Short presentation about bitcoin in particular and crypto currencies in general. Its mainly a description of whats money and what is bitcoin why bitcoin will dominate

1. BITCOIN 101
Hossam SOFFAR
07.07.2017
Find updated version always here https://drive.google.com/open?id=0B6IAFMYKvYOyMXFuRlBLbjd1blU
The story of internet Programmable Currency

2. I will NOT talk about:
Politics
Economics
How to make millions out of thin air… this is not QNET
…
Coming up next:
Crypto currencies
Blockchains
Bitcoin
Cryptography
Mining
Graphs and charts
Applications
Smart contracts

3. Breif History of Money !

4. What is Money !
Barter
Store of value
Limited supply
Securable
Medium of exchange & unit of account
Widely accepted
recognizable
divisible
transferable
What gives this a value ? We did
Inflation !

5. Crypto-Currencies
•“is a digital asset designed to work as a medium of exchange using cryptography
to secure the transactions and to control the creation of additional units of the
currency.”
There is about 900 currencies !

6. What is Bitcoin ?
• Bitcoin is a Software !!
• Bitcoin is a global Peer-to-Peer medium of value exchange.
• A distributed, decentralized digital currency system
• Created 2009: Bitcoin announced by Satoshi Nakamoto
• Effectively a bank run by an ad hoc network
• A distributed transaction log/ ledger (Block Chain)
• Max 21 Million Bitcoins will be ever created.
-25 Bitcoins generated each 10 minutes (halves approximately every four years)
The currency is divisible by 8 decimal places.(฿.00000001)
• When the first Bitcoin exchanges went online, the price per Bitcoin was about $.05 . Currently 2600$
• Like fiat currencies, they are worth what we think they are. Free market

7. System is run by the rules of a protocol (Bitcoin Protocol) – Consensus
It is based on mathematics unlike conventional currencies that had been based on fixed quantity of metal (gold,
silver…) or fiat currencies.
Bitcoin has several features that set it apart from fiat currencies:
1. It is decentralized , democratic
-No one controls it , No bank nor a government
-peer-to-peer system which means that there is no need for a third party.
-There is no authority, which can tinker with monetary policy and in that sense devalue or revalue
Bitcoin currency.
2. It is easy to set up and it is fast Just download an application and get plugged into he network
3. It is anonymous Hard to trace
4. It is completely transparent Transactions are public , every one works to secure it
5. Transaction fees are miniscule Either no fees , or Really less fess
6. Transactions are irreversible Built on trust, There is no charge backs , Like real Money
What makes it different from fiat currencies?

8. Cont, Why Bitcoin Rocks !
7. Bitcoin and trust
In Bitcoin, the users only need to trust the algorithm, nothing else.
In contrast, with traditional currency trust in the central bank,
The Bitcoin protocol is a system without inherent trust.
You don’t even need to trust the initial creator, Nakamoto.
8. An open source Software
If you hate it , you think you can do better fork it, modify it and launch
your token.

9. Who Created it ?
No one knows who he/she is , it could even be a group who called them selves
Satoshi Nakamoto. (I’ll refer to him as a He) Makes more sense
He proposed the bitcoin protocol Nov 2008 through a cryptography Mailing list .
It described a system of cryptocurrency that was not backed by any government
or any form of existing currency.
Nakamoto worked with people on the open-source team, but took care never to
reveal anything personal about himself, and the last anyone heard from him was
in the spring of 2011, when he said that he had “moved on to other things”.

10. How is it like to Send / Receive Bitcoin?
-Bitcoin Network
-Propagate , Verifies
transaction
-Control the generation
of new coins
….etc
Digital wallet

11. Think of it as a Mail !
Every one has a unique
address, payments are sent to
addresses
“Email isn't real mail. It's not physical so it has no value!”

