Presentation of Bitcoin and blockchain technology at Jon Bing's memorial seminar

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Bitcoin and blockchain for
dummies:
-An introduction to the
technology and its applications
Svein Ølnes, Vestlandsforsking
Jon Bing’s Memorial Seminar, 19th of April 2016

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 Research institute located in Sogndal, founded in 1985
 Research areas:
 Climate and environment
 Information technology
 Tourism
 Around 25 employees
 Part of the research infrastructure in Norway
Vestlandsforsking

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 Researcher at Vestlandsforsking since 1996
 Research field: ICT in public sector
 Interested in Bitcoin/blockchain since 2011
 bought my first bitcoins in 2011 (Mt. Gox!)
 have followed the development since then
 interested in the intersection of technology, economy, and society
About me

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Imagine sending money to anyone in the world...
... as fast and easy as e-mail

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Imagine being able to pay 5 øre (NOK 0.05) or
less for something

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Imagine being able to store certificates
securely on the Net and available to anybody

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Imagine a world without passwords!
 «One password to rule them all»
 Secure web (HTTPS)
 Domain names registered on the blockchain

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 What is Bitcoin?
 Bitcoin - the currency
 Blockchain - the infrastructure
 Currency and infrastructure interplay
 A future-looking use case
Content

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What is Bitcoin?
1. A currency
 Digital cash («Internet money», «Money over IP»)
2. An infrastructure
 Blockchain technology
 An open, permissionless infrastructure for innovation
 Bitcoin is proof of ownership without the need for a third-party
 First presented in the white paper «Bitcoin – A Peer-to-Peer
Electronic Cash System», by Satoshi Nakamoto, Oct. 2008
 The Bitcoin system was launched on 3rd of Jan. 2009

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Technological breaktrough
1. Secure transactions made possible in a trustless environment
(Internet) without the need for a third-party
 «The Byzantine Generals’ Problem»
 How to reach consensus in a decentralized environment without a
trusted third-party
2. The first functional system for micro payments
3. The first open, permissionless platform for financial innovation
 You don’t need to ask anybody to make a payment system

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The Bitcoin software
 Open source software (code available on Github)
 Based on well known cryptographic standards
 Public key cryptography
 Hashing functions
 TCP/IP for communication between nodes (IPv6 is supported)

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Centralized, decentralized og distributed
Paul Baran: «On Distributed Communications Network»
[Baran invented packet switching, together with Donald Davies, UK]

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Typical innovation progress
 1980s: DigiCash (David Chaum)
 1990s: HashCash, b-money (Adam Back, Wei Dai)
 2000s: Bit gold (Nick Szabo)
 2008: Bitcoin (Satoshi Nakamoto)
 Solved the «double spending» problem
 Bitcoin emerged from the cypherpunk environment (which all
of the above belonged to)

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Bitcoin and the financial crisis

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What is a bitcoin?
 A bitcoin transaction is a digital signature
 Handing over ownership from one to another (bitcoins, assets)
 Bitcoins never leave the blockchain!
 Chain of transactions: A bitcoin is always an unspent output
 Bitcoins can disappear, like ordinary cash: by loosing your private key,
by «burning»
 The ownership of bitcoins (assets) is recorded on the
blockchain
 A distributed ledger, shared by all nodes (compters) in the system
 Anybody can read the content
 Updating the ledger requries computer resources («Proof of work»)

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A bitcoin transaction
Alice pays 0.7 bitcoin to Bob
Alice has 1.1 bitcoins

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A bitcoin transaction

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A bitcoin transaction

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Unspent transactions (UTXO)
Spent transactions Unspent transactions (UTXO)

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The blockchain – A distributed ledger
(Ill: Antony Lewis – www.bitsonblocks.net)
 Blockchain
 A block is a bunch of transactions, like records in a database
 Blocks are linked to form a long chain = the blockchain
 Anybody can read
 Adding new blocks needs lot of resources (= «Proof of work»)
 Adding a new block is rewarded with 25 new bitcoins (soon to be 12,5)
 After about one hour (5-6 confirmations) the trans. become immutable

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Key actors
(Ill: Antony Lewis – www.bitsonblocks.net)
 Bitcoin users
 running the full client software
 Miners
 securing the transactions
 Programmers
 maintaining the system, implementing improvements

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Today
 Deterministic
 max. 21 mill. bitcoins
 1 bitcoin = 108 satoshi
 25 new bitcoins every 10th minute
 «Halving» of supply every 4th year

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Bitcoin exchange rates 2012 - today
Source: http://bitcoincharts.com

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Bitcoin as an infrastructure
Bitcoin infrastructure (Network Services)
Blockchain, Consensus, Ordering, Hash storage, Security
Bitcoin currency
Colored coins
(Mastercoin,
Counterparty
++)
Sidechains
Payment
channels
(Lightning
Network..)
Smart
contracts

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The self-driving taxi..
+ +

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Relevant literature
 Nakamoto Satoshi: «Bitcoin - A Peer-to-Peer Electronic Cash
System» (bitcoin.org/en/bitcoin-paper)
 Andreas Antonopolous: «Mastering Bitcoin»
 Nathaniel Popper: «Digital Gold»

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Thanks for your attention!
E-mail: sol@vestforsk.no
This presentation:
http://www.slideshare.net/sveino/jonbingmemorial
My Bitcoin address (= ”accounting number”):
1HpvvptgrYJh4xUHerm1ruZtvnyUnnnHkU