A BEGINNERS LOOK AT BITCOIN TECHNOLOGY AND ITS PRESENT STATUS

1. Dr.Ram Mohan.K.P

2. Thomas Carper, US-Senator
• Virtual currencies, perhaps most
notably Bitcoin,
“have captured the imagination of
some,
struck fear among others, and
confused the heck out of the rest of
us.”

4. Cryptocurrency
A digital asset designed to
work as a medium of exchange that uses
cryptography to secure its transactions,
to control the creation of additional units,
and to verify the transfer of assets

5. In 2009, a mysterious inventor using the pseudonym,
Satoshi Nakamoto, released upon the world the first
decentralized, digital currency which he called Bitcoin
It represented the first attempt to build a
non-trust based currency.
With cryptocurrencies, we have the first successful
attempt to go outside the concept of using a central
database to keep everything organized.

6. What is Money?
Money is all about a verified entry in some kind of
database of accounts, balances, and transactions.
Just limited entries in a database no one can
change without fulfilling specific conditions

7. Value of money
The value of
money is
decided
purely by
its purchasing
power, as
dictated by
inflation.
Money is
valuable only
because it
can get us a
desired
product or
service.

9. Fiat currency
is “LEGAL TENDER”
backed by a “central
government.”
Either in physical form or
it can be represented
electronically.
The government controls
the supply and you can
pay your taxes with it
Cryptocurrency
Not “legal tender”
Not backed by a central
government or bank (it is
decentralized and global).
Its form is more like bank
credit sans the bank .
An algorithm controls the
supply and you can’t pay
your taxes with it.

11. Satoshi Nakamoto,
the unknown inventor of Bitcoin,.
• In 2008, Nakamoto published a nine-page
white paper containing the first-ever
mention of bitcoin, calling it a
"peer-to-peer electronic cash system."

13. Some common terms
referred to in cryptocurrency
understanding

15. It is a continuously growing list of records, called blocks,
which are linked and secured using cryptography

17. Blockchain formation

18. Each block typically contains a cryptographic hash of
the previous block, a timestamp and transaction data.
It serves as the public ledger for all transactions on the
network

19. The blockchain has complete information about
different user addresses and their balances right from
the genesis block to the most recently completed block
By design, a blockchain is inherently
resistant to modification of the data
Transactions are immutable, meaning they
cannot be deleted:
Typically managed by a
peer- to- peer network
collectively adhering to a protocol.

20. Non-Trust based system
Traditional currency system
consisted of a single ledger
sitting on a bank’s database
somewhere,
a cryptocurrency ledger is
recreated in its entirety on
every node of the network
with every confirmed
transaction
This automatic, algorithm-
powered approval process is
what we mean by a non-
trust based system.
No single entity is in charge,
which makes it almost
impossible to manipulate.

24. How Bitcoin Handles The Double
Spending Problem
Bitcoin’s blockchain maintains a chronologically-ordered,
time-stamped transaction ledger from the very start of its
operation in 2009.
Every 10 mins, a block (i.e. a group of transactions) is added
to the ledger. And all the nodes on the Bitcoin network keep a
copy of this global ledger (the blockchain).

26. What is 'Bitcoin Mining’
The process by
which
transactions are
verified and
added to the
public ledger
The mining
process involves
compiling recent
transactions into
blocks and
trying to solve a
computationally
difficult puzzle
The participant
who first solves
the puzzle gets
to place the next
block on the
block chain and
claim the
rewards

27. What Miners do?
• Trying to be the first miner to come up with a 64-
digit hexadecimal number (a “Hash") that is less
than or equal to the target hash.
• In a hexadecimal system, each digit has 16
possibilities
• Because it's guesswork, you need a lot of
computing power in order to get there first.
• The first miner whose nonce generates a hash
that is less than or equal to the target hash is
awarded credit for completing that block,

28. Eg. Of a Hash
•0000000000000000
057fcc708cf0130d9
5e27c5819203e9f96
7ac56e4df598ee.

29. Proof of work
means that a
miner is proving
that they did a
certain amount of
work, on average,
in order to
produce a block
If someone wanted
to modify a block in
the blockchain and
have everyone
accept it, that person
must perform the
same amount of
work that went into
creating the block
the amount of
work required to
rewrite history is
considered to be
infeasible and
much too costly to
do practically.

30. Reward for Mining
The amount of
new bitcoin
released with
each mined
block is called
the block
reward
The block
reward started
at 50 in 2009, is
now 12.5 in
2018, and will
continue to
decrease.
The block
reward is halved
every 210,000
blocks, or
roughly every 4
years
This diminishing
block reward
will result in a
total release of
bitcoin that
approaches 21
million.

31. Transaction Fees
Are some amount of Bitcoin that are included in a
transaction as a reward for the miner who mines the
block in which the transaction is included.
• voluntary on the part of the person sending a transaction
Thus, users sending transactions can use transaction
fees to incentive miners to verify their transactions.

