1.
Cryptocurrencies 101
v4
Brett Colbert
@brett_colbert

2.
Two main types of blockchains
Public “tokenized” Private or Permissioned
Hyperledger
R3 Corda
Gem
Quorum
Cryptocurrencies are used to
ensure TRUST and serve as a
reward mechanism for block
miners

3.
What exactly is the blockchain?
• A decentralized, trusted public ledger of all transactions
• Characteristics
– Decentralized - nodes on the network manage and maintain the blockchain
– Trusted - distributed verification using math - immutable = unchanging over time so fundamentally irreversible
– Public - anyone can see the block, the transactions and
– Pseudononymous - kinda anonymous for the user
– Programmable - smart contracts
Block x Block x+1 Block x+3Block x+2
transactions transactions transactions transactions
Cryptocurrencies are used to ensure TRUST and serve
as a reward mechanism for block miners

4.
Decentralized Trust - What is Bitcoin Mining?
…
Miners are trying to figure out the hash of the next Block. They
all start with the same info.
Miners repeatedly hash the current block header only changing
one parameter each time, until the resulting hash matches a
specific target.
Why is it hard to figure out the next Block header hash?
1) The hash cannot be determined in advance
2) No pattern can be created to determine the hash
Mining is the activity associated with figuring out the next Block!
It’s basically a puzzle that must be solved.
Why would someone want to figure out the next Block?
Because they get rewarded a certain number of Bitcoins! Currently
the reward is 12.5 Bitcoins.
??????

5.
Both bitcoin blockchain and ethereum blockchain DEPEND
on a reward mechanism to function
Bitcoin is integral to the bitcoin blockchain - it’s a critical piece that incents miners to mine.
Ether/Ethereum is integral to the ethereum blockchain - it’s a critical piece that incents miners to mine.

6.
History of currencies (1000BC to 500BC)
Standardized metal objects stamped with a standard value -- were
the Chinese bronze spade money, c. 475-221 BC
Chinese shell money, 1000 BC..The shell most widely
used worldwide as currency was the shell of Cypraea
moneta, the money cowry.
Coins as currency were manufactured in China, India and Turkey
between 700 and 500 BC.

7.
History of currencies (800AD to 1862)
Foreign currency exchange 1700 - England and
Holland
Paper currency 800 AD
1816 Gold as a benchmark of value in
England
1862 United States issues first paper
currency

8.
History of currencies (1950 to current)
1955 US introduces first paper checks as currency
1950 the first US credit card
1958 AmEx introduces their first credit card
https://www.currencyfair.com/cf-
content/uploads/2014/07/History-of-Currency-Exchange_1.jpg
2008 Satoshi Nakamoto introduces
cryptocurrency based on blockchain

9.
https://howmuch.net/articles/worlds
-money-in-perspective
Bitcoin has increased
from $41B to $231 B
market cap currently

10.
Why the recent explosion in cryptocurrencies?
2 fairly recent events increased attention
• Satoshi Nakamoto’s White Paper -
https://bitcoin.org/bitcoin.pdf - published
October 31, 2008
• No one knows who Satoshi is
• Satoshi Nakamoto is a pseudonym,
possibly a name made up from SAmsung,
TOSHIba, NAKAmichi, MOTOrola
• Bitcoin blockchain was born 2008
• Vitalik Buterin launches
Ethereum blockchain July 2015
• Improved the programmability of
the blockchain - Turing complete
• Many startups are being built on
top of Ethereum
• Dapps = distributed apps
Ethereum’s blockchain primarily stores contractual
transactions
https://www.youtube.com/watch?v=WSN5BaCzsbo
Biitcoin’s blockchain primarily stores financial
transactions

11.
Both bitcoin blockchain and ethereum blockchain DEPEND
on a reward mechanism to function
Bitcoin is integral to the bitcoin blockchain - it’s a critical piece that incents miners to mine.
Ether/Ethereum is integral to the ethereum blockchain - it’s a critical piece that incents miners to mine.

12.
“The currency is in the service of the protocol”
-- Vitalik Buterin

13.
… and there are TONS of other cryptocurrencies
https://www.worldcoinindex.com/
1187 cryptocurrencies currently
tracked on worldcoinindex.com

14.
Where did many of these cryptocurrencies come from?

15.
The original bitcoin blockchain gave birth to many of the other
cryptocurrencies

16.
Example of forks used to ‘create’ new cryptocurrencies…

17.
Some forked off the original bitcoin blockchain
https://steemit.com/bitcoin/
@hugobro/what-is-this-
bitcoin-hard-fork-all-about

18.
Some cryptocurrencies are built on Ethereum… ~385 currently

19.
Why Ethereum-based coins?
Ethereum enables smart contracts. Smart contracts can use used to
raise money for startups, called an ICO, or Initial Coin Offering.
https://blockgeeks.com/guides/ico-basics/

20.
What is an Initial Coin Offering (ICO)?
Leveraging smart contracts to fund an idea...
“An ICO is a fundraising tool that trades future
cryptocoins in exchange for cryptocurrencies of
immediate, liquid value. You give the ICO bitcoin or
ethereum, and you get some of Billy’s New Super
Great Coin.”

21.
ICOs created on top of Ethereum blockchain
Startups have raised $3 Billion through digital coin sales

22.
Ethereum, ARK, Cardano, NEO
Smart Contract “platforms”
● Ethereum - the original programmable smart contract platform; first mover
advantage; 2nd generation
● NEO - focusing on smart economy
● ARK - focusing on smart bridges and blockchain interoperability
● Cardano (ADA) - focusing on academically peer-reviewed open source
code

23.
As people realized the tremendous potential of blockchain, the respective
tokens gained value (eg bitcoin and ethereum).
This has caused investment and speculation.
Anyone can download the open source blockchain code and create their
own coin.
What happened here???? Why the explosion in cryptocurrencies?

