Published on February 5, 2014
manchester http://www.bitcoinmanchester.org.uk/ Introduction to Bitcoin Why is cryptocurrency so important? Ash Moran firstname.lastname@example.org
Overview 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?
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?
UK money supply (billion GBP) Source: Wikipedia
When will this happen?
The bankers are stealing your beer + =
4. What is Bitcoin?
Addresses Example: 1kqHKEYYC8CQPxyV53nCju4Lk2ufpQqA2 Donation address for http://bitcoincharts.com/
Transactions public record
Blocks and the blockchain T8 Block 1 T1 T2 Block 2 T3 T5 Block 3 T6 T7 T9 public record
Aside: centralised banking private record (central, trusted authority)
Distributed peer-to-peer-network Internet public record (no central authority, no trust)
5. How does Bitcoin work?
Three difﬁcult problems to solve 1. Deﬁning the sequence of events (transactions) 2. Ensuring only address owners can spend coins 3. Ensuring address owners can only spend coins once
One easy problem to solve 1. Issuing bitcoins
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 Longest chain (“true history”) Genesis block 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 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?
Sadly no money forts either
Scarcity “Economic growth is good for you”
Scarcity ? consumption capital
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
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