Decentralized Payments with Bitcoin

So you’ve heard of Bitcoin, a global digital currency with an avid following, and a wildly fluctuating price. But the real power of Bitcoin stems from its underlying decentralized ledger, the blockchain.

In this talk, Adrian will take a deep dive into the blockchain, and look at how transactions are generated and broadcast in a completely trustless peer-to-peer network. He will discuss what role miners play in this network, and whether the blockchain network could exist independent of the Bitcoin currency. Finally, he will look at some of the potential future applications of Bitcoin and the blockchain, including sidechains and decentralized asset tracking.

Transcript

1. Payments, Decentralized COINBASE ADRIAN MACNEIL
2. WHAT IS BITCOIN? • Digital Currency • Payment Network
3. BITCOIN: THE CURRENCY • Global digital currency • Supply is capped at 21M • Can be divided into 8dp • Currently costs about $375 USD
4. BITCOIN: THE PAYMENT NETWORK • Decentralized, peer-to-peer network • Transactions are fast and cheap • Transactions are irreversible • Can be used to transmit anything of value
5. BITCOIN HISTORY 2008: Satoshi Nakamoto releases white paper 2009: Bitcoin software released 2010: First currency exchanges appear 2011: Reaches dollar parity, first price bubble ($32) 2012: Multisig transactions 2013: Silk Road, more price bubbles ($1200) 2014: Mainstream awareness
6. BITCOIN IS NOT: • A stock • A company • A Ponzi scheme • Illegal • Anonymous
7. BITCOIN PRICE (USD) 0 300 600 900 1,200 Dec 2011 Mar 2012 Jul 2012 Nov 2012 Mar 2013 Jul 2013 Nov 2013 Mar 2014 Jul 2014 Nov 2014
8. DAILY TRANSACTIONS 0 22,500 45,000 67,500 90,000 Dec 2011 Mar 2012 Jul 2012 Nov 2012 Mar 2013 Jul 2013 Nov 2013 Mar 2014 Jul 2014 Nov 2014
9. EMAIL FOR PAYMENTS • Open, decentralized protocol (SMTP) • Built on top of the internet • Pre-internet technologies are slow and expensive
10. HOW SLOW ARE PAYMENTS TODAY?
11. For US merchant accounts, payment taken with a Visa, MasterCard or Discover will typically be deposited into the designated bank account within 2-3 business days of settlement. American Express typically takes 5 business days. - Braintree “ ”
12. LET’S SEND SOME MONEY OVERSEAS
17. S M T W T F S 16 17 18 19 20 21 22 23 24 25 26 27 28 29 TIME TAKEN: 5 DAYS *bank computers take weekends off
18. Sent (USD) $100.00 Sending Bank Fee $35.00 Shit Exchange Rate ~$4.03 Receiving Bank Fee ~$21.27 Received (USD) ~$39.70 BANK FEES: 60%
19. WTF?!
20. HOW IS BITCOIN DIFFERENT?
21. ALICE BOB
22. Alice Bob -20 +20
23. Alice Bob -20 +20 ฿
24. WHY SHOULD I CARE? • Open source and decentralized • Fast and cheap payments • Because technology
25. THE BITCOIN PROTOCOL • ADDRESSES • TRANSACTIONS • MINING
26. BITCOIN ADDRESSES
27. PUBLIC KEY CRYPTO
28. PRIVATE KEY PUBLIC KEY 5HvkirAJtfAqvCEuFR 2LaY9YfhdhF2FnhEzT zBZzH8QGGyhutd9 1CeQin17MWwfctk5iiK uVyCLnBEMH8XEpL BITCOIN ADDRESS
29. 1CeQin17MWwfctk5iiKuVyCLnBEMH8XEpL
30. 1CeQin17MWwfctk5iiK uVyCLnBEMH8XEpL
32. • Bitcoin addresses are public • Private keys are required to spend bitcoin • All transactions are public • Bitcoin addresses are cheap to generate
33. BITCOIN TRANSACTIONS
35. ANATOMY OF A TRANSACTION INPUTS OUTPUTS
36. ANATOMY OF A TRANSACTION INPUTS OUTPUTS ฿5.00 ฿2.00 ฿3.00 (change)
37. ANATOMY OF A TRANSACTION INPUTS OUTPUTS ฿1.00 ฿3.00 ฿1.00 ฿1.00
38. ANATOMY OF A TRANSACTION INPUTS OUTPUTS ฿1.00 ฿2.00 ฿1.00 ฿1.00 ฿1.00
39. • Transactions are made up of any number of inputs and outputs • Outputs are spent by using as inputs in future transactions • Balance can be thought of as sum of unspent outputs
44. BITCOIN MINING
45. “BLOCK”
46. n: 1 d4431c5127a04a3695bb81 0b98d7385b306f1c361777 1f50c0e191ad7b954eb2 SHA256 =
47. n: 2 cedefc3dada92165d0505d 09d222c7120a6a3c571008 8aae1b9b85b37d8404a7 SHA256 =
48. n: 3 7f4641378075b2923144b1 4b279a4666f3dbfcc9424e9 cd31e33e3f5d28e408d SHA256 =
49. n: 42 00000000000000000b2b42 4842d051883f222904245ff 9ab1ce5d52e2a784c7a SHA256 =
58. • Transactions are consolidated into blocks • Blocks are confirmed by searching for a specific hash value • This process is known as mining • The longest valid blockchain is correct
59. WHY MINE BITCOIN? Transaction Fees Block Reward
60. 0 3,000,000 6,000,000 9,000,000 12,000,000 15,000,000 18,000,000 21,000,000 2008 2012 2016 2020 2024 2028 2032 BITCOIN SUPPLY
61. MINING POWER (TH/s) 0 75,000 150,000 225,000 300,000 December 2012 March 2013 July 2013 November 2013 March 2014 July 2014 November 2014
62. 0M 10,250M 20,500M 30,750M 41,000M December 2012 March 2013 July 2013 November 2013 March 2014 July 2014 November 2014 BITCOIN DIFFICULTY
63. • Miners are incentivized with a block reward and transaction fees • Over time, the block reward will decrease • The mining difficulty adjusts automatically, based on the hash rate of the network
64. FUTURE
65. FUTURE: ADOPTION • E-commerce • Remittance • Micro-transactions
66. FUTURE: APPLICATIONS • Decentralized asset tracking • Smart contracts • Machine-to-machine payments
67. FUTURE: PROTOCOL • POS standards (NFC + BLE) • Performance improvements • Sidechains
68. QUESTIONS?