Introduction to Bitcoin and the underpinnings of currencies

1. bitcoin
Technology beyond Politics
(Partly sponsored by Bitcoin earnings)

2. What is bitcoin?
http://www.youtube.com/watch?feature=player_detailpage&v=Um63OQz3bjo

3. Open Source
(...to anybody that can read code...) (Will our financial system be left in the hands of engineers?? Are we crazy!!! Much better
in the hands of politicians J)

4. Software
(Decentralized Software in a Decentralized Repository... sounds like a Police song)

5. That Creates a Digital Currency
Image courtesy of http://dosmagazine.com/es/nace-el-bitcoin-la-divisa-preferida-por-hackers/

6. Features I
Scarce
Image courtesy of http://falkvinge.net/2011/08/21/bitcoins-deflationary-economy-not-a-problem-in-
itself/

7. Features II
Digital
Image courtesy of http://www.turbosquid.com/3d-models/3d-bitcoin-digital-currency-model/708855

8. Features III
Peer 2 Peer
(Cryptography in a p2p World)

9. Features IV
No Governments involved
(Keep on rocking in a p2p world)
Image courtesy of http://www.impactlab.net/2011/07/23/top-10-photos-of-the-week-188/

10. Features V
Cryptography
Courtsey of xkcd http://xkcd.com/

11. Features VI
Anonymous

12. Anyway, is
Currency
Important?

13. Courtesy of http://www.moneychoice.org/the-future-of-money/

19. Don't Blame the Government:
Central Banks Rule
Extracted from the M. Goodwin & D.E. Barr, Economix: How our Economy Works (2012)

20. And Commercial Banks Live Out of
Us...

21. And Take Others' Homes Away
Image courtesy of http://periodismohumano.com

22. In the End, Money is Just a Number in Your
Bank Account

23. Okay, so what is
bitcoin about?

24. Theoretical Foundation (2009)
http://bitcoin.org/bitcoin.pdf

25. Basic Concepts I
Blockchain
The blockchain is a shared public
transaction log on which the entire
Bitcoin network relies. All confirmed
transactions are included in the
blockchain with no exception. This
way, new transactions can be verified
to be spending bitcoins that are
actually owned by the spender. The
integrity and the chronological order
of the blockchain are enforced with
cryptography.
http://bitcoin.org/en/how-it-works

26. Basic Concepts II
Transaction
A transaction is a transfer of value between Bitcoin addresses that gets included in the blockchain.
Bitcoin wallets keep a secret piece of data called a private key for each Bitcoin address. Private keys
are used to sign transactions, providing a mathematical proof that they come from the owner of the
addresses. The signature also prevents the transaction from being altered by anybody once it has
been issued. All transactions are broadcast between users and confirmed by the network in the
following minutes, through a process called mining.
Image courtesy of http://arstechnica.com/tech-policy/2011/06/bitcoin-inside-the-encrypted-peer-to-peer-currency/

27. Basic Concepts III
Nonce
The "nonce" in a bitcoin block is a 32-bit (4-byte) field whose value is set so that the hash of the block will contain a run of zeros. The rest of the
fields may not be changed, as they have a defined meaning.
Any change to the block data (such as the nonce) will make the block hash completely different. Since it is believed infeasible to predict which
combination of bits will result in the right hash, many different nonce values are tried, and the hash is recomputed for each value until a hash
containing the required number of zero bits is found. As this iterative calculation requires time and resources, the presentation of the block with
the correct nonce value constitutes proof of work.
https://en.bitcoin.it/wiki/Nonce

28. Basic Concept IV
Mining
"Winning" the next bitcoin in a chain means happening upon a bitstring, or nonce, that when combined with the data in the
chain so far, produces a SHA-256 hash with a certain number of leading zeros. The probability of finding such a pattern by
chance - and there is no better way known - is 1/2z , where z is the number of needed zero bits. The Bitcoin protocol
estimates the amount of CPU power currently in the Bitcoin mining network, and continually adjusts z so that, on average, one
successful solution turns up every ten minutes. Each successful solution is currently worth 25 bitcoins
http://nakedsecurity.sophos.com/2013/03/13/anatomy-of-a-problem-bitcoin-loses-25-percent-in-value/
Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the
blockchain. It enforces a chronological order in the blockchain, protects the neutrality of the network, and allows
different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block
that fits very strict cryptographic rules that will be verified by the network. These rules prevent any previous block
from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a
competitive lottery that prevents any individual from easily adding new blocks consecutively in the blockchain. This
way, no individuals can control what is included in the blockchain or replace parts of the blockchain to roll back their
own spends.

