Brought to You by The L40 Crypto Group

An Introduction to Bitcoin/Blockchain

Summary

Blockchain technology was conceived a little over ten years ago. In that short time, it went from being the foundation for a relatively unknown alternative currency for cypher-punk fringe groups to being the "next big thing" in computing, with industries such as banking, insurance, defense and government organizations pouring billions of dollars in blockchain research and development. We’ll try to get you up to speed and provide you with the necessary resources for taking a deeper dive, should you want to explore the underlying technical concepts. Blockchain innovation iterates rapidly, so our "living" guide will be continuously updated to help provide the most contemporary information about the technology - please, bear with us as changes are made.

Very special thanks to Jameson Lopp for providing the basis for this guide.

Let’s Get Started; Blockchain Overview

For the past several weeks, you've likely heard some of the following buzzwords if you've paid any attention to the world of finance: Cryptocurrency, Blockchain, Bitcoin, Ethereum.... But what do they mean? And why is cryptocurrency suddenly so hot? First, we'll explain the blockchain basics.

What is Blockchain (quick 2 min video)
All-encompassing Introduction to Blockchain and it’s potential use cases. (18 min video)

The Value of Blockchains (6 min video)
Blockchain: The Invisible Technology That's Changing the World (Extremely thorough overview including potential use cases)
Simple, Fundamental explanation of how Blockchain works. (Shai Rubin, CTO of Citi Innovation Lab - a bit dry, but worth it for a basic technical overview)

Recap: At its most basic, a blockchain is simply a distributed ledger that tracks transactions among parties. What makes it interesting are its fundamental properties, which apply to every single transaction:

All parties agree that the transaction occurred.
All parties agree on the identities of the individuals participating in the transaction.
All parties agree on the time of the transaction.
The details of the transaction are easy to review and not subject to dispute.
Evidence of the transaction persists, unchangeable, over time.

This combination of these properties results in a system that, by design, timestamps and records all transactions in a secure and permanent manner and is easily auditable in the future. In addition to the above, due to its distributed nature, the system is highly resilient to downtime (you’ve gotta pretty much shut down the internet to hijack the blockchain). All these properties combined makes an appealing system for a wide variety of applications and indeed explains much of the interest in the tech.

If you need three words to describe blockchain to your mom, use the three T’s ;
Timestamped
Transparent
Tamper-proof

Bitcoin

If you find the concept of Bitcoin confusing, you are not alone. The virtual currency has been a constant source of controversy, but it is still not well understood. Bitcoin emerged in 2008 just after Occupy Wall Street accused big banks of misusing borrowers’ money, duping clients, rigging the system, and charging boggling fees. Bitcoin pioneers wanted to put the seller in charge, eliminate the middleman, cancel interest fees, and make transactions transparent to hack corruption and cut fees. So they created a decentralized system, where you could control your funds and know what’s going on. Let’s take a closer look.

How Bitcoin Works in 5 Minutes (5 min video)
Explain Bitcoin Like I’m Five (finally, you’ll be able to explain to your friends how your magic internet money works)
How Bitcoin Works Under the Hood (22 min video)
Bitcoin 101 (Balaji Srinivasan)
Bitcoin for Beginners (Andreas Antonopoulos)
Bitcoin: Ringing in a new asset class (ARK Invest - Chris Burniske) ***

Side note - Chris Burniske is a brilliant analyst, if you’re interested in crypto-economics, follow this dude.

Satoshi’s Original White Paper

What’s behind Bitcoin’s Price increase? How can we begin to think about where it’s headed?

https://dms.licdn.com/playback/B56AQEdlu268aRh2A/a1ab706f31e5419f8aa253530281ef9a/feedshare-mp4_500-migrate-1/1479932728445-v0ch3x?e=1509127758&v=alpha&t=jwu9P5t3J4aX6NxN9N0gNeAEGqr5SG3C0Kt9clSQEKE

Recap: Bitcoin Transactions are…

1.) Irreversible: After confirmation, a transaction can‘t be reversed. By anyone. And anyone means anyone. Not you, not your bank, not the president of the United States, not Satoshi, not your miner. Nobody. If you send money, you send it. Period. No one can help you, if you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.

2.) Pseudonymous: Neither transactions nor accounts are connected to real world identities. You receive Bitcoins on so-called addresses, which are randomly seeming chains of around 30 characters. While it is usually possible to analyze the transaction flow, it is not necessarily possible to connect the real world identity of users with those addresses.

3.) Fast and global: Transactions are propagated nearly instantly in the network and are confirmed in a couple of minutes. Since they happen in a global network of computers they are completely indifferent of your physical location. It doesn‘t matter if you send Bitcoin to your neighbour or to someone on the other side of the world.

4.) Secure: Bitcoin funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency. Strong cryptography and the magic of big numbers makes it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.

5.) Permissionless: You don‘t have to ask anybody to use cryptocurrency. It‘s just a software that everyone can download for free. After you installed it, you can receive and send Bitcoins or other cryptocurrencies. No one can prevent you. There is no gatekeeper.

-------

How to Buy Bitcoin

Alright, so you've learned the basics about Bitcoin, the next step is to secure some. But how? Don’t worry, we’ll help you out.

You can buy Bitcoins from either exchanges or directly from other people via marketplaces, and you can pay for them in a variety of ways, ranging from cold cash to credit and debit cards to wire transfers or even with other cryptocurrencies (depending on who you are buying them from and where you live).

Gemini
Here at L40, we recommend that you use Gemini if you are looking for ease of use and quick KYC and verification. Gemini is a popular wallet and exchange service that will also trade fiat currency for Bitcoins. The company has web and mobile apps. Keep in mind that there are fees on this platform, so if you are planning to make lots of transactions, there are better options. But for someone just getting started, Gemini does the job.

