Medium of Exchange
Store of Value
Unit of Account
"I can give Alice some value."
Alice --(house)--> Max
Max --(money)--> Alice
Alice --(money)--> Bob
Bob --(apples)--> Alice
"I can hold it and it doesn't go away."
Alice --(house)--> Max
Max --(money)--> Alice
Alice --(money)--> Bob
Bob --(apples)--> Alice
"I can price both houses and apples"
Alice --(house)--> Max
Max --(money)--> Alice
Alice --(money)--> Bob
Bob --(apples)--> AliceFungible (units are alike)
Divisible (can represent big or small values)
Portable
Durable
Recognisable
Scarce
Non-consumable
Australian Dollar → Legal Foundation
Bitcoin → Mathematical Foundation
Both Money
3-and-a-bit answers:
Currently: ~$590 USD
Doubling time: ~4 months
Name | Volume | # Transactions |
---|---|---|
Western Union | 4x | 10x |
Paypal | 10x | 100x |
Visa | 300x | 3000x |
Doubling time (# transactions):
~11 months
Name | # Merchants |
---|---|
Bitpay | 35,000+ |
Coinbase | 35,000+ |
Doubling Time: ~5-6 months
New Adopters:
Name | # Users |
---|---|
Blockchain | 2,000,000 |
Coinbase | 1,500,000 |
Doubling Time: ~6 months
(August 2014)
Addresses and Wallets
Transactions
Double Spends
Global Tx Ledger
An address looks like 157AGN5ztnE8ZXZFDX6iaAiHptWBvNFrSa
Simply a description, not a movement
"Bob sends 9.95000000 XBT to Alice"
1PGo2Yx9FSNAUqLGhBZijeCoyrLRsPtrY4
sends 9.95000000 XBT to
1NFdNzV9R8YfVV3ferjpRywZkfcXy783pj
If transactions are just descriptions...
Why can't I lie?
Answer:
Everyone knows EVERY transaction
Updated (approximately) every 10 minutes with a new 'block'
(block: a list of transactions)
Data Structures:
Transactions
Blocks
The Blockchain
Contain a list of transactions
(and a little metadata)
Also require a special
'coinbase' transaction
This is how new coins are introduced
Idea:
try one thing
many times
until a 'special' solution is found
Because the solution is random,
if a 'special' solution can be found,
the number of attempts can be estimated.
Each block has a proof of work attached
(dependant on the contents of that block)
Quick to validate
Hard to generate
No Short-cuts
Each block points to the previous block
Which creates a chain:
... ← b30 ← b31 ← b32 ← b33 ← b34 ← ... ← b315300
Able to estimate how many attempts
in the ENTIRE chain
Consensus rule:
pick the chain with the most attempts
Self regulating production time
Constant production rate
(predictable inflation)
Set the number of attempts needed
via the 'difficulty'
(Time for game theory)
↘
↘
↘
↘
Low difficulty / high price creates profit potential
More miners
Faster blocks
Difficulty increase
Profit potential decreases
Bitcoin reward and price at equilibrium
↓
Price increase
↓
Higher profit potential from mining
↓
More miners
↓
Reward and price at new equilibrium
No profit potential with current hardware
↓
Design & produce new custom hardware
↓
More attempts for same cost
↓
New profit potential
Approaching current limits of technology
↓
Cannot make smaller, faster chips
↓
Market will respond by making chips cheaper and more accessible
Date | Difficulty |
---|---|
May 2013 | 12 million |
August 2014 | 19 billion |
Doubling Period: ~1.5 months
10 THash/s for $10,000
Equivalent to 25,000 GPUs
$10,000 buys you:
S1: 500,000 word dictionary with 2,000 permutations per word
S2: All 10 character alpha-numeric combinations
Medium | S1 | S2 | |
---|---|---|---|
GPU | 0.15s | 1,200 days | |
ASIC | 0.0001s | 0.97 days |