29. It's definitely geeky stuff
(how much energy does this mammuth need to produce 5 Ghz/s processing power...

30. Courtesy of Joshua J. Romero, Brandon Palacio & Karlssonwilker Inc. http://spectrum.ieee.org/img/06Bitcoin-1338412974774.jpg

31. The Ecosystem I
How to Become
a User
First result of a query in Google for 'usage coin' https:
//www.weusecoins.com/ your portal into the world of
bitcoin

32. Identity. Private and Public key

33. Relations. Digital Wallet
The original is a Java application with an open source interface, yes, from those
great folks that brought you vim!

34. Exchange. An internet site/trader

35. The Supply
How are bitcoins
Created?
It's simple, just need a computer

36. Mining Client
One block every 10 minutes
https://en.bitcoin.it/wiki/Software#Mining_apps
http://motherboard.vice.com/blog/a-guide-to-bitcoin-mining-why-someone-bought-a-1500-bitcoin-miner-
on-ebay-for-20600

37. And also a Flourishing Aficionados' Market
(..this beauty ASIC outputs 60 billion hashes a second consuming 60 Watts, like a bulb)

38. Samsung Exynos 5 Octa incorporates a full HD 60fps (frame per second) video hardware codec
engine for 1080p video recording and play-back, an embedded 13 mega-pixel 30fps image signal
processor interface for high-quality camera functionality, and 12.8GB/s memory bandwidth interface
that enables Full HD Wifi display.
Read more at: http://phys.org/news/2013-03-samsung-exynos-octa-mobile-devices.html#jCp
Mining. When Processing Power == Wealth &
power (or at least a chance) (on an algorithmic version of the bingo)

39. Scarcity. Currency Supply

40. Mining is a hard day's work
it would statistically take you 40 years with a normal CPU to find out one winning ticket of hashes and nonces.
Coal miner Lee Hipshire in 1976,
shortly after emerging from a
mine in Logan County, W.Va. at
the end of his shift. At age 36, he
had worked 26 years
underground. A few years later,
Lee took early retirement
because of pneumoconiosis, or
black lung disease. He died at
57.
(Courtesy of Earl Dotter http://www.npr.
org/blogs/pictureshow/2012/07/06/1563
86882/documenting-dirty-jobs-miners-
at-work)

41. Just a little help of my friends
(Pooled mining is a mining approach where multiple generating clients contribute to the generation of a block, and then
split the block reward according the contributed processing power. Pooled mining effectively reduces the granularity of
the block generation reward, spreading it out more smoothly over time. https://en.bitcoin.it/wiki/Pooled_mining)

42. The Ecosystem II
Where Can They
Be Used?

43. Digital Goods (or why I don't buy cds anymore)

44. The Ecosystem and its Amenities
(Amenities (Def.) 2. Something that contributes to physical or material comfort)

45. Other Uses

46. bitcoin and
Capitalism

47. Welcome to the Darkside!
The Ponzi Scheme (or why are there so many exiled princes in Nigeria sending me emails)
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the
money paid by subsequent investors, rather than from profit earned by the individual or organization running the
operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the
form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns
requires an ever-increasing flow of money from new investors to keep the scheme going. http://en.wikipedia.
org/wiki/Ponzi_scheme

49. Recycling Debt or The Roots of
Crisis
"Finance capitalism has become a network of
exponentially growing interest-bearing claims
wrapped around the production economy. The
internal contradiction is that its dynamic leads
to debt deflation and asset stripping. The
economy is turned into a Ponzi scheme by
recycling debt service to make new loans to
inflate property prices by enough to justify yet
new lending."
http://michael-hudson.com/2010/07/from-marx-to-goldman-sachs-the-fictions-of-fictitious-capital1/

50. Speculative Bubble: The Case of the
Dutch Tulips
Image and story courtesy of Aleix Saló, Simiocracia, Crónica de la Gran Resaca, 2011.

