BITCOIN

AND THE BLOCKCHAIN TECHNOLOGY

A Short, Non-Technical Introduction

HOAN BUI QUOC @blockstackvn BLOCKSTACK VIETNAM GROUP

SUMMARY
What? (Technology)
Why? (Ideology)
How? (Practicality)

Issues
Resources
Part I: Technology
ØWhat is it?

ØHow does it work?

WHAT IS BITCOIN?
§ Bitcoin (capital “B”) is a peer-to-peer network that maintains a public
decentralized ledger of digital math-based assets known as bitcoins
(lowercase “b”). The integrity of this ledger is backed and secured by a
subnetwork of computers (miners) who audit and archive its
transactions for a reward.

§ The supply of bitcoins is fixed at 21 million and each bitcoin can be

divided into a hundred million pieces (10-8 BTC) called satoshi.

§ Not backed by any government or organization.

§ Instantaneous peer-to-peer transactions.

§ No need for trusted third-party.

§ Cryptographic security.

§ Low-cost banking for everybody, everywhere.

§ There are no bitcoins, only records of bitcoin transactions

 WHO CREATED BITCOIN?

Satoshi Nakamoto JANUARY 3, Satoshi updates the APRIL 23, 2011

publishes white paper 2009 source code and
titled Bitcoin: A Peer- writes hundreds of
Satoshi releases Satoshi vanishes
to- Peer Electronic posts totaling
Bitcoin source from the Internet
Cash System via “The 80,000 words
code and after emailing a
Cryptography Mailing (length of a novel).
software client to developer saying he
List”.
NOVEMBER 1, the world. 2009-2010 has “moved onto
2008 other things”.
§ Satoshi could be a woman, a man, or a group of people. Nobody knows!

§ In Japanese satoshi means “clear-thinking” or “wise”, naka can mean “inside” or

“relationship” and moto is used to describe “the origin” or “the foundation.” Strung together
it reads “thinking clearly inside the foundation”.
 HOW DOES IT WORK?

Source: https://www.upfolio.com/ultimate-bitcoin-guide
 Bitcoin wallet and address

bitcoins are not “stored” anywhere. There

a no “accounts”
§ Public address: “receive” bitcoins
(transactions outputs)
§ Private address: prove bitcoins
ownership, sign messages
Related to cryptographic public/private
key pair - mathematically linked.
Derived using Elliptic Curve Digital
Signature Algorithm (ECDSA).
Transactions
A transactions is a message containing:
§ input(s): output of previous transaction sent to your
wallet address (prove ownership of your bitcoins)
§ output(s): bitcoin address of receiver and BTC
amount you want to send.

Transfer of bitcoin ownership from inputs to output.

Your transaction broadcasted to the Bitcoin network

Blockchain
Blockchain = block + chain
§ The big invention that make Bitcoin work
§ The blockchain is a database containing historical recorded of all the
transactions that ever occurred in the network.
§ Every full node in the network has a copy that they keep up to date and verify
§ Broadcasted transactions are gathered into a “block”
§ Blocks are “mined” and appended to the blockchain
§ Block “chain” each other using “hash”
 Mining
§ Where do bitcoins come from? With paper money, a government decides when to
print and distribute money. Bitcoin doesn't have a central government.
§ Who gets to write the next block?

Bitcoin using Proof-of-Work (PoW) protocol to archive decentralized consensus:

1. Miners solve mathematically hard puzzle
(takes ~10 minutes to solve)
2. The first one to find the solution announces
it to the network
3. Gets write to the next block
4. Generate new bitcoins as a reward

Reward halves every 4 years (currently 12.5 BTC/block)

Orphaned Block

Detached or Orphaned blocks are valid

blocks which are not part of the main
chain. They can occur naturally when two
miners produce blocks at similar times or
they can be caused by an attacker (with
enough hashing power) attempting to
reverse transactions.
Double spending and 51% attack
Part II: Ideology

ØWhat problems it solves?

(or Why does Bitcoin exist?)

ØWhy should we care?

Nakamoto’s Political Motivations

Source: http://satoshi.nakamotoinstitute.org/quotes/motives/
 Your bank controls your money
qCyprus crisis (https://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financial_crisis)
§ On 25 March 2013, a €10 billion international bailout by the Eurogroup, European
Commission (EC), European Central Bank (ECB) and International Monetary
Fund(IMF) was announced, in return for Cyprus agreeing to close the country's
second-largest bank, the Cyprus Popular Bank (also known as Laiki Bank),
imposing a one-time bank deposit levy on all uninsured deposits there, and
possibly around 48% of uninsured deposits in the Bank of Cyprus (the island's
largest commercial bank)
§ Cyprus freezes all bank accounts, restricting all withdrawals and transfers of
money
qA woman who lost VND245 billion ($10.8 million) from her account at a Vietnamese
bank has rejected a token compensation offer, saying the it's too low and that the
bank needs to be more transparent.
Governments take populations hostage:
Zimbabwe hyper inflation
§ 1999 - Zimbabwe president Robert
Mugabe begins redistributing private
farm land, leading to a steep drop in
economic productivity.

§ 2000 - Mugabe prints an excessive

amount of money to finance the Second
Congo War, spending ~$23M per month.

§ 2008-2009 - Inflation climbs to an

alleged 6.5 sextillion percent.

§ 2009 - Zimbabwe abandons the

Zimbabwean Dollar (Z$) and does not
replace it with another fiat currency.
Source: https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
Technology for independence
Be your own bank
Part III: Practicality

ØHow to get it?

ØHow to store it?

ØWhere to spend it?

How do I get bitcoins?

• Buy bitcoins on exchanges

• Coinbase (coinbase.com)
• Remitano (remitano.com)
• LocalBitcoins (localbitcoins.com)

• Buy from other people (beware of

scam)

• Mining (hard but interesting)

• Find someone private-key (just

kidding :D)
 How do I store my bitcoins?
1. Create a wallet
a. Online (web wallet)
b. Offline

convenience
§ Software wallet
§ Hardware wallet
§ Paper wallet

2. Keep your wallet safe

security
a. Stored online
b. Stored on computer
c. Stored offline
 Where to spend my bitcoins?

Source: https://99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/ https://medium.com/@CoinATMRadar/how-to-use-a-bitcoin-atm-

or-how-does-a-bitcoin-atm-work-283d7a08d7e
Issues

• Some form of centralization

• Hard to understand

• Energy consumption

• No “customer support”

• Negative press
Some form of centralization
Hard to understand
Bitcoin is combination of:
• Game theory
• Cryptography
• Distributed system
• Peer-to-peer network
• Economic and monetary theory
Energy consumption
No ”customer support”
Negative Press
ØBut only nerds like cryptos!
• You mean like when computer geek Jeff Bezos was starting a
little company called Amazon to sell books on this thing called
the Internet that nobody but nerds understood? I mean there are
all these book stores I can go to, why would I need that?
ØBut…But It’s Backed By Nothing
• Nothing has any inherent value except the value we put in it.
• Same applies to euros and dollars.
ØBut…But It’s Unstable
• You know this story too. Cryptos are unstable. They can go to
nothing overnight. You can lose a lot of money.
• This argument tells you absolutely zero.
• Anything can go to nothing over night.
• Nothing is immune. Not central markets or decentralized ones.
Resources
Any Questions?
 How to
Influence Your
Interviewer