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BitcoinVesa Linja-aho T-76.5753 Law in Network Societyhttp://www.flickr.com/photos/31119160@N06/8007585111/

About meVesa Linja-aho, M. Sc. in electrical and electronics engineering.Professional background:7 years at Aalto university (research and teaching)1 year in Computerworld Finland magazine (editor)3 years at Metropolia, senior lecturerElectronics and electric safetyAccounting and economicsOpen educational resourcesEverything new http://www.google.com/#q=vesa+linja-aho

2Bitcoin = open source cryptocurrencyBitcoin = distributed accounting systemNo central authority -> does not depend on trust to single or couple of institutions.Like cash, but for the internet1 bitcoin = 50 euros (20th of Mar 2013).Created by pseudonym Satoshi NakamotoBased on a peer-to-peer network of computers running the bitcoin software.The transactions are verified by proof-of-work system of computers running a mining software.

3ProsNo unpredictable inflation by printing more money by political decision.Transactions travel instantlySend money in seconds to anyone with internet access with zero transaction costs.Highly anonymous, in certain conditionsEvery transaction is public, 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 useYou can choose the tool (usability / security)

4ConsBitcoin is rather new and its still in marginal use -> high volatility.BTC money supply: 500,000,000 EUR money supply: 5,000,000,000,000 Its currency for the internet take down the internet, and you cannot use bitcoins.Perhaps not suitable for any countrys official currency.Lose your private key -> lose your bitcoins.No means to cancel the transaction!

56Someones pro is someones con!Stupid arguments against bitcoinPeople buy guns and drugs with it!But it proves it works!And people use plain cash for the same.Early adopters benefit too muchIs it really a problem?Bitcoin has actually no valueSame applies to euros and dollars.They only have value because people believe they have value.

7Good or at least considerable arguments against bitcoinThe value is unstable.There might be a bubble!Bitcoin can be replaced with a similar product.The government can shut it down.Or at least try to, by making it illegal to use bitcoins.The slowness of transaction verification (about 10 minutes per block).The scalability: the current version can not handle the transactions if everyone in the world used bitcoins.MtGox handles most of the trade -> raid it -> ?

8Is there a bubble?Media attention will inspire people to buy bitcoinsMedia attention will inspire companies to accept bitcoins (and vice versa)The price of bitcoins rise -> media attentionThe circle is ready.

As long as the price rises together with the use of bitcoin, there is (probably) no bubble.I emphasize the word probably. The circulation speed of bitcoin is low if compared to regular money.9How it worksEvery 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 transactions10The addressesAn example of a bitcoin address:14nRKoXJAUpKYYbzw6Yrqh9gW2p26zerpW2160 (about 1048)possible addressesThe corresponding private key:5HuEupX3DNFJ7UypjFtXDTm4BVuAwZtAgYf94sMALPyakgafVnU256 bitsAbout 1077 possible private keys

11ConfirmationsIn 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.12Double spend eliminationBecause 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 (= computer running the bitcoin program) in the network has a copy of all mined blocks.Disrupting the system would need enormous computing power.

13AnonymityUnderstand how bitcoin worksEvery 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 transactionUse mixing servicesThe larger the transactions, the easier it is to carry out traffic analysis14Who accepts bitcoins?NamecheapWordpressMany nonprofits accept bitcoin donationsArchive.orgBitpay (= simple interface for merchants)Bitspend.net (order anything with bitcoins)

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Legal stuffIn Finland, the Board of Accounting recognizes bitcoin:treated like stocksor if selling and buying bitcoins is the core business of the company, they are put in the current assets.Its completely legal to use bitcoins as money (as it is legal to use potatoes or gold as money)Anti-terrorism and money laundering law: selling bitcoins for > 15 000 -> ask for ID.

17Bitcoin and taxesI asked the tax authorities about bitcoin: 'we have a group of experts working on it.Currently, VAT 24% is imposed on selling bitcoins.Exchanging bitcoins for a customer is VAT 0%That is, the dealer buys the bitcoins for the customer.

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Worth readinghttp://www.reddit.com/r/Bitcoinhttp://bitcoin.it/https://blockchain.info/tx/8b555a4399797c784033863dda38abef7b8adcaf6748e9519dcb175fb1d04ee0http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/https://twitter.com/carsonj/status/314382483468713984

20Tools for beginners (and everyone)http://easywallet.orghttp://blockchain.info/https://www.bitaddress.org/

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