!" # $ % & " & ( ) " ) * ) % + % & ) % , - . , - " & / & + " / # !

/ , $ % ) (
& / ) " . & / # 0 , % ( ( - . * & 1 / ) " . &


) * % ( 1 / 2 3 - % 4 , * / , 2 5 6 3 7 8 5 9
!"#$%"&'( $*++,&$- %. #/, .*#*+,0
!"#$%"& !1'"$ .1$#'
! 1he nomenclaLure ls 8lLcoln for Lhe enure ecosysLem, and
blLcoln for Lhe currency lLself.
! 1he LoLal supply of blLcolns ls llmlLed aL 21 mm. LxpecLed
2040.
! 1here are abouL 12 mm blLcolns ln exlsLence now (37°)
! 8y 2017, 73° wlll be ln exlsLence
! Ledger abouL 27 mm llnes aL Lhe end of lasL year
! 20,000 nodes ln Lhe sysLem
2
2/1# 314,' 5%%6 3%&,-0
! Medlum of exchange (no barLer requlred)
! SLore of value (you can save Lo buy Lhlngs laLer)
! lL ls a unlL of accounL (you can enumeraLe Lhlngs)
! 1hls means:
! lL shouldn'L decay or wear ouL
! lL should be easy Lo carry around/Lransfer
! lL should be funglble (lndlñerenL Lo lndlvldual unlLs)
! lL should be verlñable (noL a forgery)
! lL should be dlvlslble
! lL should have predlcLable (ldeally) or aL leasL undersLandable supply
dynamlcs
3
'1#%'/" &1413%#%
! 1he rooL problem wlLh convenuonal currency ls all Lhe LrusL
LhaL's requlred Lo make lL work. 1he cenLral bank musL be
LrusLed noL Lo debase Lhe currency, buL Lhe hlsLory of llaL
currencles ls full of breaches of LhaL LrusL. 8anks musL be
LrusLed Lo hold our money and Lransfer lL elecLronlcally, buL
Lhey lend lL ouL ln waves of credlL bubbles wlLh barely a
fracuon ln reserve. We have Lo LrusL Lhem wlLh our prlvacy,
LrusL Lhem noL Lo leL ldenuLy Lhleves draln our accounLs.
! WlLh e-currency based on crypLographlc proof, wlLhouL Lhe
need Lo LrusL a Lhlrd-parLy mlddleman, money can be secure
and Lransacuons eñorLless.
4
2/1#7' 2+%&5 2"#/ 1 *'"&5 1 $,&#+18
$%*&#,+91+#- .%+ 314"&5 91-3,&#'0
! Access ls regulaLed (barrlers Lo enLry can be hlgh)
! ?ou have Lo LrusL LhaL counLerparLy (credlL rlsk)
! ?our accounL can be frozen, Laxed, or conñscaLed
! ?our counLerparLy could refuse Lo make your paymenL
! ?our paymenL could be reversed
! Money Lransfer Lakes ume
! Somebody (noL you) ls keeplng LhaL ßoaL
! Money Lransfer ls cosLly
! ÞaymenL and Lransacuon banklng revenue $324 bllllon lasL year (8CC)
! lees 2-3 percenL, more ln LuCs
! ?our Lransacuon reveals lnformauon abouL you
! 1argeL 70 mm cusLomers
! MerchanLs have Lo re[ecL 3-10° of orders
5
2/1#7' 2+%&5 2"#/ 1 $,&#+18 !1&4
$+,1#"&5 ."1# $*++,&$-0
! lndlvlduals make !"#$%&'()*%+ declslons abouL how much
currency Lo creaLe
! 1here ls an lnherenL ºume lnconslsLency problem"
! lnßauon ls drlven by expecLauons
! Cn Lhe oLher hand.
! lull falLh and credlL of Lhe governmenL Lo defend Lhe currency (ßoor)
! Wldely accepLed because governmenL lnslsLs LhaL Laxes are pald ln Lhe
currency
6
'9,$*81#"%& %& $/"&,', ,:$/1&5,
7
Source: BofA Merrill Lynch Global Research
!"#$%"& "' 1 6"..,+,&# '-'#,3
! lL ls noL a LrusL-based sysLem:
! lL ls dlslnLermedlaLed. 1here ls no cenLral counLerparLy ln charge of
bookkeeplng for your accounL (no credlL rlsk)
! 1he publlc ledger ls LransparenL Lo everyone
! All Lhe soûware, archlLecLure, and rules are open source
! lL's a consensual sysLem
! Þeer Lo peer neLwork of (currenLly) approxlmaLely 20,000 nodes
! Lverybody plays by Lhe same seL of rules
! ueclslons (addluons, changes, anyLhlng) requlre agreemenL by sysLem
paruclpanLs (nodes).
8
!"#$%"& 3"&,+'
9
! 8uns on a masslve peer-Lo-peer neLwork of speclally deslgned ASlC chlps
! CurrenLly approxlmaLely 20,000 nodes ln Lhe neLwork
Source: Alec Liu, A Guide to Bitcoin Mining
!"#$%"& /1' '%3, +,188- 5+,1# 9+%9,+#",'
! 1ransacuon cosLs are low (LrusL cosLs money)
! 8arrlers Lo LnLry are exLremely low
! lL's psuedonymous
! AccounLs are noL malnLalned, only Lransacuons are malnLalned
! no emall, username, password eLc.
! 8uL LraceablllLy ls lnherenL
! 1ransacuons are lrreverslble aûer abouL one hour (Lo be safe).
10
3%+, 5+,1# 9+%9,+#",'
! MlcropaymenLs can be made easlly
! 8lLcoln ls dlñerenL Lhan oLher currencles because lL's *%-".%*%"/+ !"0"#"-/&1
! lL ls now dlvlslble Lo elghL declmal places (currenLly)
! So you can charge .00000001 for someLhlng = one saLoshl
! 1he blLcoln unlverse has 2.1 quadrllllon SaLoshl
! 1here are approxlmaLely 1 quadrllllon pennles ouL Lhere.
! 1here ls no moneLary auLhorlLy LhaL creaLes blLcolns..and Lhe
supply dynamlcs are known ex anLe