32. The Bitcoin Mining difficulty
•It is recalculated
every 2016 blocks
is the measure of how
difficult it is to find a new
block
•This will yield, on
average, one block
every ten minutes
As more miners join, the
rate of block creation will
go up. As the rate of
block generation goes up,
the difficulty rises to
compensate

33. What equipment do I need to mine?
• Either a GPU (graphics processing unit) or an
application-specific integrated circuit (ASIC)..

34. Application-specific integrated
circuit (ASIC).

35. Mining
factory

36. Bitcoin is like gold
Gold must be
mined out of
the ground,
and Bitcoin
must be mined
via digital
means
like gold, it
have a limited
and finite
supply.
In fact, there
are only 21
million Bitcoins
that can be
mined in total
Once miners
have unlocked
this many
Bitcoins, the
planet's supply
will essentially
be tapped out,
unless Bitcoin's
protocol is
changed to
allow for a
larger supply.

38. cryptocurrency
wallet
• is a software program either on your desktop or on an
app on your smart phone, that stores private and public
keys and interacts with various blockchain to enable
users to send and receive digital currency and monitor
their balance.
• If you want to use Bitcoin or any othercryptocurrency,
you will need to have a digital wallet.

39. Types of wallets
Offline wallet
• a client that is
downloaded
and installed on
the user’s own
computer. The
public and
private keys are
then stored
inside of this
software client
Online wallet
• as signing up
for an account
directly
through the
website. They
are not very
secure
Hardware
wallet
• most secure of
the commonly-
used wallets.
Most hardware
wallets consist
of a USB device
Paper wallet
You print out
your public
and private
keys and
secure them
in any way
you see fit

40. Public and Private keys

44. 3. Preventing voter fraud
• Blockchain technology has the ability to
provide an unhackable electronic vote-
counting system.
• This system can secure an election during
voter registration, and can account for the
voters identification and insure votes cannot
be tampered with at a later date.
• There’s a startup already working on this
called Follow My Vote.

46. • Paying With Bitcoin at Bic Camera in Tokyo -
YouTube (360p)_cut_cut.mp4

47. Bitcoin ATM
BATMOne and BATMTwo - Bitcoin ATM - Bitcoins purchase process - YouTube
(360p).mp4

49. Bitcoin Exchanges

50. Bitcoin Exchanges in India

51. Laszlo Hanyecz made the first real-world transaction by
buying two pizzas in Jacksonville, Florida for 10,000 BTC

52. Monetary properties:
• Controlled supply: Most cryptocurrencies
limit the supply of the tokens. In Bitcoin, the
supply decreases in time and will reach its
final number somewhere in around 2140. All
cryptocurrencies control the supply of the
token by a schedule written in the code. This
means the monetary supply of a
cryptocurrency in every given moment in the
future can roughly be calculated today. There
is no surpris

53. Bitcoin Price history

54. Volatile price history
May 2010 less than $ 0.01
April 2013- $266
Nov 2013 $1,242
Mar 2015 $250
January 2017 $920
September 2017- $5,000
December 2017- $19,210
5 February 2018- $6930
9 APR 2018 $7,093.35 4,58,426.52 Indian Rupee

56. • Bitcoin has a limited supply of 21 million which is
expected to be reached by the year 2140.
• In 10 years, the analyst thinks that there will be
17 million bitcoin in circulation, up from the
current 16.3 million figure.
• If the potential 17 million of bitcoins in supply is
divided by the $1.75 trillion market cap estimate,
then each bitcoin would be worth just over
$100,000.

57. • INR 1000 investment in Bitcoin in 2010, now
worth INR 2.3 crore
• if you would have invested $1,000 in Bitcoins
seven years ago, to purchase about 333,000
Bitcoins, you would have garnered about $3.2
billion
• Dec-17—INR 13,77,202.
• 9th April2018----INR-4,58,426.

58. Who is Satoshi Nakomoto?
One of the biggest mysteries in the
technology world is the identity of Satoshi
Nakamoto, the computer programmer who
invented the digital currency bitcoin
The name—Satoshi Nakamoto—is a
pseudonym. It could represent a man, a
woman, or even a group of people
But beyond solving a longstanding mystery,
experts agree that uncovering Nakamoto's
identity could have an immense impact on
bitcoin's economics and internal politics.

60. • In 2008, Nakamoto published a nine-page
white paper containing the first-ever mention
of bitcoin, calling it a "peer-to-peer electronic
cash system."
• A few months later, Nakamoto released
bitcoin's first software and partnered with
developers and coders online to improve it.
• This collaborative environment continued
until 2011 when, without warning, Nakamoto
vanished.
• Before vanishing, he is supposed to have
accumulated about 1 million bitcoins

61. Nick Szabo Dorian Prentice Satoshi Nakamoto
Hal Finney Craig Steven Wright

62. Why is uncovering Nakamoto’s identity
so important?
"If bitcoin fulfills its
role of becoming a
global currency, than
Satoshi Nakamoto
would likely be the
richest person in the
world.
If Satoshi Nakamoto
were ever to sell
Bitcoins in his or her
possession the price
of Bitcoin could
potentially become
more volatile than it
already is.
Identifying Bitcoin’s
creator may be a
quixotic endeavor
The Bitcoin
community will be
forced to coexist with
the enigma that is
Satoshi Nakamoto, for
the better or for the
worst

63. Other cryptocurrencies (Altcoins)

64. Ethereum was proposed in
late 2013 by Vitalik Buterin
The value of the
Ethereum currency
grew over 13,000
percent in 2017.

