Resources from the Coffee Talk: Introduction to Blockchain & Bitcoin, organized at CirCO co-working space in Ho Chi Minh city, on 20 August 2017.

1. Blockchain Primer
What’s the hype?

2. Your Presenter: Robert Vong
Blockchain Enthusiast
• Industrial Bitcoin mining
• Co-founder, BlockFin Asia
– First FinTech conference in
Vietnam advocating closer industry
and regulatory collaboration
• Core team, Bitcoin Saigon
– Organising community events
• Contributor, Australian Tax Office 2014 draft
ruling on application of GST (VAT) to Bitcoin
• Australian Senate Standing Committees on
Economics Enquiry into Digital Currencies;
Role of Bitcoin in Australia whitepaper, 2014
• Bitcoin Mining Primer
2014; Reddit, r/Bitcoin• Buy-side equity research
analyst, Melbourne & NYC
• Software Engineer, and
others…
• MBA New York Univ.
• B.Eng. RMIT Univ.

3. Background: Vietnam’s First
Digital Bitcoin Exchange
•Bitcoin Vietnam
–Established in 2014
–First digital bitcoin exchange
•Full-service boutique
–OTC market making
–Brokerage
–Digital trading
–Remittances

4. Blockchain Making Headlines
“Bitcoin is a technological
tour de force” –Bill Gates
“You can't stop things like
Bitcoin” –John McAfee
“Bitcoin has the potential to
change the world” –Peter
Thiel
“Blockchain technology has the
potential to reduce transaction
costs in the energy sector”
–World Energy Council
“Blockchain presents huge cost
saving advantages” –European
Assoc. for forwarding,
Transport, Logistics & Customs
Services
“Nasdaq list of industries that will
be disrupted in 2017: private
transport, cyber security, music
distribution, healthcare, cloud
storage, supply chain
management and voting”

5. Cut Through the Confusion
- Understand high-level
concepts behind blockchains
- How is it different from
prevailing technologies
- Distinguish hype from reality

6. Bitcoin is Simple by Design
•Many computers working together
– No leader, no countries, same rules
– Self-checking
•Making new “block” about every 10 min
•Three rules define blockchains!
Block 0
Data
Block 1
Data
Block 2
Data
…
Block N
Data
“Genesis
Block”
Current
block
This is a blockchain!

7. Many Copies of the Blockchain
• Rule 1: Always accept the longest chain
• Nodes must share new blocks and keep the integrity of their
blockchain
0 1 2
…
100
0 1 2
…
99 Alert!
0 1 2
…
1000 1 2
…
100

8. Nodes Reproduce
Payment Requests
•Rule 2: Share valid transactions
•Each node must verify validity of transaction request
Mempool
Pay X
Mempool
Pay X
Mempool
Pay X
Pay X

9. Miners Confirm Transactions
•Rule 3: Miners create “blocks”
– and they get Block Rewards + Transaction Fees
•Network shares each new valid block
•Transactions not yet in the blockchain are unconfirmed
Mempool
Pay X
Block N
Data
1) Miners
make
“blocks”
2)
Propagate
new blocks

10. Cryptographic Hash = Integrity
•Hashes detect data corruption
– Ensure transactions are not altered
– Ensures blocks are not changed
– Sequentially linked blocks form a
blockchain
Lette
r
Value
A 1
B 2
C 3
… …
Z 26
Data Has
h
P A Y X = 66
16 1 25 24
P A Y C = 45
P A Y Z = 68
Block 0
Hash: 66
PAY X
Block 1
Hash: 111
PAY C
Block 2
Hash: 179
PAY Z
1) “Hashing” example 2) Linking blocks together example

11. Public Key Encryption
for Security
•Elliptic Curve Cryptography: invented 1985
•Only the Bitcoin owner can use it
– Secrets are never sent on Bitcoin network
Private Key Public Key
Message: PAY X
Encrypted HashHash: 66
Message: PAY X
Encryp
t
Decryp
t
Message: PAY X
Hash: 66
Hash: 66
(Bitcoin sender address)(Secret)
Public Information
Compare

12. Numerous Blockchains Now
Exist
•Bitcoin, “spin-offs”
•Ethereum, “spin-offs” (smart contracts)
•Hyperledger (private blockchains)
•Others…

13. Old Technologies,
New Applications
- Understand high-level concept behind
blockchains
Blockchain, transactions, mining, cryptography...
- Difference compared to today’s technologies
Decentralised, distributed, peer-to-peer,
autonomous
- Resistant to censorship and hacking
- Eliminates agency problem
- Distinguish hype from reality?

14. Thank you
Q & AVisit: bitcoin.vn
Learn more:
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15. 1. what is Bitcoin's legal status?
Cryptocurrencies are officially unregulated in Vietnam. This led to some confusion--for
example, in the media--about what it means. Since 2014, we have put a lot of effort into
building a community as part of our outreach to educate and inform people about the
technology of Blockchain and it's implications. Last year, we organized the first Fintech
conference in Vietnam by bringing experts from all over the world to engage key
stakeholders.
We understand the State Bank of Vietnam is interested in this topic. With support from
Asian Development Bank, they are studying how other countries view digital currencies
in order to arrive at solutions that suit the circumstances here.
Note: In the week following the presentation, Vietnam announced a comprehensive
2-year plan to bring cryptocurrencies into the regulatory framework, which involves
compliance with legal, tax and public security laws.