11
6,.81#"%&1+- $*++,&$-
1here ls a llmlLed supply of blLcolns
! 21 mllllon wlll be creaLed ln LoLal
! LxpecLed Lo be reached ln abouL 2040
1he raLe of supply dlmlnlshes over ume
! ln a predlcLable way...Lhls ls really lmporLanL
lf somebody loses Lhelr blLcolns, Lhey wlll never agaln be reLrleved
! 1hls happens by loslng your prlvaLe key
12
!"#$%"&7' '*998- 6-&13"$'
13
Source: Bitcoin Forum; whitslack
2/1# "' "&$+,6"!8, 1!%*# !"#$%"&
!;<=>;? ;@ A B;@<C;DE<FB BA<ADA@F GHFCF <HF >CBFC >I <CA?@A=J>?@
;@ AKCFFB EL>? DM FNFCMD>BMO

! 1herefore, Lhere ls no quesuon abouL leglumacy. Lverybody
agrees on who has won (who goL Lhere ñrsL)
! lL solves Lhe ºdouble spendlng" problem wlLhouL Lhe
requlremenL of a cenLral counLerparLy.
! 1here are oLher examples of Lhe ume-sLamp problem..

14
/%2 6%,' !"#$%"& 2%+40
! Allce sends blLcolns Lo her frlend 8ob by ñlllng ouL an elecLronlc
order LhaL lncludes hls ºaddress" and Lhe amounL.
! She ºslgns" LhaL order wlLh her slgnaLure (Lo show LhaL lL ls hers)
! 1haL Lransacuon ls blasLed ouL Lo Lhe 8lLcoln neLwork, where all
Lhe compuLers valldaLe lL.
! 1o make sure she acLually has Lhe rlghL Lo send Lhe money
! lf lL's ok, Lhe Lransacuon ls added Lo Lhe ledger
! 1he money ls now assoclaLed 8ob's address
! A bunch (10 mlnuLes worLh) of Lransacuons are complled lnLo a
block and added Lo Lhe maln ledger. (a ºpage" ln Lhe ledger)
15
,P,+- #+1&'1$#"%& 5%,' #% #/, 8,65,+
16
º8y readlng Lhls arucle you are mlnlng blLcolns", CuarLz, uecember 17, 2013
2/1# $%*86 9%''"!8- 5% 2+%&50
8lLcoln needs Lo solve Lhree fundamenLal problems:
! keep Lhe ledger as a whole secure (sysLem fallure/hacklng)
! Make sure each Lransacuon ls secure
! ÞroLecL Lhe lnLegrlLy of Lhe ledger
! Solve Lhe double paymenLs problem
17
4,,9"&5 #/, 8,65,+ ',$*+,( #/,
6"'#+"!*#,6 3%6,8
! Lvery Lransacuon ls sLored on every compuLer ln Lhe sysLem
! Lach compuLer helps keep Lhe sysLem secure (and ls rewarded
for dolng so)
! lL's a dlsLrlbuLed neLwork, so any change Lo Lhe ledger or Lo Lhe
sysLem as a whole has Lo be accepLed by everybody (Lhe
ma[orlLy of nodes)
18
314"&5 #+1&'1$#"%&' ',$*+,
Þubllc/ÞrlvaLe key crypLography
! All paymenLs are verlñed by knowlng someone's publlc key
(pseudonym)
! All paymenLs are made secure by uslng Lhe prlvaLe key.
! Anyone can see Lhe balance assoclaLed wlLh Lhe publlc address,
buL you can'L spend Lhe money wlLhouL Lhe prlvaLe key.
CrypLographlc Pash luncuon
