Internet of Transactions:
Bitcoin, an Internet-Scale Open
Platform for Value Exchange
Pierre Noizat PAYMIUM - June 2014
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Genesis & history
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2014 : Paypal starts integrating Bitcoin
2013 : First Big Online Retailers start accepting Bitcoins
2012 : First Bitcoin wallets in Appstore ..and out
2011 : Bitcoin trading over 1 USD for the first time
2010 : Gavin Andresen starts working on the code
2008 : Bitcoin (Satoshi Nakamoto)
2004 : Ripple (Ryan Fugger)
2001: Bit Gold (Nick Szabo)
1998: B-Money (Wei Dai)
1997: Hashcash (Adam Back)
1980: Digital Signatures (RSA)
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Why it’s a big deal..
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Debt Money vs.Value Money
Monnaie élastique
Generation Transaction
Issuance of a debt
Open source software/
Public Ledger
NO
Monnaie «commodité»
Mathematical extraction
YES
Money Supply Graph
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Banque
Actif
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Banque
Actif
Actif
Prêt à Durand: !
10 000 €
Durand
Actif
Passif
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Avant le prêt bancaire
Passif
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Après le prêt bancaire:!
10 000 euros sont créés !
ex nihilo
Durand
Actif
Actif
Passif
Passif
Compte de Durand: !
10 000 €
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Passif
Passif
Compte à la Banque: ! Prêt à rembourser: !
10 000 €
10 000 €
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Big Data: Business Data or Open Data ? Bitcoin is large-volume, complex , dynamic data: Big Open Data
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Data is raw material for value added services:
Network architecture is key to the balance of power between data collector and data producers
Cetralized networks:Google,
Facebook, Amazon, Banks, etc.
Decentralized networks: Bitcoin, email, web, etc.
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Data capture by centralized networks leads to an unsustainable software-mediated economy
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Chain of Transactions
Input
Input (25)
Generation
Input
Output (25)
Output (100)
Input (100)
Input (25)
Output (15)
Output (110)
Change
Payment
Input (110)
Output (110)
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Transaction Inputs & Outputs
Transaction 1
Tx Hash 0
Output Index 0
Signature
Tx Hash 0
Output Index 1
Signature
Amount x
Address 1
Amount y
Address 2
Transaction 2
Tx Hash 1
Output Index 0
Signature 1
Tx Hash 1
Output Index 1
Signature 2
Amount z
Address 3
Amount v
Address 4
SIGHASH_ALL , the default signature hash type, signs all the inputs and outputs, protecting everything except the scriptSigs against
modification
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Bitcoin Address
1CC3X2gu58d6wXUWMffpuzN9JAfTUWu4Kj
Public Key
(x,y) = !
04588D202AFCC1EE4AB5254C7847EC25B9A135BBDA0F2BC69EE1A714749FD77DC!
9F88FF2A00D7E752D44CBE16E1EBCF0890B76EC7C78886109DEE76CCFC8445424
The public key P is a point (x,y):
P = K*G where G is a base point on the elliptic curve
specified by Bitcoin: y2= x3+7.
x and y are two 256-bit integers.
Private Key
K = 5Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KF
Main branch of the blockchain: most difficult to rewrite
Orphan Block
Block on side branch
Block on main branch
Blockchain Overview
Genesis Block
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The main branch is defined as the branch with highest total difficulty, summing the difficulties for each block in the
branch.!
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1 Megabyte Block size limit => 10 tx /sec!
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Blockchain Simplified View
Block size < 1 MB
=
7 tx/second
Generation = 50
Total Fees = 6
Input = 25
Outputs = 24
Fee = 1
Source: Jan Vornberger
Inputs = 20+50
Outputs = 65
Fee = 5
Blockchain explorers
blockchain.info
blockr.io
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Bitcoin Exchange: Marketplace
Real Time Trading
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paymium.com
Bitcoin Exchange AML Compliance:
Review CDD Role and Balance Sheet of the PI
1. Customer Due Diligence !
by the Payment Institution
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Proof of residence!
State ID!
Bank Satement
2. Customer Account Balance in Euro logged in the Payment Institution Liabilities !
=> Balance Sheet Review by the Regulators
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Bitcoin Wallet Solutions
A Bitcoin wallet is in fact a key ring
Hosted Wallet, P2SH address
Client Side Wallet
Hosted Wallet, standard address
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Mobile clients
Mycelium
Schildbach bitcoin wallet
breadwallet
Use Cases
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• Peer-to-peer, money transfer
• Group payments
• Pre-paid cards
• «Single Scan Purchase»
• «Open Source Payment Solution» for communities
• Complex transactions: escrow, open assets protocol,
crowdfunding
• Electronic vote
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Gift cards, pre-paid cards
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Single Scan Payment
scan, purchase, receive !
Group Payments
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The bitcoin «group» payment address (e.g
1PierreFUi7RuFkkA812MQyRruDZhzzh7Y for Pierre’s birthday party) is
generated by the organizer and published on social networks.
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All donators can follow the payments sent to that address (e.g via
blockchain.info): no sign up is required.
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Each donator can get a proof of payment and sign a greetings message with
the private key that was used to pay.
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Only the organizer can spend the donated bitcoins.
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Further reading...
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bitcoin.org (official project web site)
https://github.com/bitcoin/bitcoin (project repo)
paymium.com (compliant euro/bitcoin exchange)
blockchain.info (bitcoin blockchain exlorer, e-wallet)
https://bitcoinpaperwallet.com
bitaddress.org (bitcoin javascript utilities)
https://electrum.org (Bitcoin light client)
e-ducat.fr (my blog, in French)
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pierre.noizat@paymium.com
Credits: Oleg Andreev
Pierre Noizat
Jan Vornberger
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