COM700 Final report presentation

2. Current Payment System
• Token-based system
1. Paper cash
2. Stamp
3. Gift card
• Account-based system
1. Credit card
2. Paypal
3. Bank account

3. Problems of current payment system
Cash:
Easy to carry and transact, untraceable...
Lose, stolen…
Electronic payment system:
Reduces the risk to lose, stolen
Losing privacy, traceable…
Current financial system is controlled by
government, may lead to inflation...

4. Digital Cash
Introduced by Chaum in 1982
Features:
• security
• privacy
• transferability
• off-line payment
• divisibility
Problems:
Double spending

5. BitCoin
Designed by Satoshi Nakamoto in 2008
•Account
•Transaction
•Block

6. BitCoin
Account
• 19MrhxNSDyMRQ8NXn8BR9kLmntQMEQofNc
• Public key & Private key
• Wallet file

7. How it works:
Transactions
•
•
•
•
•
•
Payer’s account ID
Payee’s account ID
Amount
Payer’s signature
Payee’s public key
Hash of previous transaction

8. How it works
Blocks:
•
•
•
Hash of previous block
Transactions happened in
last ten minutes
A nonce

9. How does BitCoin solve double spending problem

10. Problems of BitCoin:
Technical bottleneck:
• Space: huge disk space will be required for chain of
blocks
• SHA256: safe for now
• Anonymity: Can be analysed by some interested
party

11. Problem of BitCoin
Financial problem: Cause deflation
Equation of Exchange
P*Q=M*V
•
•
•
•
M, is the total nominal amount of money in circulation on average in an economy.
V, the velocity of money, that is the average frequency with which a unit of money is
spent.
P, is the price level.
Q, is an index of real expenditures (on newly produced goods and services).
When M * V keeps same or increase in a fixed speed
the price of goods and services (P) is inversely
proportional to the amount of goods and services in
market

12. Market price of BitCoin
http://blockchain.info/charts/market-price

13. What’s happening now:
A story about success
Cameron and Tyler Winklevoss,
the twins best known for their
role in the early days
of Facebook, believe the online
currency bitcoin is "digital
gold."

14. What’s happening now:
A sad story…
Homeless, Unemploy
ed, and Surviving on
Bitcoins
http://www.wired.com/wirede
nterprise/2013/09/bitcoinhomeless/

15. Future work for BitCoin
1. Solve technical bottleneck
2. Combine BitCoin with economic activities