A_Gentle_Introduction_to_Bitcoin_Full.pptx

Bitcoin intro

1. A Gentle Introduction to Bitcoin By Antony Lewis / BraveNewCoin Adapted from: “A Gentle Introduction To Bitcoin” (Contentful) (Optional: Date, Your Name, Institution)

2. Table of Contents Why Use Bitcoin How Does It Work Keeping Track of Payments: The Bitcoin Blockchain How Are Bitcoins Stored? How Are Bitcoins Sent? What Happens When I Make a Bitcoin Payment? How Are Bitcoins Tracked? Bitcoin Security What Is the “Decentralised” Bit? Conclusion & Further Reading (Contentful)

3. Why Use Bitcoin Bitcoin is best understood as an electronic asset, rather than a currency. It sidesteps questions like “which government backs it?” or “who sets the interest rate?” You can buy, own, and send bitcoins to others. Key stats: • ~14 million bitcoins already created (as of writing) • Maximum supply capped at 21 million Transactions are global, nearly instant in notification, typically settled within ≈ 1 hour. Price is determined by supply & demand (market) and usually quoted in USD. Use cases for Bitcoin: • Banking for underserved / unbanked populations • Faster cross-border remittances • Digital payments (especially small payments) Caveats: • Volatility is (and has been) high • “Fast / free” claims neglect conversion / on-off ramp costs

4. How Does It Work — Overview A network of computers (nodes) keeps track of all bitcoin payments. The master record is called the Bitcoin Blockchain — an ever-growing ledger of all transactions. Think of “blockchain” as equivalent to a database or ledger, but distributed. Every participant (node) keeps its own copy of the blockchain.

5. Peer-to-Peer, Not Client-Server Bitcoin operates via peer-to-peer (P2P) architecture, not traditional client-server. In P2P, there is no central point of control; each node communicates with many others (gossip style). When a new payment occurs: 1. Wallet software creates a transaction 2. It is broadcast to nodes 3. Nodes validate it and relay 4. Eventually it is included into a block, and appended to the blockchain across nodes New blocks are added roughly every 10 minutes (on average).

6. How Are Bitcoins Stored? Bitcoins are not stored in your wallet — what is stored are private keys. Ownership is linked to bitcoin addresses (public addresses). Wallet software: • Manages keys (private & public) • Generates addresses • Interfaces with the blockchain to compute balances • Allows sending / receiving transactions

7. Private Keys, Addresses & Wallets Every address has an associated private key. You need the private key to spend funds from the address. The private key is mathematically linked and cannot be changed once set. Wallets typically encrypt private keys with a passphrase (to protect them). Copying a wallet (i.e. private keys) does not duplicate bitcoins — it just duplicates control over the same funds.

8. How Are Bitcoins Sent? A transaction is a data structure/instruction to move bitcoins from one address to another. Transaction includes: • Which bitcoins (inputs) are being spent • Source address(es) • Destination address(es) • Digital signature (using private key) to prove ownership & authorization Once constructed, the transaction is broadcast to the network’s nodes (validators). Validators check both technical correctness and business logic (e.g. no double spending, no creation of new coins). If the transaction is valid, it becomes “unconfirmed” (acknowledged) until included in a block.

9. What Happens after I Make a Payment? (Mining & Block Inclusion) Nodes not only validate transactions, but also attempt to include them into blocks — this is called mining. Mining is often described as a “guessing game” or puzzle-solving. In reality, it’s brute-force computation following protocol rules. Whoever first finds a valid block (i.e. meets difficulty target) propagates it; other nodes validate it and append it to their blockchain copy. The miner gets a reward (newly created bitcoins + transaction fees) for the winning block. Mining is intentionally resource-intensive and slow (≈10 min per block) to make attacks expensive.

10. How Are Bitcoins Tracked? Two main processes: 1. Making payments — only private keys are needed 2. Block control / consensus — nodes validate and agree on which block chain is canonical Miners often join mining pools to increase their chance of winning blocks; rewards are shared. A security threat: double spend / chain reorg attack • If an attacker can produce a longer chain (with greater computational work), they can override recent blocks. • This is harder the deeper a transaction is in the blockchain (i.e. older).

11. Bitcoin Security & Risks Bitcoin’s network rules are enforced by validators / miners, not a central authority. The software is open source — everyone can inspect how validation / consensus works. Protocol changes require consensus among miners / node operators. The 21 million coin limit is not immutable in code; it can be changed — but only if majority consensus supports it. Real-world risks are often via external systems — e.g. exchanges, wallets, human error, hacks (e.g. Mt. Gox).

12. What Does “Decentralised” Mean in Bitcoin? “Decentralised” means no single point of control over the network / ledger. Validators (miners) share influence proportionally to computational power. Anyone can run the software, run a node, become a miner—so long as they follow protocol rules. Changes to protocol rules must achieve consensus among the network participants (miners/nodes) to be adopted. The “turkeys won’t vote for Christmas” analogy: miners may resist protocol changes that reduce their profit.

13. Conclusion & Further Reading This introduction is intentionally high-level — many details are simplified. Bitcoin is a rich and evolving system; deeper study is needed to fully understand cryptography, incentives, scaling, forks, etc. For further reading: BraveNewCoin, Bits On Blocks, Bitcoin developer documentation, blockchain textbooks, whitepapers. Glossary: see terms used in this series at bravenewcoin.com/bitcoin-basics/glossary