE OFBLOCKCHAIN 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 ofbitcoin as a currency secures the blockchain by incentivizing miner participation.
- 61. Bitcoin’s blockchain isone 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 blockchainis 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 downthe 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.
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- 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 anddistributed network is impossible to shut down because the network only requires 2 nodes to operate.
- 68. SYSTEMS ARE ONLYSECURE 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 themathematical transaction-clearing process that protects the blockchain against attack. http://commons.wikimedia.org/wiki/File:Datacenter-MIVITEC-MUNICH.jpg
- 70. Mining is themathematical 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 themathematical 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.
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- 73. http://commons.wikimedia.org/wiki/File:Ledger_of_the_fur_trader_Dedo_from_Leipzig,_1876-1885_015.jpg Mining also addsnew 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 ofwork is a mathematical game that forces miners to compete with each other.
- 75. The game isnecessary to protect the network against malicious actors.
- 76. http://commons.wikimedia.org/wiki/File:Small_Box_Monopoly.JPG The Bitcoin protocolregards 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 minerto 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 minerto 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 minerto 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 ofdistributed consensus amongst miners is what makes the blockchain a revolutionary innovation.
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- 82. Decentralizing trust meansthat we are able to remove some of human nature’s failings from the financial system.
- 83. Cryptocurrency may allowus 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, easiestoption for US citizens • BTC China, Huobi • localbitcoins.com • bitcoin ATMs WHERE TO BUY BITCOIN?
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- 86. • Only exchangesand 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 MOREPOWERFUL THAN AN IDEA WHOSE TIME HAS COME” - Victor Hugo
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