12. Post Office vs. Email

13. ??? vs. Bitcoin
Disruptive technology

14. The Network Protocol
Each P2P node runs the following algorithm:
• New transactions are broadcast to all nodes.
• Each node (miners) collects new transactions into a block.
• Each node works on finding a proof-of-work for its block. (Hard to do, costly . The one to finish early will probably win.) aka Mining
• Transactions are public but are not linked to any one's identity
• When a node finds a proof-of-work, it broadcasts the block to all nodes.
• Nodes accept the block only if all transactions in it are valid (digital signature checking) and not already spent (check all the
transactions).
• Nodes express their acceptance by working on creating the next block in the chain, using the hash of the accepted block as the
previous hash. (The Block chain)

15. Challenges for trustworthy currency system
All crypto currencices must address the following challenges:
1. Creation of the coin/note Who is responsible to issue it ?
Cant be a person , don’t trust some one with your money
(bank el 7az) (Greece , Brazil , Zimbabwe , Egypt)
2. How is it created in the first place?
3. How do you prevent inflation? (What prevents anyone from creating lots of coins?) Good rules applied with good Code
4. Validation Is the transaction legit , does who ever sending the coins owns it ?
5. How do you prevent a coin from double-spending?
Double-spending is the result of successfully spending some money more than once.
Bitcoin protects against double spending by verifying each transaction added to the
block chain to ensure that the inputs for the transaction had not previously already been spent
6. Rely on proof instead of trust
7. No central bank : You are your own Bank

16. Blockchain

17. What is it ?
A blockchain is just a file , a data structure.
Similar to a (databases (rows, columns, tables), text files (csv), ….)
A blockchain is a ledger of records arranged in data batches called blocks that use
cryptographic validation to link themselves together. Put simply, each block references and
identifies the previous block by a hashing function, forming an unbroken chain (Tamper
proof)
Blocks in a chain = pages in a book

19. TX
TX
TX
TX
Hash
Hash
Hash
Hash
Hash

20. Traditional Database !

21. Distributed Database/ Block Chain

22. Applications of Blockchain
• Smart Contract
Replaces a judge / 3rd party authority , Code would control
• Voting (You are home using your private key to vote in election , Superb! )
• Registering Real states, Marriage,cars , Supply chain etc…
• Automotive : Daimler , launched a $110 million blockchain pilot. , Just for the
know a how and coming up with ideas for the auto industry

23. Bitcoin address
Bitcoin Address looks like a number of symbols:
Such as : 12gftEtmZhRCnCTw1rQJWw6bgAH6zq791n
Its similar to a mail address yet weird.
It could be represented as QR code
Scan it , select amount to send .. Done
Also called Public Key.

24. Private & public Key
• Each user / Wallet has its own private Key
• This private key is used to generate addresses where we will receive
transactions
• These addresses are called public keys
• With our private key we could spend the coins associated with a specific public
key
• Each time we receive a transaction we generate a new public key

25. Private & public Key : Analogy !
Mail box :
12gftEtmZhRCnCTw1rQJWw6
bgAH6zq791n
The post guys , will put
a message into your
public box (#)
You are the only person
authorized to open the mail
box and read the messages
Public Key ,
Every one
knows it
Private Key , no one
has it, Only you Own
it ! Keep it safe

26. Transaction
The purpose of a Bitcoin transaction is to transfer ownership of an amount of
Bitcoin to a Bitcoin address.
We don’t own bitcoin , we own
Keys giving us the privilege to
move the ownership of a bitcoin
from ours to another address.

27. Bitcoin Block
•Transaction data is permanently recorded in files called blocks
•A new block gets verified each 10 minutes.
•https://blockexplorer.com/block/0000000000000000002cca77787686d8024c1
71f89852c0208b3e5b160e961ca

28. Block

30. Secure
Blockchain is designed to store information in a way that makes it virtually
impossible to add, remove or change data without being detected by other users.
Through Mining process ( We will come to this later on)

