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Overview of Bitcoin - Sweden
This document discusses Bitcoin and cryptocurrencies. It begins with a brief history of Bitcoin and an explanation of what cryptocurrencies are and how Bitcoin works. It describes how Bitcoin transactions are recorded in a public ledger called a blockchain and how new Bitcoins are generated through "mining." The document outlines some benefits of Bitcoin like lower transaction costs but also drawbacks like volatility. It examines alternative cryptocurrencies and recent events like the collapse of the Mt. Gox Bitcoin exchange. It concludes by speculating on potential future scenarios for cryptocurrencies and their ability to drive innovation.
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Overview of Bitcoin - Sweden
- 1. Bitcoin ---- Challenging the fiatmoney system or catalyzing economic development? March 2014
- 2. Today’s presentation Briefhistory of Bitcoin What is a cryptocurrency? How does Bitcoin work? Variations on Bitcoin Benefits and drawbacks Recent events Moving forward
- 3. Within 5 years: Challengingthe fiat money system? Bitcoin – An emergent phenomenon • Open source project on SourceForge in Jan 2009 • Original source code by “Satoshi Nakamoto” – pseudonym? • Developed by self-organizing community of thousands of strangers across globe • Approx USD 7.8 bln in circulation (March 2014) and 80,000 daily transactions • SEK 50 bln of Bitcoin vs Swedish Crown: 91 bln SEK Teigland, Yetis, Larsson 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
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- 5. Bitcoin Foundations acrossthe globe
- 6. Institutions Emergent Collective vs E.g., Bitcoin Community ~Emergent collective of users across globe connected through internet Teigland, Yetis, Larsson 2013 E.g., Central Bank ~ Long-standing financial institutions and regulations
- 7. What is acryptocurrency? Digital Decentralized, peer-to-peer (P2P), i.e., no central, third party Uses cryptography to validate transactions Also uses cryptography to generate currency itself
- 8. How does Bitcoinwork? Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor” Block chain • Shared public ledger • All transactions ever made included • Chronology and integrity enforced by cryptography
- 9. Screenclip from: HowBitcoin Works under the hood, by “Curious Inventor” Transactions between Bitcoin wallets secured through digital signatures
- 10. Screenclip from: HowBitcoin Works under the hood, by “Curious Inventor” Verifying a transaction
- 11. “Mining” confirms waitingtransactions through distributed consensus system Generates new Bitcoins (at decreasing rate) Does coding and de-coding that verifies and stores transactions (increasingly complex)
- 12. Screenclips from: HowBitcoin Works under the hood, by “Curious Inventor” Preventing double spending fraud
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- 14. Where can Ibuy Bitcoins in Sweden?
- 15. Benefits of Bitcoin Improved transaction security Trust in cryptography rather than institution(s) Transparency Lower transaction costs Cross-border, faster transactions No outside intervention No inflation (although market volatility)
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- 17. Bitcoin becoming moremainstream?
- 18. Drawbacks of Bitcoin Tax concerns Only as safe as wallet holding coins or exchange’s servers Consumer uncertainty Market volatility (commodity or currency?) Potential for illicit use High electricity consumption to “mine”
- 19. Bitcoin – oneof many cryptocurrencies Currency Code Year Est. Founder(s) Active Website PoW PoS Bitcoin BTC or XBT 2009 Satoshi Nakamoto (pseudonym) Yes N/A Yes No Ripple XRP 2013 Chris Larsen & Jed McCaleb Yes ripple.com No No Litecoin LTC 2011 Charles Lee Yes litecoin.org Yes No Peercoin PPC 2012 Sunny King (pseudonym) Yes peercoin.net Yes Yes Dogecoin DOGE 2013 Jackson Palmer & Billy Markus Yes dogecoin.co m Yes No Namecoin NMC 2011 N/A Yes dot-bit.org Yes No Mastercoin MSC 2013 J. R. Willett Yes mastercoin.or g No No Primecoin XPM 2013 Sunny King (pseudonym) Yes primecoin.or g Yes No
- 20. Variations on atheme Finite (e.g., Bitcoin) or infinite number of coins available to be mined to no mining at all Differing levels of transparence, e.g., of identities of those transacting Proof of work, i.e., show work in order to generate value (mining) Proof of stake, i.e., show legitimate ownership of currency (so possession /= ownership)
- 22. Recent events Closureand bankruptcy filing of world’s largest Bitcoin exchange, Mt Gox in Japan − Unclear what happened – Exchange says it was hacked − Others allege CEO, Mark Karpeles, stole millions of dollars of Bitcoin Will the “real” Satoshi Nakamoto please step forward?
