bitcoin - an introduction

BITCOINDawie Poolman

" It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning." ~ Henry Ford

AGENDA The current financial system

How does it work?Current state around the worldFuture

Back to fundamentals: What is money? Bitcoin

BasicsProtocol design Future developments

THOMAS JEFFERSON 3RD US PRESIDENT (1743-1826)"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

YOUTUBE VIDEO The current financial system

How does it work?Search for: Mike Maloney “Hidden Secrets

Of Money”

DEBT – SUSTAINABLE?

DEBT – SUSTAINABLE?

BEWARE INFLATION

FUTURE OF THE FINANCIAL SYSTEM China urges 'de-Americanized' new

financial system End of the Petrodollar? Uncharted territory with unsustainable

debt levels – EU, UK, Japan, USA etc.. Bail-In strategies like Cyprus

FIX OR REBUILD?

Rather than fixing the financial system, maybe it is time to rebuild a new financial system from the ground up.

CHARACTERISTIC OF SOUND MONEY

1. It must be durable, which is why we don’t use wheat or corn or rice.

2. It must be divisible, which is why we don’t use art work.

3. It must be convenient, which is why we don’t use lead or copper.

4. It must be consistent, which is why we don’t use real estate.

5. It must possess value in itself, which is why we don’t use paper.

6. It must be limited in the quantity that is available, which is why we don’t use aluminium or iron.

7. It should have a long history of acceptance, which is why we don’t use molybdenum or rhodium.

Gold & Silver possesses these qualities

CRYPTOLOGY"At any rate, the spook spoke the truth: cryptology represents the future of privacy, and more. By implication cryptology also represents the future of money, and the future of banking and finance. (By "money" I mean the medium of exchange, the institutional mechanisms for making transactions, whether by cash, check, debit card or other electronic transfer.) Given the choice between intersecting with a monetary system that leaves a detailed electronic trail of all one's financial activities, and a parallel system that ensures anonymity and privacy, people will opt for the latter. Moreover, they will demand the latter, because the current monetary system is being turned into the principal instrument of surveillance and control by tyrannical elements in Western governments." - J. Orlin Grabbe (1947-2008)

WHAT IS BITCOIN? Open Source cryptocurrency Distributed cryptographically protected

accounting ledger No central authority -> does not depend on trust

to single or couple of institutions. Like cash, but for the internet 1 Bitcoin = 3,520 ZAR (as on 8th Nov 2013). Created by pseudonym Satoshi Nakamoto in

2009 Based on a peer-to-peer network of computers

running the Bitcoin software. The transactions are verified by proof-of-work

system of computers running mining software.

WHAT IS BITCOIN? No unpredictable inflation by ”printing more

money” by political decision Transactions travel instantly Send money in seconds to anyone with internet

access – with practically zero transaction costs. Highly anonymous, in certain conditions Every transaction in the public ledger (blockchain)

though If you memorize your private key, the only way to

steal your Bitcoins (even for the authorities) is to torture you (or spy or hack your computer)

Easy to use You can choose how to store your Bitcoins (online /

offline)

HOW IT WORKS Every ”account” consists of the public

key (= bitcoin address) and the private key.

Anyone who knows your public key, can send you bitcoins.

To spend bitcoins, you have to know the private key.The transaction is broadcasted to the

Bitcoin network.The miners confirm the transactions

STUPID ARGUMENTS People buy guns and drugs with it!

But it proves it works! And people use plain cash for the same.

Early adopters benefit too much Is it really a problem?

Bitcoin has actually no value Same applies to euros and dollars. They only have value because people believe

they have value.

Many more:https://en.bitcoin.it/wiki/Myths

ADDRESSES An example of a bitcoin address:

14nRKoXJAUpKYYbzw6Yrqh9gW2p26zerpW2160 (about 1048)possible addresses

The corresponding private key:5HuEupX3DNFJ7UypjFtXDTm4BVuAwZtAgYf

94sMALPyakgafVnU256 bits (SHA256 encryption)About 1077 possible private keys

TRANSACTION CONFIRMATIONS In the process called mining, all

transactions are collected in a block. A new block is mined in about every 10 minutes.

For small payments or with payments with trusted peer, 0 confirmations is usually ok.

For large amounts, 6 confirmations is considered safe

DOUBLE SPEND ELIMINATION Because Bitcoin has no central

authority, one of the main security problems is eliminating a double spend fraud (wherein the same money is spent twice)

The main innovation in Bitcoin is the blockchain. Each full node (a computer running the Bitcoin program) in the network has a copy of all mined blocks

Disrupting the system would need enormous computing power

ANONYMITY Understand how bitcoin works

Every transaction from address to address is public.

How much and when = public, who owns the address = not public (can be analyzed, though).

Create a new address for every transaction

Use mixing services The larger the transactions, the easier it

is to carry out traffic analysis

HOW DOES IT WORK General ledger containing every Bitcoin

transaction ever made Processing power securing the ledger

using mathematics (cryptography) How are Bitcoins released:

SUMMARIZE:VALUABLE PROPERTIES OF BTC

It is scarce (there will never be more than 21 million) It is secure: it can’t be counterfeited or multiplied at will,

and it allows for as much privacy as the user desires It is extremely transportable: you send it virtually

instantaneous, essentially for free, to anywhere in the world

Flexible: every single Bitcoin can be subdivided into millions of smaller parts, and all Bitcoins are interchangeable

Extremely durable: the Bitcoins in your wallet will disappear only after every single copy of the Blockchain on the planet has been erased—and remember, the QT client alone has been downloaded already over 3 million times

And finally, unlike that of fiat currencies, the supply of Bitcoin is steady and predictable

HOW TO GET STARTED How do I get a Bitcoin?

Step 1 – Create a WalletStep 2 – Buy Bitcoin on an ExchangeStep 3 – Use it on your own terms!

STEP 1 – GET A WALLET

STEP 2 – BUY ON AN EXCHANGE

STEP 3 – USE IT – ‘ANYWHERE’!

DO PEOPLE VALUE BTC?

YEAR ON YEAR

IS IT SECURE?

EXPLORE THE BLOCKCHAIN

LEGISLATION AND REGULATION

MERCHANT SOLUTIONS

INVESTMENT AND FUTURE GROWTH System D (Informal Economy) The unbanked (Africa) Remittances (PayPal, Western Union) Protocol extension with APIs

Robotics Google Glasses Decentralised Exchanges

Decentralised Securities Exchanges BitShares, Coloured Coins, Mastercoin End of Wall Street?

Pension funds Contracts, Wills, Charity..

TIME TO CHOOSE NEO..

Man is free at the moment he wishes to be. ~Voltaire

DISCUSSION

REFERENCES AND FURTHER READING

Bitcoin

http://www.weusecoins.com/en/

http://blockchain.info/

http://www.reddit.com/r/Bitcoin

http://www.youtube.com/watch?v=Lx9zgZCMqXE

http://www.slideshare.net/jonwaller0/what-isbitcoinen

Economics & the current Financial system

http://buybitcoins.us.com/bitcoin-london-2013-cryptocurrency-is-the-future-of-money-banking-and-finance-tuur-demeester/

http://www.dw.de/china-urges-de-americanized-new-world-order/a-17159054

http://theeconomiccollapseblog.com/

http://www.zerohedge.com/

http://www.themoneymasters.com/the-money-masters/famous-quotations-on-banking/