DRIVING EDUCATION AND PROFESSIONAL USE OF
DIGITAL CURRENCY IN AUSTRALIA
Produced by: Martin Davidson
What are Digital Currencies?
1) Digital currencies, also known as crypto
currencies, are math based computer generated
money.. But what is MONEY?
S Medium of exchange
S Store of value
S Unit of account
2) They are also their own payment networks
History of Bitcoin
2008: Bitcoin white paper is released
2009: Software becomes available
2010: First currency exchanges appear
2011: 1 Bitcoin = $1 USD
2013: Cyprus bank bail ins, 1BTC=$1k
2014: Mt Gox. Mainstream awareness
2015: Stock market listings..
Some Basic Terms
S bitcoin: Without capitalization, is used to describe bitcoins as a unit of
S Bitcoin: With capitalization, is used when describing the concept of
Bitcoin, or the entire network itself
S Address: A location that bitcoins have been sent to and reside at.
Alternatively, can be thought of as an account of sorts that has a balance
S Blockchain: The complete transaction ledger of the Bitcoin network,
showing how bitcoins have been transferred from one address to another
over time. The blockchain is a public record of all bitcoin transactions in
S Transaction: The movement of bitcoins from one address to another
address. In traditional terms, this can be thought of as a payment or
Bitcoin is the most well known example
of a new breed of digital currencies.
S Global digital currency
S Supply is capped at 21 million
S Can be divided to 8 decimal places
S Cannot be counterfeited
S Currently valued at around $350
S Network valued at $3.5bn
The Payment Network
S Decentralized, peer to peer network
S Transactions are fast and cheap
S Transactions are irreversible
S Transactions are verified in minutes
S Open to anyone with an internet
S Can be used to transmit anything of
value. (2.0 projects)
What is Peer to Peer?
No centralised database or single point of failure
$100 worth of bitcoin in 2010 would be valued at $500k today
2011: 2,000 per day
2012: 7,000 per day
2013: 30,000 per day
2014: 70,000 per day
2015: 110,00 per day
25 bitcoins mined into new blocks every 10 minutes
144 blocks mined per day = $1,080,000 AUD ($300 per BTC)
What is Mining?
Mining serves 2 purposes:
S Mining creates new bitcoins in each block. The amount
of bitcoin created is fixed and diminishes with time.
S Mining creates trust by ensuring that transactions are
only confirmed if enough power was devoted to the
block that contains them.
S The creation of new blocks must
take an average of 10 minutes
S The regulation is done by
periodically adjusting the hash
target value for blocks.
S Every 2,016 blocks (which
spans 2 weeks if each block
takes 10 minutes), the nodes
calculate a new difficulty based
on the time it took to mine the
last 2,016 blocks.
Mining is a 3 step process
S Step 1: Miners create a file that contains (a) the hash of the last
block in the existing blockchain, (b) a block of the new proposed
transactions broadcast in the Bitcoin network and (c) a random
number that the miner guesses (a “nonce”). The combination of (a)
+ (b) + (c) is the data used as the input for Step 2
S Step 2: Miners apply a cryptographic function to the data. The
details of the function (SHA- 256 in the case of Bitcoin). What is
important to understand is that the function does some calculations
on the file/data from Step 1 and produces a random number known
as a “hash”
S Step 3: The hash is reviewed against a desired pattern (in the case
of Bitcoin, how many leading zeros it has, an outcome that is
effectively random). If the hash matches the pattern, the miner has
a correct block and will win an economic prize. If the hash does not
match the pattern, the miner returns to step 1, guessing a new
nonce and repeating the exercise
Bitcoin mining is a rapidly
expanding and highly specialised,
capital intensive industry.
S Mining pools use different
distribution schemes, they
share in the bitcoin rewards.
S Mining farms are located where
energy costs are lowest
Bitcoin issuance over time
May 2015: 14 million
bitcoins have been mined
2032: 99% of all bitcoins
will be mined
2140: 100% of all 21
million bitcoins will be
Public Transaction Data
Every transaction is publicly visible on the blockchain forever
What’s a Bitcoin Wallet?
The Public Key is used to produce a Bitcoin
address (like an account no.)
The Private Key is used to digitally sign the
transaction like (like a pin no.)
Bitcoin units of account
S 1BTC = bitcoin ($300AUD)
S 0.001 = mBTC –millibitcoin (30cents)
S 0.000001 = uBTC – microbitcoin/ bits (.03 cents)
S 0.00000001 = Satoshi – smallest unit of a bitcoin (.0003 cents)
S 21 million BTC / 7 billion people = 0.003 BTC / 3mBTC per person (90c)
The default fee for most bitcoin wallet apps is 0.0001 BTC – 3
cents. This fee is paid to the miners verifying transactions on
You can choose to send a higher or a lower fee with some bitcoin wallet apps. eg-
Bitcoin QT/ Blockchain.info
NB: The market price of bitcoin will affect the transaction fees.
How to get, buy and sell bitcoins
• Online exchanges
• Bitcoin ATM’s/ vending machines
• OTC (over the counter)
• Peer to peer/ in person (Local Bitcoins)
• Offer a product or service via your
• Mine bitcoins / mining contracts
Innovative decentralized solutions
allow programmable money using
Centralised options using Bitcoin
Charities and non profits
Bitcoin transactions offer the option of full transparency
Freedom of speech/ information
Like the internet, Bitcoin is a protocol which cannot be shut down.
• Transactions cannot be censored
Bitcoin has no borders
Over 100,000 businesses now accept bitcoin transactions
"Bitcoin helps us reduce the
inherent costs involved in
international trade. Tomcar
Australia already uses
Bitcoin to pay a growing
number of overseas
suppliers. Our manufacturing
partner, MTM is also actively
exploring using Bitcoin to do
this as well. If we use Bitcoin
ourselves, it makes sense to
accept it from customers too,”
Mr. Brim, Tomcar owner says.
In Store Payments
Up to 1% bitcoin to dollar transaction fee or $0 to hold digital currency
In Store Payments
Coinjar EFTPOS debit card linked to your Bitcoin trading account
Online payments/ E-commerce
Payment cost savings with zero currency volatility risk
Marketing with apps
Advertise your business using Bitcoin web and mobile app services
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