introduction to bitcoin
TRANSCRIPT
Introduction to BitcoinWhy is cryptocurrency so important?
Ash Moran [email protected]
manchesterhttp://www.bitcoinmanchester.org.uk/
1. What is money? 2. What is good money? 3. How does fiat money work? 4. What is Bitcoin? 5. How does Bitcoin work? 6. Why is Bitcoin important?
Overview
1.
What is money?
Question
What makes you consider something as money?
One definition of money
“Money is the general medium of exchange, the thing that all other goods and services are traded for, the final payment for such
goods on the market”
Murray Rothbard (referring to Ludwig von Mises)
2.
What is good money?
Question
What makes something good as a form of money for you?
Qualities of good money
‣ Generally accepted ‣ Recognisable ‣ Uniform ‣ Divisible ‣ Scarce ‣ Durable ‣ Portable
3.
How does fiat money work?
Notes and coins
Who likes pound coins and notes?
Bank debt
Who likes bank debt?
Who remembers when beer cost this much?
Who has noticed the price of beer is now this?
Why has this happened?
When will this happen?
The bankers are stealing your beer
+ =
4.
What is Bitcoin?
Not this
Browsing Blockchain.info
AddressesExample: 1kqHKEYYC8CQPxyV53nCju4Lk2ufpQqA2
Donation address for http://bitcoincharts.com/
Transactions
public record
Blocks and the blockchain
public record
Block 1
T1 T2
Block 2
T3 T5 T6
Block 3
T7
T8
T9
Aside: centralised banking
private record (central, trusted authority)
Distributed peer-to-peer-network
public record (no central authority, no trust)
Internet
5.
How does Bitcoin work?
1. Defining the sequence of events (transactions)
2. Ensuring only address owners can spend coins
3. Ensuring address owners can only spend coins once
Three difficult problems to solve
1. Issuing bitcoins
One easy problem to solve
Defining a sequence of events
a “timestamp server” using cryptographic hashes
Ensuring only address owners can spend coins
Elliptic Curve Digital Signature Algorithm
Ensuring address owners can only spend coins once
Genesis block
Longest chain (“true history”)
Dead forks
We need to make this hard to generate to prevent double-spending
Ensuring address owners can only spend coins once
Cryptographically hard to calculate
Bitcoin mining hardware
a Butterfly Labs ASIC miner
Issuing bitcoins
Issuing bitcoins
Feb 2014:12.4MBTC
~2033: 21MBTC
Creation halves every 210k blocks / ~4 years
6.
Why is Bitcoin important?
Reason 1
“Give me control of a nation's money supply, and I care not who make its laws”
– Mayer Amschel Rothschild
Reason 2
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
– Henry Ford
Qualities of good money revisited
‣ Generally accepted ‣ Recognisable ‣ Uniform ‣ Divisible ‣ Scarce ‣ Durable ‣ Portable
Scarcity
vs
Which policy do you prefer?
No hyperinflation
Sadly no money forts either
Scarcity
“Economic growth is good for you”
Scarcity
capital
consumption
?
Durability
private keys
Portability“At WordPress.com, our mission is making publishing democratic —
accessible and easy for anyone, anywhere. And while anyone can start a free blog here, not everyone can access upgrades (like going ad-free or enabling
custom design) because of limits on traditional payment networks. Today, that changes: you can now buy WordPress.com upgrades with
bitcoins. PayPal alone blocks access from over 60 countries, and many credit card
companies have similar restrictions. Some are blocked for political reasons, some because of higher fraud rates, and some for other financial reasons.
Whatever the reason, we don’t think an individual blogger from Haiti, Ethiopia, or Kenya should have diminished access to the blogosphere because of payment issues they can’t control. Our goal is to enable people, not block
them.”
– Andy Skelton, WordPress.com
Portability
Transactions are easy to broadcast
Portability
‣ Bitcoins are free or cheap to move around(free as in beer)
‣ Bitcoin is free software (free as in beer and speech)
‣ Bitcoin is free money(free as in speech)
Related Info
‣ Bitcoin: A Peer-to-Peer Electronic Cash System
‣ Original paper - surprisingly accessible if you’re a bit technical
‣ https://bitcoin.org/bitcoin.pdf
‣ Money as Debt (video by Paul Grignon)
‣ Explains the history of our monetary system
‣ Highly recommended
‣ http://www.youtube.com/watch?v=jqvKjsIxT_8
Finish
Questions?