Bitcoin Meetup

23rd May, Centro Movistar Innova

SkyBulls

#SUPbitcoin

Agenda

6:00 – 6:05 Introduction Darren Camas

6:05 – 6:10 Intro to the sharing economy Dalma Berkovics

6:10 – 6:20 What is Bitcoin? Adam Stradling

6:20 – 6:30 Technology behind Bitcoin Philippe Camacho

6:30 – 6:40 Bitcoin’s financial implications Uday Bansal

6:40 – 7:00 Q&A Darren Camas

Bitcoin Meetup

#SUPbitcoin

By Dalma Berkovics

Intro to the Sharing Economy

OuiShare Chile Connector

Ex Sustainability consultant @BeCitizen, Paris

HEC, Paris 2011 (Master in Management)

#SUPbitcoin

The Sharing Economy

a real global trend

#SUPbitcoin

You don’t want the drill, you

just want that ******* hole!

#SUPbitcoin

Fueled by the economic

downturn and P2P tech

Why is it happening?

Economic downturn

Environmental concerns

Too many stuffs

Social benefits

What conditions needed?

Peer-to-peer technologies

Trust between strangers

Critical mass

Rachel Botsman- What’s mine is yours

#SUPbitcoin

OuiShare Open community to accelerate the shift towards a more

collaborative economy

+40 events in Europe since January 2012 |

Latin America Tour in July 2013

Collaborative online

magazine

#SUPbitcoin

OuiShare looks into a wide range of

concepts of the Sharing Economy

#SUPbitcoin

About Adam Stradling

What is Bitcoin?

Co-founder and former COO of www.tradehill.com

Co-founder and Advisor of www.work4ce.me – Start Up

Chile, gen 6.2

Founder of www.4ce.cl – Recruiting and research in

banking, finance, and technology

#SUPbitcoin

About Tradehill

What is Bitcoin?

The first “professional” bitcoin company

TH Gained 40k+ users in the first 90 days

TH processed tens of millions in transactions in the first 90

days

TH was featured or mentioned in tens of global tier one news

sources (like here: http://bit.ly/YkhKq8 )

TH owned www.bitcoin.com

TH just re-launched on March 18th, 2013

#SUPbitcoin

Money is just data in a database

What is Bitcoin?

Your credit card, an encrypted number in the network

One big ledger : accounting, audits, IOUs, TRUST!

Trust, Trust, Trust – Increases the cost of doing business

High barriers to entry in banking, finance, payments

What if this “money database” were P2P?

Can’t be manipulated, can’t double spend

No trust - all accounting is public, open source, P2P

#SUPbitcoin

Fundamental Usage Cases

What is Bitcoin?

International value transfers:

IBAN system – expensive, 3-5 days, multiple banks

Other: western union, greendot, paypal – similar issues

Highly fragmented global payments network

Store of wealth:

Volatile to the upside

Deflationary currency

True supply and demand pricing – i.e. no QE possible

#SUPbitcoin

Fundamental Usage Cases

What is Bitcoin?

The 2.5 billion “unbanked” (mobile, e-commerce)

No TTP – In the network we trust

No disputes – Did you send the money?

No chargebacks – It’s digital cash

Micro transactions – Can you send me a dollar?

Gambling - Money in, money out, ten mins

Anonymous – Privacy, privacy, privacy

#SUPbitcoin

Resources for Newcoiners

What is Bitcoin?

http://www.weusecoins.com/en/

Basic: http://www.youtube.com/watch?v=Um63OQz3bjo

High level, technical: http://www.youtube.com/watch?v=Y-w7SnQWwVA

www.bitcoin.org

www.blockexplorer.com

#SUPbitcoin

Announcing coin4ce.com

What is Bitcoin?

Adam is Founder and CEO, coin4ce.com

Philippe is Co-founder and CTO, coin4ce.com

Jacob Lundberg, Partner and Biz Dev

Searching for:

Front and back-end developers

Marketing, biz dev, support/CS

Investors

#SUPbitcoin

By Philippe Camacho

How to explain Bitcoin

to your mother?

Software Developer

PhD student in Cryptology

Agile coach

Now

Bitcoin enthusiast

CTO and co-founder at coin4ce.com

#SUPbitcoin

Distributed System,

Open Source, Digital

Signatures, Collision-

Resistant Hash

Functions, Broadcast

transactions, Merkle

trees,…

Very interesting…

I can send bitcoin via

email right?

Me My mother

#SUPbitcoin

Maybe my

explanation

was not very

clear…

#SUPbitcoin

(Let’s do it again)

What is

Bitcoin?

#SUPbitcoin

Bitcoin

It’s like gold expect that it’s digital

No central authority controls the coins

Limited number of bitcoins (btc)

You can keep it or transfer it

You don’t have to reveal your identity

#SUPbitcoin

Hum… Looks nice,

but how does it work?

#SUPbitcoin

#SUPbitcoin

Solution 0

Example: Linden Dollars

#SUPbitcoin

I control everything.

#SUPbitcoin

Fix #1

Bitcoin is a distributed protocol and is open source.

#SUPbitcoin

Solution 1

1 BTC

2 BTC 1 BTC

#SUPbitcoin

Great!

I can spend my bitcoins as many times as I want !

