A brief introduction to Bitcoin

Educational, valuable and deep insights

Cosmin Novac

1. Introduction 2. What is Bitcoin? 3. Money and Currencies 3.1. Definition and functions of money The basic functions of money The properties of money Where does money come from? 3.2. The economic principles behind Bitcoin The Business Cycle Theory The Monetary Theory 4. How Does Bitcoin Work? 4.1. Storing Bitcoin Asymmetric encryption Addresses, Wallets and Clients 4.2. Transacting Bitcoin Transactions Blocks and the Blockchain 4.3. Creating Bitcoin Mining 5. Technological Aspects 5.1. The problem of the Byzantine Generals 5.2. The double-spending problem with fast payments 5.3. Decentralization of computing capacity 5.4. Transparency and anonymity 5.5. Technological critique Trust in hash functions Dust Power consumption The incentive problem Scaling and the size of the blockchain 5.6. Second-layer solutions The Lightning Network 6. Economic Aspects 6.1. Inflation and Deflation 6.2. Bitcoin’s planned deflation Keynesianism and Neoclassicism The Austrian school of economic thought Other considerations on deflation 6.3. Scarcity and Stock-To-Flow Ratio 6.4. Liquidity and Volatility Liquidity Volatility 6.5. Cryptocurrency exchanges Distributed denial of service Failure of payment by service providers 6.6. Further economic considerations related to Bitcoin Mises’ Regression Theorem Consensus on the rules Labour Theory of Value No retraction of transactions 7. Suitability as Money 7.1. Economical suitability as money 7.2. Technological suitability as money 7.3. Political suitability as money 8. The development of the Bitcoin Economy 8.1. Key events and price development 2008 – 2010 2011 - 2012 2013 - 2014 2015 - 2016 2017 - 2018 8.2. Adoption and use cases Crisis currency Industry sectors Financial service providers Donations Alternative uses of a blockchain 9. Closing Words Acknowledgements References