51. Nevermind the Bollocks, We Got
Gold

52. Nixon Shock
(...or why I am not backed by gold anymore (although I never was since I printed more money than the system produced),
but by the fiat, the trust markets have in lending money to different governments.)
To prevent a run on the dollar, stabilize the economy, and decrease unemployment and inflation rates,
on August 15, 1971, Nixon issued Executive Order 11615, pursuant to the Economic Stabilization Act
of 1970, which imposed a 90-day maximum wage and price ceiling, a 10% import surcharge, and,
most importantly, "closed the gold window", ending convertibility between U.S. dollars and gold. The
President and fifteen advisers made that decision without consulting the members of the international
monetary system, so the international community informally named it the Nixon shock http://en.wikipedia.
org/wiki/Nixon_Shock

53. Moral: States are Fancy Pants (with fancy currencies)
MStates are fancy pants (with fancy currencies)

54. Do We Really Need Banks?
Image courtesy of M.Goodwin & D.E. Carr, Economix: How Our Economy Works, 2011

55. Early Digital Alternatives

56. The basis of economy (and most things humans do as social
creatures)

57. "The root problem with conventional currency is all the trust
that's required to make it work. The central bank must be
trusted not to debase the currency, but the history of fiat
currencies is full of breaches of that trust. Banks must be
trusted to hold our money and transfer it electronically, but
they lend it out in waves of credit bubbles with barely a
fraction in reserve. We have to trust them with our privacy,
trust them not to let identity thieves drain our accounts."
Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Cash System,
2009
In Banks we Trust

58. In Bitcoin we Trust?
Bitcoin isn’t tied to any commodity—besides trust. As a
statement on the global economy, Bitcoin is hilarious. As a
currency for the disenfranchised and distrustful, it’s as
serious as can be.
http://www.businessweek.com/articles/2013-03-28/bitcoin-may-be-the-global-economys-last-safe-haven
The whole thrust behind Bitcoin is that it removes the need
for trust in currency; trust in bankers, trust in governments,
trust that the two won’t collude to do you over, like they did
with everybody in Cyprus.
http://www.spectator.co.uk/columnists/hugo-rifkind/8874321/how-bitcoin-could-destroy-the-state-and-perhaps-make-
me-a-bit-of-money/

59. Who You Gonna Trust?
Watergate! Corruption Ricky
(...or why the political party system will depend on capital and banks)
The affair began with the arrest of five men for breaking and entering into the Democratic National Committee (DNC)
headquarters at the Watergate complexon June 17, 1972. The Federal Bureau of Investigation (FBI) connected cash
found on the burglars to a slush fund used by the Committee for the Re-Election of the President, a fundraising group for
the Nixon campaign.[1][2]

60. Marx: an ethics of liberation
"MAN is born free; and everywhere he is in chains. One thinks himself the master of others, and still remains a greater
slave than they. How did this change come about? I do not know. What can make it legitimate? That question I think I
can answer." Poor iluse, The Contract Social, Jean-Jacques Rousseau (1762)
Courtesy of http:
//endofcapitalism.
com/2010/11/04/zombie-
marxism-part-2-what-marx-
got-right/

61. Actually Ricky did not Like Marxism
The election of Marxist candidate
Salvador Allende as President of Chile
in September 1970 led Nixon to order
that Allende not be allowed to take
office.[142]:25
Nixon pursued a vigorous
campaign of covert resistance to
Allende, first designed to convince the
Chilean congress to confirm Jorge
Alessandri as the winner of the election.
When this failed, false flag operatives
approached senior Chilean military
officers, in "some two dozen contacts",
with the message that "the U.S.
desired....a coup."[142]
http://en.wikipedia.
org/wiki/Richard_Nixon

62. Courtesy of http://www.westernfreepress.
com/2013/01/15/odd-celebrity-
encounters/groucho-marx/

64. Marxists don't have a dress code
(...although anything red is recommended... Btw guys do also seem more appealing to girls when wearing red and it's
science! http://news.discovery.com/human/women-are-more-attracted-to-men-wearing-red.htm)

65. Anarchist Entrepreneurs

66. Engineers are the architects of the new world

67. Will 'money' still make the world go
'round? (The yore of the Lira, the feel of the Franc and the heel of the Deutsche Marks not anymore...)
Courtesy of the always oddly fabulous Monthy Python