24.
Say what? Anyone can create a cryptocurrency?
YES!

25.
Investment and speculation in cryptocurrency is a personal choice - completely separate from opinions
on blockchain.
Possible personas...
Blockchain Cryptocurrencies
I believe in blockchain but I would never
invest in cryptocurrencies.
I believe in blockchain and I also invest
in cryptocurrencies.
I think blockchain is a fad and I would
never invest in cryptocurrencies.
I think blockchain is a fad but I’m
investing in cryptocurrencies.

26.
Socio-Economic Forces Increasing Adoption of Cryptocurrencies
Inflation, Lack of Access, Digital Wallets
http://www.paymentscardsandmobil
e.com/mobile-wallets-global-
growth-continues/

27.
Venezula - High Inflation
The president of Venezula unvelieved a new 100,000
bolivar note in November, 2017. The note has a value
of $2.50 on the black market.
Venezuelans, on average, are only allowed to withdraw
about 10k to 20k bolivares a day. 20k bolivars are
currently worth 50 cents.
IMF sees inflation in Venezula soaring to 2200% by
2017.
Venezuelans are turning to bitcoin as an appreciating
store of wealth/currency.

28.
How are people buying/selling these cryptocurrencies?
Cryptocurrency Exchanges
www.kraken.com
www.coinbase.com
www.bittrex.com
www.poloniex.com
...

29.
Sure, but these cryptocurrencies can’t be that popular... right?
11/28/2017

30.
Amazing
Recently Coinbase’s mobile app was the #1 app on Apple’s
AppStore

31.
Who actually works on bitcoin? And for free???? URL: bitcoin.team

32.
Who are the developers on the other coins? New code?
Do your research!
Sometimes very very few.

33.
Cryptos are Volatile!

34.
However, bitcoin is still small relative to gold, stock market...

35.
Brett’s Favorite Bitcoin & Cryptocurrency Tools
• https://tradeblock.com/bitcoin
• http://bitcointicker.co/#
• https://coinmarketcap.com/
• https://bitinfocharts.com/
• https://www.tradingview.com/
• https://www.gdax.com/trade/BTC-USD

36.
Key Projects to Watch - Upcoming New Capabilities
@ColdcardWallet
@OPENDIME v4
@lightning
@joinmarket
@TREZOR v2
@SegwitOrg
@SamouraiWallet iOS
@ln_zap
#MimbleWimble

37.
Evaluating cryptocurrencies
● How large is the active development team?
● What is the idea behind the coin?
● What problem is being solved?
● Who is the executive team?
● Is the solution being used? Are there customers?

38.
Bitcoin, Ethereum, Litecoin, Bcash - Hashrates

39.
Comparing bitcoin, litecoin and ethereum...
Usage Financial transactions Smart Contracts Fast Transactions - “buy coffee”
Market Cap $184 billion $44 billion
Total coins 21 million unlimited (currently 96 M)
Blockchain based Yes Yes Yes - forked from bitcoin
Mining Approach SHA-256 (Compute intensive) ethash → PoS Scrypt (memory intensive)
Block Interval 10 minutes 12-15 seconds 2.5 minutes

40.
What possible advantages do cryptocurrencies have?
● Lower transactional cost compared to other financial solutions such as credit cards which currently have a national average
APR of about 15%
● Less expensive than other online payment solutions which have rates such as 2.9% + $.30 per transaction
● With other types of currencies, there are often additional transaction costs to send money between people in different
countries
● Converting non-digital currencies from one currency type to another often carries a transaction fee (eg – converting US dollar
to Euro or Euro to GBP)
● International payments on non-digital currencies often have a significant delay (sometimes a few days) to send money
overseas
● Some emerging countries don’t have a banking system or easy access to a bank or financial institution (eg Kenya, Uruguay,
Panama) … but people have cell phones!
● Merchants pay a fee of between 2% and 3% for some credit card transactions
● “Wiring money home” in some cases costs upwards of 10% of the amount transferred
● Banks can fail – remember the 2007/2008 global financial crisis

41.
Artifacts as Wealth - Storage of Wealth

42.
The Trust Model for both Bitcoin and Ethereum rely
on mining - miners mine because there is a reward
Blockchain uses hash (SHA-256), Merkle trees and a decentralized set of nodes to
manage Trust.
This is referred to as the Proof of Work.
In the case of bitcoin, the reward for solving the puzzle is 12.5 bitcoin (currently
~$10,000 each).

43.
bitcoin = verification reward for the blockchain -
reward cuts in half approx every 4 years
This is
referred to
as the
“halving”
Nov 28, 2012

44.
http://fortune.com/2017/11/25/lost-bitcoins/
“Just as gold bars are lost at sea or $100 bills can burn, bitcoins can disappear from the
Internet forever. When all 21 million bitcoins are mined by the year 2040, the actual amount
available to trade or spend will be significantly lower.”

45.
Bitcoin’s standing in global currencies

46.
Interest in Understanding Bitcoin is Growing

47.
Will Bitcoin Go Mainstream?
12/4/2017

48.
Bitcoin’s Market Cap Exceeds Visa

49.
Key Messages
● Certain crytocurrencies such as bitcoin and ethereum underpin the
reward mechanism for bitcoin blockchain and ethereum blockchain
● Some people see cryptocurrencies as an investment vehicle
● Many cryptocurrencies exist!
● Cryptocurrencies exist because of lack of access to financial
institutions for 2B people
● Cryptocurrencies exist because of socio-econonic reasons such as
high currency inflation rates
● The interest in cryptocurrencies is growing at an exponential rate