- 23. Optimism prevails amongusers, new and old
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- 26. We are stuckin our old ways …
- 27. People • “Net generation” •24x7 “mobile” workforce • Social entrepreneurship Technology • Broadband access • Mobile hardware • ICTs • 3D printing • Robotics Open Source • Software • Hardware • Physibles Convergence of….. Finance • Microlending/microfinance • Crowdfunding/equity • Digital, non-fiat currencies
- 28. “Made in Africa”3D printer (Togo) crowdfunded through Ulele Winner of International Space Apps Challenge http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx
- 29. Recommended viewing: How BitcoinWorks under the hood, by “Curious Inventor” http://youtu.be/Lx9zgZCMqXE
- 30. Karinda Rhode aka RobinTeigland robin.teigland@hhs.se www.knowledgenetworking.org www.slideshare.net/eteigland www.nordicworlds.net RobinTeigland Photo: Lindholm, Metro Photo: Nordenskiöld Photo: Lindqvist If you love knowledge, set it free…
Editor's Notes
- #4 *No central clearing house nor are any financial or other institutions involved in the transactions.*There is a limit to Bitcoin supply (21 million bitcoins) to be reached in 2140. According to Bitcoin supporters, this implies in theory that the system will avoid inflation as well as business cycles stemming from excessive money creation. http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source?xg_source=activity
- #5 November 2009 is the month when the first message to the forum was posted. Therefore, we have the complete forum between day 1 and beginning of Jan 2013.
- #6 Bitcoin Foundation Registered as 501c of US Internal Revenue Code Bylaws effective July 23, 2012Governed by board with five seatsTwo seats by Individual member classTwo seats by Corporate member classOne seat by Founding member class Board member criteria Individual member in good standingAny business is conducted openly using real identityPass background check for felony convictionThe Bitcoin Foundation was founded by seven of the community’s most instrumental individuals, such as Gavin Andresen – a core Bitcoin developer (table 1). The Bitcoin Foundation has been registered under section 501c of the US Internal Revenue Code in Washington, D.C., and its bylaws were effective as of July 23, 2012. The Foundation is governed by a board with five seats split by membership class. Two seats elected by the Individual member class (annual membership costs .23 BTC), two seats by the Corporate member class (five different levels from 9.4 BTC for companies younger than two years and with less than 25 employees to 935.4 BTC for Platinum companies), and one seat by the Founding member class. The Individual member class currently has 426 members (of which 68 are anonymous) while the Corporate member class comprises two platinum and eight silver members (table 2). The Board has established the following requirements for its board members: 1) an Individual member in good standing, 2) any business is conducted openly using their real identity, and 3) they pass a background check for felony conviction.https://github.com/pmlaw/The-Bitcoin-Foundation-Legal-Repo/blob/master/Bylaws/Bylaws_of_The_Bitcoin_Foundation.mdhttps://bitcoinfoundation.org/about/governance
- #9 https://bitcoin.org/en/how-it-works: The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.
- #10 https://bitcoin.org/en/how-it-worksA transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.
- #12 Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.
- #13 https://en.bitcoin.it/wiki/Double-spendingDouble-spending is the result of successfully spending some money more than once. Bitcoin protects against double spending by verifying each transaction added to the block chain to ensure that the inputs for the transaction had not previously already been spent. Other electronic systems prevent double-spending by having a master authoritative source that follows business rules for authorizing each transaction. Bitcoin uses a decentralized system, where a consensus among nodes following the same protocol is substituted for a central authority. Bitcoin has some exposure to fraudulent double-spending when a transaction is first made, with less and less risk as a transaction gains confirmations.
