Bitcoin + cryptocurrency

Blockchain

- A blockchain is a shared ledger where transactions are permanently recorded by appending blocks - each transactions (buying/selling) has an input or output - input - unspent output of some other transactions (where the BTC came from) - output - where the BTC is going *complete transaction also has an amount* - notion isn't "own" certain # of BTC and sent it to someone - BUT instead receive BTC from someone and they received it from someone all the way back to the first transactions - how much BTC have you calculate amount based on all prior transactions - The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain.

cryptocurrency

- is a place holder/ want translations can use later like a IOU - crypto- means bitcoin based on encryption tech similar to PGP - currency -

Anonymous transactions

- weird dichotomy - transactions - paying thing for BTC - more or less are anonymous - records transactions are completely transparent and publicly share

History

2008 - satoshi makamoto paper describing new kind of deigital currency - 2009- Nakamoto released open saurce safware implementing idea - nakamoto belived approx 1,000,000 bitcoin (BTC) currently worth under 1billion - he was nominated noble prize in ecomomics - if wins - will be difficult to contact him to let him know because no one knows who he is

Profit?

25BTC is currently worth around $137,000, and so it would seem to be an easy way to make money to just mine blocks...$137k every 3 or 4 days, right? ▪ The PoW is so difficult that groups of hundreds or thousands of miners pool together to try to solve the problem, and must split the bounty if successful ▪ And, oh by the way, it's a race with all the other miners

What can I buy?

Anonymous cryptocurrency is fairly useless unless it can be used to actually buy things ▪ A growing number of 'real' companies accept BTC ▪ Dell, Microsoft, Overstock, CVS, and others...however... ▪ What these companies do is partner with a processing house such as Coinbase, which takes BTC in from the customer and forwards USD to the companies ▪ Still, it means that you can buy you can buy a Dell, dude, with BTC ▪ I believe you also can contribute to Bernie's campaign in BTC

dark side

Because BTC can be purchased with cash, and bitcoin addresses are not associated with individuals, it's an ideal currency for black market transactions ▪ On the dark web, accessible via the TOR browser, just about anything is available for BTC ▪ Note, however, that law enforcement knows this, too, and several large busts have been made, such as The Dread Pirate Robert's conviction for running Silk Road

What is BTC worth?

Commodity - currency regulated by some authority and value often tied to some physical thing - gold or silver Fait - currency valuable only because government says it is - US - $ = commodity currency exchangeable for silver or gold until 1971 since became fiat currency - *BTC is NEITHER - value based on solely supply and demand

Ledger

Each transactions is cryptographically signed and submitted to the ledger - ledger records all these transactions - ledger - the blockchain - widely distributed amount thousands of computers - each computer verifies the transactions in blockchain - called MINING

Hashes

Key/ Value structure that stores objects in buckets based on the value of a "hash function." The items being stored are given unique keys and are stored via hash function.

Wallets

Most bitcoin users don't have access to an ATM and instead use a digital wallet to keep track of their BTC ▪ Wallets are just a cryptographic address that BTC flow into and out of ▪ (And remember, the ledger is public and distributed, so anyone who knows your wallet address can see how much bitcoin is in it) ▪ A popular online wallet is at blockchain.info ▪ There are apps for Android and iOS (Breadwallet seems to be the most popular for iOS)

There are no bitcoin

No physical coin - you can't store them on your computer - only exists on record of every transactions ever made in BTC called BLOCKCHAIN

BTC creation

The 25BTC bounty for mining a block comes from thin air, and so the total amount of all the BTC in existence increases gradually over time ▪ The bounty decreases by half after 210,000 blocks are mined ▪ The total number of BTC that can ever be created is set by the protocol at 21 million ▪ Around the start of 2015 we were at 12 million or so ▪ Current estimates show the the 21 millionth BTC will be mined in 2033

Satoshi Nakamoto

The pseudonymous inventor or inventors of bitcoin. - chooses to name an an ominous - many theories

ATMs

There are a few hundred BTC ATM machines in the US...supposedly there are three in Cambridge ▪ For small transactions you can buy and sell BTC without much effort ▪ For large transactions the companies behind the ATMs must comply with federal KYC (Know Your Customer) rules and ask for photo IDs, passport numbers and pictures

Proof of work mining

This is the type of mining that is used on the Bitcoin blockchain. It requires computing power. - limit growth of bitcoin extra work - PoW involves requiring a very specific format for the hash values, one that is extremely difficult to calculate - essentially the mining software has to make many guesses at the correct value - The difficulty level is automatically adjusted periodically in order to keep the rate of mining at around 3 days per mined block across the entire network

mining

Transactions made over a periods of time collected together into a BLOCK - block widely distributed on network - miners mathematically verify the validity of each block + create hash value of block - includes value of previous block - connects block together into a chain - each minor has access tho entire chain so can verify each BTC came all the way back to first block - Each time a block is verified, or mined, the miner receives compensation of 25 BTC ▪ *Note that the reward is halved every 210,000 blocks...we should be close to the next halving right now

Mining hardware

When BTC were introduced in 2009 it was relatively simple to calculate the correct hashes and mine blocks - well within the reach of the average PC ▪ Around 2011 the calculations became hard enough that miners turned to boxes full of graphics cards (which are very good at math) ▪ In 2013 or so the complexity surpassed ganged graphics cards and special-built mining computers which do nothing but calculate hashes were introduced You have to factor in the cost of electricity...these computers consume a lot of power ▪ At some point pretty low on the curve, the cost of power would exceed the expected return from mining ▪ For this reason, most mining is now done by large syndicates in big data centers...this one is in Washington state...