Economics of BitCoin

Inflation! Investments! BitCoin will solve all our problems! This talk is a quick overview of how BitCoin works and debunks the flawed economics that Bitcoin uses to bolster it's accounting agenda

Transcript

1. ฿ bitcoin /ˈbɪtkɔɪn/ colin@bendell.ca zach@zachscott.ca
2. WARNING The following presentation should be considered ฿ullshit. The presenters are not financial advisers. Please consult a professional before investing your money in Bitcoin or any other money laundering scheme. FBI
3. WARNING One of the presenters is a hardcore capitalist and doesn’t like change, the other is more reasonable. I’ll be presenting the facts and Colin will be presenting the ฿ullshit. FBI
4. What is money?
5. Money is a proxy
6. Money buys beer
7. Cost of Beer over time
8. USD Purchasing Power vs. Circulation Total CA$201m CA$401m CA$602m CA$802m CA$1,003m 1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009
9. Fiat Currency
10. bitcoin: We can do better • Increase security while simplifying infrastructure overhead • Reduce transaction costs • Make transactions as fast as the internet • Remove government from money supply • Stabilize money supply to address inflation
11. Satoshi Nakamoto
12. bitcoin Quick Facts • ~10million BTC in existence • Market Price: $11.72 USD • Market Cap: $110 million USD • Transaction Volume: $2,800,000 USD / day • Total miners revenue: $80,000 USD / day
13. BTC:USD CA$0.00 CA$6.00 CA$12.00 CA$18.00 CA$24.00 CA$30.00 2010/07/17 2010/08/21 2010/09/25 2010/10/30 2010/12/04 2011/01/08 2011/02/12 2011/03/19 2011/04/23 2011/05/28 2011/07/08 2011/08/12 2011/09/16 2011/10/21 2011/11/25 2011/12/30 2012/02/03 2012/03/09 2012/04/13 2012/05/18 2012/06/22 2012/07/27 2012/08/31 2012/10/05
14. How does it work?
15. Bob: I wants beer
16. Alice: 5 dollars please =$5.00
17. nurff nomm nomm beer bitcoin ?
18. Sure, just scan this QR code
20. mmmmm... beer Thank you
21. The bitcoin P2P Network
22. Transactions are broadcast on the P2P Network TX message Amount: 2 To: 175tWpb8… Node 1 Node 2 Node 3 Node 5 Node 4 Node 6 TX TX TX TX TX TX
23. TX message Amount: 2 To: 175tWpb8… Node 1 Node 2 Node 3 Node 5 Node 4 Node 6 •••• Miner 1 •••• •••• •••• •••• •••• •••• TXs are rolled together into blocks originating from a miner
24. TX message Amount: 2 To: 175tWpb8… Node 1 Node 2 Node 3 Node 5 Node 4 Node 6 Miner 1 Each node has the entire chain of blocks •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• ••••
25. The Block Chain TX TX TX Ref ID nonce TX TX TX Ref ID nonce TX TX TX Ref ID nonce TX TX TX Ref ID nonce
26. TX message Amount: 2 To: 175tWpb8… Node 1 Node 2 Node 3 Node 5 Node 4 Node 6 Miner 1 Miners compete to “find” new blocks and transmit to nodes •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •••• •• Miner 2 ••••• Miner 3 •••• Miner 4 •••• •••• ••••
29. Miner TX TX TX Ref ID nonce TX TX TX Ref ID nonce TX TX TX Ref ID nonce
30. Miner SHA-256 TX TX TX Ref ID nonce hash = sha256[sha256(version id + previous hash reference
 + sha256(transaction list) + nonce)]
31. Current Difficulty Miner SHA-256 TX TX TX Ref ID nonce
32. Miner TX TX TX Ref ID 0 Current Difficulty
33. Miner TX TX TX Ref ID 1 Current Difficulty
34. Miner TX TX TX Ref ID 2 Current Difficulty
35. Miner TX TX TX Ref ID 4 Current Difficulty We have a winner...
36. Miner TX TX TX Ref ID 4 TX TX X ef ID nonce TX TX TX Ref ID nonce TX TX TX Ref ID nonce Newly minted block
