First dive in
The cryptoverse
Digital currency revolution.
A bit of history
Going back to where it all started.
A gift to the entire humanity
But what is Bitcoin?
* * *
FORGET EVERYTHING YOU THINK TO KNOW ABOUT IT
Bitcoin is not simple money.
Not only.
A PLATFORM FOR TRUST
What about blockchain?
Not a system of currency.
So what cryptocurrencies are?
A digital currency implemented as a native application for their blockchain.
Freely tradable
Storable without relying on any trusted centralised 3rd party
Why blockchain needs a cryptocurrency?
To create a system of economic incentives that secures the network.
AN ILLUSION
What is money?
Imaginary. More than Bitcoins.
Money
The oldest technology of the humankind.
- Year: 4600 A.C.
- Place: Wadi al-Jarf, Egypt.
The numbers — units of accounting for values — preceded the letters.
Evolution of money
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01. Barter to basic value abstractions
From the most basic exchange of goods, values, services between two or more humans to the use of beads, stones, shells, feathers.
Until we got the metals ... -
02. Paper money
Italy, during Middle Ages. Italians invented banking, assurances, checks, bonds. Basically piece of papers representing values.
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03. Plastic money
United States of America, 1950.
First use: paying a restaurant. -
04. Network money
Earth, 2009.
First use: 10000 bitcoins to pay 2 pizzas in 2010.
The internet of money
Not the money for internet.
Communication
We want to communicate and to interchange value.
Money is an abstraction — a language — to do it.
Protocol
A protocol is essentially a language.
Bitcoin is a protocol running as application — representing value with new revolutionary unique characteristics
— on a platform.
A global monetary system.
* * *
Without thirdy parties
Without central points of control / failure
DISRUPTION / INNOVATION
Bitcoin will have on the world the same impact the internet has.
EPIC TRANSFORMATION
From institutional money to network money
Bitcoin separates the money abstraction from concepts of national sovereignty, central autorithies and central powers, ...
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programmable
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decentralised
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permissionless
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international
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open
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borderless
Bitcoin does not recognize persons.
It simply doesn't care.
Humans, refrigerators, self-driving cars, software agents, machines.
Anything can exchange value on the blockchain and behave consequently.
In seconds, from everywhere, permissionless, without intermediaries.
OUR FUTURE
Be your own bank
Bitcoin allows you to control your own money.
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100 % control
Also responsibility. -
Authority
Just you. -
Not seazable
No freezes...
How Bitcoin works
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01. Transactions
Partecipants send bitcoin to each other (paying fees), cryptographically signing a tx
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02. Blocks
The network collects all the tx made during a set period into a list, validating them as consensus rules mandate
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03. Mining
Miners notarize blocks (containing txs) writing them on top of the previous blocks of the general ledger — ie., the blockchain.
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04. Reward
To notarize blocks miners have to do a very expensive activity (proof-of-work) — ie., solving difficult mathematical problems competing with other miners. Since mining is very expensive they receive a reward, the only way to create bitcoins.
Economic incentives on bitcoin blockchain
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Mining
Whoever commits computing power get a reward in bitcoin when wins the game.
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Tx
Who moves bitcoin — ie. payments — pays fees as a reward for miner.
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Difficulty
Difficulty of the network depends by the hashing power. Adapts itself every 2 weeks.
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Halving
Every 4 years the reward is automatically halved.
Bitcoin features
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21M Fixed supply
One hard rule of the protocol is the total number of bitcoins: it is fixed. -
Censorship resistance
The tx cannot be blocked or reversed in any way.
No tx can be censored.
No matter what are the parties in the game. -
Full financial control to the end user
The Bitcoin holder has complete control on its funds.
No government — literally nobody — can freeze his account.
Properties of good money
Comparation of fungibility, divisibility, portability, scarcity, and durability.
| Fungibility | Divisibility | Portability | Scarcity | Durability | |
|---|---|---|---|---|---|
| Fiat currency | |||||
| Coffee | |||||
| Diamonds | |||||
| Gold | |||||
| Bitcoin |
What is a bitcoin wallet?
* * *
A piece of software
Communicates with blockchain network
Allows you to send and receive tx
Wallets do not store any coin
* * *
Containers for private keys
Centralized systems
Information and control held by a central source.
They fail when the main node is corrupted, seizured, or simply fails.
Decentralized systems
No single point of failure.
The network can repair itself when a node is corrupted, seizured, or fails.
Distribution wins
Distributed Ledger Technology
Public ledger of transactions
Cryptography in the form of distributed merkle hash trees guarantee security as well as privacy.
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shared
Each node in the peer-to-peer network is client as well as server. -
100 % trustless
Game theory models economic incentive such that each node in the P2P network verifies the tx according to a protocol -
Distributed
No single user control, no central point of failure. -
transparent
Everyone can inspect. -
Immutable
Impossible to change blocks. -
tamper resistant
You have to manipulate data on the majority of nodes in the P2P network. You also have to rewrite the complete history of the nodes.
BEYOND TRANSFERRING VALUE
Smart Contracts
Computer protocol able to enforce the execution of a contract written on the blockchain
No possibility of downtime, censorship, fraud, 3rd party interference.
NOTARIZATION
Online notaries of files, messages, documents, luxury goods
* * *
Once uploaded receive the timestamp of the block in which it is included.
No possibility to ever change, backdate, postdate or manipulate them anymore.