16. 2. how much market share does
VBTC have?
VBTC’s market share is a fraction of a fraction. The majority of trades in
Vietnam are peer-to-peer.
We estimated the overall market to be between $5 MM and $20 MM
per day at the beginning of 2017. That’s when BTC price was around
$900. At the current price level, and with all the new interest, I would
not be surprised if we were edging closer to $100 million on a busy
day.
One of the popular use cases involves overseas workers sending
money home. Bitcoin is faster, cheaper and sometimes safer than
many alternatives, which is why people use it. This is a practical
solution for some remittance corridors, but not all.

17. 3. are there stock exchanges
based on blockchain
technology?
There have been a few proposals over the years. There are also protocols built on
top of Bitcoin that allow for the tokenisation of assets, with at least one providing a
decentralized exchange feature.
When applied to stock trading, the benefits are supposedly streamlining of back
office functions and displacement of the central share registry.
Some also claim immediate trade settlement as a benefit. We don’t think that’s an
apt comparison because traditional exchanges settle post trade, whereas the
blockchain solutions I’m referring to provide instant settlement by way of using the
prepaid model. In this regard, quick settlement is not exclusive to blockchains. The
prepaid model impacts cash flow and financing, so it’s not the best comparison.

18. 4. what determines the value of
BTC (Bitcoin)?
Ultimately, it’s about supply and demand. One factor that works in
Bitcoin’s favour is limited supply. People have compared it to gold for
this reason.
The determinants behind demand are speculation and real-world use
cases. The risk in today’s market is low liquidity, which makes Bitcoin
price volatile and easier to manipulate. On the other hand, we have
observed an increase in Bitcoin adoption for commercial applications,
such as in global remittances, which boosts long-term demand for it.

19. 5. difference between wallets?
A wallet holds the keys to your Bitcoin (or other cryptocurrencies).
The safest wallet is not connected to the internet, as are software
wallets. It should be 100% in your control, and not on an exchange
service. Avoid storing your coins on exchanges because you could
lose your assets if the exchange is compromised.
Safest storage is called “cold storage”, which is a hardware wallet like a
USB “token” with sophisticated password functionality. Examples are
Ledger or Trezor brand products.
Use at your own risk, neither HATCH! not the speaker
necessarily endorse any software or hardware product.

20. 6. what are your predictions?
Even in one week there are rapid changes. Blockchain and
cryptocurrency technology as an industry is evolving very fast so it’s
hard to say.
Price is easy to relate to; in 2015 it was around $240 compared to
$4,000 today. Nobody can say for certain, but what we can see is
there is short-term volatility and a strong case for long-term adoption.
We believe this is somewhat reflected in the price trend over the years.

21. 7. what advice do you have for
miners?
I estimate the average cost of electric power for Bitcoin miners around
the world to be US $0.10. If you can’t get it for lower than $0.08 per
kWh, don’t do it.
The next factor is efficiency. Current hardware is running around 100W
per terahash (TH), so aim to be in this range. People are paying about
$100 per TH. Add onto this the logistics and setup costs for Vietnam,
which impacts your initial outlay.
Finally, factors like Bitcoin price, the quality of your power supply all
affect profitability.

22. 8. risk of exchange hacks?
Do not use exchanges as banks, do not store money there, you have
an IOU effect with the exchange. Exchanges are for trading, not
storing.
People lost money on early exchanges that were not set up properly.
New exchanges are more secure, or provide refunds to people when
they get hacked.
There is little legal recourse for lost value on exchanges, they are not
insured, or regulated, not guaranteed by the government.
Never store more value in exchange(s) than you need for active
trading.

23. 9. are bitcoin transactions
traceable?
Yes, Bitcoin transactions are fully transparent and traceable through
the transaction addresses. They call it “pseudonymous,” which means
if a Bitcoin address can be associated with a person, tracking
becomes easy.
With the new ways transactions are formatted, the recipient address
can be hidden until funds are accessed. At this point, the address is
revealed for tracking.

24. 10. security tips
You have flexibility and advantages because you control your own
money, but it also means you need to be practically paranoid:
• Protect your private keys;
• Use offline cold storage;
• Do due diligence on Exchanges you use.
Beware of spoofed public keys (e.g. merchants for which their payment
key is spoofed by a thief).

25. 11. what cryptocurrencies are
you invested in?
The speaker invests in coins he uses himself, and understands, and for
which he is building projects.
Some people are trading “altcoins” on exchanges, but it is highly risky.

26. 12. how do people create
cryptocurrencies, what will the
next one be, and how to make it
popular?
It is easy to create one, it is open source code.
But the value of Bitcoin is the network effect, the more people use it the
more value it has.
If you make your own, then maybe you can convince some friends to
use it, but you would have a very huge expense to make it popular.

27. 13. how do we evaluate a
cryptocurrency for investment?
Short term it is about marketing, and usually there’s not much behind
the projects, and people hope they can sell before others sell. It is a
form of gambling.
Long term, you have to look at the technology, look at projects (coins)
that bring value to the table, ones that have a real business use case.
Over the long run there will probably be consolidation. Now, 10 coins
are launched each day now; most will not survive. It is highly
speculative. Most people lose. Of all cryptocurrencies that are around,
only 2 or 3 will survive.

28. Thank you!
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bitcoin.vn