Bitcoins and the Digital Economy

Presented By: Matt Blackman

Defining Bitcoins or BTCs

• Currency

• Open Source

• Decentralized

• Non-Localized

• Peer generated

Big Picture

• How do they look?

• What use do they serve?

• What keeps Bitcoins secure?

o Times they have been secure

• How does their economy compete and plan to survive?

When Were These Bits Coined?

• Idea proposed by Saroshi Nakamoto in 2008

o A need for a third-party free payment system

o Anonymous money transfers

• Network went live January 3, 2009

Itty Bitty Uses

^ Not Entirely True ^

• Easy solution for monetary exchanges

• Provides anonymity needed by some

• Investable money market

The Little Giant

http://www.thinlinedata.com/

Otherwise Impossible

http://www.marketplace.org/sites/default/files/styles/slide-show-2-column-530x396/public/Silk-Road-Slide-1_0.jpghttp://www.marketplace.org/sites/default/files/styles/slide-show-2-column-530x396/public/Silk-Road-Slide-1_0.jpg

Making $$$$$$$

http://www.bitcoincharts.com/bitcoin/

What Bitcoins look like

Well actually...

319475h26cmg7eir85k38960125f834e

or

• A string of characterso Around 33 characters to be inexacto Leading with a 1 or 3

Where do Bitcoins come from Mommy?

• Generated by users by mining

• Mining creates blocks of bitcoin transaction solutions

• Incentive given to miners through Bitcoin rewards

• No central distributer of Bitcoins

Et Compute Brute

• Psuedo-Random Hash Generationo Accept lowest value

• Millions of processors mining o Over 275 PetaFlops

https://en.bitcoin.it/w/images/en/f/f6/Quick-and-dirty-4x5970-cooling.jpg

Blocks to Bits

• Market started at 50 BTC per block

• Number halved every 210,000 blocks

• Set Bitcoin limito 21 Million Bitcoins

• More Bitcoins, less reward

• Good newso Value of BTCs in USD always rises

Blocks For Adults

Stacking Blocks

• New block found every 10 minutes

• Block is around 80 bytes size

• 80 bytes * 6 blocks/hour * 24 hours/day * 365 days/year = 4.2 MB

http://cache.kotaku.com/assets/images/9/2011/02/800px-minecraft_classic.png

Public Records

• Block information public

• Names not signed to blocko Only user keys

Who Monitors Bitcoins?

http://upload.wikimedia.org/wikipedia/commons/9/95/Capital_Building.JPGhttp://www.peakpositions.com/PeakServerRoom.jpghttp://upload.wikimedia.org/wikipedia/commons/thumb/8/84/Stantheman.jpg/230px-Stantheman.jpg

? ?? ?

Moving Wasn't Intended As Recreation

• User computers verify exchanges

• Nodes rehash Bitcoin datao Validateo Pass to next node in chaino Longest chain serves as validator

• Let's look at a transfer

Just What You Thought

Double Spending

• Issue with reusing Bitcoins

• Time stamps in Bitcoin block-chain hashes

Who Runs the Nodes?

• They are run by viewers like you

• Bitcoin incentive to validate

• Only nodes whom validated rewardedo Add "Difficulty"

Using the System

• Honest Chaino Valid Nodes trying to authentic transfer

• Attacker can send invalid data to nodes trying to verify their plan

• Creates attack chain that must validate quicker than Honest Chain

If All Else Fails

• Attacker could send BTCs then send them back in future with invalid nodes

• Attacker would plan chain of nodes in advanced

• If resending of BTCs detected the original receiver generates new keys

q=0.1

z=0 P=1.0000000

z=1 P=0.2045873

z=2 P=0.0509779

z=3 P=0.0131722

z=4 P=0.0034552

z=5 P=0.0009137

z=6 P=0.0002428

z=7 P=0.0000647

z=8 P=0.0000173

z=9 P=0.0000046

z=10 P=0.0000012

q=0.3

z=0 P=1.0000000

z=5 P=0.1773523

z=10 P=0.0416605

z=15 P=0.0101008

z=20 P=0.0024804

z=25 P=0.0006132

z=30 P=0.0001522

z=35 P=0.0000379

z=40 P=0.0000095

z=45 P=0.0000024

z=50 P=0.0000006

Not Perfect, But Close

August 15, 2010

• Block 74638

• Generated 92233720368.54277038 BTCo UINT_MAX

• Devalued market for months

Where are we at?

• Bitcoins always growing

• More people find Bitcoins benefits

Even Bad Publicity is Good

• June 2011

• Gawker wrote about the Silk Roado Negatively

• Brought light to Bitcoins

• Value of BTCs boomed afterwards

A Distant Digital Horizon

• Future in storeo Market won't fill out till 2140

• Competing economies

• Real Government free digital markets

Acceptance of my failure to teach

Q&A