Bitcoin 101

Ryan Milbourne

@RyanMilb

Bitcoin 101

Talk Outline

● What it is

● How it works

● Why it matters

What is Bitcoin?

● Decentralized Consensus Mechanism

● Open source

● Ledger of all transactions

● Created by “Satoshi Nakamoto”

Misc Facts

● Only 21 Million will ever be created

● Bitcoin mining network 8 times faster

than top 500 supercomputers

● Bitcoin is Protocol

How Transactions Work

1.Private Key

2.Public Key

Private key

E9 87 3D 79 C6 D8 7D C0 FB 6A 57 78 63 33

89 F4 45 32 13 30 3D A6 1F 20 BD 67 FC 23

3A A3 32 62

Public Key

3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy

Transaction Script

scriptPubKey: OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY

OP_CHECKSIG

scriptSig: <sig> <pubKey>

Raspberry Pi

Mining Network

● Secures the network

● Distributes new coins

Securing the Bitcoin Network

● Verifies transactions using the blockchain

● Prevents double spending

Incentivized to be a good actor

Notes on Mining:

● 1 block mined approx every 10 min

● Last bitcoin mined in 2140

● Transaction fee

● Block Reward set at 25

Difficulty Self Adjusts every 2 weeks

Benefits of Bitcoin

● Financial Privacy

● Payment freedom

● Store of value

● Digital asset

For Merchants

● Lower Fees

● No Charge backs

● Less fraudulent transactions

Microtransactions

● One Satoshi 0.00000001

● Publishing

● Fundraising

Empower Billions

● 1 Billion with access to:o International Markets

o Banking services

● More people have access to a cellphone

than sanitation (U.N. Study)

● Gets around obstacles of obtaining

a bank account

Disadvantages of bitcoins

● Volatility

● Ownership Distribution

● 51% attack

● Scalability

Price over the past 2 years

...Now on a logarithmic scale

Scalability

● Visa 2,000 Transactions per second

● Pay Pal 40-100 tps

● Bitcoin 7 tps

MTGOX

Bitcoins are Legal

● FEC Approved

● IRS released guidelines

● SEC Approved Bitcoin Trust

BitLegal.io

Venture Capital Flow Increasing

BitPay’s $30m Round was the Largest

Bitcoin VC Deal to Date

• More than 30,000 total merchants

• As of January 2014, adding more than 1,000 merchants to its network each week

• Processing $1m in bitcoin payments every day

• Processed more than $100m in bitcoin payments in 2013

• Most recent VC round valued BitPay at $160mState of Bitcoin Q2 2014

Key Bitcoin Adoption Metrics

State of Bitcoin Q2 2014

Commerce Jun-14 Jun-13 YoY Δ

Wallets 5,327,688 765,039 7x

Merchants 63,000 N/A N/A

ATMs 103 N/A N/A

Unique bitcoin addresses used per day 136,152 41,271 3x

Media

Mentions in mainstream media 9,500 2,163 4x

Technology

Network hash rate (billion/second) 111,194,683 162,269 685x

Github No. of updated repositories 12,365 676 18x

Investment

Bitcoin market capitalization ($bn) 8.3 1.0 8x

Industry

VC investment over last 12 months ($m) 200.7 17.1 12x

Number of VC-backed start-ups 49 7 7x

Bitcoin’s Price is Now on Yahoo Finance,

Google Finance and Bloomberg

State of Bitcoin Q2 2014

How to get bitcoins

● Sell a service/product for BTC

● LocalBitcoins.com

● Coinbase.com

● Exchanges

The Future

● Crypto 2.0

● Services build on top of bitcoin

● Smart Contracts

● Decentralized marketplace

“I really like Bitcoin. I own Bitcoins. It’s a store

of value, a distributed ledger. It’s a great place

to put assets, especially in places like

Argentina with 40 percent inflation, where $1

today is worth 60 cents in a year, and a

government’s currency does not hold value. It’s

also a good investment vehicle if you have an

appetite for risk. But it won’t be a currency until

volatility slows down.”David Marcus, CEO of Paypal

Thank you

For more info:

www.coindesk.com

RyanTMilbourne@gmail.com

@RyanMilb