→ SIGN UP FOR GEMINI TO BUY BITCOIN HERE ←

For more information regarding in depth analyses of other wallets and exchange options, please consult within the L40 Discord Group.

How to Store Bitcoin

Celsius

Here at L40, we recommend the industry leader in interest-bearing wallets: Celsius. Founded in 2018, Celsius is based on the principal that our financial system can be designed to be more equitable. Users transfer assets with Celsius, Celsius deploys and returns up to 80% of earnings to users. The result is one of the largest crypto-based communities in the world. Celsius is currently the second largest asset manager of crypto with over 8 billion AUM, second only to Grayscale, and ahead of Coinbase. With Celsius, after depositing your assets, you earn passive yield up to 12.5% domestically, and 16.5% internationally. It is beyond user-friendly, and extremely intuitive, not to mention simple. We believe it is one of the single-greatest tools in the crypto ecosystem for maximizing long-term wealth, and gaining exposure to the financial revolution on the front lines.

→ SIGN UP FOR CELSIUS TO STORE CRYPTO HERE ←

L40 Referral ID: 103971f875

Ethereum

What is it? Although commonly associated with Bitcoin, blockchain technology has many other applications that go way beyond digital currencies - Ethereum is one of the main applications that you should research. At its simplest, Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications.

The analogy we like to use to explain this to our friends is, "If Bitcoin is to cut banks, Ethereum is to cut laws." Allow us to be more elaborate: If Bitcoin is to cut banks from the flow of money, Ethereum is built to cut middle-men and centralized power from any other processes. It allows the same piece of software to run on everybody's computer and enables those computers to act like middle-men. For example, Uber now acts like a middle-man for rider and driver. Every ride request and dispatch runs through their server and they control all of the info. With Ethereum, we write the software that handles ride request and dispatch, and let it run on everybody's computer, which in turn forms a network. This network will handle all the requests and dispatches. Since this network is formed by everybody's computer, there is no centralized power, like a company, to control the process of ride sharing. You can theoretically remove the trusted middleman from pretty much any system that used to require one. That’s a significant fraction of our economy and a significant fraction of our society. Code becomes law though Smart Contracts.

Smart Contracts

Smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman. The best way to describe smart contracts is to compare the technology to a vending machine. Ordinarily, you would go to a lawyer or a notary, pay them, and wait while you get the document. With smart contracts, you simply drop a Bitcoin into the vending machine (i.e. ledger), and your escrow, driver’s license, or whatever drops into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforce those obligations.

ICO’s

Like IPO’s, but with coins - an Initial Coin Offering, also commonly referred to as an ICO, is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for Bitcoin and Ether. ICOs are a relatively new phenomenon but have quickly become a dominant topic of discussion within the blockchain community.

Blockchain Use Cases

Where can we apply blockchain? The nature of blockchain technology has got imaginations running wild, because the idea can now be applied to any need for a trustworthy record. Here are a just a few examples:

Government

https://www.wsj.com/articles/dubai-aims-to-be-a-city-built-on-blockchain-1493086080

ID System/Property Rights

Voting

https://www.economist.com/sites/default/files/plymouth.pdf

Financial System

Music/Art

https://hbr.org/2017/06/blockchain-could-help-musicians-make-money-again

Energy Exchange

Supply Chain Management

Deep Dive Technical Resources

A conceptual understanding of the technical foundations of the blockchain is necessary in order to understand specific blockchain applications, evaluate business cases of blockchain startups, or follow the discussion about its expected economic impacts - so don’t be afraid to dig a little deeper:

The History of Bitcoin

Learn what there is to know:

Mining:

Security:

Bitcoin's Security Model: A Deep Dive
Bitcoin Security & Storage 101 (Pamela Morgan)
Coindesk's Bitcoin Storage Guide

News Sites:

Podcasts

Toss ‘em on in the car, go ahead:

L40’s Favorite Op-Ed Picks

Smart people saying smart things:

Final Thoughts

With Bitcoin surging to new highs every other week while giant cryptocurrency crowdsales are literally creating instant millionaires almost daily, it’s really tempting to think that blockchain tech’s only contribution to society is as a dubious get-rich-quick tool. But this misses the great potential that blockchains and digital assets pose for the social good. Blockchain is going to upend entire societies. It’s going to enable new kinds of governance systems that were before only the daydreams of utopians and philosophers.

Undaunted by humanity’s past failures, numerous blockchain projects are working to tackle issues like poverty, environmental degradation, and government overreach.

Don’t get me wrong, there’s undoubtedly a heavy dose of idealistic utopianism around these efforts, and the tech, being so nascent, is far from being sufficiently developed to operate at the global scale needed - and it may never be. But this effort to try and do things a better way are founded on something quite real: blockchain tech’s capacity to improve transparency and address the perennial problem of social mistrust.

The tech’s sweeping potential lies in its ability to assure the integrity of valuable data, even when that info is derived from multiple sources with potentially conflicting interests. The result is a decentralized, common record of truth, one that is highly secure and resistant to tampering - a true breakthrough in the all-important function of recordkeeping on which civilization has been built.

All in all, blockchains point to new possibilities for gathering, recording, using information, and for programing scarcity, effectively turning networks into markets and markets into networks in a way that helps communities achieve common goals in an automated fashion. It is a social and economic revolution that will propel the next surge of human development. It will leverage what we have learned about capitalism & fuse it with collaborative consumption to produce a socioeconomic system fueled by the profit motive to serve the needs of society.

We’re really excited about this and we hope you are too.