Bitcoin… and beyondJeff Garzik @ BitPayBitcoin Core Developer

Bitcoin is…?• Asset class• Enabling

technology• Catalyst

Bitcoin 101: The Basics

Bitcoin: Features 1Digital cash + payment network

Frictionless, borderless transactions

No Single Point Of Failure (SPOF), manipulation

Resilient against bugs, malicious or missing actors

Public and transparent ledger

Payment freedom

Bitcoin: Features 2Micro-payments

Smart contracts (Contract provably satisfied by math, not lawyers)

No risk of physical possession or loss

100% open source. Based on well studied, understood mathematical and cryptographic techniques.

Very low fees, sometimes zero fees.

Anyone or thing may open account

Human2Human, Machine2H, H2M, M2M

Bitcoin:monetary supply view

In circulation: 13,405,900

Maximum: 21,000,000

Predictable supply: +25 / 10 minutes

Model: Natural resource extraction. 50, 25, 12.5, …

Smallest unit: 0.00000001 bitcoins

Decentralized design requires pre-determined supply

Bitcoin: how it works

Concept: P2P networking

Concept: Hashes

Concept: Public Key crypto

Concept: Public ledger

Details: Transactions

Details: Storing transactions

Details: Block

Details: Blockchain

Details: Mining

Details: Pooled mining

Details: Mining pools

Current statistics(snapshot)

Total blocks: 326,242

Time between blocks: 9.2 minutes

Transactions per hour: 3398

Network Terahash/sec: 252,413

Network PetaFLOPs: 3,205,649

China’s Tianhe-2 supercomputer: 33.8 PetaFLOPs

Current environment

Chicago Fed: “Automaton”

Trading

Low liquidity

Lack of swaps, other derivatives

Regulatory

IRS: Bitcoin is property. Others: It’s a currency

Much activity as states, central banks, countries attempt to catch up to technology.

Bitcoin 201: Beyond money

Smart property

Associate physical property with very-low-value token

Transfer token to new owner at any time, without intervening central authority.

Cars, smartphones, other tech can “know” its owner

Smart property:equities & bonds

Bitcoin:

First decentralized, digital supply-limited resource

Stocks & bonds: supply-limited resources

Bitcoin tech provides shareholder registry, party-to-party direct asset transfer.

Smart contracts: theory

All contract “clauses” are math equations

Parties provide digital signatures or other data to prove contract is satisfied.

100% verifiable through math, not lawyers.

Smart contracts: introA bitcoin is spendable when it’s “script” is satisfied

Script: User-provided math equation attached to every bitcoin

To spend a bitcoin, script must evaluate to “true”

To spend a bitcoin, spender must provider digital signature or other cryptographic proof of ownership.

Smart contracts: multi-sig

Bitcoin transaction may require >1 signatures to spend

1-person use case: Multi-factor security

N-person: M-of-N parties must approve, to spend

Escrow: 2-of-3 multi-sig

Infinitely flexible: (group-X AND group-Y) OR group-Z

Smart contracts: and more

Payment channels: Trustless [micro] transactions

Pay per barrel of oil or per minute wifi

Settlement guaranteed, if any party departs abruptly

Assurance contracts (PPP, KickStarter)

External state: Stock prices, events in the news, any digital data.

Blockchain technology

Database evolution: 1) SQL 2) NoSQL 3) blockchain

Bitcoin first application of this new technology

Any dataset may be decentralized

…assuming sustainable economic model

Define validation (= consensus) rules for the dataset

Namecoin: exampleContext: Internet DNS, name-to-IP address lookup

Challenge: Create decentralized database

Solution: DNS records stored in a blockchain

Buy “namecoin” tokens, which are used to purchase database operations: new entry, renew expiring entry, add data to existing entry, …

Free market provides pricing for each database operation

Advanced blockchain: DACs

Decentralized Autonomous Corporations

Built upon smart contracts, automated systems

Depending on application, some or all of executive, administrative functions may be automated

Bitcoin 301: Catalyst

Venture investment

2012: $2m

2013: $92m

2014: $268m YTD (as of Oct. 2014)

Developer engagement

Catalyst for changeWho’s looking at bitcoin?

Thousands of developers, entrepreneurs

Cutting edge Wall Street trading, financial shops

Silicon Valley + majority of F500 tech companies

All notable central banks

Legislators, law enforcement

Fini

For more information,

Paper: https://bitcoin.org/bitcoin.pdf

Only a few pages. Must read.

Bitcoin project: https://bitcoin.org/

BitPay payment processing: https://bitpay.com/

Email jgarzik@bitpay.com

Thanks to Dr. Antonio Roldao for some slide graphics.