31. Cryptography

32. Cryptographic Hash Functions
A hash function (like SHA-256) takes a block of data in, and produces an
effectively random fixed size integer.
Any change to the input randomizes it
SHA-256
“bitcoin is the future of money”
a3f9dc8f825f357a21d00e1e641
e3eb7c49d8360724e8fdf7a64b
abda9c2128f
SHA-256
“bitcoin is the future of money.”
6ce49b7f229d06a40cdae46
3bed925348d76adf0175225
84d7ee033bb23c600d

33. Cryptographic Hash Functions
Consistent: hash(X) always yields same result
One-way: given Y, hard to find X s.t. hash(X) = Y
Collision resistant: given hash(W) = Z, hard to find X such that hash(X) = Z
MD5, SHA1, SHA256
Hash FnMessage of arbitrary length
Fixed Size
Hash
Message : Bla bla bla bla xx
bla abla Sadasd Casdasd
Asd
Hash_T Hash_fun(char* message)
{
//calc hash
}
0xa3f9dc8f825f357a2
1d00e1e641e3eb7c4
9d8360724e8fdf7a64
babda9c2128f

34. Private & public Key
• This Private Key is used to derive the Public Key
• Encrypt things to your public key, and if they do so, then only your private key
can decrypt them, So you can publish your public key publicly, and people can
then encrypt messages that can only be unlocked with your private key.
• Public key is the address where we
receive our authorization to spend coins
• Private Key : is what we use to generate address
(5HpHagT65TZzG1PH3CSu63k8DbpvD8s5ip4nEB3kEsre)

35. Signatures

36. Mining

37. Mining
 Where do bitcoins come from?
 We need a process to pump new coins to the network ?
With paper money, a government decides when to print and distribute money.
Bitcoin doesn't have a central government.
 Who will validate the Transactions ?
 How transactions are prioritized?

38. Proof-of-work
 Block contains transactions to be validated and previous hash value.
 Pick a nouce such that H(prev hash, nounce, Tx) < E. E is a variable that the system
specifies. Basically, this amounts to finding a hash value who’s leading bits are zero.
The work required is exponential in the number of zero bits required.
(Difficulty ) The more people compete to mine , the lower the chances for every one
to find a solution to the puzzle , Remember we always need to maintain 10 minutes
block generation ,Verification is easy. But proof-of-work is hard.

39. Bitcoin Mining (How money is being created)
1. Everyone
tries to solve a puzzle
2. The first one to solve
the puzzle gets a
rewoard
3. The one who solves
append the transaction to
the main block chain ,
and podcast the change
to every one
New block every ~10 mins
d adjusted every ~2000 blocks
H = 2-SHA2
Initial reward: 50 BTC
Halved every ~4 years (now 25 BTC)

40. Ex.

41. How to mine ?
•Processors ( Slow , worthless now)
•GPU (Power Hungry , Heat)
•ASICs

42. What a Petahash looks like
Hashnest.com

44. Transfer of funds
Proof of ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of
ownership
Digital Signature
Transfer of funds
Proof of ownership
Digital Signature
Newly minted
BTC that is
owned by the
miner
‘Block Chain’ of verified Transactions
Transfer of funds
Proof of ownership
Digital Signature
Transfer of funds
Proof of ownership
Digital Signature
Transfer of funds
Proof of ownership
Digital Signature
Transfer of funds
Proof of ownership
Digital Signature
Transfer of funds
Proof of ownership
Digital Signature
Check

45. INCENTIVES: How do you pay Miners?
Because of bitcoin’s ‘public’ structure, it needs a defence against malicious
attackers and so uses “proof of work” to make it computationally difficult to add a
block. This has created a cost (equipment and running costs) of mining and
therefore a need for incentivisation.
Just as the price of gold determines how much equipment you can spend on a
gold mine, bitcoin’s price determines how much mining power is used to secure
the network.

46. CONSENSUS
A common conflict is when multiple miners create blocks at roughly the same
time. Because blocks take time to be shared across the network, which one
should count as the legit block?