! LncrypLs Lhe paymenL message
A slgnaLure (Pashed message + prlvaLe key) Lells Lhe world you are
allowed Lo make LhaL Lransacuon (spend Lhe blLcolns)
19
8"&4,6 !8%$4' 314, #/, 8,65,+
20
º8y readlng Lhls arucle you are mlnlng blLcolns", CuarLz, uecember 17, 2013
6%,' #/"' '%8P, #/, 9+%!8,30
! 1hls ls cool because:
! All you need Lo know ls Lhe publlc key ln order Lo verlfy LhaL Lhe person
has Lhe auLhorlLy Lo Lransfer Lhe money assoclaLed wlLh a glven publlc key
! And, Lhls process can be repeaLed backwards so LhaL blLcolns can be
Lraced back ln Lhls same manner all Lhe way Lo when Lhey were creaLed.
! 8uL whaL lf Allce dld Lhls Lwlce?
! Whlch one would be leglumaLe?
! 1he one LhaL came ñrsL!
! Whlch one came ñrsL?
! Who knows? 1hls needs Lo be declded and everybody needs Lo agree on
Lhe answer? >>> so LhaL Lhe Lransacuon ls deemed leglumaLe
21
"#7' #%% ,1'- #% 9*# !8%$4' %& #/, 8,65,+Q
! An evll node could go back Lo a prevlous block and make a
change (double paymenL) and Lhen recreaLe Lhe block chaln.
! ?ou need Lo make lL lmposslble Lo do LhaL
! So, whaL Lo do:
! CreaLe a ºproof of work" problem LhaL ls hard Lo solve.
! 1he node LhaL ñrsL does ºproof of work" wlns
! 1hls ls verlñed by all oLher nodes on Lhe neLwork
! lf accepLed lL ls appended Lo Lhe ledger (block chaln)
! Lvery oLher compuLer node wasLed Lhelr ume
! 1here could be a branch ln Lhe ledger.
! 1he nexL block-wlnnlng mlner ºdecldes" whlch one survlves
! 1he ledger of record ls Lhe longesL (mosL dlmculL) ledger
22
-%* &,,6 #% 5,# 8*$4-
23 º8y readlng Lhls arucle you are mlnlng blLcolns", CuarLz, uecember 17, 2013
#/"' "' /%2 -%* 5,# !"#$%"&'Q
! CreaLes Lhe lncenuve sLrucLure Lo do Lhe work Lo keep Lhe
enure ecosysLem secure
! lL ls falr - more work, more blLcolns
! 1hls ls whaL proLecLs Lhe sysLem agalnsL double paymenLs
! Puge compuLauonal dlmculLy --- you wlll never caLch up
! 8uL also, Lhe lncenuves are sLacked for you Lo play by Lhe rules
24
3"&"&5 "&6*'#+-
25 Source: BofA Merrill Lynch Global Research
Mining industry is growing at an exponential rate
Advances in technology key to computational prowess
8".,$-$8, %. 1 !"#$%"& #+1&'1$#"%&
26 Source: Bitcoinchart.co.uk
/%2 !"5 "' #/, 31+4,#
27 Source: http://www.coinmap.org/
Overstock.com
Virgin Galactic
Wordpress
Zynga
The Pirate Bay
Reddit
eBay
Tesla
2/% 1+, #/, !"5 981-,+'
28 Source: http://bitcoincharts.com/markets/

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