Bitcoin: What The Hell Is It...And Why Should We Care?
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Transcript of Bitcoin: What The Hell Is It...And Why Should We Care?
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@dugcampbell | Digital Thinking
BITCOINWHAT THE HELL IS IT...…AND WHY SHOULD WE CARE?
Codebase Talk | 29th May 2014
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@dugcampbell | Digital Thinking
the world’s first, completely decentralised peer-to-peer digital currency
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@dugcampbell | Digital Thinking
but how is this different to today?
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@dugcampbell | Digital Thinking
it all comes down to the ledger
and trust
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@dugcampbell | Digital Thinking
third parties bring their own problems
Bitcoin provides an answer
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@dugcampbell | Digital Thinking
WHY IS IT DIFFERENT?DIGITISED MONEY (BANKS)1 JUST DIGITS/NUMBERS
2 CENTRAL AUTHORITY/BANK
3 BANKS HOLD ELECTRONIC $/£
4 ‘NUMBERS’ CANNOT BE STOLEN
5 PAPER MONEY USED AS CASH
6 PHYSICAL PAPER MONEY
7 COUNTERFEIT NOTES & COINS
8 QUANTITATIVE EASING / INFLATE
9 ALL TRANSACTIONS RECORDED
10 NOTE PRINTING - INFLATIONARY
11 GOVERNMENT CONTROLS CURRENCY & LEGAL TENDER
12 PRIVATE DATA COMPROMISED?
13 TRANSACTION FEES / FOREX
DIGITAL MONEY (BITCOIN)1 CRYPTOGRAPHIC PROTOCOL
2 P2P NETWORK ISSUES BITCOINS
3 CONSUMERS HOLD BTC IN THEIR OWN WALLETS
4 BITCOINS CAN BE REMOVED / STOLEN
5 BITCOINS ARE (ELECTRONIC) CASH
6 NO PHYSICAL BITCOINS
7 BITCOINS CANNOT BE COUNTERFEITED
8 BITCOIN - FIXED SUPPLY - DEFLATIONARY
9 ANONYMOUS RECORDING IN BLOCKCHAIN
10 NO NOTE PRINTING - DEFLATIONARY
11 NO ONE CONTROLS BTC. TOTAL CAPPED AT 21 MILLION
12 NO PRIVATE DATA GIVEN TO MERCHANTS
13 NONE OR 0.00005 MINER’S FEE
Courtesy of Michael Parsons
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@dugcampbell | Digital Thinking
Limit of 21 million, issued every ~10 mins
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@dugcampbell | Digital Thinking
With Bitcoin, you own your own money - 100%
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@dugcampbell | Digital Thinking
Accounts can’t get frozen or seized
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@dugcampbell | Digital Thinking
Irreversible, guaranteed payment
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@dugcampbell | Digital Thinking
International transfers - safe, secure, simple
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@dugcampbell | Digital Thinking
Pseudonymous - not anonymous
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@dugcampbell | Digital Thinking
Immediate transfers...and cheaper
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@dugcampbell | Digital Thinking
BTC is the first practical way to do business over the internet with no prior relationship, no central administrator, and no trust required.
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@dugcampbell | Digital Thinking
information wants to be free
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@dugcampbell | Digital Thinking
time for the $64,000 dollar* question…
how does it work?
* approx. 110.2 BTC
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@dugcampbell | Digital Thinking
How to get bitcoins
MiningATMExchange goods/servicesSwap fiat on an exchange
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@dugcampbell | Digital Thinking
a wallet generates a bitcoin address
each address creates a cryptographic key pair
a public key and a private key
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@dugcampbell | Digital Thinking
Private key: c4bcbb1fbec99d65bf59d85c8cb62ee2db963f0fe107f483d9afa73bd4e39a8a
Public key: 0478d430274f8c5ec1321338151e9f27f4c532a008bdf8638d07c0b6be9ab35c7 1a1518063243acd4dfe93b66e3f2ec8013c8e072cd09b3834a19f81f659cc3455
Address: 1JwSSuhprg6iPtRjtyqhUYYH7bZg3Lfy1T
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@dugcampbell | Digital Thinking
to transfer BTC’s, you sign a transaction with the private key
provides mathematical proof to the network that you own the BTC’s
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@dugcampbell | Digital Thinking
cryptography proves digital ownership
but still needs to prevent ‘double-spend’
network agrees every 10 minutes on what transactions have taken place
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@dugcampbell | Digital Thinking
a miner
a peer in the network who works to collect transactions and organise them into blocks
racing to win the right to update the ledger
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@dugcampbell | Digital Thinking
Mining (competitive bookkeeping)
Race to solve a mathematical puzzle
Miners bundle new transactions into a ‘block’
Hash information & hope for correct answer
Difficulty adjusts, solved every 10 minutes
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@dugcampbell | Digital Thinking
Easy for network to check answer (Proof of Work) is correct - without redoing the work
Network agrees and new block added to chain
Winner receives 25 BTC’s (+ transaction fees)
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@dugcampbell | Digital Thinking
Want to cheat the network?
You still need to carry out that intensive work
Every ten minutes
And control 51% of network to control agreement
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@dugcampbell | Digital Thinking
Current cost of carrying out a 51% attack:
$1,112,153,015 (source: http://www.coinometrics.com/bitcoin/rix)
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@dugcampbell | Digital Thinking
so now you can see
if this invention can work for money, it can work for other digital assets also
the block chain isn’t just about money...
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@dugcampbell | Digital Thinking
“This is the distributed trust network that the Internet always needed and never had”
Marc Andreessen
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@dugcampbell | Digital Thinking
the block chain
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@dugcampbell | Digital Thinking
Physical property whose ownership transfers with a bitcoin transaction
anything that can be associated with a digital entity can be stored in bitcoin’s digital asset register
(stocks, shares, cars, houses, legal documents)
Smart Property
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@dugcampbell | Digital Thinking
Programmable Money
Endless possibilities
Money only available in certain GPS coordinates
Release money by calendar dates
Or according to specific events
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@dugcampbell | Digital Thinking
Multi-signature Transactions
Require a certain number of signatures in an organisation
Mathematically guaranteed that money cannot be spent without those signatures
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@dugcampbell | Digital Thinking
Transparency
Audit governments, companies, charities
Inspect their accounts
Ensure that money is being spent properly
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@dugcampbell | Digital Thinking
Crowdfunding
Ways to fund creation of a public good
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@dugcampbell | Digital Thinking
Micro-transactions
Website advertsInternet radioNewspaper website pageviewsPublic Wi-Fi
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@dugcampbell | Digital Thinking
Machine to Machine Payments
An economic identity for the Internet of Things
Economy that does not yet exist
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@dugcampbell | Digital Thinking
Security
The concept of irrecoverable data
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@dugcampbell | Digital Thinking
Regulation: the elephant in the room?
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@dugcampbell | Digital Thinking
The Future
like layers of an onion
decentralise currencythen you need to decentralise marketsthen you need to decentralise identity….
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@dugcampbell | Digital Thinking
We’re just at the start of the journey...
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@dugcampbell | Digital Thinking
More consumers pay with Bitcoin
More merchants accept Bitcoin
More miners validate transactions & secure the network
More entrepreneurs build products to meet the demand
the network is starting to strengthen
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@dugcampbell | Digital Thinking
Any questions?