BitCoin-Why and What? YouTube Lecture Handouts

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BitCoin: Creation, Circulation, Usage, Problems & Advantages - Currency of Internet

General Studies Bitcoins – Cryptocurrency

Bitcoins - Cryptocurrency
Eliminating the Middle Man

“If You Can՚T Explain It Simply, You Don՚T Understand It Well Enough.” - Albert Einstein

Why Use BitCoin?

  • Peer to peer
  • Account can՚t be closed
  • On digital wallet
  • Simple as email
  • Secured by Miners (rewarded for maintaining ledger)
  • Changing finance
  • Minimize transaction fee
  • Cannot be frozen & blocked

Cryptocurrency – Anonymous

  • Crypto = Hidden
  • Key
  • Signature
  • BitCoin/Altcoins – 1st decentralized Cryptocurrency in 2009

Double Spending Problem

Main Problem with the Digital Money

Open Ledger

  • Chain of transactions
  • Open & public
  • Decide valid/not valid
  • Centralized place
  • Who is doing is private

Distributed Open Ledger

  • Each can have copy of the ledger
  • Many Copy – All synchronized (have same version)

Miners

  • Special nodes that can hold ledger
  • Miners compete among themselves – to validate and add to ledger (check funds)
  • Find key – take previous transaction & lock new transaction
  • Invest computational power & time
  • Gets financial reward (when solved)

Block Chain

  • New group of accepted transactions
  • 6 times every hour – blocks made
  • Nonce: Arbitrary number may only be used once
Block Chain

Block Chain – Public Distributed Ledger

  • Its not bitcoin but backend of bitcoin
  • Ledger is open and public
  • Ledger exists in many nodes - decentralized
  • Removes dependency on 3rd party
  • No trusted entity
  • Faster/Immediately
  • Cheaper
  • For new block – 12.5 BTC
  • Every hour BTC
  • After 2.1 lakh block (4 years) , amount of BTC is halved – ultimately zero BTC – only transaction fee

Bitcoin Circulation

  • 21 million bitcoins in 100 years
  • About over 13 million bitcoins in circulation by 2014
  • 8 million bitcoins will be mined in next 95 years
Bitcoin Circulation

History of Cryptocurrency

  • 1998: We-Dai – b-money – distributed electronic cash system
  • BitGold by Nick Szabo
  • 2009: Bitcoin - used SHA-256, a cryptographic hash function, as its proof-of-work scheme
  • 2011: Namecoin
  • 2011: Litecoin - used scrypt as its hash function
  • Peercoin: proof-of-work/proof-of-stake hybrid
  • 2014: Treasury

Algorithms

  • SHA-2 (Secure Hash Algorithm 2) by NSA - cryptographic hash functions
  • Scrypt: Password-based key derivation function – make it difficult to do hardware attacks

Bitcoin (BTC, XBT Or

The Bitcoin

)

  • Key and Signature
  • Signatures are unique
  • By Satoshi Nakamoto
  • 31 May 2017: 1 bitcoin = $ 2257.96 or ₹ 143126.45
  • Mathematically limited to 21 million bitcoins

Satoshi

  • Satoshi/Austrian – one hundred million of BTC (smallest unit)
  • Japanese character ( “shi” ) - proposed
  • Katakana symbol ( “sa” ) - proposed
  • Circled shi
  • Hiragana shi

Why Bitcoin Fluctuates?

  • Rate in 2010 ($ 0.08)
  • USA (buy – uptick)
  • Zambia (sell – downtick) 30 minutes later
  • Decrease in Bitcoin rate by:
    • Merchants accepting Bitcoin
    • Miners “cashing out” to pay bills with fiat
    • Redemption of transmission bitcoin
    • Conversion of bitcoin salaries to fiat (increase in unused bitcoin)

Who Accepts?

  • More than 1 lakh retailers
  • Wallet applications
  • Apple
  • Dell
  • Newegg
  • e-Bay
  • Dish Network

Global Scenario

  • Japan – Bitcoin made legal (law passed)
  • Australia – removed double tax on bitcoin users
  • Bangladesh – Illegal – 12 years in jail
  • Kyrgyzstan – Illegal (no prohibition from buying and selling)
  • Ecuador – banned (creating its own virtual currency)
  • Bolivia – Banned
  • Vietnam – prohibits credit institutions from dealing in cryptocurrency

Bitcoin in India

  • BTCXIndia: 1st bitcoin exchange in India with KYC and AML guidelines
  • Unocoin
  • Zebpay – 5 lakh app downloads & 2,500 users per day are added
  • Fiat is needed to purchase Bitcoin to enter market in India – entry by donations, services or mining
  • Still researching on bitcoin to make it legal
  • Market acceptance, customer trust, investment security, money laundering, hawala

Bitcoin Thefts

  • Mt. Gox – mtgox. com, short for Magic: The Gathering Online exchange in 2006. World՚s leading bitcoin exchange in 2013 - 14 - 850,000 bitcoins were stolen which amounted to $ 450 million & finally bankruptcy declared
  • Bitfinex - $ 72 million stolen in Hong Kong based exchange - customers would forfeit 36 % of their holdings and be given “BFX tokens” instead that could be redeemed by the exchange or converted to shares in its parent company iFinex.

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