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DRIVING EDUCATION AND PROFESSIONAL USE OF DIGITAL CURRENCY IN AUSTRALIA

www.thinkbitcoin.com.au

Produced by: Martin Davidson Email: info@thinkbitcoin.com.au

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What are Digital Currencies?1) Digital currencies, also known as crypto currencies, are math based computer generated money.. But what is MONEY?Medium of exchangeStore of valueUnit of account

2) They are also their own payment networks

History of Bitcoin

https://bitcoin.org/bitcoin.pdf2008: Bitcoin white paper is released

2009: Software becomes available

2010: First currency exchanges appear

2011: 1 Bitcoin = $1 USD

2012: Multi-signature

2013: Cyprus bank bail ins, 1BTC=$1k

2014: Mt Gox. Mainstream awareness

2015: Stock market listings..

Some Basic Termsbitcoin: Without capitalization, is used to describe bitcoins as a unit of account Bitcoin: With capitalization, is used when describing the concept of Bitcoin, or the entire network itself Address: A location that bitcoins have been sent to and reside at. Alternatively, can be thought of as an account of sorts that has a balance of bitcoins Blockchain: The complete transaction ledger of the Bitcoin network, showing how bitcoins have been transferred from one address to another over time. The blockchain is a public record of all bitcoin transactions in chronological order Transaction: The movement of bitcoins from one address to another address. In traditional terms, this can be thought of as a payment or money movement

Digital MoneyBitcoin is the most well known example of a new breed of digital currencies. Global digital currencySupply is capped at 21 millionCan be divided to 8 decimal placesCannot be counterfeitedCurrently valued at around $350 AUDNetwork valued at $3.5bn

The Payment NetworkDecentralized, peer to peer networkTransactions are fast and cheapTransactions are irreversibleTransactions are verified in minutesOpen to anyone with an internet connectionCan be used to transmit anything of value. (2.0 projects)

What is Peer to Peer?

No centralised database or single point of failure

Bitcoin Price

$100 worth of bitcoin in 2010 would be valued at $500k today

Bitcoin Transactions

2011: 2,000 per day 2012: 7,000 per day

2013: 30,000 per day

2014: 70,000 per day

2015: 110,00 per day

Bitcoin Mining

25 bitcoins mined into new blocks every 10 minutes144 blocks mined per day = $1,080,000 AUD ($300 per BTC)

What is Mining?Mining serves 2 purposes:Mining creates new bitcoins in each block. The amount of bitcoin created is fixed and diminishes with time.Mining creates trust by ensuring that transactions are only confirmed if enough power was devoted to the block that contains them.

Mining contd.The creation of new blocks must take an average of 10 minutesThe regulation is done by periodically adjusting the hash target value for blocks.Every 2,016 blocks (which spans 2 weeks if each block takes 10 minutes), the nodes calculate a new difficulty based on the time it took to mine the last 2,016 blocks.

Mining is a 3 step processStep 1: Miners create a file that contains (a) the hash of the last block in the existing blockchain, (b) a block of the new proposed transactions broadcast in the Bitcoin network and (c) a random number that the miner guesses (a nonce). The combination of (a) + (b) + (c) is the data used as the input for Step 2 Step 2: Miners apply a cryptographic function to the data. The details of the function (SHA- 256 in the case of Bitcoin). What is important to understand is that the function does some calculations on the file/data from Step 1 and produces a random number known as a hash Step 3: The hash is reviewed against a desired pattern (in the case of Bitcoin, how many leading zeros it has, an outcome that is effectively random). If the hash matches the pattern, the miner has a correct block and will win an economic prize. If the hash does not match the pattern, the miner returns to step 1, guessing a new nonce and repeating the exercise

Cryptographic Currency mining

Mining poolsBitcoin mining is a rapidly expanding and highly specialised, capital intensive industry. Mining pools use different distribution schemes, they share in the bitcoin rewards. Mining farms are located where energy costs are lowest

Bitcoin issuance over time

May 2015: 14 million bitcoins have been mined

2032: 99% of all bitcoins will be mined

2140: 100% of all 21 million bitcoins will be mined

Public Transaction Data

Every transaction is publicly visible on the blockchain forever

How to use Bitcoin

Whats a Bitcoin Wallet?

The Public Key is used to produce a Bitcoin address (like an account no.)

1AA6oACAt6iD7asKpCKoLnZQLoZCRj8CSV

The Private Key is used to digitally sign the transaction like (like a pin no.)

5JxA624fMUnePFkgGYCUxWcDfzaomDM3QeXj9FxViJSsEz2X9Wh

Different types of wallets

Bitcoin units of account1BTC = bitcoin ($300AUD)0.001 = mBTC millibitcoin (30cents)0.000001 = uBTC microbitcoin/ bits (.03 cents)0.00000001 = Satoshi smallest unit of a bitcoin (.0003 cents)21 million BTC / 7 billion people = 0.003 BTC / 3mBTC per person (90c)The default fee for most bitcoin wallet apps is 0.0001 BTC 3 cents. This fee is paid to the miners verifying transactions on the network.You can choose to send a higher or a lower fee with some bitcoin wallet apps. eg- Bitcoin QT/ Blockchain.infoNB: The market price of bitcoin will affect the transaction fees.

How to get, buy and sell bitcoinsOnline exchanges

Bitcoin ATMs/ vending machines

OTC (over the counter)

Peer to peer/ in person (Local Bitcoins)

Offer a product or service via your website/ shop

Mine bitcoins / mining contracts

Opportunities for Digital Currencies

Remittances

$540 billion market 10% potential savings..

Digital Money for A Digital World

More people on the internet now, than the global population in 1960!

Question- How will people transact in the future?

Global Mobile Banking

Developing nations mobile and Internet infrastructure is growing rapidly.

M-Pesa now accounts for 31% of GDP in Kenya70% of African population have mobile phones

Store of value for unstable currencies?March 2015:

Inflation of as much as 40 percent is the biggest economic challenge Argentina faces, says presidential hopeful Sergio Massa.

Micro-payments

Decentralized Centralised

Crowd Funding

Innovative decentralized solutions allow programmable money using smart contractsCentralised options using Bitcoin

Charities and non profits

Bitcoin transactions offer the option of full transparency

Freedom of speech/ information

Like the internet, Bitcoin is a protocol which cannot be shut down. Transactions cannot be censored

Bitcoin has no borders

Over 100,000 businesses now accept bitcoin transactions

International trade

"Bitcoin helps us reduce the inherent costs involved in international trade. Tomcar Australia already uses Bitcoin to pay a growing number of overseas suppliers. Our manufacturing partner, MTM is also actively exploring using Bitcoin to do this as well. If we use Bitcoin ourselves, it makes sense to accept it from customers too, Mr. Brim, Tomcar owner says.

In Store Payments

Up to 1% bitcoin to dollar transaction fee or $0 to hold digital currency

In Store PaymentsCoinjar EFTPOS debit card linked to your Bitcoin trading account

Online payments/ E-commerce

Payment cost savings with zero currency volatility risk

Marketing with apps

Advertise your business using Bitcoin web and mobile app services

Future applications

Produced by: Martin Davidson Email: info@thinkbitcoin.com.au