37. Why mining? • The only way new BTC enter circulation • Difficulty is adjusted to ensure 1 block / 10 minutes • Confirms transactions • Prevents double spending • Nakamoto compared this process to gold miners expending resources to add gold to circulation.
38. What’s in it for miners? • 50 BTCs for each discovered block (declining over time) • Transaction fees paid by users
39. Mining Reward v. Total Volume THB0million THB4million THB8million THB13million THB17million THB21million THB0 THB10 THB20 THB30 THB40 THB50 2009 2013 2017 2021 2025 2029 2033
40. Total TX Fees Paid to Miners
41. Total Revenue to Miners
42. How is it doing? • Increase security while simplifying infrastructure overhead • Reduce transaction costs • Make transactions as fast as the internet • Remove government from money supply • Cap money supply to address inflation A+ A A
43. Governance is the byproduct of government monetary policy
44. How is it doing? • Increase security while simplifying infrastructure overhead • Reduce transaction costs • Make transactions as fast as the internet • Remove government from money supply • Cap money supply to address inflation A+ A A C+ ?
45. caping money supply is an interesting idea ...
46. ... but, inflation and money supply are not real problems
47. The human brain is the problem
48. Humans are predisposed to growth
49. Our economy is built on growth
50. USD Purchasing Power vs. Circulation Total CA$201m CA$401m CA$602m CA$802m CA$1,003m 1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009
51. The real story is about standard of living
52. Humans again are the problem: emotionally driven
53. GDP = C + I + G + (X-M) + + +
54. Last 30 years of data: inflation is under control -14.4% -10.8% -7.2% -3.6% 0% 3.6% 7.2% 10.8% 14.4% 18% 1914 1920 1926 1932 1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 % Change CPI
55. How is it doing? • Increase security while simplifying infrastructure overhead • Reduce transaction costs • Make transactions as fast as the internet • Remove government from money supply • Cap money supply to address inflation A+ A A F F
56. ฿ bitcoin: crossing the chasm • Growth: uncapped potential for money supply • Governance: don’t let the bad guys win • Government: or algorithms that can stimulate a currency • Greenback: technology for daily adoption Early Adopters Pragmatists Conservatives Laggards
57. Predictions & Prognostications
58. How to get involved 
 http://sourceforge.net/projects/bitcoin/files/Bitcoin/bitcoin-0.7.1/ Bitcoin clients
 * Bitcoin-Qt (original) - bitcoin.org
 * MultiBit - multibit.org
 * Armory - bitcoinarmory.com
 * Electrum - electrum-desktop.com
 * Bitcoin Wallet (Andriod) Free Resources
 * bitcoin.org
 * bitcointalk.org 
 * bitcoincharts.com
 * Bitcoin Block Explorer - blockexplorer.com
 * Bitcoin Monitor - bitcoinmonitor.com
 * Bitcoin Wiki - https://en.bitcoin.it/
 * weusecoins.com Bitcoin merchants
 * VPN Services - privateinternetaccess.com Exchanges:
 * bitinstant.com
 * cavirtex.com
 
 Online Wallets / Merchant Tools:
 * blockchain.info
 * coinbase.com
 * bitpay.com
 * paysius.com
 Economics stuff: 
 Money Supply and Purchasing Power
 Bitcoin Collusion problems Other talks:
 http://www.youtube.com/watch?v=SvZGjF1aJhM&feature=relmfu 

59. How do I get my own bitcoins? • Mine them yourself • Buy them at an exchange: • http://bitcoincharts.com/ - 50+ active markets • I use https://www.cavirtex.com/ • Buy them at Wallmart, 7-11 ! • 700,000 locations - bitinstant.com/cashpayment.com
60. ฿ bitcoin /ˈbɪtkɔɪn/ colin@bendell.ca zach@zachscott.ca Thank You!