Bitcoin 101 provides an overview of Bitcoin, including: - Bitcoin functions like cash online through a decentralized network where transactions are recorded on a public blockchain. - Benefits include no inflation, fast/free transactions, anonymity (to an extent), and security through mathematics. Risks include volatility, irreversibility, and difficulty recovering stolen coins. - The Bitcoin network consists of nodes that validate transactions and add them to the public blockchain through mining, which incentivizes this process and controls coin production. - A wallet contains a public address and private key to send/receive coins, while transactions are broadcast across the network and confirmed through mining into blocks roughly every 10 minutes.

1. Bitcoin 101
JayWSalon 05/16/2014 Tianfang Guo
http://www.flickr.com/photos/31119160@N06/8007585111/

2. If you don’t know what is Bitcoin…
§ Like cash, but based on Internet
§ Pros & cons of cash?
§ ”Decentralized”
§ Bitcoin network
2

3. Pros: Technical Superiority
§ No unpredictable inflation by ”printing more
money” by political decision.
§ Transactions with Internet speed
§ Low delay, 0 cost
§ Highly anonymous, in certain conditions
§ Every transaction is public, though!
§ Unbreakable: guranteed by mathmatics
§ Non-reversible
§ Open source
§ Tools / Apps based on the infrastructure.
3

4. Problem, IRS?
4

5. Cons
§ Slowness: trusted transaction takes 10+min
§ High volatility.
§ Still in its early stage
§ Once stolen, no finding back
§ Double-edged sword
5

6. Bitcoin 101: How it works
§ Wallet
§ Transaction
§ Bitcoin Network
§ Mining
6

7. Wallet
§ Every ”account” consists of the public key (=
bitcoin address) and the private key.
§ No real-identity needed. Register freely
§ Anyone who knows your public key, can send
you bitcoins.
§ To spend bitcoins, you have to know the private
key.
§ The transaction is broadcasted to the bitcoin
network.
§ The miners confirm the transactions
7

8. Wallet (cont)
§ An example of a bitcoin address:
§ 1E7FaC7fX35P4n7cDmvzYLEb46KCAnmsir
§ 2160 (about 1048) possible addresses
§ The corresponding private key:
§ 5HuEupX3DNFJ7UypjFtXDTm4BVuAwZtAgYf9
4sMALPyakgafVnU
§ 256 bits (1077 key space)
8

9. Transaction
§ Boardcast to entire network, randomly choose
node
§ For small payments or with payments with
trusted peer, 0 confirmations is usually ok.
§ For large amounts, 6 confirmations is considered
safe.
9

10. Bitcoin network
§ What’s transferring inside the network?
§ Bitcoin transaction records
§ Each full node (= computer running the bitcoin
program) in the network has a copy of all
transaction records (20GB as for today)
§ About 7000 nodes today (From 10000 in Mar)
10

11. BTC network: Double spend elimination
§ Centrallized system vs Decentralized system:
eliminating a double spend fraud is a key
problem
§ The main innovation in bitcoin is the blockchain.
§ “Byzantine problem”: Deal with liars
§ Disrupting the system would need enormous
computing power.
11

12. Mining
§ The incentive of generating blockchain
§ Collecte all transactions in a block. A new block
is mined in about every 10 minutes.
§ 10,500,000 will be mined in the first 4 years. Will
be cut by half every 4 years
12

13. Bitcoin Start-ups
JayWSalon 05/16/2014 Tianfang Guo
http://www.flickr.com/photos/31119160@N06/8007585111/

14. § Coinbase
§ ”BTC Bank”
§ Directly connect to US bank account: Fast
purchase & withdraw
§ Slow on trading (4 business days)
14

15. § Bitstamp & BTC-E & Huobi
§ Fast Trading
§ Slow on withdraw & deposit (international bank)
§ Trading fees & withdraw fees
15

16. § Bitpay
§ Merchant Service for Bitcoin
16

17. § Ripple
§ ”SWIFT 2.0”
§ Give all money an ”Internet speed”. Free
transaction cross account and currency
17

18. § XAPO
§ Cold Storage
18

19. § Coinify
19