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The Bitcoin Buzz

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by

Matthew Caulfield

on 8 August 2014

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Transcript of The Bitcoin Buzz

Cutting Out the Middleman
What is Bitcoin?
A virtual currency: something new?
Speaking in Code
Cryptography and Transactions
Buzz
Limited Time Only
A Deflationary Currency
Joe's
check
Joe
The Mining Process
#3
#1
#2
#4
Smallest unit "satoshi" = .00000001 BTC

4 UNIQUE FEATURES OF BITCOIN
The Bitcoin
Roadmap
What is Bitcoin, exactly?
A Ron Paul Pipe Dream?:
The Verdict
What makes it special?
THE VERDICT
European Central Bank: "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community."
Some Stats
Accepted by
60k retailers
.
Around
60k transactions
a day, totaling
$44M USD
.

One Bitcoin = ~
$590 USD
Who accepts bitcoin?
By: Matthew Caulfield, Third Way Capital Markets Initiative Intern
Penn Wharton PPI
Decentralized...what does that mean?
h
Sally
public key
private key
1) Receiver's Public Key (address)

2) Sender's Public Key & Private Key

3) Amount of bitcoin to be sent

TRANSACTION DETAILS
Mining: Transaction Processing
Crypto- comes from

Cryptography: "the process of writing or reading secret messages or codes"
Community Processing:
1) Confirm that transaction has been "signed" with sender's private key.
2) Check ledger to confirm sender owns the referenced bitcoins.


4) Compete to add the block to the ledger (a.k.a. the blockchain)
difficult
easy steps
3) Bundle transactions into a grouping called a "block."
Key features:
1) Decentralized Ledger System
2) Regulated with Cryptography
3) Community Transaction Processing
4) Deflationary Currency
Things it is good for
Things it isn't good for
Investment
Micro-payments
Back-end payment systems
A currency
Things we haven't thought of
What is Bitcoin?
Smallest unit "satoshi" = .00000001 BTC

ECB: "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community."
Some Stats
Accepted by
60k retailers
.
Around
60k transactions
a day, totaling
$44M USD
.

One Bitcoin = ~
$590 USD
A crypto-currency: something new!

Who accepts bitcoin?
h
Crypto- comes from...

Cryptography: "the process of writing or reading secret messages or codes"
M2 Money Supply:
$11-13 Trillion
Using cryptographic/mathematical methods to enable the operation of a
decentralized
virtual currency
Cutting Out the Middleman
Solving the Double-Spending Problem
Reduced Fees
Cutting Out the Middleman
#1
Great, coffee is only
$1!
Ugh, I only get
$0.978
The Mining Process
Community Processing:
1) Confirm that transaction has been "signed" with sender's private key.
2) Check ledger to confirm sender owns the referenced bitcoins.


4) Complete a "mathematical puzzle."
difficult
easy steps
3) Bundle transactions into a grouping called a "block."
The Mining Process
Gold, Coal and...Bitcoin?
Community Processing:
1) Confirm that transaction has been "signed" with sender's private key.
2) Check ledger to confirm sender owns the referenced bitcoins.


4) Complete a "mathematical puzzle."
difficult
easy steps
3) Bundle transactions into a grouping called a "block."
Rewards:
25 BTC

=
$14, 750
Incentive Payments
-Included in certain transactions to speed up confirmation
Invest resources (computing power, electricity, maintenance, cooling, time) to compete to solve a "
mathematical puzzle
."
-New bitcoins -> expand bitcoin supply
Dealing with increasing numbers of miners, and ever-improving computing power:

Constant adjustment of the mathematical puzzle.


New miners/better computers?
Less miners?
harder puzzle
easier puzzle
puzzle solved every 10 min.

Limited Supply
BTC rewards halve every 4 years
A
bad
currency, a
bad
investment...with a
bright
future.
Fees ~
2.2%
Competition: Solving a
Mathematical Puzzle
The Blockchain: the "Universal Ledger"
What is Bitcoin?
Some facts...
Who accepts bitcoin?
Smallest unit "satoshi" = .00000001 BTC=
$00.0000059

Some Stats
Accepted by
60k retailers
.
Around
60k transactions
a day, totaling
$44M USD
.

One Bitcoin = ~
$590 USD
US Currency in circulation:

$1.28 Trillion
US M2 Money Supply:
$11-13 Trillion
Q and A
(credit card companies do
$320M
a day, totaling
$33B
)
Bitcoin Supply: 13M

Bitcoin Market Cap:
$7.7B
#1: Sender's Private and Public Key
Transaction Details:
#2: Receiver's Public Key (Address)
#3: Amount of BTC
Thanks!
Average electricity cost:
$147,000
/day
First Bitcoin transaction:
2 pizzas cost 10k bitcoin

Today:
10k bitcoin=
$5.9M
= 472,000 pizzas


In 2140, incentive payments become king.
4 Unique Features of Bitcoin
Full transcript