Agenda • What is Bitcoin? • A digital currency that is created and exchanged independently of any government or bank. Bitcoin is computer generated and can be converted into cash after being deposited in a virtual wallet. • Digital currencies in general • Why now? • How does Bitcoin work? • Peer-to-peer network • Mining • Signs of a Bubble
Why now? • Payment methods like cash are problematic… • Cash wears out, needs to be replaced • Not always easily traceable • Potential for counterfeit / forgery • Theft – cannot be easily deactivated • Expensive to transport, heavy, bulky • Inflation – just print more • Costly to produce • 5.7 cents for a dollar bill • 10 cents for a dollar coin • 12.5 cents for the new $100 bill • Once retired, cash must be destroyed
In Cash We Trust • Why does cash work so well? • TRUST • Cash is just paper… exchangeable paper • As long as I know that I can exchange it… • Liquidity… as good as gold • Convertible into gold • Nixon Severs the Dollar from Gold: 8-15-71 1971
Digital Currency • The USD is kind of digital already • You don’t have to run the printing presses just to expand the money supply • Buy back bonds, pay with digital deposit • But Bitcoin isn’t like that… • Removes the central function of a federal reserve (government) • With the full force and backing of… nobody! • How do you get Bitcoin? Exchange rate applies… (weird) • Figure out a way to move Bitcoin currency… easy • How can you increase the money supply… mine more
Source: https://bitcoin.org/bitcoin.pdf Bitcoin Origins, October 2008
Exchange Rate January 2009 – Bitcoin v0.1 announced Flat line – no activity extending all the way back to January 2009 Source: https://blockchain.info/charts/market-price?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=
Demise of Mt. Gox MIT Technology Review
Bitcoin – Managing Supply There will never be more than 21 million bitcoins in circulation.