(double spending)

#SUPbitcoin

Fix #2

The network shares a transaction book

#SUPbitcoin

Solution 2

Origin Destination Amount

Homer Lisa 1 BTC

Homer Bart 2 BTC

Lisa Bart 1 BTC

… … …

The network checks

that an account is

funded before

allowing a new

transfer.

#SUPbitcoin

As every transaction is public,

the identity of user is revealed.

Nobody will want to use such a system!

#SUPbitcoin

Fix #3

Replace user id by some random number.

#SUPbitcoin

Solution 3

Origin Destination Amount

HHY67J81 JH89HF8M 1 BTC

HHY67J81 LAU4V6UU 2 BTC

JH89HF8M LAU4V6UU 1 BTC

… … …

Note that any user

can create multiple

accounts.

#SUPbitcoin

Every account id is public, thus I can transfer money

from an account that is not mine.

#SUPbitcoin

Fix #4: Digital Signatures

Private Key Public Key

= Bart’s address

Sign Message

Signature

#SUPbitcoin

Signature

Fix #4: Digital Signatures

Accept /

Reject Verify

#SUPbitcoin

Fix #4: Digital Signatures

Non-repudiation Unforgeability

(You can’t sign in Bart’s name)

#SUPbitcoin

Solution 4

Origin Destination Amount Signature

HHY67J81 JH89HF8M 1 BTC Djsh767

HHY67J81 LAU4V6UU 2 BTC 8988dd

JH89HF8M LAU4V6UU 1 BTC djDhd7n

… … …

Every bitcoin address

corresponds to the

public key.

Message

#SUPbitcoin

I can still do very bad things…

What about publishing a wrong history of transactions…

#SUPbitcoin

Things get a bit more complicated…

Name: Shafi Goldwasser

Profession: Computer scientist at MIT

Speciality: Cryptography

Other: Turing Award (march 2013)

Your mother

#SUPbitcoin

FIX #5: Cryptographic Hash Functions

H

01110001110001110

10001010100010010

00110101010010110

01100111100011100

10000101000101110

11011010110100111

Huge input

Fixed sized output

(e.g. 256 bits)

#SUPbitcoin

FIX #5: Cryptographic Hash Functions

Security properties

One-way

Given the output y it’s hard to compute some input x such that H(x) = y

Collision-Resistant

It’s hard to find two different values x,x’ such that

H(x)=H(x’)

#SUPbitcoin

Solution 5

H H H

Tx1;

Tx2;

Tx3…

Initial value of

the chain:

coinbase

Tx34;

Tx35;

Tx36…

Tx54;

Tx55;

Tx56…

Block of

transactions

Block chain

…

#SUPbitcoin

Who computes the next block?

#SUPbitcoin

Proof of work

00000 00001 00010 00011

00100 00101 00110 00111 01000 01001

01010 01011 01100 01101 01110 01111

10000 10001

10010 10011 10100 10101 10110 10111

11000 11001 11010 11011 11100 11101

11110 11111

H 1001101|| x 000||10

Find the nonce x such

that the output starts

with 3 zeros.

(*) If you find a better way you may (1) get rich, (2) become famous (Turing award), or (3) both.

#SUPbitcoin

Solution 5

The first node that manages to solve the computational puzzle (nonce) wins the block.

The network extends the chain from the newly computed block.

The network always chooses the largest chain.

Damned!

I need to control 51% of the network….

#SUPbitcoin

Nice in theory but why would

people waste their CPU cycles?

#SUPbitcoin

The winner of a block is rewarded 25 BTC

by the network

(BTW, this is how bitcoins are created).

This process is called mining.

#SUPbitcoin

1 0 -

#SUPbitcoin

By Uday Bansal

Bitcoin’s financial implications

Founder and CEO – SkyBulls

Certified Derivatives Trader (NSE India)

Ex strategy consultant @KPMG

Previous clients – Goldman Sachs, JP Morgan, BP,

Samsung, Thyssen Krupp, Thomas Cook and others

London Business School 2010

#SUPbitcoin

History of money

#SUPbitcoin

History of money

#SUPbitcoin

History of money

#SUPbitcoin

History of money

#SUPbitcoin

Fiat money

Money creation

Fractional Reserve Banking

Expansionary monetary policy

M0, M1, M2, M3

Government debt

Inflation

#SUPbitcoin

Fiat money

#SUPbitcoin

Fiat money

#SUPbitcoin

Bitcoin === Digital gold

No central authority

Based on mistrust

Not a fiat currency

Mined --> limited supply

#SUPbitcoin

Failure of fiat currency

No central authority

“Let it be”

Government debt

Failure of a country’s economy

Devaluation

#SUPbitcoin

Failure of fiat currency

1 USD equivalent

Apr 1919: 12 Marks

Dec 1923: 4.2t Marks

#SUPbitcoin

Failure of fiat currency

By late 2008

Inflation = 79.6m %

$US 1 = $Z 2.6t

#SUPbitcoin

Failure of fiat currency

More recent failures

Cyprus

Freezing bank accounts

Argentina

Default on debt

Inflation of US dollar

#SUPbitcoin

Is Bitcoin safe?

#SUPbitcoin

Is Bitcoin better?

YES!

Non-fiat currency

Supply – demand

No hyperinflation

Low transaction fee

NO!

Govt. interference. No tax

Speculative value

Deflation

Can’t outsource saving

Not traceable

#SUPbitcoin

Q&A

#SUPbitcoin