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Bitcoin & the BlockchainAn Introduction

by Christopher Allen <ChristopherA@LifeWithAlacrity.com>June 6, 2015

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What is Bitcoin?

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Is it a coin?

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What is Bitcoin?

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Is it a coin?

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What is Bitcoin?

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Is it a coin? Is it a commodity?

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What is Bitcoin?

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Is it a coin? Is it a commodity?

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So what is Bitcoin?

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So what is Bitcoin?

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Bitcoin is a consensual fantasy!

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So what is Bitcoin?

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But so is this!

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So what is Bitcoin?

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Both are a consensual reality!

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This paper is currency because someone stands behind it…

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A community, a consensus of people, decided to believe in it

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These bits are currency because someone bought a pizza…

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May 22nd 2010, one pizza for 10,000 BTC ($2,249,000 today)

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A community, a consensus of people, came to believe in Bitcoin

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May 22nd 2010, one pizza for 10,000 BTC ($2,249,000 today)

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…and Bitcoin has been a currency ever since.

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Before there was currency ancient cultures could only barter

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But you could only barter if someone wanted your goods

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The invention of currency allowed trade across distance and time

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North America The Mediterranean

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These currencies werehard to obtain or duplicate

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North America The Mediterranean

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So what prevents Bitcoinfrom being duplicated?

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You can't, because the secret of Bitcoin is…

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…there is no such thingas a Bitcoin!

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The secret of Bitcoin is that it is really only ledger!

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Ledgers are almost as old as currency

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But in the 14th-century: Double Entry Accounting!

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Invented in 2008: The Blockchain Ledger!

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Bitcoins don't exist, because they are just a balance

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In a ledger, all debitsmust equal credits

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Debits Credits

-25 +25

-100 +70 +30

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If everything must balance, where does the first credit come from?

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Debits Credits

-25 +25

-100 +70 +30

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via a Tetris-like puzzle gamecalled mining

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There is a winnerevery 10 minutes…

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…and the puzzle gets harder every two weeks

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This game incentives 5698 players to keep fair copies of the ledger

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Redundantly, all over the world.

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There is no center,no controls them—there is no

“One ring to rule them all”

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Instead, we have have achieved a consensus, about a consensual

currency, where no one can cheat, and everyone can participate.

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But the Blockchain is not only for Bitcoin…• Self-auditing books

• Shares of other kinds of assets (stocks, commodities, etc.)

• Financial instruments and insurance

• Smart contracts

• These consensus techniques can also be used for many other things.

Bitcoin is only the first app of the Blockchain

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In some ways, Bitcoin is like this bank of lockers

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Each lockerhas…•An identifying number

•A slot that money can be put in

•A window to see inside

•A lock that requires a key

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•These lockers are secure•The windows are

unbreakable•The metal can't be cut•All the lockers are

bolted to the ground•There are almost an

infinite number of lockers

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•The lockers are in a public place•Anyone may see what

is inside any locker•Anyone can put

money in a locker•Anyone can see the

identifying number, but not who owns it

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•Each locker is free of charge•Anyone may claim an

unused locker, for which they get a key•You may have as

lockers as you choose•The keys are

unforgeable

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•You many only open the locker with the key•Once you open a

locker, you take out the money and throw away the key (the lockers are free!)• If you loose the key,

the money is locked away forever

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•Transactions can be done without people meeting in person•No banks or

governments are involved•Anyone peeking can

only know that a transaction was made

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•As of today, there Bitcoins worth $3,373,831,169 in the lockers•Today, over 130,000

lockers transfered money •There are currently

5687 people guarding these lockers

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Questions?

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