BitCoins

Evolution

• Bitcoin is a consensus-based peer-to-peer network that enables a new payment system and a completely decentralized digital currency.

• The network consists of the same copy of a digital file, listing accounts like a ledger and maintained on every computer on the network.

Meaning and Definition

History of Bitcoins

• October 2008 – Bitcoin design paper – Satoshi Nakamoto

• January 2009 – Bitcoin v0.1 announced

• May 2010 – Pizza purchased for 10,000 BTC

• July 2010 – MtGox established

Where to get Bitcoins?

Transactions

Bitcoin Process and Bitcoin Supply

Blocks Chain

•Openly broadcasted to network•Unique digital signature•Links with previous transactions•50K-70K transactions daily

•Consists of blocks referencing each other (double spending protection)•Simultaneously solved blocks build several branches•Chain is switched to a longest branch•Attacking the system is not economically viable

•Determine the order of transactions•Answer unique math problem•Built by pools of miners: approximately 144 blocks/d per day•Now 25 bitcoins are released to pool of miners for a solved block

“Mining” is a competitive and decentralized process of spending computing power to process transactions and secure the network by using specialized hardware and collecting new bitcoins in exchange for this service.

Mining Rewards Schedule – Capping the Total Supply2009 -2012: 50.0 BTC 2013-2016: 25.0 BTC 2017-2021: 12.5 BTC ∙ ∙ ∙

Blocks

Bitcoin Ecosystem Participants

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1. Obtain and load a wallet: a) Cash Deposit; b) Bank Transfer; c) ATM.

2. Transact with Bitcoin network: a) Merchants; b) Exchanges; c) Investment Vehicles (no wallet needed); d) Borrow and Lend.

3. Transactions are confirmed by the network.4. Store the remaining balances of Bitcoins: a) In Bitcoin wallet; b) In bank account; c) Withdraw via ATM.

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d

FRAUD IS QUICKER THAN LAW

In the world of Bitcoin, Fraud is quicker than Law

Nathaniel Popper, New York Times

There have been a number of thefts involving BitCoins, which have shaken investor confidence in the currency

2011An investment scheme called Bitcoin Savings and Trust was launched online. The scheme announced returns of 1% daily interest

2012The scheme shut down without returning investment of over 500,000 Bitcoins worth of $5.6 million.

FRAUD IS QUICKER THAN LAW

US Securities and Exchange Commission suit which alleged that the scheme “was a sham and Ponzi scheme”.