Bitcoin & Cryptocurrencies

David Stancel
10.9.2017

Content

- What it is

- History and Background
- How it works

- Consequences

- Challenges

- Q&A

Bitcoin as a ...

Currency/Commodity/Asset?

- Decentralized with no middleman

- Independent

- Open-source

- Deflationary

- Fast (?)

- Pseudoanonymous

History & Background

- Inception of Assymetric Cryptography & PKI

- (Failed) Attempts for digital cash

- Cypherpunks

- Satoshi Nakamoto

How it works?

- Blockchain

distributed ledger of ALL transactions ever made
each node in the network has a copy

- Transactions

are divided into blocks
each block contains hash of a previous block

How it works? II.

- Distributed Consensus

mechanism that makes all nodes agree on order of transactions

- Proof of Work

Miners have to perform difficult mathematical operations in order to guess a puzzle
The one who is first wins a block reward and has right to propose a block

- Hashrate
the more computing power the more often you get reward

more miners --> bigger hashrate --> more secure --> difficulty increase (adjusted each 2016 blocks)

Hash Function

How transactions work?

New transactions are broadcast to all nodes
Each node collects transactions into a block
In each block a random node gets to transact its block
Other nodes accept the block only if it contains valid transactions (unspent, valid sigs)
Node express their acceptance of the block by including its hash to a next block they create