Presentation that introduces you to BitCoin system and gives some advantages and disadvantages of this system

1. Bitcoin
New phenomena in online payment
systems

2. Interesting Facts
or
what can you do with Bitcoins
• 2010 – BitCoin enthusiast
purchased 2 pizzas from Papa
Johns. He paid 10 000 BTC or
$25 that day. Since then, price
for BTC flew sky-high turning
$25 into $8 000 000.
• Jamaican Bobsleigh Olympic
team went to Sochi only thanks
to Reedit project which started
an initiative to collect money for
their sledge. All donations were
accepted in BTC variation –
DoggyCoins.

3. So…
What is a Bitcoin?
• BitCoin is a peer-to-peer payment system and a digital
currency.
• BTC is a type of crypto currency. Crypto, because it uses
cryptography technology to work.
• It doesn’t exist as a physical object. BitCoin has a form of a
long string that carries all of its information.

4. How it works?

6. What are advantages of using Bitcoins
• Low price of transactions
• Allows users to conduct transactions
anonymously, hiding their identity.
• Limited and fixed supply of currency
• Decentralized architecture of system

7. It’s very cheap
• Transaction fee is
40 cents for 10
000 kb file of BTC
• You don’t need to
buy any software
to conduct these
operations.

8. It’s anonymous
• BTC is a cryptocurrency. It
uses advanced methods of
encryptions of BTC files.
• The HASH cipher method
ensures that a transaction
cannot be traced to a
particular IP address.
• Though all history of
transactions is open to a wide
public, its almost impossible
to link these transaction to
one ID.

9. BTC supply

10. Bitcoin supply is fixed and
unchangeable
• In a fully decentralized monetary system, there is no central authority that
regulates the monetary base. Instead, currency is created by the nodes of
a peer-to-peer network. The Bitcoin generation algorithm defines, in
advance, how currency will be created and at what rate. Any currency that
is generated by a malicious user that does not follow the rules will be
rejected by the network and thus is worthless.
• Because the monetary base of bitcoins cannot be expanded, the currency
would be subject to severe deflation if it becomes widely used. Keynesian
economists argue that deflation is bad for an economy because it
incentivises individuals and businesses to save money rather than invest in
businesses and create jobs. The Austrian school of thought counters this
criticism, claiming that in a deflationary environment, goods and services
decrease in price, but at the same time the cost for the production of
these goods and services tend to decrease proportionally, effectively not
affecting profits.

11. Bitcoin’s cryptography structure
provides fair level of security

12. Decentralized system
architecture
• In a fully decentralized monetary
system, there is no central authority
that regulates the monetary base.
• If central authority organ fails  the
whole system fails.
Having no central authority
eliminates that chance. (Structure is
alike as the Internet structure).
• Crowdsourcing ensures that there
are always spare resources to use.

13. However
There are some side-effects
•
•
•
•
Decentralized System Architecture
Extreme volatility
Black Market and Illegal activity
Lack of international acknowledgment

14. Decentralized system
architecture
Nobody regulates relations
between the sender and the
receiver.

15. Extreme volatility
BTC exchange rate chart

16. Black market and illegal activity
Bitcoins can’t be traced to a particular IP address 
very popular with criminals.
Most popular misuses of BTC :
• Purchasing/paying for illegal products –
Drugs, weaponry, illegal software. (Latest
research shows that 5-10% of all BTC
transactions were used for drug purchase
only on 1(!) web resource)
• Money laundry
• Evasion of tax
• Concealing income/spenditure

17. Lack of international acknowledgment
• Not all governments acknowledge BTC as a currency or as a
good.
• Some governments intervene :
o China and Thailand have forbidden any use of that
technology
o USA and Canada have developed set of laws
regulating activity of firms that work with BTC.
o Germany imposed taxes on all income that comes in
the form of BTC for Germany citizens