47. CONSENSUS

50. Wallets

51. Wallets
A Bitcoin wallet is a program to send and receive Bitcoins, store Bitcoins and
monitor Bitcoin balances. Just like you need an email program like Outlook or
Gmail to manage your emails, you need a Bitcoin wallet to manage your Bitcoins.
Wallets interface with the Bitcoin blockchain.
Wallets preserve your Private key hence , can sign and validate your transactions.

52. Types of Wallets Application
 Full node
hold a full copy of the Blockchain in order to validate each and every
transaction , current size of the block chain is 85Gb
 Lit Node
don’t hold a full copy of the Blockchain. They rely on full nodes that they are
connected to in order to validate transactions. I prefer this
 Hot wallets
Online bitcoin wallets, web based service such as Blockchain.com

53. UPGRADES: How do you change the rules?
If you require change in the protocol , Updates.
Proposal would be submitted to the community
The main dev would evaluate it
The update will be considered and then the network nodes has to accept it as
well.

54. Demo,
Who wants to get his first bitcoin transaction !!

55. Bitcoin the Good ,the Bad ,the ugly

56. The good
• It’s fast, Transfer any amount of money in a matter of seconds. Any where to any one.
• No one can seize your Coins
• No charge backs
• Payment information cant be stolen (CC)
• Safe Heaven (inflationary), Not Like a fait currency the Government would just print as
they want, and suck out your savings
• No need for a third party,
• You can be anonymous if you wish

57. The bad, Why bitcoin is associated with crime !

58. Silk Road
largest online market for illegal drugs
ran as a Tor hidden service
payment in Bitcoins
site held BTC in escrow while goods shipped
eBay-like reputation system
run by “Dread Pirate Roberts”
operated February 2011 to October 2013

59. Ross Ulbricht
operator of Silk Road
Arrested October 2013
Charged with money laundering, computer
hacking, conspiracy to traffic narcotics
Convicted and sentenced to life imprisonment
in 2015
He tried to cover his tracks, but they
connected the dots
government seized 174,000 BTC
auctioned them to the public

60. Bitcoin the Good ,the Bad ,the ugly
• Like the internet , Bad people would still use it for evil stuff ,
would you call for the ban of internet ?

61. Numbers , Graphs , Pie charts…etc
Stuff which makes some sense !

62. July 2 , 11 PM

63. Value of Bitcoin since its creation (2009- 6th Jul) 2017)
2,621
1st Jan 17
1000 USD
The Bubble Nov 2013
1200+ then sucked it
down to 200$

64. Bitcoin Today

65. Market Cap

66. Technology Adoption Trend

67. The 26 million dollar large Pizza !

68. What will happen to Banks ?

69. Evolution ……

70. How to Get Bitcoin
• Buy with Credit Card
www.cex.io (High fees , Trusted)
• Exchange markets
Poloniex , Bittriex (Trade Cyrpto Currencies)
• LocalBitcoin
Website provides escrow service
• Find trusted person and buy from him directly.
• If you are an investor start mining

71. Don’t spend your bitcoin , if you don’t have Buy
and hold….hodl,,
This is my lancer
Bought it for 20 BTC
, May 2016
BTC worth ~ 680$
Today BTC worth ~ 2600$
4.5 BTC

72. Ethereum is a decentralized platform that runs smart contracts:
applications that run exactly as programmed without any possibility of
downtime, censorship, fraud or third party interference.
To make it short it helps programmers to build their own block chain
application !
Second most popular crypto token , with market cap of 24%

73. Golem
Golem is a global, open sourced, decentralized supercomputer that anyone can
access. It's made up of the combined power of user's machines, from personal
laptops to entire datacenters.
Anyone will be able to use Golem to compute (almost) any program you can think
of, from rendering to research to running websites, in a completely decentralized &
inexpensive way.
decentralized sharing economy of computing power, where anyone can make
money 'renting' out their computing power or developing & selling software.

74. “End of Text”
Bitcoin me: 12gftEtmZhRCnCTw1rQJWw6bgAH6zq791n
You may want to refer to my blog @ www.hossamsoffar.com
I’m planning to list down some in-depth topics related to bitcoin
programming, and application…