- #20 Crowdsourced – edited from Wikipedia.com
- #25 http://blog.coinsetter.com/2014/03/10/will-bitcoin-spinoff-auroracoin-save-icelands-financial-system/http://www.independent.co.uk/life-style/gadgets-and-tech/mazacoin-native-american-tribe-adopts-bitcoin-derivative-as-national-currency-9165314.html
- #26 http://techcrunch.com/2013/10/22/bitcoin-breaks-200-again/Challenging the fiat money system or catalyzing economicdevelopment?http://www.ibtimes.com/baidu-bidu-approves-bitcoin-payment-virtual-currency-value-skyrockets-1437956Despite Bitcoin’s hard-to-regulate nature, the Chinese government has been indulging, even optimistic about the currency. CCTV, China’s official state network, aired a 30-minute documentary about Bitcoin, and People’s Daily published a story on the same topic, both of which added to Bitcoin’s growing popularity in China. For now, it seems Bitcoin’s future in China is secure, but that could quickly shift if the government changes its mind and attempts to regulate or ban the currency.Aside from China, Malaysia and Indonesia are among the nations in Asia that have welcomed Bitcoin usage and now enjoy booming Bitcoin exchanges, the Diplomat reported. Thailand banned the currency earlier this year, but Bitcoin continues to be used in the country because it is technically hard to track and regulate.The value of the Bitcoin topped $200 for the second time since its inception, thanks to an announcement from China’s main search engine Baidu that one of its subsidiary services now accepts the virtual currency, which has been making headlines this year as an alternative type of payment.Baidu Inc. (Nasdaq:BIDU), China’s domestic equivalent of Google, is the fifth most-visited website in the world, ahead of familiar U.S.-based sites like Wikipedia, Twitter and Amazon, and the Chinese company’s announcement has rallied China’s demand for the virtual currency, the Diplomat reported on Wednesday.http://www.coindesk.com/hunger-bitcoin-grows-scandinavia-regulatory-approach-evolves/In Finland, the tax authority introduced a guide to taxing virtual currencies last month, which imposed capital gains tax on bitcoins, and taxes bitcoins produced by mining as earned income.However, in Sweden, the Finansinspektionen financial regulator classified bitcoin as a means of payment late last year, requiring anyone who wants to create an exchange to register with it and meet the requirements faced by other financial institutions. Bitcoin.se suggests that the tax authorities in Sweden may also be ready to make a ruling on sales tax soon.
- #29 Liam Dippenaar couldn't catch a ball with both hands. Holding two objects at once was a feat and, though right-handed, the 5-year-old used his left. Born with Ambiotic Band Syndrome, Liam lacks the instrument critical for most tasks: fingers. Thanks to two strangers halfway around the world and the magic of 3D printing, Liam is now able to color and write to his heart's content. Ivan Owen and Richard Van As created Robohand, an open-sourced device built with customized prosthetic fingers. Owen, of Washington state, and Van As, of South Africa, collaborated via the Internet to create the prosthetic. The duo decided to make the design in the public domain to help others who can benefit from the technology.Their journey started in 2011, when Van As came across a video of Owen's costume piece, a robotic hand built for amusement. Van As lost most of the fingers on his right hand in a woodworking accident and cast a net out for those willing to help build a prosthetic. Owen was the only one who agreed. "I had started with the first prototype prior to meeting Ivan. But yes, there were so many obstacles and one of the main ones was contacting people and them just saying, 'No, it can’t be done,'" Van As tells Mashable. Long nights on Skype and a 10-hour time difference took some getting used to, but the two kept the project going through email and file sharing. Owen and Van As initially used a milling machine and spent hours engineering parts until MakerBot donated two Replicator2 Desktop 3D Printers. The donation exponentially cut production time for prototypes. What used to take up to three days to complete can now be done in only 20 minutes. Using OpenSCAD, a free software application, Owen and Van As can exchange files and make changes in minutes. Jenifer Howard, MakerBot's PR director, says the cross-continent collaboration fits perfectly with the company's mission. "We love to see our printers being used for amazing life-changing and life-validating projects like this," Howard says. The two men document their progress on a blog called "Coming up Short Handed." Liam's mother, Yolandi, saw the site and reached out to Van As for help. Liam, who has no fingers on his right hand, received his own Robohand at no cost after several trials and prototypes. "At first it was quite amazing to see the smile on his face when they made the first prototype and he put it on his hand," Yolandi says. "His expression was, 'Oh wow, it’s copying me.'
- #31 http://journals.tdl.org/jvwr/article/view/866