3. Intro
• Bitcoin is a decentralized, open source,
digital currency
• No central authority
• First released anonymously in 2009 by
“Satoshi Nakamoto”
4. • It received a lot of media attention during
summer 2011, the exchange rate surged
• Some websites got hacked, Bitcoin got a
bad reputation
• The exchange rate crashed to near zero
and Bitcoin was dead according to most
media
5. • A community still believed in Bitcoin and
the exchange rate steadily went up during
2012
• Major websites started accepting Bitcoin
(Wordpress, Reddit)
• Despite all criticism, Bitcoin is now
stronger than ever
7. “I am very intrigued by Bitcoin. It has all the signs.
Paradigm shift, hackers love it, yet it's derided as a toy.
Just like microcomputers.”
Paul Graham
“Bitcoin is still very much a fringe thing [...]
But I like to pay attention to the jokes, the laughing stocks,
because occasionally they get the last laugh.”
Fred Wilson
11. • Each client is connected to nearby peers
• A client can broadcast a message to its
peers
• The peers will forward the message to
their own nearby peers until it reaches the
entire network
12. • Anyone can download a Bitcoin client and
add a node to the network
• There are already tens of thousands of
nodes
16. • In the Bitcoin network, we sign transactions
• Ownership of Bicoins go from a Bitcoin
address to another
• A Bitcoin address is just a hash of the
public key
17. • To create a transaction, I broadcast a signed
message that says “transfer ownership of X
Bitcoins from my Bitcoin address to this
Bitcoin address”
• I also send my public key
18. • Since my Bitcoin address is a hash of my
public key, peers can verify that the public
key corresponds to my Bitcoin address
• Using the digital signature, peers can now
verify that I indeed intend to send Bitcoins
to the destination Bitcoin address
19. • By combining a P2P network and digital
signatures, we have a secure, reliable way of
broadcasting Bitcoin transactions
• But have to we keep track of how many
Bitcoins belong to an address?
20. • Every Bitcoin client has an up-to-date copy
of the history of all Bitcoin transactions
• All transactions are public and irreversible
• This is what we call the “Blockchain”
22. • The blockchain is a list of blocks
• Every block contains a list of transactions
• Roughly every 10 minutes, a block
containing recent transactions is appended
to the blockchain
25. • “Miners” compete to find the next block
• It involves solving a cryptographic
challenge, known as “Proof of work”
• If blocks are mined too quickly, the difficulty
is increased (and vice versa)
26. • What if multiple blockchains emerge?
• This can happen naturally or if someone
attempts to attack the network
• The longest chain is considered valid
30. • To consider a transaction valid, we wait
until several blocks have been appended
afterwards
• This is to ensure forked chains have been
resolved
• Two to six blocks are enough to consider a
transaction valid (20 - 60 minutes)
31. • But how are Bitcoins created in the first
place?
• When a miner finds the next block, he is
rewarded Bitcoins
• Every 210,000 blocks, the reward is divided
by two (every four years)
32. • The bounty for mining one of the first
210,000 blocks was 50 Bitcoins
• Since the end of 2012, it is 25 Bitcoins
• Currently, there are around 11,000,000
Bitcoins
• By 2140, around 21,000,000 Bitcoins will
have been discovered, which is the limit
34. • In addition, you can add a fee to a
transaction
• The miner who find the block that includes
your transaction is awarded the fee
• The higher the fee, the most likely the
transaction will be included in the next
block
36. • We believe Bitcoin has enormous potential
• We work to promote Bitcoin
• We build services on top of the Bitcoin
network
37. • Unlike traditional currencies, the Bitcoin
network is totally open
• Any developer can hack a project
• Bitcoin is both a currency and a transaction
network
38. • As a currency, it is immune to inflation
(fixed number of coins) and not centrally
regulated
• As a transaction network, it allows fast,
secured, cheap irreversible transactions
• Credit cards, on the other hand, have high
fees (3% or more) and charge backs (up to
6 months, why?? Fraud!)
39. • With traditional payment systems, you have
to hand over your credit card info to third
parties (and trust them!)
• With Bitcoins, you give them nothing!
• How would you pay an online merchant
with Bitcoins?
40. • The merchant generate a new, unique
Bitcoin address for your purchase
• You send Bitcoins to the address
• After the transaction is confirmed by the
Bitcoin network, the merchant can safely
deliver your purchase
• That’s it!
41. • This is the kind of stuff Paymium has been
doing since 2011
• To help Bitcoin go mainstream, we work
with both Euros and Bitcoins
• For instance, you can pay a Bitcoin address
using Euros and vice-versa!
42. • We can do this because we have our own
Bitcoin exchange and we can trade Euros
automatically
• In addition we provide easy-to-use wallets
and an API for developers
• Much more coming later this year, so much
we can do!
43. • We made headlines last year because we
became the first Bitcoin startup to have a
Payment Service Provider!
• This means we can open a bank account
for each of our customers instead of mixing
their funds with ours
• In addition we are going to be able to print
debit cards and create IBAN numbers for
our customers
45. • At Paymium, we hold a large number of
Bitcoins for our customers
• We keeps our servers as secure as
possible, but we have to imagine worst case
scenarios
• What if someone gains access to our web
servers?
• By the way this never happened :)
46. • Remember, all you need to prove
ownership of Bitcoins is a private key
• A private key is just a string of character
• It can easily be encrypted, then printed or
stored on a USB key
47. • Because of this, you can store your private
keys in secure locations such as a bank
vault
• Afterwards, you can erase all other traces
of the private key
• This is called “cold storage”
48. • You can still keep the Bitcoin address and
receive payments
• On the other hand, you have to get access
to the physical location of the private key
and know the encryption key to send
Bitcoins
49. • On our servers, we keep the minimum
amount of Bitcoins possible (< 7%)
• We can do this because we can predict
how many Bitcoins are needed during a
normal day
• In we need more coins, we have to go to
our cold storage facilities
50. • In short, the damage that can be done is
limited and we can survive an attack
51. • I hope you enjoyed this talk and that I made
you want to try Bitcoins!
• If you are interested in Bitcoins and are
skilled in security, programming, finance,
marketing, let’s get in touch!
• Questions?