Bitcoin intro
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![Page 1: Bitcoin intro](https://reader033.fdocuments.net/reader033/viewer/2022061300/54c94d9a4a7959ef778b4733/html5/thumbnails/1.jpg)
BitcoinAn decentralized open source cryptographic currency.
![Page 2: Bitcoin intro](https://reader033.fdocuments.net/reader033/viewer/2022061300/54c94d9a4a7959ef778b4733/html5/thumbnails/2.jpg)
Stephan FlorquinDavid Francois
paymium.com
![Page 3: Bitcoin intro](https://reader033.fdocuments.net/reader033/viewer/2022061300/54c94d9a4a7959ef778b4733/html5/thumbnails/3.jpg)
Intro
• Bitcoin is a decentralized, open source, digital currency
• No central authority
• First released anonymously in 2009 by “Satoshi Nakamoto”
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• It received a lot of media attention during summer 2011, the exchange rate surged
• Some websites got hacked, Bitcoin got a bad reputation
• The exchange rate crashed to near zero and Bitcoin was dead according to most media
![Page 5: Bitcoin intro](https://reader033.fdocuments.net/reader033/viewer/2022061300/54c94d9a4a7959ef778b4733/html5/thumbnails/5.jpg)
• A community still believed in Bitcoin and the exchange rate steadily went up during 2012
• Major websites started accepting Bitcoin (Wordpress, Reddit)
• Despite all criticism, Bitcoin is now stronger than ever
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Bitcoin price over time
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“I am very intrigued by Bitcoin. It has all the signs. Paradigm shift, hackers love it, yet it's derided as a toy.
Just like microcomputers.”
Paul Graham
“Bitcoin is still very much a fringe thing [...]But I like to pay attention to the jokes, the laughing stocks,
because occasionally they get the last laugh.”
Fred Wilson
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How does Bitcoin work?
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• 2 essential concepts, not new to Bitcoin
• Pier to pier (P2P) technology
• Digital signatures
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P2P network
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• Each client is connected to nearby peers
• A client can broadcast a message to its peers
• The peers will forward the message to their own nearby peers until it reaches the entire network
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• Anyone can download a Bitcoin client and add a node to the network
• There are already tens of thousands of nodes
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Digital signatures
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Digital signatures
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Digital signatures
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• In the Bitcoin network, we sign transactions
• Ownership of Bicoins go from a Bitcoin address to another
• A Bitcoin address is just a hash of the public key
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• To create a transaction, I broadcast a signed message that says “transfer ownership of X Bitcoins from my Bitcoin address to this Bitcoin address”
• I also send my public key
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• Since my Bitcoin address is a hash of my public key, peers can verify that the public key corresponds to my Bitcoin address
• Using the digital signature, peers can now verify that I indeed intend to send Bitcoins to the destination Bitcoin address
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• By combining a P2P network and digital signatures, we have a secure, reliable way of broadcasting Bitcoin transactions
• But have to we keep track of how many Bitcoins belong to an address?
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• Every Bitcoin client has an up-to-date copy of the history of all Bitcoin transactions
• All transactions are public and irreversible
• This is what we call the “Blockchain”
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The blockchain
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• The blockchain is a list of blocks
• Every block contains a list of transactions
• Roughly every 10 minutes, a block containing recent transactions is appended to the blockchain
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The blockchain
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The blockchain
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• “Miners” compete to find the next block
• It involves solving a cryptographic challenge, known as “Proof of work”
• If blocks are mined too quickly, the difficulty is increased (and vice versa)
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• What if multiple blockchains emerge?
• This can happen naturally or if someone attempts to attack the network
• The longest chain is considered valid
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Blockchain fork
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Blockchain fork
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Blockchain fork
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• To consider a transaction valid, we wait until several blocks have been appended afterwards
• This is to ensure forked chains have been resolved
• Two to six blocks are enough to consider a transaction valid (20 - 60 minutes)
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• But how are Bitcoins created in the first place?
• When a miner finds the next block, he is rewarded Bitcoins
• Every 210,000 blocks, the reward is divided by two (every four years)
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• The bounty for mining one of the first 210,000 blocks was 50 Bitcoins
• Since the end of 2012, it is 25 Bitcoins
• Currently, there are around 11,000,000 Bitcoins
• By 2140, around 21,000,000 Bitcoins will have been discovered, which is the limit
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Number of Bitcoins
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• In addition, you can add a fee to a transaction
• The miner who find the block that includes your transaction is awarded the fee
• The higher the fee, the most likely the transaction will be included in the next block
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What we do at Paymium
![Page 36: Bitcoin intro](https://reader033.fdocuments.net/reader033/viewer/2022061300/54c94d9a4a7959ef778b4733/html5/thumbnails/36.jpg)
• We believe Bitcoin has enormous potential
• We work to promote Bitcoin
• We build services on top of the Bitcoin network
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• Unlike traditional currencies, the Bitcoin network is totally open
• Any developer can hack a project
• Bitcoin is both a currency and a transaction network
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• As a currency, it is immune to inflation (fixed number of coins) and not centrally regulated
• As a transaction network, it allows fast, secured, cheap irreversible transactions
• Credit cards, on the other hand, have high fees (3% or more) and charge backs (up to 6 months, why?? Fraud!)
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• With traditional payment systems, you have to hand over your credit card info to third parties (and trust them!)
• With Bitcoins, you give them nothing!
• How would you pay an online merchant with Bitcoins?
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• The merchant generate a new, unique Bitcoin address for your purchase
• You send Bitcoins to the address
• After the transaction is confirmed by the Bitcoin network, the merchant can safely deliver your purchase
• That’s it!
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• This is the kind of stuff Paymium has been doing since 2011
• To help Bitcoin go mainstream, we work with both Euros and Bitcoins
• For instance, you can pay a Bitcoin address using Euros and vice-versa!
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• We can do this because we have our own Bitcoin exchange and we can trade Euros automatically
• In addition we provide easy-to-use wallets and an API for developers
• Much more coming later this year, so much we can do!
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• We made headlines last year because we became the first Bitcoin startup to have a Payment Service Provider!
• This means we can open a bank account for each of our customers instead of mixing their funds with ours
• In addition we are going to be able to print debit cards and create IBAN numbers for our customers
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Security
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• At Paymium, we hold a large number of Bitcoins for our customers
• We keeps our servers as secure as possible, but we have to imagine worst case scenarios
• What if someone gains access to our web servers?
• By the way this never happened :)
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• Remember, all you need to prove ownership of Bitcoins is a private key
• A private key is just a string of character
• It can easily be encrypted, then printed or stored on a USB key
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• Because of this, you can store your private keys in secure locations such as a bank vault
• Afterwards, you can erase all other traces of the private key
• This is called “cold storage”
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• You can still keep the Bitcoin address and receive payments
• On the other hand, you have to get access to the physical location of the private key and know the encryption key to send Bitcoins
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• On our servers, we keep the minimum amount of Bitcoins possible (< 7%)
• We can do this because we can predict how many Bitcoins are needed during a normal day
• In we need more coins, we have to go to our cold storage facilities
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• In short, the damage that can be done is limited and we can survive an attack
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• I hope you enjoyed this talk and that I made you want to try Bitcoins!
• If you are interested in Bitcoins and are skilled in security, programming, finance, marketing, let’s get in touch!
• Questions?