bitcoin 101

Bitcoin 101Gene Chuang 1/23/2014

About Gene● CTO of Oversee.net - $100M domain and traffic

monitization LA Internet company● Advisor for MuckerLab, Laudville and GoTokki● Past: Director of Eng @ Chegg, Exec Dir of Eng @

AT&Ti/YP Mobile, Dir of Eng @ Yahoo!/Overture, Sr Associate @ Wilshire Associate

● UCLA BS Biochemistry ‘96● BitCoin aware since 2011● BitCoin owner since 2013

How I got into BitCoins● Learned about BTC from my boss at DreamHost in

2011● Bought 5 coins @ $40 in 2013● Used one to pay for Newsgroup archiver● Bought a desklamp on Overstock.com with BTC● Many of my tech colleagues are enthusiasts, some are

owners, a handful are miners

What is Bitcoin● Cryptocurrency - coins and transactions represented by

SHA256 a 256-bit hash or 32 character string● Global Public Ledger - Block Chains● Scarcity - 21M coins by 2140 (12.2M now)● Anonymous - sort of● Infrastructure - transaction hash calculation and

generation tied to bitcoin mining

Bitcoin MiningMining is the process of adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.

Bitcoin Mining II● Block chains are generated every 10 minutes● 25 BTCs are generated and won in lottery system

for contributors to block chain generation● Hardware evolution from CPU to GPU to ASIC● Guilds form to improve chance of winning lottery● cloudhashing.com - Cloud mining, no hardware

needed

Mining ASIC Board

Reflow & Preheat Station

MegaBigPower● BitFury - Ukrainian

ASIC whiz kid● Dave Carlson sells

BitFury chips @ $11K● Largest Mine - 100-300

coins/day

bitcoinrichlist.com/top100

BTC Wallet

btc-e.com - BTC Forex

BTC Competitors● Over 100+ cryptocurrencies● LiteCoin (LTC) - Bitcoin with faster hashing and hence

transaction time - <2 minutes vs 10 minutes● NameCoin (NMC) - DNS using BitCoin infrastructure● PPCCoin (PPC)● MasterCoin (MSC)● RonPaulCoin (RPC)● Coinye West

Security and Riskshttp://www.wired.com/wiredenterprise/2013/12/fbi_wallet/

Who owns the single largest Bitcoin wallet on the internet? The U.S. government.

In September, the FBI shut down the Silk Road online drug marketplace, and it started seizing bitcoins belonging to the Dread Pirate Roberts — the operator of the illicit online marketplace, who they say is an American man named Ross Ulbricht.

The seizure sparked an ongoing public discussion about the future of Bitcoin, the world’s most popular digital currency, but it had an unforeseen side-effect: It made the FBI the holder of the world’s biggest Bitcoin wallet.

The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address that consolidates much of the seized Silk Road bitcoins.

More Security and Risks● BTC-China Alibaba Taobao banning BTC● Denial of Service (DDoS) attacks to

artificially lower BTC value and buy in● Losing hash numbers - losing $● SHA256 is not easily replicable

BTC LawsuitsMay 2013 - CoinLab suits Mt Gox for $75M for breach of exchange agreement - pendingAug 6 2013 - US Judge says SEC can proceed with their lawsuit against a Texas man accused of running a Ponzi scheme using Bitcoin, the virtual online money system.Aug 10 2013 - Four men have sued Bitcoinica, one of the larger Bitcoin currency exchanges before it shut down in May, alleging that the exchange owes them $460,457.70 in lost deposits plus damages.Jan 14 2014 - Kanye West sues for cessation of Coinye West

Bitcoin Merchants● https://spendbitcoins.com/places/● Merchants use gocoin.com - PayPal of BTC● Virgin Galactic● Tesla Dealership in Newport Beach● wordpress.com● okcupid.com● Overstock.com - $126K in sales in 1st day

bitcoinchart.com

BTC @ $100K???http://www.wired.com/wiredenterprise/2014/01/chrisdixon/?cid=17093084Chris Dixon of Andressen Horowitz thinks BTC will bet at $100K. Crazy? Dixon points to what has happened with another scarce but widely used internet resource. “Domain names are an analogy,” he says. “It would have been absurd to say in 1993 that domain names were worth $10 million each.” But now, that’s a reality.

Bitcoin ProspectsPeer to Peer payment:Venmo allows split credit card charge and p2p cc charge.Venmo acquired by Braintree for $26.2MBraintree acquired by eBay/Paypal for $800M!Bitcoin = Venmo <2.5%

BitCoin Prospects 2Mobile Web payment without 30% tax from Apple or GoogleTransaction faster than 2 minutes - LiteCoin?Semi-anonymous transactionBitcoin Wallet - Coinbase.com, the next Venmo/Braintree/PayPal?

Bitcoin Prospects 3BTC Derivatives - futures, options, secondary marketsBTC Insurance - hedge the riskBTC Intermediaries, escrow, ATM, banksRegulation and Centralization?

Marc Andreesen’s Take● http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters● Target Credit Card Fraud - PPI not avail with BTC● International Remittance - foreign wage earners send

BTC with zero fee● Underbanked and Unbanked● Micropayment for content and spam protection● Public Payment - Random spectator with QR code sign

raised $25K from strangers