BITCOIN AND BLOCKCHAIN TALK

Pavia 19/12/2016

Federico TengaCo-founder @ Chainside

Co-founder @ Blockchain Education Network

Visiting expert @ Blockchain Lab

Email: federico.tenga@gmail.com

Twitter: @FedericoTenga

BASIC DEFINITIONS

BLOCKCHAINThe blockchain is a secure by design database that, thanks to his architecture, makes possible to

register data in an immutable way, with no need of trust and with censorship resistance guaranteed.

CRYPTOCURRENCYBlockchain-native digital currencies that can be freely traded and stored without relaying on trusted

centralised third parties (no banks). Every blockchain need a native cryptocurrency to create a system

of economic incentives to secure the network.

BITCOINThe oldest, most used and most secure blockchain available, with the most traded and with the highest

market capitalization (12 billion $) cryptocurrency.

BLOCKCHAIN USECASES

DIGITAL ASSET

The blockchain technology makes possible for the first time ever to create scarcity in the

digital world. The digital assets on the blockchain are indeed not replicable and can be

traded without risk double spend and with no need of a trusted centralised institution.

The assets on the blockchain can be cryptocurrencies like bitcoin, generic tokens

representing a physical object or a share of a source of revenue.

BLOCKCHAIN USECASES

SMART CONTRACTS

Smart contracts are computer protocols that facilitate the execution, enforce the performance of a

contract, making some contractual clause unnecessary.

Smart contracts are indeed lines of code that once it is uploaded on the blockchain it will be

automatically executed exactly as programmed by a decentralised network, without any possibility of

downtime, censorship, fraud or third party interference.

Today the most popular smart contract platform is the Ethereum blockchain.

NOTARIZATION ON THE BLOCKCHAIN

A very interesting application of the blockchain is the notarization of files and documents. Once a

string of information is uploaded on the blockchain it will receive the timestamp of the block in

which it is included. At that point since it is not possible to change in any way the data on the

blockchain, the documents notarised on the blockchain can’t be back-dated, post-dated or

manipulated in any way, so a certificate of existence of a document in a specific moment can created.

Block

n-3

Block

n-2

Block

n-1

Block

nBlock

n+1

Block

n+2

BLOCKCHAIN USECASES

WHAT IS BITCOIN?

Bitcoin is a form of digital currency, created and

held electronically. No one controls it. Bitcoins

aren’t printed, like dollars or euros – they’re

produced by people, and increasingly businesses,

running computers all around the world, using

software that solves mathematical problems.

It’s the first example of a growing category of

money known as cryptocurrency.

WHO CREATED BITCOIN?

It is still unknown who is the creator of Bitcoin

since he decided to hide behind the

pseudonymous Satoshi Nakamoto.

WHAT IS BITCOIN?

To prove that the Bitcoin blockchain was actually created on January 3, 2009 he included a message in

the genesis block, that is also a comment on the instability caused by the banking system

01 04 45 54 68 65 20 54

69 6D 65 73 20 30 33 2F

4A 61 6E 2F 32 30 30 39

20 43 68 61 6E 63 65 6C

6C 6F 72 20 6F 6E 20 62

72 69 6E 6B 20 6F 66 20

73 65 63 6F 6E 64 20 62

61 69 6C 6F 75 74 20 66

6F 72 20 62 61 6E 6B 73

FF FF FF FF 01 00 F2 05

Hex to ascii

..EThe Times

03/Jan/2009

Chancellor on

brink of second

bailout for

banksÿÿÿÿ..ò.

HOW BIG IS BITCOIN?

Bitcoin is quite big with a market capitalization of 12 billion $ and a 90% share of the whole

blockchain environment.

0

2000

4000

6000

8000

10000

12000

14000

Market Cap (million$)

Bitcoin Ethereum Ripple Litecoin

0

10000

20000

30000

40000

50000

60000

70000

24h trading volume (thousand $)

Bitcoin Ethereum Ripple Litecoin

HOW DOES IT WORK?

BITCOIN MININGPeople are sending bitcoins to each other over the bitcoin network all the time, but unless someone

keeps a record of all these transactions, no-one would be able to keep track of who had paid what. The

bitcoin network deals with this by collecting all of the transactions made during a set period into a list,

called a block. It’s the miners’ job to confirm those transactions, and write them into a general

ledger.

HOW DOES IT WORK?

MINING AND PROOF OF WORKTo validate transactions and create new blocks miner have to do a very expensive activity called proof

of work, that consist in solving difficult mathematical problems. Making the mining process expensive

the network is difficult to attack and secure.

Since mining is a very expensive task, miners need to receive a reward, so for each block mined the

miner receive a 12.5 bitcoin, mining is the only way to create new bitcoins.

Block

n-3

Block

n-2

Block

n-1

Block

nBlock

n+1

Block

n+2

WHY BITCOIN IS SO SUCCESFULL

FIXED SUPPLYThe total number of bitcoin that will ever created is fixed to 21 million, this is an hard rule of the

protocol and cant be changed

CENSORSHIP RESISTENCEThe finical transaction can be blocked or reversed in any way, no transaction can be censored, no

matter who are the parties involved or the scope of the transaction

FULL FINANCIAL CONTROLL TO THE END USERThe Bitcoin holder has full control of his money, nobody can freeze his account and no government can

try to steal money from it to finance a war or a bailout.

THE FIXED SUPPLY

U.S. DOLLAR PURCHASING POWER

WHAT ABOUT GOLD?

While national currency are a terrible store of value because of inflation and political influences, gold

seen to be much better. The supply is limited by the mining and historically it has the tendency to

increase in value over time.

PROBLEMS WITH GOLD

WE HAVE NO CONTROLL OVER THE PRODUCTION

PROBLEMS WITH GOLD

NEW TECNOLOGIES MAY DRASTICALLY INCREASE THE ESTRACTIONS, WE CAN’TPREDICT THE FUTURE SUPPLY

VALUE OF THE METALS ON NEARBY ASTEROIDS2000 BM19 Value $3.44 trillion4034 Vishnu Value $2.51 trillion65679 (1989 UQ) Value $1.77 trillion7753 (1988 XB) Value $1.38 trillion3200 Phaethon Value £870 billion

PROBLEMS WITH GOLD

It is expensive to store and transport gold

GOLD BITCOIN

PROPRIETIES OF GOOD MONEY

The ability of an asset to be a good trading token can be valuated comparing fungibility, divisibility, portability, scarcity and durability.

Fungibility Divisibility Portability Scarsity Durability

Fiat currency

Coffe beans

Diamonds

Gold

Bitcoin

BITCOIN VOLATILITY OVER TIME

BITCOIN CORRELATION WITH OTHER ASSETS

Q&AFederico TengaCo-founder @ Chainside

Co-founder @ Blockchain Education Network

Visiting expert @ Blockchain Lab

Email: federico.tenga@gmail.com

Twitter: @FedericoTenga