65. • It is a result of a prolonged disagreement on
how to handle the Bitcoin scalability problem.
• Bitcoin cash is a cryptocurrency is a fork
of Bitcoin Classic that was created in August
2017
• Increase maximum block size to eight
megabytes
• Modification of transaction signature hashing
algorithm

66. Initial coin offering
In an ICO, a quantity
of the
cryptocurrency is
pre-allocated
to investors as
"tokens", in
exchange for fiat
cash or other
cryptocurrencies
These tokens
supposedly become
functional units of
currency if or when
the ICO's funding
goal is met and the
project launches
In contrast to (IPOs),
where investors gain
shares in the
ownership of the
company, in ICOs,
the investors buy
coins of the
company, which can
appreciate in value
if the business is
successful

68. What is the future of cryptocurrencies?

70. • Cryptocurrency Will Replace National
Currencies by 2030.“ Thomas Frey

73. Govermental actions
• China has banned ICOs and cryptocurrency
trading, and may clamp down on mining.
• S.Korea has banned ICOs and anonymous trading.
• Japan has introduced a licensing regime for
cryptocurrency exchanges.
• Bank of America, Citi Bank, JP Morgan and Lloyds,
restrained their customers from buying the
cryptocurrency via credit cards.
• Google has prohibited advertisment of
cryptocurrencies in their websites, so has
Facebook

74. • Finance Minister Arun Jaitley in his budget
speech had said the government does not
consider crypto-currencies legal tender or coin
and will take all measures to eliminate use of
these crypto-assets in financing illegitimate
activities or as part of the payment system.

75. RBI's cryptocurrency clampdown: Will
existing investors lose their money?
As part of its bi-monthly monetary policy statement, the central
bank stated that, with immediate effect, entities regulated by
it can no longer deal with or provide services to any
individual or businesses dealing with or settling virtual
currencies.
Bitcoin investments in India are estimated to be in region of
$2billion.
Existing investors have been given a window ,
They are required to stop having a business relationship with the
entities dealing with virtual currencies forthwith and unwind
the existing relationship within a period of three months

76. As Per the RBI notification Indian Government may
soon unevil its own cryptocurrency named as Lakshmi
and its value may go around 50$ to 200$

77. Bitcoin’s main benefits of decentralization and
transaction anonymity have also made it a favored
currency for a host of illegal activities and money
laundering
Tax-Evasion
Money
laundering
Drug peddling
Smuggling ,
weapons
procurement
and paid
assassinations
Counterfeiting
Sex Rackets
Ransoms

79. • A study, which was conducted by researchers
from the University of Technology, Sydney,
found that 44 per cent of bitcoin transactions
and 25 per cent of all users were associated
with illegal activity and “darknet”
transactions

81. Bitcoin scams
• The Massive Mt. Gox Disaster
• Canadian Bitcoins and the Simplest Scam
• The Optioment Ploy
• Bitcoin Gold and False Promise
• Silk Road’s Ridiculous Email Trap
• Coincheck scam

83. Will Bitcoin Gain Traction as a
Currency
• Many Bitcoin fans believe it will become a
true global currency, one that you could
spend on sandwiches or scarves the same
way you’d use Visa or MasterCard today
• But if and when it did, it might be the end of
Bitcoin’s huge price surge; for the digital coin
to be useful as a currency, its value would
have to stabilize.

84. One hypester calls Bitcoin “a gift from God to help
humanity sort out the mess it has made with its
money”.
Bitcoin’s price is
not a reflection of
its growing usage
as currency;
it reflects merely
demand for the
mirage of its
speculative value
Its price is rising
only because
people all over the
world are hearing
stories of how
others doubled or
tripled their money
in a short period —
and they don’t
want to miss out.

85. What is a 'Ponzi Scheme'

86. Reasons why you should not invest in
bitcoins,as of now!
Extreme volatility
Neither
commodity, nor
currency
An unregulated
space
• The issue of
legality
• Prone to illegal
activity

87. Summary
The concept of a decentralized, no-trust, annonymous and fast
global currency is really appealing.
Blockchain technology is really path breaking and definitely will find its
application in lots of avenues in due course
Due to extreme volatality and increasing govermental enforcements, it
may be desirable to defer investment in any cryptocurrency for the time
being
The illegal uses of cryptocurreny always cast a shadow
to the normal law abiding citizen